8-K: OceanFirst Financial Corp. Amends Executive Retirement Agreement for CEO Christopher D. Maher

OceanFirst Financial Corp. has amended its Supplemental Executive Retirement Account Agreement with CEO Christopher D. Maher to clarify the treatment of benefits in the event of termination due to disability.

Summary

• OceanFirst Financial Corp. has amended and restated its Supplemental Executive Retirement Account Agreement with Christopher D. Maher, Chairman, President, and CEO, effective March 28, 2025.
• The amendment clarifies the treatment of benefits if Maher's employment is terminated due to disability, ensuring he receives the account balance plus the amount to be credited for that plan year.
• The original agreement was executed on June 13, 2013, and the amended agreement aims to comply with Section 409A of the Internal Revenue Code.
• The agreement outlines various scenarios for benefit payouts, including service to age 65, separation from service (with and without cause), resignation (with and without good reason), disability, and change in control.
• The agreement details how the account balance is calculated, including annual credit amounts and assumed interest, and specifies payment timelines for different separation scenarios.
• The agreement also covers death benefits, beneficiary designations, and general limitations, such as those related to misstatements, removal from office, or default of the bank.
• The agreement includes provisions for claims and review procedures, administration of the agreement, amendments, termination, and other miscellaneous items such as tax withholding and applicable law.
• The agreement includes a schedule of credit amounts due each year, ranging from $27,719 in 2013 to $60,147 in 2031.

Sentiment

Score: 7

Explanation: The document is a standard legal agreement outlining executive compensation terms. It is generally positive for the executive as it clarifies benefits in case of disability. The sentiment is neutral to slightly positive from an investment perspective as it provides transparency regarding executive compensation.

Positives

• The amendment provides clarity regarding the treatment of benefits in the event of termination due to disability, which reduces uncertainty for the executive.
• The agreement includes a provision for the payment of legal fees up to $500,000 if, after a change in control, the bank fails to comply with its obligations or attempts to deny Maher the intended benefits, which protects the executive's interests.
• The agreement outlines various scenarios for benefit payouts, including termination for cause, resignation without good reason, resignation for good reason, termination without cause, and change in control, which provides a comprehensive framework for benefit distribution.

Negatives

• If the Executive's Separation from Service is a Termination with Cause prior to his 65th birthday, no further benefits shall be paid under this Agreement and this Agreement shall terminate.
• If the Executive's Separation from Service occurs prior to the Executive's 65th birthday due to the Executive's resignation without Good Reason, the Credit Amounts for the five Plan Years preceding such resignation, less the Assumed Interest on such Credit Amounts for such Plan Years, shall be forfeited.

Risks

• The agreement is subject to Section 409A of the Internal Revenue Code, which could impact the timing and form of benefit payments.
• The agreement includes limitations related to misstatements, removal from office, or default of the bank, which could result in the termination of benefits.
• The agreement is unfunded, meaning that benefits are payable out of the bank's general assets and are subject to the bank's financial condition.

Future Outlook

The agreement outlines the terms and conditions for future benefit payouts based on various scenarios, including continued service, separation from service, disability, death, and change in control.

Industry Context

Executive compensation arrangements like SERPs are common in the financial services industry to attract and retain key talent. These agreements often include provisions for various separation scenarios and are designed to align executive interests with those of the company and its shareholders.

Comparison to Industry Standards

• Supplemental Executive Retirement Plans (SERPs) are common in the banking industry to provide additional retirement benefits to key executives beyond qualified retirement plans.
• The structure of OceanFirst's SERP, with annual credit amounts and assumed interest, is consistent with industry practices.
• The inclusion of provisions for change in control and disability is also standard in executive compensation agreements.
• Comparable companies like PNC Financial Services and M&T Bank also utilize SERPs as part of their executive compensation packages.
• The specific credit amounts and interest rates may vary based on company size, performance, and executive responsibilities.

Stakeholder Impact

• Shareholders: The agreement provides transparency regarding executive compensation, which can impact shareholder confidence.
• Employees: The agreement may have a positive impact on employee morale by demonstrating the company's commitment to its executives.
• Executive: The agreement provides clarity and security regarding retirement benefits, which can improve job satisfaction and retention.

Next Steps

• The Bank will continue to administer the SERP according to the terms of the amended and restated agreement.
• The Bank will provide the Executive with annual statements of the Account Balance.
• The Bank will make benefit payments according to the terms of the agreement upon the occurrence of a triggering event, such as retirement, separation from service, disability, death, or change in control.

Key Dates

Keywords

Supplemental Executive Retirement Account, SERP, Christopher D. Maher, OceanFirst Financial Corp., Executive Compensation, Retirement Agreement, Disability, Section 409A