OCEANFIRST FINANCIAL CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL SUMMARY (1) At or for the Quarters Ended (dollars in thousands, except per share amounts) March 31, 2025 December 31, 2024 March 31, 2024 SELECTED FINANCIAL CONDITION DATA: Total assets $ 13,309,278 $ 13,421,247 $ 13,418,978 Loans receivable, net of allowance for loan credit losses 10,058,072 10,055,429 10,068,209 Deposits 10,177,023 10,066,342 10,236,851 Total stockholders’ equity 1,709,117 1,702,757 1,665,837 SELECTED OPERATING DATA: Net interest income 86,652 83,329 86,224 Provision for credit losses 5,340 3,467 591 Other income 11,253 12,232 12,286 Operating expenses 64,294 64,849 58,672 Net income 21,463 22,162 28,610 Net income attributable to OceanFirst Financial Corp. 21,509 21,909 28,667 Net income available to common stockholders 20,505 20,905 27,663 Diluted earnings per share 0.35 0.36 0.47 SELECTED FINANCIAL RATIOS: Book value per common share at end of period 29.27 29.08 28.32 Cash dividend per share 0.20 0.20 0.20 Dividend payout ratio per common share 57.14 % 55.56 % 42.55 % Stockholders’ equity to total assets 12.84 12.69 12.41 Return on average assets (2) (3) (4) 0.62 0.61 0.82 Return on average stockholders’ equity (2) (3) (4) 4.85 4.88 6.65 Net interest rate spread (5) 2.35 2.11 2.23 Net interest margin (2) (6) 2.90 2.69 2.81 Operating expenses to average assets (2) (4) 1.96 1.90 1.74 Efficiency ratio (4) (7) 65.67 67.86 59.56 Loan-to-deposit ratio (8) 99.50 100.50 98.90 ASSET QUALITY (9) : Non-performing loans (10) $ 36,970 $ 35,527 $ 35,011 Non-performing assets (10) 38,887 37,338 35,011 Allowance for loan credit losses as a percent of total loans receivable (8) (11) 0.78 % 0.73 % 0.66 % Allowance for loan credit losses as a percent of total non-performing loans (10) (11) 213.14 207.19 191.86 Non-performing loans as a percent of total loans receivable (8) (10) 0.37 0.35 0.35 Non-performing assets as a percent of total assets (10) 0.29 0.28 0.26 (1) With the exception of end of quarter ratios, all ratios are based on average daily balances. (2) Ratios are annualized. (3) Ratios are based on net income available to common stockholders. (4) Performance ratios for the quarter ended March 31, 2025 included a net benefit related to a net gain on equity investments of $205,000, or $156,000, net of tax expense. Performance ratios for the quarter ended December 31, 2024 included a net expense related to Spring Garden Capital Group, LLC (“Spring Garden”) opening provision for credit losses , a net loss on equity investments and merger related expenses of $1.5 million, or $1.2 million, net of tax benefit. Performance ratios for the quarter ended March 31, 2024 included a net benefit related to a net gain on equity investments, a net gain on sale of trust business and a Federal Deposit Insurance Corporation (“FDIC”) special assessment of $2.7 million, or $2.0 million, net of tax expense. (5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (6) Net interest margin represents net interest income as a percentage of average interest-earning assets. (7) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income. (8) Total loans receivable excludes loans held-for-sale. (9) The quarter ended March 31, 2024 included a single commercial relationship exposure of $8.8 million, which was subsequently resolved in 2024. (10) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans and assets generally consist of all loans 90 days or more past due and other loans in the process of foreclosure. It is the Company’s policy to cease accruing interest on all such loans and to reverse previously accrued interest. (11) Loans acquired from acquisitions were recorded at fair value. The net unamortized credit and purchased with credit deterioration (“PCD”) marks on these loans, not reflected in the allowance for loan credit losses, was $5.6 million, $6.0 million, and $7.0 million at March 31, 2025, December 31, 2024 and March 31, 2024, respectively. 4 Table of Contents Summary OceanFirst Financial Corp. is the holding company for OceanFirst Bank N.A. (the “Bank”), a regional bank serving business and retail customers throughout New Jersey and the major metropolitan areas between Massachusetts and Virginia. The term “Company” refers to OceanFirst Financial Corp., the Bank and all their subsidiaries on a consolidated basis. The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and investments, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income such as income from bankcard services, trust and asset management products and services, deposit account services, sales of loans and investments, bank owned life insurance and commercial loan swap income. The Company’s operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, federal deposit insurance and regulatory assessments, data processing, check card processing, professional fees and other general and administrative expenses. The Company’s results of operations are significantly affected by competition, general economic conditions, including levels of unemployment and real estate values, as well as changes in market interest rates, inflation, government policies, including the imposition of tariffs, and actions of regulatory agencies. Key developments relating to the Company’s financial results and corporate activities for the quarter ended March 31, 2025, as compared to the prior linked quarter, were as follows: • Margin Expansion: Net interest margin increased 21 basis points to 2.90%, from 2.69%, and net interest income increased by $3.3 million to $86.7 million driven by a decrease in total cost of deposits to 2.06% from 2.32% in the linked quarter. • Commercial Loans : Commercial and industrial loans increased $95.1 million, or 6.1% as compared to the linked quarter. Additionally, the total commercial loan pipeline increased 90% to $375.6 million from $197.5 million in the linked quarter. • Provision for Credit Losses : Provision for credit losses was $5.3 million reflecting a net loan reserve build of $5.2 million, primarily driven by elevated uncertainty around macroeconomic conditions. This resulted in an increase of five basis points in the allowance for loan credit losses to total loans to 0.78%. Criticized and classified loans decreased by 5% to $149.3 million compared to the linked quarter, providing strong evidence of stable credit performance for the Company’s loan portfolio. The current quarter was impacted by a decrease in average interest earning assets and liabilities, benefited from funding cost repricing efforts, and included a sale of non-performing residential and consumer loans of $5.1 million, which had related charge-offs of $720,000. Additionally, the current quarter included non-recurring benefits of $842,000 in other income and $1.3 million in normal incentive related adjustments. Net income available to common stockholders for the quarter ended March 31, 2025 decreased to $20.5 million, or $0.35 per diluted share, as compared to $27.7 million, or $0.47 per diluted share, for the corresponding prior year period. The dividends paid to preferred stockholders were $1.0 million for each of the three months ended March 31, 2025 and 2024, respectively. On April 24, 2025, the Company’s Board of Directors declared a quarterly cash dividend on common stock of $0.20 per share. The dividend, related to the quarter ended March 31, 2025, will be paid on May 16, 2025 to common stockholders of record on May 5, 2025. The Board also declared a quarterly cash dividend on preferred stock of $0.4375 per depositary share, representing a 1/40th interest in the Series A Preferred Stock. This dividend will be paid on May 15, 2025 to preferred stockholders of record on April 30, 2025. The Company has notified the preferred stockholders that it intends to redeem the Series A Preferred Stock in full on May 15, 2025. 5 Table of Contents Analysis of Net Interest Income Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. For the three months ended March 31, 2025, interest income included net loan fees of $1.4 million, respectively, as compared to $737,000 for the same prior year period. The following tables set forth certain information relating to the Company for the three months ended March 31, 2025 and 2024. The yields and costs, which are annualized, are derived by dividing the income or expense by the average balance of the related assets or liabilities, respectively, for the periods shown except where noted otherwise. Average balances are derived from average daily balances. The yields and costs include certain fees and costs which are considered adjustments to yields. For the Three Months Ended March 31, 2025 2024 (dollars in thousands) Average Balance Interest Average Yield/ Cost (1) Average Balance Interest Average Yield/ Cost (1) Assets: Interest-earning assets: Interest-earning deposits and short-term investments $ 95,439 $ 983 4.18 % $ 163,192 $ 2,226 5.49 % Securities (2) 2,003,206 19,701 3.99 2,098,421 22,255 4.27 Loans receivable, net (3) Commercial 6,781,005 98,260 5.88 6,925,048 104,421 6.06 Residential real estate 3,065,679 31,270 4.08 2,974,468 28,596 3.85 Home equity loans and lines and other consumer (“other consumer”) 228,553 3,489 6.19 248,396 4,104 6.65 Allowance for loan credit losses, net of deferred loan costs and fees (61,854) — — (59,141) — — Loans receivable, net 10,013,383 133,019 5.37 10,088,771 137,121 5.46 Total interest-earning assets 12,112,028 153,703 5.13 12,350,384 161,602 5.26 Non-interest-earning assets 1,199,865 1,206,336 Total assets $ 13,311,893 $ 13,556,720 Liabilities and Stockholders’ Equity: Interest-bearing liabilities: Interest-bearing checking $ 4,135,952 21,433 2.10 % $ 3,925,965 20,795 2.13 % Money market 1,322,003 9,353 2.87 1,092,003 9,172 3.38 Savings 1,058,015 1,785 0.68 1,355,718 4,462 1.32 Time deposits 1,916,109 18,475 3.91 2,414,063 25,426 4.24 Total 8,432,079 51,046 2.46 8,787,749 59,855 2.74 Federal Home Loan Bank (“FHLB”) advances 996,293 11,359 4.62 644,818 7,771 4.85 Securities sold under agreements to repurchase 64,314 428 2.70 68,500 411 2.41 Other borrowings 283,150 4,218 6.04 500,901 7,341 5.89 Total borrowings 1,343,757 16,005 4.83 1,214,219 15,523 5.14 Total interest-bearing liabilities 9,775,836 67,051 2.78 10,001,968 75,378 3.03 Non-interest-bearing deposits 1,597,972 1,634,583 Non-interest-bearing liabilities 222,951 247,129 Total liabilities 11,596,759 11,883,680 Stockholders’ equity 1,715,134 1,673,040 Total liabilities and equity $ 13,311,893 $ 13,556,720 Net interest income $ 86,652 $ 86,224 Net interest rate spread (4) 2.35 % 2.23 % Net interest margin (5) 2.90 % 2.81 % Total cost of deposits (including non-interest-bearing deposits) 2.06 % 2.31 % (1) Average yields and costs are annualized. (2) Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank (“FRB”) stock, and are recorded at average amortized cost, net of allowance for securities credit losses. (3) Amount is net of deferred loan costs and fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, and includes loans held for sale and non-performing loans. (4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. (5) Net interest margin represents net interest income divided by average interest-earning assets. 6 Table of Contents Comparison of Financial Condition at March 31, 2025 and December 31, 2024 Total assets decreased by $112.0 million to $13.31 billion, from $13.42 billion, primarily due to decreases in total debt securities. Debt securities available-for-sale decreased by $81.3 million to $746.2 million, from $827.5 million, primarily due to principal reductions, maturities and calls. Debt securities held-to-maturity decreased by $40.4 million to $1.01 billion, from $1.05 billion, primarily due to principal repayments. Loans held-for-sale decreased by $11.5 million to $9.7 million from $21.2 million. Total loans increased by $7.2 million to $10.13 billion, from $10.12 billion, while the loan pipeline increased by $197.8 million to $504.4 million, from $306.7 million, primarily in commercial loans. Other assets decreased by $14.9 million to $170.8 million, from $185.7 million, primarily due to a decrease in market values associated with customer interest rate swap programs. Total liabilities decreased by $118.3 million to $11.60 billion, from $11.72 billion primarily related to a funding mix-shift. Deposits increased by $110.7 million to $10.18 billion, from $10.07 billion, primarily due to increases in non-interest bearing, money market and time deposits. Time deposits increased to $2.12 billion, from $2.08 billion, representing 20.8% and 20.7% of total deposits, respectively. Time deposits included an increase in brokered time deposits of $295.8 million, offset by a decrease in retail time deposits of $251.1 million. The loan-to-deposit ratio was 99.5%, as compared to 100.5%. FHLB advances decreased by $181.6 million to $891.0 million, from $1.07 billion partly driven by a shift to slightly favorably priced brokered deposits. Other liabilities decreased by $58.0 million to $240.4 million, from $298.4 million, primarily due to a decrease in the market values of derivatives associated with customer interest rate swaps and related collateral received from counterparties. Capital levels remain strong and in excess of “well-capitalized” regulatory levels at March 31, 2025, including the Company’s common equity tier one capital ratio, which increased to 11.24% from December 31, 2024. Total stockholders’ equity increased to $1.71 billion, as compared to $1.70 billion, primarily reflecting net income, partially offset by capital returns comprising of dividends and share repurchases. During the quarter ended March 31, 2025, the Company repurchased 398,395 shares totaling $6.9 million representing a weighted average cost of $17.20. The Company had 1,228,863 shares available for repurchase under the authorized repurchase program. Additionally, accumulated other comprehensive loss decreased by $2.6 million primarily due to increases in fair market value of available-for-sale debt securities, net of tax. The Company’s stockholders’ equity to assets ratio was 12.84%, as compared to 12.69% and book value per share increased to $29.27, as compared to $29.08. Comparison of Operating Results for the Three Months Ended March 31, 2025 and March 31, 2024 General Net income available to common stockholders decreased to $20.5 million, or $0.35 per diluted share, as compared to $27.7 million, or $0.47 per diluted share. Net income for the quarter ended March 31, 2025 included net gains on equity investments of $205,000, which increased net income by $156,000, net of tax. Net income for the quarter ended March 31, 2024 included net gains on equity investments of $1.9 million, a net gain on sale of a portion of its trust business of $1.2 million and a special FDIC assessment of $418,000. These items increased net income by $2.0 million, net of tax, for the quarter ended March 31, 2024. Interest Income Interest income decreased to $153.7 million, from $161.6 million, as the average balance of interest-earning assets decreased by $238.4 million, primarily due to a decrease in commercial loans and securities. The yield on average interest-earning assets decreased to 5.13%, from 5.26%. Interest Expense Interest expense decreased to $67.1 million from $75.4 million, as the average balance of interest-bearing liabilities decreased by $226.1 million, primarily due to decreases in savings, time deposits and other borrowings, largely offset by an increase in FHLB advances. The cost of average interest-bearing liabilities decreased to 2.78%, from 3.03%, primarily due to lower cost of deposits and, to a lesser extent, FHLB advances. The total cost of deposits (including non-interest-bearing deposits) decreased 25 basis points to 2.06%, from 2.31%. 7 Table of Contents Net Interest Income and Margin Net interest income increased to $86.7 million, from $86.2 million, primarily reflecting the net impact of the decreasing interest rate environment. The net interest margin increased to 2.90%, from 2.81%, primarily due to the decrease in cost of funds outpacing the decrease in yield on average interest-earning assets. Provision for Credit Losses Provision for credit losses was $5.3 million, as compared to $591,000. The current quarter provision was primarily driven by elevated uncertainty around macroeconomic conditions. Net loan charge-offs were $636,000, as compared to $349,000. The current quarter includes charge-offs of $720,000 related to the sale of $5.1 million non-performing residential and consumer loans. Non-interest Income Other income decreased to $11.3 million, as compared to $12.3 million. Other income was favorably impacted by net gains on equity investments of $205,000 in the current quarter. Other income in the prior year was favorably impacted by net gains on equity investments of $1.9 million and a net gain on sale of a portion of its trust business of $1.2 million. The remaining increase of $1.8 million was primarily driven by increases in net gain on sale of loans of $501,000, commercial loan swap income of $482,000, and non-recurring other income of $842,000. Non-interest Expense Operating expenses increased to $64.3 million, as compared to $58.7 million. Operating expenses in the prior year were adversely impacted by an FDIC special assessment of $418,000. The remaining increase of $6.0 million was primarily driven by an increase in compensation and benefits of $4.0 million, mostly due to acquisitions at the end of the prior year and annual merit increases. Additional drivers were increases in other operating expenses of $1.0 million, due to additional loan servicing expense, and data processing expense of $691,000, partly due to acquisitions at the end of the prior year. Income Tax Expense The provision for income taxes was $6.8 million, as compared to $10.6 million. The effective tax rate was 24.1%, as compared to 27.1%. The prior year’s effective tax rate was negatively impacted by 3.0% due to a one-time write-off of a deferred tax asset of $1.2 million. Liquidity and Capital Resources Liquidity Management The Company manages its liquidity and funding needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses liquidity and management monitors the adherence to policy limits to satisfy current and future cash flow needs. The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources and availability, stress testing, collateral management, and other qualitative and quantitative metrics. Management monitors cash on a daily basis to determine the liquidity needs of the Bank and OceanFirst Financial Corp. (the “Parent Company”), a separate legal entity from the Bank. Additionally, management performs multiple liquidity stress test scenarios on a periodic basis. As of March 31, 2025, the Bank and the Parent Company continued to maintain adequate liquidity under all stress scenarios. The Company also has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management. 8 Table of Contents The Company continually evaluates its on-balance sheet liquidity, including cash and unpledged securities and funding capacity at the FHLB and FRB Discount Window, and periodically tests each of its lines of credit. As of March 31, 2025, total on-balance sheet liquidity and funding capacity was $3.4 billion. The Company has a highly operational and granular deposit base, with long-standing client relationships across multiple customer segments providing stable funding. The vast majority of the government deposits are protected by the FDIC insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank. At March 31, 2025, the Bank reported in its Call Report $5.90 billion of estimated uninsured deposits. This total included $2.48 billion of collateralized government deposits and $1.67 billion of intercompany deposits of fully consolidated subsidiaries, leaving estimated adjusted uninsured deposits of $1.75 billion, or 17% of total deposits. On-balance-sheet liquidity and funding capacity represented 191% of the estimated adjusted uninsured deposits. The primary sources of liquidity specifically available to the Parent Company are dividends from the Bank, proceeds from the sale of investments, and the issuance of debt, preferred and common stock. For the three months ended March 31, 2025, the Parent Company received dividend payments of $20.0 million from the Bank. At March 31, 2025, the Parent Company held $109.1 million in cash and cash equivalents. The Bank’s primary sources of funds are deposits, principal and interest payments on loans and investments, FHLB advances, and other borrowings . While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment sales are greatly influenced by interest rates, economic conditions, and competition. The Bank has other sources of liquidity if a need for additional funds arises, including lines of credit at multiple financial institutions and access to the FRB discount window. As of March 31, 2025, the Company pledged $7.23 billion of loans with the FHLB and FRB to enhance the Company’s borrowing capacity, which included collateral pledged to the FHLB to obtain a municipal letter of credit to collateralize certain municipal deposits. The Company also pledged $1.02 billion of securities to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law. The Company had $891.0 million of FHLB advances, including $159.5 million of overnight borrowings as of March 31, 2025, as compared to $1.07 billion of FHLB term advances and no outstanding overnight borrowings from the FHLB at December 31, 2024. The Company’s cash needs for the quarter ended March 31, 2025 were primarily satisfied by principal repayments of debt securities and the increase in deposits, and primarily utilized for the repayment of FHLB advances. Off-Balance Sheet Commitments and Contractual Obligations In the normal course of business, the Bank routinely enters into various off-balance sheet commitments, primarily relating to the origination and funding of loans. At March 31, 2025, outstanding commitments to originate loans totaled $504.4 million and outstanding undrawn lines of credit totaled $1.30 billion, of which $994.1 million were commitments to commercial and commercial construction borrowers and $302.0 million were commitments to consumer and residential construction borrowers. Commitments to fund undrawn lines of credit and commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the existing contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company’s exposure to credit risk is represented by the contractual amount of the instruments. At March 31, 2025, the Company also had various contractual obligations, which included debt obligations of $1.15 billion, including finance lease obligations of $1.4 million, and an additional $17.6 million in operating lease obligations included in other liabilities. The Company expects to have sufficient funds available to meet current commitments in the normal course of business. Time deposits scheduled to mature in one year or less totaled $2.08 billion at March 31, 2025. If these deposits do not remain with the Company, it may need to seek other sources of funds, including other deposit products, advances from the Federal Home Loan Bank of New York and other borrowing sources. Liquidity Used in Stock Repurchases and Cash Dividends Under the Company’s stock repurchase program, shares of OceanFirst Financial Corp. common stock may be purchased in the open market and through other privately-negotiated transactions, from time-to-time, depending on market conditions. The repurchased shares are held as treasury stock for general corporate purposes. For the quarter ended March 31, 2025, the Company repurchased 398,395 shares of its common stock totaling $6.9 million. Of these repurchased shares, 76,058 shares were repurchased outside of the Company’s stock repurchase program at an average share price of $18.01. The Company 9 Table of Contents repurchased these shares from employees that elected to sell to cover their withholding tax obligations on vested stock awards. At March 31, 2025, there were 1,228,863 shares available to be repurchased under the authorized stock repurchase program. Cash dividends on common stock declared and paid during the three months of March 31, 2025 were $11.7 million. Cash dividends on preferred stock declared and paid during the three months of March 31, 2025 were $1.0 million. On May 15, 2025, the Company will redeem 57,370 shares of its 7.00% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, constituting all of the outstanding shares of the Series A Preferred Stock. The Company’s ability to continue to repurchase shares of common stock and pay dividends remains dependent upon capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations. If applicable regulations or regulatory bodies prevent the Bank from paying a dividend to the Company, the Company may not have the liquidity necessary to repurchase shares of common stock or pay a dividend in the future or pay a dividend at the same rate as historically paid or be able to meet current debt obligations. Additionally, regulations of the Federal Reserve may prevent the Company from either paying or increasing the cash dividend to common stockholders. These regulatory policies may affect the ability of the Parent Company to pay dividends, repurchase shares of common stock, or otherwise engage in capital distributions. Capital Management The Company manages its capital sources, uses, and expected future needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses capital and management monitors the adherence to policy limits to satisfy current and future capital needs. The policy includes internal limits, monitoring of key indicators, sources and availability, intercompany transactions, forecasts and stress testing, and other qualitative and quantitative metrics. Additionally, management performs multiple capital stress test scenarios periodically, varying loan growth, earnings, access to the capital markets, credit losses, and mark-to-market losses in the investment portfolio, including both available-for-sale and held-to-maturity. As of March 31, 2025, the Bank and Parent Company continued to maintain adequate capital under all stress scenarios, including a scenario where all losses related to the investment securities portfolio are realized. The Bank and the Parent Company also have detailed contingency capital plans and obtain comprehensive reporting of capital trends on a regular basis, which are reviewed by management and the Board. 10 Table of Contents Regulatory Capital Requirements As of March 31, 2025 and December 31, 2024, the Company and the Bank satisfied all regulatory capital requirements currently applicable as follows (dollars in thousands): Actual For capital adequacy purposes To be well-capitalized under prompt corrective action As of March 31, 2025 Amount Ratio Amount Ratio Amount Ratio Company: Tier 1 capital (to average assets) $ 1,242,807 9.73 % $ 511,051 4.00 % N/A N/A Common equity Tier 1 (to risk-weighted assets) 1,112,280 11.24 692,621 7.00 (1) N/A N/A Tier 1 capital (to risk-weighted assets) 1,242,807 12.56 841,040 8.50 (1) N/A N/A Total capital (to risk-weighted assets) 1,449,013 14.64 1,038,932 10.50 (1) N/A N/A Bank: Tier 1 capital (to average assets) $ 1,169,501 9.22 % $ 507,612 4.00 % $ 634,515 5.00 % Common equity Tier 1 (to risk-weighted assets) 1,169,501 11.92 686,738 7.00 (1) 637,685 6.50 Tier 1 capital (to risk-weighted assets) 1,169,501 11.92 833,896 8.50 (1) 784,843 8.00 Total capital (to risk-weighted assets) 1,250,707 12.75 1,030,106 10.50 (1) 981,054 10.00 As of December 31, 2024 Company: Tier 1 capital (to average assets) $ 1,235,832 9.50 % $ 520,239 4.00 % N/A N/A Common equity Tier 1 (to risk-weighted assets) 1,105,180 11.17 692,897 7.00 (1) N/A N/A Tier 1 capital (to risk-weighted assets) 1,235,832 12.49 841,375 8.50 (1) N/A N/A Total capital (to risk-weighted assets) 1,437,278 14.52 1,039,345 10.50 (1) N/A N/A Bank: Tier 1 capital (to average assets) $ 1,161,564 8.99 % $ 516,798 4.00 % $ 645,998 5.00 % Common equity Tier 1 (to risk-weighted assets) 1,161,564 11.83 687,383 7.00 (1) 638,284 6.50 Tier 1 capital (to risk-weighted assets) 1,161,564 11.83 834,679 8.50 (1) 785,580 8.00 Total capital (to risk-weighted assets) 1,238,011 12.61 1,031,074 10.50 (1) 981,975 10.00 (1) Includes the Capital Conservation Buffer of 2.50%. At March 31, 2025 and December 31, 2024, the Company and the Bank satisfied the criteria to be “well-capitalized” under the Prompt Corrective Action regulations. At March 31, 2025 and December 31, 2024, the Company maintained a stockholders’ equity to total assets ratio of 12.84% and 12.69%, respectively. 11 Table of Contents Lending Activities Loan Portfolio Composition . At March 31, 2025, the Company had total loans outstanding of $10.13 billion, of which $5.20 billion, or 51.4% of total loans, were investor owned commercial real estate, multi-family, and construction (including residential development loans), (collectively, “commercial real estate - investor”). The remainder of the portfolio consisted of commercial and industrial loans of which $896.6 million were commercial and industrial - real estate, or 8.9% of total loans; and $748.6 million were commercial and industrial - non-real estate loans, or 7.4% of total loans; $3.05 billion were residential real estate loans, or 30.2% of total loans; and $226.6 million were consumer loans, primarily home equity loans and lines of credit, or 2.2% of total loans. At March 31, 2025, the Company reclassified loans secured by owner-occupied commercial real estate to commercial and industrial - real estate to reflect the variation in the management and underlying risk profile of such loans as compared with non-owner-occupied (“investor”) commercial real estate loans. Similarly, the Company also reclassified commercial and industrial loans that were not secured by real estate to commercial and industrial - non-real estate. Collectively, these two loan portfolios are referred to as ‘Commercial and industrial” loans. Commercial Real Estate - Investor Owne d . At March 31, 2025, the Bank’s total investor owned commercial real estate loans outstanding were $5.20 billion, or 51.4% of total loans, as compared to $5.29 billion, or 52.3% of total loans at December 31, 2024. Th e Bank originates investor owned commercial real estate loans that are secured by properties, or properties under construction, that are generally used for busin ess purposes such as office, industrial, multi-family, or retail facilities. A substantial majority of the Bank’s investor owned commercial real estate loans are located in its primary market area. The Bank performs extensive due diligence in underwriting commercial real estate loans due to the larger loan amounts and the riskier nature of such loans. The Bank assesses and mitigates the risk in several ways, including inspection of all such properties and the review of the overall financial condition of the borrower and guarantors, which include, for example, the review of the rent rolls and applicable leases/lease terms and conditions and the verification of income. A tenant analysis and market analysis are part of the underwriting. Investor owned commercial real estate loans are among the largest of the Bank’s loans and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy, as a result, the Bank is particularly vigilant of this portfolio. The Bank believes this portfolio is highly diversified with loans secured by a variety of property types and the portfolio exhibits stable credit quality. The following table presents the Company’s commercial real estate - investor owned loans by industry as of March 31, 2025: As of March 31, 2025 (dollars in thousands) Amount Percent of Total Weighted Average LTV (1) Weighted Average Debt Service Coverage Ratio (2) Office $ 513,065 11 % 49 % 1.9x Medical 279,747 6 56 1.8 Credit Tenant 257,847 6 65 1.5 Total Office (3) 1,050,659 23 55 1.8 Retail 1,012,729 22 53 2.0 Multi-family (4) 851,245 19 56 1.7 Industrial/warehouse 713,189 16 48 2.1 Hospitality 176,776 4 47 2.1 Other (5) 707,311 16 51 1.7 Total 4,511,909 100 % 53 1.9 Construction 688,228 Total CRE investor owned $ 5,200,137 (1) Represents the weighted average of loan balances as of March 31, 2025 divided by their most recent appraisal value, which is generally obtained at the time of origination. (2) Represents the weighted average of net operating income on the property before debt service divided by the loan’s respective annual debt service based on the most recent credit review of the borrower. 12 Table of Contents (3) Central business district (“CBD”) exposure represented $119 million, or 6.8%, of the total office loan balance at March 31, 2025. Office CBD loans had a weighted average LTV of 54% and weighted average debt service coverage ratio of 1.8x at March 31, 2025. $85 million, or 72%, of the total office CBD exposure are to credit tenants, life sciences and medical borrowers at March 31, 2025. New York City office CBD loans represented $7 million, or 0.05% of the Company’s total assets at March 31, 2025. (4) New York City rent-regulated multi-family loans, where the property has more than 50% of its units rent-regulated, represent $31 million, or 0.23% of the Company’s total assets at March 31, 2025. (5) Other includes co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other. The following table presents total commercial real estate - investor owned loans by geography (generally based on location of collateral) as of March 31, 2025: As of March 31, 2025 (dollars in thousands) Amount Percent of Total New York $ 1,440,362 32 % Pennsylvania and Delaware 1,241,078 28 New Jersey 1,172,441 26 Massachusetts 126,110 3 Maryland and District of Columbia 138,322 3 Other 393,596 9 Total 4,511,909 100 % Construction 688,228 Total CRE investor owned $ 5,200,137 Asset quality . The following table sets forth information regarding the Company’s non-performing assets, consisting of non-performing loans and other real estate acquired through foreclosure. It is the policy of the Company to cease accruing interest on loans 90 days or more past due or in the process of foreclosure. March 31, December 31, 2025 2024 (dollars in thousands) Non-performing assets (1) : Commercial real estate – investor $ 23,595 $ 17,000 Commercial and industrial: Commercial and industrial - real estate 4,690 4,787 Commercial and industrial - non-real estate 22 32 Total commercial and industrial 4,712 4,819 Residential real estate (2) 5,709 10,644 Other consumer (2) 2,954 3,064 Total non-performing loans 36,970 35,527 Other real estate owned 1,917 1,811 Total non-performing assets $ 38,887 $ 37,338 PCD loans, net of allowance for loan credit losses $ 21,737 $ 22,006 Delinquent loans 30-89 days $ 46,246 $ 36,550 Allowance for loan credit losses as a percent of total loans (3) 0.78 % 0.73 % Allowance for loan credit losses as a percent of total non-performing loans (3) 213.14 207.19 Non-performing loans as a percent of total loans receivable 0.37 0.35 Non-performing assets as a percent of total assets 0.29 0.28 (1) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure. (2) The quarter ended March 31, 2025 included the sale of non-performing residential and consumer loans of $5.1 million. (3) Loans acquired from acquisitions were recorded at fair value. The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, were $5.6 million and $6.0 million at March 31, 2025 and December 31, 2024, respectively. 13 Table of Contents Overall asset quality metrics remained stable. The Company’s non-performing loans represented 0.37% and 0.35% of total loans, respectively. The allowance for loan credit losses as a percentage of total non-performing loans was 213.14%, as compared to 207.19%. The level of 30 to 89 days delinquent loans increased to $46.2 million, from $36.6 million, primarily related to two commercial relationships which were also classified as substandard loans. The Company’s allowance for loan credit losses was 0.78%, as compared to 0.73%. The Company classifies loans and other assets in accordance with regulatory guidelines. The table below excludes any loans held-for-sale and represents Special Mention and Substandard assets, including other real estate owned (in thousands): March 31, December 31, 2025 2024 Special Mention $ 23,811 $ 54,524 Substandard 127,371 105,344 Special mention and substandard assets, including other real estate owned, decreased by $8.7 million to $151.2 million at March 31, 2025 from $159.9 million at December 31, 2024. Net migrations from special mention to substandard assets was primarily due to one commercial relationship totaling $21.3 million which migrated during the three months ended March 31, 2025. Critical Accounting Policies and Estimates Note 1 to the Company’s Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried on the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of the Company’s financial condition and results of operations and high level of subjectivity. The critical accounting policy involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. The critical accounting policy and its application is reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors. Goodwill in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other, was a critical accounting estimate in the preparation of the consolidated financial statements at March 31, 2025 and December 31, 2024. Significant negative industry or economic trends, including declines in the market price of the Company’s stock, reduced estimates of future cash flows or business disruptions could result in impairments to goodwill in the future, which may result in recording an impairment loss. Any resulting impairment loss may have a material adverse impact on the Company’s financial condition and results of operations and is considered a non-cash event with no impact to the Company’s regulatory capital ratios, liquidity position, and ongoing operations. Management continued to carefully assess and evaluate all available information for potential triggering events and concluded no triggering events were identified through the reporting period. The Company customarily performs its annual goodwill impairment assessment during the third quarter. Impact of New Accounting Pronouncements Accounting Pronouncements Adopted in 2025 In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, “Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement”. The amendments in this ASU require that a joint venture, upon formation, apply a new basis of accounting and initially measure assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance. This update will be effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Early adoption is permitted. The adoption of this standard did not have an impact on the Company’s consolidated financial statements. 14 Table of Contents Recent Accounting Pronouncements Not Yet Adopted In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this standard to have a material impact on the Company’s consolidated financial statements. In November 2024, FASB issued ASU 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)”. The amendments in this ASU require expanded disclosure and disaggregation of certain costs and expenses including, but not limited to, purchases of inventory, employee compensation, depreciation, depletion, and amortization. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and interim periods for fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements. In November 2024, FASB issued ASU 2024-04, “Debt - Debt with Conversion and Other Options (Subtopic 470-20)”. The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2025, and interim periods for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements. Private Securities Litigation Reform Act Safe Harbor Statement In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project”, “will”, “should”, “may”, “view”, “opportunity”, “potential”, or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: changes in interest rates, inflation, general economic conditions, including potential recessionary conditions, levels of unemployment in the Company’s lending area, real estate market values in the Company’s lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, the imposition of tariffs or other domestic or international governmental policies, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company’s deposit portfolio and the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, competition, demand for financial services in the Company’s market area, changes in consumer spending, borrowing and saving habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the impact of pandemics on our operations and financial results and those of our customers and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, under Item 1A - Risk Factors and elsewhere, and subsequent securities filings and should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 15 Table of Contents