OCEANFIRST FINANCIAL CORPOCFC

OCEANFIRST FINANCIAL CORP Income Taxes Disclosure

10-KFiled Feb 27, 20266 min read
Income Taxes
The provision for income taxes for the years ended December 31, 2025, 2024 and 2023 consisted of the following (in thousands):
 For the Year Ended December 31,
 202520242023
Current
Federal$13,599 $23,315 $20,894 
State4,881 7,288 8,655 
Total current18,480 30,603 29,549 
Deferred
Federal2,748 214 4,250 
State261 (551)(1,099)
Total deferred3,009 (337)3,151 
Total provision for income taxes$21,489 $30,266 $32,700 
Included in other comprehensive income was the income tax impact attributable to the unrealized gain/loss on debt securities, accretion of unrealized losses on debt securities reclassified to held-to-maturity, unrealized loss on derivative hedges and the related reclassification adjustments included in net income. These items resulted in a tax expense of $4.5 million, $1.8 million and $4.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Income taxes that would have been computed at the statutory federal rate are reconciled to the total provision for income taxes and effective tax rate for the years ended December 31, 2025, 2024 and 2023 is as follows (dollars in thousands):
 For the Year Ended December 31,
 202520242023
AmountPercentAmountPercentAmountPercent
Income before provision for income taxes$92,516 $130,656 $136,765 
Federal income tax expense, at statutory rate19,428 21.0 %27,438 21.0 %28,721 21.0 %
Increase (decrease) in federal income tax expense resulting from:
State income taxes, net of federal benefit (1)
3,941 4.3 5,518 4.2 5,979 4.3 
Nontaxable or nondeductible items:
Earnings on BOLI
(1,628)(1.8)(1,660)(1.3)(1,109)(0.8)
Tax exempt interest(761)(0.8)(547)(0.4)(606)(0.4)
Merger related expenses620 0.7 — — — — 
Stock compensation68 0.1 391 0.3 (298)(0.2)
Dividends received deduction(241)(0.3)(322)(0.2)(368)(0.3)
Tax credits
Alternative minimum tax write-off— — 1,196 0.9 — — 
Research and development and other credits (610)(0.7)(735)(0.5)(557)(0.4)
Other items, net672 0.7 (1,013)(0.8)938 0.7 
Total provision for income taxes, at effective tax rate$21,489 23.2 %$30,266 23.2 %$32,700 23.9 %
(1) State taxes in New Jersey made up the majority (greater than 50%) of the tax effect in this category.
The difference between income taxes that would have been computed at the statutory federal rate and the total provision for income taxes at the Company's effective tax rate is primarily due to adjustments related to state income taxes, net of federal benefit, and earnings on BOLI during the years ended December 31, 2025 and 2024. In addition, the Company recorded an alternative minimum tax credit write-off during the year ended December 31, 2024. The Company's state income tax provision, net of federal benefit, increases the total tax provision as it is computed separately from the federal tax provision. Earnings on BOLI are tax exempt for federal income tax purposes and reduce the total tax provision. At December 31, 2023, the Company had $1.2 million of Alternative Minimum Tax credits that were part of the Sun acquisition, which were fully written off during 2024.

Income taxes paid for the years ended December 31, 2025, 2024 and 2023 consisted of the following (in thousands):
 For the Year Ended December 31,
 202520242023
Federal$16,149 $27,069 $22,200 
State and local
New Jersey2,614 3,242 2,658 
New York1,020 2,499 1,995 
New York City400 576 1,773 
Other506 400 705 
Total$20,689 $33,786 $29,331 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented in the following table (in thousands):
 December 31,
 20252024
Deferred tax assets:
Allowance for credit losses on loans and debt securities HTM
$21,529 $18,981 
Other reserves1,787 2,790 
Incentive compensation5,620 4,345 
Deferred compensation326 338 
Stock plans1,998 2,239 
Unrealized losses on assets held-for-sale225 347 
Unrealized losses on AFS securities897 5,346 
Net operating loss carryforwards related to acquisition17,030 19,053 
Section 174 capitalized costs4,967 5,457 
Other, net729 866 
Total gross deferred tax assets55,108 59,762 
Deferred tax liabilities:
Unrealized gain on equity securities(4,729)(4,568)
Premises and equipment(2,328)(3,104)
Deferred loan and commitment costs, net(5,740)(2,814)
Purchase accounting related adjustments(1,553)(1,698)
Investments, discount accretion(126)(185)
Other, net(1,058)(402)
Total gross deferred tax liabilities(15,534)(12,771)
Net deferred tax assets$39,574 $46,991 
The Company has federal net operating losses from the acquisitions of Colonial American and Sun. At December 31, 2025 and 2024, the net operating losses from Colonial American were $2.9 million and $3.3 million, respectively. These net operating losses are subject to annual limitation under Code Section 382 of approximately $22,000, and will expire between 2029 and 2034. At December 31, 2025 and 2024, the net operating losses from Sun were $78.1 million and $87.5 million, respectively.
These net operating losses are subject to annual limitation under Code Section 382 of approximately $9.3 million. These net operating losses will expire between 2029 and 2036.
At December 31, 2025, 2024 and 2023, the Company determined that it is not required to establish a valuation reserve for the remaining net deferred tax assets since it is “more likely than not” that the net deferred tax assets will be realized through future reversals of existing taxable temporary differences, future taxable income and tax planning strategies. The conclusion that it is “more likely than not” that the remaining net deferred tax assets will be realized is based on the history of earnings and the prospects for continued growth. Management will continue to review the tax criteria related to the recognition of deferred tax assets.
Retained earnings at December 31, 2025 included approximately $10.8 million for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate.
The Company’s federal and state income tax returns are routinely subject to examination by the Internal Revenue Service and New Jersey, New York, Pennsylvania, and several other state and city tax authorities the Company operates in. The Company believes the assumptions used to record tax-related assets or liabilities have been appropriate. However, such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions.

The Company is currently under examination by the New Jersey Division of Taxation in connection with the 2020 to 2023 tax years. As of December 31, 2025, the Company has not received any notices of proposed adjustments from this audit. The tax years that remain subject to examination by the federal government and most state or city tax authorities include the tax years 2021 and forward.
The Company incurred income tax expense of $1.8 million recognized in other comprehensive income related to Tax Reform in 2018. These amounts have been reported as separate components of accumulated other comprehensive income and reclassified and recognized as a net tax benefit in the periods in which the underlying transactions are settled through continuing operations. The amount included in accumulated other comprehensive income at December 31, 2025, subject to reclassification, was $265,000.
There were no unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023.
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Historical Timeline

Fiscal YearFiled
2025Feb 27, 2026Showing above
2024Feb 28, 2025
2023Feb 23, 2024
2022Feb 24, 2023
2021Feb 28, 2022

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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