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Incentive Plans | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Incentive Plans | Incentive Plans The Company offers long-term incentive plans that provide for the granting of stock awards (both time-vested and performance-based) and stock options, as well as phantom stock units. The Company has established these plans to attract and retain qualified personnel in key positions, provide officers, employees, and non-employee directors with a proprietary interest in the Company as an incentive to contribute to the success of the Company, align the interests of management with those of other stockholders and reward employees for outstanding performance. All officers, other employees, and non-employee directors of the Company and its affiliates are eligible to receive awards under the plans. Overview of Incentive Plans The OceanFirst Financial Corp. 2011 Stock Incentive Plan, which authorized the granting of stock options or awards of common stock, was approved by stockholders in 2011. This plan was subsequently amended in 2017 to increase the number of authorized shares available for grant and to update the performance goals under which performance-based awards may be granted. The OceanFirst Financial Corp. 2020 Stock Incentive Plan, which also authorized the granting of stock options or awards of common stock, was approved by stockholders in 2020. This plan was subsequently amended in 2021 to increase the number of shares authorized for issuance through equity awards. The following table presents the amount of the plans’ authorized shares and those that remain available for issuance as of December 31, 2022. Both plans allowed the Company to authorize shares subject to options or, in lieu of options, shares in the form of stock awards.
|  | Authorized Awards |  | Authorized but Not Issued
|  | Stock Options |  | or |  | Stock Awards |  | Stock Options |  | or |  | Stock Awards
2020 Plan |  | 6,950,000 |  |  |  |  | 2,780,000 |  |  | 4,354,574 |  |  |  |  | 1,741,830 |
2011 Plan |  | 4,000,000 |  |  |  |  | 1,600,000 |  |  | 200,003 |  |  |  |  | 80,001 |
Total |  | 10,950,000 |  |  |  |  | 4,380,000 |  |  | 4,554,577 |  |  |  |  | 1,821,831 |
Stock Awards The Company grants time-based and performance-based stock awards. Time-based awards vest ratably, and generally have a three- to five- year vesting period. Performance-based stock awards, which are granted to certain senior executives, vest based on the estimated probability of achievement of defined tiered performance goals or include market-based conditions. Tiered performance goals for each metric are aligned with corresponding tiered vesting values and have been set using financial data from the applicable strategic plan as approved by the Board. The Company granted performance-based stock awards in 2022, 2021 and 2020. The 2022 performance-based stock awards were issued with a three year cliff vesting schedule and the 2021 and 2020 performance-based stock awards vest in equal amounts over a four- to five-year period. The 2022 performance-based stock awards include market-based condition awards. The fair value of these awards were estimated through the use of the Monte Carlo valuation model applying the following assumptions:
|  |  |  |  |  | 2022
Risk-free interest rate |  |  |  |  |  | 1.36 | %
Expected performance period |  |  |  |  |  | 2.9 years
Expected volatility |  |  |  |  |  | 41.10 | %
The risk-free interest rate is based on the U.S Treasury rate, at valuation date, with a term equal to the expected performance period. The expected performance period reflects the remaining term of the awards’ performance period. Expected volatility is based on actual historical results. A summary of the granted but unvested stock award activity, which included both time- and performance-based stock awards, for the years ended December 31, 2022, 2021 and 2020 is as follows:
|  | 2022 |  | 2021 |  | 2020
|  | Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding at beginning of year: |  | 778,971 |  |  | $ | 22.30 |  |  | 575,996 |  |  | $ | 23.42 |  |  | 451,443 |  |  | $ | 25.61 |
Granted |  | 279,750 |  |  | 21.47 |  |  | 388,392 |  |  | 21.53 |  |  | 256,649 |  |  | 20.38 |
Vested |  | (190,094) |  |  | 23.14 |  |  | (126,292) |  |  | 24.04 |  |  | (96,564) |  |  | 24.41 |
Forfeited |  | (33,287) |  |  | 22.17 |  |  | (59,125) |  |  | 24.39 |  |  | (35,532) |  |  | 26.56 |
Outstanding at end of year |  | 835,340 |  |  | $ | 21.84 |  |  | 778,971 |  |  | $ | 22.30 |  |  | 575,996 |  |  | $ | 23.42 |
Stock Options The Company’s stock options expire 10 years from the date of grant and generally vest at a rate of 20% per year. The exercise price of each option equals the closing market price of the Company’s stock on the grant date. The Company typically issues treasury shares or authorized but unissued shares to satisfy stock option exercises. The Company did not grant stock options for the years ended December 31, 2022 and 2021. The fair value of stock options granted in 2020 was estimated through the use of the Black-Scholes option pricing model applying the following assumptions:
|  |  |  |  |  | 2020
Risk-free interest rate |  |  |  |  |  | 1.03 | %
Expected option life |  |  |  |  |  | 7 years
Expected volatility |  |  |  |  |  | 23 | %
Expected dividend yield |  |  |  |  |  | 3.33 | %
Weighted average fair value of an option share granted during the year |  |  |  |  |  | $ | 2.93 |
Intrinsic value of options exercised during the year (in thousands) |  |  |  |  |  | 2,499 |
The risk-free interest rate is based on the U.S. Treasury rate with a term equal to the expected option life. The expected option life conforms to the Company’s actual experience. Expected volatility is based on actual historical results. A summary of option activity for the years ended December 31, 2022, 2021 and 2020 is as follows:
|  | 2022 |  | 2021 |  | 2020
|  | Number of Shares |  | Weighted Average Exercise Price |  | Number of Shares |  | Weighted Average Exercise Price |  | Number of Shares |  | Weighted Average Exercise Price
Outstanding at beginning of year |  | 2,458,255 |  |  | $ | 21.02 |  |  | 2,838,867 |  |  | $ | 20.67 |  |  | 2,424,032 |  |  | $ | 19.80 |
Granted |  | — |  |  | — |  |  | — |  |  | — |  |  | 699,651 |  |  | 20.44 |
Exercised |  | (217,038) |  |  | 14.17 |  |  | (264,717) |  |  | 14.80 |  |  | (213,506) |  |  | 9.50 |
Forfeited |  | — |  |  | — |  |  | (1,828) |  |  | 23.78 |  |  | (6,357) |  |  | 21.26 |
Expired |  | (30,533) |  |  | 23.68 |  |  | (114,067) |  |  | 26.62 |  |  | (64,953) |  |  | 22.51 |
Outstanding at end of year |  | 2,210,684 |  |  | $ | 21.66 |  |  | 2,458,255 |  |  | $ | 21.02 |  |  | 2,838,867 |  |  | $ | 20.67 |
Options exercisable |  | 1,645,901 |  |  |  |  | 1,583,521 |  |  |  |  | 1,596,927 |  |  |
The following table summarizes information about stock options outstanding at December 31, 2022:
|  | Options Outstanding |  | Options Exercisable
Exercise Prices |  | Number of Options |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |  | Number of Options |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price
$11.70 to $16.03 |  | 194,374 |  |  | 0.3 years |  | $ | 14.19 |  |  | 194,374 |  |  | 0.3 years |  | $ | 14.19 |
16.04 to 20.36 |  | 464,706 |  |  | 2.2 |  | 17.45 |  |  | 464,706 |  |  | 2.2 |  | 17.45 |
20.37 to 24.69 |  | 733,485 |  |  | 6.9 |  | 20.55 |  |  | 334,172 |  |  | 6.6 |  | 20.68 |
24.70 to 29.01 |  | 818,119 |  |  | 5.2 |  | 26.82 |  |  | 652,649 |  |  | 5.0 |  | 27.16 |
|  | 2,210,684 |  |  | 4.7 years |  | $ | 21.66 |  |  | 1,645,901 |  |  | 4.0 years |  | $ | 21.57 |
The aggregate intrinsic value for stock options outstanding and stock options exercisable at December 31, 2022 was $3.7 million and $3.4 million, respectively. Phantom Stock Units In 2022, the Company also established the OceanFirst Bank Phantom Equity Plan to issue phantom stock units to select senior management employees. The phantom stock units are liability-classified time-based awards, which vest ratably over a three- to five- year period. The fair value is determined based on the Company’s stock price at the grant date and remeasured quarterly. The phantom stock units are settled in cash when they vest. Compensation Expense The compensation expense for stock awards, stock options and phantom stock units were as follows (in thousands):
|  | For the Year Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Stock awards |  | $ | 5,698 |  |  | $ | 4,161 |  |  | $ | 2,792 |
Stock options |  | 940 |  |  | 1,244 |  |  | 1,466 |
Phantom stock units |  | 554 |  |  | — |  |  | — |
Total |  | $ | 7,192 |  |  | $ | 5,405 |  |  | $ | 4,258 |
At December 31, 2022, the Company had an estimated $15.1 million of unrecognized compensation costs related to non-vested stock awards, stock options, and phantom stock units. This cost will be recognized over the remaining vesting period of 2.23 years.

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