Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________________ 
FORM 10-Q
________________________________________________  
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
2021
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-11713
________________________________________________  
OceanFirst Financial Corp.
(Exact name of registrant as specified in its charter)
________________________________________________ 
Delaware22-3412577
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
975 Hooper Avenue, Toms River, NJ110 West Front Street,08753Red Bank,NJ07701
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (732) 240-4500
________________________________________________  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareOCFCNASDAQ
Depositary Shares (each representing a 1/40th interest in a share of 7.0% Series A Non-Cumulative, perpetual preferred stock)OCFCPNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   ý    NO   oYes   ☒    No   ☐.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ý    NO  oYes  ☒    No  ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated Filer☐
Large Accelerated FilerýAccelerated Filero
Non-accelerated Filero☐Smaller Reporting Companyo☐
Emerging Growth Companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  o☐    NO  ý☒.
As of November 3, 20171, 2021 there were 32,582,47259,423,626 shares of the Registrant’s Common Stock, par value $.01$0.01 per share, outstanding.


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OceanFirst Financial Corp.
INDEX TO FORM 10-Q
 
PAGE
PART I.FINANCIAL INFORMATION
Item 1.Consolidated Financial Statements (unaudited)
1620
1721
1822
1923
2025
2227
Item 2.
3
Item 3.
1418
Item 4.
1519
PART II.
4752
Item 1.
4752
Item 1A.
4752
Item 2.
4952
Item 3.
5052
Item 4.
5052
Item 5.
5052
Item 6.
5154
5255


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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)September 30, 2021June 30, 2021September 30, 2020
SELECTED FINANCIAL CONDITION DATA:
Total assets$11,829,688 $11,483,901 $11,651,297 
Loans receivable, net of allowance for loan credit losses8,139,961 7,774,351 7,943,390 
Deposits9,774,097 9,415,286 9,283,288 
Stockholders’ equity1,513,249 1,508,789 1,461,714 
SELECTED OPERATING DATA:
Net interest income77,132 74,016 76,788 
Credit loss (benefit) expense(3,179)(6,460)35,714 
Other income9,883 11,803 8,179 
Operating expenses58,673 51,670 56,787 
Net income (loss)24,167 30,555 (4,926)
Net income (loss) available to common stockholders23,163 29,551 (6,019)
Diluted earnings (loss) per share0.39 0.49 (0.10)
SELECTED FINANCIAL RATIOS:
Stockholders’ equity per common share at end of period25.47 25.22 24.21 
Cash dividend per share0.17 0.17 0.17 
Dividend payout ratio per common share43.59 %34.69 %(170.00)%
Stockholders’ equity to total assets12.79 13.14 12.55 
Return on average assets (2) (3)
0.78 1.03 (0.21)
Return on average stockholders’ equity (2) (3)
6.05 7.88 (1.61)
Net interest rate spread (4)
2.80 2.75 2.77 
Net interest margin (5)
2.93 2.89 2.97 
Operating expenses to average assets (2) (3)
1.98 1.80 1.94 
Efficiency ratio (3) (6)
67.43 60.21 66.83 
Loans to deposits ratio83.71 83.06 86.19 
ASSET QUALITY:
Non-performing loans held-for-investment (8)
$23,344 $31,680 $29,895 
Non-performing assets (8)
23,450 31,786 97,490 
Allowance for loan credit losses as a percent of total loans held-for-investment (7) (9)
0.61 %0.69 %0.70 %
Allowance for loan credit losses as a percent of total non-performing loans held-for-investment (8) (9)
214.84 170.06 188.49 
Non-performing loans held-for-investment as a percent of total loans held-for-investment (7) (8)
0.29 0.41 0.37 
Non-performing assets as a percent of total assets (8)
0.20 0.28 0.84 
(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Ratios are annualized.
(3) Performance ratios include merger related expenses, branch consolidation expenses, and net loss on equity investments of $4.7 million, or $3.6 million, net of tax benefit, for the quarter ended September 30, 2021. Performance ratios include merger related expenses, branch consolidation expenses, and net gain on equity investments of $104,000, or $78,000, net of tax expense, for the quarter ended June 30, 2021. Performance ratios include merger related expenses, branch consolidation expenses, and net loss on equity investments of $7.6 million, or $5.8 million, net of tax benefit, for the quarter ended September 30, 2020.
(4) 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.
(5) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(6) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.
(7) Total loans receivable excludes loans held-for-sale.
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FINANCIAL SUMMARYAt or for the Quarters Ended
(dollars in thousands, except per share amounts)September 30, 2017 June 30, 2017 September 30, 2016
SELECTED FINANCIAL CONDITION DATA:     
Total assets$5,383,912
 $5,202,200
 $4,151,017
Loans receivable, net3,870,109
 3,868,805
 3,028,696
Deposits4,350,259
 4,176,909
 3,324,681
Stockholders’ equity596,252
 587,303
 417,244
SELECTED OPERATING DATA:     
Net interest income43,056
 42,174
 33,935
Provision for loan losses1,165
 1,165
 888
Other income7,359
 6,973
 5,896
Operating expenses30,733
 37,133
 25,026
Net income12,817
 7,679
 9,128
Diluted earnings per share0.39
 0.23
 0.35
SELECTED FINANCIAL RATIOS:     
Stockholders’ equity per common share18.31
 18.05
 16.14
Tangible stockholders’ equity per common share (1)
13.47
 13.19
 13.42
Cash dividend per share0.15
 0.15
 0.13
Stockholders’ equity to total assets11.07% 11.29% 10.05%
Tangible stockholders’ equity to total tangible assets (1)
8.39
 8.51
 8.50
Return on average assets (2) (3)
0.95
 0.59
 0.88
Return on average stockholders’ equity (2) (3)
8.60
 5.25
 8.77
Return on average tangible stockholders’ equity (1) (2) (3)
11.74
 7.19
 10.58
Net interest rate spread3.41
 3.48
 3.49
Net interest margin3.50
 3.57
 3.56
Operating expenses to average assets (2) (3)
2.29
 2.86
 2.43
Efficiency ratio (3) (4)
60.96
 75.55
 62.83
Loan to deposit ratio88.96
 92.62
 91.10
ASSET QUALITY:     
Non-performing loans$15,121
 $16,261
 $16,507
Non-performing assets24,455
 25,159
 25,614
Allowance for loan losses as a percent of total loans receivable0.42% 0.42% 0.51%
Allowance for loan losses as a percent of total non-performing loans109.68
 101.82
 94.61
Non-performing loans as a percent of total loans receivable0.39
 0.42
 0.54
Non-performing assets as a percent of total assets0.45
 0.48
 0.62
(8) Non-performing assets consist of non-performing loans held-for-investment and real estate acquired through foreclosure. Non-performing loans held-for-investment 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.
(9) Loans acquired from prior bank 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 $21.3 million, $23.6 million, and $31.6 million at September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(1)Tangible stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible.
(2)Ratios are annualized.
(3)
Performance ratios include the adverse impact of merger related and branch consolidation expenses of $3.2 million, or $2.1 million, net of tax benefit, for the quarter ended September 30, 2017; $8.6 million, or $5.6 million, net of tax benefit, for the quarter ended June 30, 2017; and $1.3 million, or $1.1 million, net of tax benefit, for the quarter ended September 30, 2016.

4
(4)Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.

Summary
OceanFirst Financial Corp. is the holding company for OceanFirst Bank N.A. (the “Bank”), a communityregional bank headquartered in Ocean County, New Jersey, serving business and retail customers throughout New Jersey and in the centralmajor metropolitan areas of Philadelphia, New York, Baltimore, Washington D.C., and southern New Jersey regions.Boston. The term “Company” refers to OceanFirst Financial Corp., OceanFirstthe Bank and all of the Bank’stheir 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, wealthtrust and asset management products and services, sales of loans and securities, deposit accounts, the sale of investment products,account services, bank owned life insurance, commercial loan originations, loan sales,swap income, and other fees. 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 also significantly affected by competition, general economic conditions, including levels of unemployment and competitive conditions, particularlyreal estate values, as well as changes in market interest rates, government policies and the actions of regulatory agencies.

Interest-earning assets, both loans and securities, are generally priced against longer-term indices, while interest-bearing liabilities, primarily deposits and borrowings, are generally priced against shorter-term indices. The Company has attempted to mitigate the adverse impact of relatively low absolute levels of interest rates by focusing on commercial loan and core deposit growth.

Over the past two years the Company has grown significantly through the acquisitions acquiring Capeof Two River Bancorp (“Two River”) and Country Bank Holding Company, Inc. (“Cape”Country Bank”) and Ocean City Home Bank (“Ocean Shore”) (the “Acquisition Transactions”). The Acquisition Transactions, each on January 1, 2020. These acquisitions added $2.5$2.03 billion in assets, and $2.1$1.56 billion in deposits. In addition, on June 30, 2017, the Company announced it had entered into a definitive agreement (the “merger agreement”) to acquire Sun Bancorp, Inc. (“Sun”). At September 30, 2017, Sun had total assets of $2.2loans and $1.59 billion total loans of $1.6 billion and total deposits of $1.7 billion. On October 24 and 25, 2017, Sun and the Company received their respective requisite stockholder approvals for the merger.  Regulatory approval of the merger was received from the Federal Reserve Bank of Philadelphia on October 17, 2017. The regulatory application for the transaction remains under review by the Office of the Comptroller of the Currency (“OCC”).   Subjectin deposits.
Key developments relating to receipt of OCC approval and other customary closing conditions, the Company expects to close the transaction in January 2018 and anticipates full integration of Sun’s branches and core operating systems in the second quarter of 2018.
Highlights of the Company’s financial results and corporate activities were as follows:

•Loan Growth: Total loan growth for the quarter was $361.0 million. Total loan growth, excluding the impact of Paycheck Protection Program (“PPP”) loans of $30.5 million, was $391.5 million for the quarter, reflecting quarterly loan originations of $771.8 million and the purchase of a residential loan pool of $219.7 million. Along with record loan production during the quarter, the committed loan pipeline remains strong at $651.4 million.
•Deposit Growth: Deposits increased $358.8 million during the third quarter, while cost of deposits decreased 5 basis points to 0.22% from 0.27% in the prior linked quarter, reflecting a trend in improving deposit quality.
•Net Interest Income and Margin: Net interest income increased by $3.1 million to $77.1 million from $74.0 million in the prior linked quarter. Net interest margin increased to 2.93%, compared to 2.89% in the prior linked quarter, largely driven by the Bank’s disciplined deposit pricing practices.
Net income available to common stockholders for the three months ended September 30, 2017 were as follows:

The Company grew deposits $173.4 million, reducing its loan to deposit ratio to 89.0%, while the cost of deposits increased only one basis point from the prior linked quarter to 0.29%.

Asset quality improved as non-performing loans decreased to $15.1 million and non-performing loans as a percentage of total loans decreased to 0.39%.

Net income for the quarter ended September 30, 2017,2021 was $12.8$23.2 million, or $0.39 per diluted share, as compared to $9.1net loss available to common stockholders of $6.0 million, or $0.35$0.10 per diluted share, for the corresponding prior year period. Net income available to common stockholders for the quartersnine months ended September 30, 20172021 was $84.4 million, or $1.41 per diluted share, as compared to $29.2 million, or $0.49 per diluted share, for the corresponding prior year period. The dividends paid to preferred stockholders were $1.0 million and 2016,$3.0 million for the three and nine months ended September 30, 2021, respectively, as compared to $1.1 million for each of the corresponding prior year periods. Net income available to common stockholders for the three and nine months ended September 30, 2021 included merger related expenses of $225,000 and $1.1 million, respectively, branch consolidation expenses which decreased net income, net of tax benefit, by $2.1$4.0 million and by $1.1$5.1 million, respectively, and reduced diluted earnings per share by $0.06net loss on equity investments of $466,000 and $0.05,net gain on equity investments of $8.4 million, respectively. Net income increased over the prior year period primarily dueloss available to the Acquisition Transactions.

Net interest incomecommon stockholders for the three months ended September 30, 2017 increased to $43.12020, included merger related expenses, branch consolidation expenses and a net loss on equity investments of $3.2 million, as compared to $33.9$830,000, and $3.6 million, respectively. Net income for the corresponding prior year period reflecting an increase in interest-earning assets primarily due to the Acquisition Transactions.

Other income increased to $7.4 million for the threenine months ended September 30, 2017, as compared to $5.9 million for the corresponding prior year period. The increase was primarily due to2020, included merger related expenses, branch consolidation expenses, a net loss on equity investments, the impact of the Acquisition Transactions, which added $1.1Two River and Country Bank opening credit loss expense under the Current Expected Credit Loss (“CECL”) model, and Federal Home Loan Bank (“FHLB”) advance prepayment fees of $14.8 million, $4.3 million, $3.6 million, $2.4 million and $924,000, respectively.
The Company remains well-capitalized with a stockholders’ equity to other income. Operating expenses increasedtotal assets ratio of 12.79% at September 30, 2021.
The Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share. The dividend, related to $30.7 million for the three monthsquarter ended September 30, 2017, as compared2021, will be paid on November 19, 2021 to $25.0 million in the same prior year period. Operating expenses for the three months ended September 30, 2017 included $3.2 millioncommon stockholders of merger related and branch consolidation expenses, as compared to $1.3 million in the prior year period. Excluding the impact of merger and branch consolidation expenses, the increase in operating expenses over the prior year was primarily due to the Acquisition Transactions, which added $2.4 million for the three months ended September 30, 2017.

record on November 8, 2021. The CompanyBoard also declared a quarterly cash dividend on common stock.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 November 15, 2021 to preferred stockholders of record on October 29, 2021.
As previously announced on August 4, 2021, the Bank entered into a definitive agreement to sell two New Jersey branch locations to First Bank, including the owned premises and equipment, all deposits associated with the branches, which totaled
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approximately $124 million as of June 30, 2021, as well as selected performing loans totaling approximately $14 million as of June 30, 2021. The dividendBank has received the required regulatory approval and the closing of the sale and customer conversion is expected to take place in early December.
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Impact of COVID-19

On March 16, 2020, the Company announced a series of actions intended to help mitigate the impact of the COVID-19 pandemic on customers, employees and communities. The Company began offering its Borrower Relief Programs to address the needs of customers who were current on their loan payments as of either December 31, 2019 or the date of the modification. In keeping with regulatory guidance under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, these loan deferrals were not considered troubled debt restructured (“TDR”) loans at September 30, 2021 and will not be reported as past due during the deferral period. As of September 30, 2021, 98.7% of total loans comply with pre-COVID-19 terms.

Further, due to conditions caused by COVID-19, appraisals ordered in the current environment may not be indicative of the underlying loan collateral value. As such, the Company may require multiple valuation approaches (sales comparison approach, income approach, cost approach), as applicable. The Company will assess the individual facts and circumstances of COVID-19 related loan downgrades and, if a new appraisal is not necessary, an additional discount may be applied to an existing appraisal.

The Company also accepted and processed applications for loans under the PPP, which was originally established under the CARES Act. At September 30, 2021, $52.5 million in PPP loans and $2.0 million in deferred fees remained on the consolidated statements of financial condition. There were no PPP loans originated during the quarter ended September 30, 20172021.

On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations (“CRRSA”) Act of $0.15 per share will be paid on November 17, 20172021 was signed into law, which contained provisions that directly impacted financial institutions. The CRRSA Act extended the PPP and provided the Company the ability to stockholders of record on November 6, 2017.continue its Borrower Relief Programs and related TDR and past due reporting considerations.


For further discussion, refer to Part I, Item 1A in the December 31, 2020 Form 10-K - Risk Factors - Risks Related to the COVID-19 Pandemic.


































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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.

The following tables set forth certain information relating to the Company for the three and nine months ended September 30, 20172021 and September 30, 2016.2020. 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 September 30,
 20212020
(dollars in thousands)Average BalanceInterestAverage
Yield/
Cost		Average BalanceInterestAverage
Yield/
Cost
Assets:
Interest-earning assets:
Interest-earning deposits and short-term investments$1,053,797 $441 0.17 %$805,863 $236 0.12 %
Securities (1)
1,542,630 6,090 1.57 1,112,174 6,793 2.43 
Loans receivable, net (2)
Commercial5,361,472 55,387 4.10 5,554,897 58,639 4.20 
Residential real estate2,260,673 20,076 3.55 2,462,513 23,091 3.75 
Home equity loans and lines and other consumer289,011 3,426 4.70 379,299 4,203 4.41 
Allowance for loan credit losses, net of deferred loan costs and fees(46,436)— — (45,912)— — 
Loans receivable, net7,864,720 78,889 3.98 8,350,797 85,933 4.09 
Total interest-earning assets10,461,147 85,420 3.24 10,268,834 92,962 3.60 
Non-interest-earning assets1,276,890 1,353,135 
Total assets$11,738,037 $11,621,969 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking$3,841,475 2,854 0.29 %$3,289,319 4,627 0.56 %
Money market767,854 245 0.13 675,841 571 0.34 
Savings1,609,197 146 0.04 1,460,232 296 0.08 
Time deposits904,384 2,134 0.94 1,606,632 5,876 1.45 
Total7,122,910 5,379 0.30 7,032,024 11,370 0.64 
FHLB advances— — — 343,412 1,470 1.70 
Securities sold under agreements to repurchase142,494 51 0.14 144,720 174 0.48 
Other borrowings228,695 2,858 4.96 246,903 3,160 5.09 
Total borrowings371,189 2,909 3.11 735,035 4,804 2.60 
Total interest-bearing liabilities7,494,099 8,288 0.44 7,767,059 16,174 0.83 
Non-interest-bearing deposits2,576,123 2,209,241 
Non-interest-bearing liabilities148,327 162,987 
Total liabilities10,218,549 10,139,287 
Stockholders’ equity1,519,488 1,482,682 
Total liabilities and equity$11,738,037 $11,621,969 
Net interest income$77,132 $76,788 
Net interest rate spread (3)
2.80 %2.77 %
Net interest margin (4)
2.93 %2.97 %
Total cost of deposits (including non-interest-bearing deposits)0.22 %0.49 %



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FOR THE THREE MONTHS ENDEDFor the Nine Months Ended September 30,
September 30, 2017 September 30, 201620212020
AVERAGE
BALANCE
 INTEREST 
AVERAGE
YIELD/
COST
 
AVERAGE
BALANCE
 INTEREST 
AVERAGE
YIELD/
COST
(dollars in thousands)
(dollars in thousands)(dollars in thousands)Average
Balance		InterestAverage
Yield/
Cost		Average
Balance		InterestAverage
Yield/
Cost
Assets:           Assets:
Interest-earning assets:           Interest-earning assets:
Interest-earning deposits and short-term investments$183,514
 $438
 0.95% $168,045
 $139
 0.33%Interest-earning deposits and short-term investments$1,061,419 $958 0.12 %$409,321 $693 0.23 %
Securities (1) and FHLB stock
817,867
 4,263
 2.07
 533,809
 2,561
 1.91
Securities (1)
Securities (1)
1,452,778 18,832 1.73 1,143,049 22,129 2.59 
Loans receivable, net (2)
           
Loans receivable, net (2)
Commercial1,865,970
 22,423
 4.77
 1,723,520
 20,970
 4.84
Commercial5,270,138 163,315 4.14 5,309,275 177,973 4.48 
Residential1,737,739
 17,588
 4.02
 1,118,435
 10,874
 3.87
Home Equity279,900
 3,289
 4.66
 255,919
 2,745
 4.27
Other1,112
 29
 10.35
 1,163
 18
 6.16
Allowance for loan loss net of deferred loan fees(12,370) —
 —
 (13,346) —
 —
Loans Receivable, net3,872,351
 43,329
 4.44
 3,085,691
 34,607
 4.46
Residential real estateResidential real estate2,269,066 59,242 3.48 2,480,932 71,590 3.85 
Home equity loans and lines and other consumerHome equity loans and lines and other consumer306,681 11,288 4.92 403,348 14,661 4.86 
Allowance for loan credit losses, net of deferred loan costs and feesAllowance for loan credit losses, net of deferred loan costs and fees(50,912)— — (27,186)— — 
Loans receivable, netLoans receivable, net7,794,973 233,845 4.01 8,166,369 264,224 4.32 
Total interest-earning assets4,873,732
 48,030
 3.91
 3,787,545
 37,307
 3.92
Total interest-earning assets10,309,170 253,635 3.29 9,718,739 287,046 3.95 
Non-interest-earning assets460,795
     316,290
    Non-interest-earning assets1,264,347 1,306,568 
Total assets$5,334,527
     $4,103,835
    Total assets$11,573,517 $11,025,307 
Liabilities and Stockholders’ Equity:           Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:           Interest-bearing liabilities:
Interest-bearing checking$1,852,421
 1,173
 0.25% $1,425,350
 583
 0.16%Interest-bearing checking$3,753,457 10,549 0.38 %$3,023,093 14,559 0.64 %
Money market389,035
 299
 0.30
 386,490
 295
 0.30
Money market761,975 823 0.14 647,566 2,316 0.48 
Savings672,548
 59
 0.03
 488,749
 49
 0.04
Savings1,571,345 490 0.04 1,436,594 2,266 0.21 
Time deposits620,308
 1,595
 1.02
 477,496
 1,156
 0.96
Time deposits1,041,371 8,338 1.07 1,563,449 18,470 1.58 
Total3,534,312
 3,126
 0.35
 2,778,085
 2,083
 0.30
Total7,128,148 20,200 0.38 6,670,702 37,611 0.75 
FHLB AdvancesFHLB Advances— — — 483,267 6,239 1.72 
Securities sold under agreements to repurchase74,285
 30
 0.16
 68,540
 24
 0.14
Securities sold under agreements to repurchase135,754 203 0.20 119,495 408 0.46 
FHLB Advances264,652
 1,153
 1.73
 264,213
 1,067
 1.61
Other borrowings56,502
 665
 4.67
 26,207
 198
 3.01
Other borrowings228,472 8,480 4.96 195,754 7,688 5.25 
Total borrowingsTotal borrowings364,226 8,683 3.19 798,516 14,335 2.40 
Total interest-bearing liabilities3,929,751
 4,974
 0.50
 3,137,045
 3,372
 0.43
Total interest-bearing liabilities7,492,374 28,883 0.52 7,469,218 51,946 0.93 
Non-interest-bearing deposits781,047
     521,088
    Non-interest-bearing deposits2,416,866 1,971,622 
Non-interest-bearing liabilities32,360
     31,536
    Non-interest-bearing liabilities157,821 133,928 
Total liabilities4,743,158
     3,689,669
    Total liabilities10,067,061 9,574,768 
Stockholders equity591,369
     414,166
    
Stockholders’ equityStockholders’ equity1,506,456 1,450,539 
Total liabilities and equity$5,334,527
     $4,103,835
    Total liabilities and equity$11,573,517 $11,025,307 
Net interest income  $43,056
     $33,935
  Net interest income$224,752 $235,100 
Net interest rate spread (3)
    3.41%     3.49%
Net interest rate spread (3)
2.77 %3.02 %
Net interest margin (4)
    3.50%     3.56%
Net interest margin (4)
2.91 %3.23 %
Total cost of deposits (including non-interest-bearing deposits)    0.29%     0.25%Total cost of deposits (including non-interest-bearing deposits)0.28 %0.58 %

(1)Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost net of allowance for securities credit losses.

(2)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.
(3)Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4)Net interest margin represents net interest income divided by average interest-earning assets.
9
 FOR THE NINE MONTHS ENDED
 September 30, 2017 September 30, 2016
 AVERAGE
BALANCE		 INTEREST AVERAGE
YIELD/
COST		 AVERAGE
BALANCE		 INTEREST AVERAGE
YIELD/
COST
 (dollars in thousands)
Assets:           
Interest-earning assets:           
Interest-earning deposits and short-term investments$180,821
 $1,058
 0.78% $86,007
 $209
 0.32%
Securities (1) and FHLB stock
769,932
 12,186
 2.12
 517,051
 7,149
 1.85
Loans receivable, net (2)
           
Commercial1,849,246
 65,619
 4.74
 1,390,196
 49,750
 4.78
Residential1,720,185
 52,231
 4.06
 1,009,012
 29,139
 3.86
Home Equity283,419
 9,760
 4.60
 228,172
 7,233
 4.23
Other1,180
 69
 7.82
 893
 41
 6.13
Allowance for loan loss net of deferred loan fees(12,338) —
 —
 (13,379) —
 —
Loans Receivable, net3,841,692
 127,679
 4.44
 2,614,894
 86,163
 4.40
Total interest-earning assets4,792,445
 140,923
 3.93
 3,217,952
 93,521
 3.88
Non-interest-earning assets461,752
     236,399
    
Total assets$5,254,197
     $3,454,351
    
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing checking$1,746,601
 3,086
 0.24% $1,181,110
 1,391
 0.16%
Money market418,681
 891
 0.28
 280,836
 546
 0.26
Savings675,684
 285
 0.06
 413,388
 117
 0.04
Time deposits628,126
 4,559
 0.97
 386,505
 3,071
 1.06
Total3,469,092
 8,821
 0.34
 2,261,839
 5,125
 0.30
Securities sold under agreements to repurchase74,729
 82
 0.15
 76,289
 78
 0.14
FHLB Advances258,147
 3,340
 1.73
 272,405
 3,351
 1.64
Other borrowings56,450
 1,967
 4.66
 23,846
 459
 2.57
Total interest-bearing liabilities3,858,418
 14,210
 0.49
 2,634,379
 9,013
 0.46
Non-interest-bearing deposits781,608
     448,459
    
Non-interest-bearing liabilities28,351
     23,650
    
Total liabilities4,668,377
     3,106,488
    
Stockholders equity585,820
     347,863
    
Total liabilities and equity$5,254,197
     $3,454,351
    
Net interest income  $126,713
     $84,508
  
Net interest rate spread (3)
    3.44%     3.42%
Net interest margin (4)
    3.54%     3.51%
Total cost of deposits (including non-interest-bearing deposits)    0.28%     0.25%
(1)Amounts are recorded at average amortized cost.
(2)Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated loss allowances and includes loans held for sale and non-performing loans.
(3)Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4)Net interest margin represents net interest income divided by average interest-earning assets.

Table of Contents

Comparison of Financial Condition at September 30, 20172021 and December 31, 2016

2020
Total assets increased by $216.9$381.4 million to $5.384$11.83 billion at September 30, 2017,2021, from $5.167$11.45 billion at December 31, 2016.2020. Cash and due from banks decreased by $46.1$291.0 million, to $255.3$981.1 million at September 30, 2017,2021, from $301.4 million at December 31, 2016, as these funds were deployed into higher-yielding securities which increased $199.1 million. Loans receivable, net, increased by $66.7 million, to $3.870 billion at September 30, 2017 from $3.803$1.27 billion at December 31, 2016. Premises2020 as excess liquidity was primarily used to purchase securities and equipment decreased $7.0fund loan growth. Total debt securities increased by $319.4 million at September 30, 2017,2021, as compared to December 31, 2016, due2020. Total loans, excluding PPP loans of $52.5 million and $95.4 million at September 30, 2021 and December 31, 2020, respectively, increased by $468.6 million, to $8.13 billion at September 30, 2021, from $7.66 billion at December 31, 2020.

Deposits increased by $346.5 million to $9.77 billion at September 30, 2021, from $9.43 billion at December 31, 2020. Excluding time deposits of $855.4 million at September 30, 2021 and $1.37 billion at December 31, 2020, total deposits increased by $863.8 million to $8.92 billion at September 30, 2021 from $8.05 billion at December 31, 2020. The loans-to-deposit ratio at September 30, 2021 was 83.7%, as compared to 82.3% at December 31, 2020.

Stockholders’ equity increased to $1.51 billion at September 30, 2021, as compared to $1.48 billion at December 31, 2020. On June 25, 2021, the consolidationCompany announced the authorization of 15 branches duringthe Board of Directors of the 2021 Stock Repurchase Program to repurchase up to an additional 3.0 million shares, which is approximately 5% of the Company’s outstanding common stock. For the nine months ended September 30, 2017. The premises2021, the Company repurchased 1,460,009 shares under its stock repurchase program at a weighted average cost of $20.98, and equipment at these locations were written down to their net realizable value and the remaining balance was reclassified to assets held for sale.

Deposits increased by $162.5 million, to $4.350 billion at September 30, 2017, from $4.188 billion at December 31, 2016. The loan-to-deposit ratio at September 30, 2017 was 89.0%, as compared to 90.8% at December 31, 2016.

Stockholders’ equity increased to $596.3 million at September 30, 2017, as compared to $572.0 million at December 31, 2016. At September 30, 2017, there were 1.8 million3,559,136 shares available for repurchase at September 30, 2021 under the Company’s stockexisting repurchase programs. In the nine months ended September 30, 2017, the Company did not repurchase any shares under these repurchase programs. Tangible stockholders’Stockholders’ equity per common share increased to $13.47$25.47 at September 30, 2017,2021, as compared to $12.95$24.57 at December 31, 2016.2020.

Comparison of Operating Results for the threeThree and nineNine Months Ended September 30, 2021 and September 30, 2020
General
Net income available to common stockholders for the three months ended September 30, 2017 and September 30, 2016
General
On May 2, 2016, the Company completed its acquisition of Cape and its results of operations are included in the consolidated results for the three and nine months ended September 30, 2017, but are excluded from the results of operations for the period from January 1, 2016 to May 1, 2016.    
On November 30, 2016, the Company completed its acquisition of Ocean Shore and its results of operations are included in the consolidated results for the three and nine months ended September 30, 2017, but are excluded from the results of operations for the three and nine months ended September 30, 2016.
Net income for the quarter ended September 30, 2017,2021 was $12.8$23.2 million, or $0.39 per diluted share, as compared to $9.1net loss available to common stockholders of $6.0 million, or $0.35$0.10 per diluted share, for the corresponding prior year period. Net income available to common stockholders for the nine months ended September 30, 20172021 was $32.5$84.4 million, or $0.98$1.41 per diluted share, as compared to net income of $17.0$29.2 million, or $0.77$0.49 per diluted share, for the corresponding prior year period. Net income available to common stockholders for the three and nine months ended September 30, 2017 includes2021 included merger related expenses of $225,000 and $1.1 million, respectively, branch consolidation expenses of $4.0 million and for the nine months ended September 30, 2017, also includes the acceleration$5.1 million, respectively, and net loss on equity investments of stock award expense due to the retirement$466,000 and net gain on equity investments of a director.$8.4 million, respectively. These items decreased net income by $3.6 million and increased net income by $1.7 million, net of tax, benefit, for the three and nine months ended September 30, 2017, by $2.12021, respectively. Net loss available to common stockholders for the three months ended September 30, 2020, included merger related expenses, branch consolidation expenses and a net loss on equity investments of $3.2 million, $830,000, and $8.8$3.6 million, respectively. Net income for the nine months ended September 30, 2020, included merger related expenses, branch consolidation expenses, a net loss on equity investments, the impact of the Two River and Country Bank opening credit loss expense under the CECL model, and FHLB advance prepayment fees of $14.8 million, $4.3 million, $3.6 million, $2.4 million and $924,000, respectively. These items decreased net loss by $5.8 million and decreased net income by $19.9 million, net of tax, for the three and nine months ended September 30, 2016 includes merger related expenses of $1.3 million and $9.9 million, respectively. The after-tax impact of these items reduced diluted earnings per share by $0.06 and $0.27 for the three and nine months ended September 30, 2017, respectively, and by $0.05 and $0.34, respectively, for the same prior year periods. Excluding these items, net income for the three and nine ended September 30, 2017 increased over the prior year periods primarily due to the Acquisition Transactions. In addition, in the first quarter of 2017, the Company adopted Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation” which resulted in decreases in income tax expense for the three and nine months ended September 30, 2017, of $158,000 and $1.7 million,2020, respectively.
Interest Income
Interest income for the three and nine months ended September 30, 2017 increased2021 decreased to $48.0$85.4 million and $140.9$253.6 million, respectively, as compared to $37.3$93.0 million and $93.5$287.0 million respectively, infor the corresponding prior year periods.periods, respectively. Average interest-earning assets increased $1.086 billionby $192.3 million and $1.574 billion, respectively,$590.4 million for the three and nine months ended September 30, 2017,2021, respectively, as compared to the same prior year periods. The averagesperiods, primarily concentrated in excess balance sheet liquidity. Average loans receivable, net of allowance for loan credit losses, decreased by $486.1 million and $371.4 million for the three and nine months ended September 30, 2017, were favorably impacted by2021, respectively, as compared to the Acquisition Transactions. The yields on average interest-earning assets decreasedsame prior year periods, primarily due to 3.91% and increased to 3.93%, respectively, forreductions in PPP loans. For the three and nine months ended September 30, 2017, from 3.92%2021, the yield on average interest-earning assets decreased to 3.24% and 3.88%3.29%, respectively, from 3.60% and 3.95% for the samecorresponding prior year periods.periods, respectively.
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Interest Expense
Interest expense for the three and nine months ended September 30, 20172021 was $5.0$8.3 million and $14.2$28.9 million, respectively, as compared to $3.4$16.2 million and $9.0$51.9 million respectively, in the corresponding prior year periods.periods, respectively. Average interest-bearing liabilities increased $792.7decreased $273.0 million and $1.224 billion, respectively,increased $23.2 million for the three and nine months ended September 30, 2017,2021, respectively, as compared to the same prior year periods. For the three and nine months ended September 30, 2017,2021, the cost of average interest-bearing liabilities increaseddecreased to 0.50%0.44% and 0.49%0.52%, respectively, from 0.43%0.83% and 0.46%0.93%, respectively, infor the corresponding prior year periods.

The total cost of deposits (including non-interest bearing deposits) was 0.29%0.22% and 0.28%, respectively, for the three and nine months ended September 30, 2017,2021, respectively, as compared to 0.25%0.49% and 0.58%, respectively, for both the three and nine months ended September 30, 2016.same prior year periods.
Net Interest Income and Margin
Net interest income for the three andmonths ended September 30, 2021, increased to $77.1 million, as compared to $76.8 million for the corresponding prior year period. Net interest income for the nine months ended September 30, 2017 increased2021 decreased to $43.1$224.8 million and $126.7 million, respectively, as compared to $33.9$235.1 million and $84.5 million, respectively, for the samecorresponding prior year periods, reflecting an increase in interest-earning assets. The netperiod, as a result of the lower interest rate environment. Net interest margin for the three and nine months ended September 30, 20172021 decreased to 3.50%2.93% and increased to 3.54%2.91%, respectively, from 3.56%2.97% and 3.51%3.23%, respectively, for the same prior year periods. The net interest margin compression was primarily due to the excess balance sheet liquidity and the lower interest rate environment.
Benefit/Provision for LoanCredit Losses
For the three and nine months ended September 30, 2017,2021, the provision for loan lossescredit loss benefit was $1.2$3.2 million and $3.0$10.3 million, respectively, as compared to $888,000a credit loss expense of $35.7 million and $2.1$55.3 million, respectively, for the corresponding prior year periods. Net loan charge-offs were $1.1 million and $1.6 million, respectively,The credit loss benefit for the three and nine months ended September 30, 2017,2021 was significantly influenced by positive trends in the Bank’s asset quality combined with stabilizing trends in economic forecasts, including strong employment levels and GDP growth, partly offset by the economic uncertainty related to supply chain and labor market constraints.

Net loan recoveries were $386,000 and $442,000 for the three and nine months ended September 30, 2021, respectively, as compared to net loan charge-offs of $1.9$15.0 million and $3.2$15.9 million respectively, infor the corresponding prior year periods.periods, respectively. The three months ended September 30, 2020 included $14.2 million in charge-offs related to the transfer of higher-risk commercial loans to held-for-sale, which were ultimately sold in the fourth quarter of 2020. Non-performing loans increased to $15.1held-for-investment totaled $23.3 million at September 30, 2017,2021, as compared to $13.6$29.9 million at December 31, 2016. The increase was primarily due to the addition of two commercial real estate relationships totaling $7.4 million, partially offset by the payoff of two non-performing loans totaling $1.7 million. An increase in non-performing residential mortgage loans was offset by the bulk sale of $7.8 million in non-performing residential loans in the second and third quarters of 2017.September 30, 2020.
OtherNon-interest Income
For the three and nine months ended September 30, 2017,2021, other income increased to $7.4$9.9 million and $20.3$42.5 million, respectively, as compared to $5.9$8.2 million and $14.2$33.3 million, respectively, for the corresponding prior year periods. The increases were primarily due to the impact of the Acquisition Transactions, which added $1.1 million and $4.9 million, respectively, to otherOther income for the three and nine months ended September 30, 2017, as compared to2021 included a net loss on equity investments of $466,000 and a net gain on equity investments of $8.4 million, respectively. Other income for both the same prior year periods. Excluding the Acquisition Transactions, thethree and nine months ended September 30, 2020 included $3.6 million of net losses on equity investments.The remaining increasedecrease of $1.4 million in other income for the three months ended September 30, 2017,2021, as compared to the corresponding prior year period, was primarily due to higher deposit and bank card related fees of $272,000 and $71,000, respectively, as compared to the same prior year period. In addition, income from other real estate operations, excluding the Acquisition Transactions, increased $364,000 which was offset by a decreasedecreases in the net gain on the sale of loans available for sale (includedof $1.0 million and fees and service charges of $759,000. The remaining decrease of $2.8 million in other income) of $360,000. Forincome for the nine months ended September 30, 2017, excluding2021, as compared to the Acquisition Transactions, the increase in other incomecorresponding prior year period, was primarily due to higher deposit and bank card related fees of $1.0 million and $153,000, respectively, as compared to the same prior year period. Excluding the Acquisition Transactions, an increase in income from other real estate operations of $609,000 was offset by a decrease in commercial loan swap income of $5.2 million, as a result of lower activity, and lower fees and service charges of $1.3 million, partially offset by increases in bankcard services of $1.7 million, due to lower card activity in the netprior year period as a result of the pandemic, gain on the sale of loans (included in other income) of $697,000.$1.3 million, and PPP loan referral fees of $800,000.
Operating ExpensesNon-interest Expense
Operating expenses increased to $30.7$58.7 million and $98.8decreased to $162.0 million respectively, for the three and nine months ended September 30, 2017,2021, respectively, as compared to $25.0$56.8 million and $70.4$175.5 million, respectively, in the same prior year periods. Operating expenses for the three and nine months ended September 30, 20172021 included $3.2$4.2 million and $13.2$6.1 million, respectively, of merger related and branch consolidation expenses. Operating expenses for the three months ended September 30, 2020 included $4.0 million of merger related and branch consolidation expenses. Operating expenses for the nine months ended September 30, 2020 included $20.0 million of merger related expenses, branch consolidation expenses and FHLB advance prepayment fees. The remaining increase of $1.6 million in operating expenses for the three months ended September 30, 2021, as compared to $1.3 million and $9.9 million, respectively, in the corresponding prior year periods. Excluding the impact of merger and branch consolidation expenses, the increase in operating expenses over the prior yearperiod, was primarily due to the Acquisition Transactions, which added $2.4increases in compensation and benefits expense of $1.7 million and $18.9data processing expense of $846,000, partly offset by a decrease in equipment expense of $782,000. The remaining increase of $372,000 in operating expenses for the nine months ended September 30, 2021, as compared to the corresponding prior year
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period, was primarily due to increases in compensation and benefits expense of $2.2 million, primarily related to higher benefit costs, federal deposit insurance and regulatory assessments of $1.4 million, and data processing expense of $953,000, partly offset by decreases in equipment expense of $1.8 million, marketing expense of $930,000, other operating expense of $469,000, and occupancy expense of $434,000.
Income Tax Expense/Benefit
The provision for income taxes was $7.4 million and $28.1 million for the three and nine months ended September 30, 2017, respectively. For the three months ended September 30, 2017, excluding the Acquisition Transaction expenses, there were increases in marketing expense2021, respectively, as compared to a benefit for income taxes of $2.6 million and loan related expenses. For the nine months ended September 30, 2017, excluding the Acquisition Transaction expenses, there were increases in compensation and employee benefits expense, equipment expense, marketing expense and professional fees.
Provision for Income Taxes
The provision for income taxes of $7.3 million for the same prior year periods, respectively. The effective tax rate was $5.7 million23.3% and $12.7 million, respectively,24.3% for the three and nine months ended September 30, 2017,2021, respectively, as compared to $4.8 million34.6% and $9.2 million, respectively,19.5% for the same prior year periods.periods, respectively. The effective tax rate was 30.8% and 28.0%, respectively, for the three and nine months ended September 30, 2017, as compared to 34.4% and 35.0%, respectively, for the same prior year periods. The lowerhigher effective tax rate for the three andmonths ended September 30, 2020 was primarily attributable to the net loss recognized during the quarter. The higher effective tax rate for the nine months ended September 30, 2017 resulted from the adoption of ASU 2016-09 “Compensation - Stock Compensation,” which decreased income tax expense by $158,000 and $1.7 million, respectively. Excluding the impact of ASU 2016-09, the effective tax rate would have been 31.6% and 31.8% for the three and nine months ended September 30, 2017, respectively. Under the ASU, the tax benefits of exercised stock options and vested stock awards are recognized as a benefit to income tax expense in the reporting period in which they occur. The tax benefit relating to the Company’s stock plans was $62,000 for the year ended December 31, 2016, which was recorded directly into stockholders equity. The elevated tax benefit for the three and nine months ended September 30, 2017, was related to the

exercise of options assumed in the acquisitions of Cape and Ocean Shore and the increase in the Company’s stock price. Excluding the tax benefit of exercised stock options and vested stock awards, the lower effective tax rate for the three and nine months ended September 30, 2017,2021, as compared to the same prior year periods,period, was primarily due to the deductibilityimpact of merger related expensesa New Jersey tax code change and an increase in tax exempt income.a higher allocation of taxable income to New York.
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Liquidity and Capital Resources
The Company’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, FHLB advances, access to the Federal Home Loan Bank (FHLB) advances andReserve discount window, other borrowings, including subordinated debt, and to a lesser extent, investment maturities and proceeds from the sale of loans.loans and equity investments. While scheduled amortization of loans is aand mortgage-backed securities are predictable sourcesources of funds, deposit flows, loan prepayments, and loan prepaymentsand equity sales are greatly influenced by interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including various lines of credit at multiple financial institutions.
At September 30, 20172021 and December 31, 2016,2020, the companyBank had no outstanding overnight borrowings from the FHLB. The CompanyBank utilizes overnight borrowings from time-to-time to fund short-term liquidity needs. The Company had totalThere were also no FHLB borrowings, including overnight borrowings, of $259.2 million and $250.5 million, respectively,term advances at September 30, 20172021 and December 31, 2016.2020.
The Company’s cash needs for the nine months ended September 30, 20172021 were primarily satisfied by principal payments onthe increase in deposits, proceeds from sales of loans and mortgage-backedequity investments, principal repayments on debt securities held-to-maturity, and proceeds from maturities and calls of investment securities, deposit growth, and increased borrowings.debt securities. The cash was principally utilized for loan originations, thepurchases of debt and equity securities, a purchase of loans receivablea residential loan pool, and the purchase of securities.loan originations. The Company’s cash needs for the nine months ended September 30, 20162020 were primarily satisfied by the increase in deposits, net proceeds from the issuance of subordinated notes and preferred stock, principal payments on loans and mortgage-backed securities, proceeds from the sale of mortgage loans held for sale and the sale of higher risk loans, proceeds from maturities and calls of investmentdebt securities, proceeds from sale of available-for-sale securities, deposit growthloans, and the issuance of subordinated notes.acquired cash from acquisitions. The cash was principally utilized for loan originations, the purchaserepayment of loans receivable,short-term borrowings, and to reduce borrowings.investment purchases.
In the normal course of business, the CompanyBank routinely enters into various off-balance-sheet commitments.commitments, primarily relating to the origination and sale of loans. At September 30, 2017,2021, outstanding commitments to originate loans totaled $651.4 million and outstanding undrawn lines of credit totaled $550.5$1.22 billion, of which $870.7 million and outstandingwere commitments to originate loans totaled $111.5 million.commercial borrowers and $353.0 million were commitments to consumer borrowers and residential construction borrowers. The Company expects to have sufficient funds available to meet current commitments arising in the normal course of business.
Time deposits scheduled to mature in one year or less totaled $322.7$586.7 million at September 30, 2017. Based upon historical experience, management estimates that a significant portion of such2021. Management is optimistic about its ability to retain funds from maturing time deposits will remain with the Company.and placing them in market comparable deposit products.
The Company has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management. Management also monitors cash on a daily basis to determine the liquidity needs of the Bank. Additionally, management performs multiple liquidity stress test scenarios on a quarterly basis. The Bank continues to maintain significant liquidity under all stress scenarios. In response to COVID-19, management identified additional sources of contingent liquidity, including expanded borrowing capacity with the FHLB, the Federal Reserve and existing correspondent bank relationships. The Company also strengthened balance sheet liquidity entering the economic downturn.
Under the Company’s common stock repurchase programs,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. ForThe Company repurchased 460,009 shares of common stock for the three months ended September 30, 2021, bringing the total shares repurchased to 1,460,009 for the nine months ended September 30, 2017 and 2016, the Company did not repurchase any shares of common stock.2021. At September 30, 2017,2021, there were 1,754,8043,559,136 shares available to be repurchased under the stock repurchase programs authorized in July of 2014 and April of 2017.authorized.
Cash dividends on common stock declared and paid during the first nine months of 2017September 30, 2021 were $14.4$30.4 million, as compared to $8.8$30.6 million infor the same prior year period. The increase in dividends was a result of the additional shares issued in the Acquisition Transactions. On October 25, 2017,28, 2021, the Company’s Board of Directors declared a quarterly cash dividend of fifteen cents ($0.15)$0.17 per common share. The dividend is payable on November 17, 201719, 2021 to common stockholders of record at the close of business on November 6, 2017.8, 2021.
Cash dividends on preferred stock declared and paid during the first nine months of September 30, 2021 were $3.0 million, as compared to $1.1 million for the same prior year period. The Company’s Board of Directors also declared a quarterly cash dividend of $0.4375 per depositary share, representing 1/40th interest in the Series A Preferred Stock, payable on November 15, 2021 to preferred stockholders of record on October 29, 2021.
The primary sources of liquidity specifically available to OceanFirst Financial Corp., the holding company of OceanFirstthe Bank, are capital distributions from the bank subsidiary andBank, the issuance of preferred and common stock, and debt. During the first quarter of 2017, the Company received notice from the Federal Reserve Bank of Philadelphia that it did not object to the payment of $32.0 million in dividends from the Bank to the Company over the year, although the Federal Reserve Bank reserved the right to revoke the notice of non-objection at any time if a safety and soundness concern arises. For the nine months ended September 30, 2017,2021, the Company received a dividend payment of $24.0$30.0 million from the Bank and $8.0 million remained to be paid.Bank. The Company’s ability to continue to pay dividends will be largely dependent upon capital distributions from the Bank, which may be adversely affected
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by capital constraintsrestraints imposed by the applicable regulations. The Company cannot predict whether the Bank

will be permitted under applicable regulations to pay a dividend to the Company. If applicable regulations or regulatory bodies prevent the Bank is unable to pay dividendsfrom paying a dividend to the Company, the Company may not have the liquidity necessary to 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. At September 30, 2017,2021, OceanFirst Financial Corp. held $31.1$83.9 million in cash.
As of September 30, 20172021 and December 31, 2016,2020, the Company and the Bank exceedsatisfy all regulatory capital requirements currently applicable as follows (in(dollars in thousands):
ActualFor capital adequacy
purposes		To be well-capitalized
under prompt
corrective action
As of September 30, 2021AmountRatioAmountRatioAmountRatio
Bank:
Tier 1 capital (to average assets)$1,012,471 9.12 %$444,076 4.00 %$555,096 5.00 %
Common equity Tier 1 (to risk-weighted assets)1,012,471 12.19 581,498 7.00 (1)539,963 6.50 
Tier 1 capital (to risk-weighted assets)1,012,471 12.19 706,105 8.50 (1)664,570 8.00 
Total capital (to risk-weighted assets)1,065,583 12.83 872,248 10.50 (1)830,712 10.00 
Company:
Tier 1 capital (to average assets)$1,037,940 9.34 %$444,531 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets)910,679 10.84 588,214 7.00 (1)N/AN/A
Tier 1 capital (to risk-weighted assets)1,037,940 12.35 714,260 8.50 (1)N/AN/A
Total capital (to risk-weighted assets)1,252,349 14.90 882,321 10.50 (1)N/AN/A
ActualFor capital adequacy
purposes		To be well-capitalized
under prompt
corrective action
As of September 30, 2017 Actual For capital  adequacy
purposes		 To be well-capitalized
under prompt
corrective action
As of December 31, 2020As of December 31, 2020AmountRatioAmountRatioAmountRatio
Bank: Amount Ratio Amount Ratio Amount RatioBank:
Tier 1 capital (to average assets) $460,836
 8.91%
$206,958
 4.000% $258,698
 5.00%Tier 1 capital (to average assets)$942,122 8.48 %$444,648 4.00 %$555,810 5.00 %
Common equity Tier 1 (to risk-weighted assets) 460,836
 12.82
 206,710
 5.750
(1) 
233,672
 6.50
Common equity Tier 1 (to risk-weighted assets)942,122 12.11 544,625 7.00 (1)505,724 6.50 
Tier 1 capital (to risk-weighted assets) 460,836
 12.82
 260,635
 7.250
(1) 
287,597
 8.00
Tier 1 capital (to risk-weighted assets)942,122 12.11 661,331 8.50 (1)622,429 8.00 
Total capital (to risk-weighted assets) 478,047
 13.30
 332,534
 9.250
(1) 
359,496
 10.00
Total capital (to risk-weighted assets)1,004,480 12.91 816,938 10.50 (1)778,036 10.00 
OceanFirst Financial Corp:            
Company:Company:
Tier 1 capital (to average assets) $467,540
 9.02%
$207,380
 4.000% N/A
 N/A
Tier 1 capital (to average assets)$998,273 9.44 %$423,028 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets) 448,307
 12.46
 206,951
 5.750
(1) 
N/A
 N/A
Common equity Tier 1 (to risk-weighted assets)871,385 11.05 552,075 7.00 (1)N/AN/A
Tier 1 capital (to risk-weighted assets) 467,540
 12.99
 260,938
 7.250
(1) 
N/A
 N/A
Tier 1 capital (to risk-weighted assets)998,273 12.66 670,377 8.50 (1)N/AN/A
Total capital (to risk-weighted assets) 519,751
 14.44
 332,921
 9.250
(1) 
N/A
 N/A
Total capital (to risk-weighted assets)1,230,370 15.60 828,113 10.50 (1)N/AN/A
As of December 31, 2016 Actual For capital  adequacy
purposes		 To be well-capitalized
under prompt
corrective action
Bank: Amount Ratio Amount Ratio Amount Ratio
Tier 1 capital (to average assets) $450,414
 10.19%
(2) 
$176,856
 4.000% $221,070
 5.00%
Common equity Tier 1 (to risk-weighted assets) 450,414
 12.81
 180,178
 5.125
(3) 
228,519
 6.50
Tier 1 capital (to risk-weighted assets) 450,414
 12.81
 232,913
 6.625
(3) 
281,254
 8.00
Total capital (to risk-weighted assets) 466,224
 13.26
 303,227
 8.625
(3) 
351,567
 10.00
OceanFirst Financial Corp:            
Tier 1 capital (to average assets) $440,552
 9.96%
(2) 
$176,897
 4.000% N/A
 N/A
Common equity Tier 1 (to risk-weighted assets) 426,855
 12.12
 180,512
 5.125
(3) 
N/A
 N/A
Tier 1 capital (to risk-weighted assets) 440,552
 12.51
 233,345
 6.625
(3) 
N/A
 N/A
Total capital (to risk-weighted assets) 491,362
 13.95
 303,788
 8.625
(3) 
N/A
 N/A
(1)Includes the Capital Conservation Buffer of 1.25%2.50%.
(2) Tier 1 capital ratios are calculated based on outstanding capital at the end of the quarter divided by average assets for the quarter. The Tier 1 capital ratios for the Bank and the Company based on total assets as of the end of the period were 8.85% and 8.75%, respectively.
(3) Includes the Capital Conservation Buffer of 0.625%.
The Company and the Bank satisfysatisfies the criteria to be “well-capitalized” under the Prompt Corrective Action Regulations.
At September 30, 2017,2021 and December 31, 2020, the Company maintained tangible commona stockholders’ equity of $438.7 million, for a tangible common equity to total assets ratio of 8.39%. At December 31, 2016, the Company maintained tangible common equity of $416.1 million, for a tangible common equity to assets ratio of 8.30%.12.79% and 12.96%, respectively.

14
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Off-Balance-Sheet Arrangements and Contractual Obligations
In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in the financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used for general corporate purposes or for customer needs. Corporate purpose transactions are used to help manage credit, interest rate and liquidity risk or to optimize capital. Customer transactions are used to manage customers’ requests for funding. These financial instruments and commitments include undrawn lines of credit and commitments to extend credit. 
The Company enters into loan sale agreements with investors in the normal course of business. The loan sale agreements generally require the Company to repurchase loans previously sold in the event of a violation of various representations and warranties customary to the mortgage banking industry. The Company is also obligated to repurchase loans previously sold under certain circumstances under a loss sharing arrangement with the FHLB relating to loans sold into the Mortgage Partnership Finance program. As a result of the COVID-19 pandemic, some of these loans were placed on forbearance and the Company may be required to repurchase them in future periods. In the opinion of management, the potential exposure related to the loan sale agreements and loans sold to the FHLB is adequately provided for in the reserve for repurchased loans and loss sharing obligations included in other liabilities. At each of September 30, 20172021 and December 31, 2016,2020, the reserve for repurchased loans and loss sharing obligations amounted to $463,000 and $846,000, respectively.was $1.2 million.
The following table shows the contractual obligations of the Company by expected payment period as of September 30, 20172021 (in thousands):. Refer to Note 9 Leases, to the Consolidated Financial Statements for lease obligations.
Contractual ObligationsTotal Less than
one year		 1-3 years 3-5 years More than
5 years
Debt Obligations$390,978
 $130,326
 $159,060
 $45,126
 $56,466
Commitments to Fund Undrawn Lines of Credit         
Commercial346,159
 346,159
 —
 —
 —
Consumer/Construction204,292
 204,292
 —
 —
 —
Commitments to Originate Loans111,525
 111,525
 —
 —
 —
Debt obligations include advances from the FHLB and other borrowings and have defined terms.
Contractual ObligationsTotal
One year
 or less		More than 1 year to 3 yearsMore than 3 years to 5 yearsMore than
5 years
Debt obligations$372,179 $143,496 $444 $35,496 $192,743 
Commitments to fund undrawn lines of credit
Commercial870,672 870,672 — — — 
Consumer and residential construction352,986 352,986 — — — 
Commitments to originate loans651,432 651,432 — — — 
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 contract. 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.


15
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Non-Performing Assets
The following table sets forth information regarding the Company’s non-performing assets, consisting of non-performing loans and other real estate owned. 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.
September 30,December 31,
September 30, 2017 December 31, 201620212020
(dollars in thousands) (dollars in thousands)
Non-performing loans:   Non-performing loans:
Commercial and industrial$63
 $441
Commercial and industrial$354 $1,551 
Commercial real estate – owner occupied923
 2,414
Commercial real estate – owner occupied8,997 13,054 
Commercial real estate – investor8,720
 521
Commercial real estate – investor6,904 10,660 
Residential mortgage3,551
 8,126
Home equity loans and lines1,864
 2,064
Residential real estateResidential real estate5,484 8,642 
Home equity loans and lines and other consumerHome equity loans and lines and other consumer1,605 2,503 
Total non-performing loans15,121
 13,566
Total non-performing loans23,344 36,410 
Other real estate owned9,334
 9,803
Other real estate owned106 106 
Total non-performing assets$24,455
 $23,369
Total non-performing assets$23,450 $36,516 
Purchased credit impaired loans (“PCI”)$4,867
 $7,575
PCD loans (1)
PCD loans (1)
$41,372 $48,488 
Delinquent loans 30-89 days$24,548
 $22,598
Delinquent loans 30-89 days$6,647 $34,683 
Allowance for loan losses as a percent of total loans receivable0.42% 0.40%
Allowance for loan losses as a percent of total non-performing loans109.68
 111.92
Non-performing loans as a percent of total loans receivable0.39
 0.35
Allowance for loan credit losses as a percent of total loansAllowance for loan credit losses as a percent of total loans0.61 %0.78 %
Allowance for loan credit losses as a percent of total non-performing loans
Allowance for loan credit losses as a percent of total non-performing loans
214.84 166.81 
Non-performing loans as a percent of total loansNon-performing loans as a percent of total loans0.29 0.47 
Non-performing assets as a percent of total assets0.45
 0.45
Non-performing assets as a percent of total assets0.20 0.32 

(1)     PCD loans are not included in non-performing loans or delinquent loans totals.

The Company’s non-performing loans totaled $15.1$23.3 million at September 30, 2017,2021, as compared to $13.6$36.4 million at December 31, 2016.2020. Included in the non-performing loans total was $270,000$9.6 million and $3.5$5.2 million of troubled debt restructured (“TDR”)TDR loans at September 30, 20172021 and December 31, 2016,2020, respectively. The increase in non-performing loans was primarily due to the addition of two commercial real estate relationships totaling $7.4 million, partially offset by the payoff of two non-performing loans totaling $1.7 million. An increase in non-performing residential mortgage loans was offset by the bulk sale of $7.8 million in non-performing residential loans in the second and third quarters of 2017. Non-performing loans do not include $4.9$41.4 million and $48.5 million of PCIacquired PCD loans acquired in the Acquisition Transactions.at September 30, 2021 and December 31, 2020, respectively. At September 30, 2017,2021, the allowance for loan credit losses totaled $16.6$50.2 million, or 0.42%0.61% of total loans, as compared to $15.2$60.7 million, or 0.40%0.78% of total loans, at December 31, 2016.2020. These ratios exclude existing fair valuenet unamortized credit and PCD marks on acquired loans of $19.8$21.3 million and $26.0$28.0 million respectively, at September 30, 20172021 and December 31, 2016. These2020, respectively. 

In response to the COVID-19 pandemic and its economic impact on customers, short-term modification programs that comply with the CARES Act, extended by the CRRSA Act, were implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19. The Commercial Borrower Relief Program allowed for the deferral of principal and interest or principal only. All payments received will first be applied to all accrued and unpaid interest and the balance, if any, on account of unpaid principal, then to fees, expenses and other amounts due to the Bank. Monthly payments will continue until the maturity date when all then unpaid principal, interest, fees, and all other charges are due and payable to the Bank. The Consumer Borrower Relief Program allowed for the deferral of principal and interest. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Provided these loans were acquiredcurrent as of either year end or the date of the modification, these loans are not considered TDR loans at fair value with no related allowances for loan losses. Other real estate owned includes $7.0 million relating toSeptember 30, 2021 and will not be reported as past due during the hotel, golf and banquet facility located in New Jersey which the Company acquired in the fourth quarter of 2015.deferral period.


The Company classifies loans and other assets in accordance with regulatory guidelines as followsguidelines. The table below excludes any loans held-for-sale (in thousands):
September 30,December 31,
20212020
Special Mention$98,687 $165,843 
Substandard158,575 194,477 
The decrease in special mention and substandard loans was primarily due to the improvement in the Bank’s borrowers’ ability to service their loans.
16
 September 30, 2017 December 31, 2016
Special Mention$25,778
 $15,692
Substandard58,939
 70,543

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Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162020 (the “2016“2020 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 inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated statements of financial condition at fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for loan losses and judgments regarding securities and goodwill impairment are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations. These judgments and policies involve a higher degree of complexity and require 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. Goodwill will be evaluatedCertain assets are carried in the consolidated statements of financial condition at fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for impairment on an annual basis, or more frequently if events or changes in circumstances

indicate potential impairment between annual measurement dates.credit losses is the most critical accounting policy because it is important to the presentation of the Company’s financial condition and results of operations. These critical accounting policies and their application are reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors.

Private Securities Litigation Reform Act Safe Harbor Statement
In addition to historical information, this quarterly report 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.OceanFirst Financial Corp. (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,”“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, those items discussed in the Company’s 2020 Form 10-K under Item 1A - Risk Factors, as supplemented by the Company’s subsequent filings with the Securities and Exchange Commission (the “SEC”) and elsewhere therein and the following: changes in interest rates, general economic conditions, public health crises (such as the governmental, social and economic effects of the novel coronavirus), levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes (particularly with respect to the novel coronavirus), 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 “FRB”), the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, andchanges in accounting principles and guidelines and the Bank’s ability to successfully integrate acquired operations.
Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the Company’s business. The extent of such impact will depend on future developments, which are highly uncertain, including when COVID-19 can be controlled and abated, the timing of inoculation against the virus and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on its business, financial condition, liquidity, and results of operations: the demand for the Bank’s products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; the Company’s allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect the Company’s net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to the Bank; if legislation or governmental or regulatory action is enacted limiting the amount of ATM fees or surcharges the Bank may receive or on its ability to charge overdraft or other fees, it could adversely impact the Company’s financial results; the Company’s cyber security risks would be increased as the result of an increased use of the Bank’s online banking platform or an increase in the number of employees working remotely; and Federal Deposit Insurance Corporation (“FDIC”) premiums may increase if the agency experiences additional resolution costs.
These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 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. Further description of the risks and uncertainties to the business are included in Item 1, Business, and Item 1A, Risk Factors, of the Company’s 2016 Form 10-K.

17

Table of Contents
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The Company’s interest rate sensitivity is monitored through the use of an interest rate risk (“IRR”) model.modeling. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at September 30, 2017,2021, which were anticipated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods shown.


At September 30, 2017,2021, the Company’s one-year gap was negative 4.38%positive 22.35% as compared to negative 3.47%positive 18.05% at December 31, 2016. These results were within the approved policy guidelines.2020.
 
At September 30, 20213 Months
or Less		More than
3 Months to
1 Year		More than
1 Year to
3 Years		More than
3 Years to
5 Years		More than
5 Years		Total
(dollars in thousands)      
Interest-earning assets: (1)
Interest-earning deposits and short-term investments$793,303$1,431$1,975$—$—$796,709
Debt securities266,574239,314348,929227,782360,6951,443,294
Equity investments——30,39928,31642,599101,314
Restricted equity investments————53,01753,017
Loans receivable (2)
2,343,9761,561,1032,291,2821,151,399847,5008,195,260
Total interest-earning assets3,403,8531,801,8482,672,5851,407,4971,303,81110,589,594
Interest-bearing liabilities:
Interest-bearing checking accounts1,444,263195,213451,077365,3721,557,6404,013,565
Money market deposit accounts72,13254,037125,669102,774462,079816,691
Savings accounts86,173138,286302,615237,016856,3571,620,447
Time deposits169,818430,971211,38127,96215,310855,442
Securities sold under agreements to repurchase and other borrowings247,421154444123,350810372,179
Total interest-bearing liabilities2,019,807818,6611,091,186856,4742,892,1967,678,324
Interest sensitivity gap (3)
$1,384,046$983,187$1,581,399$551,023$(1,588,385)$2,911,270
Cumulative interest sensitivity gap$1,384,046$2,367,233$3,948,632$4,499,655$2,911,270$2,911,270
Cumulative interest sensitivity gap as a percent of total interest-earning assets13.07 %22.35 %37.29 %42.49 %27.49 %27.49 %
(1)Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments, and contractual maturities.
(2)For purposes of the gap analysis, loans receivable includes loans held for sale and non-performing loans gross of the allowance for loan credit losses, unamortized discounts and deferred loan costs and fees.
(3)Interest sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.
18
At September 30, 20173 Months
or Less		 More than
3 Months to
1 Year		 More than
1 Year to
3 Years		 More than
3 Years to
5 Years		 More than
5 Years		 Total
(dollars in thousands)           
Interest-earning assets: (1)
           
Interest-earning deposits and short-term investments$174,079
 $971
 $2,713
 $—
 $—
 $177,763
Investment securities66,168
 28,181
 85,296
 58,300
 71,492
 309,437
Mortgage-backed securities33,735
 71,473
 156,030
 118,022
 129,833
 509,093
FHLB stock—
 —
 —
 —
 18,472
 18,472
Loans receivable (2)
596,331
 813,588
 1,217,892
 694,223
 560,352
 3,882,386
Total interest-earning assets870,313
 914,213
 1,461,931
 870,545
 780,149
 4,897,151
Interest-bearing liabilities:           
Money market deposit accounts27,938
 26,132
 60,662
 49,481
 219,893
 384,106
Savings accounts83,497
 51,208
 115,685
 90,608
 327,372
 668,370
Interest-bearing checking accounts1,278,133
 56,591
 123,083
 92,490
 342,535
 1,892,832
Time deposits103,322
 219,578
 183,652
 112,287
 5,069
 623,908
FHLB advances—
 55,000
 159,060
 45,126
 —
 259,186
Securities sold under agreements to repurchase and other borrowings97,826
 —
 —
 33,966
 —
 131,792
Total interest-bearing liabilities1,590,716
 408,509
 642,142
 423,958
 894,869
 3,960,194
Interest sensitivity gap (3)
$(720,403) $505,704
 $819,789
 $446,587
 $(114,720) $936,957
Cumulative interest sensitivity gap$(720,403) $(214,699) $605,090
 $1,051,677
 $936,957
 $936,957
Cumulative interest sensitivity gap as a percent of total interest-earning assets(14.71)% (4.38)% 12.36% 21.48% 19.13% 19.13%
Table of Contents
(1)Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments, and contractual maturities.
(2)For purposes of the gap analysis, loans receivable includes loans held for sale and non-performing loans gross of the allowance for loan losses, unamortized discounts and deferred loan fees.
(3)Interest sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.

Additionally, the table below sets forth the Company’s exposure to IRR as measured by the change in economic value of equity (“EVE”) and net interest income under varying rate shocks as of September 30, 20172021 and December 31, 2016.2020. All methods used to measure interest rate sensitivity involve the use of assumptions, which may tend to oversimplify the manner in which actual yields and costs respond to changes in market interest rates. The Company’s interest rate sensitivity should be reviewed in conjunction with the financial statements and notes thereto contained in the 20162020 Form 10-K.
 
September 30, 2017 December 31, 2016 September 30, 2021December 31, 2020
Change in Interest Rates in Basis Points (Rate Shock)Economic Value of Equity Net Interest Income Economic Value of Equity Net Interest IncomeChange in Interest Rates in Basis Points (Rate Shock)Economic Value of EquityNet Interest IncomeEconomic Value of EquityNet Interest Income
Amount % Change EVE Ratio Amount % Change Amount % Change EVE Ratio Amount % ChangeAmount% ChangeEVE RatioAmount% ChangeAmount% ChangeEVE RatioAmount% Change
(dollars in thousands)                   (dollars in thousands)          
300$778,489
 (0.4)% 15.4% $155,106
 (9.2)% $664,767
 (1.1)% 14.1% $156,689
 (1.0)%300$1,900,559 33.8 %17.1 %$389,436 31.9 %$1,890,335 38.5 %17.3 %$340,098 16.2 %
200797,951
 2.0
 15.4
 161,134
 (5.7) 678,347
 1.0
 14.0
 158,078
 (0.1)2001,770,701 24.6 15.6 354,181 19.9 1,752,255 28.4 15.7 325,436 11.2 
100799,982
 2.3
 15.1
 166,414
 (2.6) 683,492
 1.7
 13.7
 158,840
 0.3
1001,611,072 13.4 13.9 318,183 7.7 1,578,917 15.7 13.9 309,644 5.8 
Static781,958
 —
 14.4
 170,833
 —
 671,878
 —
 13.2
 158,309
 —
Static1,420,933 — 12.0 295,335 — 1,365,119 — 11.8 292,572 — 
(100)733,571
 (6.2) 13.2
 164,993
 (3.4) 620,675
 (7.6) 11.9
 152,007
 (4.0)(100)1,160,332 (18.3)9.6 268,236 (9.2)1,074,346 (21.3)9.2 284,763 (2.7)
The increased interest rate sensitivity of net interest income in a rising interest rate environment at September 30, 2017, as compared to2021 and December 31, 2016, is primarily2020, continue to be impacted by the result of increased holdings in fixed-rate securities and loans. Another factor in the increased net interest income sensitivity is a change in the assumption regarding the interest rate sensitivity of certain deposits without maturity dates. This change was made to reflect the Company’s reasonable expectation of the increased sensitivity of these deposits in the face of rising interest rates.cash liquidity position that remains elevated.


Item 4.    Controls and Procedures
(a) Disclosure Controls and Procedures
The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (“SEC”)SEC (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, there

(b) Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.



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Table of Contents
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
September 30,December 31,
20212020
 (Unaudited) 
Assets
Cash and due from banks$981,126 $1,272,134 
Debt securities available-for-sale, at estimated fair value314,620 183,302 
Debt securities held-to-maturity, net of allowance for securities credit losses of $1,503 at September 30, 2021 and $1,715 at December 31, 2020 (estimated fair value of $1,143,381 at September 30, 2021 and $968,466 at December 31, 2020)1,125,382 937,253 
Equity investments101,314 107,079 
Restricted equity investments, at cost53,017 51,705 
Loans receivable, net of allowance for loan credit losses of $50,153 at September 30, 2021 and $60,735 at December 31, 20208,139,961 7,704,857 
Loans held-for-sale13,428 45,524 
Interest and dividends receivable32,512 35,269 
Other real estate owned106 106 
Premises and equipment, net123,669 107,094 
Bank owned life insurance260,072 265,253 
Assets held for sale4,613 5,782 
Goodwill500,319 500,319 
Core deposit intangible19,558 23,668 
Other assets159,991 208,968 
Total assets$11,829,688 $11,448,313 
Liabilities and Stockholders’ Equity
Deposits$9,774,097 $9,427,616 
Securities sold under agreements to repurchase with retail customers143,292 128,454 
Other borrowings228,887 235,471 
Advances by borrowers for taxes and insurance22,214 17,296 
Other liabilities147,949 155,346 
Total liabilities10,316,439 9,964,183 
Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both September 30, 2021 and December 31, 2020
1 1 
Common stock, $0.01 par value, 150,000,000 shares authorized, 61,526,126 and 61,040,894 shares issued at September 30, 2021 and December 31, 2020, respectively; and 59,417,266 and 60,392,043 shares outstanding at September 30, 2021 and December 31, 2020, respectively611 609 
Additional paid-in capital1,145,448 1,137,715 
Retained earnings430,721 378,268 
Accumulated other comprehensive (loss) income(734)621 
Less: Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")(6,519)(7,433)
Treasury stock, 2,108,860 and 648,851 shares at September 30, 2021 and December 31, 2020, respectively(56,279)(25,651)
Total stockholders’ equity1,513,249 1,484,130 
Total liabilities and stockholders’ equity$11,829,688 $11,448,313 
 September 30, 2017 December 31, 2016
 (Unaudited)  
Assets   
Cash and due from banks$255,258
 $301,373
Securities available-for-sale, at estimated fair value67,133
 12,224
Securities held-to-maturity, net (estimated fair value of $746,497 at September 30, 2017 and $598,119 at December 31, 2016)742,886
 598,691
Federal Home Loan Bank of New York stock, at cost18,472
 19,313
Loans receivable, net3,870,109
 3,803,443
Loans held for sale338
 1,551
Interest and dividends receivable13,627
 11,989
Other real estate owned9,334
 9,803
Premises and equipment, net64,350
 71,385
Bank Owned Life Insurance134,298
 132,172
Deferred tax asset29,718
 38,787
Assets held for sale5,241
 360
Other assets15,634
 9,973
Core deposit intangible9,380
 10,924
Goodwill148,134
 145,064
Total assets$5,383,912
 $5,167,052
Liabilities and Stockholders’ Equity   
Deposits$4,350,259
 $4,187,750
Securities sold under agreements to repurchase with deposit customers75,326
 69,935
Federal Home Loan Bank advances259,186
 250,498
Other borrowings56,466
 56,559
Advances by borrowers for taxes and insurance14,371
 14,030
Other liabilities32,052
 16,242
Total liabilities4,787,660
 4,595,014
Stockholders’ equity:   
Preferred stock, $.01 par value, $1,000 liquidation preference, 5,000,000 shares authorized, no shares issued—
 —
Common stock, $.01 par value, 55,000,000 shares authorized, 33,566,772 shares issued and 32,567,477 and 32,136,892 shares outstanding at September 30, 2017 and December 31, 2016, respectively336
 336
Additional paid-in capital353,817
 364,433
Retained earnings266,053
 238,192
Accumulated other comprehensive loss(5,037) (5,614)
Less: Unallocated common stock held by Employee Stock Ownership Plan(2,549) (2,761)
Treasury stock, 999,295 and 1,429,880 shares at September 30, 2017 and December 31, 2016, respectively(16,368) (22,548)
Common stock acquired by Deferred Compensation Plan(83) (313)
Deferred Compensation Plan Liability83
 313
Total stockholders’ equity596,252
 572,038
Total liabilities and stockholders’ equity$5,383,912
 $5,167,052


See accompanying Notes to Unaudited Consolidated Financial Statements.

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Table of Contents
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts)
For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Three Months Ended September 30,For the Nine Months Ended September 30,
2017 2016 2017 2016 2021202020212020
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
Interest income:       Interest income:
Loans$43,329
 $34,607
 $127,679
 $86,163
Loans$78,889 $85,933 $233,845 $264,224 
Mortgage-backed securities2,738
 1,700
 8,189
 4,823
Investment securities and other1,963
 1,000
 5,055
 2,535
Debt securitiesDebt securities5,040 5,596 16,379 18,577 
Equity investments and otherEquity investments and other1,491 1,433 3,411 4,245 
Total interest income48,030
 37,307
 140,923
 93,521
Total interest income85,420 92,962 253,635 287,046 
Interest expense:       Interest expense:
Deposits3,126
 2,083
 8,821
 5,125
Deposits5,379 11,370 20,200 37,611 
Borrowed funds1,848
 1,289
 5,389
 3,888
Borrowed funds2,909 4,804 8,683 14,335 
Total interest expense4,974
 3,372
 14,210
 9,013
Total interest expense8,288 16,174 28,883 51,946 
Net interest income43,056
 33,935
 126,713
 84,508
Net interest income77,132 76,788 224,752 235,100 
Provision for loan losses1,165
 888
 3,030
 2,113
Net interest income after provision for loan losses41,891
 33,047
 123,683
 82,395
Credit loss (benefit) expenseCredit loss (benefit) expense(3,179)35,714 (10,259)55,332 
Net interest income after credit loss (benefit) expenseNet interest income after credit loss (benefit) expense80,311 41,074 235,011 179,768 
Other income:       Other income:
Bankcard services revenue1,785
 1,347
 5,202
 3,409
Bankcard services revenue3,409 3,097 10,052 8,319 
Wealth management revenue541
 608
 1,622
 1,779
Trust and asset management revenueTrust and asset management revenue584 490 1,774 1,560 
Fees and service charges3,702
 2,916
 11,163
 7,235
Fees and service charges2,973 3,732 10,519 11,858 
Net gain (loss) from other real estate operations432
 (63) (196) (782)
Income from Bank Owned Life Insurance881
 659
 2,436
 1,520
Net (loss) gain on sales of loansNet (loss) gain on sales of loans(15)1,001 3,180 1,930 
Net (loss) gain on equity investmentsNet (loss) gain on equity investments(466)(3,576)8,397 (3,273)
Net (loss) gain from other real estate operationsNet (loss) gain from other real estate operations(3)214 (12)12 
Income from bank owned life insuranceIncome from bank owned life insurance1,640 1,530 4,771 4,626 
Commercial loan swap incomeCommercial loan swap income1,588 1,425 2,772 7,964 
Other18
 429
 97
 994
Other173 266 1,068 310 
Total other income7,359
 5,896
 20,324
 14,155
Total other income9,883 8,179 42,521 33,306 
Operating expenses:       Operating expenses:
Compensation and employee benefits14,673
 13,558
 46,138
 33,456
Compensation and employee benefits30,730 29,012 89,008 86,832 
Occupancy2,556
 2,315
 7,965
 5,952
Occupancy5,005 5,270 15,380 15,814 
Equipment1,605
 1,452
 5,006
 3,605
Equipment1,124 1,906 4,008 5,831 
Marketing775
 479
 2,245
 1,273
Marketing496 963 1,555 2,485 
Federal deposit insurance713
 743
 2,079
 1,995
Federal deposit insurance and regulatory assessmentsFederal deposit insurance and regulatory assessments1,459 1,212 4,422 3,012 
Data processing2,367
 2,140
 6,809
 5,286
Data processing5,363 4,517 13,796 12,843 
Check card processing871
 623
 2,640
 1,548
Check card processing1,337 1,385 4,012 3,951 
Professional fees846
 681
 2,901
 1,879
Professional fees3,089 3,354 8,317 8,339 
Other operating expense2,667
 1,543
 8,258
 5,036
Other operating expense4,477 3,644 11,315 11,784 
Federal Home Loan Bank prepayment fee—
 —
 —
 136
Federal Home Loan Bank (“FHLB”) prepayment feesFederal Home Loan Bank (“FHLB”) prepayment fees— — — 924 
Amortization of core deposit intangible507
 181
 1,544
 319
Amortization of core deposit intangible1,354 1,538 4,110 4,660 
Branch consolidation expenses1,455
 —
 6,939
 —
Branch consolidation expenseBranch consolidation expense4,014 830 5,051 4,287 
Merger related expenses1,698
 1,311
 6,300
 9,902
Merger related expenses225 3,156 1,052 14,753 
Total operating expenses30,733
 25,026
 98,824
 70,387
Total operating expenses58,673 56,787 162,026 175,515 
Income before provision for income taxes18,517
 13,917
 45,183
 26,163
Provision for income taxes5,700
 4,789
 12,669
 9,169
Net income$12,817
 $9,128
 $32,514
 $16,994
Basic earnings per share$0.40
 $0.36
 $1.01
 $0.79
Diluted earnings per share$0.39
 $0.35
 $0.98
 $0.77
Income (loss) before provision (benefit) for income taxesIncome (loss) before provision (benefit) for income taxes31,521 (7,534)115,506 37,559 
Provision (benefit) for income taxesProvision (benefit) for income taxes7,354 (2,608)28,087 7,314 
Net income (loss)Net income (loss)24,167 (4,926)87,419 30,245 
Dividends on preferred sharesDividends on preferred shares1,004 1,093 3,012 1,093 
Net income (loss) available to common stockholdersNet income (loss) available to common stockholders$23,163 $(6,019)$84,407 $29,152 
Basic earnings (loss) per shareBasic earnings (loss) per share$0.40 $(0.10)$1.42 $0.49 
Diluted earnings (loss) per shareDiluted earnings (loss) per share$0.39 $(0.10)$1.41 $0.49 
Average basic shares outstanding32,184
 25,435
 32,073
 21,624
Average basic shares outstanding59,311 59,935 59,619 59,901 
Average diluted shares outstanding33,106
 25,889
 33,110
 21,990
Average diluted shares outstanding59,515 59,935 59,862 60,076 
See accompanying Notes to Unaudited Consolidated Financial Statements.

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OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
 (Unaudited) (Unaudited)
Net income$12,817
 $9,128
 $32,514
 $16,994
Other comprehensive income:       
Unrealized (loss) gain on securities (net of tax benefit of $10 and tax expense of $34 in 2017, and net of tax benefit of $27 and tax expense of $10 in 2016, respectively)(14) (39) 49
 14
Accretion of unrealized loss on securities reclassified to held-to-maturity (net of tax expense of $122 and $365 in 2017 and net of tax expense of $153 and $431 in 2016, respectively)176
 221
 528
 623
Reclassification adjustment for losses included in net income (net of tax benefit of $5 in 2016)—
 —
 —
 (7)
Total comprehensive income$12,979
 $9,310
 $33,091
 $17,624
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2021202020212020
 (Unaudited)(Unaudited)
Net income (loss)$24,167 $(4,926)$87,419 $30,245 
Other comprehensive (loss) income:
Unrealized (loss) gain on debt securities (net of tax benefit of $232 and $446 in 2021 and net of tax benefit of $105 and net of tax expense of $604 in 2020, respectively)(855)(461)(1,658)1,644 
Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $66 and $209 in 2021 and $75 and $235 in 2020, respectively)95 108 303 336 
Reclassification adjustment for gains included in net income (net of tax expense of $45 and $45 in 2020)— 168 — 168 
Total other comprehensive (loss) income(760)(185)(1,355)2,148 
Total comprehensive income (loss)23,407 (5,111)86,064 32,393 
Less: Dividends on preferred shares1,004 1,093 3,012 1,093 
Comprehensive income (loss) available to common stockholders$22,403 $(6,204)$83,052 $31,300 
See accompanying Notes to Unaudited Consolidated Financial Statements.

22

OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the NineThree Months Ended September 30, 20172021 and 2016
2020
 Preferred
Stock		 Common
Stock		 Additional
Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Employee
Stock
Ownership
Plan		 Treasury
Stock		 Common
Stock
Acquired by
Deferred
Compensation
Plan		 Deferred
Compensation
Plan Liability		 Total
Balance at December 31, 2015$—
 $336
 $269,757
 $229,140
 $(6,241) $(3,045) $(251,501) $(314) $314
 $238,446
Net income—
 —
 —
 16,994
 —
 —
 —
 —
 —
 16,994
Other comprehensive income, net of tax—
 —
 —
 —
 630
 —
 —
 —
 —
 630
Tax expense of stock plans—
 —
 (228) —
 —
 —
 —
 —
 —
 (228)
Stock awards—
 —
 1,181
 —
 —
 —
 —
 —
 —
 1,181
Treasury stock allocated to restricted stock plan—
 —
 1,081
 (109) —
 —
 (972) —
 —
 —
Issued 8,282,296 treasury shares to finance acquisition—
 —
 36,940
 —
 —
 —
 128,961
 —
 —
 165,901
Allocation of ESOP stock—
 —
 248
 —
 —
 213
 —
 —
 —
 461
Cash dividend $0.39 per share—
 —
 —
 (8,789) —
 —
 —
 —
 —
 (8,789)
Exercise of stock options—
 —
 —
 (764) —
 —
 3,412
 —
 —
 2,648
Sale of stock for the deferred compensation plan—
 —
 —
 —
 —
 —
 —
 4
 (4) —
Balance at September 30, 2016$—
 $336
 $308,979
 $236,472
 $(5,611) $(2,832) $(120,100) $(310) $310
 $417,244
Balance at December 31, 2016$—
 $336
 $364,433
 $238,192
 $(5,614) $(2,761) $(22,548) $(313) $313
 $572,038
Net income—
 —
 —
 32,514
 —
 —
 —
 —
 —
 32,514
Other comprehensive income, net of tax—
 —
 —
 —
 577
 —
 —
 —
 —
 577
Effect of adopting Accounting Standards Update ("ASU") No. 2016-09—
 —
 (11,129) 11,129
 —
 —
 —
 —
 —
 —
Stock awards—
 —
 1,678
 —
 —
 —
 —
 —
 —
 1,678
Treasury stock allocated to restricted stock plan—
 —
 (1,645) 782
 —
 —
 863
 —
 —
 —
Allocation of ESOP stock—
 —
 480
 —
 —
 212
 —
 —
 —
 692
Cash dividend $0.45 per share—
 —
 —
 (14,439) —
 —
 —
 —
 —
 (14,439)
Exercise of stock options—
 —
 —
 (2,125) —
 —
 5,317
 —
 —
 3,192
Sale of stock for the deferred compensation plan—
 —
 —
 —
 —
 —
 —
 230
 (230) —
Balance at September 30, 2017$—
 $336
 $353,817
 $266,053
 $(5,037) $(2,549) $(16,368) $(83) $83
 $596,252
Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Employee
Stock
Ownership
Plan		Treasury
Stock		Total
Balance at June 30, 2020$1 $609 $1,135,839 $372,552 $1,125 $(8,041)$(25,651)$1,476,434 
Net loss— — — (4,926)— — — (4,926)
Other comprehensive income, net of tax— — — — (185)— — (185)
Stock compensation— — 1,250 — — — — 1,250 
Allocation of ESOP stock— — (46)— — 304 — 258 
Cash dividend $0.17 per share— — — (10,136)— — — (10,136)
Exercise of stock options— — 296 — — — — 296 
Issuance of preferred equity, net of costs— — (184)— — — — (184)
Preferred stock dividend— — — (1,093)— — — (1,093)
Balance at September 30, 2020$1 $609 $1,137,155 $356,397 $940 $(7,737)$(25,651)$1,461,714 
Balance at June 30, 2021$1 $611 $1,143,907 $417,658 $26 $(6,824)$(46,590)$1,508,789 
Net income— — — 24,167 — — — 24,167 
Other comprehensive loss, net of tax— — — — (760)— — (760)
Stock compensation— — 1,505 — — — — 1,505 
Allocation of ESOP stock— — 31 — — 305 — 336 
Cash dividend $0.17 per share— — — (10,100)— — — (10,100)
Exercise of stock options— — 5 — — — — 5 
Repurchase 460,009 shares of common stock— — — — — — (9,689)(9,689)
Preferred stock dividend— — — (1,004)— — — (1,004)
Balance at September 30, 2021$1 $611 $1,145,448 $430,721 $(734)$(6,519)$(56,279)$1,513,249 
See accompanying Notes to Unaudited Consolidated Financial Statements.



















23
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OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the Nine Months Ended September 30, 2021 and 2020
Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Employee
Stock
Ownership
Plan		Treasury
Stock		Total
Balance at December 31, 2019$— $519 $840,691 $358,668 $(1,208)$(8,648)$(36,903)$1,153,119 
Net income— — — 30,245 — — — 30,245 
Other comprehensive income, net of tax— — — — 2,148 — — 2,148 
Stock compensation— 2 3,727 — — — — 3,729 
Effect of adopting Accounting Standards Update(“ASU”) No. 2016-13— — — (4)— — — (4)
Allocation of ESOP stock— — (45)— — 911 — 866 
Cash dividend $0.51 per share— — — (30,630)— — — (30,630)
Exercise of stock options— 2 1,961 (789)— — — 1,174 
Repurchase 648,851 shares of common stock— — — — — — (14,814)(14,814)
Issuance of preferred equity, net of costs1 — 55,528 — — — — 55,529 
Preferred stock dividend— — — (1,093)— — — (1,093)
Acquisition of Two River Bancorp— 42 122,501 — — — 26,066 148,609 
Acquisition of Country Bank Holding Company, Inc.— 44 112,792 — — — — 112,836 
Balance at September 30, 2020$1 $609 $1,137,155 $356,397 $940 $(7,737)$(25,651)$1,461,714 
Balance at December 31, 2020$1 $609 $1,137,715 $378,268 $621 $(7,433)$(25,651)$1,484,130 
Net income— — — 87,419 — — — 87,419 
Other comprehensive loss, net of tax— — — — (1,355)— — (1,355)
Stock compensation— — 4,231 — — — — 4,231 
Allocation of ESOP stock— — 142 — — 914 — 1,056 
Cash dividend $0.51 per share— — — (30,425)— — — (30,425)
Exercise of stock options— 2 3,360 (1,529)— — — 1,833 
Repurchase 1,460,009 shares of common stock— — — — — — (30,628)(30,628)
Preferred stock dividend— — — (3,012)— — — (3,012)
Balance at September 30, 2021$1 $611 $1,145,448 $430,721 $(734)$(6,519)$(56,279)$1,513,249 
See accompanying Notes to Unaudited Consolidated Financial Statements.


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OceanFirst Financial Corp.
Consolidated Statements of Cash Flows
(dollars in thousands)
 For the Nine Months Ended September 30,
 20212020
 (Unaudited)
Cash flows from operating activities:
Net income$87,419 $30,245 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment6,150 6,291 
Allocation of ESOP stock1,056 866 
Stock compensation4,231 3,729 
Net excess tax expense on stock compensation93 123 
Amortization of servicing asset60 65 
Net premium amortization in excess of discount accretion on securities5,719 2,126 
Net amortization of deferred costs on borrowings688 355 
Amortization of core deposit intangible4,110 4,660 
Net accretion of purchase accounting adjustments(10,720)(15,802)
Net amortization of deferred costs and discounts on loans606 1,135 
(Benefit) provision for credit losses(10,259)55,332 
Net gain on sale and write-down of other real estate owned— (101)
Net write down of fixed assets held-for-sale to net realizable value3,114 4,193 
Net loss on sale of fixed assets11 6 
Net (gain) loss on equity securities(8,397)3,220 
Net gain on sales of loans(3,180)(1,930)
Proceeds from sales of residential loans held for sale101,992 113,708 
Mortgage loans originated for sale(53,935)(134,907)
Increase in value of bank owned life insurance(4,771)(4,626)
Net gain on sale of assets held for sale(318)— 
Decrease (increase) in interest and dividends receivable2,757 (14,836)
Deferred tax provision570 99 
Decrease in other assets29,366 2,301 
(Decrease) increase in other liabilities(37,311)71,285 
Total adjustments31,632 97,292 
Net cash provided by operating activities119,051 127,537 
Cash flows from investing activities:
Net increase in loans receivable(203,104)(654,461)
Proceeds from sale of loans825 71,604 
Purchase of residential loan pool(219,745)— 
Premiums paid on purchased loan pool(6,318)— 
Purchase of debt securities available-for-sale(200,034)(57,487)
Purchase of debt securities held-to-maturity(381,032)(79,115)
Purchase of equity investments(85,077)(53,726)
Proceeds from sale of equity investments98,776 891 
Proceeds from maturities and calls of debt securities available-for-sale93,835 41,101 
Proceeds from maturities and calls of debt securities held-to-maturity22,125 41,583 
Proceeds from sales of debt securities available-for-sale— 5,869 
Principal repayments on debt securities available-for-sale114 256 
Principal repayments on debt securities held-to-maturity168,059 128,683 
Proceeds from bank owned life insurance9,952 310 
Proceeds from the redemption of restricted equity investments1,110 62,354 
Purchases of restricted equity investments(2,069)(59,489)
Proceeds from sales of other real estate owned— 713 
Proceeds from sales of assets held-for-sale2,601 — 
Purchases of premises and equipment(26,493)(9,014)
Net cash consideration received for acquisition— 23,460 
Net cash used in investing activities(726,475)(536,468)
25
 For the Nine Months Ended September 30,
 2017 2016
 (Unaudited)
Cash flows from operating activities:   
Net income$32,514
 $16,994
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization of premises and equipment4,606
 3,441
Allocation of ESOP stock692
 461
Stock awards1,678
 1,181
Tax expense of stock plans—
 (228)
Net excess tax benefit on stock compensation(1,700) —
Amortization of servicing asset67
 125
Net premium amortization in excess of discount accretion on securities2,153
 1,295
Net amortization of deferred costs and discounts on borrowings33
 —
Amortization of core deposit intangible1,544
 319
Net accretion of purchase accounting adjustments(6,281) (3,068)
Net amortization (accretion) of deferred costs and discounts on loans300
 (117)
Provision for loan losses3,030
 2,113
Net loss on sale of other real estate owned737
 208
Write down of fixed assets held for sale to net realizable value6,350
 —
Net loss on sale of fixed assets13
 38
Net loss on sales of available-for-sale securities—
 12
Net gain on sales of loans(74) (696)
Proceeds from sales of mortgage loans held for sale3,837
 37,687
Mortgage loans originated for sale(2,551) (25,079)
Increase in value of Bank Owned Life Insurance(2,436) (1,520)
Increase in interest and dividends receivable(1,638) (24)
Decrease in other assets4,012
 8,708
Increase in other liabilities15,810
 4,072
Total adjustments30,182
 28,928
Net cash provided by operating activities62,696
 45,922
Cash flows from investing activities:   
Net (increase) decrease in loans receivable(57,646) 68,358
Proceeds from sale of under performing loans6,022
 12,797
Purchase of loans receivable(16,627) (12,942)
Purchase of investment securities available-for-sale(54,810) —
Purchase of investment securities held-to-maturity(111,593) (2,030)
Purchase of mortgage-backed securities held-to-maturity(120,210) —
Proceeds from maturities and calls of investment securities held-to-maturity13,020
 53,552
Proceeds from sales of securities available-for-sale—
 59,870
Principal repayments on mortgage-backed securities held-to-maturity73,313
 52,110
Proceeds from Bank Owned Life Insurance310
 310
Proceeds from the redemption of Federal Home Loan Bank of New York stock19,010
 32,042
Purchases of Federal Home Loan Bank of New York stock(18,169) (23,571)
Proceeds from sales of other real estate owned2,777
 3,193
Purchases of premises and equipment(9,031) (4,580)
Cash received, net of cash consideration paid for acquisition—
 (477)
Cash acquired, net of cash paid for branch acquisition—
 16,727
Net cash (used in) provided by investing activities(273,634) 255,359
Table of Contents

Continued
OceanFirst Financial Corp.
Consolidated Statements of Cash Flows (Continued)
(dollars in thousands)
Nine Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 20212020
(Unaudited) (Unaudited)
Cash flows from financing activities:   Cash flows from financing activities:
Increase in deposits$163,182
 $143,104
Increase in deposits$347,672 $1,362,996 
Increase (decrease) in short-term borrowings5,391
 (175,821)Increase (decrease) in short-term borrowings14,838 (211,649)
Proceeds from Federal Home Loan Bank advances10,000
 55,000
Repayments of Federal Home Loan Bank advances(1,438) (73,678)
Proceeds from FHLB advancesProceeds from FHLB advances— 525,000 
Repayments of FHLB advancesRepayments of FHLB advances— (496,200)
Proceeds from Federal Reserve Bank advancesProceeds from Federal Reserve Bank advances— 3,778 
Net proceeds from issuance of subordinated notes—
 33,899
Net proceeds from issuance of subordinated notes— 122,180 
Repayments of other borrowings—
 (10,000)Repayments of other borrowings(7,585)(80)
Increase in advances by borrowers for taxes and insurance341
 237
Increase in advances by borrowers for taxes and insurance4,918 5 
Exercise of stock options3,192
 2,648
Exercise of stock options1,833 1,174 
Payment of employee taxes withheld from stock awards(1,406) (244)Payment of employee taxes withheld from stock awards(1,176)(2,084)
Purchase of treasury stockPurchase of treasury stock(30,628)(14,814)
Net proceeds from the issuance of preferred stockNet proceeds from the issuance of preferred stock— 55,529 
Dividends paid(14,439) (8,789)Dividends paid(33,437)(31,723)
Net cash provided by (used in) financing activities164,823
 (33,644)
Net (decrease) increase in cash and due from banks(46,115) 267,637
Net cash provided by financing activitiesNet cash provided by financing activities296,435 1,314,112 
Net (decrease) increase in cash and due from banks and restricted cashNet (decrease) increase in cash and due from banks and restricted cash(310,989)905,181 
Cash and due from banks and restricted cash at beginning of periodCash and due from banks and restricted cash at beginning of period1,318,661 133,226 
Cash and due from banks and restricted cash at end of periodCash and due from banks and restricted cash at end of period$1,007,672 $1,038,407 
Supplemental Disclosure of Cash Flow Information:Supplemental Disclosure of Cash Flow Information:
Cash and due from banks at beginning of period301,373
 43,946
Cash and due from banks at beginning of period$1,272,134 $120,544 
Restricted cash at beginning of periodRestricted cash at beginning of period46,527 12,682 
Cash and due from banks and restricted cash at beginning of periodCash and due from banks and restricted cash at beginning of period$1,318,661 $133,226 
Cash and due from banks at end of period$255,258
 $311,583
Cash and due from banks at end of period$981,126 $980,870 
Supplemental Disclosure of Cash Flow Information:   
Restricted cash at end of periodRestricted cash at end of period26,546 57,537 
Cash and due from banks and restricted cash at end of periodCash and due from banks and restricted cash at end of period$1,007,672 $1,038,407 
Cash paid during the period for:   Cash paid during the period for:
Interest$14,333
 $8,932
Interest$28,009 $51,494 
Income taxes8
 7,064
Income taxes38,707 5,232 
Non-cash activities:   Non-cash activities:
Accretion of unrealized loss on securities reclassified to held-to-maturity865
 1,054
Accretion of unrealized loss on securities reclassified to held-to-maturity512 570 
Net loan charge-offs1,629
 1,949
Net loan (recoveries) charge-offsNet loan (recoveries) charge-offs(442)15,917 
Transfer of loans receivable to loans held-for-saleTransfer of loans receivable to loans held-for-sale12,781 365,634 
Transfer of premises and equipment to assets held-for-sale5,078
 —
Transfer of premises and equipment to assets held-for-sale1,476 4,043 
Transfer of loans receivable to other real estate owned3,389
 1,667
Transfer of loans receivable to other real estate owned— 106 
Acquisition:   Acquisition:
Non-cash assets acquired:   Non-cash assets acquired:
Securities$—
 $212,156
Securities$— $208,880 
Federal Home Loan Bank of New York stock—
 6,782
Restricted equity investmentsRestricted equity investments— 5,334 
Loans—
 1,157,753
Loans— 1,558,480 
Premises & equipment—
 21,723
Other real estate owned—
 1,996
Deferred tax asset—
 21,664
Premises and equipmentPremises and equipment— 9,744 
Accrued interest receivableAccrued interest receivable— 4,161 
Bank owned life insuranceBank owned life insurance— 22,440 
Deferred tax assets, netDeferred tax assets, net— (509)
Other assets—
 61,793
Other assets— 10,073 
Goodwill and other intangible assets, net—
 68,179
Goodwill and other intangible assets, net— 140,031 
Total non-cash assets acquired$—
 $1,552,046
Total non-cash assets acquired$— $1,958,634 
Liabilities assumed:   Liabilities assumed:
Deposits$—
 $1,248,367
Deposits$— $1,594,403 
Federal Home Loan Bank advances—
 124,466
BorrowingsBorrowings— 92,618 
Other liabilities—
 12,835
Other liabilities— 33,628 
Total liabilities assumed$—
 $1,385,668
Total liabilities assumed$— $1,720,649 
See accompanying Notes to Unaudited Consolidated Financial Statements.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements





Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of OceanFirst Financial Corp. (the “Company”) and its wholly-owned subsidiaries, OceanFirst Bank N.A. (the “Bank”) and OceanFirst Risk Management, Inc. and OceanFirst Bank (the “Bank”), and the Bank’s subsidiaries.direct and indirect wholly-owned subsidiaries, OceanFirst REIT Holdings, Inc., OceanFirst Management Corp., OceanFirst Realty Corp. Casaba Real Estate Holdings Corporation, CBNJ Investments Corp., Country Property Holdings, Inc., and TRCB Investment Corp. Certain other subsidiaries were dissolved in 2020 and are included in the consolidated financial statements for previous periods. All significant intercompany accounts and transactions have been eliminated in consolidation.
On May 18, 2017,a new subsidiary ofCertain amounts previously reported have been reclassified to conform to the Company was incorporated under the name OceanFirst Risk Management, Inc. OceanFirst Risk Management, Inc. is a captive insurance subsidiary which insures various liability and property damage policies for the Company and its related subsidiaries.current year’s presentation.
The interim consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and nine months ended September 30, 20172021 are not necessarily indicative of the results of operations that may be expected for all of 2017.the full year 2021 or any other period. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and the results of operations for the period. Actual results could differ from these estimates.
Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report to Stockholders on Form 10-K for the year ended December 31, 2016.2020.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 2. Business Combinations
BranchTwo River Bancorp Acquisition
On March 11, 2016,January 1, 2020, the Company completed its acquisition of an existing retail branch in the TomsTwo River market. Under the terms of the Purchase and Assumption Agreement dated July 31, 2015, the Company paid a deposit premium of $340,000, equal to 2.50% of core deposits; i.e., all deposits other than time deposits, government deposits, and fiduciary accounts. 
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax. The excess of consideration paid over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following table presents the assets acquired and liabilities assumed as of March 11, 2016 and the fair value estimates (in thousands):
 Fair Value
Assets acquired: 
Cash and cash equivalents$16,727
Loans9
Other assets15
Core deposit intangible66
Total assets acquired$16,817
Liabilities assumed: 
Deposits$16,957
Other liabilities138
Total liabilities assumed$17,095
Goodwill$278



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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


Cape Bancorp Acquisition
On May 2, 2016, the Company completed its acquisition of Cape Bancorp, Inc. (“Cape”Two River”), which after purchase accounting adjustments added $1.5$1.11 billion toof assets, $1.2 billion to$940.1 million of loans, and $1.2 billion to$941.8 million of deposits. Total consideration paid for CapeTwo River was $196.4$197.1 million, including cash consideration of $30.5$48.4 million. Cape was merged with and into the Company as of the date of acquisition.
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax. The excess of consideration paid over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Cape, net of total consideration paid (in thousands):
 At May 2, 2016
 Fair Value
Total Purchase Price:$196,403
Assets acquired: 
Cash and cash equivalents$30,025
Securities and Federal Home Loan Bank Stock218,938
Loans1,156,719
Premises and equipment25,999
Other real estate owned1,683
Deferred tax asset17,826
Other assets61,793
Core deposit intangible3,718
Total assets acquired$1,516,701
Liabilities assumed: 
Deposits$(1,248,367)
Borrowings(124,466)
Other liabilities(12,767)
Total liabilities assumed$(1,385,600)
Net assets acquired$131,101
Goodwill recorded in the merger$65,302

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties becomes available. On May 2, 2017, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Ocean Shore Holding Co. Acquisition
On November 30, 2016, the Company completed its acquisition of Ocean Shore Holding Co. (“Ocean Shore”), which after purchase accounting adjustments added $994.2 million to assets, $773.6 million to loans, and $875.1 million to deposits. Total consideration paid for Ocean Shore was $180.7 million, including cash consideration of $28.4 million. Ocean ShoreTwo River was merged with and into the Company on the date of acquisition.
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax. The excess of consideration paid over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Ocean Shore,Two River, net of total consideration paid (in thousands):
 At November 30, 2016
 Estimated
Fair  Value
Total Purchase Price:$180,732
Assets acquired: 
Cash and cash equivalents$60,871
Securities and Federal Home Loan Bank Stock94,133
Loans773,641
Premises and equipment15,068
Other real estate owned1,044
Deferred tax asset6,563
Other assets35,364
Core deposit intangible7,506
Total assets acquired$994,190
Liabilities assumed: 
Deposits$(875,073)
Borrowings(3,694)
Other liabilities(15,447)
Total liabilities assumed$(894,214)
Net assets acquired$99,976
Goodwill recorded in the merger$80,756
At January 1, 2020
Estimated
Fair Value
Total purchase price:$197,050 
Assets acquired:
Cash and cash equivalents$51,102 
Securities64,381 
Loans940,072 
Accrued interest receivable2,382 
Bank owned life insurance22,440 
Deferred tax assets, net3,158 
Other assets15,956 
Core deposit intangible12,130 
Total assets acquired1,111,621 
Liabilities assumed:
Deposits(941,750)
Other liabilities(59,026)
Total liabilities assumed(1,000,776)
Net assets acquired$110,845 
Goodwill recorded in the merger$86,205 
The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties used to determine fair value as of the closing date become available. As of January 1, 2021, the Company finalizesfinalized its review of the acquired assets and liabilities certainand will not be recording any further adjustments to the carrying value.
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Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Country Bank Holding Company, Inc. Acquisition
On January 1, 2020, the Company completed its acquisition of Country Bank Holding Company, Inc. (“Country Bank”), which after purchase accounting adjustments added $793.7 million of assets, $618.4 million of loans, and $652.7 million of deposits. Total consideration paid for Country Bank was $112.8 million. Country Bank was merged with and into the Company on the date of acquisition.
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax. The excess of consideration paid over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Country Bank, net of total consideration paid (in thousands):
At January 1, 2020
Estimated
Fair Value
Total purchase price:$112,836 
Assets acquired:
Cash and cash equivalents$20,799 
Securities144,499 
Loans618,408 
Accrued interest receivable1,779 
Deferred tax assets, net(3,117)
Other assets9,195 
Core deposit intangible2,117 
Total assets acquired793,680 
Liabilities assumed:
Deposits(652,653)
Other liabilities(67,240)
Total liabilities assumed(719,893)
Net assets acquired$73,787 
Goodwill recorded in the merger$39,049 
The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the estimates and uncertainties used to determine fair value as of the closing date become available. As of January 1, 2021, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying values may be required.value.
Fair Value Measurement of Assets Assumed and Liabilities Assumed
The methods used to determine the fair value of the assets acquired and liabilities assumed in the CapeTwo River and Ocean ShoreCountry Bank acquisitions were as follows. Refer to Note 8,7, Fair Value Measurements, for a discussion of the fair value hierarchy.
Securities
The estimated fair values of the securities were calculated utilizing Level 2 inputs. The securities acquired are bought and sold in active markets. Prices for these instruments were obtained through security industry sources that actively participate in the buying and selling of securities.
Loans
The acquired loan portfolio was valued utilizing Level 3 inputs and included the use of present value techniques employing cash flow estimates and incorporated assumptions that marketplace participants would use in estimating fair values. In instances where reliable market information was not available, the Company used its own assumptions in an effort to determine reasonable fair value. Specifically, the Company utilized three separate fair value analyses which a market participant would employ in estimating

24
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


the total fair value adjustment. The three separate fair valuation methodologies used were: 1) interest rate loan fair value analysis; 2) general credit fair value adjustment; and 3) specific credit fair value adjustment.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

To prepare the interest rate fair value analysis, loans were grouped by characteristics such as loan type, term, collateral and rate. Market rates for similar loans were obtained from various external data sources and reviewed by Company management for reasonableness. The average of these rates was used as the fair value interest rate a market participant would utilize. A present value approach was utilized to calculate the interest rate fair value adjustment.
The general credit fair value adjustment was calculated using a two part general credit fair value analysis: 1) expected lifetime losses and 2) estimated fair value adjustment for qualitative factors. The expected lifetime losses were calculated using an average of historical losses of the acquired bank.bank or historical loss experiences of peer groups where deemed appropriate. The adjustment related to qualitative factors was impacted by general economic conditions and the risk related to lack of experience with the originator’s underwriting process. 
To calculate the specific credit fair value adjustment, subsequent to January 1, 2020, the Company reviewed the acquired loan portfolio foridentified loans meeting the definition of an impaired loan with deterioratedthat have experienced more-than-insignificant deterioration in credit quality.quality since origination. Loans meeting thesethis criteria were reviewed by comparing the contractual cash flows to expected collectible cash flows. The aggregate expected cash flows less the acquisition date fair value resulted in an accretable yield amount which will be recognized over the life of the loans on a level yield basis as an adjustment to yield.
Premises and Equipment
Fair values are based upon appraisals from independent third parties. In addition to owned properties, CapeTwo River operated eight14 properties subject to lease agreements, and Ocean ShoreCountry Bank operated two5 properties, subject to lease agreements.
Deposits and Core Deposit Premium
Core deposit premium represents the value assigned to non-interest-bearing demand deposits, interest-bearing checking, money market and saving accounts acquired as part of thean acquisition. The core deposit premium value represents the future economic benefit, including the present value of future tax benefits, of the potential cost savingsavings from acquiring the core deposits as part of an acquisition compared to the cost of alternative funding sources and is valued utilizing Level 2 inputs. The core deposit premium totaled $66,000, $3.7$12.1 million and $7.5$2.1 million, for the branch, Cape,acquisitions of Two River and Ocean Shore acquisitions,Country Bank, respectively, and is being amortized over its estimated useful life of approximately 10 years using an accelerated method.
Time deposits are not considered to be core deposits as they are assumed to have a low expected average life upon acquisition. The fair value of time deposits represents the present value of the expected contractual payments discounted by market rates for similar time deposits and is valued utilizing Level 2 inputs.
Borrowings
Fair value estimates are based on discounting contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 3. Earnings (Loss) per Share
The following reconciles shares outstanding for basic and diluted earnings (loss) per share for the three and nine months ended September 30, 20172021 and 20162020 (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
Weighted average shares outstanding59,722 60,363 60,050 60,349 
Less: Unallocated ESOP shares(353)(418)(369)(435)
 Unallocated incentive award shares(58)(10)(62)(13)
Average basic shares outstanding59,311 59,935 59,619 59,901 
Add: Effect of dilutive securities:
Incentive awards204 — 243 175 
Average diluted shares outstanding59,515 59,935 59,862 60,076 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Weighted average shares issued net of Treasury shares32,545
 25,823
 32,456
 22,010
Less: Unallocated ESOP shares(306) (340) (315) (348)
 Unallocated incentive award shares and shares held by deferred compensation plan(55) (48) (68) (38)
Average basic shares outstanding32,184
 25,435
 32,073
 21,624
Add: Effect of dilutive securities:       
Stock options912
 434
 1,023
 347
Shares held by deferred compensation plan10
 20
 14
 19
Average diluted shares outstanding33,106
 25,889
 33,110
 21,990
For the three and nine months ended September 30, 2021, antidilutive stock options of 1,573,000 and 1,566,000, respectively, were excluded from the earnings (loss) per share calculations. For the three and nine months ended September 30, 2020, antidilutive stock options of 2,251,000 and 2,067,000, respectively, were excluded from the earnings (loss) per share calculations. For the three months ended September 30, 2017 and 2016, antidilutive stock options of 476,000 and 914,000, respectively,2020, 87,000 shares related to incentive awards were excluded from the diluted earnings (loss) per share calculations. For the nine months ended September 30, 2017 and 2016, antidilutive stock options of 244,000 and 1,132,000, respectively,calculation as they were excluded from earnings per share calculations.

antidilutive.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 4. Securities
The amortized cost, and estimated fair value, and allowance for securities credit losses of debt securities available-for-sale and held-to-maturity at September 30, 2017,2021 and December 31, 2016,2020 are as follows (in thousands):
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value		Allowance for Credit Losses
At September 30, 2021
Debt securities available-for-sale:
U.S. government and agency obligations$133,088 $1,653 $(136)$134,605 $— 
Corporate debt securities5,000 52 (3)5,049 — 
Collateralized loan obligations (“CLOs”)145,792 8 (380)145,420 — 
Mortgage-backed securities - FNMA12,648 1 — 12,649 — 
Mortgage-backed securities - agency commercial17,047 — (150)16,897 — 
Total debt securities available-for-sale$313,575 $1,714 $(669)$314,620 $— 
Debt securities held-to-maturity:
State, municipal and sovereign debt obligations$292,226 $8,379 $(630)$299,975 $(86)
Corporate debt securities70,343 1,828 (1,273)70,898 (1,309)
Mortgage-backed securities:
FHLMC359,449 3,568 (2,881)360,136 — 
FNMA326,877 4,887 (1,964)329,800 — 
GNMA44,010 1,056 (34)45,032 — 
SBA4,654 12 (43)4,623 — 
Other32,160 760 (3)32,917 (108)
Total mortgage-backed securities767,150 10,283 (4,925)772,508 (108)
Total debt securities held-to-maturity$1,129,719 $20,490 $(6,828)$1,143,381 $(1,503)
Total debt securities$1,443,294 $22,204 $(7,497)$1,458,001 $(1,503)
At December 31, 2020
Debt securities available-for-sale:
U.S. government and agency obligations$173,790 $3,152 $(2)$176,940 $— 
CLOs6,174 — (4)6,170 — 
Mortgage-backed securities - FNMA190 2 — 192 — 
Total debt securities available-for-sale$180,154 $3,154 $(6)$183,302 $— 
Debt securities held-to-maturity:
State and municipal obligations$238,405 $11,500 $(231)$249,674 $(48)
Corporate debt securities72,305 1,615 (2,652)71,268 (1,550)
Mortgage-backed securities:
FHLMC232,942 5,383 (124)238,201 — 
FNMA293,615 7,640 (147)301,108 — 
GNMA67,334 2,014 (12)69,336 — 
SBA5,392 — (60)5,332 — 
Other32,321 1,226 — 33,547 (117)
Total mortgage-backed securities631,604 16,263 (343)647,524 (117)
Total debt securities held-to-maturity$942,314 $29,378 $(3,226)$968,466 $(1,715)
Total debt securities$1,122,468 $32,532 $(3,232)$1,151,768 $(1,715)
 At September 30, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Available-for-sale:       
Investment securities:       
U.S. agency obligations$67,367
 $88
 $(322) $67,133
Held-to-maturity:       
Investment securities:       
U.S. agency obligations$14,966
 $41
 $—
 $15,007
State and municipal obligations142,168
 610
 (579) 142,199
Corporate debt securities76,033
 361
 (3,753) 72,641
Other investments8,903
 —
 (189) 8,714
Total investment securities242,070
 1,012
 (4,521) 238,561
Mortgage-backed securities:       
FHLMC179,890
 447
 (1,674) 178,663
FNMA244,279
 1,892
 (1,474) 244,697
GNMA78,441
 96
 (505) 78,032
SBA6,483
 61
 —
 6,544
Total mortgage-backed securities509,093
 2,496
 (3,653) 507,936
Total held-to-maturity$751,163
 $3,508
 $(8,174) $746,497
Total securities$818,530
 $3,596
 $(8,496) $813,630

32
 At December 31, 2016
 Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value
Available-for-sale:       
Investment securities:       
U.S. agency obligations$12,542
 $—
 $(318) $12,224
Held-to-maturity:       
Investment securities:       
U.S. agency obligations$19,960
 $69
 $—
 $20,029
State and municipal obligations39,155
 10
 (856) 38,309
Corporate debt securities77,057
 85
 (6,001) 71,141
Other investments8,778
 —
 (228) 8,550
Total investment securities144,950
 164
 (7,085) 138,029
Mortgage-backed securities:       
FHLMC144,016
 195
 (2,457) 141,754
FNMA217,445
 2,175
 (2,524) 217,096
GNMA92,475
 119
 (364) 92,230
SBA8,947
 28
 —
 8,975
Total mortgage-backed securities462,883
 2,517
 (5,345) 460,055
Total held-to-maturity$607,833
 $2,681
 $(12,430) $598,084
Total securities$620,375
 $2,681
 $(12,748) $610,308


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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



There was no allowance for securities credit losses on debt securities available-for-sale at September 30, 2021 or December 31, 2020.
DuringThe following table presents the third quarteractivity in the allowance for credit losses for debt securities held-to-maturity for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Allowance for credit losses
Beginning balance$(1,609)$(2,446)$(1,715)$— 
Impact of current expected credit loss (“CECL”) adoption— — — (1,268)
Provision for credit loss expense106 53 212 (1,125)
Total ending allowance balance$(1,503)$(2,393)$(1,503)$(2,393)

During 2013, the Bank transferred $536.0 million of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value. The securities transferred had an unrealized net loss of $13.3 million at the time of transfer, which continues to be reflected in accumulated other comprehensive lossincome on the consolidated balance sheet,statement of financial condition, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the debt securities held-to-maturity investment securities at September 30, 2017,2021 and December 31, 2016, are2020 is as follows (in thousands):
September 30,December 31,
September 30, 2017 December 31, 201620212020
Amortized cost$751,163
 $607,833
Amortized cost$1,129,719 $942,314 
Net loss on date of transfer from available-for-sale(13,347) (13,347)Net loss on date of transfer from available-for-sale(13,347)(13,347)
Allowance for securities credit lossAllowance for securities credit loss(1,503)(1,715)
Accretion of net unrealized loss on securities reclassified as held-to-maturity5,070
 4,205
Accretion of net unrealized loss on securities reclassified as held-to-maturity10,513 10,001 
Carrying value$742,886
 $598,691
Carrying value$1,125,382 $937,253 
There were no realized gains or losses on the sale ofdebt securities for the three and nine months ended September 30, 2017. There were no2021, as compared to $244,000 of realized gains or losses on the sale ofdebt securities for the three months ended September 30, 2016 and there were $75,000 in realized gains and $87,000 in realized losses on the sale of available-for-sale securities for the nine months ended September 30, 2016.corresponding prior year periods.
The amortized cost and estimated fair value of investmentdebt securities at September 30, 20172021 by contractual maturity are shown below (in thousands). Actual maturities may differ from contractual maturities in instances where issuers have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2017, investment2021, corporate debt securities with an amortized cost of $60.9$29.4 million, and estimated fair value of $57.5$31.0 million, and CLOs with an amortized cost of $145.8 million and estimated fair value of $145.4 million were callable prior to the maturity date.
 
September 30, 2021Amortized
Cost		Estimated
Fair Value
Less than one year$90,596 $91,346 
Due after one year through five years154,228 157,403 
Due after five years through ten years222,930 222,072 
Due after ten years178,695 185,126 
$646,449 $655,947 
September 30, 2017
Amortized
Cost
 
Estimated
Fair Value
Less than one year$35,395
 $35,384
Due after one year through five years145,590
 145,528
Due after five years through ten years89,509
 88,277
Due after ten years30,000
 27,751
 $300,494
 $296,940
Other investments which consist of two open-end funds are excluded from the above table since there are no contractual maturity dates. Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.

The estimated fair value of securities pledged as required security for deposits and for other purposes required by law amounted to $993.0 million and $435.9 million at September 30, 2021 and December 31, 2020, respectively, which includes $150.7 million and $152.7 million at September 30, 2021 and December 31, 2020, respectively, pledged as collateral for securities sold under agreements to repurchase.
At September 30, 2021, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies and government-sponsored enterprises, in an amount greater than 10% of stockholders’ equity.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



The estimated fair value and unrealized losses offor debt securities available-for-sale and held-to-maturity at September 30, 20172021 and December 31, 2016,2020, segregated by the duration of the unrealized losses, are as follows (in thousands):

 Less than 12 months12 months or longerTotal
 Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses
At September 30, 2021
Debt securities available-for-sale:
U.S. government and agency obligations$25,911 $(136)$— $— $25,911 $(136)
Corporate debt securities997 (3)— — 997 (3)
Mortgage-backed securities11,555 (150)— — 11,555 (150)
CLOs117,477 (380)— — 117,477 (380)
Total debt securities available-for-sale155,940 (669)— — 155,940 (669)
Debt securities held-to-maturity:
State, municipal and sovereign debt obligations64,303 (608)911 (22)65,214 (630)
Corporate debt securities39,573 (1,273)— — 39,573 (1,273)
Mortgage-backed securities:
FHLMC242,215 (2,823)4,102 (58)246,317 (2,881)
FNMA171,450 (1,776)8,647 (188)180,097 (1,964)
GNMA458 (3)4,867 (31)5,325 (34)
SBA1,602 (41)969 (2)2,571 (43)
Other4,484 (3)— — 4,484 (3)
Total mortgage-backed securities420,209 (4,646)18,585 (279)438,794 (4,925)
Total debt securities held-to-maturity524,085 (6,527)19,496 (301)543,581 (6,828)
Total debt securities$680,025 $(7,196)$19,496 $(301)$699,521 $(7,497)
At December 31, 2020
Debt securities available-for-sale:
U.S. government and agency obligations$17,029 $(2)$— $— $17,029 $(2)
CLOs4,766 (4)— — 4,766 (4)
Total debt securities available-for-sale21,795 (6)— — 21,795 (6)
Debt securities held-to-maturity:
State and municipal obligations2,823 (23)7,509 (208)10,332 (231)
Corporate debt securities10,192 (255)35,935 (2,397)46,127 (2,652)
Mortgage-backed securities:
FHLMC24,661 (117)669 (7)25,330 (124)
FNMA39,365 (128)939 (19)40,304 (147)
GNMA5,856 (11)207 (1)6,063 (12)
SBA3,626 (12)1,706 (48)5,332 (60)
Total mortgage-backed securities73,508 (268)3,521 (75)77,029 (343)
Total debt securities held-to-maturity86,523 (546)46,965 (2,680)133,488 (3,226)
Total debt securities$108,318 $(552)$46,965 $(2,680)$155,283 $(3,232)

 At September 30, 2017
 Less than 12 months 12 months or longer Total
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Available-for-sale:           
Investment securities:           
U.S. agency obligations$52,276
 $(322) $—
 $—
 $52,276
 $(322)
Held-to-maturity:           
Investment securities:           
State and municipal obligations77,979
 (531) 9,908
 (48) 87,887
 (579)
Corporate debt securities5,028
 (11) 53,260
 (3,742) 58,288
 (3,753)
Other investments—
 —
 8,714
 (189) 8,714
 (189)
Total investment securities83,007
 (542) 71,882
 (3,979) 154,889
 (4,521)
Mortgage-backed securities:           
FHLMC67,059
 (892) 30,684
 (782) 97,743
 (1,674)
FNMA96,886
 (954) 19,878
 (520) 116,764
 (1,474)
GNMA65,565
 (477) 741
 (28) 66,306
 (505)
Total mortgage-backed securities229,510
 (2,323) 51,303
 (1,330) 280,813
 (3,653)
Total held-to-maturity312,517
 (2,865) 123,185
 (5,309) 435,702
 (8,174)
Total securities$364,793
 $(3,187) $123,185
 $(5,309) $487,978
 $(8,496)
            
 At December 31, 2016
 Less than 12 months 12 months or longer Total
 Estimated
Fair
Value		 Unrealized
Losses		 Estimated
Fair
Value		 Unrealized
Losses		 Estimated
Fair
Value		 Unrealized
Losses
Available-for-sale:           
Investment securities:           
U.S. agency obligations$12,224
 $(318) $—
 $—
 $12,224
 $(318)
Held-to-maturity:           
Investment securities:           
State and municipal obligations32,995
 (856) —
 —
 32,995
 (856)
Corporate debt securities12,450
 (120) 49,119
 (5,881) 61,569
 (6,001)
Other Investments8,551
 (228) —
 —
 8,551
 (228)
Total investment securities53,996
 (1,204) 49,119
 (5,881) 103,115
 (7,085)
Mortgage-backed securities:           
FHLMC102,461
 (1,665) 26,898
 (792) 129,359
 (2,457)
FNMA124,403
 (2,185) 8,925
 (339) 133,328
 (2,524)
GNMA79,116
 (364) —
 —
 79,116
 (364)
Total mortgage-backed securities305,980
 (4,214) 35,823
 (1,131) 341,803
 (5,345)
Total held-to-maturity359,976
 (5,418) 84,942
 (7,012) 444,918
 (12,430)
Total securities$372,200
 $(5,736) $84,942
 $(7,012) $457,142
 $(12,748)


29
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements


At September 30, 2017, the amortized cost, estimated fair value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):
Security Description
Amortized
Cost
 
Estimated
Fair Value
 
Credit Rating
Moody’s/
S&P
BankAmerica Capital$15,000
 $14,155
 Ba1/BB+
Chase Capital10,000
 9,355
 Baa2/BBB-
Wells Fargo Capital5,000
 4,706
 A1/BBB+
Huntington Capital5,000
 4,463
 Baa2/BB
Keycorp Capital5,000
 4,715
 Baa2/BB+
PNC Capital5,000
 4,663
 Baa1/BBB-
State Street Capital5,000
 4,613
 A3/BBB
SunTrust Capital5,000
 4,592
 Not Rated/BB+
MetLife Global Funding1,000
 999
 Aa3/AA-
State Street Corporation1,000
 999
 A1/A
 $57,000
 $53,260
  
At September 30, 2017, the estimated fair value of each of the above corporate debt securities was below cost. The Company concluded that thesethe corporate debt securities were only temporarilynot impaired atat September 30, 2017. In concluding that the impairments were only temporary, the Company considered2021 based on a consideration of several factors in its analysis.factors. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments, and no interest payments were deferred. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the Company does not have the intentintend to sell these corporate debt securities and it is more likely than not that the Company will not be required to sell the securities. Historically, the Company has not utilized securities sales as a source of liquidity. Theliquidity and the Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.
The mortgage-backed securities are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”),FHLMC, FNMA, GNMA or the Small Business Administration (“SBA”)SBA, corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+/Aaa by oneS&P and Moody’s,
34
Table of the internationally-recognizedContents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

respectively. Additionally, there are private label commercial mortgage-backed securities with credit rating services.ratings ranging between Aaa and Aa3. The Company considers the unrealized losses to be the result of changes in interest rates, and not credit quality, which over time can have both a positive and negative impact on the estimated fair value of the mortgage-backed securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that these securities were only temporarilynot impaired at September 30, 2017.2021.

State, municipal, and sovereign debt obligations are securities issued by state, local and national governments for various purposes. The Company is not aware of any information subsequent to the purchase of any state, municipal, and sovereign debt obligations that indicates an inability on the part of an issuer to meet all of its financial commitments. The credit rating of these securities is between Aaa/AAA and Baa2/BBB. The Company has the ability and stated intention to hold these securities to maturity at which time the Company expects to receive full repayment. Current unrealized losses are considered to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated fair value of the securities. As a result, the Company concluded that these securities were not impaired as of September 30, 2021.
The Company monitors the credit quality of debt securities held-to-maturity on a quarterly basis through the use of internal credit analysis supplemented by external credit ratings. The following table summarized the amortized cost of debt securities held-to-maturity at September 30, 2021, aggregated by credit quality indicator (in thousands):
AAAAAABBBBBTotal
As of September 30, 2021
State, municipal and sovereign debt obligations$31,053 $145,704 $85,435 $30,034 $— $292,226 
Corporate debt securities— 7,534 4,748 47,538 10,523 70,343 
Mortgage-backed securities - other11,093 21,067 — — — 32,160 
Total debt securities held-to-maturity$42,146 $174,305 $90,183 $77,572 $10,523 $394,729 
Equity Investments
At September 30, 2021 and December 31, 2020, the Company held equity investments of $101.3 million and $107.1 million, respectively. The equity investments primarily comprised of select financial services institutions’ common and preferred stocks paying attractive dividends.
The realized and unrealized gains or losses on equity securities for the three and nine months ended September 30, 2021 and September 30, 2020 are shown in the table below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net (loss) gain on equity investments$(466)$(3,576)$8,397 $(3,273)
Less: Net gains (losses) recognized on equity securities sold— — 8,123 (53)
Unrealized (loss) gain recognized on equity securities still held$(466)$(3,576)$274 $(3,220)
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 5. Loans Receivable, Net
Loans receivable, net at September 30, 20172021 and December 31, 20162020 consisted of the following (in thousands):
September 30,December 31,
20212020
Commercial:
Commercial and industrial (1)
$457,674 $470,656 
Commercial real estate – owner occupied1,123,973 1,145,065 
Commercial real estate – investor3,922,983 3,491,464 
Total commercial5,504,630 5,107,185 
Consumer:
Residential real estate2,401,240 2,309,459 
Home equity loans and lines and other consumer275,962 339,462 
Total consumer2,677,202 2,648,921 
Total loans receivable8,181,832 7,756,106 
Deferred origination costs, net8,282 9,486 
Allowance for loan credit losses(50,153)(60,735)
Total loans receivable, net$8,139,961 $7,704,857 
 September 30, 2017 December 31, 2016
Commercial:   
Commercial and industrial$183,420
 $152,569
Commercial real estate – owner occupied553,971
 534,214
Commercial real estate – investor1,133,118
 1,132,075
Total commercial1,870,509
 1,818,858
Consumer:   
Residential mortgage1,676,143
 1,647,154
Residential construction73,812
 65,319
Home equity loans and lines277,909
 288,991
Other consumer1,354
 1,564
Total consumer2,029,218
 2,003,028
 3,899,727
 3,821,886
Purchased credit impaired (“PCI”) loans4,867
 7,575
Total Loans3,904,594
 3,829,461
Loans in process(22,546) (14,249)
Deferred origination costs, net4,645
 3,414
Allowance for loan losses(16,584) (15,183)
Total loans, net$3,870,109
 $3,803,443
At(1) The commercial and industrial loans balance at September 30, 20172021 and December 31, 2016, loans in the amount of $15.1 million and $13.6 million, respectively, were three or more months delinquent or in the process of foreclosure and the Company was not accruing interest income on these loans. At September 30, 2017, there were no loans that were ninety days or greater past due and still accruing interest. Non-accrual loans include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.
The recorded investment in mortgage and consumer loans collateralized by residential real estate which are in the process of foreclosure amounted to $2.5 million at September 30, 2017. The amount of foreclosed residential real estate property held by the Company was $1.2 million at September 30, 2017.
The Company defines an impaired loan as non-accrual commercial real estate, multi-family, land, construction and commercial loans in excess of $250,000. Impaired loans also include all loans modified as troubled debt restructurings. At September 30, 2017, the impaired loan portfolio totaled $44.9 million for which there was a specific allocation in the allowance for loan losses of $616,000. At December 31, 2016, the impaired loan portfolio totaled $31.0 million for which there was a specific allocation in the allowance for loan losses of $510,000. The average balance of impaired loans for the three months ended September 30, 2017 and 2016 was $43.1 million and $34.5 million, respectively. The average balance of impaired loans for the nine months ended September 30, 2017 and 2016 was $38.0 million and $34.3 million, respectively.
An analysis of the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 is as follows (in thousands):
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Balance at beginning of period$16,557
 $16,678
 $15,183
 $16,722
Provision charged to operations1,165
 888
 3,030
 2,113
Charge-offs(1,357) (2,116) (2,861) (3,511)
Recoveries219
 167
 1,232
 293
Balance at end of period$16,584
 $15,617
 $16,584
 $15,617


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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


The following table presents an analysis of the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2017 and December 31, 2016, excluding PCI loans (in thousands):

 
Residential
Real Estate
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 Consumer 
Commercial
and Industrial
 Unallocated Total
For the three months ended September 30, 2017             
Allowance for loan losses:             
Balance at beginning of period$1,492
 $3,097
 $8,367
 $930
 $2,253
 $418
 $16,557
Provision (benefit) charged to operations1,465
 119
 81
 (122) (180) (198) 1,165
Charge-offs(1,284) —
 —
 (67) (6) —
 (1,357)
Recoveries128
 —
 24
 17
 50
 —
 219
Balance at end of period$1,801
 $3,216
 $8,472
 $758
 $2,117
 $220
 $16,584
For the three months ended September 30, 2016             
Allowance for loan losses:             
Balance at beginning of period$6,006
 $2,711
 $4,713
 $1,107
 $1,209
 $932
 $16,678
Provision (benefit) charged to operations(376) (168) 104
 (130) 1,949
 (491) 888
Charge-offs(167) —
 —
 (80) (1,869) —
 (2,116)
Recoveries6
 —
 —
 —
 161
 —
 167
Balance at end of period$5,469
 $2,543
 $4,817
 $897
 $1,450
 $441
 $15,617
For the nine months ended September 30, 2017             
Allowance for loan losses:             
Balance at beginning of period$2,245
 $2,999
 $6,361
 $1,110
 $2,037
 $431
 $15,183
Provision (benefit) charged to operations1,477
 167
 2,164
 (346) (221) (211) 3,030
Charge-offs(2,485) (73) (84) (125) (94) —
 (2,861)
Recoveries564
 123
 31
 119
 395
 —
 1,232
Balance at end of period$1,801
 $3,216
 $8,472
 $758
 $2,117
 $220
 $16,584
For the nine months ended September 30, 2016             
Allowance for loan losses:             
Balance at beginning of period$6,590
 $2,292
 $4,873
 $1,095
 $1,639
 $233
 $16,722
Provision (benefit) charged to operations(867) 1,261
 (56) (98) 1,665
 208
 2,113
Charge-offs(319) (1,010) —
 (146) (2,036) —
 (3,511)
Recoveries65
 —
 —
 46
 182
 —
 293
Balance at end of period$5,469
 $2,543
 $4,817
 $897
 $1,450
 $441
 $15,617
September 30, 2017             
Allowance for loan losses:             
Ending allowance balance attributed to loans:             
Individually evaluated for impairment$—
 $—
 $616
 $—
 $—
 $—
 $616
Collectively evaluated for impairment1,801
 3,216
 7,856
 758
 2,117
 220
 15,968
Total ending allowance balance$1,801
 $3,216
 $8,472
 $758
 $2,117
 $220
 $16,584
Loans:             
Loans individually evaluated for impairment$12,484
 $11,537
 $17,535
 $2,478
 $893
 $—
 $44,927
Loans collectively evaluated for impairment1,737,471
 542,434
 1,115,583
 276,785
 182,527
 —
 3,854,800
Total ending loan balance$1,749,955
 $553,971
 $1,133,118
 $279,263
 $183,420
 $—
 $3,899,727

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


 
Residential
Real Estate
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 Consumer 
Commercial
and Industrial
 Unallocated Total
December 31, 2016             
Allowance for loan losses:             
Ending allowance balance attributed to loans:             
Individually evaluated for impairment$266
 $—
 $119
 $125
 $—
 $—
 $510
Collectively evaluated for impairment1,979
 2,999
 6,242
 985
 2,037
 431
 14,673
Total ending allowance balance$2,245
 $2,999
 $6,361
 $1,110
 $2,037
 $431
 $15,183
Loans:             
Loans individually evaluated for impairment$13,306
 $11,123
 $3,789
 $2,556
 $268
 $—
 $31,042
Loans collectively evaluated for impairment1,699,167
 523,091
 1,128,286
 287,999
 152,301
 —
 3,790,844
Total ending loan balance$1,712,473
 $534,214
 $1,132,075
 $290,555
 $152,569
 $—
 $3,821,886

33
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


A summary of impaired loans at September 30, 2017, and December 31, 2016, is as follows, excluding PCI loans (in thousands):
 September 30, 2017 December 31, 2016
Impaired loans with no allocated allowance for loan losses$40,386
 $25,228
Impaired loans with allocated allowance for loan losses4,541
 5,814
 $44,927
 $31,042
Amount of the allowance for loan losses allocated$616
 $510
At September 30, 2017, impaired loans included troubled debt restructured2020 includes Paycheck Protection Program (“TDR”PPP”) loans of $36.1$52.5 million of which $35.8and $95.4 million, were performing in accordance with their restructured terms for a minimum of six months and were accruing interest. At December 31, 2016, impaired loans included TDR loans of $30.5 million, of which $27.0 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest.
The summary of loans individually evaluated for impairment by loan portfolio segment as of September 30, 2017, and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016, is as follows, excluding PCI loans (in thousands):
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of September 30, 2017     
With no related allowance recorded:     
Residential real estate$12,896
 $12,484
 $—
Commercial real estate – owner occupied12,233
 11,537
 —
Commercial real estate – investor13,938
 12,994
 —
Consumer2,939
 2,478
 —
Commercial and industrial925
 893
 —
 $42,931
 $40,386
 $—
With an allowance recorded:     
Residential real estate$—
 $—
 $—
Commercial real estate – owner occupied—
 —
 —
Commercial real estate – investor4,556
 4,541
 616
Consumer—
 —
 —
Commercial and industrial—
 —
 —
 $4,556
 $4,541
 $616
As of December 31, 2016     
With no related allowance recorded:     
Residential real estate$9,848
 $9,694
 $—
Commercial real estate – owner occupied11,886
 11,123
 —
Commercial real estate – investor2,239
 1,897
 —
Consumer2,559
 2,246
 —
Commercial and industrial300
 268
 —
 $26,832
 $25,228
 $—
With an allowance recorded:     
Residential real estate$3,998
 $3,612
 $266
Commercial real estate – owner occupied—
 —
 —
Commercial real estate – investor2,011
 1,892
 119
Consumer581
 310
 125
Commercial and industrial—
 —
 —
 $6,590
 $5,814
 $510

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Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


 Three Months Ended September 30,
 2017 2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:       
Residential real estate$12,791
 $128
 $13,451
 $171
Commercial real estate – owner occupied11,217
 335
 17,198
 119
Commercial real estate – investor11,147
 240
 281
 3
Consumer2,495
 36
 2,340
 44
Commercial and industrial908
 26
 269
 —
 $38,558
 $765
 $33,539
 $337
With an allowance recorded:       
Residential real estate$—
 $—
 $107
 $1
Commercial real estate – owner occupied—
 —
 —
 —
Commercial real estate – investor4,551
 13
 896
 —
Consumer—
 —
 —
 —
Commercial and industrial—
 —
 —
 —
 $4,551
 $13
 $1,003
 $1
 Nine Months Ended September 30,
 2017 2016
 Average
Recorded
Investment		 Interest
Income
Recognized		 Average
Recorded
Investment		 Interest
Income
Recognized
With no related allowance recorded:       
Residential real estate$11,009
 $401
 $13,326
 $437
Commercial real estate – owner occupied11,080
 520
 17,333
 406
Commercial real estate – investor6,550
 487
 303
 9
Consumer2,368
 106
 2,220
 105
Commercial and industrial588
 50
 270
 —
 $31,595
 $1,564
 $33,452
 $957
With an allowance recorded:       
Residential real estate$1,981
 $62
 $108
 $3
Commercial real estate – owner occupied—
 —
 —
 —
Commercial real estate – investor4,233
 81
 755
 —
Consumer148
 6
 —
 —
Commercial and industrial—
 —
 —
 —
 $6,362
 $149
 $863
 $3
The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of September 30, 2017 and December 31, 2016, excluding PCI loans (in thousands):
 September 30, 2017 December 31, 2016
Residential real estate$3,551
 $8,126
Commercial real estate – owner occupied923
 2,414
Commercial real estate – investor8,720
 521
Consumer1,864
 2,064
Commercial and industrial63
 441
 $15,121
 $13,566

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


The following table presents the aging of the recorded investment in past due loans as of September 30, 2017 and December 31, 2016 by loan portfolio segment, excluding PCI loans (in thousands):
 
30-59
Days
Past Due
 
60-89
Days
Past Due
 
Greater
than
90 Days
Past Due
 
Total
Past Due
 
Loans Not
Past Due
 Total
September 30, 2017           
Residential real estate$12,736
 $6,872
 $2,277
 $21,885
 $1,728,070
 $1,749,955
Commercial real estate – owner occupied711
 —
 289
 1,000
 552,971
 553,971
Commercial real estate – investor2,301
 173
 8,146
 10,620
 1,122,498
 1,133,118
Consumer768
 491
 1,486
 2,745
 276,518
 279,263
Commercial and industrial—
 1,874
 64
 1,938
 181,482
 183,420
 $16,516
 $9,410
 $12,262
 $38,188
 $3,861,539
 $3,899,727
December 31, 2016           
Residential real estate$9,532
 $3,038
 $7,159
 $19,729
 $1,692,744
 $1,712,473
Commercial real estate – owner occupied3,962
 1,032
 890
 5,884
 528,330
 534,214
Commercial real estate – investor—
 —
 521
 521
 1,131,554
 1,132,075
Consumer1,519
 436
 1,963
 3,918
 286,637
 290,555
Commercial and industrial5,548
 181
 384
 6,113
 146,456
 152,569
 $20,561
 $4,687
 $10,917
 $36,165
 $3,785,721
 $3,821,886
respectively.
The Company categorizes all commercial and commercial real estate loans, except for small business loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. Generally, risk ratings for loans on forbearance pursuant to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, extended by the Coronavirus Response and Relief Supplemental Appropriations (“CRRSA”) Act of 2021, are not re-evaluated until the initial 90-day forbearance period ends. At that time, risk ratings are updated with an emphasis on industries that were heavily impacted by the pandemic, as well as individual borrower liquidity, and other measures of resiliency as described below. The Company evaluates risk ratings on an ongoing basis and as such, adversely rated loans will be re-evaluated as government restrictions end and businesses resume normal operations. The Company uses the following definitions for risk ratings:
Pass: Loans classified as Pass are well protected by the paying capacity and net worth of the borrower.
Special Mention: Loans classified as Special Mention have a potential weakness that deserves management’s close attention. This includes borrowers that have been negatively affected by the pandemic but demonstrate some degree of liquidity. This liquidity may or may not be adequate to resume operations.If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.
Substandard: Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. This includes borrowers whose operations were negatively affected by the pandemic and whom, in the assessment, do not have adequate liquidity available to resume operations at levels sufficient to service their current debt levels. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
As of September 30, 2017 and December 31, 2016, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment follows, excluding PCI loans (in thousands) is as follows:
 Pass 
Special
Mention
 Substandard Doubtful Total
September 30, 2017         
Commercial real estate – owner occupied$531,493
 $4,349
 $18,129
 $—
 $553,971
Commercial real estate – investor1,100,142
 10,768
 22,208
 —
 1,133,118
Commercial and industrial176,619
 3,520
 3,281
 —
 183,420
 $1,808,254
 $18,637
 $43,618
 $—
 $1,870,509
December 31, 2016         
Commercial real estate – owner occupied$501,652
 $7,680
 $24,882
 $—
 $534,214
Commercial real estate – investor1,106,747
 713
 24,615
 —
 1,132,075
Commercial and industrial150,474
 757
 1,338
 —
 152,569
 $1,758,873
 $9,150
 $50,835
 $—
 $1,818,858

36
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



The following tables summarize total loans by year of origination, internally assigned credit grades and risk characteristics (in thousands):
202120202019201820172016 and priorRevolving lines of creditTotal
September 30, 2021
Commercial and industrial
Pass$67,130 $25,950 $27,728 $17,799 $10,361 $74,014 $220,570 $443,552 
Special Mention— 72 240 438 96 601 2,797 4,244 
Substandard— 603 2,542 838 52 978 4,865 9,878 
Total commercial and industrial67,130 26,625 30,510 19,075 10,509 75,593 228,232 457,674 
Commercial real estate - owner occupied
Pass84,621 74,192 126,131 124,268 112,848 496,831 13,056 1,031,947 
Special Mention— — 2,958 4,010 696 15,761 203 23,628 
Substandard— 3,446 12,600 8,416 5,707 37,174 1,055 68,398 
Total commercial real estate - owner occupied84,621 77,638 141,689 136,694 119,251 549,766 14,314 1,123,973 
Commercial real estate - investor
Pass878,697 624,794 535,828 274,668 382,965 844,970 237,610 3,779,532 
Special Mention— — 23,822 9,409 5,223 29,565 — 68,019 
Substandard— 4,289 29,124 685 8,656 29,510 3,168 75,432 
Total commercial real estate - investor878,697 629,083 588,774 284,762 396,844 904,045 240,778 3,922,983 
Residential real estate (1)
Pass648,364 509,408 317,460 145,652 119,991 655,803 — 2,396,678 
Special Mention— 801 145 — — 1,481 — 2,427 
Substandard— — — — 221 1,914 — 2,135 
Total residential real estate648,364 510,209 317,605 145,652 120,212 659,198 — 2,401,240 
Consumer (1)
Pass20,208 21,016 18,985 58,392 18,930 135,436 — 272,967 
Special Mention— — — — — 369 — 369 
Substandard— — — 18 — 2,608 — 2,626 
Total consumer20,208 21,016 18,985 58,410 18,930 138,413 — 275,962 
Total loans$1,699,020 $1,264,571 $1,097,563 $644,593 $665,746 $2,327,015 $483,324 $8,181,832 
(1)For residential real estate and consumer loan classes,loans, the Company evaluates credit quality based on the aging status of the loan which was previously presented, and by payment activity.

37
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

202020192018201720162015 and priorRevolving lines of creditTotal
December 31, 2020
Commercial and industrial
Pass$137,262 $40,737 $27,967 $18,845 $33,568 $59,339 $134,140 $451,858 
Special Mention150 583 826 1,422 907 118 1,429 5,435 
Substandard581 1,284 1,243 809 439 1,706 7,301 13,363 
Total commercial and industrial137,993 42,604 30,036 21,076 34,914 61,163 142,870 470,656 
Commercial real estate - owner occupied
Pass96,888 114,506 122,962 124,050 104,264 428,423 18,932 1,010,025 
Special Mention— 3,512 8,240 1,023 17,115 17,811 439 48,140 
Substandard— 34,670 9,001 3,404 3,677 35,509 639 86,900 
Total commercial real estate - owner occupied96,888 152,688 140,203 128,477 125,056 481,743 20,010 1,145,065 
Commercial real estate - investor
Pass635,930 628,435 317,104 426,268 281,876 812,062 194,913 3,296,588 
Special Mention— 15,979 17,113 15,225 4,234 55,872 149 108,572 
Substandard4,311 9,217 1,931 17,222 11,474 36,326 5,823 86,304 
Total commercial real estate - investor640,241 653,631 336,148 458,715 297,584 904,260 200,885 3,491,464 
Residential real estate (1)
Pass595,982 437,593 226,435 166,773 146,237 729,037 — 2,302,057 
Special Mention— 532 — — 446 2,186 — 3,164 
Substandard570 — 1,489 221 — 1,958 — 4,238 
Total residential real estate596,552 438,125 227,924 166,994 146,683 733,181 — 2,309,459 
Consumer (1)
Pass24,954 26,659 83,296 25,469 16,565 156,276 2,145 335,364 
Special Mention— — — — 150 382 — 532 
Substandard— — — — — 3,566 — 3,566 
Total consumer24,954 26,659 83,296 25,469 16,715 160,224 2,145 339,462 
Total loans$1,496,628 $1,313,707 $817,607 $800,731 $620,952 $2,340,571 $365,910 $7,756,106 
(1) For residential real estate and consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.
38
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

An analysis of the allowance for credit losses on loans for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):
 Commercial
and 
Industrial		Commercial
Real Estate –
Owner
Occupied		Commercial
Real Estate –
Investor		Residential
Real Estate		ConsumerUnallocatedTotal
For the three months ended
September 30, 2021
Allowance for credit losses on loans
Balance at beginning of period$4,404 $6,350 $33,037 $8,818 $1,267 $— $53,876 
Credit loss expense (benefit)1,962 515 (9,902)3,081 235 — (4,109)
Charge-offs(50)(64)— (12)(37)— (163)
Recoveries50 26 5 292 176 — 549 
Balance at end of period$6,366 $6,827 $23,140 $12,179 $1,641 $— $50,153 
For the three months ended
September 30, 2020
Allowance for credit losses on loans
Balance at beginning of period$4,979 $2,765 $8,860 $17,685 $4,220 $— $38,509 
Credit loss (benefit) expense(106)5,166 30,131 (1,891)(464)— 32,836 
Charge-offs(575)(2,252)(12,037)(6)(541)— (15,411)
Recoveries29 2 32 320 33 — 416 
Balance at end of period$4,327 $5,681 $26,986 $16,108 $3,248 $— $56,350 
For the nine months ended
September 30, 2021
Allowance for credit losses on loans
Balance at beginning of period$5,390 $15,054 $26,703 $11,818 $1,770 $— $60,735 
Credit loss expense (benefit)958 (8,225)(3,336)284 (705)— (11,024)
Charge-offs(83)(64)(345)(254)(193)— (939)
Recoveries101 62 118 331 769 — 1,381 
Balance at end of period$6,366 $6,827 $23,140 $12,179 $1,641 $— $50,153 
For the nine months ended
September 30, 2020
Allowance for credit losses on loans
Balance at beginning of period$1,458 $2,893 $9,883 $2,002 $591 $25 $16,852 
Impact of CECL adoption2,416 (1,109)(5,395)3,833 2,981 (25)2,701 
Credit loss (benefit) expense(275)6,120 34,208 10,749 (727)— 50,075 
Initial allowance for credit losses on purchased with credit deterioration (“PCD”) loans1,221 26 260 109 1,023 — 2,639 
Charge-offs(575)(2,253)(12,062)(1,351)(723)— (16,964)
Recoveries82 4 92 766 103 — 1,047 
Balance at end of period$4,327 $5,681 $26,986 $16,108 $3,248 $— $56,350 
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At September 30, 2021 and December 31, 2020, the Company had collateral dependent loans with an amortized cost balance as follows: commercial and industrial of $416,000 and $1.9 million, respectively, commercial real estate - owner occupied of $12.5 million and $13.8 million, respectively, and commercial real estate - investor of $8.5 million and $18.3 million, respectively. In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $669,000 and $1.4 million at September 30, 2021 and December 31, 2020, respectively. At both September 30, 2021 and December 31, 2020, the amount of foreclosed residential real estate property held by the Company was $106,000.
39
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

The following table presents the recorded investment in residential and consumernon-accrual loans based on payment activityby loan portfolio segment as of September 30, 20172021 and December 31, 2016, excluding PCI loans2020 (in thousands):
September 30,December 31,
20212020
Commercial and industrial$418 $1,908 
Commercial real estate – owner occupied12,524 13,751 
Commercial real estate – investor8,506 18,287 
Residential real estate5,505 8,671 
Consumer3,351 4,246 
$30,304 $46,863 
 Residential Real Estate
 Residential Consumer
September 30, 2017   
Performing$1,746,404
 $277,399
Non-performing3,551
 1,864
 $1,749,955
 $279,263
December 31, 2016   
Performing$1,704,347
 $288,491
Non-performing8,126
 2,064
 $1,712,473
 $290,555
At September 30, 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans. At September 30, 2021 and December 31, 2020, there were no loans that were 90 days or greater past due and still accruing interest.
The following table presents the aging of the recorded investment in past due loans as of September 30, 2021 and December 31, 2020 by loan portfolio segment (in thousands):
30-59
Days
Past Due		60-89
Days
Past Due		90 Days or Greater Past DueTotal
Past Due		Loans Not
Past Due		Total
September 30, 2021
Commercial and industrial$1,797 $— $354 $2,151 $455,523 $457,674 
Commercial real estate – owner occupied515 — 6,992 7,507 1,116,466 1,123,973 
Commercial real estate – investor1,074 95 1,663 2,832 3,920,151 3,922,983 
Residential real estate308 2,427 2,136 4,871 2,396,369 2,401,240 
Consumer1,255 369 2,626 4,250 271,712 275,962 
$4,949 $2,891 $13,771 $21,611 $8,160,221 $8,181,832 
December 31, 2020
Commercial and industrial$3,050 $628 $327 $4,005 $466,651 $470,656 
Commercial real estate – owner occupied1,015 — 7,871 8,886 1,136,179 1,145,065 
Commercial real estate – investor8,897 3,233 11,122 23,252 3,468,212 3,491,464 
Residential real estate15,156 3,164 4,238 22,558 2,286,901 2,309,459 
Consumer978 533 3,568 5,079 334,383 339,462 
$29,096 $7,558 $27,126 $63,780 $7,692,326 $7,756,106 
The Company classifies certain loans as troubled debt restructuringsrestructured (“TDR”) loans when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts and/or the restructuring of scheduled principal payments. Residential real estate and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered TDR loans. For these loans, the Bank retains its security interest in the real estate collateral. At September 30, 2021 and December 31, 2020, TDR loans totaled $19.6 million and $17.5 million, respectively. Included in the non-accrual loan total at September 30, 2017,2021 and December 31, 2016,2020 were $270,000$10.0 million and $3.5$5.5 million, respectively, of troubled debt restructurings.TDR loans. At September 30, 2017,2021 and December 31, 2020, the Company had no specific reserves allocated to loans that are classified as troubled debt restructurings. At December 31, 2016, the Company had allocated $510,000 of specific reserves to loans that are classified as troubled debt restructurings.TDR loans. Non-accrual loans which become troubled debt restructuringsTDR loans are generally returned to accrual status after six months of performance. In addition to the troubled debt restructuringsTDR loans included in non-accrual loans, the Company also has loans classified as accruing troubled debt restructuringsloans which totaled $9.6 million and $12.0 million at September 30, 2017,2021 and December 31, 2016, which totaled $35.8 million and $27.0 million,2020, respectively. Troubled debt restructurings are considered in the allowance for loan losses similar to other impaired loans.
The following table presents information about troubled debt restructurings which occurred during the three and nine months ended September 30, 2017 and 2016, and troubled debt restructurings modified within the previous year and which defaulted during the three and nine months ended September 30, 2017 and 2016, (dollars in thousands):
40
 Number of Loans 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended September 30, 2017     
Troubled Debt Restructurings:     
Residential real estate2
 $328
 $357
Commercial real estate - owner occupied1
 700
 700
Commercial real estate - investor1
 700
 700
Number of LoansRecorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:None
None
 Number of Loans Pre-modification
Recorded Investment		 Post-modification
Recorded Investment
Nine months ended September 30, 2017     
Troubled Debt Restructurings:     
Residential real estate6
 $1,354
 $1,356
Commercial real estate - owner occupied4
 3,309
 3,309
Commercial real estate – investor4
 6,362
 6,484
Commercial and industrial1
 665
 665
Number of LoansRecorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:None
None


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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



 Number of Loans 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended September 30, 2016     
Troubled Debt Restructurings:     
Residential real estate1
 $455
 $455
Consumer1
 602
 602
Number of LoansRecorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:None
None
 Number of Loans 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Nine months ended September 30, 2016     
Troubled Debt Restructurings:     
Residential real estate3
 $674
 $673
Commercial real estate – investor1
 256
 270
Consumer3
 665
 665
Number of LoansRecorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:None
None

As part of the Cape, Ocean Shore and Colonial American Bank acquisitions, PCI loans were acquired at a discount primarily due to deteriorated credit quality. PCI loans are accounted for at fair value, based upon the present value of expected future cash flows, with no related allowance for loan losses.
 
The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected and the estimated fair value of the PCIabout TDR loans acquired from Ocean Shore at December 1, 2016, Cape at May 2, 2016, and Colonial American Bank at July 31, 2015 (in thousands):
 Ocean Shore
December 1, 2016		 Cape
May 2, 2016		 Colonial American
July 31, 2015
Contractually required principal and interest$7,385
 $21,345
 $3,263
Contractual cash flows not expected to be collected (non-accretable discount)(4,666) (12,387) (1,854)
Expected cash flows to be collected at acquisition2,719
 8,958
 1,409
Interest component of expected cash flows (accretable yield)(401) (576) (109)
Fair value of acquired loans$2,318
 $8,382
 $1,300
The following table summarizes the changes in accretable yield for PCI loanswhich occurred during the three and nine months ended September 30, 20172021 and 2016 (in2020 (dollars in thousands):
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Three months ended September 30, 2021
Troubled debt restructurings:
Commercial real estate - owner occupied1 $93 $110 
Three months ended September 30, 2020
Troubled debt restructurings:
Commercial real estate – investor1 $928 $993 
Residential real estate1 418 418 
Consumer1 16 16 
Nine months ended September 30, 2021
Troubled debt restructurings:
Commercial real estate - owner occupied1 $93 $110 
Commercial real estate – investor1 4,903 4,903 
Residential real estate3 244 336 
Consumer2 26 33 
Nine months ended September 30, 2020
Troubled debt restructurings:
Commercial real estate - owner occupied1$1,112 $1,143 
Commercial real estate – investor1928993
Residential real estate5849865
Consumer5175193
There were no TDR loans that defaulted during the three months ended September 30, 2021 which were modified within the preceding year. There was 1 TDR commercial real estate - investor loan for $923,000 that defaulted during the nine months ended September 30, 2021 which was modified within the preceding year and the loan is now current. There were no TDR loans that defaulted during the three and nine months ended September 30, 2020 which were modified within the preceding year.
In response to the COVID-19 pandemic and its economic impact on customers, short-term modification programs that comply with the CARES Act, extended by the CRRSA Act, were implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19. The Commercial Borrower Relief Program allowed for the deferral of principal and interest or principal only. All payments received will first be applied to all accrued and unpaid interest and the balance, if any, on account of unpaid principal, then to fees, expenses and other amounts due to the Bank. Monthly payments will continue until the maturity date when all then unpaid principal, interest, fees, and all other charges are due and payable to the Bank. The Consumer Borrower Relief Program allowed for the deferral of principal and interest. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Provided these loans were current as of either December 31, 2019 or the date of the modification, these loans are not considered TDR loans at September 30, 2021 and will not be reported as past due during the deferral period.
41
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
Beginning balance$1,465
 $749
 $503
 $75
Acquisition—
 —
 —
 576
Accretion(328) (642) (196) (344)
Reclassification from non-accretable difference13
 1,043
 —
 —
Ending balance$1,150
 $1,150
 $307
 $307

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 6. Deposits
The major types of deposits at September 30, 20172021 and December 31, 20162020 were as follows (in thousands):
Type of AccountType of AccountSeptember 30,December 31,
September 30, 2017 December 31, 201620212020
Non-interest-bearing$781,043
 $782,504
Non-interest-bearing$2,467,952 $2,133,195 
Interest-bearing checking1,892,832
 1,626,713
Interest-bearing checking4,013,565 3,646,866 
Money market deposit384,106
 458,911
Money market deposit816,691 783,521 
Savings668,370
 672,519
Savings1,620,447 1,491,251 
Time deposits623,908
 647,103
Time deposits855,442 1,372,783 
Total deposits$4,350,259
 $4,187,750
Total deposits$9,774,097 $9,427,616 
Included in time deposits at September 30, 20172021 and December 31, 2016, is $273.62020 was $137.7 million and $269.0$409.5 million, respectively, in deposits of $100,000 and over.

$250,000 or more.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 7. Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” and subsequent related Updates modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other guidance.  The updates also requires new qualitative and quantitative disclosures, including disaggregation of revenues and descriptions of performance obligations. The Company will adopt the guidance in first quarter of 2018 using the modified retrospective method with a cumulative-effect adjustment to opening retained earnings. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S. GAAP, the new revenue recognition standard does not have a material impact on the Company’s consolidated financial statements. The Company’s implementation efforts include the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts. While we have not identified any material changes related to the timing or amount of revenue recognition, the Company will continue to evaluate disaggregation for significant categories of revenue in the scope of the guidance.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities.” The main objective in developing this new ASU is to enhance the reporting model for financial instruments to provide users of financial statements with more useful information. The update requires equity investments to be measured at fair value with changes in fair value recognized in net income. It simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a quantitative assessment to identify impairment. The amendment eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. It requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Financial assets and financial liabilities are to be presented separately by measurement category and the need for a valuation allowance on a deferred tax asset related to available-for-sale securities should be evaluated with other deferred tax assets. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, with early adoption permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact that the guidance will have on the Company’s consolidated financial statements. The Company has begun its evaluation of the amended guidance including the potential impact on its consolidated financial statements. To date, the Company has identified its leased real estate as within the scope of the guidance. The Company continues to evaluate the impact of the guidance, including determining whether other contracts exist that are deemed to be in scope. As such, no conclusions have yet been reached regarding the potential impact of adoption on the Company’s consolidated financial statements. Further, to date, no guidance has been issued by either the Company’s or the Bank’s primary regulator with respect to how the impact of the amended standard is to be treated for regulatory capital purposes.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718).” The objective of the Update is to simplify accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the Update, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current accounting) or account for forfeitures when they occur. Within the Cash Flow Statement, excess tax benefits should be classified along with other income tax cash flows as an operating activity, and cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. The amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this ASU on January 1, 2017 and it did not have a material impact on the Company’s consolidated financial statements, resulting in a balance sheet reclassification.
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company has begun its evaluation of the amended guidance including the potential impact on its consolidated financial statements. As a result of the required change in approach toward determining estimated credit losses from the current “incurred loss” model to one based on estimated cash flows over a loan’s contractual life, adjusted for prepayments (a “life of loan” model), the Company expects that the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration loan portfolios. The Company also expects that the new guidance may result in an allowance for debt securities. In both cases, the extent of the change is indeterminable at this time as it will be dependent upon portfolio composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. Further, to date, no guidance has been issued by either the Company’s or the Bank’s primary regulator with respect to how the impact of the amended standard is to be treated for regulatory purposes.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.”  This ASU is intended to reduce diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  The guidance is effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including adoption in an interim period.   A retrospective transition method should be applied to each period presented, unless it is impracticable to apply the amendments retrospectively for some of the issues, then the amendments for those issues would be applied prospectively as of the earliest date practicable. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business.” This ASU narrows the definition of a business and clarifies that, to be considered a business, the fair value of the gross assets acquired (or disposed of) may not be substantially all concentrated in a single identifiable asset or group of similar assets. In addition, in order to be considered a business, a set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This ASU is effective for fiscal years beginning after December 15, 2017; early adoption is permitted on a limited basis. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” This ASU intends to simplify the subsequent measurement of goodwill, eliminating Step 2 from the goodwill impairment test. Instead, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge by which the carrying amount exceeds the reporting unit’s fair value; however the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2019; early adoption is permitted for annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities.” This ASU requires the amortization of premiums to the earliest call date on debt securities with call features that are explicit, noncontingent and callable at fixed prices and on preset dates. This ASU does not impact securities held as a discount, as the discount continues to be amortized to the contractual maturity. The guidance is effective for fiscal years beginning December 15, 2018, with early adoption permitted, including adoption in an interim period. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


Note 8.7. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or the most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.
The Company uses valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability and developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability and developed based on the best information available in the circumstances. In that regard, a fair value hierarchy has been established for valuation inputs that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Movements within the fair value hierarchy are recognized at the end of the applicable reporting period. There were no transfers between the levels of the fair value hierarchy for the three and nine months ended September 30, 2017. The fair value hierarchy is as follows:
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.
Level 3 Inputs – Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
Debt Securities Available-For-SaleAvailable-for-Sale
SecuritiesDebt securities classified as available-for-sale are reported at fair value. Fair value for these debt securities all of which are U. S. agency obligations, is determined using a quoted price in an active market or exchange (Level 1) or estimated by using inputs other than quoted prices that are based on market observable information (Level 2). Level 2 debt securities are priced through third-party pricing services or security industry sources that actively participate in the buying and selling of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing is a mathematical technique used principally to value certain debt securities without relying exclusively on quoted prices for the specific securities, but comparing the debt securities to benchmark or comparable debt securities.
Equity Investments
Equity investments with readily determinable fair value are reported at fair value. Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1) or using inputs other than quoted prices that are based on market observable information (Level 2). Fair value for certain securities, including convertible preferred stock, was determined using broker or dealer quotes with limited levels of activity and price transparency (Level 3). Equity securities without readily determinable fair values are carried at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Interest Rate Derivatives
The Company’s interest rate swaps and cap contracts are reported at fair value utilizing discounted cash flow models provided by an independent, third-party and observable market data (Level 2). When entering into an interest rate swap or cap contract, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of the contract counterparty.
Other Real Estate Owned and Impaired Loans Individually Measured for Impairment
Other real estate owned and loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs. Fair value is based on independent appraisals.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


appraisals (Level 3).
The following table summarizes financial assets and financial liabilities measured at fair value as of September 30, 20172021 and December 31, 2016,2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
  Fair Value Measurements at Reporting Date Using:
Total Fair
Value		Level 1
Inputs		Level 2
Inputs		Level 3
Inputs
September 30, 2021
Items measured on a recurring basis:
Debt securities available-for-sale$314,620 $— $314,620 $— 
Equity investments91,191 13,658 75,177 2,356 
Interest rate derivative asset27,503 — 27,503 — 
Interest rate derivative liability(27,589)— (27,589)— 
Items measured on a non-recurring basis:
Equity investments10,123 — — 10,123 
Other real estate owned106 — — 106 
Loans measured for impairment based on the fair value of the underlying collateral22,114 — — 22,114 
December 31, 2020
Items measured on a recurring basis:
Debt securities available-for-sale$183,302 $— $183,302 $— 
Equity investments107,079 104,539 — 2,540 
Interest rate derivative asset45,289 — 45,289 — 
Interest rate derivative liability(45,429)— (45,429)— 
Items measured on a non-recurring basis:
Other real estate owned106 — — 106 
Loans measured for impairment based on the fair value of the underlying collateral35,366 — — 35,366 

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

   Fair Value Measurements at Reporting Date Using:
September 30, 2017
Total Fair
Value
 
Level 1
Inputs
 
Level 2
Inputs
 
Level 3
Inputs
Items measured on a recurring basis:       
Investment securities available-for-sale:       
U.S. agency obligations$67,133
 $—
 $67,133
 $—
Items measured on a non-recurring basis:       
Other real estate owned9,334
 —
 —
 9,334
Loans measured for impairment based on the fair value of the underlying collateral12,065
 —
 —
 12,065
The following table reconciles, for the three and nine months ended September 30, 2021 and 2020, the beginning and ending balances for equity investments and debt securities available-for-sale that are recognized at fair value on a recurring basis, in the consolidated statements of financial condition, using significant unobservable inputs (in thousands):
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2021202020212020
Equity InvestmentsDebt SecuritiesEquity InvestmentsDebt Securities
Beginning balance$2,978 $2,402 $2,540 $25 
Total losses included in earnings(622)— (184)— 
Purchases— — — 2,377 
Ending balance$2,356 $2,402 $2,356 $2,402 
   Fair Value Measurements at Reporting Date Using:
December 31, 2016
Total Fair
Value
 
Level 1
Inputs
 
Level 2
Inputs
 
Level 3
Inputs
Items measured on a recurring basis:       
Investment securities available-for-sale:       
U.S. agency obligations$12,224
 $—
 $12,224
 $—
Items measured on a non-recurring basis:       
Other real estate owned9,803
 —
 —
 9,803
Loans measured for impairment based on the fair value of the underlying collateral2,419
 —
 —
 2,419
There were no debt securities in Level 3 for the three and nine months ended September 30, 2021. There were no equity securities in Level 3 for the three and nine months ended September 30, 2020. The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods. There were no transfers into or out of Level 3 assets or liabilities in the fair value hierarchy for the three and nine months ended September 30, 2021 and 2020.

Assets and Liabilities Disclosed at Fair Value
A description of the valuation methodologies used for assets and liabilities disclosed at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy is set forth below.
Cash and Due from Banks
For cash and due from banks, the carrying amount approximates fair value.
Debt Securities Held-to-Maturity
SecuritiesDebt securities classified as held-to-maturity are carried at amortized cost, as the Company has the positive intent and ability to hold these debt securities to maturity. The Company determines the fair value of the debt securities utilizing Level 1, Level 2 and, infrequently, Level 3 inputs. In general, fair value is based upon quoted market prices, where available. Most of the Company’s investment and mortgage-backed securities however, are fixed income instruments that are not quoted on an exchange, but are bought and sold in active markets. Prices for these instruments are obtained through third-party pricing vendors or security industry sources that actively participate in the buying and selling of debt securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing is a mathematical technique used principally to value certain debt securities without relying exclusively on quoted prices for the specific debt securities, but comparing the debt securities to benchmark or comparable debt securities.
Fair value estimates are made at a point in time, based on relevant market data as well as the best information available about the security. Fair value estimates for securities for which limited observable market data is available are based on judgments regarding current economic conditions, liquidity discounts, credit and interest rate risks, and other factors. These estimates involve significant uncertainties and judgments and cannot be determined with precision. As a result, such calculated fair value estimates may not be realizable in a current sale or immediate settlement of the security.
The Company utilizes third-party pricing services to obtain fair values for most of its securities held-to-maturity. Management’s policy is to obtain and review all available documentation from the third-party pricing service relating to their fair value determinations, including their methodology and summary of inputs. Management reviews this documentation, makes inquiries of the third-party pricing service and makes a determinationdecides as to the level of the valuation inputs. Based on the Company’s review of the available documentation from the third-party pricing service, management concluded that Level 2 inputs were utilized for

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


all securities except for certain investments classified as Level 1, which are derived from quoted market prices in active markets and certain state and municipal obligations, known as bond anticipation notesBond Anticipation Notes (“BANs”), as well as certain debt securities where management utilized Level 3 inputs. In the case of the Level 2 securities, the significant observable inputs, include benchmark yields, reported trades, broker/such as broker or dealer quotes issuer spreads, two-sided markets, benchmark securities, bids, offers, other market informationwith limited levels of activity and observations of equity and credit default swap curves related to the issuer. Management based its fair value estimate of the BANs on the local nature of the issuing entities, the short-term life of the security and current economic conditions.price transparency.
Federal Home Loan Bank of New York StockRestricted Equity Investments
The fair value for Federal Home Loan Bank of New York and Federal Reserve Bank stock is its carrying value since this is the amount for which it could be redeemed. There is no active market for this stock and the Company is required to maintain a minimum investment based uponas stipulated by the outstanding balance of mortgage related assetsrespective agencies.
Loans Receivable and outstanding borrowings.
Loans Held-for-Sale
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage,real estate, consumer and commercial. Each loan category is further segmented into fixed and adjustable rate interest terms.
Fair value of performing and non-performing loans was estimated by discounting the future cash flows, net of estimated prepayments, at a rate for which similar loans would be originated to new borrowers with similar terms. Fair values estimated in this manner do not fully incorporate anThe fair value of loans was measured using the exit price approachnotion.
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OceanFirst Financial Corp.
Notes to fair value, but instead are based on a comparison to current market rates for comparable loans.Unaudited Consolidated Financial Statements (Continued)

Deposits Other than Time Deposits
The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, and interest-bearing checking accounts and money market accounts and saving accounts are,is, by definition, equal to the amount payable on demand. The related insensitivity of the majority of these deposits to interest rate changes creates a significant inherent value which is not reflected in the fair value reported.
Time Deposits
The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase with Retail Customers
Fair value approximates the carrying amount as these borrowings are payable on demand and the interest rate adjusts monthly.
Borrowed Funds
Fair value estimates are based on discounting contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities.

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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


The book value and estimated fair value of the Bank’sCompany’s significant financial instruments not recorded at fair value as of September 30, 20172021 and December 31, 20162020 are presented in the following tables (in thousands):
   Fair Value Measurements at Reporting Date Using:
September 30, 2017
Book
Value
 
Level 1
Inputs
 
Level 2
Inputs
 
Level 3
Inputs
Financial Assets:       
Cash and due from banks$255,258
 $255,258
 $—
 $—
Securities held-to-maturity742,886
 8,714
 734,990
 2,793
Federal Home Loan Bank of New York stock18,472
 —
 —
 18,472
Loans receivable, net and mortgage loans held for sale3,870,447
 —
 —
 3,935,093
Financial Liabilities:       
Deposits other than time deposits3,726,351
 —
 3,726,351
 —
Time deposits623,908
 —
 619,619
 —
Securities sold under agreements to repurchase with retail customers75,326
 75,326
 —
 —
Federal Home Loan Bank advances and other borrowings315,652
 —
 314,021
 —
 Fair Value Measurements at Reporting Date Using:
  Fair Value Measurements at Reporting Date Using:Book
Value		Level 1
Inputs		Level 2
Inputs		Level 3
Inputs
December 31, 2016
Book
Value
 
Level 1
Inputs
 
Level 2
Inputs
 
Level 3
Inputs
September 30, 2021September 30, 2021
Financial Assets:       Financial Assets:
Cash and due from banks$301,373
 $301,373
 $—
 $—
Cash and due from banks$981,126 $981,126 $— $— 
Securities held-to-maturity598,691
 8,550
 586,504
 3,030
Federal Home Loan Bank of New York stock19,313
 —
 —
 19,313
Loans receivable and mortgage loans held for sale3,804,994
 —
 —
 3,834,677
Debt securities held-to-maturityDebt securities held-to-maturity1,125,382 — 1,125,486 17,895 
Restricted equity investmentsRestricted equity investments53,017 — — 53,017 
Loans receivable, net and loans held-for-saleLoans receivable, net and loans held-for-sale8,153,389 — — 8,140,267 
Financial Liabilities:       Financial Liabilities:
Deposits other than time deposits3,540,647
 —
 3,540,647
 —
Deposits other than time deposits8,918,655 — 8,918,655 — 
Time deposits647,103
 —
 644,354
 —
Time deposits855,442 — 857,767 — 
Other borrowingsOther borrowings228,887 — 256,577 — 
Securities sold under agreements to repurchase with retail customers69,935
 69,935
 —
 —
Securities sold under agreements to repurchase with retail customers143,292 143,292 — — 
Federal Home Loan Bank advances and other borrowings307,057
 —
 304,901
 —
December 31, 2020December 31, 2020
Financial Assets:Financial Assets:
Cash and due from banksCash and due from banks$1,272,134 $1,272,134 $— $— 
Debt securities held-to-maturityDebt securities held-to-maturity937,253 — 952,365 16,101 
Restricted equity investmentsRestricted equity investments51,705 — — 51,705 
Loans receivable, net and loans held-for-saleLoans receivable, net and loans held-for-sale7,750,381 — — 7,806,743 
Financial Liabilities:Financial Liabilities:
Deposits other than time depositsDeposits other than time deposits8,054,833 — 8,054,833 — 
Time depositsTime deposits1,372,783 — 1,383,173 — 
FHLB advances and other borrowingsFHLB advances and other borrowings235,471 — 251,798 — 
Securities sold under agreements to repurchase with retail customersSecurities sold under agreements to repurchase with retail customers128,454 128,454 — — 
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience,
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, Bank Owned Life Insurance,bank owned life insurance, deferred tax assets and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.


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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 8. Derivatives, Hedging Activities and Other Financial Instruments
The Company enters into derivative financial instruments which involve, to varying degrees, interest rate, market and credit risk. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures, seeking to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The derivative financial instruments entered into by the Company are an economic hedge of a derivative offering to Bank customers. The Company does not use derivative financial instruments for trading purposes.
Customer Derivatives – Interest Rate Swaps and Cap Contracts
The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The Company also enters into interest rate cap contracts that enable commercial loan customers to lock in a cap on a variable-rate commercial loan agreement. This feature prevents the loan from repricing to a level that exceeds the cap contract’s specified interest rate, which serves to hedge the risk from rising interest rates. The Company then enters into an offsetting interest rate cap contract with a third party in order to economically hedge its exposure through the customer agreement.
The interest rate swaps and cap contracts with both the customers and third parties are not designated as hedges under FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, and are marked to market through earnings. As the interest rate swaps and cap contracts are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC Topic 820, Fair Value Measurements. The Company recognized gains of $14,000 and $55,000 in other income resulting from fair value adjustments for the three and nine months ended September 30, 2021, respectively, as compared to gains of $15,000 and $364,000 in other income resulting from fair value adjustments for the three and nine months ended September 30, 2020, respectively. The notional amount of derivatives not designated as hedging instruments was $925.4 million and $725.9 million at September 30, 2021 and December 31, 2020, respectively.

The table below presents the fair value of derivatives not designated as hedging instruments as well as their location on the consolidated statements of financial condition (in thousands):
Fair Value
Balance Sheet LocationSeptember 30,December 31,
20212020
Other assets$27,503 $45,289 
Other liabilities27,589 45,429 
Credit Risk-Related Contingent Features
The Company is a party to International Swaps and Derivatives Association agreements with third party broker-dealers that require a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties was $26.5 million and $46.5 million at September 30, 2021 and December 31, 2020, respectively. The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures. The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $27.6 million and $45.4 million at September 30, 2021 and December 31, 2020, respectively.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 9. Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company’s leases are comprised of real estate property for branches, automated teller machine locations and office space with terms extending through 2050. The Company has 1 existing finance lease, which has a lease term through 2029.
The following table represents the classification of the Company’s right-of-use (“ROU”) assets and lease liabilities on the consolidated statements of financial condition (in thousands):
September 30,December 31,
20212020
Lease ROU AssetsClassification
Operating lease ROU assetsOther assets$21,117 $22,555 
Finance lease ROU assetPremises and equipment, net1,545 1,694 
Total lease ROU assets$22,662 $24,249 
Lease Liabilities
Operating lease liabilities (1)
Other liabilities$21,713 $22,990 
Finance lease liabilityOther borrowings1,954 2,100 
Total lease liabilities$23,667 $25,090 
(1) Operating lease liabilities excludes liabilities for future rent and lease termination payments related to closed branches of $5.3 million and $7.4 million as of September 30, 2021 and December 31, 2020, respectively.
The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments. Lease agreements often include one or more options to renew the lease at the Company’s discretion. If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, Leases (Topic 842) requires the Company to use the rate implicit in the lease, provided the rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term. For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019. For the finance lease, the Company utilized its incremental borrowing rate at lease inception.
September 30,December 31,
20212020
Weighted-Average Remaining Lease Term
Operating leases7.98 years7.77 years
Finance lease7.85 years8.59 years
Weighted-Average Discount Rate
Operating leases2.94 %3.01 %
Finance lease5.63 5.63 






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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

The following table represents lease expenses and other lease information (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Lease Expense
Operating lease expense$1,498 $1,585 $4,459 $4,898 
Finance lease expense:
Amortization of ROU assets50 43 149 124 
Interest on lease liabilities(1)
28 27 85 80 
Total$1,576 $1,655 $4,693 $5,102 
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,322 $1,756 $4,119 $4,808 
Operating cash flows from finance leases28 27 85 80 
Financing cash flows from finance leases50 47 146 141 
(1)Included in borrowed funds interest expense on the consolidated statements of income. All other costs are included in occupancy expense.
The Company previously announced plans to sell two branches, including owned premises and equipment, all deposits associated with the branches and selected performing loans to First Bank which is expected to take place in early December 2021. The Company also announced plans to consolidate 20 deposit gathering locations in late 2021 and early 2022. These plans have resulted in a shortened estimated useful life for premises and equipment and accelerated recognition of lease expenses associated with these branches. The effect on income for the three and nine months ended September 30, 2021 is included in branch consolidation expenses and totaled $3.8 million, which are excluded above.
Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of September 30, 2021 were as follows (in thousands):
Finance LeaseOperating Leases
For the Twelve Months Ending September 30,
2022$307 $5,382 
2023307 3,782 
2024307 3,231 
2025307 2,927 
2026307 2,162 
Thereafter875 7,423 
Total2,410 24,907 
Less: Imputed interest(456)(3,194)
Total lease liabilities$1,954 $21,713 


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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


Note 9.10. Subsequent Event

On June 30, 2017,November 4, 2021, the Company announced anthe execution of a definitive agreement to acquire Sun Bancorp, Inc.and plan of merger (the merger agreement) with Partners Bancorp. (“Sun”Partners”), headquartered in Mount Laurel, New Jersey, in a multi-bank holding company operating under the brands of Virginia Partners Bank, Maryland Partners Bank, The Bank of Delmarva, and Liberty Bell Bank. The transaction valued at approximately $487 million. Under the termsis subject to receipt of the agreement, Sun stockholders will be entitled to receive $3.78 in cash and 0.7884 shares of the Company’s common stock, for each share of Sun common stock. Sun and the Company received their respective requisite stockholder approvals for the merger.  Regulatory approval of the merger was received from the Federal Reserve Bank of Philadelphia on October 17, 2017. ThePartners’ stockholders and required regulatory application for the transaction remains under review by the Office of the Comptroller of the Currency (“OCC”).approval. Subject to receipt of OCC approvalthose approvals and fulfillment of other customary closing conditions, the Company expects to close the transaction in January 2018.
On  November 1, 2017 the Company closed on its previously announced acquisition of an office building in Red Bank, New Jersey related to its back-office consolidation, at a purchase price of $42.5 million. Included in the acquisition is a structured parking facility as well as the existing furniture, fixtures and equipment. Occupancy is expected in the first half of 2018.2022.





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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company isand the Bank are not engagedinvolved in any pending legal proceedings of a material nature at the present time. From time to time, the Company is a party toother than routine legal proceedings withinoccurring in the normalordinary course of business. Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.
Item 1A. Risk Factors
In addition to theFor a summary of risk factors relevant to the Company, set forth insee Part I, Item 1A, “Risk Factors,” in the 20162020 Form 10-K stockholders and investors of the Company should consider the following risk factors related to the pending merger with Sun. For more information regarding the pending merger with Sun, stockholders and investors of the Company should read the joint proxy statement/prospectus included in the registration statement (File No. 333-220235) on Form S-4 that was filed with the SEC on August 29, 2017, as amended by that certain Amendment No. 1 to Form S-4, filed with the SEC on September 19, 2017, and declared effective by the SEC on September 20, 2017, in connection with such pending merger.10-K. There werehave been no other material changes to risk factors relevant to the Company’s operations since December 31, 2016.
Because the market price of the Company’s common stock may fluctuate, neither the Company’s stockholders nor Sun shareholders can be certain of the market value of the stock portion of the merger consideration that will be payable by2020. Additional risks not presently known to the Company, to the Sun shareholders. At the time of the completion of the merger of Mercury Merger Sub Corp. into Sun (the “first-step merger”), each outstanding share of Sun common stock, except for certain shares of Sun common stock owned by Sun or that the Company will be converted into the right to receive the “merger consideration” which is either (i) the cash consideration, which is an amount in cash equal to the sum of (A) $3.78 plus (B) the product of 0.7884 multiplied by the volume weighted-average trading price of shares of common stock of the Company for the five trading days immediately prior to the effective time of the first-step merger (the “Company share closing price”), or (ii) the stock consideration, which will be a number of shares of Company common stock equal to the exchange ratio, which is the quotient of (A) the cash consideration divided by (B) the Company share closing price. The right to receive the cash consideration or the stock consideration will be made at the election of each holder of shares of Sun common stock, subject to the allocation and proration provisions of the merger agreement. The merger agreement provides that the aggregate amount of cash consideration will not exceed the product of (x) $3.78 and (y) the total number of shares of Sun common stock issued and outstanding immediately prior to the effective time of the first-step merger (the “effective time”). There will be a lapse of time between the date of this report and the date on which the first-step merger is completed. The market value of the Company common stockcurrently deemed immaterial, may fluctuate during this period as a result of a variety of factors, including general market and economic conditions, changes in the Company’s businesses, operations and prospects and regulatory considerations. Many of these factors are outside of the control of the Company.
Because the merger consideration is primarily based on the Company share closing price, any changes in the market price of Company common stock prior to the completion of the first-step merger will have a corresponding effect on the amount of per share cash consideration payable by the Company and the value of the per share stock consideration. There will be no adjustment to the computation of the merger consideration for changes in the market price of either shares of Company common stock or shares of Sun common stock.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the proposed transaction with Sun. Before the proposed transaction with Sun can be completed, the Company and Sun must obtain approvals from the Board of Governors of the Federal Reserve System (the “FRS”) and the OCC. The Company and Sun obtained approval from the Board of Governors of the FRS on October 17, 2017. In evaluating an application for approval, the OCC takes into consideration a number of factors, including (i) the competitive impact of the transaction; (ii) financial and managerial resources of the bank parties to the bank merger or integrated mergers both on a current and pro forma basis; (iii) the convenience and needs of the community to be served and the record of the banks under the Community Reinvestment Act (the “CRA”), including their CRA ratings; (iv) the banks’ effectiveness in combating money laundering activities; and (v) the extent to which the bank merger or integrated mergers would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. Other approvals, as well as waivers or consents, from regulators may also be required. An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approval or delay their receipt. These regulators may impose conditions on the completion of the proposed transaction or require changes to the terms of the proposed transaction. Such conditions or changes could have the effect of delaying or preventing completion of the proposed transaction with Sun or imposing additional costs on or limiting the revenues of the combined company following the completion of the proposed transaction, any of which might have an adverse effect on the combined company following the completion of the proposed transaction. However, under the terms of the merger agreement, in connection with obtaining such regulatory approvals or waivers, neither party is required to take any action, or commit to take

any action, or agree to any condition or restriction, that would reasonably be expected to have a material adverse effect (measured on a scale relative to Sun) on any of the Company, Sun or the surviving corporation, after giving effect to the proposed transaction. In addition, subject to approval from the OCC, prior to the completion of the proposed transaction, OceanFirst Bank intends to convert from a federal savings association into a national banking association, and the Company intends to cease being a savings and loan holding company and become a bank holding company. The approval process for the conversion application could delay the completion of the proposed transaction with Sun.
Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the proposed transaction with Sun may not be realized. The Company and Sun have operated and, until the completion of the proposed transaction, will continue to operate, independently. The success of the proposed transaction with Sun, including anticipated benefits and cost savings, will depend, in part, on the Company’s ability to successfully combine and integrate the businesses of the Company and Sun in a manner that permits growth opportunities and does not materially disrupt existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, employees and other constituentsbusiness, financial condition or to achieve the anticipated benefits and cost savingsresults of the proposed transaction with Sun. The loss of key employees could adversely affect the Company’s ability to successfully conduct its business, which could have an adverse effect on the Company’s financial results and the value of its common stock. If the Company experiences difficulties with the integration process, the anticipated benefits of the proposed transaction with Sun may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause the Company and/or Sun to lose customers or cause customers to remove their accounts from the Company and/or Sun and move their business to competing financial institutions. Integration efforts between the two companies, as well as the Company’s ongoing integration efforts relating to the Cape acquisition and the Ocean Shore acquisition, will also divert management attention and resources. These integration matters could have an adverse effect on each of Sun and the Company during this transition period and for an undetermined period after completion of the proposed transaction on the combined company. In addition, the actual cost savings of the proposed transaction could be less than anticipated.operations.
Termination of the merger agreement could negatively impact the Company. If the merger agreement is terminated, there may be various consequences. For example, the Company’s businesses may have been impacted adversely by the failure to pursue other opportunities due to management’s focus on the proposed transaction with Sun, without realizing any of the anticipated benefits of completing the proposed transaction. Additionally, if the merger agreement is terminated, the market price of the Company common stock could decline to the extent that the current market prices reflect a market assumption that the proposed transaction will be completed. If the merger agreement is terminated under certain circumstances, Sun or the Company may be required to pay to the other party a termination fee of $17.045 million.
The Company will be subject to business uncertainties and contractual restrictions while the proposed transaction is pending. Uncertainty about the effect of the proposed transaction with Sun on employees and customers may have an adverse effect on the Company. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel until the proposed transaction is completed, and could cause customers and others that deal with the Company to seek to change existing business relationships with the Company. Retention of certain employees by the Company may be challenging while the proposed transaction is pending, as certain employees may experience uncertainty about their future roles with the Company. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the Company, the Company’s business could be harmed. In addition, subject to certain exceptions, the Company has agreed to certain restrictive covenants.
Litigation relating to the proposed transaction with Sun could require the Company to incur significant costs and suffer management distraction, as well as delay and/or enjoin the proposed transaction. Following the announcement of the transaction with Sun, three stockholders filed purported class actions in state court which were consolidated under the caption In re Sun Bancorp, Inc. Consolidated Stockholder Litigation, Case No. BUR-L-2060-17 (N.J. Super. Ct. Law Div.). Plaintiffs alleged that members of the Sun board breached their fiduciary duties by approving the merger agreement because the transaction was procedurally flawed and financially inadequate, and by failing to disclose material information about the transaction. Plaintiffs further alleged that OceanFirst and Merger Sub aided and abetted such alleged breaches, and sought to enjoin the merger, as well as unspecified money damages, costs and attorneys' fees and expenses. A purported class action was also filed in federal court captioned Parshall v. Sun Bancorp, Inc., Case No. 1:17-cv-07368 (D.N.J.) alleging defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and certain rules and regulations promulgated thereunder, by not disclosing certain allegedly material facts about the transaction. On October 13, 2017, the parties to the various actions entered into a Memorandum of Understanding to resolve the named plaintiffs' individual claims in the state and federal actions.


If the proposed transaction with Sun is not completed, the Company will have incurred substantial expenses without realizing the expected benefits of the proposed transaction. The Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing the joint proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the first-step merger. If the proposed transaction with Sun is not completed, the Company would have to recognize these expenses without realizing the expected benefits of the proposed transaction.
Holders of Company common stock will have a reduced ownership and voting interest after the first-step merger and will exercise less influence over management. Holders of Company common stock currently have the right to vote in the election of the board of directors of the Company and on other matters affecting the Company. Upon the completion of the first-step merger, each Sun shareholder who receives the stock consideration (either because such Sun shareholder elects to receive stock consideration or because of the allocation and proration provisions of the merger agreement) will become a Company stockholder. It is currently expected that the former Sun shareholders as a group will receive shares in the first-step merger constituting approximately 32% of the outstanding shares of Company common stock immediately after the first-step merger. As a result, current Company stockholders as a group will own approximately 68% of the outstanding shares of Company common stock immediately after the first-step merger. Because of this reduced ownership percentage, Company stockholders may have less influence on the management and policies of the Company than they now have on the management and policies of the Company. Upon consummation of the proposed transaction with Sun, the Company has agreed to increase the size of the board of directors of the Company and the board of directors of OceanFirst Bank to fourteen members and appoint two current members of the board of directors of Sun, to be selected by the Leadership Committee of the Company in consultation with the board of directors of the Company and the board of directors of Sun, to the board of directors of the Company and the board of directors of OceanFirst Bank. Each such appointee will be appointed to a class of the board of directors of the Company and the board of directors of OceanFirst Bank to be selected by the Company in its discretion (provided that such appointees shall be allocated among the classes as evenly as possible).
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 24, 2014,December 18, 2019, the Company announced the authorization ofby the Board of Directors to repurchase up to 5% of the Company’s outstanding common stock, or 867,923 shares of which 154,804 shares remain available for repurchase.2.5 million shares. The repurchase plan has no expiration date. On April 27, 2017,June 25, 2021, the Company announced the authorization ofby the Board of Directors to repurchase up to an additional 5% of the Company’s outstanding common stock, or 1.63.0 million sharesshares. The Company repurchased 460,009 shares of which all shares authorized for repurchase remain available at September 30, 2017. Information regarding the Company’sits common stock repurchases forduring the three month period ended September 30, 2017 is as follows:2021. At September 30, 2021, there were 3,559,136 shares available for repurchase under the Company’s stock repurchase program.
PeriodTotal Number of
Shares Purchased		Average Price Paid per ShareTotal Number of
Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
July 1, 2021 through July 31, 2021— — — 4,019,145 
August 1, 2021 through August 31, 2021206,288 $21.17 206,288 3,812,857 
September 1, 2021 through September 30, 2021253,721 20.98 253,721 3,559,136 
PeriodTotal
Number of
Shares
Purchased		Average Price
Paid per Share		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs		Maximum
Number of Shares
that May Yet Be
Purchased Under the
Plans or Programs
July 1, 2017 through July 31, 2017—
—
—
1,754,804
August 1, 2017 through August 31, 2017—
—
—
1,754,804
September 1, 2017 through September 30, 2017—
—
—
1,754,804


Item 3. Defaults Upon Senior Securities
Not ApplicableApplicable.
Item 4. Mine Safety Disclosures
Not ApplicableApplicable.
Item 5. Other Information


(a)On November 1, 20172, 2021, the Company closed onand Grace Vallacchi, its previously announced acquisitionChief Risk Officer, amended and restated the terms of an office buildingthe Executive Employment Agreement and the Executive Change in Red Bank, New Jersey relatedControl Agreement between them, each dated October 23, 2017. The amendments to the Employment Agreement extended its back-office consolidation, at a purchase price of $42.5 million. Includedterm by one year, to July 31, 2024, with annual automatic renewals thereafter. The Amendments to the Executive Change in Control Agreement amended the amount payable to her in the acquisition isevent of a structured parking facility as wellchange in control to:

an amount equal to the sum of (i) Executive’s Salary and (ii) the greater of the cash incentive payment paid to the Executive for the prior fiscal year or the Target Cash Compensation for the current fiscal year (“Change in Control Payment”). In the event that the Company’s Board in good faith determines that the Change in Control occurred during such time as the existing furniture, fixturesCompany is at least “adequately capitalized” (within the meaning of 12 U.S.C. § 1831o(b)) then the Change in Control Payment shall be multiplied by a factor of three (3), provided, however, that the total value of the Change in Control Payment (including any insurance benefits provided) shall not exceed three times the sum of the Executive’s Salary and equipment. Occupancy is expectedthe greater of the cash incentive payment paid to the Executive for the prior fiscal year or the Target Cash Compensation for the current fiscal year.
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Other than the above amendments (and certain nonsubstantive updates and technical corrections), the Employment Agreements and Change in the first halfControl Agreement remain unchanged. The revised agreements are attached as Exhibits 10.1 and 10.2 to this Quarterly Report, respectively, and are incorporated by reference herein.

(b)Not Applicable.

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Table of 2018.Contents



Item 6. Exhibits
 
Exhibits:Exhibit No:Exhibit DescriptionReference
Employment Agreement and Plan of Merger, dated as of June 30, 2017, by and amongbetween OceanFirst Financial Corp., Sun Bancorp, Inc. and Mercury Merger Sub Corp. (1)Grace M. VallacchiFiled here within this document
Amended Bylaws of
Change in Control Agreement between OceanFirst (2)Financial Corp. and Grace M. VallacchiFiled here within this document
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed here within this document
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed here within this document
Certification pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002Filed here within this document
101.0The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,2021, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements
104.0Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)


(1) Incorporated by reference from Exhibit 2.1 to current report on Form 8-K filed July 3, 2017.
(2) Incorporated by reference from Exhibit 3.1 to current report on Form 10-Q filed August 9, 2017.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
OceanFirst Financial Corp.
Registrant
DATE:November 8, 20174, 2021/s/ Christopher D. Maher
Christopher D. Maher
Chairman President and Chief Executive Officer
DATE:November 8, 20174, 2021/s/ Michael J. Fitzpatrick
Michael J. Fitzpatrick
Executive Vice President and Chief Financial Officer


Exhibit Index

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ExhibitDescription
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.0
Certification pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002
101.0
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.


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