What changed in this filing

/stocks — the workspaceLOADING

Item 4. Controls and Procedures

2021-11-04 compared with 2021-08-05 · 210 added, 194 removed, 886 unchanged (31% of the section changed)

5 unchanged sentences

(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, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OceanFirst Financial Corp.

1 unchanged sentence

(dollars in thousands, except per share amounts)

June 30, 2021 December 31, 2020

September 30, December 31,

Cash and due from banks $ 981,126 $ 1,272,134

Debt securities available-for-sale, at estimated fair value 314,620 183,302

Debt securities held-to-maturity, net of allowance for securities credit losses of $ 1,609 at June 30, 2021 and $ 1,715 at December 31, 2020 (estimated fair value of $ 1,169,123 at June 30, 2021 and $ 968,466 at December 31, 2020)

Debt securities held-to-maturity, net of allowance for securities credit losses of $ 1,503 at September 30, 2021 and $ 1,715 at December 31, 2020 (estimated fair value of $ 1,143,381 at September 30, 2021 and $ 968,466 at December 31, 2020)

1,125,382 937,253

Equity investments, at estimated fair value 90,917 107,079

Equity investments 101,314 107,079

Restricted equity investments, at cost 53,017 51,705

Loans receivable, net of allowance for loan credit losses of $ 53,876 at June 30, 2021 and $ 60,735 at December 31, 2020

Loans receivable, net of allowance for loan credit losses of $ 50,153 at September 30, 2021 and $ 60,735 at December 31, 2020

8,139,961 7,704,857

17 unchanged sentences

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, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 61,482,869 and 61,040,894 shares issued at June 30, 2021 and December 31, 2020, respectively;

and 59,834,018 and 60,392,043 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.01 par value, $ 1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both September 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 61,526,126 and 61,040,894 shares issued at September 30, 2021 and December 31, 2020, respectively;

and 59,417,266 and 60,392,043 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,145,448 1,137,715

Retained earnings 430,721 378,268

Accumulated other comprehensive income 26 621

Accumulated other comprehensive (loss) income ( 734 ) 621

Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") ( 6,519 ) ( 7,433 )

Treasury stock, 1,648,851 and 648,851 shares at June 30, 2021 and December 31, 2020, respectively

Treasury stock, 2,108,860 and 648,851 shares at September 30, 2021 and December 31, 2020, respectively

( 56,279 ) ( 25,651 )

3 unchanged sentences

OceanFirst Financial Corp.

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share amounts)

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

16 unchanged sentences

Fees and service charges 2,973 3,732 10,519 11,858

Net gain on sales of loans 1,279 756 3,195 929

Net gain on equity investments 576 148 8,863 303

Net loss from other real estate operations ( 1 ) ( 52 ) ( 9 ) ( 202 )

Net (loss) gain on sales of loans ( 15 ) 1,001 3,180 1,930

Net (loss) gain on equity investments ( 466 ) ( 3,576 ) 8,397 ( 3,273 )

Net (loss) gain from other real estate operations ( 3 ) 214 ( 12 ) 12

Income from bank owned life insurance 1,640 1,530 4,771 4,626

12 unchanged sentences

Other operating expense 4,477 3,644 11,315 11,784

Federal Home Loan Bank prepayment fees — 924 — 924

Federal Home Loan Bank (“FHLB”) prepayment fees — — — 924

Amortization of core deposit intangible 1,354 1,538 4,110 4,660

2 unchanged sentences

Total operating expenses 58,673 56,787 162,026 175,515

Income before provision for income taxes 40,609 24,516 83,985 45,093

Provision for income taxes 10,054 5,878 20,733 9,922

Net income 30,555 18,638 63,252 35,171

Income (loss) before provision (benefit) for income taxes 31,521 ( 7,534 ) 115,506 37,559

Provision (benefit) for income taxes 7,354 ( 2,608 ) 28,087 7,314

Net income (loss) 24,167 ( 4,926 ) 87,419 30,245

Dividends on preferred shares 1,004 1,093 3,012 1,093

Net income available to common stockholders $ 29,551 $ 18,638 $ 61,244 $ 35,171

Basic earnings per share $ 0.49 $ 0.31 $ 1.02 $ 0.59

Diluted earnings per share $ 0.49 $ 0.31 $ 1.02 $ 0.58

Net income (loss) available to common stockholders $ 23,163 $ ( 6,019 ) $ 84,407 $ 29,152

Basic earnings (loss) per share $ 0.40 $ ( 0.10 ) $ 1.42 $ 0.49

Diluted earnings (loss) per share $ 0.39 $ ( 0.10 ) $ 1.41 $ 0.49

Average basic shares outstanding 59,311 59,935 59,619 59,901

2 unchanged sentences

OceanFirst Financial Corp.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Net income $ 30,555 $ 18,638 $ 63,252 $ 35,171

Net income (loss) $ 24,167 $ ( 4,926 ) $ 87,419 $ 30,245

Other comprehensive (loss) income:

Unrealized (loss) gain on debt securities (net of tax of $ 102 and $ 214 in 2021 and net tax of $ 11 and $ 709 in 2020, respectively)

Unrealized (loss) gain on debt securities (net of tax benefit of $ 232 and $ 446 in 2021 and net of tax benefit of $ 105 and net of tax expense of $ 604 in 2020, respectively)

( 855 ) ( 461 ) ( 1,658 ) 1,644

Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax of $ 70 and $ 143 in 2021 and $ 76 and $ 160 in 2020, respectively)

Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $ 66 and $ 209 in 2021 and $ 75 and $ 235 in 2020, respectively)

95 108 303 336

Reclassification adjustment for gains included in net income (net of tax of $ 173 in 2020)

Reclassification adjustment for gains included in net income (net of tax expense of $ 45 and $ 45 in 2020)

Total other comprehensive (loss) income ( 760 ) ( 185 ) ( 1,355 ) 2,148

Total comprehensive income 30,269 19,254 62,657 37,504

Total comprehensive income (loss) 23,407 ( 5,111 ) 86,064 32,393

Dividends on preferred shares 1,004 1,093 3,012 1,093

Comprehensive income available to common stockholders $ 29,265 $ 19,254 $ 60,649 $ 37,504

Comprehensive income (loss) available to common stockholders $ 22,403 $ ( 6,204 ) $ 83,052 $ 31,300

See accompanying Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands, except per share amounts)

For the Three Months Ended June 30, 2021 and June 30, 2020

For the Three Months Ended September 30, 2021 and 2020

Stock Additional

4 unchanged sentences

Plan Treasury

Balance at March 31, 2020 $ — $ 609 $ 1,078,438 $ 364,273 $ 509 $ ( 8,344 ) $ ( 25,651 ) $ 1,409,834

Net income — — — 18,638 — — — 18,638

Balance at June 30, 2020 $ 1 $ 609 $ 1,135,839 $ 372,552 $ 1,125 $ ( 8,041 ) $ ( 25,651 ) $ 1,476,434

Net loss — — — ( 4,926 ) — — — ( 4,926 )

Other comprehensive income, net of tax — — — — ( 185 ) — — ( 185 )

4 unchanged sentences

Exercise of stock options — — 296 — — — — 296

Issuance of preferred equity 1 — 55,712 — — — — 55,713

Issuance of preferred equity, net of costs — — ( 184 ) — — — — ( 184 )

Preferred stock dividend — — — ( 1,093 ) — — — ( 1,093 )

Balance at September 30, 2020 $ 1 $ 609 $ 1,137,155 $ 356,397 $ 940 $ ( 7,737 ) $ ( 25,651 ) $ 1,461,714

Balance at June 30, 2021 $ 1 $ 611 $ 1,143,907 $ 417,658 $ 26 $ ( 6,824 ) $ ( 46,590 ) $ 1,508,789

Balance at March 31, 2021 $ 1 $ 610 $ 1,142,290 $ 398,280 $ 312 $ ( 7,129 ) $ ( 35,645 ) $ 1,498,719

Net income — — — 24,167 — — — 24,167

8 unchanged sentences

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 September 30, 2021 $ 1 $ 611 $ 1,145,448 $ 430,721 $ ( 734 ) $ ( 6,519 ) $ ( 56,279 ) $ 1,513,249

See accompanying Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands, except per share amounts)

For the Six Months Ended June 30, 2021 and June 30, 2020

For the Nine Months Ended September 30, 2021 and 2020

Stock Additional

16 unchanged sentences

— — — — — — ( 14,814 ) ( 14,814 )

Issuance of preferred stock 1 — 55,712 — — — — 55,713

Issuance of preferred equity, net of costs 1 — 55,528 — — — — 55,529

Preferred stock dividend — — — ( 1,093 ) — — — ( 1,093 )

Acquisition of Two River Bancorp — 42 122,501 — — — 26,066 148,609

1 unchanged sentence

— 44 112,792 — — — — 112,836

Balance at June 30, 2020 $ 1 $ 609 $ 1,135,839 $ 372,552 $ 1,125 $ ( 8,041 ) $ ( 25,651 ) $ 1,476,434

Balance at September 30, 2020 $ 1 $ 609 $ 1,137,155 $ 356,397 $ 940 $ ( 7,737 ) $ ( 25,651 ) $ 1,461,714

Balance at December 31, 2020 $ 1 $ 609 $ 1,137,715 $ 378,268 $ 621 $ ( 7,433 ) $ ( 25,651 ) $ 1,484,130

6 unchanged sentences

Exercise of stock options — 2 3,360 ( 1,529 ) — — — 1,833

Repurchase 1.0 million shares of common stock

Repurchase 1,460,009 shares of common stock

— — — — — — ( 30,628 ) ( 30,628 )

Preferred stock dividend — — — ( 3,012 ) — — — ( 3,012 )

Balance at June 30, 2021 $ 1 $ 611 $ 1,143,907 $ 417,658 $ 26 $ ( 6,824 ) $ ( 46,590 ) $ 1,508,789

Balance at September 30, 2021 $ 1 $ 611 $ 1,145,448 $ 430,721 $ ( 734 ) $ ( 6,519 ) $ ( 56,279 ) $ 1,513,249

See accompanying Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

12 unchanged sentences

(Benefit) provision for credit losses ( 10,259 ) 55,332

Net gain on sale and write-down of other real estate owned — ( 101 )

Net write down of fixed assets held-for-sale to net realizable value 3,114 4,193

Net (gain) loss on sale of fixed assets ( 1 ) 6

Net gain on equity securities ( 8,863 ) ( 356 )

Net loss on sale of fixed assets 11 6

Net (gain) loss on equity securities ( 8,397 ) 3,220

Net gain on sales of loans ( 3,180 ) ( 1,930 )

4 unchanged sentences

Decrease (increase) in interest and dividends receivable 2,757 ( 14,836 )

Deferred tax (benefit) provision ( 95 ) 161

Deferred tax provision 570 99

Decrease in other assets 29,366 2,301

Increase in other liabilities 424 60,171

(Decrease) increase in other liabilities ( 37,311 ) 71,285

Total adjustments 31,632 97,292

3 unchanged sentences

Proceeds from sale of loans 825 71,604

Purchase of residential loan pool ( 219,745 ) —

Premiums paid on purchased loan pool ( 6,318 ) —

Purchase of debt securities available-for-sale ( 200,034 ) ( 57,487 )

18 unchanged sentences

(dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from financing activities:

(Decrease) increase in deposits $ ( 11,452 ) $ 1,046,687

Increase in deposits $ 347,672 $ 1,362,996

Increase (decrease) in short-term borrowings 14,838 ( 211,649 )

Proceeds from Federal Home Loan Bank advances — 525,000

Repayments of Federal Home Loan Bank advances — ( 496,200 )

Proceeds from FHLB advances — 525,000

Repayments of FHLB advances — ( 496,200 )

Proceeds from Federal Reserve Bank advances — 3,778

7 unchanged sentences

Dividends paid ( 33,437 ) ( 31,723 )

Net cash (used) provided by financing activities ( 44,622 ) 1,018,993

Net cash provided by financing activities 296,435 1,314,112

Net (decrease) increase in cash and due from banks and restricted cash ( 310,989 ) 905,181

14 unchanged sentences

Net loan (recoveries) charge-offs ( 442 ) 15,917

Transfer of loans receivable to loans held-for-sale 12,781 365,634

Transfer of premises and equipment to assets held-for-sale 1,476 4,043

28 unchanged sentences

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, 2021 are not necessarily indicative of the results of operations that may be expected for the full year 2021 or any other period.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations that may be expected for the full year 2021 or any other period.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and the results of operations for the period.

100 unchanged sentences

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements

Earnings per Share

The following reconciles shares outstanding for basic and diluted earnings per share for the three and six months ended June 30, 2021 and June 30, 2020 (in thousands):

Notes to Unaudited Consolidated Financial Statements (Continued)

Earnings (Loss) per Share

The following reconciles shares outstanding for basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

6 unchanged sentences

Average diluted shares outstanding 59,515 59,935 59,862 60,076

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 earnings per share calculations.

For the three and six months ended June 30, 2020, antidilutive stock options of 2,293,000 and 1,739,000 , respectively, were excluded from earnings per share calculations.

For the three and nine months ended September 30, 2021, antidilutive stock options of 1,573,000 and 1,566,000 , respectively, were excluded from the earnings (loss) per share calculations.

For the three and nine months ended September 30, 2020, antidilutive stock options of 2,251,000 and 2,067,000 , respectively, were excluded from the earnings (loss) per share calculations.

For the three months ended September 30, 2020, 87,000 shares related to incentive awards were excluded from the diluted earnings (loss) per share calculation as they were antidilutive.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements

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, 2021 and December 31, 2020 are as follows (in thousands):

Notes to Unaudited Consolidated Financial Statements (Continued)

The amortized cost, estimated fair value, and allowance for securities credit losses of debt securities available-for-sale and held-to-maturity at September 30, 2021 and December 31, 2020 are as follows (in thousands):

Losses Estimated

Value Allowance for Credit Losses

At June 30, 2021

At September 30, 2021

Debt securities available-for-sale:

3 unchanged sentences

Mortgage-backed securities - FNMA 12,648 1 — 12,649 —

Mortgage-backed securities - agency commercial 17,047 — ( 150 ) 16,897 —

Total debt securities available-for-sale $ 313,575 $ 1,714 $ ( 669 ) $ 314,620 $ —

30 unchanged sentences

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements

There was no allowance for securities credit losses on debt securities available-for-sale at June 30, 2021 or December 31, 2020.

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, 2021 and 2020 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Notes to Unaudited Consolidated Financial Statements (Continued)

There was no allowance for securities credit losses on debt securities available-for-sale at September 30, 2021 or December 31, 2020.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Beginning balance $ ( 1,609 ) $ ( 2,446 ) $ ( 1,715 ) $ —

Impact of CECL adoption — — — ( 1,268 )

Impact of current expected credit loss (“CECL”) adoption — — — ( 1,268 )

Provision for credit loss expense 106 53 212 ( 1,125 )

2 unchanged sentences

The securities transferred had an unrealized net loss of $ 13.3 million at the time of transfer, which continues to be reflected in accumulated other comprehensive income 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, 2021 and December 31, 2020 is as follows (in thousands):

June 30, 2021 December 31, 2020

The carrying value of the debt securities held-to-maturity at September 30, 2021 and December 31, 2020 is as follows (in thousands):

September 30, December 31,

Amortized cost $ 1,129,719 $ 942,314

3 unchanged sentences

Carrying value $ 1,125,382 $ 937,253

There were no realized gains or losses on debt securities for the three and six months ended June 30, 2021 and 2020.

The amortized cost and estimated fair value of debt securities at June 30, 2021 by contractual maturity are shown below (in thousands).

There were no realized gains or losses on debt securities for the three and nine months ended September 30, 2021, as compared to $ 244,000 of realized gains on debt securities for the corresponding prior year periods.

The amortized cost and estimated fair value of debt securities at September 30, 2021 by contractual maturity are shown below (in thousands).

Actual maturities may differ from contractual maturities in instances where issuers have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2021, corporate debt securities with an amortized cost of $ 34.0 million, and estimated fair value of $ 35.5 million, and CLOs with an amortized cost and estimated fair value of $ 97.9 million were callable prior to the maturity date.

June 30, 2021 Amortized

At September 30, 2021, corporate debt securities with an amortized cost of $ 29.4 million, and estimated fair value of $ 31.0 million, and CLOs with an amortized cost of $ 145.8 million and estimated fair value of $ 145.4 million were callable prior to the maturity date.

September 30, 2021 Amortized

Cost Estimated

5 unchanged sentences

Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.

The estimated fair value of securities pledged as required security for deposits and for other purposes required by law amounted to $ 991.3 million and $ 435.9 million at June 30, 2021 and December 31, 2020, respectively, which includes $ 277.4 million and $ 152.7 million at June 30, 2021 and December 31, 2020, respectively, pledged as collateral for securities sold under agreements to repurchase.

At June 30, 2021, there were no holdings of securities of any one issuer, other than the U.S.

The estimated fair value of securities pledged as required security for deposits and for other purposes required by law amounted to $ 993.0 million and $ 435.9 million at September 30, 2021 and December 31, 2020, respectively, which includes $ 150.7 million and $ 152.7 million at September 30, 2021 and December 31, 2020, respectively, pledged as collateral for securities sold under agreements to repurchase.

At September 30, 2021, there were no holdings of securities of any one issuer, other than the U.S.

government and its agencies and government-sponsored enterprises, in an amount greater than 10% of stockholders’ equity.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements

The estimated fair value and unrealized losses for debt securities available-for-sale and held-to-maturity at June 30, 2021 and December 31, 2020, segregated by the duration of the unrealized losses, are as follows (in thousands):

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 September 30, 2021 and December 31, 2020, segregated by the duration of the unrealized losses, are as follows (in thousands):

Less than 12 months 12 months or longer Total

4 unchanged sentences

Value Unrealized

At June 30, 2021

At September 30, 2021

Debt securities available-for-sale:

1 unchanged sentence

Corporate debt securities 997 ( 3 ) — — 997 ( 3 )

Mortgage-backed securities 11,555 ( 150 ) — — 11,555 ( 150 )

CLOs 117,477 ( 380 ) — — 117,477 ( 380 )

8 unchanged sentences

SBA 1,602 ( 41 ) 969 ( 2 ) 2,571 ( 43 )

Other 4,484 ( 3 ) — — 4,484 ( 3 )

Total mortgage-backed securities 420,209 ( 4,646 ) 18,585 ( 279 ) 438,794 ( 4,925 )

17 unchanged sentences

Total debt securities $ 108,318 $ ( 552 ) $ 46,965 $ ( 2,680 ) $ 155,283 $ ( 3,232 )

The Company concluded that the corporate debt securities were not impaired at June 30, 2021 and the Company considered several factors in its analysis.

The Company concluded that the corporate debt securities were not impaired a t September 30, 2021 based on a consideration of several factors.

The Company noted that each issuer made all the contractually due payments when required.

3 unchanged sentences

Historically, the Company has not utilized securities sales as a source of liquidity and the Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.

The mortgage-backed securities are issued and guaranteed by either FHLMC, FNMA, GNMA, or SBA, corporations which are chartered by the United States Government and whose debt obligations are rated AA+/Aaa by S&P and Moody’s, respectively.

The mortgage-backed securities are issued and guaranteed by either FHLMC, FNMA, GNMA or the SBA, corporations which are chartered by the United States Government and whose debt obligations are rated AA+/Aaa by S&P and Moody’s,

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Consolidated Financial Statements (Continued)

respectively.

Additionally, there are private label commercial mortgage-backed securities with credit ratings ranging between Aaa and Aa3.

1 unchanged sentence

The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost.

As a result, the Company concluded that these securities were not impaired at June 30, 2021.

As a result, the Company concluded that these securities were not impaired at September 30, 2021.

State, municipal, and sovereign debt obligations are securities issued by state, local and national governments for various purposes.

The Company is not aware of any information subsequent to the purchase of any state, municipal, and sovereign debt obligations that indicates an inability on the part of an issuer to meet all of its financial commitments.

The weighted average credit rating of these securities is Aa2/AA with no credit rating below Baa2/BBB.

The credit rating of these securities is between Aaa/AAA and Baa2/BBB.

The Company has the ability and stated intention to hold these securities to maturity at which time the Company expects to receive full repayment.

Current unrealized losses are considered to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated fair value of the securities.

As a result, the Company concluded that these securities were not impaired as of June 30, 2021.

As a result, the Company concluded that these securities were not impaired as of September 30, 2021.

The Company monitors the credit quality of debt securities held-to-maturity on a quarterly basis through the use of internal credit analysis supplemented by external credit ratings.

The following table summarized the amortized cost of debt securities held-to-maturity at June 30, 2021, aggregated by credit quality indicator (in thousands):

The following table summarized the amortized cost of debt securities held-to-maturity at September 30, 2021, aggregated by credit quality indicator (in thousands):

AAA AA A BBB BB Total

As of June 30, 2021

As of September 30, 2021

State, municipal and sovereign debt obligations $ 31,053 $ 145,704 $ 85,435 $ 30,034 $ — $ 292,226

3 unchanged sentences

Equity Investments

At June 30, 2021 and December 31, 2020, the Company held equity investments at an estimated fair value of $ 90.9 million and $ 107.1 million, respectively.

At September 30, 2021 and December 31, 2020, the Company held equity investments of $ 101.3 million and $ 107.1 million, respectively.

The equity investments primarily comprised of select financial services institutions’ common and preferred stocks paying attractive dividends.

The realized and unrealized gains or losses on equity securities for the three and six months ended June 30, 2021 and June 30, 2020 are shown in the table below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The realized and unrealized gains or losses on equity securities for the three and nine months ended September 30, 2021 and September 30, 2020 are shown in the table below (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net gain on equity investments $ 576 $ 148 $ 8,863 $ 303

Net (loss) gain on equity investments $ ( 466 ) $ ( 3,576 ) $ 8,397 $ ( 3,273 )

Net gains (losses) recognized on equity securities sold — — 8,123 ( 53 )

Unrealized gain recognized on equity securities still held $ 576 $ 201 $ 740 $ 356

Unrealized (loss) gain recognized on equity securities still held $ ( 466 ) $ ( 3,576 ) $ 274 $ ( 3,220 )

OceanFirst Financial Corp.

1 unchanged sentence

Loans Receivable, Net

Loans receivable, net at June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021 December 31, 2020

Loans receivable, net at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):

September 30, December 31,

Commercial and industrial (1)

4 unchanged sentences

Residential real estate 2,401,240 2,309,459

Home equity loans and lines 255,097 285,016

Other consumer 40,485 54,446

Home equity loans and lines and other consumer 275,962 339,462

Total consumer 2,677,202 2,648,921

3 unchanged sentences

Total loans receivable, net $ 8,139,961 $ 7,704,857

(1) The commercial and industrial loans balance at June 30, 2021 and December 31, 2020 includes Paycheck Protection Program (“PPP”) loans of $ 83.0 million and $ 95.4 million, respectively.

(1) The commercial and industrial loans balance at September 30, 2021 and December 31, 2020 includes Paycheck Protection Program (“PPP”) loans of $ 52.5 million and $ 95.4 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:

20 unchanged sentences

2021 2020 2019 2018 2017 2016 and prior Revolving lines of credit Total

June 30, 2021

September 30, 2021

Commercial and industrial

56 unchanged sentences

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, 2021 and June 30, 2020 is as follows (in thousands):

An analysis of the allowance for credit losses on loans for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

Industrial Commercial

5 unchanged sentences

For the three months ended

June 30, 2021

September 30, 2021

Allowance for credit losses on loans

Balance at beginning of period $ 4,404 $ 6,350 $ 33,037 $ 8,818 $ 1,267 $ — $ 53,876

Credit loss (benefit) expense 1,871 ( 1,483 ) ( 3,583 ) ( 2,462 ) ( 219 ) — ( 5,876 )

Credit loss expense (benefit) 1,962 515 ( 9,902 ) 3,081 235 — ( 4,109 )

Charge-offs ( 50 ) ( 64 ) — ( 12 ) ( 37 ) — ( 163 )

2 unchanged sentences

For the three months ended

June 30, 2020

September 30, 2020

Allowance for credit losses on loans

4 unchanged sentences

Balance at end of period $ 4,327 $ 5,681 $ 26,986 $ 16,108 $ 3,248 $ — $ 56,350

For the six months ended

June 30, 2021

For the nine months ended

September 30, 2021

Allowance for credit losses on loans

Balance at beginning of period $ 5,390 $ 15,054 $ 26,703 $ 11,818 $ 1,770 $ — $ 60,735

Credit loss (benefit) expense ( 1,004 ) ( 8,740 ) 6,566 ( 2,797 ) ( 940 ) — ( 6,915 )

Credit loss expense (benefit) 958 ( 8,225 ) ( 3,336 ) 284 ( 705 ) — ( 11,024 )

Charge-offs ( 83 ) ( 64 ) ( 345 ) ( 254 ) ( 193 ) — ( 939 )

1 unchanged sentence

Balance at end of period $ 6,366 $ 6,827 $ 23,140 $ 12,179 $ 1,641 $ — $ 50,153

For the six months ended

June 30, 2020

For the nine months ended

September 30, 2020

Allowance for credit losses on loans

Balance at beginning of period $ 1,458 $ 2,893 $ 9,883 $ 2,002 $ 591 $ 25 $ 16,852

Impact of current expected credit loss (“CECL”) adoption 2,416 ( 1,109 ) ( 5,395 ) 3,833 2,981 ( 25 ) 2,701

Impact of CECL adoption 2,416 ( 1,109 ) ( 5,395 ) 3,833 2,981 ( 25 ) 2,701

Credit loss (benefit) expense ( 275 ) 6,120 34,208 10,749 ( 727 ) — 50,075

4 unchanged sentences

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

At June 30, 2021 and December 31, 2020, the Company had collateral dependent loans with an amortized cost balance as follows:

commercial and industrial of $ 1.6 million and $ 1.9 million, respectively, commercial real estate - owner occupied of $ 12.1 million and $ 13.8 million, respectively, and commercial real estate - investor of $ 15.2 million and $ 18.3 million, respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 800,000 and $ 1.4 million at June 30, 2021 and December 31, 2020, respectively.

At both June 30, 2021 and December 31, 2020, the amount of foreclosed residential real estate property held by the Company was $ 106,000 .

At September 30, 2021 and December 31, 2020, the Company had collateral dependent loans with an amortized cost balance as follows:

commercial and industrial of $ 416,000 and $ 1.9 million, respectively, commercial real estate - owner occupied of $ 12.5 million and $ 13.8 million, respectively, and commercial real estate - investor of $ 8.5 million and $ 18.3 million, respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 669,000 and $ 1.4 million at September 30, 2021 and December 31, 2020, respectively.

At both September 30, 2021 and December 31, 2020, the amount of foreclosed residential real estate property held by the Company was $ 106,000 .

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, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, December 31,

Commercial and industrial $ 418 $ 1,908

4 unchanged sentences

$ 30,304 $ 46,863

At June 30, 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At June 30, 2021, there was $ 835,000 of loans that were 90 days or greater past due and still accruing interest that were fully paid off on July 1, 2021.

At December 31, 2020, there were no loans that were 90 days or greater past due and still accruing interest.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2021 and December 31, 2020 by loan portfolio segment (in thousands):

At September 30, 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At September 30, 2021 and December 31, 2020, there were no loans that were 90 days or greater past due and still accruing interest.

The following table presents the aging of the recorded investment in past due loans as of September 30, 2021 and December 31, 2020 by loan portfolio segment (in thousands):

Past Due 60-89

2 unchanged sentences

Past Due Total

June 30, 2021

September 30, 2021

Commercial and industrial $ 1,797 $ — $ 354 $ 2,151 $ 455,523 $ 457,674

15 unchanged sentences

For these loans, the Bank retains its security interest in the real estate collateral.

At June 30, 2021 and December 31, 2020, TDR loans totaled $ 20.4 million and $ 17.5 million, respectively.

Included in the non-accrual loan total at June 30, 2021 and December 31, 2020 were $ 10.1 million and $ 5.5 million, respectively, of TDR loans.

At June 30, 2021 and December 31, 2020, the Company had no specific reserves allocated to loans that are classified as TDR loans.

At September 30, 2021 and December 31, 2020, TDR loans totaled $ 19.6 million and $ 17.5 million, respectively.

Included in the non-accrual loan total at September 30, 2021 and December 31, 2020 were $ 10.0 million and $ 5.5 million, respectively, of TDR loans.

At September 30, 2021 and December 31, 2020, the Company had no specific reserves allocated to loans that are 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 loans classified as accruing TDR loans at June 30, 2021 and December 31, 2020, which totaled $ 10.3 million and $ 12.0 million, respectively.

In addition to the TDR loans included in non-accrual loans, the Company also has loans classified as accruing loans which totaled $ 9.6 million and $ 12.0 million at September 30, 2021 and December 31, 2020, respectively.

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, 2021 and June 30, 2020 (dollars in thousands):

The following table presents information about TDR loans which occurred during the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):

Number of Loans Pre-modification

1 unchanged sentence

Recorded Investment

Three months ended June 30, 2021

Three months ended September 30, 2021

Troubled debt restructurings:

Commercial real estate – investor 1 $ 4,903 $ 4,903

Residential real estate 3 244 336

Number of Loans Pre-modification

Recorded Investment Post-modification

Recorded Investment

Six months ended June 30, 2021

Commercial real estate - owner occupied 1 $ 93 $ 110

Three months ended September 30, 2020

Troubled debt restructurings:

2 unchanged sentences

Consumer 1 16 16

Number of Loans Pre-modification

Recorded Investment Post-modification

Recorded Investment

Three Months Ended June 30, 2020

Nine months ended September 30, 2021

Troubled debt restructurings:

Commercial real estate - owner occupied 1 $ 93 $ 110

Commercial real estate – investor 1 4,903 4,903

Residential real estate 3 244 336

Number of Loans Pre-modification

Recorded Investment Post-modification

Recorded Investment

Six months ended June 30, 2020

Consumer 2 26 33

Nine months ended September 30, 2020

Troubled debt restructurings:

Commercial real estate - owner occupied 1 $ 1,112 $ 1,143

Commercial real estate – investor 1 928 993

Residential real estate 5 849 865

Consumer 5 175 193

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.

There were no TDR loans that defaulted during the three and six months ended June 30, 2020 which were modified within the preceding year.

There were no TDR loans that defaulted during the three months ended September 30, 2021 which were modified within the preceding year.

There was one TDR commercial real estate - investor loan for $ 923,000 that defaulted during the nine months ended September 30, 2021 which was modified within the preceding year and the loan is now current.

There were no TDR loans that defaulted during the three and nine months ended September 30, 2020 which were modified within the preceding year.

In response to the COVID-19 pandemic and its economic impact on customers, short-term modification programs that comply with the CARES Act, extended by the CRRSA Act, were implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19.

4 unchanged sentences

The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date.

Provided these loans were current as of either December 31, 2019 or the date of the modification, these loans are not considered TDR loans at June 30, 2021 and will not be reported as past due during the deferral period.

Provided these loans were current as of either December 31, 2019 or the date of the modification, these loans are not considered TDR loans at September 30, 2021 and will not be reported as past due during the deferral period.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The major types of deposits at June 30, 2021 and December 31, 2020 were as follows (in thousands):

Type of Account June 30, 2021 December 31, 2020

The major types of deposits at September 30, 2021 and December 31, 2020 were as follows (in thousands):

Type of Account September 30, December 31,

Non-interest-bearing $ 2,467,952 $ 2,133,195

4 unchanged sentences

Total deposits $ 9,774,097 $ 9,427,616

Included in time deposits at June 30, 2021 and December 31, 2020, was $ 155.4 million and $ 409.5 million, respectively, in deposits of $250,000 and over.

Included in time deposits at September 30, 2021 and December 31, 2020 was $ 137.7 million and $ 409.5 million, respectively, in deposits of $250,000 or more.

OceanFirst Financial Corp.

30 unchanged sentences

Equity Investments

Equity investments are reported at fair value.

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).

3 unchanged sentences

Notes to Unaudited Consolidated Financial Statements (Continued)

Interest Rate Swaps

The Company’s interest rate swaps 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 agreement, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of the contract counterparty.

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

1 unchanged sentence

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, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

The following table summarizes financial assets and financial liabilities measured at fair value as of September 30, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

Fair Value Measurements at Reporting Date Using:

2 unchanged sentences

Inputs Level 3

June 30, 2021

September 30, 2021

Items measured on a recurring basis:

3 unchanged sentences

91,191 13,658 75,177 2,356

Interest rate swap asset

29,167 — 29,167 —

Interest rate swap liability

( 29,266 ) — ( 29,266 ) —

Interest rate derivative asset 27,503 — 27,503 —

Interest rate derivative liability ( 27,589 ) — ( 27,589 ) —

Items measured on a non-recurring basis:

Equity investments

10,123 — — 10,123

Other real estate owned

7 unchanged sentences

107,079 104,539 — 2,540

Interest rate swap asset

45,289 — 45,289 —

Interest rate swap liability

( 45,429 ) — ( 45,429 ) —

Interest rate derivative asset 45,289 — 45,289 —

Interest rate derivative liability ( 45,429 ) — ( 45,429 ) —

Items measured on a non-recurring basis:

4 unchanged sentences

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table reconciles, for the three and six months ended June 30, 2021 and June 30, 2020, the beginning and ending balances for equity investments and debt securities available-for-sale that are recognized at fair value on a recurring basis, in the consolidated statements of financial condition, using significant unobservable inputs (in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

The following table reconciles, for the three and nine months ended September 30, 2021 and 2020, the beginning and ending balances for equity investments and debt securities available-for-sale that are recognized at fair value on a recurring basis, in the consolidated statements of financial condition, using significant unobservable inputs (in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Beginning balance $ 2,978 $ 2,402 $ 2,540 $ 25

Total gains included in earnings 40 — 438 —

Total losses included in earnings ( 622 ) — ( 184 ) —

Purchases — — — 2,377

Transfers into Level 3 — — — —

Transfers out of Level 3 — — — —

Ending balance $ 2,356 $ 2,402 $ 2,356 $ 2,402

There were no debt securities in Level 3 for the three and nine months ended September 30, 2021.

There were no equity securities in Level 3 for the three and nine months ended September 30, 2020.

The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods.

There were no debt securities in Level 3 for the three and six months ended June 30, 2021.

There were no equity securities in Level 3 for the three and six months ended June 30, 2020.

There were no transfers into or out of Level 3 assets or liabilities in the fair value hierarchy for the three and six months ended June 30, 2021.

The Company purchased minority, non-controlling equity investments of $ 5.0 million, which are classified as Level 3 at June 30, 2021 as the securities were carried at cost with no observable price changes noted since purchased, a fair value measurement alternative.

There were no transfers into or out of Level 3 assets or liabilities in the fair value hierarchy for the three and nine months ended September 30, 2021 and 2020.

Assets and Liabilities Disclosed at Fair Value

15 unchanged sentences

There is no active market for this stock and the Company is required to maintain a minimum investment as stipulated by the respective agencies.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

Loans Receivable and Loans Held-for-Sale

4 unchanged sentences

The fair value of loans was measured using the exit price notion.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

Deposits Other than Time Deposits

8 unchanged sentences

Fair value estimates are based on discounting contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of June 30, 2021 and December 31, 2020 are presented in the following tables (in thousands):

The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of September 30, 2021 and December 31, 2020 are presented in the following tables (in thousands):

Fair Value Measurements at Reporting Date Using:

2 unchanged sentences

Inputs Level 3

June 30, 2021

September 30, 2021

Financial Assets:

21 unchanged sentences

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs.

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,

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.

11 unchanged sentences

The Company does not use derivative financial instruments for trading purposes.

Customer Derivatives – Interest Rate Swaps

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.

1 unchanged sentence

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 interest rate swaps 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 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;

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 loss of $ 23,000 and a gain of $ 41,000 in other income resulting from fair value adjustments for the three and six months ended June 30, 2021, respectively, as compared to gains of $ 46,000 and $ 349,000 in other income resulting from fair value adjustments for the three and six months ended June 30, 2020, respectively.

The notional amount of derivatives not designated as hedging instruments was $ 814.8 million and $ 725.9 million at June 30, 2021 and December 31, 2020, respectively.

The Company recognized gains of $ 14,000 and $ 55,000 in other income resulting from fair value adjustments for the three and nine months ended September 30, 2021, respectively, as compared to gains of $ 15,000 and $ 364,000 in other income resulting from fair value adjustments for the three and nine months ended September 30, 2020, respectively.

The notional amount of derivatives not designated as hedging instruments was $ 925.4 million and $ 725.9 million at September 30, 2021 and December 31, 2020, respectively.

The table below presents the fair value of derivatives not designated as hedging instruments as well as their location on the consolidated statements of financial condition (in thousands):

Balance Sheet Location June 30, 2021 December 31, 2020

Balance Sheet Location September 30, December 31,

Other assets $ 27,503 $ 45,289

3 unchanged sentences

This requirement is dependent on certain specified credit measures.

The amount of collateral posted with third parties was $ 27.1 million and $ 46.5 million at June 30, 2021 and December 31, 2020, respectively.

The amount of collateral posted with third parties was $ 26.5 million and $ 46.5 million at September 30, 2021 and December 31, 2020, respectively.

The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures.

The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $ 29.3 million and $ 45.4 million at June 30, 2021 and December 31, 2020, respectively.

The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $ 27.6 million and $ 45.4 million at September 30, 2021 and December 31, 2020, respectively.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

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.

1 unchanged sentence

The Company has one existing finance lease, which has a lease term through 2029.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table represents the classification of the Company’s right-of-use (“ROU”) assets and lease liabilities on the consolidated statements of financial condition (in thousands):

June 30, 2021 December 31, 2020

September 30, December 31,

Lease ROU Assets Classification

Operating lease ROU asset Other assets $ 21,627 $ 22,555

Operating lease ROU assets Other assets $ 21,117 $ 22,555

Finance lease ROU asset Premises and equipment, net 1,545 1,694

Total lease ROU asset $ 23,222 $ 24,249

Total lease ROU assets $ 22,662 $ 24,249

Lease Liabilities

Operating lease liability Other liabilities $ 22,163 $ 22,990

Operating lease liabilities (1)

Other liabilities $ 21,713 $ 22,990

Finance lease liability Other borrowings 1,954 2,100

Total lease liability $ 24,166 $ 25,090

Total lease liabilities $ 23,667 $ 25,090

(1) Operating lease liabilities excludes liabilities for future rent and lease termination payments related to closed branches of $ 5.3 million and $ 7.4 million as of September 30, 2021 and December 31, 2020, respectively.

The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments.

5 unchanged sentences

For the finance lease, the Company utilized its incremental borrowing rate at lease inception.

June 30, 2021 December 31, 2020

September 30, December 31,

Weighted-Average Remaining Lease Term

4 unchanged sentences

Finance lease 5.63 5.63

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,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

12 unchanged sentences

All other costs are included in occupancy expense.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of June 30, 2021 were as follows (in thousands):

The Company previously announced plans to sell two branches, including owned premises and equipment, all deposits associated with the branches and selected performing loans to First Bank which is expected to take place in early December 2021.

The Company also announced plans to consolidate 20 deposit gathering locations in late 2021 and early 2022.

These plans have resulted in a shortened estimated useful life for premises and equipment and accelerated recognition of lease expenses associated with these branches.

The effect on income for the three and nine months ended September 30, 2021 is included in branch consolidation expenses and totaled $ 3.8 million, which are excluded above.

Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of September 30, 2021 were as follows (in thousands):

Finance Lease Operating Leases

For the Twelve Months Ended June 30,

For the Twelve Months Ending September 30,

2022 $ 307 $ 5,382

7 unchanged sentences

Total lease liabilities $ 1,954 $ 21,713

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

Subsequent Event

On November 4, 2021, the Company announced the execution of a definitive agreement and plan of merger (the merger agreement) with Partners Bancorp.

(“Partners”), a multi-bank holding company operating under the brands of Virginia Partners Bank, Maryland Partners Bank, The Bank of Delmarva, and Liberty Bell Bank.

The transaction is subject to receipt of the approval of Partners’ stockholders and required regulatory approval.

Subject to receipt of those approvals and fulfillment of other customary closing conditions, the Company expects to close the transaction in the first half of 2022.

OTHER INFORMATION

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 4. Controls and Procedures