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Incentive Plan
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Incentive Plan Incentive Plan
On April 20, 2006, the OceanFirst Financial Corp. 2006 Stock Incentive Plan, which authorizes the granting of stock options or awards of common stock, was approved by stockholders. On May 5, 2011, the OceanFirst Financial Corp. 2011 Stock Incentive Plan, which also authorizes the granting of stock options or awards of common stock, was approved by stockholders. This plan was subsequently amended on June 2, 2017. In January 2018, the Company implemented a performance-based stock plan for directors and select senior management executives. The purpose of these plans is to attract and retain qualified personnel in key positions, provide officers, employees and non-employee directors (“Outside 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 Outside Directors of the Company and its affiliates are eligible to receive awards under the plans.
Under the amended 2011 Stock Incentive Plan, the Company is authorized to issue up to an additional 4,000,000 shares subject to option or, in lieu of options, up to 1,600,000 shares in the form of stock awards. At December 31, 2019, 261,527 options or 104,611 awards remain to be issued. Under the 2006 Stock Incentive Plan, the Company was authorized to issue up to an additional 1,000,000 shares subject to options, or in lieu of options, up to 333,333 shares in the form of stock awards. At December 31, 2019, no options or awards remain to be issued.
As part of the Cape acquisition, 599,373 options were granted in 2016 for the conversion of outstanding Cape options. These options had a weighted average exercise price of $10.34 per option and were fully vested upon acquisition. As part of the Ocean Shore acquisition, 287,595 options were granted in 2016 for the conversion of outstanding Ocean Shore options. These options had a weighted average exercise price of $9.37 per option and were fully vested upon acquisition. As part of the Sun acquisition, 491,248 options were granted in 2018 for the conversion of outstanding Sun options. These options had a weighted average exercise price of $21.92 per option and were fully vested upon acquisition. The Company will not recognize compensation expense in the future on these options as they have been accounted for as part of the acquisition.
Stock awards generally vest at the rate of 20% per year. In 2019 and 2018, the Company granted performance-based awards, which vest in equal amounts over a 3 year period when a specific performance metric has been attained or exceeded. Options expire 10 years from the date of grant and generally vest at the rate of 20% per year. The exercise price of each option equals the closing market price of the Company’s stock on the date of grant. The Company typically issues Treasury shares or authorized but unissued shares to satisfy stock option exercises.
The Company recognizes the grant-date fair value of stock options and other stock-based compensation issued to employees in the income statement. The modified prospective transition method was adopted and, as a result, the income statement includes $973,000, $1.0 million, and $1.2 million, of expense for stock option grants and $2.9 million, $2.0 million, and $1.0 million, of expense for stock award grants, for the years ended December 31, 2019, 2018 and 2017, respectively. At December 31, 2019, the Company had $10.4 million in compensation cost related to non-vested options and stock awards not yet recognized. This cost will be recognized over the remaining vesting period of 3.35 years.
The fair value of stock options granted by the Company was estimated through the use of the Black-Scholes option pricing model applying the following assumptions:
 
 
2019
 
2018
 
2017
Risk-free interest rate
 
2.63
%
 
2.65
%
 
2.31
%
Expected option life
 
7 years

 
7 years

 
7 years

Expected volatility
 
21
%
 
21
%
 
21
%
Expected dividend yield
 
2.70
%
 
2.19
%
 
2.07
%
 
 
 
 
 
 
 
Weighted average fair value of an option share granted during the year
 
$
4.47

 
$
5.44

 
$
5.62

Intrinsic value of options exercised during the year (in thousands)
 
2,994

 
8,513

 
7,882


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. Compensation cost is recognized on a straight line basis over the vesting period.
A summary of option activity for the years ended December 31, 2019, 2018 and 2017 is as follows:
 
 
2019
 
2018
 
2017
 
 
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
 
2,340,842

 
$
18.25

 
2,489,314

 
$
16.91

 
2,758,833

 
$
14.94

Granted
 
461,407

 
25.20

 
135,107

 
27.39

 
335,150

 
29.01

Assumed in acquisition
 
—

 
—

 
491,248

 
21.92

 
—

 
—

Exercised
 
(227,189
)
 
11.24

 
(765,624
)
 
17.69

 
(567,153
)
 
14.39

Forfeited
 
(149,158
)
 
24.71

 
(9,203
)
 
28.42

 
(35,099
)
 
18.42

Expired
 
(1,870
)
 
29.59

 
—

 
—

 
(2,417
)
 
11.70

Outstanding at end of year
 
2,424,032

 
$
19.80

 
2,340,842

 
$
18.25

 
2,489,314

 
$
16.91

Options exercisable
 
1,612,946

 
 
 
1,604,576

 
 
 
1,608,762

 
 

The following table summarizes information about stock options outstanding at December 31, 2019:
 
 
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
  $8.45 to 12.95
 
293,334

 
1.3 years
 
$
9.78

 
290,334

 
1.3 years
 
$
9.76

12.95 to 17.45
 
900,520

 
3.7
 
15.45

 
765,149

 
3.3
 
15.13

17.45 to 21.95
 
196,744

 
4.2
 
17.98

 
196,744

 
4.2
 
17.98

21.95 to 26.45
 
457,563

 
8.8
 
24.99

 
34,570

 
4.8
 
23.18

26.45 to 30.95
 
575,871

 
5.9
 
28.21

 
326,149

 
4.6
 
28.04

 
 
2,424,032

 
4.9 years
 
$
19.80

 
1,612,946

 
3.3 years
 
$
17.29


The aggregate intrinsic value for stock options outstanding and stock options exercisable at December 31, 2019 is $15.4 million and $14.1 million, respectively.
A summary of the granted but unvested stock award activity for the years ended December 31, 2019, 2018 and 2017 are as follows:
 
 
2019
 
2018
 
2017
 
 
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:
 
330,598

 
$
25.92

 
169,703

 
$
21.79

 
156,945

 
$
17.25

Granted
 
249,651

 
24.80

 
272,668

 
27.52

 
69,175

 
28.70

Vested
 
(105,307
)
 
24.49

 
(58,754
)
 
20.81

 
(47,379
)
 
17.32

Forfeited
 
(23,499
)
 
26.38

 
(53,019
)
 
26.60

 
(9,038
)
 
19.14

Outstanding at end of year
 
451,443

 
$
25.61

 
330,598

 
$
25.92

 
169,703

 
$
21.79