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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 SeptemberJune 30, 2017
2023
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

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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, 2017July 31, 2023, there were 32,582,47259,421,498 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)
1621
1722
1823
1924
2026
2228
Item 2.
34
Item 3.
1419
Item 4.
1520
PART II.
4750
Item 1.
4750
Item 1A.
4750
Item 2.
4950
Item 3.
50
Item 4.
50
Item 5.
50
Item 6.
51
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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)June 30, 2023March 31, 2023June 30, 2022
SELECTED FINANCIAL CONDITION DATA:
Total assets$13,538,903 $13,555,175 $12,438,653 
Loans receivable, net of allowance for loan credit losses10,030,106 9,986,949 9,380,688 
Deposits10,158,337 9,993,095 9,831,484 
Total stockholders’ equity1,626,283 1,610,371 1,521,432 
SELECTED OPERATING DATA:
Net interest income92,109 98,802 90,797 
Provision for credit losses1,229 3,013 1,254 
Other income8,928 2,073 7,541 
Operating expenses62,930 61,309 58,661 
Net income27,882 27,899 29,483 
Net income attributable to OceanFirst Financial Corp.27,797 27,883 28,961 
Net income available to common stockholders26,793 26,879 27,957 
Diluted earnings per share0.45 0.46 0.47 
SELECTED FINANCIAL RATIOS:
Stockholders’ equity per common share at end of period27.37 27.07 25.73 
Cash dividend per share0.20 0.20 0.17 
Dividend payout ratio per common share44.44 %43.48 %36.17 %
Stockholders’ equity to total assets12.01 11.88 12.23 
Return on average assets (2) (3) (4)
0.80 0.82 0.92 
Return on average stockholders’ equity (2) (3) (4)
6.61 6.77 7.31 
Net interest rate spread (5)
2.50 2.92 3.18 
Net interest margin (2) (6)
3.02 3.34 3.29 
Operating expenses to average assets (2) (4)
1.87 1.88 1.92 
Efficiency ratio (4) (7)
62.28 60.78 59.65 
Loans-to-deposits ratio (8)
99.30 100.50 95.90 
ASSET QUALITY:
Non-performing loans (9)
$22,758 $22,437 $20,753 
Allowance for loan credit losses as a percent of total loans receivable (8) (10)
0.61 %0.60 %0.55 %
Allowance for loan credit losses as a percent of total non-performing loans (9) (10)
271.51 268.28 250.86 
Non-performing loans as a percent of total loans receivable (8) (9)
0.23 0.22 0.22 
Non-performing assets as a percent of total assets (9)
0.17 0.17 0.17 
(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Ratios are annualized.
(3) Ratios for each period are based on net income available to common stockholders.
(4) Performance ratios for the three months ended June 30, 2023 included a net loss on equity investments of $559,000, or $397,000, net of tax benefit. Performance ratios for the three months ended March 31, 2023 included a net expense related to merger related expenses, net branch consolidation expenses, net loss on equity investments, and net loss on sale of investments of $7.6 million, or $5.8 million, net of tax benefit. Performance ratios for the three months ended June 30, 2022 included a net expense related to merger related expenses, net branch consolidation expenses, and net loss on equity investments of $8.8 million, or $6.7 million, net of tax benefit.
(5) 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.
(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(7) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.
(8) Total loans receivable excludes loans held-for-sale.
(9) Non-performing loans and assets generally 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.
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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
(10) 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 $9.8 million, $10.5 million, and $15.5 million at June 30, 2023, March 31, 2023 and June 30, 2022, 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.
5
(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 in the central and southernthroughout New Jersey regions.and the major metropolitan areas of Philadelphia, New York, Baltimore, and 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, deposit accounts, theaccount services, bank owned life insurance, commercial loan swap income, gain on sale of investment products, loan originations, loan sales,loans, securities and equity investments, title-related fees and service charges and other fees. The Company’s operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, Federalfederal 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, inflation, 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 attemptedKey developments relating 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 acquisitions, acquiring Cape Bancorp, Inc. (“Cape”) and Ocean City Home Bank (“Ocean Shore”) (the “Acquisition Transactions”). The Acquisition Transactions added $2.5 billion in assets and $2.1 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 $2.2 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”).   Subject 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 for the three months ended SeptemberJune 30, 20172023 were as follows:


•Excess Liquidity:The Company grewmaintained elevated levels of on-balance sheet cash and funding availability of $4.0 billion at June 30, 2023. Deposits increased $165.2 million during the quarter, which included a shift from non-maturity deposits $173.4 million, reducing its loan to deposit ratiotime deposits.
•Asset Quality: Continued strong asset quality as criticized assets, non-performing loans, and loans 30 to 89.0%89 days past due as a percent of total loans receivable were 1.18%, while0.23%, and 0.03%, respectively, at June 30, 2023. Net charge-off activity continues to remain at zero percent of total average loans on an annualized basis.
•Strong Capital: Capital ratios remained above “well-capitalized” levels, including the cost of depositsCompany’s common equity tier 1 capital, which increased only one19 basis pointpoints from the prior linked quarter, to 0.29%.10.21% at June 30, 2023. Stockholders’ equity per common share was $27.37, up $0.30 from the prior quarter.

Asset quality improved as non-performing loans decreasedThe current quarter results were impacted by the following matters. Net interest income and cost of funds were adversely impacted by shifts to $15.1 millionhigher cost time deposits, repricing of government deposits, and non-performing loans as a percentage of total loans decreasedmaintaining excess liquidity on balance sheet, which outpaced the increase in interest-earning assets. This drove an increase in deposit betas, which is the change in rates paid to 0.39%customers relative to the change in federal funds target rate, to 29%.

Net income available to common stockholders for the quarterthree and six months ended SeptemberJune 30, 2017, was $12.82023 decreased to $26.8 million and increased to $53.7 million, respectively, or $0.39$0.45 and $0.91 per diluted share, as compared to $9.1$28.0 million and $52.7 million, or $0.35$0.47 and $0.89 per diluted share, for the corresponding prior year period. Net income for the quarters ended September 30, 2017 and 2016, included merger related and branch consolidation expenses, which decreased net income, net of tax benefit, by $2.1periods. The dividends paid to preferred stockholders were $1.0 million and by $1.1 million, respectively, and reduced diluted earnings per share by $0.06 and $0.05, respectively. Net income increased over the prior year period primarily due to the Acquisition Transactions.

Net interest income for the three months ended September 30, 2017 increased to $43.1 million, as compared to $33.9 million 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$2.0 million for the three and six months ended SeptemberJune 30, 2017, as compared to $5.9 million for2023 and 2022, respectively.
On July 20, 2023, the corresponding prior year period. The increase was primarily due to the impactCompany’s Board of the Acquisition Transactions, which added $1.1 million to other income. Operating expenses increased to $30.7 million for the three months ended September 30, 2017, as compared to $25.0 million in the same prior year period. Operating expenses for the three months ended September 30, 2017 included $3.2 million 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.

The CompanyDirectors declared a quarterly cash dividend on common stock.stock of $0.20 per share. The dividend, forrelated to the quarter ended SeptemberJune 30, 2017 of $0.15 per share2023, will be paid on November 17, 2017August 18, 2023 to common stockholders of record on November 6, 2017.August 7, 2023. The Board also declared a quarterly cash dividend on 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 August 15, 2023 to preferred stockholders of record on July 31, 2023.

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Recent Developments
Bank failures earlier in the year led to uncertainty and volatility in the financial services industry. In response to these events, in March 2023 the Company took a series of precautionary measures, which included expanding and optimizing its funding and contingency funding sources; enhanced monitoring of deposit and funding flows; refreshing stress test scenarios; and evaluating supplemental liquidity and conservation measures. Additionally, management executed other timely actions such as re-evaluating the securities portfolio and updating capital and credit stress tests to understand and mitigate other potential risks that were highlighted by these events.
As a result of these procedures, the Company took a few key actions such as increasing on-balance sheet liquidity and funding capacity to $4.0 billion at June 30, 2023; sold specific positions in two financial institutions for the three months ended March 31, 2023, reviewed and concluded no further impairment existed in the Company’s remaining securities portfolio; and performed credit stress tests on the Company’s commercial real estate - investor portfolio, which included site visits. These actions resulted in a robust liquidity position and strong balance sheet. The Company will continue to monitor these events and the impact they may have in future periods, and will respond accordingly as economic and industry conditions change. Refer to the “Liquidity and Capital Resources” section for further information regarding liquidity.

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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. For the three and six months ended June 30, 2023, interest income included net loan fees of $1.2 million and $1.8 million, respectively, as compared to $3.2 million and $4.2 million for the same prior year periods, respectively.
The following tables set forth certain information relating to the Company for the three and ninesix months ended SeptemberJune 30, 20172023 and September 30, 2016.2022. 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 June 30,
 20232022
(dollars in thousands)Average BalanceInterest
Average
Yield/
Cost (1)
Average BalanceInterest
Average
Yield/
Cost (1)
Assets:
Interest-earning assets:
Interest-earning deposits and short-term investments$308,238 $4,283 5.57 %$67,440 $100 0.59 %
Securities (2)
1,931,032 16,709 3.47 1,811,869 8,585 1.90 
Loans receivable, net (3)
Commercial6,912,698 99,350 5.76 6,278,465 65,390 4.18 
Residential real estate2,895,629 25,936 3.58 2,718,787 22,742 3.35 
Home equity loans and lines and other consumer (“other consumer”)255,785 3,818 5.99 251,014 2,599 4.15 
Allowance for loan credit losses, net of deferred loan costs and fees(53,327)— — (43,683)— — 
Loans receivable, net10,010,785 129,104 5.17 9,204,583 90,731 3.95 
Total interest-earning assets12,250,055 150,096 4.91 11,083,892 99,416 3.60 
Non-interest-earning assets1,217,666 1,168,093 
Total assets$13,467,721 $12,251,985 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking$3,718,289 11,964 1.29 %$4,020,474 1,612 0.16 %
Money market694,311 3,678 2.12 739,647 279 0.15 
Savings1,248,312 389 0.12 1,639,568 161 0.04 
Time deposits2,458,872 21,903 3.57 937,387 2,265 0.97 
Total8,119,784 37,934 1.87 7,337,076 4,317 0.24 
Federal Home Loan Bank (“FHLB”) advances1,246,914 15,406 4.96 538,754 1,647 1.23 
Securities sold under agreements to repurchase71,752 192 1.07 103,929 41 0.16 
Other borrowings195,754 4,455 9.13 194,481 2,614 5.39 
Total borrowings1,514,420 20,053 5.31 837,164 4,302 2.06 
Total interest-bearing liabilities9,634,204 57,987 2.41 8,174,240 8,619 0.42 
Non-interest-bearing deposits1,873,226 2,328,124 
Non-interest-bearing liabilities333,598 214,900 
Total liabilities11,841,028 10,717,264 
Stockholders’ equity1,626,693 1,534,721 
Total liabilities and equity$13,467,721 $12,251,985 
Net interest income$92,109 $90,797 
Net interest rate spread (4)
2.50 %3.18 %
Net interest margin (5)
3.02 %3.29 %
Total cost of deposits (including non-interest-bearing deposits)1.52 %0.18 %
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FOR THE THREE MONTHS ENDEDFor the Six Months Ended June 30,
September 30, 2017 September 30, 201620232022
AVERAGE
BALANCE
 INTEREST 
AVERAGE
YIELD/
COST
 
AVERAGE
BALANCE
 INTEREST 
AVERAGE
YIELD/
COST
(dollars in thousands)
(dollars in thousands)(dollars in thousands)Average
Balance		Interest
Average
Yield/
Cost (1)
Average
Balance		Interest
Average
Yield/
Cost (1)
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$219,482 $5,221 4.80 %$78,074 $136 0.35 %
Securities (1) and FHLB stock
817,867
 4,263
 2.07
 533,809
 2,561
 1.91
Loans receivable, net (2)
           
Securities (2)
Securities (2)
1,943,148 33,085 3.43 1,829,065 17,064 1.88 
Loans receivable, net (3)
Loans receivable, net (3)
Commercial1,865,970
 22,423
 4.77
 1,723,520
 20,970
 4.84
Commercial6,876,553 192,130 5.63 6,157,060 123,745 4.05 
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 estate2,883,904 51,097 3.54 2,631,208 44,081 3.35 
Other consumerOther consumer259,573 7,597 5.90 254,002 5,373 4.27 
Allowance for loan credit losses, net of deferred loan costs and feesAllowance for loan credit losses, net of deferred loan costs and fees(51,948)— — (42,080)— — 
Loans receivable, netLoans receivable, net9,968,082 250,824 5.07 9,000,190 173,199 3.87 
Total interest-earning assets4,873,732
 48,030
 3.91
 3,787,545
 37,307
 3.92
Total interest-earning assets12,130,712 289,130 4.80 10,907,329 190,399 3.51 
Non-interest-earning assets460,795
     316,290
    Non-interest-earning assets1,226,061 1,191,453 
Total assets$5,334,527
     $4,103,835
    Total assets$13,356,773 $12,098,782 
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$3,790,413 18,234 0.97 %$4,197,935 3,762 0.18 %
Money market389,035
 299
 0.30
 386,490
 295
 0.30
Money market699,940 5,437 1.57 763,721 596 0.16 
Savings672,548
 59
 0.03
 488,749
 49
 0.04
Savings1,308,381 723 0.11 1,624,575 286 0.04 
Time deposits620,308
 1,595
 1.02
 477,496
 1,156
 0.96
Time deposits2,144,514 34,870 3.28 853,017 3,714 0.88 
Total3,534,312
 3,126
 0.35
 2,778,085
 2,083
 0.30
Total7,943,248 59,264 1.50 7,439,248 8,358 0.23 
FHLB AdvancesFHLB Advances1,234,919 29,824 4.87 285,501 1,682 1.19 
Securities sold under agreements to repurchase74,285
 30
 0.16
 68,540
 24
 0.14
Securities sold under agreements to repurchase71,825 282 0.79 110,738 83 0.15 
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 borrowings203,911 8,849 8.75 211,407 5,252 5.01 
Total borrowingsTotal borrowings1,510,655 38,955 5.20 607,646 7,017 2.33 
Total interest-bearing liabilities3,929,751
 4,974
 0.50
 3,137,045
 3,372
 0.43
Total interest-bearing liabilities9,453,903 98,219 2.10 8,046,894 15,375 0.39 
Non-interest-bearing deposits781,047
     521,088
    Non-interest-bearing deposits1,950,437 2,364,757 
Non-interest-bearing liabilities32,360
     31,536
    Non-interest-bearing liabilities334,201 155,832 
Total liabilities4,743,158
     3,689,669
    Total liabilities11,738,541 10,567,483 
Stockholders equity591,369
     414,166
    
Stockholders’ equityStockholders’ equity1,618,232 1,531,299 
Total liabilities and equity$5,334,527
     $4,103,835
    Total liabilities and equity$13,356,773 $12,098,782 
Net interest income  $43,056
     $33,935
  Net interest income$190,911 $175,024 
Net interest rate spread (3)(4)
    3.41%     3.49%2.70 %3.12 %
Net interest margin (4)(5)
    3.50%     3.56%3.17 %3.24 %
Total cost of deposits (including non-interest-bearing deposits)    0.29%     0.25%Total cost of deposits (including non-interest-bearing deposits)1.21 %0.17 %

(1)Average yields and costs are annualized.

(2)Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank (“FRB”) stock, and are recorded at average amortized cost net of allowance for securities credit losses.
(3)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.
(4)Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)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.

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Comparison of Financial Condition at SeptemberJune 30, 20172023 and December 31, 2016

2022
Total assets increased by $216.9$435.0 million to $5.384$13.54 billion, at September 30, 2017, from $5.167$13.10 billion, at December 31, 2016.due to higher cash and due from banks and loans. Cash and due from banks decreased by $46.1increased $289.8 million to $255.3$457.7 million, at September 30, 2017, from $301.4$167.9 million at December 31, 2016, as these funds were deployed into higher-yielding securities which increased $199.1 million. Loans receivable, net,the Company maintained excess liquidity on balance sheet. Total loans increased by $66.7$165.6 million to $3.870$10.08 billion, at September 30, 2017 from $3.803$9.92 billion, at December 31, 2016. Premises and equipment decreased $7.0 million at September 30, 2017, as compared to December 31, 2016, due to the consolidation of 15 branches during the nine months ended September 30, 2017. The premises and equipment at these locations were written downloan originations primarily in commercial.
Total liabilities increased by $394.2 million to their net realizable value and the remaining balance was reclassified to assets held for sale.

$11.91 billion, from $11.52 billion. Deposits increased by $162.5$483.1 million to $4.350$10.16 billion, at September 30, 2017, from $4.188$9.68 billion. Time deposits increased to $2.77 billion at December 31, 2016.from $1.54 billion, or 27.2% and 15.9% of total deposits, respectively. Brokered time deposits increased $547.9 million and retail time deposits increased $674.9 million. The loan-to-depositloans-to-deposit ratio at September 30, 2017 was 89.0%99.3%, as compared to 90.8% at December 31, 2016.102.5%. FHLB advances decreased by $119.5 million to $1.09 billion, from $1.21 billion.

Stockholders’Total stockholders’ equity increased to $596.3 million at September 30, 2017,$1.63 billion, as compared to $572.0 million at December 31, 2016. At September 30, 2017, there were 1.8 million shares available$1.59 billion, reflecting net income for repurchase under the Company’s stock repurchase programs. In the ninesix months ended SeptemberJune 30, 2017,2023 and a net increase in the fair market value of available-for-sale debt securities, net of tax, which decreased accumulated other comprehensive loss by $5.6 million.
For the six months ended June 30, 2023, the Company did not repurchase any shares under theseits stock repurchase programs. Tangible stockholders’program. There were 2,934,438 shares available for repurchase at June 30, 2023 under the existing repurchase program. Stockholders’ equity per common share increased to $13.47 at September 30, 2017,$27.37, as compared to $12.95 at December 31, 2016.$26.81.

Comparison of Operating Results for the threeThree and nine months ended SeptemberSix Months Ended June 30, 20172023 and SeptemberJune 30, 20162022
General
On May 2, 2016, the Company completed its acquisition of Cape and its results of operations are included in the consolidated resultsNet income available to common stockholders for the three and ninesix months ended SeptemberJune 30, 2017, but are excluded from the results of operations for the period from January 1, 20162023 decreased to May 1, 2016.    
On November 30, 2016, the Company completed its acquisition of Ocean Shore$26.8 million and its results of operations are included in the consolidated results for the threeincreased to $53.7 million, respectively, or $0.45 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, was $12.8 million, or $0.39$0.91 per diluted share, as compared to $9.1$28.0 million and $52.7 million, or $0.35$0.47 and $0.89 per diluted share, for the corresponding prior year period. Net income for the nine months ended September 30, 2017 was $32.5 million, or $0.98 per diluted share, as compared to net income of $17.0 million, or $0.77 per diluted share, for the corresponding prior year period.periods. Net income for the three and ninesix months ended SeptemberJune 30, 2017 includes merger related2023 included net loss on equity investments of $559,000 and branch consolidation expenses and for the nine months ended September 30, 2017, also includes the acceleration of stock award expense due to the retirement of a director. These items decreased net income, net of tax benefit, for the three and nine months ended September 30, 2017, by $2.1 million and $8.8$2.8 million, respectively. Net income for the three and ninesix months ended SeptemberJune 30, 2016 includes2023 also included merger related expenses of $1.3$22,000, net branch consolidation expense of $70,000 and net loss on sale of investments of $5.3 million. These items decreased net income by $397,000 and $6.2 million, and $9.9 million, respectively. The after-tax impactnet of these items reduced diluted earnings per share by $0.06 and $0.27tax, for the three and ninesix months ended SeptemberJune 30, 2017, respectively, and by $0.05 and $0.34, respectively, for the same prior year periods. Excluding these items, net2023, respectively.
Net income for the three and ninesix months ended SeptemberJune 30, 2017 increased over the prior year periods primarily due to the Acquisition Transactions. In addition, in the first quarter2022 included merger related expenses of 2017, the Company adopted Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation” which resulted in decreases in$196,000 and $2.2 million, respectively, net branch consolidation expenses of $546,000 and $948,000, and a net loss on equity investments of $8.1 million and $10.9 million. These items decreased net income by $6.7 million and $10.7 million, net of tax, expense for the three and ninesix months ended SeptemberJune 30, 2017, of $158,000 and $1.7 million,2022, respectively.
Interest Income
Interest income for the three and ninesix months ended SeptemberJune 30, 20172023 increased to $48.0$150.1 million and $140.9$289.1 million, respectively, as compared to $37.3from $99.4 million and $93.5$190.4 million respectively, infor the corresponding prior year periods. For the three and six months ended June 30, 2023, the yield on average interest-earning assets increased to 4.91% and 4.80%, respectively, from 3.60% and 3.51% for the corresponding prior year periods, due to the impact of rising rates on interest-earning asset growth. Average interest-earning assets increased $1.086by $1.17 billion and $1.574$1.22 billion respectively, for the three and ninesix months ended SeptemberJune 30, 2017, as compared to the same prior year periods. The averages for the three and nine months ended September 30, 2017, were favorably impacted2023, respectively, primarily driven by the Acquisition Transactions. The yields on average interest-earning assets decreased to 3.91% and increased to 3.93%, respectively, for the three and nine months ended September 30, 2017, from 3.92% and 3.88%, respectively, for the same prior year periods.organic commercial loan growth.
Interest Expense
Interest expense for the three and ninesix months ended SeptemberJune 30, 2017 was $5.02023 increased to $58.0 million and $14.2$98.2 million, respectively, as compared to $3.4from $8.6 million and $9.0$15.4 million respectively, in the corresponding prior year periods. Average interest-bearing liabilities increased $792.7 millionperiods, reflecting rising rates on costs, deposit mix shift to higher cost time deposits and $1.224 billion, respectively, for the threeFHLB advances, repricing of government deposits, and nine months ended September 30, 2017, as compared to the same prior year periods.maintaining excess liquidity on balance sheet. For the three and ninesix months ended SeptemberJune 30, 2017,2023, the cost of average interest-bearing liabilities increased to 0.50%2.41% and 0.49%2.10%, respectively, from 0.43%0.42% and 0.46%, respectively, in0.39% for the corresponding prior year periods.

periods, due to higher cost of deposits and FHLB advances. The total cost of deposits (including non-interest bearingnon-interest-bearing deposits) was 0.29%increased to 1.52% and 0.28%, respectively,1.21% for the three and ninesix months ended SeptemberJune 30, 2017, as compared to 0.25%2023, respectively, from 0.18% and 0.17% for both the three and nine months ended September 30, 2016.same prior year periods.
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Net Interest Income and Margin
Net interest income for the three and ninesix months ended SeptemberJune 30, 20172023 increased to $43.1$92.1 million and $126.7$190.9 million, respectively, as compared to $33.9from $90.8 million and $84.5$175.0 million respectively, forin the samecorresponding prior year periods, reflecting a net impact of higher interest rates and to a lesser extent, an increase in average interest-earning assets. The netNet interest margin for the three and ninesix months ended SeptemberJune 30, 20172023 decreased to 3.50%3.02% and increased to 3.54%3.17%, respectively, from 3.56%3.29% and 3.51%, respectively,3.24% for the same prior year periods. Net interest margin decreased primarily due to the increase in cost of funds outpacing that of average interest earning assets in the current interest rate environment.
Provision for LoanCredit Losses
ForProvision for credit losses for the three and ninesix months ended SeptemberJune 30, 2017, the provision for loan losses2023 was $1.2 million and $3.0$4.2 million, respectively, as compared to $888,000 and $2.1 million, respectively, for the corresponding prior year periods. Net loan charge-offs were $1.1$1.3 million and $1.6$3.1 million respectively, for the three and nine months ended September 30, 2017, as compared to net loan charge-offs of $1.9 million and $3.2 million, respectively, in the corresponding prior year periods. Non-performing loans increased to $15.1 million at September 30, 2017, as compared to $13.6 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.
Other Income
For the three and nine months ended September 30, 2017, other income increased to $7.4 million and $20.3 million, respectively, as compared to $5.9 million and $14.2 million, respectively, for the corresponding prior year periods. The increases were primarily dueprovision for credit losses for the current quarter reflected an increase to the impact of the Acquisition Transactions,allowance for loan credit losses, primarily related to commercial real estate, which added $1.1 millionwas driven by sustained macroeconomic headwinds. Net loan charge-offs were $123,000 and $4.9 million, respectively, to other income$76,000 for the three and ninesix months ended SeptemberJune 30, 2017,2023, respectively. Net loan charge-offs were $9,000 and net loan recoveries were $83,000 for the three and six months ended June 30, 2022, respectively.
Non-interest Income
Three months ended June 30, 2023 vs. June 30, 2022
Other income increased to $8.9 million, as compared to $7.5 million. Other income was adversely impacted by net losses on equity investments of $559,000 and $8.1 million, for the samerespective quarters. The remaining decrease of $6.1 million was driven by decreases in commercial loan swap income of $2.3 million and fees and service charges of $2.0 million, which were adversely impacted by the current interest rate environment resulting in lower swap volume and mortgage activity. Bankcard services revenue decreased $1.8 million due to the Durbin amendment, which became effective for the Company on July 1, 2022.
Six months ended June 30, 2023 vs. June 30, 2022
Other income decreased to $11.0 million, as compared to $16.4 million. Other income was adversely impacted by net losses on equity investments of $8.1 million and $10.9 million, for the respective periods. The current year also included $5.3 million of losses related to the sale of investments in the first quarter. The remaining decrease of $8.2 million was driven by decreases in commercial loan swap income on lower volume of $4.4 million, bankcard services revenue of $3.4 million due to the Durbin amendment, and income from bank owned life insurance of $1.1 million on lower claims.
Non-interest Expense
Three months ended June 30, 2023 vs. June 30, 2022
Operating expenses increased to $62.9 million, as compared to $58.7 million. Operating expenses were adversely impacted by $742,000 of merger related expenses and net branch consolidation expense in the prior year periods. Excluding the Acquisition Transactions, theperiod. The remaining increase of $5.0 million was due to increases in other incomeprofessional fees of $2.6 million related to the ongoing investments to improve profitability and operational efficiencies, and compensation and benefits expense of $1.1 million primarily related to inflation, annual merit-related compensation increases and higher medical costs. The current quarter also included increases to federal deposit insurance and regulatory assessments of $677,000 due to new assessment rates that went into effect on January 1, 2023, and real estate charges on assets held for sale of $580,000.
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Six months ended June 30, 2023 vs. June 30, 2022
Operating expenses increased to $124.2 million, as compared to $116.2 million. Operating expenses were adversely impacted by $92,000 and $3.1 million, for the respective periods, related to merger related expenses and net branch consolidation expense. The remaining increase of $11.1 million was due to increases in professional fees of $4.4 million and compensation and benefits expense of $4.3 million. The drivers of changes in expenses for the three months ended, September 30, 2017, was primarily dueas noted above, were also the drivers for the six months ended. Additionally, other operating expenses included higher expenses of $580,000 and $427,000 related 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 decrease in the net gaincharges on the sale of loans availableassets held for sale (included in other income) of $360,000. For the nine months ended September 30, 2017, excluding the Acquisition Transactions, the increase in other income was primarily due to higher deposit and bank card relatedmortgage title search 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 the net gain on the sale of loans (included in other income) of $697,000.respectively.
Operating Expenses
Operating expenses increased to $30.7 million and $98.8 million, respectively, for the three and nine months ended September 30, 2017, as compared to $25.0 million and $70.4 million, respectively, in the same prior year periods. Operating expenses for the three and nine months ended September 30, 2017 included $3.2 million and $13.2 million, respectively, of merger related and branch consolidation expenses, as compared to $1.3 million and $9.9 million, respectively, in the prior year periods. 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 and $18.9 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 expense 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 TaxesTax Expense
The provision for income taxes was $5.7$9.0 million and $12.7$17.7 million respectively, for the three and ninesix months ended SeptemberJune 30, 2017,2023, respectively, as compared to $4.8$8.9 million and $9.2$16.9 million respectively, for the same prior year periods. The effective tax rate was 30.8%24.4% and 28.0%, respectively,24.0% for the three and ninesix months ended SeptemberJune 30, 2017,2023, respectively, as compared to 34.4%23.3% and 35.0%, respectively,23.4% for the same prior year periods. The lower effective tax rate for the three and nine months ended September 30, 2017 resulted from the adoption
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Table 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 theContents

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, as compared to the same prior year periods, was primarily due to the deductibility of merger related expenses and an increase in tax exempt income.
Liquidity and Capital Resources
Liquidity Management
The Company’s primaryCompany manages its liquidity and funding needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses liquidity and management monitors the adherence to policy limits to satisfy current and future cash flow needs. The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, Federal Home Loan Bank (FHLB) advancesavailability, quarterly stress testing, collateral management, and other borrowingsqualitative and quantitative metrics.
Management monitors cash on a daily basis to determine the liquidity needs of the Bank and OceanFirst Financial Corp. (the “Parent Company”), a lesser extent, investment maturities and proceedsseparate legal entity from the sale of loans. While scheduled amortization of loans isBank. Additionally, management performs multiple liquidity stress test scenarios on a predictable source of funds, deposit flowsquarterly basis. The Bank and loan prepayments are greatly influenced by interest rates, economic conditions and competition. 
At September 30, 2017 and December 31, 2016, the company had no outstanding overnight borrowings from the FHLB.Parent Company continue to maintain adequate liquidity under all stress scenarios. The Company utilizes overnight borrowings from time-to-time to fund short-term liquidity needs. The Company had total FHLB borrowings, including overnight borrowings, of $259.2 million and $250.5 million, respectively, at September 30, 2017 and December 31, 2016.
The Company’s cash needs for the nine months ended September 30, 2017 were primarily satisfied by principal payments on loans and mortgage-backed securities, proceeds from maturities and calls of investment securities, deposit growth, and increased borrowings. The cash was principally utilized for loan originations, the purchase of loans receivable and the purchase of securities. The Company’s cash needs for the nine months ended September 30, 2016 were primarily satisfied by 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 investment securities, proceeds from sale of available-for-sale securities, deposit growth and the issuance of subordinated notes. The cash was principally utilized for loan originations, the purchase of loans receivable, and to reduce borrowings.
In the normal course of business, the Company routinely enters into various off-balance-sheet commitments. At September 30, 2017, outstanding undrawn lines of credit totaled $550.5 million and outstanding commitments to originate loans totaled $111.5 million. 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 million at September 30, 2017. Based upon historical experience, management estimates that a significant portion of such time deposits will remain with the Company.
The Companyalso 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
As a daily basis to determineresult of bank failures during the liquidity needsfirst quarter of the year, the Company took a series of precautionary measures and opted to bolster on-balance sheet liquidity, including cash and unpledged securities; and funding capacity at the FHLB and FRB Discount Window. As of June 30, 2023, total on-balance sheet liquidity and funding capacity was $4.0 billion.
The Company has a highly operational and granular deposit base, with long-standing client relationships across multiple customer segments providing stable funding. The vast majority of the government deposits are protected by the Federal Deposit Insurance Corporation insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank. Additionally, management performs multipleAt June 30, 2023, the Bank reported in its respective Call Report $5.06 billion of estimated uninsured deposits. Excluding $2.03 billion of collateralized government deposits and $1.48 billion of intercompany deposits of fully consolidated subsidiaries, the Bank had estimated adjusted uninsured deposits of $1.55 billion, or 15% of total deposits. On balance-sheet liquidity stress test scenariosand funding capacity represent 260% of the estimated adjusted uninsured deposits.

The primary sources of liquidity specifically available to the Parent Company are dividends from the Bank, proceeds from the sale of investments, and the issuance of debt, preferred and common stock. For the six months ended June 30, 2023, the Parent Company received dividend payments of $51.5 million from the Bank. At June 30, 2023, the Parent Company held $62.7 million in cash and cash equivalents.
The Bank’s primary sources of funds are deposits, principal and interest payments on a quarterly basis.loans and investments, FHLB advances, other borrowings, and proceeds from the sale of loans and investments. While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment sales are greatly influenced by interest rates, economic conditions, and competition. The Bank continueshas other sources of liquidity if a need for additional funds arises, including various lines of credit at multiple financial institutions, access to maintain significantthe FRB discount window, and the Bank Term Funding Program (“BTFP”).
As of June 30, 2023, the Company pledged $7.15 billion of loans with the FHLB and FRB to enhance the Company’s borrowing capacity, and includes collateral pledged to the FHLB to obtain a municipal letter of credit to collateralize certain municipal deposits. The Company also pledged $97.0 million of securities to collateralize its repurchase agreements and for other purposes required by law. The Company had $1.09 billion of term advances from the FHLB as of June 30, 2023, as compared to $1.21 billion at December 31, 2022. As of June 30, 2023, the Company had no overnight borrowings from the FHLB and no outstanding borrowings from the FRB discount window or the BTFP.
The Company’s cash needs for the six months ended June 30, 2023 were primarily satisfied by the increase in deposits. The cash was primarily maintained on the balance sheet to increase liquidity under all stress scenarios.on hand, and utilized for loan originations and purchases of debt securities.
Off-Balance Sheet Commitments and Contractual Obligations
In the normal course of business, the Bank routinely enters into various off-balance sheet commitments, primarily relating to the origination and funding of loans. At June 30, 2023, outstanding commitments to originate loans totaled $115.8 million and outstanding undrawn lines of credit totaled $1.65 billion, of which $1.29 billion were commitments to commercial and commercial construction borrowers and $364.6 million were commitments to consumer borrowers and residential construction borrowers. 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 existing contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are
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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.
At June 30, 2023, the Company also had various contractual obligations, which included debt obligations of $1.4 billion, including finance lease obligations of $1.8 million, and an additional $21.1 million in operating lease obligations included in other liabilities. The Company expects to have sufficient funds available to meet current commitments in the normal course of business. Time deposits scheduled to mature in one year or less totaled $2.51 billion at June 30, 2023.
Liquidity Used in Stock Repurchases and Cash Dividends
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. For the ninethree months ended SeptemberJune 30, 2017 and 2016,2023, the Company did not repurchase any shares of its common stock. At SeptemberJune 30, 2017,2023, there were 1,754,8042,934,438 shares available to be repurchased under the authorized stock repurchase programs authorized in July of 2014 and April of 2017.program.
Cash dividends on common stock declared and paid during the first ninesix months of 2017 were $14.4 million, as compared to $8.8 million in the same prior year period. The increase inJune 30, 2023 was $23.6 million. Cash dividends was a result of the additional shares issued in the Acquisition Transactions. On October 25, 2017, the Company’s Board of Directorson preferred stock declared a quarterly cash dividend of fifteen cents ($0.15) per common share. The dividend is payable on November 17, 2017 to stockholders of record at the close of business on November 6, 2017.
The primary sources of liquidity specifically available to OceanFirst Financial Corp., the holding company of OceanFirst Bank, are capital distributions from the bank subsidiary and the issuance of preferred and common stock and debt. Duringpaid during the first quartersix months 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 SeptemberJune 30, 2017, the Company received a dividend payment of $24.0 million from the Bank and $8.0 million remained to be paid. 2023 was $2.0 million.
The Company’s ability to continue to pay dividends will be largelyremains dependent upon capital distributions from the Bank, which may be adversely affected 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 Parent Company. If applicable regulations or regulatory bodies prevent the Bank is unablefrom paying a dividend to pay dividends to the Parent 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. At September 30, 2017, OceanFirst Financial Corp. held $31.1 millionAdditionally, regulations of the Federal Reserve may prevent the Company from either paying or increasing the cash dividend to common stockholders.
Capital Management
The Company manages its capital sources, uses, and expected future needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses capital and management monitors the adherence to policy limits to satisfy current and future capital needs. The policy includes internal limits, monitoring of key indicators, sources and availability, intercompany transactions, forecasts and stress testing, and other qualitative and quantitative metrics.
Additionally, management performs multiple capital stress test scenarios on a quarterly basis, varying loan growth, earnings, access to the capital markets, credit losses, and more recently, mark-to-market losses in cash.the investment portfolio, including both available-for-sale and held-to-maturity. The Bank and Parent Company continue to maintain adequate capital under all stress scenarios, including a scenario where all losses related to the investment securities portfolio are realized. The Bank and the Parent Company also have detailed contingency capital plans and obtain comprehensive reporting of capital trends on a regular basis, which are reviewed by management and the Board.
14
Table of Contents
Regulatory Capital Requirements
As of SeptemberJune 30, 20172023 and December 31, 2016,2022, 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 June 30, 2023AmountRatioAmountRatioAmountRatio
Company:
Tier 1 capital (to average assets)$1,190,122 9.21 %$517,131 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets)1,060,812 10.21 727,032 7.00 (1)N/AN/A
Tier 1 capital (to risk-weighted assets)1,190,122 11.46 882,824 8.50 (1)N/AN/A
Total capital (to risk-weighted assets)1,380,249 13.29 1,090,547 10.50 (1)N/AN/A
Bank:
Tier 1 capital (to average assets)$1,144,580 8.92 %$513,100 4.00 %$641,375 5.00 %
Common equity Tier 1 (to risk-weighted assets)1,144,580 11.13 719,670 7.00 (1)668,265 6.50 
Tier 1 capital (to risk-weighted assets)1,144,580 11.13 873,885 8.50 (1)822,480 8.00 
Total capital (to risk-weighted assets)1,209,475 11.76 1,079,505 10.50 (1)1,028,100 10.00 
As of December 31, 2022
Company:
Tier 1 capital (to average assets)$1,150,690 9.43 %$488,297 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets)1,021,774 9.93 720,641 7.00 (1)N/AN/A
Tier 1 capital (to risk-weighted assets)1,150,690 11.18 875,064 8.50 (1)N/AN/A
Total capital (to risk-weighted assets)1,336,652 12.98 1,080,961 10.50 (1)N/AN/A
Bank:
Tier 1 capital (to average assets)$1,122,946 9.20 %$488,033 4.00 %$610,041 5.00 %
Common equity Tier 1 (to risk-weighted assets)1,122,946 11.02 713,194 7.00 (1)662,251 6.50 
Tier 1 capital (to risk-weighted assets)1,122,946 11.02 866,021 8.50 (1)815,078 8.00 
Total capital (to risk-weighted assets)1,183,705 11.62 1,069,791 10.50 (1)1,018,848 10.00 
As of September 30, 2017 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) $460,836
 8.91%
$206,958
 4.000% $258,698
 5.00%
Common equity Tier 1 (to risk-weighted assets) 460,836
 12.82
 206,710
 5.750
(1) 
233,672
 6.50
Tier 1 capital (to risk-weighted assets) 460,836
 12.82
 260,635
 7.250
(1) 
287,597
 8.00
Total capital (to risk-weighted assets) 478,047
 13.30
 332,534
 9.250
(1) 
359,496
 10.00
OceanFirst Financial Corp:            
Tier 1 capital (to average assets) $467,540
 9.02%
$207,380
 4.000% N/A
 N/A
Common equity Tier 1 (to risk-weighted assets) 448,307
 12.46
 206,951
 5.750
(1) 
N/A
 N/A
Tier 1 capital (to risk-weighted assets) 467,540
 12.99
 260,938
 7.250
(1) 
N/A
 N/A
Total capital (to risk-weighted assets) 519,751
 14.44
 332,921
 9.250
(1) 
N/A
 N/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 satisfysatisfied the criteria to be “well-capitalized” under the Prompt Corrective Action Regulations.regulations.
At SeptemberJune 30, 2017,2023 and December 31, 2022, 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 equity12.01% and 12.10%, respectively.

15
Table of $416.1 million, for a tangible common equity to assets ratio of 8.30%.Contents

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 under a loss sharing arrangement with the FHLB relating to loans sold into the Mortgage Partnership Finance program. 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 September 30, 2017 and December 31, 2016, the reserve for repurchased loans and loss sharing obligations amounted to $463,000 and $846,000, respectively.
The following table shows the contractual obligations of the Company by expected payment period as of September 30, 2017 (in thousands):
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.
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.

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.loans. 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, 2017 December 31, 2016
 (dollars in thousands)
Non-performing loans:   
Commercial and industrial$63
 $441
Commercial real estate – owner occupied923
 2,414
Commercial real estate – investor8,720
 521
Residential mortgage3,551
 8,126
Home equity loans and lines1,864
 2,064
Total non-performing loans15,121
 13,566
Other real estate owned9,334
 9,803
Total non-performing assets$24,455
 $23,369
Purchased credit impaired loans (“PCI”)$4,867
 $7,575
Delinquent loans 30-89 days$24,548
 $22,598
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
Non-performing assets as a percent of total assets0.45
 0.45

June 30,December 31,
20232022
 (dollars in thousands)
Non-performing loans:
Commercial real estate – investor$13,000 $10,483 
Commercial real estate – owner occupied565 4,025 
Commercial and industrial199 331 
Residential real estate6,174 5,969 
Other consumer2,820 2,457 
Total non-performing loans and assets$22,758 $23,265 
PCD loans, net of allowance for loan credit losses
$18,872 $27,129 
Delinquent loans 30-89 days$3,136 $14,148 
Allowance for loan credit losses as a percent of total loans0.61 %0.57 %
Allowance for loan credit losses as a percent of total non-performing loans
271.51 244.25 
Non-performing loans as a percent of total loans receivable0.23 0.23 
Non-performing assets as a percent of total assets0.17 0.18 
The Company’s non-performing loans totaled $15.1$22.8 million at SeptemberJune 30, 2017,2023, as compared to $13.6$23.3 million at December 31, 2016.2022. At June 30, 2023, total non-performing loans included $718,000 of modified loans to borrowers experiencing financial difficulty and $6.2 million of troubled debt restructuring (“TDR”) loans that existed prior to adoption of Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023. At December 31, 2022, total non-performing loans included $6.4 million of TDR loans. Included in the non-performing loans total was $270,000$3.2 million and $3.5$3.9 million of troubled debt restructured (“TDR”)PCD loans at SeptemberJune 30, 20172023 and December 31, 2016,2022, 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 million of PCI loans acquired in the Acquisition Transactions. At SeptemberJune 30, 2017,2023, the allowance for loan credit losses totaled $16.6$61.8 million, or 0.42%0.61% of total loans, as compared to $15.2$56.8 million, or 0.40%0.57% of total loans, at December 31, 2016.2022. These ratios exclude existing fair valuenet unamortized credit and PCD marks on acquired loans of $19.8$9.8 million and $26.0$11.4 million respectively, at SeptemberJune 30, 20172023 and December 31, 2016. These loans were acquired at fair value with no related allowances for loan losses. Other real estate owned includes $7.0 million relating to the hotel, golf and banquet facility located in New Jersey which the Company acquired in the fourth quarter of 2015.2022, respectively. 


The Company classifies loans and other assets in accordance with regulatory guidelines as followsguidelines. The table below excludes any loans held-for-sale and represents Special Mention and Substandard assets (in thousands):
June 30,December 31,
20232022
Special Mention$30,859 $48,214 
Substandard88,152 50,776 
The change in special mention and substandard loans was due to a migration of certain loans from special mention to substandard risk rating, which primarily consisted of two CRE-Investor Owned relationships totaling $24.3 million. The remaining increase in substandard loans was primarily due to one CRE-Investor Owned relationship for $7.0 million, which was downgraded to substandard during the six months ended June 30, 2023.
16
 September 30, 2017 December 31, 2016
Special Mention$25,778
 $15,692
Substandard58,939
 70,543

Table of Contents
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, 20162022 (the “2016“2022 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 estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for loancredit losses and judgments regarding securities and goodwill impairment are the mostis a critical accounting policiespolicy and estimate because they are importantof its importance to the presentation of the Company’s financial condition and results of operations. These judgments and policies involveThe critical accounting policy involves a higher degree of complexity and requirerequires 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 evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances

indicate potential impairment between annual measurement dates. TheseThe critical accounting policiespolicy and theirits application areis reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors.


Impact of New Accounting Pronouncements

Accounting Pronouncements Adopted in 2023

In March 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-01 “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method”, which made targeted improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity’s risk management activities in its financial statements. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2022. Early adoption is permitted for any entity that has adopted the amendments in ASU 2017-12 for the corresponding period. The adoption of this standard did not have an impact on the Company’s consolidated financial statements, as the Company currently does not have any fair value hedges.
In March 2022, FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures”. The amendments in this ASU were issued to (1) eliminate accounting guidance for TDRs by creditors, while enhancing disclosure requirements for loan refinancings and restructurings when a borrower is experiencing financial difficulty; (2) require disclosures of current period gross write-offs by year of origination for financing receivables and net investments in leases. For entities that have adopted the amendments in ASU 2016-13, Measurement of Credit Losses on Financial Instruments, this update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2022. Early adoption is permitted. The amendments in this ASU should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, where there is an option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company adopted this guidance prospectively, and the adoption of this standard did not have an impact on the Company’s consolidated financial statements.
In December 2022, FASB issued ASU 2022-06, “Deferral of the Sunset Date of Topic 848”, which was effective upon issuance. The amendments in this ASU defer the sunset date of Topic 848 (Reference Rate Reform) from December 31, 2022 to December 31, 2024. Topic 848, originally issued in 2020 and later amended in 2021, provides optional accounting expedients and exceptions for certain loan agreements, derivatives and other transactions affected by the transition away from London Inter-Bank Offered Rate (“LIBOR”) towards alternative reference rates. As of December 31, 2021, the Company adopted certain of these practical expedients in Topic 848 and will continue to apply prospectively until December 31, 2024. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Transition from LIBOR
As of December 31, 2021, the Company ceased issuing LIBOR-based products and transitioned to Alternative Rates. For the tenors of U.S. dollar LIBOR utilized by the Company, the administrator of LIBOR extended publication until June 30, 2023. As of June 30, 2023, the Company has transitioned substantially all of its previously existing LIBOR-based products that were not expected to mature or settle prior to the cessation date. Contract language for all remaining LIBOR-based loans, securities, and borrowings has been reviewed and updated as necessary to automatically convert to an Alternative Rate at their next rate reset date with no action required.

17
Table of Contents

Recent Accounting Pronouncements Not Yet Adopted
In June 2022, FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, this update introduces new disclosure requirements to provide information about the contractual sales restriction including the nature and remaining duration of the restriction. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023. Early adoption is permitted. The Company does not expect this standard to have a material impact to the consolidated financial statements.
In March 2023, FASB issued ASU 2023-02, “Investments - Equity Method and Joint Venture (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method”. The amendments in this ASU permit reporting entities to account for the tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
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,” 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,to: changes in interest rates, inflation, general economic conditions, potential recessionary conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters, andpotential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, 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,FRB, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, changes in liquidity, including the size and composition of the Company’s deposit portfolio, including the percentage of uninsured deposits in the portfolio, competition, demand for financial services in the Company’s market area, changes in consumer spending, borrowing and savings habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the impact of the COVID-19 pandemic or any other pandemic on our operations and guidelinesfinancial results and those of our customers and the Bank’s ability to successfully integrate acquired operations.
These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162022, under Item 1A - Risk Factors and elsewhere, 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
18
Table 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.Contents


Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Management of Interest Rate Risk (“IRR”)
Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from the IRR inherent in its lending, investment, deposit-taking, and funding activities. The Company’s profitability is affected by fluctuations in interest rates. Changes in interest rates may negatively or positively impact the Company’s earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. Changes in interest rates may also negatively or positively impact the market value of the Company’s investment securities, in particular fixed-rate instruments. Net gains or losses in available-for-sale securities can increase or decrease accumulated other comprehensive income or loss and total stockholders’ equity. To that end, management actively monitors and manages IRR. The extent of the movement of interest rates, higher or lower, is an uncertainty that could have a substantial impact on the earnings and stockholders’ equity of the Company.
The principal objectives of the IRR management function are to: evaluate the IRR inherent in the Company’s business; determine the level of risk appropriate given the Company’s business focus, operating environment, capital, and liquidity requirements and performance objectives; and manage the risk consistent with Board approved guidelines. The Company’s Board has established an Asset Liability Committee (“ALCO”) consisting of members of management, responsible for reviewing asset liability policies and the IRR position. ALCO meets regularly and reports the Company’s IRR position and trends to the Board on a regular basis.
The Company utilizes a number of strategies to manage IRR including, but not limited to: (1) managing the origination, purchase, sale, and retention of various types of loans with differing IRR profiles; (2) attempting to reduce the overall interest rate sensitivity of liabilities by emphasizing core and longer-term deposits; (3) selectively purchasing interest rate swaps and caps converting the rates for customer loans to manage individual loans and the Bank’s overall IRR profile; (4) managing the investment portfolio IRR profile; (5) managing the maturities and rate structures of borrowings; and (6) purchasing interest rate swaps to manage overall balance sheet interest rate risk.
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive.” Interest rate sensitivity is monitored through the use of an interest rate risk (“IRR”) model. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at September 30, 2017,IRR model, 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, the Company’s one-year gap was negative 4.38% as compared to negative 3.47% at December 31, 2016. These results were within the approved policy guidelines.
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%
(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 bymeasures the change in the institution’s economic value of equity (“EVE”) and net interest income under varyingvarious interest rate shocksscenarios. EVE is the difference between the net present value of assets, liabilities and off-balance-sheet contracts. The EVE ratio, in any interest rate scenario, is defined as the EVE in that scenario divided by the fair value of assets in the same scenario. Interest rate sensitivity is monitored by management through the use of a model which measures IRR by modeling the change in EVE and net interest income over a range of interest rate scenarios. Modeled assets and liabilities are assumed to reprice at respective repricing or maturity dates. Pricing caps and floors are included in the results, where applicable. The Company uses prepayment expectations set forth by market sources as well as Company generated data where applicable. Generally, cash flows from loans and securities are assumed to be reinvested to maintain a static balance sheet. Other assumptions about balance sheet mix are generally held constant. The Company’s interest rate sensitivity should be reviewed in conjunction with the financial statements and notes thereto contained in the 2022 Form 10-K.
The Company performs a variety of EVE and twelve-month net interest income sensitivity scenarios. The following table sets forth sensitivity scenarios for a specific range of interest rate scenarios as of SeptemberJune 30, 20172023 and December 31, 2016. All methods2022 (dollars in thousands).
 June 30, 2023December 31, 2022
Change in Interest Rates in Basis Points (Rate Shock)Economic Value of EquityNet Interest IncomeEconomic Value of EquityNet Interest Income
Amount% ChangeEVE RatioAmount% ChangeAmount% ChangeEVE RatioAmount% Change
(dollars in thousands)          
200$1,023,376 (12.9)%8.8 %$391,374 3.5 %$1,574,239 (8.5)%13.7 %$440,916 1.2 %
1001,090,156 (7.2)9.2 384,774 1.7 1,646,301 (4.3)13.9 438,280 0.6 
Static1,174,533 — 9.6 378,181 — 1,719,619 — 14.1 435,492 — 
(100)1,279,641 8.9 10.1 366,624 (3.1)1,762,678 2.5 14.0 428,519 (1.6)
(200)1,399,997 19.2 10.7 351,948 (6.9)1,740,837 1.2 13.5 412,038 (5.4)
The net interest income sensitivity results indicate that at both June 30, 2023 and December 31, 2022 the Company was modestly asset sensitive. The change in sensitivity between these periods was impacted by floating rate loan growth and an increase in longer-term fixed-rate funding, partially offset by the deposit mix shift into short-term time deposits.
19

Overall, the measure of EVE at risk increased in all rising rate scenarios from December 31, 2022 to June 30, 2023. This increase is the result of rising market rates resulting in lower market values in the loan portfolio, along with the impact of an increase in deposit costs and a shift from lower cost, long-term non-maturity deposits to higher cost time deposits.
Certain shortcomings are inherent in the methodology used to measurein the EVE and net interest rate sensitivity involveincome IRR measurements. The model requires the usemaking of certain assumptions which may tend to oversimplify the manner in which actual yields and costs respond to changes in market interest rates. TheFirst, the model assumes that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured. Second, the model assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Third, the model does not take into account the Company’s business or strategic plans or any steps it may take to respond to changes in rates. Fourth, prepayment, rate sensitivity, should be reviewedand average life assumptions can have a significant impact on the IRR model results. Lastly, the model utilizes data derived from historical performance. Accordingly, although the above measurements provide an indication of the Company’s IRR exposure at a particular point in conjunction withtime, such measurements are not intended to provide a precise forecast of the financial statements and notes thereto containedeffect of changes in market interest rates, given the 2016 Form 10-K.
 September 30, 2017 December 31, 2016
Change in Interest Rates in Basis Points (Rate Shock)Economic Value of Equity Net Interest Income Economic Value of Equity Net Interest Income
Amount % Change EVE Ratio Amount % Change Amount % Change EVE Ratio Amount % Change
(dollars in thousands)                   
300$778,489
 (0.4)% 15.4% $155,106
 (9.2)% $664,767
 (1.1)% 14.1% $156,689
 (1.0)%
200797,951
 2.0
 15.4
 161,134
 (5.7) 678,347
 1.0
 14.0
 158,078
 (0.1)
100799,982
 2.3
 15.1
 166,414
 (2.6) 683,492
 1.7
 13.7
 158,840
 0.3
Static781,958
 —
 14.4
 170,833
 —
 671,878
 —
 13.2
 158,309
 —
(100)733,571
 (6.2) 13.2
 164,993
 (3.4) 620,675
 (7.6) 11.9
 152,007
 (4.0)
The increasedunique nature of the post-pandemic interest rate sensitivity ofenvironment and the speed with which interest rates have been changing, the projections noted above on the Company’s EVE and net interest income in a rising interest rate environment at September 30, 2017, as comparedand can be expected to December 31, 2016, is primarily 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.significantly differ from actual results.


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”) (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 SeptemberJune 30, 20172023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.



20
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
June 30,December 31,
20232022
 (Unaudited) 
Assets
Cash and due from banks$457,747 $167,946 
Debt securities available-for-sale, at estimated fair value452,016 457,648 
Debt securities held-to-maturity, net of allowance for securities credit losses of $964 at June 30, 2023 and $1,128 at December 31, 2022 (estimated fair value of $1,109,756 at June 30, 2023 and $1,110,041 at December 31, 2022)1,222,507 1,221,138 
Equity investments96,452 102,037 
Restricted equity investments, at cost105,305 109,278 
Loans receivable, net of allowance for loan credit losses of $61,791 at June 30, 2023 and $56,824 at December 31, 202210,030,106 9,868,718 
Loans held-for-sale4,200 690 
Interest and dividends receivable47,933 44,704 
Premises and equipment, net124,139 126,705 
Bank owned life insurance263,836 261,603 
Assets held for sale3,608 2,719 
Goodwill506,146 506,146 
Core deposit intangible11,476 13,497 
Other assets213,432 221,067 
Total assets$13,538,903 $13,103,896 
Liabilities and Stockholders’ Equity
Deposits$10,158,337 $9,675,206 
Federal Home Loan Bank (“FHLB”) advances1,091,666 1,211,166 
Securities sold under agreements to repurchase with customers74,452 69,097 
Other borrowings195,925 195,403 
Advances by borrowers for taxes and insurance27,839 21,405 
Other liabilities364,401 346,155 
Total liabilities11,912,620 11,518,432 
Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both June 30, 2023 and December 31, 20221 1 
Common stock, $0.01 par value, 150,000,000 shares authorized, 62,155,942 and 61,877,686 shares issued at June 30, 2023 and December 31, 2022, respectively; and 59,420,859 and 59,144,128 shares outstanding at June 30, 2023 and December 31, 2022, respectively613 612 
Additional paid-in capital1,159,394 1,154,821 
Retained earnings569,867 540,507 
Accumulated other comprehensive loss(30,348)(35,982)
Less: Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")(4,986)(6,191)
Treasury stock, 2,735,083 shares at both June 30, 2023 and December 31, 2022(69,106)(69,106)
OceanFirst Financial Corp. stockholders’ equity1,625,435 1,584,662 
Non-controlling interest848 802 
Total stockholders’ equity1,626,283 1,585,464 
Total liabilities and stockholders’ equity$13,538,903 $13,103,896 
 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.

21
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(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 June 30,For the Six Months Ended June 30,
2017 2016 2017 2016 2023202220232022
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
Interest income:       Interest income:
Loans$43,329
 $34,607
 $127,679
 $86,163
Loans$129,104 $90,731 $250,824 $173,199 
Mortgage-backed securities2,738
 1,700
 8,189
 4,823
Investment securities and other1,963
 1,000
 5,055
 2,535
Debt securitiesDebt securities14,320 7,473 28,606 14,977 
Equity investments and otherEquity investments and other6,672 1,212 9,700 2,223 
Total interest income48,030
 37,307
 140,923
 93,521
Total interest income150,096 99,416 289,130 190,399 
Interest expense:       Interest expense:
Deposits3,126
 2,083
 8,821
 5,125
Deposits37,934 4,317 59,264 8,358 
Borrowed funds1,848
 1,289
 5,389
 3,888
Borrowed funds20,053 4,302 38,955 7,017 
Total interest expense4,974
 3,372
 14,210
 9,013
Total interest expense57,987 8,619 98,219 15,375 
Net interest income43,056
 33,935
 126,713
 84,508
Net interest income92,109 90,797 190,911 175,024 
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
Provision for credit lossesProvision for credit losses1,229 1,254 4,242 3,105 
Net interest income after provision for credit lossesNet interest income after provision for credit losses90,880 89,543 186,669 171,919 
Other income:       Other income:
Bankcard services revenue1,785
 1,347
 5,202
 3,409
Bankcard services revenue1,544 3,310 2,874 6,273 
Wealth management revenue541
 608
 1,622
 1,779
Trust and asset management revenueTrust and asset management revenue645 658 1,257 1,267 
Fees and service charges3,702
 2,916
 11,163
 7,235
Fees and service charges5,602 7,646 10,761 10,706 
Net gain (loss) from other real estate operations432
 (63) (196) (782)
Income from Bank Owned Life Insurance881
 659
 2,436
 1,520
Net gain on sales of loansNet gain on sales of loans33 3 53 180 
Net loss on equity investmentsNet loss on equity investments(559)(8,078)(7,360)(10,864)
Net gain from other real estate operationsNet gain from other real estate operations— 50 — 48 
Income from bank owned life insuranceIncome from bank owned life insurance1,182 1,422 2,463 3,525 
Commercial loan swap incomeCommercial loan swap income— 2,294 701 5,075 
Other18
 429
 97
 994
Other481 236 252 183 
Total other income7,359
 5,896
 20,324
 14,155
Total other income8,928 7,541 11,001 16,393 
Operating expenses:       Operating expenses:
Compensation and employee benefits14,673
 13,558
 46,138
 33,456
Compensation and employee benefits34,222 33,153 68,142 63,848 
Occupancy2,556
 2,315
 7,965
 5,952
Occupancy5,265 4,758 10,504 10,502 
Equipment1,605
 1,452
 5,006
 3,605
Equipment1,101 1,336 2,306 2,706 
Marketing775
 479
 2,245
 1,273
Marketing961 971 1,943 1,587 
Federal deposit insurance713
 743
 2,079
 1,995
Federal deposit insurance and regulatory assessmentsFederal deposit insurance and regulatory assessments2,465 1,788 4,214 3,678 
Data processing2,367
 2,140
 6,809
 5,286
Data processing6,165 6,170 12,319 11,906 
Check card processing871
 623
 2,640
 1,548
Check card processing1,214 1,515 2,495 2,497 
Professional fees846
 681
 2,901
 1,879
Professional fees5,083 2,472 10,181 5,794 
Amortization of core deposit intangibleAmortization of core deposit intangible994 1,178 2,021 2,388 
Branch consolidation expense, netBranch consolidation expense, net— 546 70 948 
Merger related expensesMerger related expenses— 196 22 2,161 
Other operating expense2,667
 1,543
 8,258
 5,036
Other operating expense5,460 4,578 10,022 8,141 
Federal Home Loan Bank prepayment fee—
 —
 —
 136
Amortization of core deposit intangible507
 181
 1,544
 319
Branch consolidation expenses1,455
 —
 6,939
 —
Merger related expenses1,698
 1,311
 6,300
 9,902
Total operating expenses30,733
 25,026
 98,824
 70,387
Total operating expenses62,930 58,661 124,239 116,156 
Income before provision for income taxes18,517
 13,917
 45,183
 26,163
Income before provision for income taxes36,878 38,423 73,431 72,156 
Provision for income taxes5,700
 4,789
 12,669
 9,169
Provision for income taxes8,996 8,940 17,650 16,914 
Net income$12,817
 $9,128
 $32,514
 $16,994
Net income27,882 29,483 55,781 55,242 
Net income attributable to non-controlling interestNet income attributable to non-controlling interest85 522 101 522 
Net income attributable to OceanFirst Financial Corp.Net income attributable to OceanFirst Financial Corp.27,797 28,961 55,680 54,720 
Dividends on preferred sharesDividends on preferred shares1,004 1,004 2,008 2,008 
Net income available to common stockholdersNet income available to common stockholders$26,793 $27,957 $53,672 $52,712 
Basic earnings per share$0.40
 $0.36
 $1.01
 $0.79
Basic earnings per share$0.45 $0.48 $0.91 $0.90 
Diluted earnings per share$0.39
 $0.35
 $0.98
 $0.77
Diluted earnings per share$0.45 $0.47 $0.91 $0.89 
Average basic shares outstanding32,184
 25,435
 32,073
 21,624
Average basic shares outstanding59,147 58,894 58,988 58,823 
Average diluted shares outstanding33,106
 25,889
 33,110
 21,990
Average diluted shares outstanding59,153 58,995 59,038 58,975 
See accompanying Notes to Unaudited Consolidated Financial Statements.

22
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(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 June 30,For the Six Months Ended June 30,
 2023202220232022
 (Unaudited)(Unaudited)
Net income$27,882 $29,483 $55,781 $55,242 
Other comprehensive (loss) income:
Net unrealized gain (loss) on debt securities (net of tax expense of $92 and $1,858 in 2023 and tax benefit of $4,460 and $8,388 in 2022, respectively)282 (13,996)5,829 (26,368)
Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $54 and $110 in 2023 and tax expense of $61 and $126 in 2022, respectively)82 89 161 178 
Unrealized loss on derivative hedges (net of tax benefit of $506 and $375 in 2023)(1,588)— (1,176)— 
Reclassification adjustment for losses (gains) included in net income (net of tax expense of $61 and $262 in 2023 and benefit of $5 and $26 in 2022, respectively)191 (16)820 (82)
Total other comprehensive (loss) income, net of tax(1,033)(13,923)5,634 (26,272)
Total comprehensive income26,849 15,560 61,415 28,970 
Less: comprehensive income attributable to non-controlling interest85 522 101 522 
Comprehensive income attributable to OceanFirst Financial Corp.26,764 15,038 61,314 28,448 
Less: Dividends on preferred shares1,004 1,004 2,008 2,008 
Total comprehensive income available to common stockholders$25,760 $14,034 $59,306 $26,440 
See accompanying Notes to Unaudited Consolidated Financial Statements.

23

OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the NineThree Months Ended SeptemberJune 30, 20172023 and 20162022
Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Employee
Stock
Ownership
Plan		Treasury
Stock		Non-Controlling InterestTotal
Balance at March 31, 2022$1 $612 $1,149,503 $456,251 $(15,170)$(8,009)$(63,854)$— $1,519,334 
Net income— — — 28,961 — — — 522 29,483 
Other comprehensive loss, net of tax— — — — (13,923)— — — (13,923)
Stock compensation— — 1,848 — — — — — 1,848 
Allocation of ESOP stock— — (30)— — 606 — — 576 
Cash dividend $0.17 per share— — — (10,022)— — — — (10,022)
Exercise of stock options— — 42 (80)— — — — (38)
Repurchase 272,779 shares of common stock— — — — — — (5,252)— (5,252)
Preferred stock dividend— — — (1,004)— — — — (1,004)
Acquisition of Trident Abstract Title Agency, LLC (“Trident”)— — — — — — — 836 836 
Distributions to non-controlling interest— — — 8 — — — (414)(406)
Balance at June 30, 2022$1 $612 $1,151,363 $474,114 $(29,093)$(7,403)$(69,106)$944 $1,521,432 
Balance at March 31, 2023$1 $613 $1,158,007 $554,941 $(29,315)$(5,588)$(69,106)$818 $1,610,371 
Net income— — — 27,797 — — — 85 27,882 
Other comprehensive loss, net of tax— — — — (1,033)— — — (1,033)
Stock compensation— — 1,508 — — — — — 1,508 
Allocation of ESOP stock— — (136)— — 602 — — 466 
Cash dividend $0.20 per share— — — (11,837)— — — — (11,837)
Exercise of stock options— — 15 (30)— — — — (15)
Preferred stock dividend— — — (1,004)— — — — (1,004)
Distributions to non-controlling interest— — — — — — — (55)(55)
Balance at June 30, 2023$1 $613 $1,159,394 $569,867 $(30,348)$(4,986)$(69,106)$848 $1,626,283 
















24
 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
OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the Six Months Ended June 30, 2023 and 2022
Preferred
Stock		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Employee
Stock
Ownership
Plan		Treasury
Stock		Non-Controlling InterestTotal
Balance at December 31, 2021$1 $611 $1,146,781 $442,306 $(2,821)$(8,615)$(61,710)$— $1,516,553 
Net income— — — 54,720 — — — 522 55,242 
Other comprehensive loss, net of tax— — — — (26,272)— — — (26,272)
Stock compensation— — 3,400 — — — — — 3,400 
Allocation of ESOP stock— — 35 — — 1,212 — — 1,247 
Cash dividend $0.34 per share— — — (20,015)— — — — (20,015)
Exercise of stock options— 1 1,147 (897)— — — — 251 
Repurchase 373,223 shares of common stock— — — — — — (7,396)— (7,396)
Preferred stock dividend— — — (2,008)— — — — (2,008)
Acquisition of Trident— — — — — — — 836 836 
Distributions to non-controlling interest— — — 8 — — — (414)(406)
Balance at June 30, 2022$1 $612 $1,151,363 $474,114 $(29,093)$(7,403)$(69,106)$944 $1,521,432 
Balance at December 31, 2022$1 $612 $1,154,821 $540,507 $(35,982)$(6,191)$(69,106)$802 $1,585,464 
Net income— — — 55,680 — — — 101 55,781 
Other comprehensive income, net of tax— — — — 5,634 — — — 5,634 
Stock compensation— — 3,336 — — — — — 3,336 
Allocation of ESOP stock— — (75)— — 1,205 — — 1,130 
Cash dividend $0.40 per share— — — (23,592)— — — — (23,592)
Exercise of stock options— 1 1,312 (720)— — — — 593 
Preferred stock dividend— — — (2,008)— — — — (2,008)
Distributions to non-controlling interest— — — — — — — (55)(55)
Balance at June 30, 2023$1 $613 $1,159,394 $569,867 $(30,348)$(4,986)$(69,106)$848 $1,626,283 

See accompanying Notes to Unaudited Consolidated Financial Statements.

25
OceanFirst Financial Corp.
Consolidated Statements of Cash Flows
(dollars in thousands)
 For the Six Months Ended June 30,
 20232022
 (Unaudited)
Cash flows from operating activities:
Net income$55,781 $55,242 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment6,082 5,627 
Allocation of ESOP stock1,130 1,247 
Stock compensation3,336 3,400 
Net excess tax expense on stock compensation244 217 
Amortization of servicing asset20 12 
Net premium amortization in excess of discount accretion on securities2,012 3,714 
Net amortization of deferred costs on borrowings297 276 
Amortization of core deposit intangible2,021 2,388 
Net accretion of purchase accounting adjustments(2,448)(5,384)
Net amortization of deferred fees/costs and premiums/discounts on loans(818)414 
Provision for credit losses4,242 3,105 
Net gain on sale of other real estate owned— (54)
Net write down of fixed assets held-for-sale to net realizable value459 1,403 
Net gain on sale of fixed assets(26)(63)
Net loss on sales of available-for-sale securities697 — 
Net loss on equity investments7,360 10,864 
Net gain on sales of loans(53)(180)
Proceeds from sales of residential loans held for sale22,578 727 
Residential loans originated for sale(26,035)(703)
Increase in value of bank owned life insurance(2,463)(3,525)
Net loss (gain) on sale of assets held for sale44 (1,394)
Increase in interest and dividends receivable(3,229)(1,578)
Deferred tax benefit(33)(47)
Decrease (increase) in other assets6,424 (55,494)
Increase in other liabilities18,640 106,082 
Total adjustments40,481 71,054 
Net cash provided by operating activities96,262 126,296 
Cash flows from investing activities:
Net increase in loans receivable(163,714)(646,428)
Proceeds from sale of loans— 12,167 
Purchase of residential loan pool— (161,701)
Premiums paid on purchased loan pool— (495)
Purchase of debt securities available-for-sale(4,287)(63,568)
Purchase of debt securities held-to-maturity(63,661)(25,204)
Purchase of equity investments(7,175)(3,298)
Proceeds from maturities and calls of debt securities available-for-sale15,800 63,750 
Proceeds from maturities and calls of debt securities held-to-maturity11,465 17,700 
Proceeds from sales of debt securities available-for-sale1,300 25,257 
Proceeds from sale of equity investments4,822 17,734 
Principal repayments on debt securities held-to-maturity51,012 77,510 
Proceeds from bank owned life insurance230 2,502 
Proceeds from the redemption of restricted equity investments105,427 109,543 
Purchases of restricted equity investments(101,449)(132,395)
Proceeds from sale of other real estate owned— 160 
Proceeds from sales of assets held-for-sale328 6,100 
Purchases of premises and equipment(4,717)(11,745)
Net cash consideration received for acquisition— 38,609 
Net cash used in investing activities(154,619)(673,802)
26
 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

Continued
OceanFirst Financial Corp.
Consolidated Statements of Cash Flows (Continued)
(dollars in thousands)
 For the Six Months Ended June 30,
 20232022
 (Unaudited)
Cash flows from financing activities:
Increase in deposits$483,289 $99,068 
Increase (decrease) in short-term borrowings5,303 (13,274)
Net proceeds from FHLB advances(119,500)488,750 
Repayments of other borrowings— (35,052)
Increase in advances by borrowers for taxes and insurance6,434 3,335 
Exercise of stock options593 251 
Payment of employee taxes withheld from stock awards and phantom stock units(2,346)(1,472)
Purchase of treasury stock— (7,396)
Dividends paid(25,600)(22,023)
Distributions to non-controlling interest(55)(406)
Net cash provided by financing activities348,118 511,781 
Net increase (decrease) in cash and due from banks and restricted cash289,761 (35,725)
Cash and due from banks and restricted cash at beginning of period167,986 224,784 
Cash and due from banks and restricted cash at end of period$457,747 $189,059 
Supplemental Disclosure of Cash Flow Information:
Cash and due from banks at beginning of period$167,946 $204,949 
Restricted cash at beginning of period40 19,835 
Cash and due from banks and restricted cash at beginning of period$167,986 $224,784 
Cash and due from banks at end of period$457,747 $189,019 
Restricted cash at end of period— 40 
Cash and due from banks and restricted cash at end of period$457,747 $189,059 
Cash paid during the period for:
Interest$86,290 $15,059 
Income taxes20,076 3,633 
Non-cash activities:
Accretion of unrealized loss on securities reclassified to held-to-maturity272 304 
Net loan charge-offs (recoveries)123 (83)
Transfer of loans receivable to loans held-for-sale— 12,011 
Transfer of premises and equipment to assets held-for-sale1,302 2,776 
Acquisition:
Non-cash assets acquired:
Other current assets$— $238 
Premises and equipment— 18 
Right of use (“ROU”) asset— 779 
Other assets— 81 
Total non-cash assets acquired$— $1,116 
Liabilities assumed:
Lease liability$— $779 
Other liabilities— 43,937 
Total liabilities assumed$— $44,716 
 Nine Months Ended September 30,
 2017 2016
 (Unaudited)
Cash flows from financing activities:   
Increase in deposits$163,182
 $143,104
Increase (decrease) in short-term borrowings5,391
 (175,821)
Proceeds from Federal Home Loan Bank advances10,000
 55,000
Repayments of Federal Home Loan Bank advances(1,438) (73,678)
Net proceeds from issuance of subordinated notes—
 33,899
Repayments of other borrowings—
 (10,000)
Increase in advances by borrowers for taxes and insurance341
 237
Exercise of stock options3,192
 2,648
Payment of employee taxes withheld from stock awards(1,406) (244)
Dividends paid(14,439) (8,789)
Net cash provided by (used in) financing activities164,823
 (33,644)
Net (decrease) increase in cash and due from banks(46,115) 267,637
Cash and due from banks at beginning of period301,373
 43,946
Cash and due from banks at end of period$255,258
 $311,583
Supplemental Disclosure of Cash Flow Information:   
Cash paid during the period for:   
Interest$14,333
 $8,932
Income taxes8
 7,064
Non-cash activities:   
Accretion of unrealized loss on securities reclassified to held-to-maturity865
 1,054
Net loan charge-offs1,629
 1,949
Transfer of premises and equipment to assets held-for-sale5,078
 —
Transfer of loans receivable to other real estate owned3,389
 1,667
Acquisition:   
Non-cash assets acquired:   
Securities$—
 $212,156
Federal Home Loan Bank of New York stock—
 6,782
Loans—
 1,157,753
Premises & equipment—
 21,723
Other real estate owned—
 1,996
Deferred tax asset—
 21,664
Other assets—
 61,793
Goodwill and other intangible assets, net—
 68,179
Total non-cash assets acquired$—
 $1,552,046
Liabilities assumed:   
Deposits$—
 $1,248,367
Federal Home Loan Bank advances—
 124,466
Other liabilities—
 12,835
Total liabilities assumed$—
 $1,385,668


See accompanying Notes to Unaudited Consolidated Financial Statements.

27
21
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements





Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements includeinclude: the accounts of OceanFirst Financial Corp. (the “Company”) and; its wholly-owned subsidiaries, OceanFirst Risk Management, Inc. and OceanFirst Bank N.A. (the “Bank”), and the Bank’s subsidiaries.
On May 18, 2017,a new subsidiary of the Company was incorporated under the name OceanFirst Risk Management, Inc.; the Bank’s direct and indirect wholly-owned subsidiaries, OceanFirst RiskREIT Holdings, Inc., OceanFirst Management Inc. isCorp., OceanFirst Realty Corp., Casaba Real Estate Holdings Corporation, and Country Property Holdings, Inc; and a captive insurance subsidiary which insures various liabilitymajority controlling interest in Trident. Certain other subsidiaries were dissolved in 2022 and property damage policiesare included in the consolidated financial statements for the Companyprevious periods. All significant intercompany accounts and its related subsidiaries.transactions have been eliminated in consolidation.
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 ninesix months ended SeptemberJune 30, 20172023 are not necessarily indicative of the results of operations that may be expected for all of 2017.the full year 2023 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.periods presented. 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, 2016.2022.
Note 2. Business Combinations
Branch Acquisition
On March 11, 2016, the Company completed its acquisition of an existing retail branch in the Toms 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):
28
 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



22
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”), which after purchase accounting adjustments added $1.5 billion to assets, $1.2 billion to loans, and $1.2 billion to deposits. Total consideration paid for Cape was $196.4 million, including cash consideration of $30.5 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.

23
Table of Contents
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 Shore 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, 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
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 become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to the recorded carrying values may be required.
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 Cape and Ocean Shore acquisitions were as follows. Refer to Note 8, 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
Table of Contents
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.
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. 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, the Company reviewed the acquired loan portfolio for loans meeting the definition of an impaired loan with deteriorated credit quality. Loans meeting these 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, Cape operated eight properties subject to lease agreements, and Ocean Shore operated two 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 the acquisition. The core deposit premium value represents the future economic benefit, including the present value of future tax benefits, of the potential cost saving 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 million, and $7.5 million, for the branch, Cape, and Ocean Shore acquisitions, 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.

25
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements


Note 3.2. Earnings per Share
The following reconciles shares outstanding for basic and diluted earnings per share for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 2023202220232022
2017 2016 2017 2016
Weighted average shares issued net of Treasury shares32,545
 25,823
 32,456
 22,010
Weighted average shares outstandingWeighted average shares outstanding59,451 59,300 59,371 59,302 
Less: Unallocated ESOP shares(306) (340) (315) (348)Less: Unallocated ESOP shares(273)(393)(287)(408)
Unallocated incentive award shares and shares held by deferred compensation plan(55) (48) (68) (38)
Unallocated incentive award shares Unallocated incentive award shares(31)(13)(96)(71)
Average basic shares outstanding32,184
 25,435
 32,073
 21,624
Average basic shares outstanding59,147 58,894 58,988 58,823 
Add: Effect of dilutive securities:       Add: Effect of dilutive securities:
Stock options912
 434
 1,023
 347
Shares held by deferred compensation plan10
 20
 14
 19
Incentive awardsIncentive awards6 101 50 152 
Average diluted shares outstanding33,106
 25,889
 33,110
 21,990
Average diluted shares outstanding59,153 58,995 59,038 58,975 
For the three and six months ended SeptemberJune 30, 2017 and 2016,2023, antidilutive stock options of 476,0001,986,000 and 914,000,1,540,000, respectively, were excluded from the earnings per share calculations.calculation. For the ninethree and six months ended SeptemberJune 30, 2017 and 2016,2022, antidilutive stock options of 244,0001,577,000 and 1,132,000,1,573,000, respectively, were excluded from the earnings per share calculations.

calculation.
26
29
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Note 4.3. 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 SeptemberJune 30, 2017,2023 and December 31, 2016,2022 are as follows (in thousands):
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value		Allowance for Credit Losses
At June 30, 2023
Debt securities available-for-sale:
U.S. government and agency obligations$73,026 $— $(7,228)$65,798 $— 
Corporate debt securities10,077 — (1,141)8,936 — 
Asset-backed securities296,212 — (11,375)284,837 — 
Agency commercial mortgage-backed securities (“MBS”)110,073 — (17,628)92,445 — 
Total debt securities available-for-sale$489,388 $— $(37,372)$452,016 $— 
Debt securities held-to-maturity:
State and municipal debt obligations$249,515 $90 $(22,371)$227,234 $(52)
Corporate debt securities54,948 51 (5,349)49,650 (907)
Mortgage-backed securities:
Agency residential863,179 400 (84,246)779,333 — 
Agency commercial32,569 — (1,794)30,775 — 
Non-agency commercial25,286 — (2,522)22,764 (5)
Total mortgage-backed securities921,034 400 (88,562)832,872 (5)
Total debt securities held-to-maturity$1,225,497 $541 $(116,282)$1,109,756 $(964)
Total debt securities$1,714,885 $541 $(153,654)$1,561,772 $(964)
At December 31, 2022
Debt securities available-for-sale:
U.S. government and agency obligations$87,648 $1 $(7,635)$80,014 $— 
Corporate debt securities8,928 — (756)8,172 — 
Asset-backed securities296,222 — (19,349)276,873 — 
Agency commercial MBS110,606 — (18,017)92,589 — 
Total debt securities available-for-sale$503,404 $1 $(45,757)$457,648 $— 
Debt securities held-to-maturity:
State, municipal, and sovereign debt obligations$260,249 $46 $(24,940)$235,355 $(60)
Corporate debt securities56,893 380 (3,778)53,495 (1,059)
Mortgage-backed securities:
Agency residential849,985 795 (83,586)767,194 — 
Agency commercial32,127 23 (1,189)30,961 — 
Non-agency commercial25,310 — (2,274)23,036 (9)
Total mortgage-backed securities907,422 818 (87,049)821,191 (9)
Total debt securities held-to-maturity$1,224,564 $1,244 $(115,767)$1,110,041 $(1,128)
Total debt securities$1,727,968 $1,245 $(161,524)$1,567,689 $(1,128)
 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

There was no allowance for securities credit losses on debt securities available-for-sale at June 30, 2023 or December 31, 2022.
The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Allowance for securities credit losses
Beginning balance$(1,043)$(1,380)$(1,128)$(1,467)
Provision for credit loss benefit79 87 164 174 
Total ending allowance balance$(964)$(1,293)$(964)$(1,293)
30
 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


27
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



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. Credit ratings of BBB- or Baa3 or higher are considered investment grade. Where multiple ratings are available, the Company considers the lowest rating when determining the allowance for securities credit losses. Under this approach, the amortized cost of debt securities held-to-maturity at June 30, 2023, aggregated by credit quality indicator, are as follows (in thousands):
Investment GradeNon-Investment Grade/Non-ratedTotal
As of June 30, 2023
State and municipal debt obligations$249,515 $— $249,515 
Corporate debt securities40,408 14,540 54,948 
Non-agency commercial MBS25,286 — 25,286 
Total debt securities held-to-maturity$315,209 $14,540 $329,749 
During the third quarter2021 and 2013, the Bank transferred $12.7 million and $536.0 million, respectively, 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 $209,000 and $13.3 million at the time of transfer in 2021 and 2013, respectively, which continues to be reflected in accumulated other comprehensive loss on the consolidated balance sheet,Consolidated Statement of Financial Condition, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of thedebt securities held-to-maturity investment securities at SeptemberJune 30, 2017,2023 and December 31, 2016, are2022 is as follows (in thousands):
June 30,December 31,
September 30, 2017 December 31, 201620232022
Amortized cost$751,163
 $607,833
Amortized cost$1,225,497 $1,224,564 
Allowance for securities credit lossesAllowance for securities credit losses(964)(1,128)
Net loss on date of transfer from available-for-sale(13,347) (13,347)Net loss on date of transfer from available-for-sale(13,556)(13,556)
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-maturity11,530 11,258 
Carrying value$742,886
 $598,691
Carrying value$1,222,507 $1,221,138 
There were no realized gains orlosses and $697,000 of realized losses on the sale of debt securities available-for-sale for the three and ninesix months ended SeptemberJune 30, 2017. There were no realized gains or losses on the sale of securities2023, respectively, as compared to $21,000 and $108,000 for the three months ended September 30, 2016 and there were $75,000 in realized gains and $87,000 incorresponding prior year periods. These realized losses on debt securities are presented within Other under Total other income of the saleConsolidated Statements of available-for-sale securities for the nine months ended September 30, 2016.Income.
The amortized cost and estimated fair value of investmentdebt securities at SeptemberJune 30, 20172023 by contractual maturity are shown below (in thousands). :
June 30, 2023Amortized
Cost		Estimated
Fair Value
Less than one year$36,231 $35,786 
Due after one year through five years176,032 160,455 
Due after five years through ten years207,267 193,962 
Due after ten years264,248 246,252 
$683,778 $636,455 
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 SeptemberJune 30, 2017, investment2023, corporate debt securities, state and municipal obligations, and asset-backed securities with an amortized cost of $60.9$64.0 million, $82.3 million, and $296.2 million, respectively, and an estimated fair value of $57.5$57.6 million, $78.0 million, and $284.8 million, respectively, were callable prior to the maturity date.
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.

2831
Table of Contents
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 SeptemberJune 30, 20172023 and December 31, 2016,2022, 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 June 30, 2023
Debt securities available-for-sale:
U.S. government and agency obligations$2,334 $(25)$63,464 $(7,203)$65,798 $(7,228)
Corporate debt securities6,557 (520)2,379 (621)8,936 (1,141)
Asset-backed securities— — 284,837 (11,375)284,837 (11,375)
Agency commercial MBS— — 92,445 (17,628)92,445 (17,628)
Total debt securities available-for-sale8,891 (545)443,125 (36,827)452,016 (37,372)
Debt securities held-to-maturity:
State and municipal debt obligations29,552 (368)191,803 (22,003)221,355 (22,371)
Corporate debt securities5,532 (576)39,686 (4,773)45,218 (5,349)
MBS:
Agency residential227,401 (5,715)498,132 (78,531)725,533 (84,246)
Agency commercial28,478 (1,751)1,899 (43)30,377 (1,794)
Non-agency commercial— — 22,764 (2,522)22,764 (2,522)
Total MBS255,879 (7,466)522,795 (81,096)778,674 (88,562)
Total debt securities held-to-maturity290,963 (8,410)754,284 (107,872)1,045,247 (116,282)
Total debt securities$299,854 $(8,955)$1,197,409 $(144,699)$1,497,263 $(153,654)
At December 31, 2022
Debt securities available-for-sale:
U.S. government and agency obligations$27,232 $(450)$52,782 $(7,185)$80,014 $(7,635)
Corporate debt securities4,735 (193)3,437 (563)8,172 (756)
Asset-backed securities143,392 (9,179)133,481 (10,170)276,873 (19,349)
Agency commercial MBS8,782 (1,675)83,807 (16,342)92,589 (18,017)
Total debt securities available-for-sale184,141 (11,497)273,507 (34,260)457,648 (45,757)
Debt securities held-to-maturity:
State, municipal, and sovereign debt obligations133,492 (11,952)97,135 (12,988)230,627 (24,940)
Corporate debt securities11,783 (598)36,152 (3,180)47,935 (3,778)
MBS:
Agency residential297,296 (12,404)397,036 (71,182)694,332 (83,586)
Agency commercial25,936 (1,150)2,062 (39)27,998 (1,189)
Non-agency commercial16,839 (1,621)6,198 (653)23,037 (2,274)
Total MBS340,071 (15,175)405,296 (71,874)745,367 (87,049)
Total debt securities held-to-maturity485,346 (27,725)538,583 (88,042)1,023,929 (115,767)
Total debt securities$669,487 $(39,222)$812,090 $(122,302)$1,481,577 $(161,524)

 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
Table of Contents
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 these corporate debt securities were only temporarilynot impaired at SeptemberJune 30, 2017. In concluding that the impairments were only temporary, the Company considered2023 based on 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 doeschange in net unrealized losses were primarily due to changes in the general credit and interest rate environment and not have the intent to sell these corporate debt securities and it is more likely than not that the Company will not be required to sell the securities.credit quality. Historically, the Company has not utilized securities sales as a source of liquidity. Theliquidity and the Company’s long range liquidity plans indicateinclude 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”), or the Small Business Administration (“SBA”) corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+ by one of the internationally-recognized credit rating services. The Company considers the unrealized losses 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 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 temporarily impaired at September 30, 2017.

sales.
30
32
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)



Equity Investments
At June 30, 2023 and December 31, 2022, the Company held equity investments of $96.5 million and $102.0 million, respectively. The equity investments are primarily comprised of select financial services institutions’ preferred stocks, investments in funds and other financial institutions.
The realized and unrealized gains or losses on equity securities for the three and six months ended June 30, 2023 and 2022 are shown in the table below (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net loss on equity investments$(559)$(8,078)$(7,360)$(10,864)
Less: Net (losses) gains recognized on equity investments sold(854)(231)(5,462)1,351 
Unrealized gains (losses) recognized on equity investments still held$295 $(7,847)$(1,898)$(12,215)
33
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 5.4. Loans Receivable, Net
Loans receivable, net at SeptemberJune 30, 20172023 and December 31, 20162022 consisted of the following (in thousands):
 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 September 30, 2017 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


31
Table of Contents
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

32
Table of Contents
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 restructured (“TDR”) loans of $36.1 million, of which $35.8 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

34
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

35
Table of Contents
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):
June 30,December 31,
30-59
Days
Past Due
 
60-89
Days
Past Due
 
Greater
than
90 Days
Past Due
 
Total
Past Due
 
Loans Not
Past Due
 Total20232022
September 30, 2017           
Commercial:Commercial:
Commercial real estate – investorCommercial real estate – investor$5,319,686 $5,171,952 
Commercial real estate – owner occupiedCommercial real estate – owner occupied981,618 997,367 
Commercial and industrialCommercial and industrial620,284 622,372 
Total commercialTotal commercial6,921,588 6,791,691 
Consumer:Consumer:
Residential real estate$12,736
 $6,872
 $2,277
 $21,885
 $1,728,070
 $1,749,955
Residential real estate2,906,556 2,861,991 
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
Home equity loans and lines and other consumer (“other consumer”)Home equity loans and lines and other consumer (“other consumer”)255,486 264,372 
$20,561
 $4,687
 $10,917
 $36,165
 $3,785,721
 $3,821,886
Total consumerTotal consumer3,162,042 3,126,363 
Total loans receivableTotal loans receivable10,083,630 9,918,054 
Deferred origination costs, net of feesDeferred origination costs, net of fees8,267 7,488 
Allowance for loan credit lossesAllowance for loan credit losses(61,791)(56,824)
Total loans receivable, netTotal loans receivable, net$10,030,106 $9,868,718 
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. The Company evaluates risk ratings on an ongoing basis. 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. 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 collection or the liquidation of the debt. 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:
34
 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
Table of Contents
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):
202320222021202020192018 and priorRevolving lines of creditTotal
June 30, 2023
Commercial real estate - investor
Pass$116,385 $1,169,785 $1,304,903 $535,020 $502,580 $994,662 $616,235 $5,239,570 
Special Mention— — 2,460 188 63 17,502 1,388 21,601 
Substandard— — — 3,750 20,109 33,398 1,258 58,515 
Total commercial real estate - investor116,385 1,169,785 1,307,363 538,958 522,752 1,045,562 618,881 5,319,686 
Commercial real estate - owner occupied
Pass51,839 117,775 110,128 66,894 108,189 488,320 12,127 955,272 
Special Mention— — — — — 4,895 — 4,895 
Substandard— — — — 2,003 19,358 90 21,451 
Total commercial real estate - owner occupied51,839 117,775 110,128 66,894 110,192 512,573 12,217 981,618 
Commercial and industrial
Pass65,775 57,240 21,505 11,258 9,781 57,200 390,624 613,383 
Special Mention— — 10 — — 210 2,037 2,257 
Substandard— — 21 18 960 2,006 1,639 4,644 
Total commercial and industrial65,775 57,240 21,536 11,276 10,741 59,416 394,300 620,284 
Residential real estate (1)
Pass111,815 931,294 582,192 405,474 234,279 637,803 — 2,902,857 
Special Mention— 308 — 206 147 1,336 — 1,997 
Substandard62 56 — 258 487 839 — 1,702 
Total residential real estate111,877 931,658 582,192 405,938 234,913 639,978 — 2,906,556 
Other consumer (1)
Pass15,400 22,078 22,150 13,850 14,128 131,342 34,589 253,537 
Special Mention— — — — — 109 — 109 
Substandard— — — — 49 1,791 — 1,840 
Total other consumer15,400 22,078 22,150 13,850 14,177 133,242 34,589 255,486 
Total loans$361,276 $2,298,536 $2,043,369 $1,036,916 $892,775 $2,390,771 $1,059,987 $10,083,630 
(1)For residential real estate and other 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.


35
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

202220212020201920182017 and priorRevolving lines of creditTotal
December 31, 2022
Commercial real estate - investor
Pass$1,144,763 $1,339,289 $555,937 $524,428 $220,999 $881,344 $450,787 $5,117,547 
Special Mention— 2,508 192 17,094 — 12,818 2,188 34,800 
Substandard— — — 893 — 18,180 532 19,605 
Total commercial real estate - investor1,144,763 1,341,797 556,129 542,415 220,999 912,342 453,507 5,171,952 
Commercial real estate - owner occupied
Pass119,912 110,440 59,952 115,385 88,204 458,708 14,932 967,533 
Special Mention— — — — 748 5,679 — 6,427 
Substandard— — 3,750 2,037 4,817 12,803 — 23,407 
Total commercial real estate - owner occupied119,912 110,440 63,702 117,422 93,769 477,190 14,932 997,367 
Commercial and industrial
Pass60,078 23,724 14,072 17,175 10,992 47,370 443,211 616,622 
Special Mention— 7 — — — 250 1,680 1,937 
Substandard— 21 76 1,083 301 2,212 120 3,813 
Total commercial and industrial60,078 23,752 14,148 18,258 11,293 49,832 445,011 622,372 
Residential real estate (1)
Pass919,364 591,745 419,712 247,387 99,945 577,392 — 2,855,545 
Special Mention— 193 1,514 204 59 2,407 — 4,377 
Substandard— — — 656 286 1,127 — 2,069 
Total residential real estate919,364 591,938 421,226 248,247 100,290 580,926 — 2,861,991 
Other consumer (1)
Pass24,069 24,111 15,440 15,471 39,057 108,818 34,851 261,817 
Special Mention— — — 75 — 598 — 673 
Substandard— — — 157 18 1,707 — 1,882 
Total other consumer24,069 24,111 15,440 15,703 39,075 111,123 34,851 264,372 
Total loans$2,268,186 $2,092,038 $1,070,645 $942,045 $465,426 $2,131,413 $948,301 $9,918,054 
(1) For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.



36
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 six months ended June 30, 2023 and 2022 was as follows (in thousands):
 Commercial
Real Estate –
Investor		Commercial
Real Estate –
Owner
Occupied		Commercial
and 
Industrial		Residential
Real Estate		Other ConsumerTotal
For the three months ended June 30, 2023
Allowance for credit losses on loans
Balance at beginning of period$22,451 $4,116 $5,827 $26,928 $873 $60,195 
Provision (benefit) for credit losses2,029 223 239 (785)13 1,719 
Charge-offs (1)
— — (125)— (81)(206)
Recoveries1 3 4 9 66 83 
Balance at end of period$24,481 $4,342 $5,945 $26,152 $871 $61,791 
For the three months ended June 30, 2022
Allowance for credit losses on loans
Balance at beginning of period$23,637 $5,053 $4,649 $16,277 $982 $50,598 
(Benefit) provision for credit losses(1,080)(116)572 1,966 130 1,472 
Charge-offs— (14)— (56)(217)(287)
Recoveries51 98 19 9 101 278 
Balance at end of period$22,608 $5,021 $5,240 $18,196 $996 $52,061 
For the six months ended June 30, 2023
Allowance for credit losses on loans
Balance at beginning of period$21,070 $4,423 $5,695 $24,530 $1,106 $56,824 
Provision (benefit) for credit losses3,408 (81)370 1,605 (259)5,043 
Charge-offs (1)
— (6)(128)— (82)(216)
Recoveries3 6 8 17 106 140 
Balance at end of period$24,481 $4,342 $5,945 $26,152 $871 $61,791 
For the six months ended June 30, 2022
Allowance for credit losses on loans
Balance at beginning of period$25,504 $5,884 $5,039 $11,155 $1,268 $48,850 
(Benefit) provision for credit losses(2,947)(956)166 6,994 (129)3,128 
Charge-offs— (18)— (56)(356)(430)
Recoveries51 111 35 103 213 513 
Balance at end of period$22,608 $5,021 $5,240 $18,196 $996 $52,061 
(1) Gross charge-offs for the three and six months ended June 30, 2023 of $206,000 and $216,000, respectively, related to loans that were originated in and prior to 2018.
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 and, therefore, is classified as non-accruing. At June 30, 2023 and December 31, 2022, the Company had collateral dependent loans with an amortized cost balance as follows: commercial real estate - investor of $7.3 million and $4.6 million, respectively, commercial real estate - owner occupied of $565,000 and $4.0 million, respectively, and commercial and industrial of $199,000 and $160,000, 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 $1.6 million and $858,000 at June 30, 2023 and December 31, 2022, respectively. 
The following table presents the recorded investment in residential and consumernon-accrual loans, based on payment activityby loan portfolio segment as of SeptemberJune 30, 20172023 and December 31, 2016, excluding PCI loans2022 (in thousands):
June 30,December 31,
20232022
Commercial real estate – investor$13,000 $10,483 
Commercial real estate – owner occupied565 4,025 
Commercial and industrial199 331 
Residential real estate6,174 5,969 
Other consumer2,820 2,457 
$22,758 $23,265 
37
Table of Contents
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

 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 June 30, 2023 and December 31, 2022, 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 June 30, 2023, there were no loans that were past due 90 days or greater and still accruing interest. At December 31, 2022, there was one Paycheck Protection Program (“PPP”) loan for $14,000 that was past due 90 days or greater and still accrued interest, which subsequently became current. Per Small Business Administration (“SBA”) guidelines, the SBA will pay accrued interest through the deferral period up to a maximum of 120 days past due. Given these servicing guidelines, PPP loans that are 90 to 120 days past due will be reported as accruing loans.
The following table presents the aging of the recorded investment in past due loans as of June 30, 2023 and December 31, 2022 by loan portfolio segment (in thousands):
30-59
Days
Past Due		60-89
Days
Past Due		90 Days or Greater Past DueTotal
Past Due		Loans Not
Past Due		Total
June 30, 2023
Commercial real estate – investor$— $— $3,958 $3,958 $5,315,728 $5,319,686 
Commercial real estate – owner occupied95 41 — 136 981,482 981,618 
Commercial and industrial7 149 39 195 620,089 620,284 
Residential real estate— 1,997 1,702 3,699 2,902,857 2,906,556 
Other consumer738 109 1,840 2,687 252,799 255,486 
$840 $2,296 $7,539 $10,675 $10,072,955 $10,083,630 
December 31, 2022
Commercial real estate – investor$217 $875 $3,700 $4,792 $5,167,160 $5,171,952 
Commercial real estate – owner occupied143 80 3,750 3,973 993,394 997,367 
Commercial and industrial159 47 180 386 621,986 622,372 
Residential real estate7,003 4,377 2,069 13,449 2,848,542 2,861,991 
Other consumer573 673 1,882 3,128 261,244 264,372 
$8,095 $6,052 $11,581 $25,728 $9,892,326 $9,918,054 
The Company classifiesadopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023. Since adoption, the Company has modified certain loans to borrowers experiencing financial difficulty. These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay. At June 30, 2023, loans with modifications to borrowers experiencing financial difficulty totaled $898,000 related to term extensions, which included residential real estate of $658,000 and other consumer of $240,000.
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Of the $898,000 loans with modifications to borrowers experiencing financial difficulty, $755,000 were current and one residential loan of $143,000 had a payment default during the three and six months ended June 30, 2023.
Prior to the adoption of ASU 2022-02, the Company classified certain loans as troubled debt restructuringsrestructuring (“TDR”) loans when credit terms to a borrower in financial difficulty are modified. The modifications may include a reductionwere modified in rate, an extension in term,accordance with ASC 310-40. Since adoption of this ASU, the capitalizationCompany has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 remain until settled.
At June 30, 2023 and December 31, 2022, TDR loans totaled $13.5 million and $13.9 million, respectively. At June 30, 2023 and December 31, 2022, there were $6.2 million and $6.4 million, respectively, of past due amounts and/or the restructuring of scheduled principal payments. IncludedTDR loans included in the non-accrual loan total at Septembertotals. At June 30, 2017,2023 and December 31, 2016, were $270,000 and $3.5 million, respectively, of troubled debt restructurings. At September 30, 2017,2022, the Company had no$436,000 and $590,000, respectively, of specific reservesreserve allocated to loansone loan that arewas 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.a TDR loan. 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 TDR loans classified as accruing troubled debt restructuringsloans, which totaled $7.3 million and $7.5 million at SeptemberJune 30, 2017,2023 and December 31, 2016, which totaled $35.8 million and $27.0 million,2022, 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):
38
 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 ninesix months ended SeptemberJune 30, 2017 and 2016 (in2022 (dollars in thousands):
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Three months ended June 30, 2022
Troubled debt restructurings:NoneNoneNone
Six months ended June 30, 2022
Troubled debt restructurings:
Commercial and industrial1$65 $65 
Consumer3991 1,109 
There were no TDR loans that defaulted during the three and six months ended June 30, 2023 and 2022, which were modified within the preceding year.

39
 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 6.5. Deposits
The major types of deposits at SeptemberJune 30, 20172023 and December 31, 20162022 were as follows (in thousands):
Type of AccountType of AccountJune 30,December 31,
September 30, 2017 December 31, 201620232022
Non-interest-bearing$781,043
 $782,504
Non-interest-bearing$1,854,136 $2,101,308 
Interest-bearing checking1,892,832
 1,626,713
Interest-bearing checking3,537,834 3,829,683 
Money market deposit384,106
 458,911
Money market deposit770,440 714,386 
Savings668,370
 672,519
Savings1,229,897 1,487,809 
Time deposits623,908
 647,103
Time deposits2,766,030 1,542,020 
Total deposits$4,350,259
 $4,187,750
Total deposits$10,158,337 $9,675,206 
Included in time deposits at SeptemberJune 30, 20172023 and December 31, 2016, is $273.62022 was $310.6 million and $269.0$117.7 million, respectively, in deposits of $100,000$250,000 or more. Time deposits also include brokered deposits of $1.42 billion and over.$873.4 million at June 30, 2023 and December 31, 2022, respectively.

Note 6. Borrowed Funds
Borrowed funds at June 30, 2023 and December 31, 2022 were as follows (in thousands):
June 30,December 31,
20232022
FHLB advances$1,091,666 $1,211,166 
Securities sold under agreements to repurchase with customers74,452 69,097 
Other borrowings195,925 195,403 
Total borrowed funds$1,362,043 $1,475,666 
The Company had no FHLB overnight advances or borrowings from the Federal Reserve Bank (“FRB”) Discount Window or Bank Term Funding Program at June 30, 2023 and December 31, 2022.
Pledged assets
The following table presents the assets pledged to secure borrowings, borrowing capacity, repurchase agreements, letters of credit, and for other purposes required by law at carrying value (in thousands):
LoansDebt securitiesTotal
June 30, 2023
FHLB and FRB$7,147,408 $15,037 $7,162,445 
Repurchase agreements— 81,919 81,919 
Total pledged assets$7,147,408 $96,956 $7,244,364 
December 31, 2022
FHLB and FRB$6,487,980 $830,057 $7,318,037 
Repurchase agreements— 105,294 105,294 
Total pledged assets$6,487,980 $935,351 $7,423,331 

The securities pledged, which collateralize the repurchase agreements are delivered to the lender, with whom each transaction is executed, or to a third-party custodian. The lender, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agrees to resell to the Company substantially the same securities at the maturity of the repurchase agreements.
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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.
Other Real Estate OwnedEquity 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). Equity investments 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 (measurement alternative). Certain equity investments without readily
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

determinable fair values are measured at net asset value (“NAV”) per share as a practical expedient, which are excluded from the fair value hierarchy levels in the table below.
Interest Rate Derivatives
The Company’s interest rate swaps and Impaired Loanscap 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 loansLoans Individually Measured for Impairment
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 SeptemberJune 30, 20172023 and December 31, 2016,2022, 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
June 30, 2023
Items measured on a recurring basis:
Debt securities available-for-sale$452,016 $— $452,016 $— 
Equity investments49,469 — 49,470 — 
Interest rate derivative asset109,651 — 109,651 — 
Interest rate derivative liability(110,869)— (110,869)— 
Items measured on a non-recurring basis:
Equity investments (1) (2)
46,983 — — 43,576 
Loans measured for impairment based on the fair value of the underlying collateral (3)
9,613 — — 9,613 
December 31, 2022
Items measured on a recurring basis:
Debt securities available-for-sale$457,648 $— $457,648 $— 
Equity investments61,942 430 61,511 — 
Interest rate derivative asset113,420 — 113,420 — 
Interest rate derivative liability(113,473)— (113,473)— 
Items measured on a non-recurring basis:
Equity investments (1) (2)
40,095 — — 37,076 
Loans measured for impairment based on the fair value of the underlying collateral (3)
9,635 — — 9,635 
(1)    As of June 30, 2023 and December 31, 2022, primarily consists of $43.6 million and $37.1 million, respectively, of equity investments measured under the measurement alternative. This included no unrealized gains or losses for the six months ended June 30, 2023 as a result of observable price changes in the investment and $20.0 million of unrealized gains for the year ended December 31, 2022.
(2)    As of June 30, 2023 and December 31, 2022, equity investments of $47.0 million and $40.1 million, respectively, included $3.4 million and $3.0 million of certain equity investment funds measured at NAV per share (or its equivalent) as a practical expedient to fair value and these equity investments have not been classified in the fair value hierarchy levels.
(3) Primarily consists of commercial loans, which are collateral dependent. The amounts are based on independent appraisals, which may be adjusted by management for qualitative factors, such as economic factors and estimated liquidation expenses. The range may vary but is generally 0% to 8% on the discount for costs to sell and 0% to 10% on appraisal adjustments.

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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 the beginning and ending balances for equity investments 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 Six Months Ended June 30,
2022
Beginning balance$2,718 
Transfers out of Level 3(2,718)
Ending balance$— 
   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
The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods. There were no assets in Level 3 that were recognized at fair value on a recurring basis or transfers into or out of Level 3 for the three and six months ended June 30, 2023. During the six months ended June 30, 2022, the Company executed its right to convert $2.7 million of preferred stock into common stock, which resulted in a transfer from Level 3 into Level 1.

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-backeddebt 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 notes (“BANs”)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, Federal Reserve Bank stock, and Atlantic Community Bankers Bank 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 entities.
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, which is based on an exit price notion, was estimated by discounting the future cash flows, net of estimated prepayments, at amarket discount rates that reflect the credit and interest rate for which similar loans would be originated to new borrowers with similar terms. Fair values estimatedrisk inherent in this manner do not fully incorporate an exit price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.the loan.
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
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

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 FundsFHLB Advances and Other 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)


The book value and estimated fair value of the Bank’sCompany’s significant financial instruments not recorded at fair value as of SeptemberJune 30, 20172023 and December 31, 20162022 are presented in the following tables (in thousands):
  Fair Value Measurements at Reporting Date Using:
Book
Value		Level 1
Inputs		Level 2
Inputs		Level 3
Inputs
June 30, 2023
Financial Assets:
Cash and due from banks$457,747 $457,747 $— $— 
Debt securities held-to-maturity1,222,507 — 1,100,929 8,827 
Restricted equity investments105,305 — — 105,305 
Loans receivable, net and loans held-for-sale10,034,306 — — 8,895,899 
Financial Liabilities:
Deposits other than time deposits (1)
7,392,307 — 7,392,307 — 
Time deposits2,766,030 — 2,731,216 — 
FHLB advances and other borrowings1,287,591 — 1,277,187 — 
Securities sold under agreements to repurchase with customers74,452 74,452 — — 
December 31, 2022
Financial Assets:
Cash and due from banks$167,946 $167,946 $— $— 
Debt securities held-to-maturity1,221,138 — 1,097,984 12,057 
Restricted equity investments109,278 — — 109,278 
Loans receivable, net and loans held-for-sale9,869,408 — — 9,103,137 
Financial Liabilities:
Deposits other than time deposits (1)
8,133,186 — 8,133,186 — 
Time deposits1,542,020 — 1,504,601 — 
FHLB advances and other borrowings1,406,569 — 1,416,384 — 
Securities sold under agreements to repurchase with customers69,097 69,097 — — 
   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
 —
(1) The estimated fair value of non-maturity deposits does not consider any inherent value and represents amount payable on demand. However, non-maturity deposits do contain significant inherent value to the Company, particularly when overnight funding costs are greater than the deposit costs.
   Fair Value Measurements at Reporting Date Using:
December 31, 2016
Book
Value
 
Level 1
Inputs
 
Level 2
Inputs
 
Level 3
Inputs
Financial Assets:       
Cash and due from banks$301,373
 $301,373
 $—
 $—
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
Financial Liabilities:       
Deposits other than time deposits3,540,647
 —
 3,540,647
 —
Time deposits647,103
 —
 644,354
 —
Securities sold under agreements to repurchase with retail customers69,935
 69,935
 —
 —
Federal Home Loan Bank advances and other borrowings307,057
 —
 304,901
 —


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, current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs.
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

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 and Hedging Activities
The Company enters into derivative financial instruments which involve, to varying degrees, interest rate 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 derivative financial instruments to accommodate the business needs of its customers as well as to economically hedge the exposure that this creates for the Company. Additionally, the Company enters into certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The Company does not use derivative financial instruments for trading purposes.
Customer Derivatives – Interest Rate Swaps and Cap Contracts
Derivatives Not Designated as Hedging Instruments
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.
These interest rate swaps and cap contracts with both the customers and third parties are not designated as hedges under ASC Topic 815, Derivatives and Hedging, therefore changes in fair value are reported in 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 ASC Topic 820, Fair Value Measurements. The Company recognized gains of $22,000 and $0 in commercial loan swap income resulting from the fair value adjustment for the three and six months ended June 30, 2023, respectively, as compared to gains of $0 and $37,000 for the corresponding prior year periods.
Derivatives Designated as Hedging Instruments
During the fourth quarter of 2022, the Company entered into a three-year interest rate swap intended to add stability to its net interest income and to manage its exposure to future interest rate movements associated with a pool of floating rate commercial loans. The swap requires the Company to pay variable-rate amounts indexed to one-month term Secured Overnight Financing Rate (“SOFR”) to the counterparty in exchange for the receipt of fixed-rate amounts at 4.0% from the counterparty. The swap was designated and qualified as a cash flow hedge, under ASC Topic 815, Derivatives and Hedging. The changes in the fair value of cash flow hedges are initially reported in other comprehensive income. Amounts are subsequently reclassified from accumulated other comprehensive income to earnings when the hedged transactions occur, specifically within the same line item as the hedged item (interest income). Therefore, a portion of the balance reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income as interest payments are made or received on the Company’s interest rate swaps.
The table below presents the effect on the Company’s accumulated other comprehensive income/loss (“AOCI” or “AOCL”) attributable to the cash flow hedge derivative, net of tax, and the related gains/(losses) reclassified from AOCI into income (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
20232023
AOCI (AOCL) balance at beginning of period, net of tax$488 $(25)
Unrealized losses recognized in OCI(1,588)(1,176)
Losses reclassified from AOCI into interest income191 292 
AOCL balance at end of period, net of tax$(909)$(909)
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OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

During the next twelve months, the Company estimates that an additional $1.2 million will be reclassified as a reduction to interest income.
The table below presents the notional amount and fair value of derivatives designated and not designated as hedging instruments, as well as their location on the Consolidated Statements of Financial Condition (in thousands):
NotionalFair Value
Other assetsOther liabilities
As of June 30, 2023
Derivatives Not Designated as Hedging Instruments
Interest rate swaps and cap contracts$1,424,747 $109,651 $109,670 
Derivatives Designated as Cash Flow Hedge
Interest rate swap contract100,000 — 1,199 
Total Derivatives$1,524,747 $109,651 $110,869 
December 31, 2022
Derivatives Not Designated as Hedging Instruments
Interest rate swaps and cap contracts$1,368,245 $113,420 $113,440 
Derivatives Designated as Cash Flow Hedge
Interest rate swap contract100,000 — 33 
Total Derivatives$1,468,245 $113,420 $113,473 
Credit Risk-Related Contingent Features
The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by being 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 $0 and $40,000 at June 30, 2023 and December 31, 2022, respectively. The amount of collateral received from third parties was $112.5 million and $104.5 million at June 30, 2023 and December 31, 2022, respectively. The amount of collateral posted with third parties and received from 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 $110.9 million and $113.5 million at June 30, 2023 and December 31, 2022, respectively.
The interest rate derivatives which the Company executes with the commercial borrowers are collateralized by the borrowers’ commercial real estate financed by the Company.

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

Note 9. Subsequent EventLeases
On June 30, 2017,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 2038. The Company announced an agreement to acquire Sun Bancorp, Inc. (“Sun”), headquartered in Mount Laurel, New Jersey, inhas one existing finance lease, which has a transaction valued at approximately $487 million. Underlease term through 2029.
The following table represents the terms of the agreement, Sun stockholders will be entitled to receive $3.78 in cash and 0.7884 sharesclassification of the Company’s common stock,ROU assets and lease liabilities on the Consolidated Statements of Financial Condition (in thousands):
June 30,December 31,
20232022
Lease ROU AssetsClassification
Operating lease ROU assetsOther assets$20,044 $19,055 
Finance lease ROU assetPremises and equipment, net1,420 1,532 
Total lease ROU assets$21,464 $20,587 
Lease Liabilities
Operating lease liabilities (1)
Other liabilities$21,080 $20,053 
Finance lease liabilityOther borrowings1,811 1,934 
Total lease liabilities$22,891 $21,987 
(1) Operating lease liabilities excludes liabilities for each sharefuture rent and estimated lease termination payments related to closed branches of Sun common stock. Sun$6.8 million and $7.7 million at June 30, 2023 and December 31, 2022, 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 received their respective requisite stockholder approvalsincludes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, ASC Topic 842, Leases requires the Company to use the rate implicit in the lease, provided the rate is readily determinable. As this rate is not readily 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 merger.  Regulatory approvalremaining lease term as of January 1, 2019. For the finance lease, the Company utilized its incremental borrowing rate at lease inception.
June 30,December 31,
20232022
Weighted-Average Remaining Lease Term
Operating leases6.68 years6.87 years
Finance lease6.10 years6.60 years
Weighted-Average Discount Rate
Operating leases2.86 %2.86 %
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 June 30,Six Months Ended June 30,
2023202220232022
Lease Expense
Operating lease expense$1,174 $1,440 $2,319 $2,698 
Finance lease expense:
Amortization of ROU assets54 50 112 99 
Interest on lease liabilities (1)
26 26 52 52 
Total$1,254 $1,516 $2,483 $2,849 
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,121 $1,249 $2,260 $2,411 
Operating cash flows from finance leases26 26 52 52 
Financing cash flows from finance leases62 51 123 102 
(1)Included in borrowed funds interest expense on the Consolidated Statements of Income. All other costs are included in occupancy expense on the Consolidated Statements of Income.
Future minimum payments for the finance lease and operating leases with initial or remaining terms were as follows (in thousands):
Finance LeaseOperating Leases
For the Year Ending December 31,
2023$175 $2,311 
2024350 4,334 
2025350 4,274 
2026350 3,648 
2027350 2,489 
Thereafter559 6,400 
Total2,134 23,456 
Less: Imputed interest(323)(2,376)
Total lease liabilities$1,811 $21,080 

Note 10. Variable Interest Entity
The Company accounts for Trident as a variable interest entity (“VIE”) under ASC 810, Consolidation, for which the Company is considered the primary beneficiary (i.e. the party that has a controlling financial interest). In accordance with ASC 810, Consolidation, the Company has consolidated Trident’s assets and liabilities.

The summarized financial information for the Company’s consolidated VIE at June 30, 2023 and December 31, 2022 consisted of the merger was received from the Federal Reserve Bankfollowing (in thousands):
June 30, 2023December 31, 2022
Cash and cash equivalents$37,022 $30,062 
Other assets805 941 
Total assets37,827 31,003 
Other liabilities35,706 28,998 
Net assets$2,121 $2,005 

49
Table 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”).   Subject to receipt of OCC approval and other customary closing conditions, the Company expects to close the transaction in January 2018.Contents
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.




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 20162022 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 includedPart II, Item 1A, “Risk Factors,” in the registration statement (File No. 333-220235) on Form S-4 that was filed with10-Q for the SEC on August 29, 2017,quarter ended March 31, 2023. Except 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. There werepreviously disclosed, there have 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 by2022. 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 deems 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, and Purchases of Equity Securities
On July 24, 2014,June 25, 2021, the Company announced the authorization of 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. On April 27, 2017, 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 shares. The Company did not repurchase any shares of which all shares authorized for repurchase remain available at September 30, 2017. Information regarding the Company’sits common stock repurchases forunder its repurchase program during the three month period ended SeptemberJune 30, 2017 is as follows:2023. At June 30, 2023, there were 2,934,438 shares available for repurchase under the Company’s stock repurchase program.
For the month of May 31, 2023, there were 1,525 shares that were repurchased outside of the Company’s stock repurchase program at an average share price of $19.02. The Company repurchased these shares from employees that elected to sell to cover their withholding tax obligations on vested stock awards.
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


On  November 1, 2017During the three months ended June 30, 2023, no directors or executive officers of the Company closed on its previously announced acquisitionadopted or terminated any contract, instruction or written plan for the purchase or sale of an office building in Red Bank, New Jersey relatedthe Company securities that was intended to its  back-office consolidation, at a purchase pricesatisfy the affirmative defense conditions 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 halfRule 10b5-1(c) and/or any “Rule 10b5-1 trading arrangement.”


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Table of 2018.Contents



Item 6. Exhibits
 
Exhibits:Exhibit No:Exhibit DescriptionReference
Agreement and Plan of Merger, dated as of June 30, 2017, by and among OceanFirst Financial Corp., Sun Bancorp, Inc. and Mercury Merger Sub Corp. (1)
3.1
Amended Bylaws of OceanFirst (2)
31.1
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 SeptemberJune 30, 2017,2023, 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, 2017August 3, 2023/s/ Christopher D. Maher
Christopher D. Maher
Chairman President and Chief Executive Officer
DATE:August 3, 2023/s/ Patrick S. Barrett
DATE: November 8, 2017/s/ Michael J. FitzpatrickPatrick S. Barrett
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.


53