What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-28 compared with 2021-03-01 · 287 added, 392 removed, 498 unchanged (58% of the section changed)

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The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”) and the Securities and Exchange Commission (the “SEC”).

The Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency (the “OCC”) and the Federal Deposit Insurance Corporation (the“FDIC”).

Currently, the Company does not transact any material business other than through its subsidiary, the Bank.

The Bank is primarily subject to regulation and supervision by the Office of the Comptroller of the Currency (the “OCC”) and the Consumer Financial Protection Bureau (the “CFPB”).

Currently, the Company does not transact any material business other than through the Bank, its subsidiary.

The Company has been the holding company for the Bank since it acquired the stock of the Bank upon the Bank’s conversion from a federally-chartered mutual savings bank to a federally-chartered capital stock savings bank in 1996 (the “Conversion”).

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Government and agencies thereof, corporate securities and other investments permitted by applicable law and regulations.

The Bank’s revenues are derived principally from interest on its loans, and to a lesser extent, interest on its investment and mortgage-backed securities.

The Bank also receives income from bankcard services, trust and asset management services, deposit account services, gains on sales of loans, bank owned life insurance, derivative fee income and other fees.

The Bank’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, investment security maturities, Federal Home Loan Bank (“FHLB”) advances and other borrowings.

The Bank’s revenues are derived principally from interest on its loans, and to a lesser extent, interest on its debt and equity securities.

The Bank also receives income from bankcard services, trust and asset management services, deposit account services, gains on sales of loans, gains on equity investments, bank owned life insurance, commercial loan swap income, and other fees.

The Bank’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, maturities of debt securities, Federal Home Loan Bank (“FHLB”) advances, access to the Federal Reserve discount window, other borrowings such as subordinated debt, and to a lesser extent, investment maturities and proceeds from the sale of loans and equity investments .

The Company’s website address is www.oceanfirst.com .

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Risk Factors herein and the following:

changes in interest rates, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S.

changes in interest rates, general economic conditions nationally and in local markets, unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory/tax changes, monetary and fiscal policies of the U.S.

Government, including policies of the U.S.

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demand for financial services in the Company’s market area, accounting principles and guidelines, and the Bank’s ability to successfully integrate acquired operations.

Further, given its ongoing and dynamic nature, it is difficult to predict what continued effects the COVID-19 pandemic will have on the Company’s business and results of operations.

The pandemic and the related local and national economic disruption may result in a decline in demand for the Company’s products and services;

increased levels of loan delinquencies, problem assets and foreclosures;

an increase in the Bank’s allowance for credit losses;

a decline in the value of loan collateral, including real estate;

a greater decline in the yield on interest-earning assets than the decline in the cost of interest-bearing liabilities;

and increased cybersecurity risks, as employees increasingly work remotely.

Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business.

The extent of such impact will depend on future developments, which are highly uncertain, including when

COVID-19 can be fully controlled and abated and, the timing of full inoculation against the virus.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on its business, financial condition, liquidity, and results of operations:

the demand for the Bank’s products and services may decline, making it difficult to grow assets and income;

loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

the Company’s allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect the Company’s net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to the Bank;

if legislation or governmental or regulatory action is enacted limiting the amount of ATM fees or surcharges the Bank may receive or on its ability to charge overdraft or other fees, it could adversely impact the Company’s financial results;

the Company’s cybersecurity risks would be increased as the result of an increased use of the Bank’s online banking platform or an increase in the number of employees working remotely;

and Federal Deposit Insurance Corporation (“FDIC”) premiums may increase if the agency experiences additional resolution costs.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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Market Area and Competition

The Bank is a regional bank, offering a wide variety of financial services to meet the needs of the communities it serves.

At December 31, 2020, the Bank operated its business through its branch office and headquarters located in Toms River, New Jersey, its administrative office located in Red Bank, New Jersey, an administrative office located in Mount Laurel, New Jersey, and 61 additional branch offices and six deposit production facilities located throughout central and southern New Jersey, and the greater metropolitan area of New York City.

The Bank also operated commercial loan production offices in New York City, the greater Philadelphia area and in Atlantic and Mercer Counties in New Jersey.

The Bank is a regional community bank offering a wide variety of financial services to meet the needs of the communities it serves.

At December 31, 2021, the Bank operated its business through its branch office and headquarters located in Toms River, New Jersey, its administrative office located in Red Bank, New Jersey, an administrative office located in Mount Laurel, New Jersey, 46 additional branch offices, and four deposit production facilities located throughout central and southern New Jersey and the greater metropolitan area of New York City and Philadelphia.

The Bank also operated commercial loan production offices in New Jersey, New York City, the greater Philadelphia area, Baltimore, and Boston.

The Bank is one of the largest and oldest financial institutions in New Jersey, with headquarters approximately midway between New York City and Philadelphia.

The economy in the Bank’s primary market area, which represents the broader central and southern New Jersey market, is based upon a mixture of service and retail trade.

Other employment is provided by a variety of wholesale trade, manufacturing, Federal, state and local government, hospitals and utilities.

The area is also home to commuters working in areas in and around New York City and Philadelphia.

The market area includes a significant number of vacation and second homes in the communities along the New Jersey shore.

The Bank also operates in the metropolitan areas of New York City and Philadelphia, the first and eighth largest metropolitan areas, respectively, in the United States.

The Bank’s future growth opportunities will be partly influenced by the growth and stability of its geographic marketplace and the competitive environment.

The economy in the Bank’s primary market area, which represents central and southern New Jersey, is based on a mixture of service and retail trade;

with other empl oyment provided by a variety of wholesale trade, manufacturing, federal, state and local government, hospitals and utilities.

The area is home to commuters working in and around New York City and Philadelphia and also includes a significant number of vacation and second homes in the communities along the New Jersey shore.

In addition, the Bank provides banking services through teams located in the major metropolitan markets of Philadelphia, New York, Baltimore, Washington D.C., and Boston.

The Bank’s future growth opportunities will be influenced by the growth and stability of its geographic marketplace and the competitive environment.

The Bank faces significant competition both in making loans and in attracting deposits.

In addition, rapid technological changes and consumer preferences may result in increased competition for the Company’s other services, while a number of well-funded technology-focused companies are innovating in the payments, distributed ledger, and cryptocurrency networks to disintermediate portions of the traditional banking model.

The state of New Jersey, New York City and Philadelphia are attractive markets to many financial institutions.

Many of the Bank’s competitors are significantly larger institutions headquartered out-of-market which have greater financial resources than the Bank.

In addition, rapid technological changes and consumer preferences may result in increased competition for the Company’s other services as a number of well-funded technology-focused companies are innovating in the payments, distributed ledger, and cryptocurrency networks to disintermediate portions of the traditional banking model.

The state of New Jersey, New York City, Philadelphia, Baltimore, Washington D.C., and Boston are attractive markets to many financial institu tions.

Many of the Bank’s competitors are significantly larger institutions headquartered out-of-market that have greater financial resources than the Bank.

The Bank’s competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies, internet-based providers and insurance companies.

Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations and credit unions although the Bank also faces competition for deposits from short-term money market funds, other corporate and government securities funds, internet-only providers and from other financial service institutions such as brokerage firms and insurance companies.

The Bank distinguishes itself from large banking competitors through its local presence and ability to deliver personalized service.

Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations, and credit unions.

The Bank also faces competition for deposits from short-term money market funds, other corporate and government securities funds, internet-only providers, and from other financial service institutions such as brokerage firms and insurance companies.

The Bank distinguishes itself from large bank competitors with teams of local financial experts in each market providing personalized accounts and extraordinary customer service.

Community Involvement

The Bank proudly promotes a higher quality of life in the communities it serves through employee volunteer efforts and the work of OceanFirst Foundation (the “Foundation”).

Employees are continually encouraged to beco me leaders in their communities and use the Bank’s support to help others.

The Foundation, established in 1996, has granted over $42 million to enrich the lives of local citizens by supporting initiatives in health and human services, education, affordab le housing, youth development and the arts.

The Bank promotes efforts to enhance the quality of life in the communities it serves through employee volunteer efforts and the work of OceanFirst Foundation (the “Foundation”).

Employees are encouraged to help their neighbors in many ways and receive up to eight hours of Bank-paid volunteer time each year.

Known as the WaveMakers when helping in the community, employees collectively spend thousands of hours volunteering and serving in leadership roles with local nonprofit organizations, along with participating in other activities that contribute to improving the quality of life for others.

The Foundation, established in 1996 during the Company’s initial public offering, has granted over $43.8 million to enrich the lives

of local citizens by supporting initiatives in health and human services, education, affordab le housing, youth development, and the arts.

On November 4, 2021, the Company announced the execution of a definitive agreement and plan of merger 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 approvals.

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

On January 1, 2020, the Company completed its acquisition of Two River Bancorp (“Two River”), which added $1.1 billion to assets, $940.1 million to loans, and $941.8 million to deposits.

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On January 1, 2020, the Company completed its acquisition of Country Bank Holding Company, Inc.

(“Country Bank”) which added $793.7 million to assets, $618.4 million to loans, $652.7 million to deposits.

(“Country Bank”), which added $793.7 million to assets, $618.4 million to loans, and $652.7 million to deposits.

Country Bank’s results of operations are included in the consolidated results for the period beginning on January 1, 2020.

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Capital Bank’s results of operations are included in the consolidated results for the period beginning on February 1, 2019.

On January 31, 2018, the Company completed its acquisition of Sun Bancorp, Inc.

(“Sun”) which added $2.0 billion to assets, $1.5 billion to loans, and $1.6 billion to deposits.

Sun’s results of operations are included in the consolidated results for the period beginning on February 1, 2018.

These transactions have enhanced the Bank’s position as the premier community banking franchise in central and southern New Jersey, and the metropolitan areas of Philadelphia and New York City and they have grown business lines, expanded the geographic footprint and improved financial performance.

These transactions have enhanced the Bank’s position as the premier community banking franchise in central and southern New Jersey, strengthened its presence in the major metropolitan areas of Philadelphia and New York, grown business lines, expanded its geographic footprint, and improved financial performance.

The announced transaction with Partners will supplement the Company’s existing expansion efforts into Baltimore and Washington D.C.

The Company will continue to evaluate potential acquisition opportunities to further create stockholder value.

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At December 31, 2021, the Bank had total loans outstanding of $8.62 billion, of which $5.43 billion, or 63.0% of total loans, were commercial real estate, multi-family, and land loans (collectively, “commercial real estate”).

The remainder of the portfolio consisted of $2.35 billion of residential real estate loans, or 30.2% of total loans;

The remainder of the portfolio consisted of:

$2.48 billion of residential real estate loans, or 28.8% of total loans;

$449.2 million of commercial and industrial loans, or 5.2% of total loans;

and $260.8 million of consumer loans, primarily home equity loans and lines of credit, or 3.0% of total loans.

At December 31, 2020, the Bank had $45.5 million of loans held-for-sale.

At that same date, 38.3% of the Bank’s total loans had adjustable interest rates.

At December 31, 2021, the Bank had no loans held-for-sale and 36.7% of the Bank’s total loans had adjustable interest rates.

The types of loans that the Bank may originate are subject to federal and state laws and regulations.

Interest rates charged by the Bank on loans are affected by the demand for such loans and the supply of money available for lending purposes and the rates offered by competitors.

These factors are, in turn, affected by, among other things, economic conditions, monetary policies of the Federal government, including the FRB, and legislative tax policies.

These factors are, in turn, affected by, among other things, economic conditions, monetary policies of the federal government, including the FRB, and legislative and tax policies.

The following table sets forth the composition of the Bank’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated:

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of Total Amount Percent

(dollars in thousands)

Commercial and industrial $ 449,224 5.21 % $ 470,656 6.03 % $ 396,434 6.38 %

Commercial real estate 5,433,126 63.01 4,636,529 59.43 3,089,063 49.71

Residential real estate 2,479,701 28.76 2,354,983 30.19 2,321,157 37.35

Commercial and industrial

260,819 3.02 339,462 4.35 407,998 6.56

339,462 4.35 407,998 6.56 475,170 8.50 282,438 7.10 290,676 7.62

7,801,630 100.00 % 6,214,652 100.00 % 5,588,713 100.00 % 3,976,355 100.00 % 3,816,763 100.00 %

Total loans 8,622,870 100.00 % 7,801,630 100.00 % 6,214,652 100.00 %

Deferred origination costs, net 9,332 9,486 9,880

9,486 9,880 7,086 5,380 3,414

Allowance for credit losses (60,735) (16,852) (16,577) (15,721) (15,183)

Allowance for loan credit losses (48,850) (60,735) (16,852)

Loans receivable, net 8,583,352 7,750,381 6,207,680

Loans held for sale — 45,524 —

45,524 — — 241 1,551

Total loans receivable, net $ 8,583,352 $ 7,704,857 $ 6,207,680

Adjustable rate $ 3,162,950 36.68 % $ 2,991,321 38.34 % $ 2,107,790 33.92 %

$ 2,991,321 38.34 % $ 2,107,790 33.92 % $ 1,974,387 35.33 % $ 1,266,817 31.86 % $ 1,192,998 31.26 %

4,810,309 61.66 4,106,862 66.08 3,614,326 64.67 2,709,538 68.14 2,623,765 68.74

Fixed rate 5,459,920 63.32 4,810,309 61.66 4,106,862 66.08

$ 8,622,870 100.00 % $ 7,801,630 100.00 % $ 6,214,652 100.00 %

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At December 31, 2021

Commercial Real Estate Residential

Real Estate Commercial

Industrial Consumer Total

Industrial Commercial Real Estate Residential

Real Estate Consumer Total

(in thousands)

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After one year:

More than one year to three years 660,922 17,520 185,779 10,683 874,904

More than three years to five years 909,798 18,617 47,599 26,197 1,002,211

More than five years to ten years 1,928,968 111,632 74,291 95,350 2,210,241

More than ten years to twenty years 336,499 422,162 8,156 202,470 969,287

More than twenty years 42,313 1,689,321 25,086 1,417 1,758,137

More than one year to five years 238,636 1,959,435 21,190 35,565 2,254,826

More than five years to fifteen years 41,898 2,705,307 349,940 129,458 3,226,603

More than fifteen years 26,382 115,377 2,102,893 93,387 2,338,039

Total due after December 31, 2022 306,916 4,780,119 2,474,023 258,410 7,819,468

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Deferred origination costs, net 9,332

Allowance for credit losses (60,735)

Allowance for loan credit losses (48,850)

Loans receivable, net $ 8,583,352

Loans held-for-sale 45,524

Total loans receivable, net $ 7,704,857

The following table sets forth at December 31, 2021, the dollar amount of total loans receivable, contractually due after December 31, 2022, and whether such loans have fixed interest rates or adjustable interest rates:

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(in thousands)

Real estate loans:

Commercial and industrial $ 139,447 $ 167,469 $ 306,916

Commercial real estate 2,458,850 2,321,269 4,780,119

Residential real estate 2,268,017 206,006 2,474,023

Commercial and industrial 228,160 112,751 340,911

Consumer 142,763 115,647 258,410

Total loans receivable $ 5,009,077 $ 2,810,391 $ 7,819,468

Origination, Sale and Servicing of Loans .

The following table sets forth the Bank’s loan originations, purchases, sales, principal repayments and loan activity, including loans held-for-sale, for the periods indicated.

For the Year Ended December 31,

2020 2019 2018

(in thousands)

Beginning balance $ 6,214,652 $ 5,588,713 $ 3,976,355

Loans originated:

Commercial real estate 752,562 701,009 327,513

Residential real estate 832,917 579,101 395,387

Commercial and Industrial .

Consumer 47,195 50,787 68,489

Total loans originated 2,229,435 1,506,346 878,938

Loans purchased — 101,674 199,580

Net loans acquired in acquisition 1,558,480 307,778 1,517,345

Total 10,002,567 7,504,511 6,572,218

Principal repayments 1,568,299 1,278,734 965,520

Sales of loans 612,348 7,358 13,152

Charge-offs (gross) 20,184 2,804 3,841

Transfer to other real estate owned 106 963 992

Total loans $ 7,801,630 $ 6,214,652 $ 5,588,713

At December 31, 2021, commercial and industrial (“C&I”) loans totale d $449.2 million, or 5.2% of the Bank’s total loans outstanding.

The Bank originates C&I loans and lines of credit (including for working capital, fixed asset purchases, and acquisition, receivable, and inventory financing) primarily in the Bank’s market are a.

In underwriting C&I loans and credit lines, the Bank reviews and analyzes the financial history and capacity of the borrower, collateral value, strength and character of the principals, and general payment history of the principal borrowers in coming to a credit decision.

The Bank generally originates C&I loans secured by the assets of the business including accounts receivable, inventory, and fixtures.

The Bank generally requires the personal guarantee of the principal borrowers for all C&I loans.

Risk of loss on a C&I business loan is dependent largely on the borrower’s ability to remain financially able to repay the loan from the ongoing operations of the business.

In addition, any collateral securing such loans may depreciate over time, may be difficult to appraise, and may fluctuate in value.

Commercial Real Estate .

Th e Bank originates commercial real estate loans that are secured by properties, or properties under construction, generally used for business purposes such as office, industrial or retail facilities.

Th e Bank originates commercial real estate loans that are secured by properties, or properties under construction, that are generally used for business purposes such as office, industrial, or retail facilities.

A substantial majority of the Bank’s commercial real estate loans are located in its primary market area.

The Bank generally originates commercial real estate loans with terms of up to ten years and amortization schedules up to 30 years with fixed or adjustable rates.

Fixed rate loans typically contain prepayment penalties over the initial term.

Fixed-rate loans typically contain prepayment penalties over an initial term.

Additionally, the B ank offers an interest rate swap program that allows commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement.

In reaching its decision on whether to make a commercial real estate loan, the Bank considers the net operating income of the property and the borrower’s expertise, credit history, and profitability, among other factors.

At December 31, 2020, the Bank’s total commercial real estate loans outstanding were $4.64 billion, or 59.4% of total loans, were commercial real estate loans , as compared to $3.09 billion, or 49.7% of total loans, at December 31, 2019.

The Bank continues to grow this market segment primarily through the addition of experienced commercial lenders and through an expansive lending area with commercial lending teams in various New Jersey counties as well as teams in New York City and the greater Philadelphia area.

Of the total commercial real estate portfolio, 24.7% is considered owner-occupied, whereby the underlying business owner occupies a majority of the property.

The commercial real estate portfolio includes loans for the construction of commercial properties.

Typically, these loans are underwritten based upon commercial leases in place prior to funding.

At December 31, 2021, the Bank’s total commercial real estate loans outstanding were $5.43 billion, or 63.0% of total loans, as compared to $4.64 billion, or 59.4% of total loans at December 31, 2020.

The Bank continues to grow this market segment primarily through the addition of experienced commercial lenders and through expansive commercial lending teams i n various New Jersey counties as well as teams in New York City, Philadelphia, Baltimore, Washington D.C., and Boston.

commercial real estate portfolio, 19.4% is considered owner-occupied, whereby the underlying business owner occupies a majority of the property.

The commercial real estate portfolio also includes loans for the construction of commercial properties.

In certain cases, these loans are underwritten based upon commercial leases in place prior to funding.

In many cases, commercial construction loans are extended to owners that intend to occupy the property for business operations, in which case the loan is based upon the financial capacity of the related business and the owner of the business.

At December 31, 2020, the Bank had an outstanding balance in commercial construction loans of approximately 5% of total loans , as compared to approximately 3% at December 31, 2019.

The Bank also originates mu lti-family mortgage loans and to a lesser extent land loans.

The Bank’s multi-family loans and land loans at December 31, 2020 totaled $710.2 million and $8.2 million , respectively, as compared to $470.0 million and $3.7 million , respectively, at December 31, 2019.

Residential Real Estate Lending .

At December 31, 2021 and 2020, the Bank had an outstanding balance in commercial construction loans of less than 5% of total exposure .

The Bank originates mu lti-family mortgage loans and, to a lesser extent, land loans, which are included in commercial real estate.

At December 31, 2021 and 2020, the Bank’s multi-family loans were $1.05 billion and $710.2 million, respectively, and land loans were $4.2 million and $8.2 million , respectively.

Residential Real Estate .

The Bank offers both fixed-rate and adjustable-rate mortgage (“ARM”) loans secured by one-to-four family residences with maturities up to 30 years.

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Loan originations are typically generated by the Bank’s commissioned loan representatives and are largely derived from contacts within the local real estate industry, members of the local communities, and the Bank’s existing or past customers.

On occasion the Bank purchases loans originated by other banks.

Additionally, for the year ended December 31, 2021, the Bank purchased $302.0 million of loans originated by others.

At December 31, 2021, $2.48 billion, or 28.8% of total loans, were residential real estate loans, primarily single family and owner occupied.

To a lesser extent and included in this activity are residential mortgage loans secured by seasonal second homes and non-owner occupied investment properties.

The average size of the Bank’s residential real estate loans was approximately $273,000 at December 31, 2020.

The Bank currently offers several ARM loan programs with interest rates which adjust every three, five or ten years.

To a lesser extent and included in this activity are residential mortgage loans secured by seasonal second homes, non-owner occupied investment properties and construction loans.

The average size of the Bank’s residential real estate loans, excluding purchased loan pools, was approximately $280,000 at December 31, 2021.

The Bank currently offers several ARM loan programs with interest rates that adjust every one, three, five, or ten years.

The Bank’s ARM loans generally provide for periodic caps of 2% or 3% and an overall cap of 6% on the increase or decrease in the interest rate at any adjustment date and over the life of the loan.

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In order to minimize risks, borrowers of ARM loans with an initial fixed period of five years or less must qualify based on the greater of the note rate plus 2% or the fully-indexed rate.

Seven- to ten-year ARMs must qualify based on the note rate.

Seven- to ten-year ARM loans must qualify based on the note rate.

The Bank does not originate ARM loans that can result in negative amortization.

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Appraisals are obtained for loans secured by real estate properties.

The weighted average loan-to-value ratio of the Bank’s residential real estate loans was 61% at December 31, 2020 based on appraisal values at the time of origination.

The weighted average loan-to-value ratio of the Bank’s residential real estate loans, excluding purchased loan pools, was 59% at December 31, 2021 based on appraisal values at the time of origination.

Title insurance is typically required for first mortgage loans.

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Due-on-sale clauses are an important means of adjusting the rates on the Bank’s fixed-rate residential mortgage loan portfolio and the Bank has generally exercised its rights under these clauses.

The Bank has made, and may continue to make, residential mortgage loans that will not qualify as Qualified Mortgage Loans under the Dodd-Frank Act and the Consumer Financial Protection Bureau (“CFPB”) regulations.

See Risk Factors – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .

The Bank has made, and may continue to make, residential mortgage loans that will not qualify as Qualified Mortgage Loans under the Dodd-Frank Act and the CFPB regulations.

See Risk Factors – Risks Related to Lending Activities – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .

Included in the Bank’s residential real estate loan balance at December 31, 2021 were residential construction loans which totaled $153.5 million.

The Bank originates residential construction loans primarily on a construction/permanent basis with such loans converting to an amortizing loan following the completion of the construction phase.

The Bank originates residential construction loans primarily on a construction to permanent basis with such loans converting to an amortizing loan following the completion of the construction phase.

All of the Bank’s residential construction loans are made to individuals building a residence.

Construction lending, by its nature, entails additional risks compared to residential real estate lending, attributable primarily to the fact that funds are advanced based upon a security interest in a project which is not yet complete.

Risk of loss on a construction loan depends largely upon whether initial estimate of the property's value at completion of construction equals or exceeds the cost of the property construction.

During the construction phase, a number of factors can result in delays and cost overruns.

If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed.

The Bank addresses these risks through its underwriting policies and procedures and its experienced staff.

Commercial and Industrial Lending .

At December 31, 2020, commercial and industrial (“C&I”) loans totale d $470.7 million, or 6.0% of the Bank’s total loans outstanding.

The Bank originates C&I loans and lines of credit (including for working capital, fixed asset purchases, and acquisition, receivable and inventory financing) primarily in the Bank’s market are a.

In underwriting commercial and industrial loans and credit lines, the Bank reviews and analyzes financial history and capacity of the borrower, collateral value, strength and character of the principals, and general payment history of the principal borrowers in coming to a credit decision.

The Bank generally originates C&I loans secured by the assets of the business including accounts receivable, inventory and fixtures.

The Bank generally requires the personal guarantee of the principal borrowers for all commercial and industrial loans.

Risk of loss on a commercial and industrial business loan is dependent largely on the borrower’s ability to remain financially able to repay the loan from the ongoing operations of the business.

In addition, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Consumer Loans .

At December 31, 2020, th e Bank’s consumer loans totaled $339.5 million, or 4.4% of the Bank’s total loan portfolio.

Other Consumer:

Home Equity Lines and Loans, Student Loans and Other Consumer .

At December 31, 2021, th e Bank’s other consumer loans totaled $260.8 million, or 3.0% of the Bank’s total loan portfolio.

Of the total consumer loan portfolio, home equity loans comprised $108.0 million;

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The loans have an 18% lifetime cap on interest rate adjustments.

Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly.

Other consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly.

Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower.

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Loan Approval Procedures and Authority .

The Board of Directors (“Board”) establishes the loan approval policies of the Bank based on total exposure to the individual borrower.

The Loan Committee of the Board of Directors (“Board”) establishes the loan approval policies of the Bank based on total exposure to the individual borrower.

The Board has authorized the approval of loans by a minimum of two officers of the Bank or the Management Credit Committee, on a scale which requires approval by personnel with progressively higher levels of credit approval authority as the loan amount increases.

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Loan Servicing .

Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, making inspections as required of mortgaged premises, contacting delinquent borrowers, supervising foreclosures, and property dispositions in the event of defaults, making certain insurance and tax payments on behalf of the borrowers, and generally administering the loans.

Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, making inspections as required of mortgaged premises, contacting delinquent borrowers, supervising foreclosures, property dispositions in the event of defaults, making certain insurance and tax payments on behalf of the borrowers, and generally administering the

The Bank also services mortgage loans for others.

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or (ii) sell non-performing loans where foreclosure proceedings may or may not have been initiated.

If a foreclosure action is instituted and the loan is not brought current, paid in full, or an acceptable workout accommodation is not agreed upon before

the foreclosure sale, the real property securing the loan generally is sold at foreclosure.

If a foreclosure action is instituted and the loan is not brought current, paid in full, or an acceptable workout accommodation is not agreed upon before the foreclosure sale, the real property securing the loan generally is sold at foreclosure.

Foreclosure timelines in New Jersey are among the longest in the nation and have remained protracted over the past several years.

The Bank classifies assets in accordance with its Classification of Assets and Allowance for Credit Losses Policy (“Policy”), which considers certain regulatory guidelines and definitions.

As part of this Policy, the Deputy Chief Credit Officer reviews and confirms the criticized and classified commercial loans report on a monthly basis.

In addition, the Chief Credit Officer reviews and affirms all loan risk rating changes within and into any criticized category.

The Bank classifies assets in accordance with its Classification of Assets and Allowance for Credit Losses Policy (“ACL Policy”), which considers certain regulatory guidelines and definitions.

As part of this ACL Policy, the Deputy Chief Credit Officer reviews and confirms the criticized and classified commercial loans report on a monthly basis.

At December 31, 2021, the Bank h ad $148.6 million of assets, including all other real estate owned (“OREO”), classified as Substandard.

At December 31, 2020, the Bank had $194.5 million of assets, including all OREO, classified as Substandard.

Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess potential weaknesses, such as past delinquencies, are designated Special Mention.

Assets which do not currently expose the Bank to sufficient risk to warrant classification but possess potential weaknesses, such as past delinquencies, are designated Special Mention.

Special Mention assets totaled $91.6 million at December 31, 2021, as compared to $165.8 million at December 31, 2020.

The increase in Special Mention and Substandard assets were driven by the Bank’s practice to promptly re-risk loans subject to forbearance.

The decrease in Special Mention and Substandard assets were primarily due to the improved economic outlook and greater certainty regarding these borrowers’ ability to service their loans.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations, Impact of COVID-19 .

Non-Accrual Loans and OREO.

Non-Performing Loans and OREO.

The following table sets forth information regarding non-accrual loans (“non-performing loans”) and OREO, excluding loans p urchased with credit deterioration (“PCD”, or, previously, purchased credit impaired) loans.

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(“Cape”), Ocean Shore Holding Co.

(“Ocean Shore”), Sun and Capital Bank.

(“Ocean Shore”), Sun Bancorp, Inc.

(“Sun”), and Capital Bank.

These were reclassified as PCD loans as of January 1, 2020.

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PCD loans are accounted for at the purchase price or acquisition date fair value, with an estimate of expected credit losse s for groups of PCD loans with similar risk characteristics and individual PCD loans without similar characteristics, to arrive at an initial amortized cost basis.

PCD lo ans totaled $48.5 million and $13.3 million at December 31, 2020 and 2019, respectively.

It is the policy of the Bank to cease accruing interest on loans 90 days or more past due or in the process of foreclosure.

For the years ended December 31, 2019 and 2018, the amount of interest income that would have been recognized on non-accrual loans if such loans had continued to perform in accordance with their contractual terms were $372,000 , a nd $419,000, respectively.

At December 31,

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Non-performing loans (1)

Commercial real estate $ 23,714 $ 7,728 $ 5,525 $ 14,243 $ 2,935

Residential real estate 8,642 7,181 7,389 4,190 8,126

Commercial and industrial

$ 18,948 $ 36,410 $ 17,849

2,503 2,733 2,914 1,929 2,064

Total non-performing loans (1)

36,410 17,849 17,415 20,865 13,566

106 264 1,381 8,186 9,803

Total non-performing assets (1)

OREO 106 106 264

Non-performing assets (1)

$ 19,054 $ 36,516 $ 18,113

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Non-performing assets consist of non-performing loans and OREO.

(2) The loans acquired from Two River, Country Bank, Capital Bank, Sun, Ocean Shore, Cape, and Colonial American were recorded at fair value.

The net credit mark on these loans, not reflected in the allowance for credit losses, was $27,951, $30,260, $31,647, $17,531, and $25,973 at December 31, 2020, 2019, 2018, 2017, and 2016 respectively.

Non-performing loans totaled $36.4 million at December 31, 2020, an increase of $18.6 million, as compared to December 31, 2019.

Non-performing loans at December 31, 2020 and 2019 do not include $48.5 million and $13.3 million, respectively, of PCD loans acquired from Two River, Country Bank, Colonial American, Cape, Ocean Shore, Sun and Capital Bank.

The Company’s OREO totaled $106,000 at December 31, 2020, a $158,000 decrease from December 31, 2019.

(2) The loans acquired from prior bank acquisitions were recorded at fair value.

The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, were $18.9 million, $28.0 million, and $30.3 million at December 31, 2021, 2020, and 2019, respectively.

Non-performing loans totaled $18.9 million at December 31, 2021, a decrease of $17.5 million as compared to December 31, 2020, primarily due to loans that returned to accrual status and partly due to loans that were paid off.

Non-performing loans at December 31, 2021 and 2020 do not include PCD loans acquired from prior bank acquisitions of $41.8 million and $48.5 million, respectively.

The Company’s OREO totaled $106,000 at both December 31, 2021, and December 31, 2020.

Allowance for Credit Losses (“ACL”):

Under the Current Expected Credit Loss (“CECL”) model, the ACL on financial assets is a valuation allowance estimated at each balance sheet date in accordance with generally accepted accounting principles

(“GAAP”) that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial assets.

Under the current expected credit loss (“CECL”) model, the ACL on financial assets is a valuation allowance estimated at each balance sheet date in accordance with generally accepted accounting principles (“GAAP”) that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial assets.

The CECL model also applies to certain off-balance sheet credit exposures.

The Company estimates the loan ACL (previously the allowance for loan losses) based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, net deferred fees or costs, collection of cash, and charge-offs.

The Company estimates the loan ACL based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, net deferred fees or costs, collection of cash, and charge-offs.

In the event that collection of principal becomes uncertain, the Company has policies in place to write-off accrued interest receivable by reversing interest income in a timely manner.

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A description of the methodology used in establishing the ACL is set forth in the section Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies, Allowance for Credit Losses .

As of December 31, 2020 and 2019, the Bank’s loan ACL was 0.78% and 0.27% of total loans, respectively.

The net credit mark on all acquired loans, not reflected in the allowance, was $28.0 million and $30.3 million at December 31, 2020 and 2019, respectively.

As of December 31, 2021 and 2020, the Bank’s loan ACL as a percentage of total loans were 0.57% and 0.78%, respectively.

The net unamortized credit and PCD marks on all acquired loans, not reflected in the allowance, was $18.9 million and $28.0 million at December 31, 2021 and 2020, respectively.

The loan ACL as a percent of total non-performing loans was 257.81% at December 31, 2021, an increase from 166.81% in the prior year.

The Bank will continue to monitor its allowance for credit losses as conditions dictate.

The Bank will continue to monitor its allowance for loan credit losses as conditions dictate.

The following table sets forth activity in the Bank’s loan ACL, or allowance for loan losses, as appropriate, for the periods set forth in the table:

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Balance at beginning of year $ 60,735 $ 16,852 $ 16,577

Commercial and industrial 154 890 —

Commercial real estate 410 14,850 899

Residential real estate 254 3,200 1,299

Commercial and industrial 890 — 230 380 184

Consumer 1,244 606 337 135 349

Other consumer 213 1,244 606

Total charge-offs 1,031 20,184 2,804

Recoveries 1,492 1,325 1,443

Net charge-offs 18,859 1,361 2,634 3,907 4,162

Credit loss expense 57,402 1,636 3,490 4,445 2,623

Net (recoveries) charge-offs (461) 18,859 1,361

Credit loss (benefit) expense (12,346) 57,402 1,636

Impact of CECL adoption — 2,701 —

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Balance at end of year $ 48,850 $ 60,735 $ 16,852

Ratio of net charge-offs during the year to average net loans outstanding during the year

The following table sets forth the net charge-offs/recoveries and the percent of net charge-offs/recoveries by loan category to average net loans outstanding for the periods indicated (dollars in thousands):

At or for the Year Ended December 31,

2021 2020 2019

Net (Recoveries) Charge-offs Ratio of Net (Recoveries) Charge-offs to Average Loans Net Charge-offs Ratio of Net Charge-offs to Average Loans Net Charge-offs (Recoveries) Ratio of Net Charge-offs (Recoveries) to Average Loans

Net (recoveries) charge-offs:

Commercial and industrial $ 30 — % $ 744 0.01 % $ (160) — %

Commercial real estate 205 — 14,743 0.18 (144) —

Residential real estate (98) — 2,317 0.03 1,203 0.02

Other consumer (598) (0.01) 1,055 0.01 462 0.01

Total net (recoveries) charge-offs (461) (0.01) % 18,859 0.23 % 1,361 0.02 %

Average net loans outstanding during the year $ 7,921,611 $ 8,122,631 $ 5,973,015

The increase in net recoveries for the year ended December 31, 2021 was primarily due to improved credit quality and successful recovery of previously charged-off balances.

The increase in net charge-offs for the year ended December 31, 2020 was primarily due to charge-offs of $14.6 million related to the sale of higher risk commercial real estate loans and $3.3 million of charge-offs related to the sale of under-performing residential and consumer loans.

The Company executed these loan sales as part of its strategy to limit exposure to credit risk and has accelerated the resolution of credit losses on higher risk credit exposures and minimized the operational impact associated with potential litigation and foreclosure proceedings.

The following table sets forth the Bank’s percent of loan ACL by category to the total loan ACL at December 31, 2020, the percent of allowance by category to total allowance at December 31, 2019, 2018, 2017, and 2016, and the percent of loans to total loans in each of the categories listed at the dates indicated (dollars in thousands):

The Company executed these loan sales as part of its strategy to limit exposure to credit risk, accelerated the resolution of potential credit losses on higher risk credit exposures, and minimized the operational impact associated with potential litigation and foreclosure proceedings.

The following table sets forth the Bank’s percent of loan ACL by category to the total loan ACL at December 31, 2021 and 2020, the percent of loan allowance by category to total loan allowance at December 31, 2019, and the percent of loans to total loans in each of the categories listed at the dates indicated (dollars in thousands):

At December 31,

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Amount Percent of

Loans Amount Percent of

Allowance Percent

Loans Amount Percent of

Allowance Percent

of Loans to Total

Loans Amount Percent of

Allowance Percent

of Loans to Total

Loans Amount Percent of

Allowance Percent

of Loans to Total

Commercial and industrial $ 5,039 10.32 % 5.21 % $ 5,390 8.87 % 6.03 % $ 1,458 8.65 % 6.38 %

Commercial real estate 31,388 64.24 63.01 41,757 68.76 59.43 12,776 75.81 49.71

Residential real estate 11,155 22.84 28.76 11,818 19.46 30.19 2,002 11.88 37.35

Commercial and industrial 1,770 2.91 6.03 1,458 8.65 6.38 1,609 9.71 5.46 1,801 11.45 4.72 2,037 13.41 4.00

Consumer 11,818 19.46 4.35 591 3.51 6.56 486 2.93 8.50 614 3.91 7.10 1,110 7.31 7.62

Other consumer 1,268 2.60 3.02 1,770 2.91 4.35 591 3.51 6.56

Unallocated — — — — — — 25 0.15 —

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The Company prepares a comprehensive analysis of the adequacy of the reserve for repurchased loans and loss sharing obligations at each quarter-end.

At December 31, 2020 and 2019, the Company maintained a reserve for repurchased loans and loss sharing obligations of $1.2 million and $1.1 million, respectively.

At December 31, 2021 and 2020, the Company maintained a reserve for repurchased loans and loss sharing obligations of $1.2 million.

Provisions or credits for losses are charged to gain on sale of loans and credited to the reserve while actual losses are charged to the reserve.

There were no losses for the years ended December 31, 2021, 2020, or 2019.

The reserve increased by $100,000 during 2020, which was recorded as a decrease in other income.

Losses on loans repurchased would include cash settlements in lieu of repurchases.

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Investment Activities

The investment policy of the Bank as established by the Board attempts to provide and maintain liquidity, generate a favorable return on investments without incurring undue interest rate and credit risk, and complement the Bank’s lending activities.

Specifically, the Bank’s policies generally limit investments to government and Federal agency-backed, municipal, corporate, and mortgage-backed.

The Bank views its securities portfolio primarily as a source of income and liquidity.

Interest and principal payments generated from securities provide a source of liquidity to fund loans and meet short-term cash needs.

In times of reduced loan demand, the securities portfolio can provide an alternative source of investment income.

The portfolio is also used to provide collateral for qualified deposits and borrowings and to manage interest rate risk.

The investment policy is overseen by the Board of Directors and generally limits investments to government and federal agency obligations, agency and non-agency mortgage-backed securities, municipal, corporate, and asset-backed securities.

The Company’s investment policy mirrors that of the Bank except that it allows for the purchase of certain other debt, preferred stock, and equity securities in limited amounts.

The Board of Directors has delegated authority to implement the investment policy to the Bank’s Investment Committee under the oversight of the Asset Liability Committee.

Day-to-day management of the portfolio rests with the Treasurer.

Management determines the appropriate classification of securities at the time of purchase.

If the Bank has the intent and the ability at the time of purchase to hold debt securities until maturity, they may be classified as held-to-maturity.

Investment and mortgage-backed securities identified as held-to-maturity are carried at cost, adjusted for amortization of premium and accretion of discount, which are recognized as adjustments to interest income.

Debt securities identified as held-to-maturity are carried at cost, adjusted for amortization of premium and accretion of discount, which are recognized as adjustments to interest income.

Debt securities to be held for indefinite periods of time, but not necessarily to maturity are classified as available-for-sale.

Such debt securities are carried at estimated fair value and unrealized gains and losses, net of related tax effect, are excluded from earnings, but are included as a separate component of stockholders’ equity.

Such debt securities are carried at an estimated fair value and unrealized gains and losses, net of tax effect, are included as a separate component of stockholders’ equity.

Refer to Note 4 Securities, to the Consolidated Financial Statements.

Mortgage-backed Securities .

Mortgage-backed securities represent a participation interest in a pool of single-family or multi-family mortgages, the principal and interest payments on which, in general, are passed from the mortgage originators, through intermediaries that pool and repackage the participation interests in the form of securities, to investors such as the Bank.

Such intermediaries may be private issuers, or agencies including the Federal Home Loan Mortgage Company (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”), and the Small Business Administration (“SBA”) that guarantee the payment of principal and interest to investors.

Mortgage-backed securities typically are issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with

interest rates that are within a certain range and with varying maturities.

The underlying pool of mortgages can be composed of either fixed-rate or adjustable-rate loans.

The actual maturity of a mortgage-backed security varies, depending on when the mortgagors repay or prepay the underlying mortgages.

Prepayments of the underlying mortgages may shorten the life of the security, thereby affecting its yield to maturity and the related estimated fair value of the mortgage-backed security.

The prepayments of the underlying mortgages depend on many factors, including the type of mortgages, the coupon rates, the age of the mortgages, the geographical location of the underlying real estate collateralizing the mortgages, the general levels of market interest rates, and general economic conditions.

GNMA mortgage-backed securities that are backed by assumable Federal Housing Administration or Department of Veterans Affairs loans generally have a longer life than conventional non-assumable loans underlying FHLMC and FNMA mortgage-backed securities.

During periods of falling mortgage interest rates, prepayments generally increase, as opposed to periods of increasing interest rates when prepayments generally decrease.

If the interest rate of underlying mortgages significantly exceeds the prevailing market interest rates offered for mortgage loans, refinancing generally increases and accelerates the prepayment of the underlying mortgages.

Prepayment experience is more difficult to estimate for adjustable-rate mortgage-backed securities.

The Bank has investments in mortgage-backed securities and has utilized such investments to complement its lending activities.

The Bank invests in a large variety of mortgage-backed securities, including adjustable-rate, balloon and fixed-rate securities and are primarily directly insured or guaranteed by either FHLMC, FNMA, GNMA or SBA.

The following table sets forth certain information regarding the amortized cost and estimated fair value of the Bank’s mortgage-backed securities at the dates indicated:

At December 31,

2020 2019 2018

Cost Estimated

Value Amortized

Cost Estimated

Value Amortized

Cost Estimated

(in thousands)

Mortgage-backed securities:

FHLMC $ 232,942 $ 238,201 $ 206,985 $ 208,682 $ 237,703 $ 232,752

FNMA 293,805 301,300 244,923 247,115 278,264 272,982

GNMA 67,334 69,336 110,661 111,388 127,611 125,449

SBA 5,392 5,332 1,940 1,889 3,527 3,447

CMO 32,321 33,547 — — — —

Total mortgage-backed securities $ 631,794 $ 647,716 $ 564,509 $ 569,074 $ 647,105 $ 634,630

As of December 31, 2020, 2019 and 2018, the Company had no investments in a single issuer other than FHLMC and FNMA within the mortgage-backed securities portfolio that exceeded 10% of the Company’s stockholders’ equity.

Investment Securities .

At December 31, 2020, the amortized cost of the Company’s investment securities totaled $490.7 million, and consisted of $173.8 million of U.S.

government and agency obligations, $238.4 million of state and municipal obligations, $72.3 million of corporate debt securities, and $6.2 million of collateralized loan obligations.

The majority of the Bank’s residential and commercial mortgage-backed securities are issued or guaranteed by an agency of the U.S.

government including Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), and Government National Mortgage Association (“GNMA”).

Agency mortgage-backed securities along with obligations issued directly by the U.S.

government and its agencies entail a lesser degree of risk than loans made by the Bank and most other securities by virtue of the guarantees that back them, they require less capital under risk-based capital rules, are generally more liquid, and are more easily used to collateralize borrowings or other obligations of the Bank.

Each of the U.S.

government and agency obligations are rated AA+ by Standard and Poor’s and Aaa by Moody’s.

The state and municipal obligations are issued by government entities with current credit ratings by one of the nationally recognized statistical rating organizations that are considered investment grade ranging from a high of AAA to a low of Baa2.

Corporate debt securities are issued by various corporate entities with an amortized cost of $72.3 million.

Credit ratings range from a high of AA to a low of BB categories.

The collateralized loan obligations are rated AAA or AA categories and one trust preferred collateralized debt obligation is rated in the A category.

government, agency, and agency guaranteed obligations are rated AA+ by Standard and Poor’s and Aaa by Moody’s.

The municipal portfolio provides tax-advantaged yield and diversification of risk and is generally comprised of general obligation and revenue bonds issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways, sewer systems, hospitals, or other critical infrastructure.

The asset-backed securities portfolio provides attractive yields and diversification of risk and is largely comprised of senior classes of collateralized loan obligations that invest in U.S.

based broadly syndicated and middle market loans.

The corporate debt securities portfolio is comprised of U.S.

financial services and industrial companies that exhibit strong credit characteristics and provide attractive returns.

The Bank may occasionally invest in non-agency residential or commercial mortgage-backed securities that are rated investment grade depending on credit and return on investment profiles.

The vast majority of municipal, asset-backed, corporate, and other mortgage-backed securities are issued by entities with current credit ratings by one of the nationally recognized statistical rating organizations that are considered investment grade.

See Note 4 Securities, to the Consolidated Financial Statements.

The following table sets forth certain information regarding the amortized cost and estimated fair value of the Company’s investment securities at the dates indicated.

At December 31,

2020 2019 2018

Cost Estimated

Value Amortized

Cost Estimated

Value Amortized

Cost Estimated

(in thousands)

Investment securities:

government and agency obligations $ 173,790 $ 176,940 $ 154,104 $ 155,433 $ 115,499 $ 114,569

State and municipal obligations 238,405 249,674 124,455 125,784 123,987 122,357

Corporate debt securities 72,305 71,268 79,547 77,959 66,834 61,976

Collateralized loan obligations 6,174 6,170 — — — —

Total investment securities $ 490,674 $ 504,052 $ 358,106 $ 359,176 $ 306,320 $ 298,902

As of December 31, 2020, 2019 and 2018, the Company had no investments in a single issuer within the investment securities portfolio that exceeded 10% of the Company’s stockholders’ equity.

The ta ble below sets forth certain information regarding the amortized cost, weighted average yields and contractual maturities, excluding scheduled principal amortization, of the Bank’s investment and mortgage-backed securities as of December 31, 2020.

At December 31, 2021, the amortized cost of the Company’s debt securities totaled $1.71 billion, and consisted of $164.8 million of U.S.

government and agency obligations, $281.4 million of state, municipal, and sovereign debt obligations, $73.8 million of corporate debt securities, $299.0 million of asset-backed securities, and $894.5 million of mortgage-backed securities.

The ta ble below sets forth certain information regarding the amortized cost, weighted average yield, and contractual maturities, excluding scheduled principal amortization, of the Bank’s debt securities as of December 31, 2021.

The weighted average yield is calculated based on the yield to maturity weighted for the size of each debt security over the entire portfolio of debt securities.

The weighted average yields on tax-exempt obligations have been computed on a tax-equivalent basis.

Other investments consist of mutual funds that do not have a contractual maturity date and are excluded from the table.

Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

See Investment Activities – Mortgage-backed Securities.

At December 31, 2021

or Less Amortized Cost More than One Year to Five Years Amortized Cost More than Five Years to Ten Years Amortized Cost More than Ten Years Amortized Cost Amortized

or Less Amortized Cost Weighted Average Yield More than One Year to Five Years Amortized Cost Weighted Average Yield More than Five Years to Ten Years Amortized Cost Weighted Average Yield More than Ten Years Amortized Cost Weighted Average Yield Amortized

Cost Estimated

(dollars in thousands)

Investment securities:

government and agency obligations $ 80,393 1.23 % $ 40,390 1.59 % $ 43,973 1.35 % $ — — % $ 164,756 $ 165,420

State and municipal obligations 21,877 85,613 38,465 92,450 238,405 249,674

State, municipal, and sovereign debt obligations 13,606 1.67 104,464 1.64 79,832 2.04 83,487 2.50 281,389 290,410

Corporate debt securities (1)

6,485 2.94 3,477 4.04 53,656 2.50 10,205 2.46 73,823 74,203

Collateralized loan obligations (2)

Asset-backed securities (2)

— — — — 98,273 1.66 200,703 1.75 298,976 297,528

Total investment securities $ 97,822 $ 195,949 $ 93,597 $ 103,306 $ 490,674 $ 504,052

Weighted average yield 1.40 % 1.74 % 2.35 % 2.57 % 1.96 %

Mortgage-backed securities:

FHLMC $ 51 $ 1,841 $ 43,866 $ 187,184 $ 232,942 $ 238,201

FNMA 3 11,404 63,439 218,959 293,805 301,300

GNMA — 32 1,636 65,666 67,334 69,336

SBA — — 2,884 2,508 5,392 5,332

CMO — 20,352 — 11,969 32,321 33,547

Agency residential 121 1.77 24,308 2.20 89,879 2.12 642,536 1.75 756,844 756,449

Agency commercial — — — — 90,262 1.56 15,265 1.84 105,527 104,624

Non-agency commercial 1,504 0.46 18,646 2.87 — — 11,957 3.67 32,107 32,365

Total mortgage-backed securities $ 1,625 0.56 % $ 42,954 2.49 % $ 180,141 1.84 % $ 669,758 1.78 % $ 894,478 $ 893,438

Weighted average yield 1.98 % 2.98 % 2.17 % 2.13 % 2.18 %

Total debt securities $ 102,109 1.38 % $ 191,285 1.87 % $ 455,875 1.86 % $ 964,153 1.85 % $ 1,713,422 $ 1,720,999

(1) $53.0 million of the Bank’s corporate debt securities carry interest rates which adjust to a spread over London Inter-Bank Offered Rate (“LIBOR”) on a quarterly basis.

(2) $6.2 million of the Bank’s collateralized loan obligations carry interest rates which adjust to a spread over LIBOR on a quarterly basis.

(2) All of the Bank’s asset-backed securities carry interest rates which adjust to a spread over LIBOR on a quarterly basis.

Equity Investments .

At December 31, 2020, and 2019, the Company held equity investments at an estimated fair value of $107.1 million and $10.1 million, respectively.

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

The positive performance of the portfolio drove the decision to liquidate a vast majority of the positions in December 2020 and January 2021.

As of December 31, 2020, and 2019, the Company had no investments in a single issuer within the equity investments portfolio that exceeded 10% of the Company’s stockholders’ equity.

At December 31, 2021, and 2020, the Company held equity investments of $101.2 million and $107.1 million, respectively.

The equity investments are primarily comprised of select financial services institutions’ common or preferred stocks paying attractive dividends and funds that invest in financial services institutions.

Sources of Funds

Repayments and prepayments of loans and mortgage-backed securities, proceeds from sales of loans, cash flows generated from operations, borrowings, proceeds from maturities of debt securities, and deposits are the primary sources of the Bank’s funds for use in lending, investing and for other general purposes.

Repayments and prepayments of loans, proceeds from sales of loans, cash flows generated from operations, borrowings, proceeds from maturities and sales of securities, and deposits are the primary sources of the Bank’s funds for use in lending, investing and for other general purposes.

The Bank offers a variety of deposit accounts with a range of interest rates and terms to retail, government, and business customers.

The Bank’s deposits consist of money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits.

The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition.

The flow of deposits is influenced significantly by general economic conditions, prevailing interest rates, and competition.

The Bank’s deposits are obtained predominantly from the areas in which its branch offices are located.

1 unchanged sentence

however, market interest rates and rates offered by competing financial institutions could significantly affect the Bank’s ability to attract and retain deposits.

At December 31, 2021 and 2020, the Bank had $5.14 billion and $4.90 billion, respectively, of total uninsured deposits (in excess of the Federal Deposit Insurance Corporation limit).

At those dates, the Bank had no deposits that were otherwise uninsured.

At December 31, 2021, the Bank had $145.4 million in time deposits in amounts of $250,000 or more maturing as follows:

Maturity Period Amount Weighted

Maturity Period Time Deposits Weighted

(dollars in thousands)

15 unchanged sentences

Interest-bearing checking accounts $ 3,878,465 40.21 % 0.35 % $ 3,168,889 35.76 % 0.61 % $ 2,517,068 40.05 % 0.67 %

$ 3,168,889 35.76 % 0.61 % $ 2,517,068 40.05 % 0.67 % $ 2,336,917 40.43 % 0.39 %

Non-interest-bearing accounts 2,429,547 25.19 — 2,031,100 22.93 — 1,325,836 21.10 —

2,031,100 22.93 — 1,325,836 21.10 — 1,135,602 19.64 —

Money market deposit accounts 769,157 7.98 0.14 677,554 7.65 0.43 605,607 9.64 0.81

677,554 7.65 0.43 605,607 9.64 0.81 571,997 9.90 0.49

Savings accounts 1,581,472 16.40 0.04 1,449,982 16.37 0.17 906,086 14.42 0.13

1,449,982 16.37 0.17 906,086 14.42 0.13 877,179 15.17 0.11

Time deposits 985,328 10.22 1.02 1,531,857 17.29 1.53 929,488 14.79 1.67

1,531,857 17.29 1.53 929,488 14.79 1.67 858,978 14.86 1.11

Total average deposits $ 9,643,969 100.00 % 0.26 % $ 8,859,382 100.00 % 0.55 % $ 6,284,085 100.00 % 0.61 %

$ 8,859,382 100.00 % 0.55 % $ 6,284,085 100.00 % 0.61 % $ 5,780,673 100.00 % 0.39 %

From time to time, the Bank obtains advances from the FHLB for cash management and interest rate risk management purposes or as an alternative to deposits.

FHLB term advances are also used to acquire certain other assets as may be deemed appropriate for investment purposes.

Advances are collateralized primarily by certain of the Bank’s mortgage loans and investment and mortgage-backed securities and secondarily by the Bank’s investment in capital stock of the FHLB.

The maximum amount that the FHLB will advance to member institutions, including the Bank, fluctuates from time-to-time in

accordance with the policies of the FHLB.

From time to time, the Bank obtains advances from the FHLB and other sources for cash management and interest rate risk management purposes or as an alternative to deposits.

Advances are collateralized primarily by certain of the Bank’s mortgage loans and debt securities and secondarily by the Bank’s investment in capital stock of the FHLB.

The maximum amount that the FHLB will advance to member institutions, including the Bank, fluctuates from time-to-time in accordance with the policies of the FHLB.

At December 31, 2021, the Bank had no outstanding advances from the FHLB.

The Bank has outstanding municipal letters of credit issued by the FHLB used to secure government deposits.

The Bank also has outstanding municipal letters of credit issued by the FHLB used to secure government deposits.

At December 31, 2021, these municipal letters of credit totaled $1.45 billion.

The Bank also borrows funds using securities sold under agreements to repurchase.

Under this form of borrowing specific U.S.

Government agency and/or mortgage-backed securities are pledged as collateral to secure the borrowing.

Under this form of borrowing specific securities are pledged as collateral to secure the borrowing.

These pledged securities are held by a third-party custodian.

At December 31, 2021, the Bank had borrowed $118.8 million through securities sold under agreements to repurchase.

The Bank can also borrow from the Federal Reserve Bank of Philadelphia (“Reserve Bank”) under its primary credit program.

The Bank can also borrow from the Federal Reserve Bank of Philadelphia under its primary credit program.

Primary credit is available on a short-term basis, typically overnight, at a rate above the Federal Open Market Committee’s Federal funds target rate.

All extensions of credit by the Reserve Bank must be secured.

At December 31, 2020, the Bank had no borrowings outstanding with the Reserve Bank.

All extensions of credit by the Federal Reserve Bank of Philadelphia must be secured.

At December 31, 2021, the Bank had no borrowings outstanding with the Federal Reserve Bank of Philadelphia.

Subsidiary Activities

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OceanFirst Capital Trust I, OceanFirst Capital Trust II, OceanFirst Capital Trust III, Sun Statutory Trust VII, Sun Capital Trust VII, Sun Capital Trust VIII, and Country Bank Statutory Trust I, collectively known as the “Trusts”.

All of the Trusts are incorporated in Delaware and are formed for the issuance of trust preferred securities.

All of the Trusts are incorporated in Delaware and were formed for the issuance of trust preferred securities.

Human Capital

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As of December 31, 2021, the Bank had 874 full-time employees, 43 part-time employees, and 20 commissioned employees, for a total of 937 employees.

In addition, approximately 72% of the Bank’s employee base is female and 28% male, and the average tenure was eight years as of December 31, 2020.

In addition, approximately 68% of the Bank’s employees are female and 32% are male, and the average tenure was eight years as of December 31, 2021.

Total rewards

As part of the Bank’s compensation philosophy, market competitive total rewards programs are maintained for employees in order to attract and retain superior talent.

In addition to competitive base wages, additional programs include annual bonus opportunities, a Company Employee Stock Ownership Plan (“ESOP”), a Company matched 401(k) Plan, health and welfare benefits, flexible spending accounts, paid time off, family leave and employee assistance programs.

In addition to competitive base wages, additional programs include annual bonus opportunities, a Bank Employee Stock Ownership Plan (“ESOP”), a Bank matched 401(k) Plan, health and welfare benefits, flexible spending accounts, paid time off, family leave, and employee assistance programs.

Some employees also receive grants of equity awards in the Company’s stock.

Health and safety

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The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while continuing successful operations.

Through teamwork and the adaptability of the Bank’s management and staff, over a short period of time, a significant majority of employees were transitioned to effectively work from remote locations and ensure a safely-distanced working environment for employees with customer facing responsibilities, at branches and operations centers.

Proactively, the Bank partnered with an external vendor, Eden Health (“Eden”), to monitor the daily workday health status of employees working in an OceanFirst facility.

Eden features a team of medical professionals and clinicians who are qualified to assist in maintaining a safe and healthy workplace.

Through a smartphone application, Eden monitors employees’ daily health condition and any recent potential exposure to COVID-19.

Through teamwork and the adaptability of the Bank’s management and staff, over a short period of time, a significant majority of employees were transitioned to effectively work remotely and a safely-distanced working environment for employees with customer facing responsibilities at branches and operations centers was ensured.

The Bank has developed a process to collect COVID-19 vaccination records and monitor any recent potential exposure to COVID-19.

Employees are asked not to come to work when they experience signs or symptoms of a possible COVID-19 illness and are provided additional paid time off to cover compensation during such absences.

On an ongoing basis, the Bank further promotes the health and wellness by strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.

A core tenet of the Bank’s talent system is to both develop talent from within and supplement with external hires.

On an ongoing basis, the Bank further promotes health and wellness by strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care premiums to a minimum, and sponsoring various wellness programs.

A core tenet of the Bank’s talent philosophy is to both develop talent from within and supplement with external hires.

Whenever possible, the Bank seeks to fill positions by promotion and transfer from within the organization.

The Bank’s talent acquisition team uses internal and external resources to recruit highly skilled and talented candidates, and employee referrals for open positions is encouraged.

Following a multi-pronged recruiting strategy, which includes sourcing diverse candidate pools, new hires participate in an onboarding program that includes an introduction to the Bank’s culture, policies and procedures.

New employees are assigned an ambassador, who extend the integration process beyond the typical orientation experience.

The Bank’s talent acquisition team uses internal and external resources to recruit highly skilled and talented candidates, and employee referrals for open positions are encouraged.

Diverse candidate pools are required for open positions within OceanFirst Bank branches and corporate offices.

In the past year, a partnership with the African American Chamber of Commerce has provided increased connection with diverse candidates.

Other available tools are also utilized to connect with prospective new hires.

As of December 31, 2021, 17% of the Bank’s employees were persons of color.

Following a multi-pronged recruiting strategy, which includes sourcing diverse candidate pools, new hires participate in an onboarding program which includes an introduction to the Bank’s culture, policies, and procedures.

New employees are assigned an ambassador, who extends the integration process beyond the typical orientation experience.

Retention strategies include espousing a culture that inspires loyalty and trust through ongoing communication of strategic initiatives and executive roundtable conversations, in addition to the benefits mentioned above in Total rewards .

The Bank’s leadership development programs and opportunities offered through OceanFirst Bank University help ensure that motivated individuals have the opportunity for continuous improvement.

The Bank’s leadership development programs and opportunities offered through OceanFirst Bank University help ensure that motivated individuals have the

opportunity for continuous improvement.

Employees each maintain a professional development action plan and participate in regular evaluation and growth opportunities.

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This approach has also added new employees and ideas, which support a continuous improvement mindset and the goals of a diverse and inclusive workforce.

The average tenure of eight years reflects employee engagement in this core talent system tenet.

The Bank strives to promote inclusion through stated Company values and behaviors.

The Bank strives to promote inclusion through defined Company values and behaviors.

With the support from the Board of Directors, the Bank continues to explore additional diversity, equity, inclusion, and belonging efforts through multiple approaches to inclusion:

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Prior to January 2018, the Bank was a Federally-chartered savings bank, and the Company was registered as a savings and loan holding company.

Effective January 31, 2018, the Bank converted to a national bank charter and the Company became a bank holding company (“BHC”) under Section 3 of the Bank Holding Company Act of 1956, as amended (the “BHC Act”) and is subject to the requirements of the BHC Act, including required approvals for investments in or acquisitions of banking organizations, or entities involved in activities that are deemed closely related to banking, capital adequacy standards and limitations on nonbanking activities.

Effective January 31, 2018, the Bank converted to a national bank charter, and the Company became a bank holding company (“BHC”) under Section 3 of the Bank Holding Company Act of 1956, as amended (the “BHC Act”).

As a bank holding company, the Company is subject to the requirements of the BHC Act, including required approvals for investments in or acquisitions of banking organizations, or entities involved in activities that are deemed closely related to banking, capital adequacy standards, and limitations on nonbanking activities.

The Company is registered with the FRB and is required by Federal law to file reports with, and comply with the rules and regulations of the FRB.

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This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors and to ensure the safe and sound operation of the Bank.

The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

In addition, the Company elected to become a financial holding company under the Gramm-Leach Bliley Act (the “GLBA”) amendments to the BHC Act.

A financial holding company, and the nonbank companies under its control, are permitted to engage in activities considered financial in nature or incidental to financial activities and, if the FRB determines that they pose no risk to the safety or soundness of depository institutions or the financial system in general, activities that are considered complementary to financial activities.

Financial holding companies, and the nonbank companies under their control, are permitted to engage in activities considered financial in nature or incidental to financial activities and, if the FRB determines that they pose no risk to the safety or soundness of depository institutions or the financial system in general, activities that are considered complementary to financial activities.

The banking industry is highly regulated.

Both the scope of the laws and regulations and the intensity of supervision to which the Company and the Bank are subject to have increased in recent years, in response to the financial crisis as well as other factors such as technological and market changes.

Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations.

In addition, in 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “EGRRCPA”) was enacted.

This legislation includes targeted amendments to the Dodd-Frank Act and other financial services laws.

Statutory and regulatory controls increase a BHC’s cost of doing business and limit the options of its management to deploy assets and maximize income.

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The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.

The CFPB has enforcement authority over all banks with more than $10 billion in assets.

Institutions with $10 billion or less in assets will continue to be examined for compliance with consumer laws by their primary bank regulator.

The Bank is currently examined by the OCC for compliance with consumer protection laws.

At December 31, 2020, the Bank’s total assets were $11.45 billion and is therefore subject to authority enforcement by the CFPB, subject to a phase in period.

The Dodd-Frank Act also weakens the Federal preemption rules that have been applicable for national banks and Federal savings associations, and gives state attorney generals the ability to enforce Federal consumer protection laws.

The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets.

At December 31, 2021, the Bank’s total assets were $11.74 billion and, therefore, the Bank is subject to CFPB supervision and examination of compliance with Federal consumer protection laws.

Additionally, the Dodd-Frank Act includes a series of provisions covering mortgage loan origination standards affecting, among other things, originator compensation, minimum repayment standards and prepayments.

If the originator cannot meet this standard, the burden is on the lender to demonstrate the appropriateness of its policies and the strength of its controls.

The Dodd-Frank Act contains an exception from this Ability-To-Repay rule for “Qualified Mortgages.” The rule sets forth specific underwriting criteria for a loan to qualify as a Qualified Mortgage.

The criteria generally exclude loans that (1) are interest-only, (2) have excessive upfront points or fees, or (3) have negative amortization features, balloon payments, or terms in excess of 30 years.

To be defined as an Ability-To-Repay Qualified Mortgage, the underwriting criteria also impose a maximum debt to income ratio of 43%, based upon documented and verifiable information.

If a loan meets these criteria and is not a “higher priced loan” as defined in FRB regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s Ability-To-Repay.

Additionally, confo rming fixed-rate loans with a debt-to-income ratio

greater than 43% would also qualify as an Ability-To-Repay Qualified Mortgage based upon an automated loan approval from one of the government sponsored mortgage entities.

However, a consumer may assert the lender’s failure to comply with the Ability-To- Repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge a lender’s determination that a loan was in fact a Qualified Mortgage.

The qualified mortgage rule has yet to be fully addressed by the foreclosure courts and depending on the interpretation of these rules, collectability of non-qualifying mortgages could be subject to future action by the courts.

See Risk Factors – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .

The Dodd-Frank Act also directed the FRB to issue rules to limit debit card interchange fees (the fees that issuing banks charge merchants each time a consumer uses a debit card) collected by banks with assets of $10 billion or more.

The FRB issued a final rule which caps an issuer’s debit card interchange base fee at twe nty-one cents ($0.21) per transaction and allows an additional 5 basis point charge per transaction to cover fraud losses.

The FRB also issued an interim final rule that allows a fraud-prevention adjustment of one cent ($0.01) per transaction conditioned upon an issuer adopting effective fraud prevention policies and procedures.

The Bank’s average interchange fee per transaction is forty one cents ($0.41).

At December 31, 2020, the Bank’s total assets were $11.45 billion and will therefore be subject to reduced interchange fees beginning in July 2021 of approximately $2.5 million for 2021, or $5.0 million annualized.

In addition, market forces may result in reduced fees charged by all issuers, regardless of asset size, which may result in reduced revenues for the Bank.

For the year ended December 31, 2020, the Bank’s revenues from interchange fees was $10.9 million, an increase of $1.4 million from 2019.

The Bank is currently seeking transition relief from this rule and, if approved, the Bank may be exempt until 2022.

The Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term and establishes certain protections from liability under this requirement for “qualified mortgages”.

The Ability-To-Repay/Qualified Mortgage Rule defines several categories of “qualified mortgage” loans, which obtain certain protections from liability.

For further discussion, refer to Risk Factors – Risks Related to Lending Activities – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .

The Dodd-Frank Act also requires that the amount of any interchange fee received by a debit card issuer with respect to debit card transactions be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.

Rules adopted by the FRB to implement these requirements limit interchange fees per debit card transaction collected by banks with assets of $10 billion or more.

For the year ended December 31, 2021, the Bank’s revenues from interchange fees was $12.7 million, an increase of $1.8 million from 2020, and the average interchange fee per transaction is forty four cents ($0.44).

Under the temporary relief provisions of a joint rule published by the OCC, the FDIC, and the FRB, the Bank received relief from Dodd-Frank limitations on debit card interchange fees collected by banks with assets of $10 billion or more and will remain exempt from limits on debit card interchange fees until July 2022.

At December 31, 2021, the Bank’s total assets were $11.74 billion and will therefore be subject to reduced interchange fees in 2022.

For further discussion, see Risk Factors – Risks Related to Laws and Regulations – The Company and the Bank operated in a highly regulated environment and may be adversely affected by changes in laws and regulations .

The Dodd-Frank Act mandates that institutions with more than $10 billion in assets clear all eligible dealer swaps through a futures commission merchant to a central counterparty clearing house.

The Bank has entered into relationships with a futures commission merchant and two central counterparty clearing houses in advance of the timeframe required.

In addition, initial margin requirements for non-centrally cleared swaps and security-based swaps may be effective for the Bank’s swap counterparties that are swap dealers on September 1, 2021, at which time such counterparties will be required to collect initial margin from the Bank.

The initial margin requirements were issued for the purpose of ensuring safety and soundness of swap trading in light of the risk to the financial system associated with non-cleared swaps activity.

The Bank is prepared to meet compliance with the initial margin requirements.

Further, the additional expense associated with complying will increase along with transaction volume but is not expected to materially impact the Bank’s results.

The Dodd-Frank Act requires publicly-traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and allows greater access by stockholders to the company’s proxy material by authorizing the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials.

The legislation also directs the Federal banking agencies to promulgate rules prohibiting excessive compensation paid to bank executives, regardless of whether the company is publicly traded.

The SEC has not yet implemented rules giving stockholders access to company proxy statements, and the banking agency rules primarily address incentive compensation.

The rules prohibit incentive-based compensation that would encourage inappropriate risks by providing excessive compensation or that would expose the bank to inappropriate risks by providing compensation that could lead to a material financial loss.

It is still uncertain to what extent and how full implementation of and promulgation of rules under the Dodd-Frank Act, will occur and affect the Bank.

The Bank has entered into relationships with a futures commission merchant and two central counterparty clearing houses.

Economic Growth, Regulatory Relief and Consumer Protection Act .

The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), adopted in 2018, was intended to provide regulatory relief to midsized and regional banks.

While many of its provisions are aimed at larger institutions, such as raising the threshold to be considered a systemically important financial institution to $250 billion in assets from $50 billion in assets, many of its provisions will provide regulatory relief to those institutions with $10 billion or more in assets.

Among other things, the EGRRCPA increased the asset threshold for depository institutions and holding companies to perform stress tests required under Dodd Frank from $10 billion to $250 billion, exempted institutions with less than $10 billion in consolidated assets from the “Volker Rule,” and raised the threshold for the requirement that publicly traded holding companies have a risk committee from $10 billion in consolidated assets to $50 billion in consolidated assets.

EGRRCPA was intended to provide regulatory relief to midsized and regional banks.

While many of its provisions are aimed at larger institutions, such as raising the threshold to be considered a systemically important financial institution to $250 billion in assets from $50 billion in assets, many of its provisions provide regulatory relief to those institutions with $10 billion or more in assets.

Among other things, the EGRRCPA increased the asset threshold for depository institutions and holding companies to perform stress tests required under Dodd Frank from $10 billion to $250 billion in total consolidated assets, and raised the threshold for the requirement that publicly traded holding companies have a risk committee from $10 billion in consolidated assets to $50 billion in consolidated assets.

In addition, the EGRRCPA limited the definition of loans that would be subject to the higher risk weighting applicable to high volatility commercial real estate.

Many of the regulations needed to implement the EGRRCPA have yet to be promulgated by the federal banking agencies, and so it is still uncertain how full implementation of the EGRRCPA will affect the Company and the Bank.

Volcker Rule .

Under the provisions of the Volcker Rule, insured depository institutions and companies affiliated with insured depository institutions (collectively, “banking entities”) are prohibited from:

(i) engaging in short-term proprietary trading for their own account;

and (ii) having certain investments in, and relationships with, hedge funds, private equity funds and similar funds, subject to certain exemptions, in each case as the applicable terms are defined in the Volcker Rule and the implementing regulations.

The implementing regulations also require banking entities to establish and maintain a compliance program to ensure adherence with the Volcker Rule requirements.

Bank Holding Company Regulation

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The Company and its subsidiaries are subject to examination by the FRB.

The BHC Act prohibits the companies which do not elect to become financial holding companies, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to subsidiary banks, except that a BHC may, upon application, engage in, and may own shares of companies engaged in, certain businesses found by the FRB to be so closely related to banking “as to be a proper incident thereto.” The BHC Act requires prior approval by the FRB of the acquisition by bank holding companies of more than 5% of the voting stock of any other entity, including another bank.

Satisfactory capital ratios and Community Reinvestment Act (“CRA”) ratings and anti-money laundering policies are generally prerequisites to obtaining federal regulatory approval to make acquisitions.

FRB regulations provide that a BHC is expected to act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support the subsidiary bank in circumstances in which it might not do so absent those regulations.

Holding Company Capital Requirements .

Holding Company Consolidated Capital Requirements .

The Dodd-Frank Act requires capital rules and the application of the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies.

In addition to making bank holding companies subject to the same capital requirements as their bank subsidiaries, these provisions (often referred to as the Collins Amendment to the Dodd-Frank Act) were also intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital.

The Dodd-Frank Act also requires banking regulators to seek to make capital standards countercyclical, so that the required levels of capital increase in times of economic expansion and decrease in times of economic contraction.

In addition to making bank holding companies subject to the same capital requirements as their bank subsidiaries, these

provisions (often referred to as the Collins Amendment to the Dodd-Frank Act) were also intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital.

At December 31, 2021 , the Company exceeded all regulatory capital requirements currently applicable.

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Regulatory pressures to reclassify and charge off loans and to establish additional credit loss reserves can have the effect of reducing current operating earnings and thus impacting an institution’s ability to pay dividends.

Further, regulatory guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the Company’s net income for the past four quarters, net of dividends previously paid over that period is insufficient to fully fund the dividend or the Company’s overall rate of earnings retention is inconsistent with the Company’s capital needs and overall financial condition.

Further, regulatory guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the Company’s net income for the past four quarters, net of dividends previously paid over that period is insufficient to fully fund the dividend, the proposed dividend exceeds earnings for the period for which it is being paid, or the Company’s overall rate of earnings retention is inconsistent with the Company’s capital needs and overall financial condition.

The guidance also provides for prior consultation with supervisory staff for material increases in the amount of a banking holding company’s common stock dividend.

The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

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Acquisition of the Company .

Under the Federal Change in Bank Control Act (“CBCA”) and applicable regulations, a notice must be submitted to the FRB if any person (including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s outstanding voting stock, unless the FRB has found that the acquisition will not result in a change of control of the Company.

Under CBCA, the FRB has 60 days from the filing of a complete notice to act, taking into consideration certain

factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition.

Any company that so acquires control would then be subject to regulation as a BHC.

Under the Change in Bank Control Act, no person may acquire control of a bank holding company, such as the Company, unless the FRB has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquiror and the competitive effects of the acquisition.

Control, as defined for this purpose, means ownership, control of power to vote 25% or more of any class of voting stock.

There is a rebuttable presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Securities Exchange Act of 1934, or if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition.

Financial Holding Company Status

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Also, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity, if it shows, among other things, that the activity does not pose a substantial risk to the safety and soundness of its insured depository institutions or the financial system.

A financial holding company generally may acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB.

A financial holding company generally may acquire a company (other than a BHC, bank, or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB.

Prior FRB approval is required, however, before the financial holding company may acquire control of more than 5% of the voting shares or substantially all of the assets of a BHC, bank, or savings association.

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Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital.

Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include

cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets.

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An institution that has a tangible capital to total assets ratio equal to or less than 2% is deemed to be critically undercapitalized.

The FDIC is required, with some exceptions, to appoint a receiver or conservator for an insured bank if that bank is critically undercapitalized.

The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon the occurrence of certain events, including:

• insolvency, or when the assets of the bank are less than its liabilities to depositors and others;

• substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices;

• existence of an unsafe or unsound condition to transact business;

• likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in the normal course of business;

• insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without Federal assistance.

Based on the regulatory guidelines, the Bank satisfies the criteria to be well-capitalized.

The regulations provide that a capital restoration plan must be filed with the OCC within 45 days of the date a national bank receives notice that it is “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Any holding company for the bank required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5.0% of the bank’s assets at the time it was notified or deemed to be undercapitalized by the OCC, or the amount necessary to restore the bank to adequately capitalized status.

Various restrictions, including as to growth and capital distributions, also apply to “undercapitalized” institutions.

If an “undercapitalized” institution fails to submit an acceptable capital plan, it is treated as

“significantly undercapitalized.” “Significantly undercapitalized” institutions must comply with one or more additional restrictions including, but not limited to, an order by the OCC to sell sufficient voting stock to become adequately capitalized, a requirement to reduce total assets, cease receipt of deposits from correspondent banks, or dismiss officers or directors and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.

Critically undercapitalized institutions are subject to the appointment of a receiver or conservator.

The OCC may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive.

Based on the regulatory guidelines, the Bank satisfies the criteria to be well-capitalized at December 31, 2021.

Insurance of Deposit Accounts .

Deposit accounts at the Bank are insured by the DIF of the FDIC.

The Bank is therefore subject to FDIC deposit insurance assessments which are determined using a risk-based system.

Deposit accounts at the Bank are insured by the DIF of the FDIC up to a maximum of $250,000 per separately insured depositor.

The FDIC charges insured depository institutions premiums to maintain the DIF.

Under the FDIC’s risk-based assessment system, institutions deemed less risky pay lower FDIC assessments.

Assessments for institutions with $10 billion or more of assets are primarily based on a scorecard approach by the FDIC, including factors such as examination ratings and modeling measuring the institution’s ability to withstand asset-related and funding-related stress and potential loss to the DIF should the bank fail.

The assessment range (inclusive of possible adjustments specified by the regulations) for institutions with greater than $10 billion of total assets is 1.5 to 40 basis points.

The FDIC has authority to increase insurance assessments.

Any significant increases would have an adverse effect on the Company’s operating expenses and results of operations.

The Company cannot predict what assessment rates will be in the future.

In 2011, the FDIC approved a final rule required by the Dodd-Frank Act, that changed the assessment base from domestic deposits to average assets minus average tangible equity, adopted a new large-bank pricing assessment scheme, and set a target size for the DIF.

The rule finalized a target size for the DIF at 2% of insured deposits.

It also implemented a lower assessment rate schedule when the fund reaches 1.15% (so that the average rate over time should be about 8.5 basis points) and, in lieu of dividends, provided for a lower rate schedule when the reserve ratio reaches 2% and 2.5%.

In addition, the FDIC set a targeted reserve ratio of 1.35% by September 30, 2018, and provided that the FDIC would award assessment credits to banks with consolidated assets less than $10 billion, for the portion of the assessment that contributed to the growth in the reserve ratio, if the target was met.

The rule lowered overall assessment rates in order to generate the same approximate amount of revenue under the new larger base as was raised under the old base.

The assessment rates in total are between 2.5 and 9 basis points on the broader base for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category.

Deposit accounts are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor.

Any significant increases would have an adverse effect on the Bank’s operating expenses and results of operations.

The Bank cannot predict what assessment rates will be in the future.

The FDIC may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.

The management of the Bank does not know of any practice, condition, or violation that might lead to termination of deposit insurance.

On September 30, 2018, the Deposit Insurance Fund Reserve Ratio reached 1.36%.

Because the reserve ratio has exceeded 1.35% threshold, the FDIC awarded assessment credits to banks with consolidated assets less than $10 billion, for the portion of the assessment that contributed to the growth in the reserve ratio.

The Company received the FDIC assessment credits during the second half of 2019 and into the first half of 2020.

The total expense incurred in 2021 and 2020 for the deposit insurance assessment were $4.8 million and $3.8 million, respectively.

The total expense incurred in 2019 also included FICO payments.

Loans to One Borrower .

Subject to certain exceptions, a banking institution may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.

An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral.

Subject to certain exceptions, a national bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.

An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral, which generally does not include real estate.

As of December 31, 2021, the Bank was in compliance with the loans-to-one borrower limitations.

Limitation on Capital Distributions .

Applicable regulations impose limitations upon all capital distributions by a banking institution, including cash dividends, payments to repurchase its shares and payments to stockholders of another institution in a cash-out merger.

Under the regulations, an application to and the approval of the OCC, is required prior to any capital distribution if the total capital distributions for the calendar year exceeds net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution

would otherwise be contrary to a statute, regulation or agreement with the OCC.

In the event the Bank’s capital fell below its regulatory requirements or the FRB or OCC notified it that it was in need of more than normal supervision, the Bank’s ability to make capital distributions could be restricted.

In addition, the FRB or OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the FRB or OCC determine that such distribution would constitute an unsafe or unsound practice.

A national bank may not pay a dividend if it would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC.

A national bank may be further limited in payment of cash dividends if it does not maintain the capital conservation buffer.

In the event the Bank’s capital fell below its regulatory requirements or the OCC notified it that it was in need of more than normal supervision, the Bank’s ability to make capital distributions could be restricted.

In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice.

If the Bank is unable for any reason to pay a dividend to the Company, the Company may not have the liquidity necessary to pay a dividend in the future, pay a dividend at the same rate as historically paid, be able to repurchase stock, or to meet current debt obligations.

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Transactions with Related Parties .

The Bank’s authority to engage in transactions with affiliates ( e.g.

, any company that controls or is under common control with an institution, including the Company and its non-bank subsidiaries) is limited by Federal law.

The Bank’s authority to engage in transactions with affiliates (e.g., any company that controls or is under common control with an institution, including the Company and its non-bank subsidiaries) is limited by

The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the bank.

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In addition, banks are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no bank may purchase the securities of any affiliate other than a subsidiary.

Federal Home Loan Bank System

Federal Home Loan Bank System (“FHLB”)

The Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional FHLBs.

Each FHLB provides member institutions with a central credit facility.

The Bank, as a member of the FHLB-NY is required to acquire and hold shares of capital stock in that FHLB in an amount at least equal to 0.125% of mortgage-related assets and 4.5% of the specified value of certain transactions with the FHLB.

The Bank was in compliance with this requirement with an investment in FHLB-NY stock at December 31, 2020 and 2019 of $12.6 million and $31.9 million, respectively.

The Bank, as a member of the FHLB New York is required to acquire and hold shares of capital stock in that FHLB in a specified amount.

The Bank was in compliance with this requirement with an investment in FHLB New York stock at December 31, 2021 and 2020 of $13.5 million and $12.6 million, respectively.

Federal Reserve System

The Federal Reserve Board regulations require depository institutions to maintain reserves against their transaction accounts (primarily interest-bearing checking and regular checking accounts).

The regulations are adjusted annually and generally provide that reserves be maintained against aggregate transaction accounts.

At December 31, 2020, the reserve requirements were as follows:

a 3% reserve ratio is assessed on net transaction accounts up to and including $127.5 million;

a 10% reserve ratio is applied above $127.5 million.

The first $16.9 million of otherwise reservable balances (subject to adjustments by the FRB) are exempt from the reserve requirements.

The Bank complies with the foregoing requirements.

For 2021, the FRB has set the 3% reserve limit at $182.9 million and the exemption at $21.1 million.

The FRB regulations require depository institutions to maintain reserves against their transaction accounts (primarily interest-bearing checking and regular checking accounts).

Effective March 26, 2020, the FRB reduced reserve requirement ratios to zero, effectively eliminating the requirements.

The FRB indicated that it has no plans to re-impose reserve requirements but could in the future if conditions warrant.

In addition, as a national bank, the Bank is required to hold capital stock of the Federal Reserve Bank of Philadelphia.

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For 2021, the asset level is $10.79 billion, and financial institutions whose assets exceed that level receive dividends generally equal to the rate of the 10-year Treasury note, as opposed to 6% for smaller financial institutions.

Such reduction will significantly decrease the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $2.1 million for the year ended December 31, 2020.

Such reduction has significantly decreased the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $591,000 for the year ended December 31, 2021.

FEDERAL AND STATE TAXATION

Federal Taxation

The Company and the Bank report their income on a calendar year basis using the accrual method of accounting, and are subject to Federal income taxation in the same manner as other corporations with some exceptions, including particularly

the Bank’s reserve for bad debts.

The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company.

Corporate Alternative Minimum Tax .

For tax years before December 31, 2017, the Internal Revenue Code of 1986, as amended (the “Code”) imposed a tax on alternative minimum taxable income (“AMTI”) at a rate of 20%.

Only 90% of AMTI can be offset by net operating loss carryovers.

AMTI is increased by an amount equal to 75% of the amount by which the Bank’s adjusted current earnings exceeds its AMTI (determined without regard to this preference and prior to reduction for net operating losses).

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted resulting in significant modifications to existing laws, including elimination of the corporate alternative tax.

The current applicable statutory tax rate is 21%.

Dividends Received Deduction and Other Matters .

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The corporate dividends received deduction is generally 50% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank own more than 20% of the stock of a corporation distributing a dividend then 65% of any dividends received may be deducted.

On December 22, 2017, the Tax Reform was enacted resulting in significant modifications to existing law, including a reduction in the statutory rate from 35% in 2017, to 21% in 2018.

As a result of the Tax Reform, the Company was required to revalue its deferred tax asset, resulting in no impact for the year ended December 31, 2019, a tax benefit of $1.9 million, for the year ended December 31, 2018, and a tax expense of $3.6 million for the year ended December 31, 2017.

State and Local Taxation

New Jersey Taxation .

The Bank files New Jersey income tax returns.

For New Jersey income tax purposes, the Bank is subject to a tax rate of 9% of taxable income.

For this purpose, taxable income generally means Federal taxable income, subject to certain adjustments (including addition of interest income on state and municipal obligations).

The Company files New Jersey income tax returns.

For New Jersey income tax purposes, the Company is subject to a tax rate of 9% of taxable income.

For this purpose, taxable income generally means Federal taxable income, excluding some entities not included in the unitary filing and other adjustments (including addition of interest income on state and municipal obligations).

The Company is required to file a New Jersey income tax return because it does business in New Jersey.

For New Jersey tax purposes, regular corporations are presently taxed at a rate equal to 9% of taxable income.

New Jersey also imposes a temporary surtax of 2.5% for 2018 and 2019, and 1.5% for 2020 and 2021.

On September 29, 2020, the New Jersey surcharge for 2020 was increased to 2.5% and was retroactively applied to periods beginning on or after January 1, 2020.

The surcharge of 2.5% will be extended through December 31, 2023.

If the Company meets certain requirements, it is eligible to elect to be taxed as a New Jersey Investment Company at a tax rate presently equal to 4.60% (40% of 11.5%) of taxable income.

The Company did not qualify as a New Jersey Investment Company.

For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group but excludes companies that qualify as a New Jersey Investment Company.

New Jersey also requires combined filing for members of an affiliated group for tax years beginning on or after January 1, 2019, changing New Jersey’s current status as a separate return state, and limits the deductibility of dividends received.

New Jersey also imposes a temporary surtax of 2.5% which is effective through December 31, 2023.

For 2019 and prospectively, New Jersey law requires

combined filing for members of an affiliated group, but excludes companies that qualify as a New Jersey Investment Company and Real Estate Investment Companies.

New Jersey also requires combined filing for members of an affiliated group for tax years beginning on or after January 1, 2019, changing New Jersey’s current status as a separate return state.

These changes are not temporary.

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New York Taxation .

Due to an increase in loan activity both organically and through acquisition, the Bank is required to file New York State, MTA, and New York City tax returns.

The Company is required to file New York State, MTA, and New York City tax returns.

The New York State and New York City returns require consolidation of all entities, including OceanFirst Realty, and taxable income, consistent with other states, generally means Federal taxable income subject to certain adjustments.

The allocation and apportionment of taxable income to New York State and New York City may positively affect the overall tax rate.

The allocation and apportionment of taxable income to New York State and New York City may affect the overall tax rate.

Pennsylvania Taxation .

The Bank is required to file a Pennsylvania bank shares tax return.

The Bank’s net assets, less allowable deductions, are taxed at a rate presently equal to 0.95% of apportioned net assets.

The allocation and apportionment to Pennsylvania may affect the overall tax rate.

Delaware Taxation .

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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-K

Item 1. Business