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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________________ 
FORM 10-Q
 ________________________________________________  
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
☐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.)
110 West Front Street, Red 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   ☒    No   ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    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 ☐
Non-accelerated Filer ☐Smaller Reporting Company ☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒.
As of August 1, 2022, there were 59,130,236 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.

OceanFirst Financial Corp.
INDEX TO FORM 10-Q
 
  PAGE
PART I.FINANCIAL INFORMATION
Item 1.Consolidated Financial Statements (unaudited)
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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, 2022March 31, 2022June 30, 2021
SELECTED FINANCIAL CONDITION DATA:
Total assets$12,438,653 $12,164,945 $11,483,901 
Loans receivable, net of allowance for loan credit losses9,380,688 9,065,679 7,774,351 
Deposits9,831,484 10,056,233 9,415,286 
Total stockholders’ equity1,521,432 1,519,334 1,508,789 
SELECTED OPERATING DATA:
Net interest income90,797 84,227 74,016 
Credit loss expense (benefit) 1,254 1,851 (6,460)
Other income7,541 8,852 11,803 
Operating expenses58,661 57,495 51,670 
Net income 29,483 25,759 30,555 
Net income attributable to OceanFirst Financial Corp.28,961 25,759 30,555 
Net income available to common stockholders27,957 24,755 29,551 
Diluted earnings per share0.47 0.42 0.49 
SELECTED FINANCIAL RATIOS:
Stockholders’ equity per common share at end of period25.73 25.58 25.22 
Cash dividend per share0.17 0.17 0.17 
Dividend payout ratio per common share36.17 %40.48 %34.69 %
Stockholders’ equity to total assets12.23 12.49 13.14 
Return on average assets (2) (3) (4)
0.92 0.84 1.03 
Return on average stockholders’ equity (2) (3) (4)
7.31 6.57 7.88 
Net interest rate spread (5)
3.18 3.08 2.75 
Net interest margin (2) (6)
3.29 3.18 2.89 
Operating expenses to average assets (2) (4)
1.92 1.95 1.80 
Efficiency ratio (4) (7)
59.65 61.77 60.21 
Loans-to-deposits ratio95.90 90.60 83.06 
ASSET QUALITY:
Non-performing loans (8)
$20,753 $26,925 $38,659 
Non-performing assets (8)
20,753 27,031 38,765 
Allowance for loan credit losses as a percent of total loans receivable (9) (10)
0.55 %0.56 %0.69 %
Allowance for loan credit losses as a percent of total non-performing loans (8) (10)
250.86 187.92 139.36 
Non-performing loans as a percent of total loans receivable (8) (9)
0.22 0.30 0.49 
Non-performing assets as a percent of total assets (8)
0.17 0.22 0.34 
(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) Included net expenses 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, for the three months ended June 30, 2022. Included net expenses related to merger related expenses, net branch consolidation expenses, and net loss on equity investments of $5.2 million, or $4.0 million, net of tax benefit, for the three months ended March 31, 2022. Included a net benefit related to merger related expenses, net branch consolidation expenses, and net gain on equity investments of $104,000, or $78,000, net of tax expense, for the three months ended June 30, 2021.
(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.

4
(8) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure. It is the Company’s policy to cease accruing interest on all such loans and to reverse previously accrued interest.
(9) Total loans receivable excludes loans held-for-sale.
(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 $15.5 million, $16.9 million, and $23.6 million at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

5
Summary
OceanFirst Financial Corp. is the holding company for OceanFirst Bank N.A. (the “Bank”), a regional bank serving business and retail customers throughout New Jersey and the major metropolitan areas of Philadelphia, New York, Baltimore, Washington D.C., and Boston. The term “Company” refers to OceanFirst Financial Corp., the Bank and all of their 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, trust and asset management products and services, deposit account services, bank owned life insurance, commercial loan swap income, gain on sale of loans, securities and on 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, federal deposit insurance and regulatory assessments, data processing, check card processing, professional fees and other general and administrative expenses. The Company’s results of operations are also significantly affected by competition, general economic conditions, including levels of unemployment and real estate values, as well as changes in market interest rates, inflation, government policies and actions of regulatory agencies.
Key developments relating to the Company’s financial results and corporate activities for the three months ended June 30, 2022 were as follows:

•Strengthening Net Interest Income and Margin: Net interest income increased by $6.6 million to $90.8 million, from $84.2 million in the prior linked quarter. Net interest margin increased to 3.29%, as compared to 3.18% in the prior linked quarter, largely driven by the impact of the rising rate environment on interest earning assets, as well as elevated prepayment fees, partly offset by increased cost of funds.
•Balance Sheet Growth and Improving Asset Quality: Loan growth for the quarter was $315.9 million, reflecting originations of $835.5 million, and the committed loan pipeline was $385.0 million as of June 30, 2022. Non-performing loans decreased to $20.8 million, as compared to $26.9 million in the prior linked quarter. Deposits grew by $98.7 million year-to-date and $416.2 million as compared to June 30, 2021.
•Expense Management Discipline: Total operating expenses increased modestly to $58.7 million, from $57.5 million in the prior linked quarter. Operating expenses for the current quarter included $3.2 million of expenses related to the acquisition of a majority interest in Trident Abstract Title Agency, LLC (“Trident”). The efficiency ratio improved to 59.65% from 61.77% in the prior linked quarter.
•Dividend Increase: On July 27, 2022, the Board of Directors approved an increase to the quarterly cash dividend by $0.03, or 18%, to $0.20 per share.
Net income available to common stockholders for the three and six months ended June 30, 2022 was $28.0 million and $52.7 million, respectively, or $0.47 and $0.89 per diluted share, respectively, as compared to $29.6 million and $61.2 million, or $0.49 and $1.02 per diluted share, for the corresponding prior year periods, respectively. The dividends paid to preferred stockholders were $1.0 million and $2.0 million for the three and six months ended June 30, 2022 and 2021, respectively. Net income available to common stockholders for the three and six months ended June 30, 2022 included merger related expenses of $196,000 and $2.2 million, respectively, net branch consolidation expenses of $546,000 and $948,000, respectively, and net loss on equity investments of $8.1 million and $10.9 million, respectively. Net income available to common stockholders for the three and six months ended June 30, 2021 included merger related expenses of $446,000 and $827,000, respectively, net branch consolidation expenses of $26,000 and $1.0 million, respectively, and net gain on equity investments of $576,000 and $8.9 million, respectively.
The Company remains well-capitalized with a stockholders’ equity to total assets ratio of 12.23% at June 30, 2022.
On July 27, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share. The dividend, related to the quarter ended June 30, 2022, will be paid on August 19, 2022 to common stockholders of record on August 8, 2022. 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, 2022 to preferred stockholders of record on July 29, 2022.
6

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, 2022 interest income included net loan fees of $3.2 million and $4.2 million, respectively, as compared to $1.2 million and $2.6 million for the same prior year periods, respectively.
The following tables set forth certain information relating to the Company for the three and six months ended June 30, 2022 and 2021. 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,
 20222021
(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$67,440 $100 0.59 %$992,485 $241 0.10 %
Securities (2)
1,811,869 8,585 1.90 1,501,484 6,052 1.62 
Loans receivable, net (3)
Commercial6,278,465 65,390 4.18 5,318,436 54,258 4.09 
Residential real estate2,718,787 22,742 3.35 2,219,425 19,097 3.44 
Home equity loans and lines and other consumer (“other consumer”)251,014 2,599 4.15 304,541 3,693 4.86 
Allowance for loan credit losses, net of deferred loan costs and fees(43,683)— — (53,483)— — 
Loans receivable, net9,204,583 90,731 3.95 7,788,919 77,048 3.97 
Total interest-earning assets11,083,892 99,416 3.60 10,282,888 83,341 3.25 
Non-interest-earning assets1,168,093 1,256,844 
Total assets$12,251,985 $11,539,732 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking$4,020,474 1,612 0.16 %$3,701,496 3,385 0.37 %
Money market739,647 279 0.15 760,323 212 0.11 
Savings1,639,568 161 0.04 1,581,284 166 0.04 
Time deposits937,387 2,265 0.97 1,002,086 2,562 1.03 
Total7,337,076 4,317 0.24 7,045,189 6,325 0.36 
Federal Home Loan Bank (“FHLB”) advances538,754 1,647 1.23 — — — 
Securities sold under agreements to repurchase103,929 41 0.16 135,181 56 0.17 
Other borrowings194,481 2,614 5.39 228,350 2,944 5.17 
Total borrowings837,164 4,302 2.06 363,531 3,000 3.31 
Total interest-bearing liabilities8,174,240 8,619 0.42 7,408,720 9,325 0.50 
Non-interest-bearing deposits2,328,124 2,462,203 
Non-interest-bearing liabilities214,900 164,774 
Total liabilities10,717,264 10,035,697 
Stockholders’ equity1,534,721 1,504,035 
Total liabilities and equity$12,251,985 $11,539,732 
Net interest income$90,797 $74,016 
Net interest rate spread (4)
3.18 %2.75 %
Net interest margin (5)
3.29 %2.89 %
Total cost of deposits (including non-interest-bearing deposits)0.18 %0.27 %
7
For the Six Months Ended June 30,
20222021
(dollars in thousands)Average
Balance		Interest
Average
Yield/
Cost (1)
Average
Balance		Interest
Average
Yield/
Cost (1)
Assets:
Interest-earning assets:
Interest-earning deposits and short-term investments$78,074 $136 0.35 %$1,065,294 $518 0.10 %
Securities (2)
1,829,065 17,064 1.88 1,407,108 12,741 1.83 
Loans receivable, net (3)
Commercial6,157,060 123,745 4.05 5,223,714 107,927 4.17 
Residential real estate2,631,208 44,081 3.35 2,273,332 39,166 3.45 
Other consumer254,002 5,373 4.27 315,662 7,863 5.02 
Allowance for loan credit losses, net of deferred loan costs and fees(42,080)— — (53,187)— — 
Loans receivable, net9,000,190 173,199 3.87 7,759,521 154,956 4.03 
Total interest-earning assets10,907,329 190,399 3.51 10,231,923 168,215 3.32 
Non-interest-earning assets1,191,453 1,257,970 
Total assets$12,098,782 $11,489,893 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking$4,197,935 3,762 0.18 %$3,707,398 7,695 0.42 %
Money market763,721 596 0.16 758,986 579 0.15 
Savings1,624,575 286 0.04 1,552,106 345 0.04 
Time deposits853,017 3,714 0.88 1,111,000 6,202 1.13 
Total7,439,248 8,358 0.23 7,129,490 14,821 0.42 
FHLB Advances285,501 1,682 1.19 — — — 
Securities sold under agreements to repurchase110,738 83 0.15 132,328 151 0.23 
Other borrowings211,407 5,252 5.01 228,359 5,623 4.97 
Total borrowings607,646 7,017 2.33 360,687 5,774 3.23 
Total interest-bearing liabilities8,046,894 15,375 0.39 7,490,177 20,595 0.55 
Non-interest-bearing deposits2,364,757 2,337,238 
Non-interest-bearing liabilities155,832 162,647 
Total liabilities10,567,483 9,990,062 
Stockholders’ equity1,531,299 1,499,831 
Total liabilities and equity$12,098,782 $11,489,893 
Net interest income$175,024 $147,620 
Net interest rate spread (4)
3.12 %2.77 %
Net interest margin (5)
3.24 %2.91 %
Total cost of deposits (including non-interest-bearing deposits)0.17 %0.32 %
(1)Average yields and costs are annualized.
(2)Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost net of allowance for securities credit losses.
(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.
8
Comparison of Financial Condition at June 30, 2022 and December 31, 2021
Total assets increased by $699.0 million to $12.44 billion at June 30, 2022, from $11.74 billion at December 31, 2021. Total loans increased by $802.0 million to $9.42 billion at June 30, 2022, from $8.62 billion at December 31, 2021, due to strong loan originations. Total debt securities decreased by $132.1 million at June 30, 2022, as compared to December 31, 2021, primarily due to principal repayments, and to a lesser extent, an increase in unrealized losses driven by the rising rate environment. Other assets increased by $46.5 million to $193.6 million at June 30, 2022 from $147.0 million at December 31, 2021, primarily due to an increase in market values associated with the Company’s customer interest rate swap programs.

Total liabilities increased by $694.2 million to $10.92 billion at June 30, 2022, from $10.22 billion at December 31, 2021. Deposits increased by $98.7 million to $9.83 billion at June 30, 2022, from $9.73 billion at December 31, 2021. Total deposits, excluding time deposits, decreased by $626.3 million to $8.33 billion at June 30, 2022, from $8.96 billion at December 31, 2021, due to the net runoff of interest-bearing checking balances. Time deposits increased to $1.50 billion at June 30, 2022, from $775.0 million at December 31, 2021, primarily due to an increase in brokered time deposits. The Company largely completed a program to extend maturities on price sensitive deposits in a cost-effective manner, consisting of the addition of $689.2 million in brokered time deposits with laddered maturities ranging from 1 to 24 months. The brokered time deposits carry a weighted average rate of 2.12%, a weighted average life of 9.5 months, and were issued at costs less than comparable wholesale borrowings. The loans-to-deposit ratio at June 30, 2022 was 95.9%, as compared to 88.6% at December 31, 2021.

Overnight FHLB advances increased to $488.8 million at June 30, 2022 from $0 at December 31, 2021 to fund liquidity needs. Other borrowings decreased by $34.5 million to $194.7 million at June 30, 2022, from $229.1 million at December 31, 2021, primarily due to the extinguishment of $35.0 million of subordinated debt in March 2022. Other liabilities increased by $151.2 million to $273.2 million at June 30, 2022, from $122.0 million at December 31, 2021, primarily due to an increase in the market values associated with the Company’s customer interest rate swap programs and collateral received from counterparties.

Stockholders’ equity was $1.52 billion at June 30, 2022 and December 31, 2021 as net income of $55.2 million was primarily offset by an increase in accumulated other comprehensive loss, cash dividends of $0.34 per share for a cost of $20.0 million, stock repurchases of $7.4 million, and preferred stock dividends of $2.0 million. Accumulated other comprehensive loss increased by $26.3 million to $29.1 million at June 30, 2022 from $2.8 million at December 31, 2021, primarily due to unrealized losses on debt securities available-for-sale which were adversely impacted by the rising interest rate environment. For the six months ended June 30, 2022, the Company repurchased 373,223 shares totaling $7.4 million under its stock repurchase programs at a weighted average cost of $19.82. There were 2,934,438 shares available for repurchase at June 30, 2022 under the existing repurchase program. Stockholders’ equity per common share increased to $25.73 at June 30, 2022, as compared to $25.63 at December 31, 2021.

Comparison of Operating Results for the Three and Six Months Ended June 30, 2022 and June 30, 2021
General
Net income available to common stockholders for the three and six months ended June 30, 2022 was $28.0 million and $52.7 million, respectively, or $0.47 and $0.89 per diluted share, respectively, as compared to $29.6 million and $61.2 million, or $0.49 and $1.02 per diluted share, for the corresponding prior year periods, respectively. Net income available to common stockholders for the three and six months ended June 30, 2022 included merger related expenses of $196,000 and $2.2 million, respectively, net branch consolidation expenses of $546,000 and $948,000, respectively, and net loss on equity investments of and $8.1 million and $10.9 million, respectively. These items decreased net income by $6.7 million and $10.7 million, net of tax, for the three and six months ended June 30, 2022, respectively. Net income available to common stockholders for the three and six months ended June 30, 2021 included merger related expenses of $446,000 and $827,000, respectively, net branch consolidation expenses of $26,000 and $1.0 million, respectively, and a net gain on equity investments of $576,000 and $8.9 million, respectively. These items increased net income by $78,000 and $5.3 million, net of tax, for the three and six months ended June 30, 2021, respectively.
Interest Income
Interest income for the three and six months ended June 30, 2022 increased to $99.4 million and $190.4 million, respectively, as compared to $83.3 million and $168.2 million for the corresponding prior year periods, respectively. Average interest-earning assets increased by $801.0 million and $675.4 million for the three and six months ended June 30, 2022, respectively, as compared to the same prior year periods, primarily due to loan and securities growth funded by the redeployment of excess cash and, to a lesser extent, funding from increased deposits and borrowings. Average loans receivable, net of allowance for loan credit losses, increased by $1.42 billion and $1.24 billion for the three and six months ended June 30, 2022, respectively, as compared to the same prior year periods. For the three and six months ended June 30, 2022, the yield on average interest-
9
earning assets increased to 3.60% and 3.51%, respectively, from 3.25% and 3.32%, for the corresponding prior year periods, respectively.
Interest Expense
Interest expense for the three and six months ended June 30, 2022 was $8.6 million and $15.4 million, respectively, as compared to $9.3 million and $20.6 million in the corresponding prior year periods, respectively. For the three and six months ended June 30, 2022, the cost of average interest-bearing liabilities decreased to 0.42% and 0.39%, respectively, from 0.50% and 0.55% for the corresponding prior year periods, respectively, as a result of the downward repricing of deposits. The total cost of deposits (including non-interest bearing deposits) was 0.18% and 0.17% for the three and six months ended June 30, 2022, respectively, as compared to 0.27% and 0.32%, for the same prior year periods, respectively, and a weighted average rate of 0.28% at June 30, 2022.
Net Interest Income and Margin
Net interest income for the three and six months ended June 30, 2022 increased to $90.8 million and $175.0 million, respectively, as compared to $74.0 million and $147.6 million for the corresponding prior year periods, respectively, reflecting increases in average interest-earning assets and net interest margin. Net interest margin for the three and six months ended June 30, 2022 increased to 3.29% and 3.24%, from 2.89% and 2.91% for the same prior year periods, respectively. The net interest margin expansion was primarily attributable to the redeployment of excess cash into loans and securities and, to a lesser extent, the impact of the rising interest rate environment on interest earning assets and a decreased cost of funds.
Credit Loss Expense (Benefit)
For the three and six months ended June 30, 2022, the credit loss expense was $1.3 million and $3.1 million, respectively, as compared to a credit loss benefit of $6.5 million and $7.1 million, for the corresponding prior year periods, respectively. The credit loss expense for the three and six months ended June 30, 2022 was influenced by strong loan portfolio growth, cooling and increasingly uncertain macro-economic forecasts due to conflicting economic signals, partly offset by ongoing positive trends in the Company’s asset quality and continued robust employment levels. Net loan charge-offs were $9,000 and $224,000 for the three months ended June 30, 2022 and 2021, respectively. Net loan recoveries were $83,000 and $56,000 for the six months ended June 30, 2022 and 2021, respectively. Non-performing loans totaled $20.8 million at June 30, 2022, as compared to $38.7 million at June 30, 2021, primarily due to loans that returned to accrual status and partly due to loans that were paid off.
Non-interest Income
For the three months ended June 30, 2022, other income decreased to $7.5 million, as compared to $11.8 million for the corresponding prior year period. The decrease was driven by a net loss on equity investments of $8.1 million compared to a net gain on equity investments of $576,000 in the prior year period, along with lower net gain on sale of loans of $1.3 million and fees and service charges of $510,000. The decrease was partially offset by the acquisition of a majority interest in Trident, which added $4.5 million of title-related fees and service charges and an increase in commercial loan swap income of $2.2 million.
For the six months ended June 30, 2022, other income decreased to $16.4 million, as compared to $32.6 million for the corresponding prior year period. The decrease was driven by a net loss on equity investments of $10.9 million compared to a net gain on equity investments of $8.9 million in the prior period, along with lower net gain on sale of loans of $3.0 million, deposit fees and service charges of $1.2 million, and Paycheck Protection Program (“PPP”) loan origination referral fees of $776,000. The decrease was partially offset by the acquisition of a majority interest in Trident, which added $4.5 million of title-related fees and service charges and an increase in commercial loan swap income of $3.9 million.
Non-interest Expense
Operating expenses increased to $58.7 million for the three months ended June 30, 2022, as compared to $51.7 million in the same prior year period. Operating expenses for the three months ended June 30, 2022 and 2021 included $742,000 and $472,000, respectively, of merger related and net branch consolidation expenses. The remaining increase of $6.7 million in operating expenses for the three months ended June 30, 2022, as compared to the corresponding prior year period, was partly due to the acquisition of majority interest in Trident, which added $3.2 million of expenses. The further remaining increase of $3.5 million in operating expense for the three months ended June 30, 2022 was due to increases in data processing expense of $1.8 million, as a result of the migration to a new core banking system, compensation and benefits expense of $1.2 million partly relating to the commercial banking strategy and the commercial banking hires in expansion markets of Boston and
10
Baltimore, and an increase in the Company’s federal deposit insurance and regulatory assessments of $689,000 as a result of a higher assessment base and multiplier.
Operating expenses increased to $116.2 million for the six months ended June 30, 2022, as compared to $103.4 million in the same prior year period. Operating expenses for the six months ended June 30, 2022 and 2021 included $3.1 million and $1.9 million, respectively, of merger related and net branch consolidation expenses. The remaining increase of $11.6 million in operating expenses for the six months ended June 30, 2022, as compared to the corresponding prior year period, was partly due to the acquisition of majority interest in Trident, which added $3.2 million of expenses. The further remaining increase of $8.4 million in operating expense for the six months ended June 30, 2022 was primarily due to increases in data processing expense of $3.5 million as a result of the migration to a new core banking system, compensation and benefits expense of $3.5 million partly relating to the commercial banking strategy and the commercial banking hires in expansion markets of Boston and Baltimore, federal deposit insurance and regulatory assessments of $715,000 as a result of a higher assessment base and multiplier, and professional fees of $547,000.
Income Tax Expense
The provision for income taxes was $8.9 million and $16.9 million for the three and six months ended June 30, 2022, respectively, as compared to $10.1 million and $20.7 million for the same prior year periods. The effective tax rate was 23.3% and 23.4% for the three and six months ended June 30, 2022, respectively, as compared to 24.8% and 24.7% for the same prior year periods, respectively.
11
Liquidity and Capital Resources
The primary sources of liquidity specifically available to OceanFirst Financial Corp. are dividends from the Bank, proceeds from sale of investments, and the issuance of preferred and common stock, and debt. For the six months ended June 30, 2022, the holding company received dividend payments of $30.0 million from the Bank. At June 30, 2022, OceanFirst Financial Corp. held $32.8 million in cash.
The Bank’s primary sources of funds are deposits, principal and interest payments on loans and investments, FHLB advances, access to the Federal Reserve discount window, 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 has other sources of liquidity if a need for additional funds arises, including various lines of credit at multiple financial institutions.
At June 30, 2022, the Bank had $488.8 million outstanding in overnight borrowings from the FHLB, as compared to $0 at December 31, 2021. The Bank utilizes overnight borrowings from time-to-time to fund short-term liquidity needs. There were no FHLB term advances at June 30, 2022 and December 31, 2021.
The Company’s cash needs for the six months ended June 30, 2022 were primarily satisfied by the increase in net proceeds from FHLB advances, deposits, which included the issuance of brokered time deposits, proceeds from maturities and calls of debt maturities, and principal repayments on debt securities. The cash was principally utilized for loan originations, purchases of residential loan pools, purchases of debt and equity securities, and redemption of subordinated debt. The Company’s cash needs for the six months ended June 30, 2021 were primarily satisfied by principal repayments on debt securities held-to-maturity, proceeds from sales of loans and equity investments, and proceeds from maturities and calls of debt securities. The cash was principally utilized for purchases of debt and equity securities, and loan originations.
In the normal course of business, the Bank routinely enters into various off-balance-sheet commitments, primarily relating to the origination and sale of loans. At June 30, 2022, outstanding commitments to originate loans totaled $385.0 million and outstanding undrawn lines of credit totaled $1.78 billion, of which $1.42 billion were commitments to commercial and commercial construction borrowers and $359.5 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 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.
Time deposits scheduled to mature in one year or less totaled $1.01 billion at June 30, 2022.
At June 30, 2022, the Company also had various contractual obligations, which included debt obligations of $788.9 million, including finance lease obligations of $1.8 million, and an additional $21.2 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.
The Company has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management. Management also monitors cash on a daily basis to determine the liquidity needs of the Company and the Bank. Additionally, management performs multiple liquidity stress test scenarios on a quarterly basis. The Company and Bank continue to maintain adequate liquidity under all stress scenarios.
Under the Company’s stock repurchase 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 three and six months ended June 30, 2022, the Company repurchased 272,779 and 373,223 shares of its common stock, respectively, at a total cost of $5.3 million and $7.4 million, respectively. For the three and six months ended June 30, 2021, the Company repurchased 500,000 and 1.0 million shares of its common stock, respectively, at a total cost of $10.9 million and $20.9 million, respectively. At June 30, 2022, there were 2,934,438 shares available to be repurchased under the authorized stock repurchase program.
Cash dividends on common stock declared and paid during the first six months of June 30, 2022 were $20.0 million, as compared to $20.3 million for the same prior year period. On July 27, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share. The dividend is payable on August 19, 2022 to common stockholders of record at the close of business on August 8, 2022.
12
Cash dividends on preferred stock declared and paid during the first six months of June 30, 2022 and 2021 were $2.0 million for both periods. The Company’s Board of Directors also declared a quarterly cash dividend of $0.4375 per depositary share, representing 1/40th interest in the Series A Preferred Stock, payable on August 15, 2022 to preferred stockholders of record on July 29, 2022.
The Company’s ability to continue to pay dividends remains dependent upon capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations. The Company cannot predict whether the Bank will be permitted under applicable regulations to pay a dividend to the Company. If applicable regulations or regulatory bodies prevent the Bank from paying a dividend to the Company, the Company may not have the liquidity necessary to pay a dividend in the future or pay a dividend at the same rate as historically paid or be able to meet current debt obligations. Additionally, regulations of the Federal Reserve may prevent the Company from either paying or increasing the cash dividend to common stockholders.
As of June 30, 2022 and December 31, 2021, the Company and the Bank satisfy all regulatory capital requirements currently applicable as follows (dollars in thousands):
ActualFor capital adequacy
purposes		To be well-capitalized
under prompt
corrective action
As of June 30, 2022AmountRatioAmountRatioAmountRatio
Bank:
Tier 1 capital (to average assets)$1,075,202 9.26 %$464,250 4.00 %$580,313 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,075,202 11.03 682,095 7.00 
(1)
633,374 6.50 
Tier 1 capital (to risk-weighted assets)1,075,202 11.03 828,258 8.50 
(1)
779,537 8.00 
Total capital (to risk-weighted assets)1,130,590 11.60 1,023,143 10.50 
(1)
974,422 10.00 
Company:
Tier 1 capital (to average assets)$1,077,686 9.28 %$464,464 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets)
948,973 9.65 688,350 7.00 
(1)
N/AN/A
Tier 1 capital (to risk-weighted assets)1,077,686 10.96 835,853 8.50 
(1)
N/AN/A
Total capital (to risk-weighted assets)1,258,728 12.80 1,032,525 10.50 
(1)
N/AN/A
ActualFor capital adequacy
purposes		To be well-capitalized
under prompt
corrective action
As of December 31, 2021AmountRatioAmountRatioAmountRatio
Bank:
Tier 1 capital (to average assets)$1,027,660 9.08 %$452,669 4.00 %$565,836 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,027,660 11.62 619,178 7.00 
(1)
574,951 6.50 
Tier 1 capital (to risk-weighted assets)1,027,660 11.62 751,860 8.50 
(1)
707,633 8.00 
Total capital (to risk-weighted assets)1,079,766 12.21 928,768 10.50 
(1)
884,541 10.00 
Company:
Tier 1 capital (to average assets)$1,044,518 9.22 %$453,087 4.00 %N/AN/A
Common equity Tier 1 (to risk-weighted assets)
917,088 10.26 625,801 7.00 
(1)
N/AN/A
Tier 1 capital (to risk-weighted assets)1,044,518 11.68 759,902 8.50 
(1)
N/AN/A
Total capital (to risk-weighted assets)1,257,372 14.06 938,702 10.50 
(1)
N/AN/A
(1)Includes the Capital Conservation Buffer of 2.50%.
The Company and the Bank satisfied the criteria to be “well-capitalized” under the Prompt Corrective Action Regulations.
At June 30, 2022 and December 31, 2021, the Company maintained a stockholders’ equity to total assets ratio of 12.23% and 12.92%, respectively.
13
Non-Performing Assets
The following table sets forth information regarding the Company’s non-performing assets, consisting of non-performing loans and other real estate owned. It is the policy of the Company to cease accruing interest on loans 90 days or more past due or in the process of foreclosure.
June 30,December 31,
20222021
 (dollars in thousands)
Non-performing loans:
Commercial real estate – investor$2,609 $3,614 
Commercial real estate – owner occupied8,233 11,904 
Commercial and industrial364 277 
Residential real estate5,846 6,114 
Other consumer3,701 3,585 
Total non-performing loans20,753 25,494 
Other real estate owned— 106 
Total non-performing assets$20,753 $25,600 
PCD loans
$35,227 $41,817 
Delinquent loans 30-89 days$9,558 $14,546 
Allowance for loan credit losses as a percent of total loans0.55 %0.57 %
Allowance for loan credit losses as a percent of total non-performing loans
250.86 191.61 
Non-performing loans as a percent of total loans receivable0.22 0.30 
Non-performing assets as a percent of total assets0.17 0.22 
The Company’s non-performing loans totaled $20.8 million at June 30, 2022, as compared to $25.5 million at December 31, 2021, primarily due to loans that returned to accrual status and partly due to loans that were paid off. Included in the non-performing loans total was $10.5 million and $11.3 million of troubled debt restructuring (“TDR”) loans at June 30, 2022 and December 31, 2021, respectively. Included in the non-performing loans total was $3.5 million and $6.5 million of PCD loans at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022, the allowance for loan credit losses totaled $52.1 million, or 0.55% of total loans, as compared to $48.9 million, or 0.57% of total loans, at December 31, 2021. These ratios exclude existing net unamortized credit and PCD marks on acquired loans of $15.5 million and $18.9 million at June 30, 2022 and December 31, 2021, respectively. 

The Company classifies loans and other assets in accordance with regulatory guidelines. The table below represents Special Mention and Substandard assets (in thousands):
June 30,December 31,
20222021
Special Mention$60,812 $91,607 
Substandard103,294 148,557 
The decreases in special mention and substandard loans were primarily due to improved profitability of borrowers and their ability to service their loans. The decrease in special mention also included one commercial loan of $14.1 million, which paid in full during the six months ended  June 30, 2022.
14
Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 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 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 credit losses is a critical accounting policy and estimate because of its importance to the presentation of the Company’s financial condition and results of operations. The critical accounting policy involves a higher degree of complexity and requires 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. The critical accounting policy and its application is reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors.

Impact of New Accounting Pronouncements

Accounting Pronouncements Adopted in 2022
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes” as part of an initiative to reduce complexity in accounting standards for income taxes. The amendments also improve consistent application of and simplify generally accepted accounting principles for other areas of Topic 740 by clarifying and amending existing guidance. This update was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2021. The adoption of this standard did not have a material impact on the Company’s financial statements.

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 is currently evaluating the potential impact of this standard to the consolidated financial statements.

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 plans to adopt this standard on January 1, 2023 and is currently evaluating the impact of this standard to the consolidated financial statements.

In March 2022, 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 Company currently does not apply fair value hedge accounting; however the Company is currently evaluating the potential impact of this standard to 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 OceanFirst Financial Corp. (the “Company”). These forward-looking statements are generally identified by
15
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: the impact of the COVID-19 or any other pandemic on our operations and financial results and those of our customers, changes in interest rates, inflation, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, the 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, volatility and deterioration in the credit and equity markets, our ability to access low-cost funding, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks; 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, 2021, 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.
16
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The Company’s interest rate sensitivity is monitored through the use of interest rate risk (“IRR”) modeling. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at June 30, 2022, which were estimated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods shown. At June 30, 2022, the Company’s one-year gap was positive 7.62% as compared to positive 14.15% at December 31, 2021.
The table is intended to provide an approximation of the projected repricing of assets and liabilities at June 30, 2022 on the basis of contractual maturities, anticipated prepayments, scheduled rate adjustments, and the rate sensitivity of non-maturity deposits within a three month period and subsequent selected time intervals.
 
At June 30, 20223 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:
Interest-earning deposits and short-term investments$59,520$1,489$1,982$—$—$62,991
Debt securities440,003137,611264,336265,032508,6901,615,672
Equity investments—1,966——73,30375,269
Restricted equity investments————76,04776,047
Loans receivable (1)
2,743,535917,3872,139,4391,663,6051,960,9199,424,885
Total interest-earning assets3,243,0581,058,4532,405,7571,928,6372,618,95911,254,864
Interest-bearing liabilities:
Interest-bearing checking accounts1,238,842186,697431,400349,4341,489,6943,696,067
Money market deposit accounts48,97849,682115,129296,182206,811716,782
Savings accounts111,381130,668295,198231,207838,0801,606,534
Time deposits420,545592,925442,72730,83212,9461,499,975
FHLB advances488,750————488,750
Securities sold under agreements to repurchase and other borrowings175,134143123,728518626300,149
Total interest-bearing liabilities2,483,630960,1151,408,182908,1732,548,1578,308,257
Interest sensitivity gap (2)
$759,428$98,338$997,575$1,020,464$70,802$2,946,607
Cumulative interest sensitivity gap$759,428$857,766$1,855,341$2,875,805$2,946,607$2,946,607
Cumulative interest sensitivity gap as a percent of total interest-earning assets6.75 %7.62 %16.48 %25.55 %26.18 %26.18 %
(1)For purposes of the gap analysis, loans receivable includes non-performing loans gross of the allowance for loan credit losses, unamortized discounts and deferred loan costs and fees.
(2)Interest sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.

Certain shortcomings are inherent in gap analysis. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, loan prepayment rates and average lives of deposits would likely deviate significantly from those assumed in the calculation. Finally, the ability of many borrowers to service their adjustable-rate loans may be impaired in the event of an interest rate increase.
17
Additionally, the table below sets forth the Company’s exposure to IRR as measured by the change in economic value of equity (“EVE”) and net interest income under varying rate shocks as of June 30, 2022 and December 31, 2021. All methods used to measure interest rate sensitivity involve the use of assumptions, which may tend to oversimplify the manner in which actual yields and costs respond to changes in market interest rates. The Company’s interest rate sensitivity should be reviewed in conjunction with the financial statements and notes thereto contained in the 2021 Form 10-K.
 
 June 30, 2022December 31, 2021
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)          
300$1,786,484 (1.9)%16.2 %$404,020 6.5 %$1,817,134 24.5 %16.7 %$346,723 10.3 %
2001,828,376 0.4 16.1 396,572 4.6 1,738,602 19.1 15.6 336,816 7.1 
1001,843,051 1.2 15.8 388,496 2.4 1,621,984 11.1 14.2 325,960 3.7 
Static1,821,246 — 15.2 379,219 — 1,459,706 — 12.5 314,395 — 
(100)1,720,450 (5.5)14.0 357,004 (5.9)1,230,947 (15.7)10.3 299,994 (4.6)
The change in interest rate sensitivity was impacted by the deployment of cash into loans, an increase in overnight borrowings, change in deposit mix resulting in an increase in shorter-term time deposits, and a significant increase in market interest rates.
As is the case with the gap calculation, certain shortcomings are inherent in the methodology used in the EVE and net interest income IRR measurements. The model requires the making of certain assumptions which may tend to oversimplify the manner in which actual yields and costs respond to changes in market interest rates. First, 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. Accordingly, although the above measurements provide an indication of the Company’s IRR exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates on the Company’s EVE and net interest income, and can be expected to 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 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.

(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 June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

18
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
June 30,December 31,
20222021
 (Unaudited) 
Assets
Cash and due from banks$189,019 $204,949 
Debt securities available-for-sale, at estimated fair value507,276 568,255 
Debt securities held-to-maturity, net of allowance for securities credit losses of $1,293 at June 30, 2022 and $1,467 at December 31, 2021 (estimated fair value of $987,532 at June 30, 2022 and $1,152,744 at December 31, 2021)
1,068,034 1,139,193 
Equity investments75,269 101,155 
Restricted equity investments, at cost76,047 53,195 
Loans receivable, net of allowance for loan credit losses of $52,061 at June 30, 2022 and $48,850 at December 31, 2021
9,380,688 8,583,352 
Interest and dividends receivable34,184 32,606 
Other real estate owned— 106 
Premises and equipment, net128,118 125,828 
Bank owned life insurance260,230 259,207 
Assets held for sale4,263 6,229 
Goodwill506,146 500,319 
Core deposit intangible15,827 18,215 
Other assets193,552 147,007 
Total assets$12,438,653 $11,739,616 
Liabilities and Stockholders’ Equity
Deposits$9,831,484 $9,732,816 
Federal Home Loan Bank (“FHLB”) advances488,750 — 
Securities sold under agreements to repurchase with customers105,495 118,769 
Other borrowings194,654 229,141 
Advances by borrowers for taxes and insurance23,640 20,305 
Other liabilities273,198 122,032 
Total liabilities10,917,221 10,223,063 
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, 2022 and December 31, 2021
1 1 
Common stock, $0.01 par value, 150,000,000 shares authorized, 61,863,794 and 61,535,381 shares issued at June 30, 2022 and December 31, 2021, respectively; and 59,130,236 and 59,175,046 shares outstanding at June 30, 2022 and December 31, 2021, respectively
612 611 
Additional paid-in capital1,151,363 1,146,781 
Retained earnings474,114 442,306 
Accumulated other comprehensive loss(29,093)(2,821)
Less: Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")(7,403)(8,615)
Treasury stock, 2,733,558 and 2,360,335 shares at June 30, 2022 and December 31, 2021, respectively
(69,106)(61,710)
OceanFirst Financial Corp. stockholders’ equity1,520,488 1,516,553 
Non-controlling interest944 — 
Total stockholders’ equity1,521,432 1,516,553 
Total liabilities and stockholders’ equity$12,438,653 $11,739,616 

See accompanying Notes to Unaudited Consolidated Financial Statements.
19
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
 (Unaudited)(Unaudited)
Interest income:
Loans$90,731 $77,048 $173,199 $154,956 
Debt securities7,473 5,984 14,977 11,339 
Equity investments and other1,212 309 2,223 1,920 
Total interest income99,416 83,341 190,399 168,215 
Interest expense:
Deposits4,317 6,325 8,358 14,821 
Borrowed funds4,302 3,000 7,017 5,774 
Total interest expense8,619 9,325 15,375 20,595 
Net interest income90,797 74,016 175,024 147,620 
Credit loss expense (benefit) 1,254 (6,460)3,105 (7,080)
Net interest income after credit loss expense (benefit) 89,543 80,476 171,919 154,700 
Other income:
Bankcard services revenue3,310 3,591 6,273 6,643 
Trust and asset management revenue658 591 1,267 1,190 
Fees and service charges7,646 3,809 10,706 7,546 
Net gain on sales of loans3 1,279 180 3,195 
Net (loss) gain on equity investments(8,078)576 (10,864)8,863 
Net gain (loss) from other real estate operations50 (1)48 (9)
Income from bank owned life insurance1,422 1,716 3,525 3,131 
Commercial loan swap income2,294 73 5,075 1,184 
Other236 169 183 895 
Total other income7,541 11,803 16,393 32,638 
Operating expenses:
Compensation and employee benefits33,153 29,912 63,848 58,278 
Occupancy4,758 5,314 10,502 10,375 
Equipment1,336 1,306 2,706 2,884 
Marketing971 625 1,587 1,059 
Federal deposit insurance and regulatory assessments1,788 1,099 3,678 2,963 
Data processing6,170 4,402 11,906 8,433 
Check card processing1,515 1,303 2,497 2,675 
Professional fees2,472 2,391 5,794 5,228 
Amortization of core deposit intangible1,178 1,361 2,388 2,756 
Branch consolidation expense, net546 26 948 1,037 
Merger related expenses196 446 2,161 827 
Other operating expense4,578 3,485 8,141 6,838 
Total operating expenses58,661 51,670 116,156 103,353 
Income before provision for income taxes38,423 40,609 72,156 83,985 
Provision for income taxes8,940 10,054 16,914 20,733 
Net income29,483 30,555 55,242 63,252 
Net income attributable to non-controlling interest522 — 522 — 
Net income attributable to OceanFirst Financial Corp.28,961 30,555 54,720 63,252 
Dividends on preferred shares1,004 1,004 2,008 2,008 
Net income available to common stockholders$27,957 $29,551 $52,712 $61,244 
Basic earnings per share$0.48 $0.49 $0.90 $1.02 
Diluted earnings per share$0.47 $0.49 $0.89 $1.02 
Average basic shares outstanding58,894 59,701 58,823 59,776 
Average diluted shares outstanding58,995 59,966 58,975 60,040 
See accompanying Notes to Unaudited Consolidated Financial Statements.
20
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
 (Unaudited)(Unaudited)
Net income$29,483 $30,555 $55,242 $63,252 
Other comprehensive loss:
Net unrealized loss on debt securities (net of tax benefit of $4,460 and $8,388 in 2022 and tax benefit of $102 and $214 in 2021, respectively)
(13,996)(387)(26,368)(803)
Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $61 and $126 in 2022 and tax expense of $70 and $143 in 2021)
89 101 178 208 
Reclassification adjustment for gains included in net income (net of tax benefit of $5 and $26 in 2022)
(16)— (82)— 
Total other comprehensive loss, net of tax(13,923)(286)(26,272)(595)
Total comprehensive income15,560 30,269 28,970 62,657 
Less: comprehensive income attributable to non-controlling interest522 — 522 — 
Comprehensive income attributable to OceanFirst Financial Corp.15,038 30,269 28,448 62,657 
Less: Dividends on preferred shares1,004 1,004 2,008 2,008 
Comprehensive income available to common stockholders$14,034 $29,265 $26,440 $60,649 
See accompanying Notes to Unaudited Consolidated Financial Statements.
21

OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended June 30, 2022 and 2021
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, 2021$1 $610 $1,142,290 $398,280 $312 $(7,129)$(35,645)$— $1,498,719 
Net income— — — 30,555 — — — — 30,555 
Other comprehensive loss, net of tax— — — — (286)— — — (286)
Stock compensation— — 1,489 — — — — — 1,489 
Allocation of ESOP stock— — 63 — — 305 — — 368 
Cash dividend $0.17 per share
— — — (10,173)— — — — (10,173)
Exercise of stock options— 1 65 — — — — — 66 
Repurchase 500,000 shares of common stock
— — — — — — (10,945)— (10,945)
Preferred stock dividend— — — (1,004)— — — — (1,004)
Balance at June 30, 2021$1 $611 $1,143,907 $417,658 $26 $(6,824)$(46,590)$— $1,508,789 
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 

See accompanying Notes to Unaudited Consolidated Financial Statements.














22
OceanFirst Financial Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(dollars in thousands, except per share amounts)
(Unaudited)
For the Six Months Ended June 30, 2022 and 2021
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, 2020$1 $609 $1,137,715 $378,268 $621 $(7,433)$(25,651)$— $1,484,130 
Net income— — — 63,252 — — — — 63,252 
Other comprehensive loss, net of tax— — — — (595)— — — (595)
Stock compensation— — 2,726 — — — — — 2,726 
Allocation of ESOP stock— — 111 — — 609 — — 720 
Cash dividend $0.34 per share
— — — (20,325)— — — — (20,325)
Exercise of stock options— 2 3,355 (1,529)— — — — 1,828 
Repurchase 1,000,000 shares of common stock
— — — — — — (20,939)— (20,939)
Preferred stock dividend— — — (2,008)— — — — (2,008)
Balance at June 30, 2021$1 $611 $1,143,907 $417,658 $26 $(6,824)$(46,590)$— $1,508,789 
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 

See accompanying Notes to Unaudited Consolidated Financial Statements.
23
OceanFirst Financial Corp.
Consolidated Statements of Cash Flows
(dollars in thousands)
 For the Six Months Ended June 30,
 20222021
 (Unaudited)
Cash flows from operating activities:
Net income$55,242 $63,252 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment5,627 4,066 
Allocation of ESOP stock1,247 720 
Stock compensation3,400 2,726 
Net excess tax expense on stock compensation217 93 
Amortization of servicing asset12 50 
Net premium amortization in excess of discount accretion on securities3,714 2,923 
Net amortization of deferred costs on borrowings276 489 
Amortization of core deposit intangible2,388 2,756 
Net accretion of purchase accounting adjustments(5,384)(6,800)
Net amortization of deferred costs and discounts on loans414 70 
Provision (benefit) for credit losses3,105 (7,080)
Net gain on sale of other real estate owned(54)— 
Net write down of fixed assets held-for-sale to net realizable value1,403 552 
Net gain on sale of fixed assets(63)(1)
Net loss (gain) on equity securities10,864 (8,863)
Net gain on sales of loans(180)(3,195)
Proceeds from sales of residential loans held for sale727 100,251 
Mortgage loans originated for sale(703)(53,025)
Increase in value of bank owned life insurance(3,525)(3,131)
Net gain on sale of assets held for sale(1,394)(318)
(Increase) decrease in interest and dividends receivable(1,578)7,255 
Deferred tax benefit(47)(95)
(Increase) decrease in other assets(55,494)35,683 
Increase in other liabilities106,082 424 
Total adjustments71,054 75,550 
Net cash provided by operating activities126,296 138,802 
Cash flows from investing activities:
Net increase in loans receivable(646,428)(57,435)
Proceeds from sale of loans12,167 825 
Purchase of residential loan pool(161,701)— 
Premiums paid on purchased loan pool(495)— 
Purchase of debt securities available-for-sale(63,568)(117,421)
Purchase of debt securities held-to-maturity(25,204)(335,071)
Purchase of equity investments(3,298)(72,414)
Proceeds from maturities and calls of debt securities available-for-sale63,750 60,850 
Proceeds from maturities and calls of debt securities held-to-maturity17,700 12,470 
Proceeds from sales of debt securities available-for-sale25,257 — 
Proceeds from sale of equity investments17,734 98,776 
Principal repayments on debt securities available-for-sale— 85 
Principal repayments on debt securities held-to-maturity77,510 111,917 
Proceeds from bank owned life insurance2,502 8,776 
Proceeds from the redemption of restricted equity investments109,543 826 
Purchases of restricted equity investments(132,395)(1,287)
Proceeds from sale of other real estate owned160 — 
Proceeds from sales of assets held-for-sale6,100 2,601 
Purchases of premises and equipment(11,745)(15,250)
Net cash consideration received for acquisition38,609 — 
Net cash used in investing activities(673,802)(301,752)
24
OceanFirst Financial Corp.
Consolidated Statements of Cash Flows (Continued)
(dollars in thousands)
 For the Six Months Ended June 30,
 20222021
 (Unaudited)
Cash flows from financing activities:
Increase (decrease) in deposits$99,068 $(11,452)
(Decrease) increase in short-term borrowings(13,274)13,021 
Net proceeds from FHLB advances488,750 — 
Repayments of other borrowings(35,052)(7,557)
Increase in advances by borrowers for taxes and insurance3,335 3,985 
Exercise of stock options251 1,828 
Payment of employee taxes withheld from stock awards(1,472)(1,175)
Purchase of treasury stock(7,396)(20,939)
Dividends paid(22,023)(22,333)
Distributions to non-controlling interest(406)— 
Net cash provided by (used in) financing activities511,781 (44,622)
Net decrease in cash and due from banks and restricted cash(35,725)(207,572)
Cash and due from banks and restricted cash at beginning of period224,784 1,318,661 
Cash and due from banks and restricted cash at end of period$189,059 $1,111,089 
Supplemental Disclosure of Cash Flow Information:
Cash and due from banks at beginning of period$204,949 $1,272,134 
Restricted cash at beginning of period19,835 46,527 
Cash and due from banks and restricted cash at beginning of period$224,784 $1,318,661 
Cash and due from banks at end of period$189,019 $1,084,029 
Restricted cash at end of period40 27,060 
Cash and due from banks and restricted cash at end of period$189,059 $1,111,089 
Cash paid during the period for:
Interest$15,059 $20,943 
Income taxes3,633 25,699 
Non-cash activities:
Accretion of unrealized loss on securities reclassified to held-to-maturity304 351 
Net loan recoveries(83)(56)
Transfer of loans receivable to loans held-for-sale12,011 — 
Transfer of premises and equipment to assets held-for-sale2,776 533 
Acquisition:
Non-cash assets acquired:
Other current assets$238 $— 
Premises and equipment18 — 
Right of use (“ROU”) asset779 — 
Other assets81 — 
Total non-cash assets acquired$1,116 $— 
Liabilities assumed:
Lease liability$779 $— 
Other liabilities43,937 — 
Total liabilities assumed$44,716 $— 

See accompanying Notes to Unaudited Consolidated Financial Statements.
25
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements


Note 1. Basis of Presentation
The consolidated financial statements include the accounts of OceanFirst Financial Corp. (the “Company”), its wholly-owned subsidiaries, OceanFirst Bank N.A. (the “Bank”) and OceanFirst Risk Management, Inc., the Bank’s direct and indirect wholly-owned subsidiaries, OceanFirst REIT Holdings, Inc., OceanFirst Management Corp., OceanFirst Realty Corp., Casaba Real Estate Holdings Corporation, and Country Property Holdings, Inc; and a majority controlling interest in Trident Abstract Title Agency, LLC. Certain other subsidiaries were dissolved in 2022 and are included in the consolidated financial statements for previous periods. All significant intercompany accounts and 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 six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the full year 2022 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 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 on Form 10-K for the year ended December 31, 2021.

26
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements

Note 2. Business Combinations
Trident Acquisition
On April 1, 2022, the Company completed its acquisition of a majority controlling interest of 60% in Trident. Trident provides commercial and residential title services throughout New Jersey; and through strategic alliances can also service client’s title insurance needs outside of New Jersey. The acquisition is expected to be complimentary to the Company’s existing consumer and commercial lending business. Total consideration paid was $7.1 million and goodwill from the transaction amounted to $5.8 million.
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. The excess of consideration paid over the estimated fair value of the net assets acquired, excluding the net assets attributable to the non-controlling interest, has been recorded as goodwill.
The Company consolidated Trident’s assets, liabilities and components of comprehensive income within its consolidated results. Thus, the consolidated results include amounts attributable to the Company and the non-controlling interest. Amounts attributable to the non-controlling interest are presented separately as a single line on the Consolidated Statements of Income (net income attributable to non-controlling interest) and the Consolidated Statements of Financial Condition (non-controlling interest in stockholders’ equity). Amounts attributed to the non-controlling interest are based upon the ownership interest in Trident that the Company does not own. For further discussion on the accounting for this arrangement refer to Note 11 Variable Interest Entity, to this Form 10-Q.
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed by the Company at the date of the acquisition for Trident, net of total consideration paid (in thousands):
At April 1, 2022
Estimated
Fair Value
Total purchase price:$7,084 
Assets acquired:
Cash and cash equivalents$45,693 
Other current assets238 
Premises and equipment18 
ROU asset779 
Other assets81 
Total assets acquired46,809 
Liabilities assumed:
Lease liability779 
Other liabilities43,937 
Total liabilities assumed44,716 
Net assets acquired$2,093 
Net assets attributable to non-controlling interest$836 
Goodwill recorded$5,827 
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.
27
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 3. Earnings per Share
The following reconciles shares outstanding for basic and diluted earnings per share for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
Weighted average shares outstanding59,300 60,133 59,302 60,216 
Less: Unallocated ESOP shares(393)(369)(408)(378)
 Unallocated incentive award shares(13)(63)(71)(62)
Average basic shares outstanding58,894 59,701 58,823 59,776 
Add: Effect of dilutive securities:
Incentive awards101 265 152 264 
Average diluted shares outstanding58,995 59,966 58,975 60,040 
For the three and six months ended June 30, 2022, antidilutive stock options of 1,577,000 and 1,573,000, respectively, were excluded from the earnings per share calculation. For the three and six months ended June 30, 2021, antidilutive stock options of 1,589,000 and 1,666,000, respectively, were excluded from the earnings per share calculation.
28
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 4. Securities
The amortized cost, estimated fair value, and allowance for securities credit losses of debt securities available-for-sale and held-to-maturity at June 30, 2022 and December 31, 2021 are as follows (in thousands):
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value		Allowance for Credit Losses
At June 30, 2022
Debt securities available-for-sale:
U.S. government and agency obligations$131,394 $1 $(5,591)$125,804 $— 
Corporate debt securities5,000 — (410)4,590 — 
Asset-backed securities296,232 — (17,251)278,981 — 
Agency commercial mortgage-backed securities (“MBS”)111,135 — (13,234)97,901 — 
Total debt securities available-for-sale$543,761 $1 $(36,486)$507,276 $— 
Debt securities held-to-maturity:
State, municipal and sovereign debt obligations$268,473 $109 $(21,443)$247,139 $(291)
Corporate debt securities62,212 555 (3,247)59,520 (972)
Mortgage-backed securities:
Agency residential701,478 218 (58,953)642,743 — 
Agency commercial7,741 36 (35)7,742 — 
Non-agency commercial32,007 — (1,619)30,388 (30)
Total mortgage-backed securities741,226 254 (60,607)680,873 (30)
Total debt securities held-to-maturity$1,071,911 $918 $(85,297)$987,532 $(1,293)
Total debt securities$1,615,672 $919 $(121,783)$1,494,808 $(1,293)
At December 31, 2021
Debt securities available-for-sale:
U.S. government and agency obligations$164,756 $1,135 $(471)$165,420 $— 
Corporate debt securities5,000 42 (11)5,031 — 
Asset-backed securities298,976 41 (1,489)297,528 — 
Agency commercial MBS101,142 57 (923)100,276 — 
Total debt securities available-for-sale$569,874 $1,275 $(2,894)$568,255 $— 
Debt securities held-to-maturity:
State, municipal, and sovereign debt obligations$281,389 $10,185 $(1,164)$290,410 $(85)
Corporate debt securities68,823 1,628 (1,279)69,172 (1,343)
Mortgage-backed securities:
Agency residential756,844 6,785 (7,180)756,449 — 
Agency commercial4,385 7 (44)4,348 — 
Non-agency commercial32,107 362 (104)32,365 (39)
Total mortgage-backed securities793,336 7,154 (7,328)793,162 (39)
Total debt securities held-to-maturity$1,143,548 $18,967 $(9,771)$1,152,744 $(1,467)
Total debt securities$1,713,422 $20,242 $(12,665)$1,720,999 $(1,467)

There was no allowance for securities credit losses on debt securities available-for-sale at June 30, 2022 or December 31, 2021. The unrealized losses across security classes were due to interest rate movements. In addition, the asset-backed securities, which are largely comprised of collateralized-loan obligations, and the corporate debt securities were also impacted by credit spread widening across the fixed income markets. All of these securities are rated investment grade.
29
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

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, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Allowance for securities credit losses
Beginning balance$(1,380)$(1,717)$(1,467)$(1,715)
Credit loss benefit87 108 174 106 
Total ending allowance balance$(1,293)$(1,609)$(1,293)$(1,609)
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 as 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, 2022, aggregated by credit quality indicator, are as follows (in thousands):
Investment GradeNon-Investment Grade/Non-ratedTotal
As of June 30, 2022
State, municipal and sovereign debt obligations$266,455 $2,018 $268,473 
Corporate debt securities46,340 15,872 62,212 
Non-agency commercial MBS32,007 — 32,007 
Total debt securities held-to-maturity$344,802 $17,890 $362,692 
During 2021 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 Statement of Financial Condition, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the debt securities held-to-maturity at June 30, 2022 and December 31, 2021 is as follows (in thousands): 
June 30,December 31,
20222021
Amortized cost$1,071,911 $1,143,548 
Net loss on date of transfer from available-for-sale(13,556)(13,556)
Allowance for securities credit losses(1,293)(1,467)
Accretion of net unrealized loss on securities reclassified as held-to-maturity10,972 10,668 
Carrying value$1,068,034 $1,139,193 
There were $21,000 and $108,000 of realized losses on debt securities for the three and six months ended June 30, 2022. There were no realized gains or losses on debt securities for the three and six months ended June 30, 2021.
The amortized cost and estimated fair value of debt securities at June 30, 2022 by contractual maturity are shown below (in thousands).
June 30, 2022Amortized
Cost		Estimated
Fair Value
Less than one year$81,436 $81,117 
Due after one year through five years165,148 156,828 
Due after five years through ten years221,620 206,328 
Due after ten years295,107 271,762 
$763,311 $716,035 
30
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

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 June 30, 2022, corporate debt securities, state and municipal obligations, and asset-backed securities with an amortized cost of $61.1 million, $87.2 million, and $296.2 million, respectively, and an estimated fair value of $58.0 million, $83.4 million, and $279.0 million, respectively, were callable prior to the maturity date. Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.
The estimated fair value of securities pledged for the ability to draw on FHLB advances, access to the Federal Reserve discount window, and other borrowings and for other purposes required by law amounted to $941.9 million and $1.14 billion at June 30, 2022 and December 31, 2021, respectively, which includes $110.6 million and $142.9 million at June 30, 2022 and December 31, 2021, respectively, pledged as collateral for securities sold under agreements to repurchase.
31
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

The estimated fair value and unrealized losses for debt securities available-for-sale and held-to-maturity at June 30, 2022 and December 31, 2021, 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, 2022
Debt securities available-for-sale:
U.S. government and agency obligations$120,061 $(5,543)$5,742 $(48)$125,803 $(5,591)
Corporate debt securities4,590 (410)— — 4,590 (410)
Asset-backed securities256,738 (15,945)22,243 (1,306)278,981 (17,251)
Agency commercial MBS97,901 (13,234)— — 97,901 (13,234)
Total debt securities available-for-sale479,290 (35,132)27,985 (1,354)507,275 (36,486)
Debt securities held-to-maturity:
State, municipal and sovereign debt obligations201,586 (19,834)15,084 (1,609)216,670 (21,443)
Corporate debt securities6,904 (224)35,308 (3,023)42,212 (3,247)
MBS:
Agency residential453,637 (38,586)158,125 (20,367)611,762 (58,953)
Agency commercial2,283 (35)2,283 (35)
Non-agency commercial30,388 (1,619)— — 30,388 (1,619)
Total MBS484,025 (40,205)160,408 (20,402)644,433 (60,607)
Total debt securities held-to-maturity692,515 (60,263)210,800 (25,034)903,315 (85,297)
Total debt securities$1,171,805 $(95,395)$238,785 $(26,388)$1,410,590 $(121,783)
At December 31, 2021
Debt securities available-for-sale:
U.S. government and agency obligations$82,395 $(471)$— $— $82,395 $(471)
Corporate debt securities1,989 (11)— — 1,989 (11)
Asset-backed securities279,486 (1,489)— — 279,486 (1,489)
Agency commercial MBS80,726 (923)— — 80,726 (923)
Total debt securities available-for-sale444,596 (2,894)— — 444,596 (2,894)
Debt securities held-to-maturity:
State, municipal, and sovereign debt obligations75,329 (1,063)4,383 (101)79,712 (1,164)
Corporate debt securities38,304 (1,279)— — 38,304 (1,279)
MBS:
Agency residential445,399 (5,822)50,133 (1,358)495,532 (7,180)
Agency commercial2,255 (41)886 (3)3,141 (44)
Non-agency commercial10,722 (104)— — 10,722 (104)
Total MBS458,376 (5,967)51,019 (1,361)509,395 (7,328)
Total debt securities held-to-maturity572,009 (8,309)55,402 (1,462)627,411 (9,771)
Total debt securities$1,016,605 $(11,203)$55,402 $(1,462)$1,072,007 $(12,665)

The Company concluded that debt securities were not impaired at June 30, 2022 based on a consideration of several 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 change in net unrealized losses were primarily due to changes in the general credit and interest rate environment and not credit quality. Historically, the Company has not utilized securities sales as a source of liquidity and the Company’s liquidity plans include adequate sources of liquidity outside the securities portfolio.
32
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Equity Investments
At June 30, 2022 and December 31, 2021, the Company held equity investments of $75.3 million and $101.2 million, respectively. The equity investments primarily comprised of select financial services institutions’ common and preferred stocks and, to a lesser extent, other equity investments in funds and other financial institutions.
The realized and unrealized gains or losses on equity securities for the three and six months ended June 30, 2022 and 2021 are shown in the table below (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net (loss) gain on equity investments$(8,078)$576 $(10,864)$8,863 
Less: Net (losses) gains recognized on equity securities sold(231)— 1,351 8,123 
Unrealized (loss) gain recognized on equity securities still held$(7,847)$576 $(12,215)$740 
33
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 5. Loans Receivable, Net
Loans receivable, net at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
June 30,December 31,
20222021
Commercial:
Commercial real estate – investor$4,808,965 $4,378,061 
Commercial real estate – owner occupied1,020,873 1,055,065 
Commercial and industrial (1)
584,464 449,224 
Total commercial6,414,302 5,882,350 
Consumer:
Residential real estate2,758,269 2,479,701 
Home equity loans and lines and other consumer (“other consumer”)252,314 260,819 
Total consumer3,010,583 2,740,520 
Total loans receivable9,424,885 8,622,870 
Deferred origination costs, net of fees7,864 9,332 
Allowance for loan credit losses(52,061)(48,850)
Total loans receivable, net$9,380,688 $8,583,352 
(1) The commercial and industrial loans balance at June 30, 2022 and December 31, 2021 includes Paycheck Protection Program loans of $6.5 million and $22.9 million, respectively.
The Company categorizes all 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.

34
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):
202220212020201920182017 and priorRevolving lines of creditTotal
June 30, 2022
Commercial real estate - investor
Pass$736,901 $1,361,548 $591,183 $511,811 $221,225 $993,374 $296,251 $4,712,293 
Special Mention— — 195 19,413 9,349 14,228 2,187 45,372 
Substandard— — — 22,432 2 27,271 1,595 51,300 
Total commercial real estate - investor736,901 1,361,548 591,378 553,656 230,576 1,034,873 300,033 4,808,965 
Commercial real estate - owner occupied
Pass55,822 119,096 68,901 128,781 88,826 499,529 9,703 970,658 
Special Mention— — — — 3,226 5,611 — 8,837 
Substandard— — — 4,577 5,366 31,435 — 41,378 
Total commercial real estate - owner occupied55,822 119,096 68,901 133,358 97,418 536,575 9,703 1,020,873 
Commercial and industrial
Pass40,999 30,167 16,758 17,695 12,796 51,537 404,641 574,593 
Special Mention— — — 167 247 274 2,947 3,635 
Substandard— — 133 1,676 666 1,866 1,895 6,236 
Total commercial and industrial40,999 30,167 16,891 19,538 13,709 53,677 409,483 584,464 
Residential real estate (1)
Pass459,564 865,089 440,402 257,136 108,117 622,819 — 2,753,127 
Special Mention— — — 1,482 — 1,208 — 2,690 
Substandard— — — 505 288 1,659 — 2,452 
Total residential real estate459,564 865,089 440,402 259,123 108,405 625,686 — 2,758,269 
Other consumer (1)
Pass20,361 26,050 17,043 16,790 44,473 125,391 — 250,108 
Special Mention— — — 71 — 207 — 278 
Substandard— — — — 18 1,910 — 1,928 
Total other consumer20,361 26,050 17,043 16,861 44,491 127,508 — 252,314 
Total loans$1,313,647 $2,401,950 $1,134,615 $982,536 $494,599 $2,378,319 $719,219 $9,424,885 
(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.


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

202120202019201820172016 and priorRevolving lines of creditTotal
December 31, 2021
Commercial real estate - investor
Pass$1,387,753 $609,916 $535,551 $274,662 $375,646 $800,089 $255,613 $4,239,230 
Special Mention— — 23,794 9,400 2,731 28,663 582 65,170 
Substandard— 4,267 28,802 468 8,495 28,228 3,401 73,661 
Total commercial real estate - investor1,387,753 614,183 588,147 284,530 386,872 856,980 259,596 4,378,061 
Commercial real estate - owner occupied
Pass116,355 71,196 125,212 91,531 109,232 449,966 10,913 974,405 
Special Mention— — 1,365 3,829 479 14,371 2 20,046 
Substandard— — 14,166 8,549 5,606 31,576 717 60,614 
Total commercial real estate - owner occupied116,355 71,196 140,743 103,909 115,317 495,913 11,632 1,055,065 
Commercial and industrial
Pass42,955 22,573 22,878 16,404 8,671 50,887 271,818 436,186 
Special Mention— — 231 350 85 172 3,645 4,483 
Substandard— 457 2,281 813 198 2,029 2,777 8,555 
Total commercial and industrial42,955 23,030 25,390 17,567 8,954 53,088 278,240 449,224 
Residential real estate (1)
Pass876,135 475,134 288,699 127,756 105,385 602,331 — 2,475,440 
Special Mention— 212 — 61 — 1,313 — 1,586 
Substandard— — — — 351 2,324 — 2,675 
Total residential real estate876,135 475,346 288,699 127,817 105,736 605,968 — 2,479,701 
Other consumer (1)
Pass26,512 19,168 18,179 51,954 17,955 123,783 — 257,551 
Special Mention— — — — — 322 — 322 
Substandard— — — 18 — 2,928 — 2,946 
Total other consumer26,512 19,168 18,179 51,972 17,955 127,033 — 260,819 
Total loans$2,449,710 $1,202,923 $1,061,158 $585,795 $634,834 $2,138,982 $549,468 $8,622,870 
(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
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, 2022 and 2021 is 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, 2022
Allowance for credit losses on loans
Balance at beginning of period$23,637 $5,053 $4,649 $16,277 $982 $50,598 
Credit loss (benefit) expense(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 three months ended June 30, 2021
Allowance for credit losses on loans
Balance at beginning of period$36,922 $7,827 $2,541 $11,280 $1,406 $59,976 
Credit loss (benefit) expense(3,583)(1,483)1,871 (2,462)(219)(5,876)
Charge-offs(311)— (33)— (76)(420)
Recoveries9 6 25 — 156 196 
Balance at end of period$33,037 $6,350 $4,404 $8,818 $1,267 $53,876 
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 
Credit loss (benefit) expense(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 
For the six months ended June 30, 2021
Allowance for credit losses on loans
Balance at beginning of period$26,703 $15,054 $5,390 $11,818 $1,770 $60,735 
Credit loss expense (benefit)6,566 (8,740)(1,004)(2,797)(940)(6,915)
Charge-offs(345)— (33)(242)(156)(776)
Recoveries113 36 51 39 593 832 
Balance at end of period$33,037 $6,350 $4,404 $8,818 $1,267 $53,876 
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, non-accruing. At June 30, 2022 and December 31, 2021, the Company had collateral dependent loans with an amortized cost balance as follows: commercial real estate - investor of $2.6 million and $3.6 million, respectively, commercial real estate - owner occupied of $2.2 million and $11.9 million, respectively, and commercial and industrial of $364,000 and $277,000, 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 $261,000 and $438,000 at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022 and December 31, 2021, the amount of foreclosed residential real estate property held by the Company was $0 and $106,000, respectively.









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

The following table presents the recorded investment in non-accrual loans, by loan portfolio segment as of June 30, 2022 and December 31, 2021 (in thousands):
June 30,December 31,
20222021
Commercial real estate – investor$2,609 $3,614 
Commercial real estate – owner occupied8,233 11,904 
Commercial and industrial364 277 
Residential real estate5,846 6,114 
Other consumer3,701 3,585 
$20,753 $25,494 
 
At June 30, 2022 and December 31, 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans. At June 30, 2022, there were no loans that were 90 days or greater past due and still accruing. At December 31, 2021, there was one loan for $46,000 that was 90 days or greater past due and still accruing interest that was fully paid on January 14, 2022.
The following table presents the aging of the recorded investment in past due loans as of June 30, 2022 and December 31, 2021 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, 2022
Commercial real estate – investor$1,667 $978 $1,582 $4,227 $4,804,738 $4,808,965 
Commercial real estate – owner occupied181 1,883 85 2,149 1,018,724 1,020,873 
Commercial and industrial1,112 138 — 1,250 583,214 584,464 
Residential real estate— 2,690 2,452 5,142 2,753,127 2,758,269 
Other consumer631 278 1,928 2,837 249,477 252,314 
$3,591 $5,967 $6,047 $15,605 $9,409,280 $9,424,885 
December 31, 2021
Commercial real estate – investor$1,717 $102 $1,709 $3,528 $4,374,533 $4,378,061 
Commercial real estate – owner occupied599 — 575 1,174 1,053,891 1,055,065 
Commercial and industrial25 151 277 453 448,771 449,224 
Residential real estate9,705 1,586 2,675 13,966 2,465,735 2,479,701 
Other consumer339 322 2,946 3,607 257,212 260,819 
$12,385 $2,161 $8,182 $22,728 $8,600,142 $8,622,870 
The Company classifies certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts and/or the restructuring of scheduled principal payments. Residential real estate and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered TDR loans. For these loans, the Bank retains its security interest in the real estate collateral. At June 30, 2022 and December 31, 2021, TDR loans totaled $17.4 million and $23.6 million, respectively. At June 30, 2022 and December 31, 2021, there were $10.5 million and $11.3 million, respectively, of TDR loans included in the non-accrual loan totals. At June 30, 2022 the Company had a $744,000 specific reserve allocated to a loan that was classified as a TDR loan. At December 31, 2021, the Company had no specific reserves allocated to loans that were classified as TDR loans. Non-accrual loans which become TDR loans are generally returned to accrual status after six months of performance. In addition to the TDR loans included in non-accrual loans, the Company also has TDR loans classified as accruing loans, which totaled $6.9 million and $12.3 million at June 30, 2022 and December 31, 2021, respectively. 
38
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

 
The following table presents information about TDR loans which occurred during the three and six months ended June 30, 2022 and 2021 (dollars in thousands):
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Three months ended June 30, 2022
Troubled debt restructurings:NoneNoneNone
Three months ended June 30, 2021
Troubled debt restructurings:
Commercial real estate – investor1 $4,903 $4,903 
Residential real estate3 244 336 
Six months ended June 30, 2022
Troubled debt restructurings:
Commercial and industrial1 $65 $65 
Other consumer3 991 1,109 
Six months ended June 30, 2021
Troubled debt restructurings:
Commercial real estate – investor1$4,903 $4,903 
Residential real estate3244336
Other consumer 22633
There were no TDR loans that defaulted during the three and six months ended June 30, 2022, which were modified within the preceding year. There was one TDR commercial real estate - investor loan for $923,000 that defaulted during the three and six months ended June 30, 2021, which was modified within the preceding year and the loan was subsequently paid in full as of June 30, 2022.
Note 6. Deposits
The major types of deposits at June 30, 2022 and December 31, 2021 were as follows (in thousands):
Type of AccountJune 30,December 31,
20222021
Non-interest-bearing$2,312,126 $2,412,056 
Interest-bearing checking3,696,067 4,201,736 
Money market deposit716,782 736,090 
Savings1,606,534 1,607,933 
Time deposits1,499,975 775,001 
Total deposits$9,831,484 $9,732,816 
Included in time deposits at June 30, 2022 and December 31, 2021 was $90.3 million and $145.4 million, respectively, in deposits of $250,000 or more. Time deposits also include brokered deposits of $887.6 million and $25.0 million at June 30, 2022 and December 31, 2021, respectively.
39
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 7. Borrowed Funds
Borrowed funds at June 30, 2022 and December 31, 2021 were as follows (in thousands):
June 30,December 31,
20222021
FHLB advances$488,750 $— 
Securities sold under agreements to repurchase with customers105,495 118,769 
Other borrowings194,654 229,141 
Total borrowed funds$788,899 $347,910 
At June 30, 2022, there was $488.8 million outstanding in overnight borrowings from the FHLB, as compared to $0 at December 31, 2021. There were no FHLB term advances at June 30, 2022 and December 31, 2021.
In March 2022, the Company redeemed $35.0 million of subordinated debt due September 30, 2026. The debt carried an interest rate of 4.14% based on a floating rate of three months LIBOR plus 392 basis points.

40
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 8. 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 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. 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-Sale
Debt securities classified as available-for-sale are reported at fair value. Fair value for these debt securities is determined using inputs other than quoted prices that are based on market observable information (Level 2). Level 2 debt securities are priced through third-party pricing services or security industry sources that actively participate in the buying and selling of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing is a mathematical technique used principally to value certain debt securities without relying exclusively on quoted prices for the specific securities, but comparing the debt securities to benchmark or comparable debt securities.
Equity Investments
Equity investments with readily determinable fair value are reported at fair value. Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1) or using inputs other than quoted prices that are based on market observable information (Level 2). Fair value for certain securities, including convertible preferred stock, was determined using broker or dealer quotes with limited levels of activity and price transparency (Level 3). Equity 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.
41
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Interest Rate Derivatives
The Company’s interest rate swaps and cap contracts are reported at fair value utilizing discounted cash flow models provided by an independent, third-party and observable market data (Level 2). When entering into an interest rate swap or cap contract, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of the contract counterparty.
Other Real Estate Owned and Loans Individually Measured for Impairment
Other real estate owned and loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs. Fair value is based on independent appraisals (Level 3).
The following table summarizes financial assets and financial liabilities measured at fair value as of June 30, 2022 and December 31, 2021, 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, 2022
Items measured on a recurring basis:
Debt securities available-for-sale
$507,276 $— $507,276 $— 
Equity investments
61,963 763 61,200 — 
Interest rate derivative asset74,082 — 74,082 — 
Interest rate derivative liability(74,113)— (74,113)— 
Items measured on a non-recurring basis:
Equity investments
13,306 — 13,306 
Loans measured for impairment based on the fair value of the underlying collateral (1)
5,426 — — 5,426 
December 31, 2021
Items measured on a recurring basis:
Debt securities available-for-sale
$568,255 $— $568,255 $— 
Equity investments
90,726 14,608 73,400 2,718 
Interest rate derivative asset22,787 — 22,787 — 
Interest rate derivative liability(22,855)— (22,855)— 
Items measured on a non-recurring basis:
Equity investments10,429 — — 10,429 
Other real estate owned106 — — 106 
Loans measured for impairment based on the fair value of the underlying collateral(1)
16,233 — — 16,233 
(1) 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.

42
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

The following table reconciles, for the three and six months ended June 30, 2022 and 2021, 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 Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Beginning balance$— $7,938 $2,718 $2,540 
Total gains included in earnings— 40 — 438 
Purchases— 40 — 5,040 
Transfers out of Level 3— — (2,718)— 
Ending balance$— $8,018 $— $8,018 
The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods. There were no transfers into or out of Level 3 for the three months ended June 30, 2022. During the six months ended June 30, 2022, the Company executed its right to convert $2.7 million preferred stock into common stock, which resulted in a transfer from Level 3 into Level 1. There were no transfers into or out of Level 3 assets and liabilities in the fair value hierarchy for the three and six months ended June 30, 2021.

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
Debt 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 2 and, infrequently, Level 3 inputs. Most of the Company’s debt securities 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.
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 decides 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 all securities except for certain state and municipal obligations, known as bond anticipation notes, as well as certain debt securities where management utilized Level 3 inputs, such as broker or dealer quotes with limited levels of activity and price transparency.
Restricted 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 as stipulated by the respective entities.
Loans Receivable and Loans Held-for-Sale
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential real estate, consumer and commercial. Each loan category is further segmented into fixed and adjustable rate interest terms.
Fair value of performing and non-performing loans was estimated by discounting the future cash flows, net of estimated prepayments, at a rate for which similar loans would be originated to new borrowers with similar terms.
43
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

The fair value of loans was measured using the exit price notion.
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 is, by definition, equal to the amount payable on demand. The related insensitivity of the majority of these deposits to interest rate changes creates a significant inherent value which is not reflected in the fair value reported.
Time Deposits
The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase with Customers
Fair value approximates the carrying amount as these borrowings are payable on demand and the interest rate adjusts monthly.
Borrowed Funds
Fair value estimates are based on discounting contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities.
The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of June 30, 2022 and December 31, 2021 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, 2022
Financial Assets:
Cash and due from banks$189,019 $189,019 $— $— 
Debt securities held-to-maturity1,068,034 — 975,027 12,505 
Restricted equity investments76,047 — — 76,047 
Loans receivable, net and loans held-for-sale9,380,688 — — 9,013,653 
Financial Liabilities:
Deposits other than time deposits8,331,509 — 8,331,509 — 
Time deposits1,499,975 — 1,472,791 — 
FHLB advances and other borrowings683,404 — 697,444 — 
Securities sold under agreements to repurchase with customers105,495 105,495 — — 
December 31, 2021
Financial Assets:
Cash and due from banks$204,949 $204,949 $— $— 
Debt securities held-to-maturity1,139,193 — 1,138,529 14,215 
Restricted equity investments53,195 — — 53,195 
Loans receivable, net and loans held-for-sale8,583,352 — — 8,533,506 
Financial Liabilities:
Deposits other than time deposits8,957,815 — 8,957,815 — 
Time deposits775,001 — 773,766 — 
Other borrowings229,141 — 251,491 — 
Securities sold under agreements to repurchase with customers118,769 118,769 — — 
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
44
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

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. 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, 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.

45
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 9. Derivatives, Hedging Activities and Other Financial Instruments
The Company enters into derivative financial instruments which involve, to varying degrees, interest rate, market and credit risk. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures, seeking to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The derivative financial instruments entered into by the Company are an economic hedge of a derivative offering to its customers. The Company does not use derivative financial instruments for trading purposes.
Customer Derivatives – Interest Rate Swaps and Cap Contracts
The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The Company also enters into interest rate cap contracts that enable commercial loan customers to lock in a cap on a variable-rate commercial loan agreement. This feature prevents the loan from repricing to a level that exceeds the cap contract’s specified interest rate, which serves to hedge the risk from rising interest rates. The Company then enters into an offsetting interest rate cap contract with a third party in order to economically hedge its exposure through the customer agreement.
The interest rate swaps and cap contracts with both the customers and third parties are not designated as hedges under FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, and are marked to market through earnings. As the interest rate swaps and cap contracts are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC Topic 820, Fair Value Measurements. The Company recognized a gain of $0 and $37,000 in commercial loan swap income resulting from the fair value adjustment for the three and six months ended June 30, 2022, respectively, as compared to a loss of $23,000 and a gain of $41,000 for the three and six months ended June 30, 2021, respectively. The notional amount of derivatives not designated as hedging instruments was $1.24 billion and $938.7 million at June 30, 2022 and December 31, 2021, respectively.
The table below presents the fair value of derivatives not designated as hedging instruments as well as their location on the consolidated statements of financial condition (in thousands):
Fair Value
Balance Sheet LocationJune 30,December 31,
20222021
Other assets$74,082 $22,787 
Other liabilities74,113 22,855 
Credit Risk-Related Contingent Features
The Company is a party to International Swaps and Derivatives Association agreements with third party broker-dealers that require a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties was $40,000 and $19.8 million at June 30, 2022 and December 31, 2021, respectively. The amount of collateral received from third parties was $69.1 million and $0 at June 30, 2022 and December 31, 2021, 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 $74.1 million and $22.9 million at June 30, 2022 and December 31, 2021, respectively.
46
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)

Note 10. Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company’s leases are comprised of real estate property for branches, automated teller machine locations and office space with terms extending through 2038. The Company has one existing finance lease, which has a lease term through 2029.
The following table represents the classification of the Company’s right-of-use assets and lease liabilities on the consolidated statements of financial condition (in thousands):
June 30,December 31,
20222021
Lease ROU AssetsClassification
Operating lease ROU assetsOther assets$20,467 $17,442 
Finance lease ROU assetPremises and equipment, net1,396 1,495 
Total lease ROU assets$21,863 $18,937 
Lease Liabilities
Operating lease liabilities (1)
Other liabilities$21,218 $17,982 
Finance lease liabilityOther borrowings1,802 1,904 
Total lease liabilities$23,020 $19,886 
(1) Operating lease liabilities excludes liabilities for future rent and estimated lease termination payments related to closed branches of $8.5 million and $8.2 million as of June 30, 2022 and December 31, 2021, respectively.
The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments. Lease agreements often include one or more options to renew the lease at the Company’s discretion. If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, Leases (Topic 842) requires the Company to use the rate implicit in the lease, provided the rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term. For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019. For the finance lease, the Company utilized its incremental borrowing rate at lease inception.
June 30,December 31,
20222021
Weighted-Average Remaining Lease Term
Operating leases7.17 years8.22 years
Finance lease7.10 years7.59 years
Weighted-Average Discount Rate
Operating leases2.83 %2.97 %
Finance lease5.63 5.63 






47
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,
2022202120222021
Lease Expense
Operating lease expense$1,440 $1,471 $2,698 $2,961 
Finance lease expense:
Amortization of ROU assets50 49 99 99 
Interest on lease liabilities(1)
26 28 52 57 
Total$1,516 $1,548 $2,849 $3,117 
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,249 $1,347 $2,411 $2,797 
Operating cash flows from finance leases26 28 52 57 
Financing cash flows from finance leases51 48 102 96 
(1)Included in borrowed funds interest expense on the consolidated statements of income. All other costs are included in occupancy expense.
Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of June 30, 2022 were as follows (in thousands):
Finance LeaseOperating Leases
For the Twelve Months Ending June 30,
2023$307 $4,174 
2024307 3,828 
2025307 3,936 
2026307 3,226 
2027307 2,492 
Thereafter645 6,168 
Total2,180 23,824 
Less: Imputed interest(378)(2,606)
Total lease liabilities$1,802 $21,218 

48
OceanFirst Financial Corp.
Notes to Unaudited Consolidated Financial Statements (Continued)


Note 11. Variable Interest Entity
On April 1, 2022, the Company acquired a 60% ownership in Trident, and held a variable interest in the entity. Trident meets the definition of 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. For further discussion on the acquisition of Trident refer to Note 2 Business Combinations, to this Form 10-Q.

The summarized financial information for the Company’s consolidated VIE consisted of the following (in thousands):
As of June 30, 2022
Cash and cash equivalents$45,795 
Other assets1,139 
Total assets46,934 
Other liabilities44,566 
Net assets$2,368 

49

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and the Bank are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary 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
For a summary of risk factors relevant to the Company, see Part I, Item 1A, “Risk Factors,” in the 2021 Form 10-K. There have been no material changes to risk factors relevant to the Company’s operations since December 31, 2021. Additional risks not presently known to the Company, or that the Company currently deems immaterial, may also adversely affect the business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On December 18, 2019, the Company announced the authorization by the Board of Directors to repurchase up to 5% of the Company’s then outstanding common stock, or 2.5 million shares. The repurchase plan has no expiration date. On June 25, 2021, the Company announced the authorization by the Board of Directors to repurchase up to an additional 5% of the Company’s outstanding common stock, or 3.0 million shares. The Company repurchased 272,779 shares of its common stock during the three month period ended June 30, 2022. At June 30, 2022, there were 2,934,438 shares available for repurchase under the Company’s stock repurchase programs.
PeriodTotal Number of
Shares Purchased		Average Price Paid per ShareTotal Number of
Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
April 1, 2022 through April 30, 2022— $— — 3,207,217 
May 1, 2022 through May 31, 2022143,760 19.14 143,760 3,063,457 
June 1, 2022 through June 30, 2022129,019 19.38 129,019 2,934,438 
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information

Not Applicable.

50
Item 6. Exhibits
 
Exhibit No:Exhibit DescriptionReference
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
101.0
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, 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)



51
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:August 4, 2022/s/ Christopher D. Maher
Christopher D. Maher
Chairman and Chief Executive Officer
DATE:August 4, 2022/s/ Patrick S. Barrett
Patrick S. Barrett
Executive Vice President and Chief Financial Officer

52
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