What changed in this filing

/stocks — the workspaceLOADING

Item 4. Controls and Procedures

2023-11-07 compared with 2023-08-03 · 148 added, 142 removed, 869 unchanged (25% of the section changed)

5 unchanged sentences

(b) Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OceanFirst Financial Corp.

1 unchanged sentence

(dollars in thousands, except per share amounts)

June 30, December 31,

September 30, December 31,

Cash and due from banks $ 408,882 $ 167,946

Debt securities available-for-sale, at estimated fair value 453,208 457,648

Debt securities held-to-maturity, net of allowance for securities credit losses of $ 964 at June 30, 2023 and $ 1,128 at December 31, 2022 (estimated fair value of $ 1,109,756 at June 30, 2023 and $ 1,110,041 at December 31, 2022)

Debt securities held-to-maturity, net of allowance for securities credit losses of $ 932 at September 30, 2023 and $ 1,128 at December 31, 2022 (estimated fair value of $ 1,047,342 at September 30, 2023 and $ 1,110,041 at December 31, 2022)

1,189,339 1,221,138

1 unchanged sentence

Restricted equity investments, at cost 82,484 109,278

Loans receivable, net of allowance for loan credit losses of $ 61,791 at June 30, 2023 and $ 56,824 at December 31, 2022

Loans receivable, net of allowance for loan credit losses of $ 63,877 at September 30, 2023 and $ 56,824 at December 31, 2022

10,068,156 9,868,718

17 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.01 par value, $ 1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 62,155,942 and 61,877,686 shares issued at June 30, 2023 and December 31, 2022, respectively;

and 59,420,859 and 59,144,128 shares outstanding at June 30, 2023 and December 31, 2022, respectively

Preferred stock, $ 0.01 par value, $ 1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both September 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 62,156,581 and 61,877,686 shares issued at September 30, 2023 and December 31, 2022, respectively;

and 59,421,498 and 59,144,128 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,160,869 1,154,821

2 unchanged sentences

Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") ( 4,383 ) ( 6,191 )

Treasury stock, 2,735,083 shares at both June 30, 2023 and December 31, 2022

Treasury stock, 2,735,083 and 2,733,558 shares at September 30, 2023 and December 31, 2022

( 69,106 ) ( 69,106 )

8 unchanged sentences

(in thousands, except per share amounts)

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

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

2023 2022 2023 2022

17 unchanged sentences

Net gain on sales of loans 66 168 119 348

Net loss on equity investments ( 559 ) ( 8,078 ) ( 7,360 ) ( 10,864 )

Net gain (loss) on equity investments 1,452 3,362 ( 5,908 ) ( 7,502 )

Net gain from other real estate operations — — — 48

13 unchanged sentences

Amortization of core deposit intangible 987 1,171 3,008 3,559

Branch consolidation expense, net — 546 70 948

Branch consolidation (benefit) expense, net — ( 346 ) 70 602

Merger related expenses — 298 22 2,459

4 unchanged sentences

Net income 20,532 38,804 76,313 94,046

Net income attributable to non-controlling interest 85 522 101 522

Net (loss) income attributable to non-controlling interest ( 135 ) 193 ( 34 ) 715

Net income attributable to OceanFirst Financial Corp.

10 unchanged sentences

(in thousands)

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

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

2023 2022 2023 2022

1 unchanged sentence

Net income $ 20,532 $ 38,804 $ 76,313 $ 94,046

Other comprehensive (loss) income:

Other comprehensive income (loss):

Net unrealized gain (loss) on debt securities (net of tax expense of $ 572 and $ 2,430 in 2023 and tax benefit of $ 3,023 and $ 11,411 in 2022, respectively)

4 unchanged sentences

( 622 ) — ( 1,798 ) —

Reclassification adjustment for losses (gains) included in net income (net of tax expense of $ 61 and $ 262 in 2023 and benefit of $ 5 and $ 26 in 2022, respectively)

Reclassification adjustment for losses (gains) included in net income (net of tax expense of $ 78 and $ 340 in 2023 and tax benefit $ 26 in 2022, respectively)

246 — 1,066 ( 82 )

Total other comprehensive (loss) income, net of tax ( 1,033 ) ( 13,923 ) 5,634 ( 26,272 )

Total other comprehensive income (loss), net of tax 1,537 ( 9,403 ) 7,171 ( 35,675 )

Total comprehensive income 22,069 29,401 83,484 58,371

comprehensive income attributable to non-controlling interest 85 522 101 522

comprehensive (loss) income attributable to non-controlling interest ( 135 ) 193 ( 34 ) 715

Comprehensive income attributable to OceanFirst Financial Corp.

6 unchanged sentences

(dollars in thousands, except per share amounts)

For the Three Months Ended June 30, 2023 and 2022

For the Three Months Ended September 30, 2023 and 2022

Stock Additional

5 unchanged sentences

Stock Non-Controlling Interest Total

Balance at March 31, 2022 $ 1 $ 612 $ 1,149,503 $ 456,251 $ ( 15,170 ) $ ( 8,009 ) $ ( 63,854 ) $ — $ 1,519,334

Balance at June 30, 2022 $ 1 $ 612 $ 1,151,363 $ 474,114 $ ( 29,093 ) $ ( 7,403 ) $ ( 69,106 ) $ 944 $ 1,521,432

Net income — — — 38,611 — — — 193 38,804

5 unchanged sentences

Exercise of stock options — — 95 — — — — — 95

Repurchase 272,779 shares of common stock

— — — — — — ( 5,252 ) — ( 5,252 )

Preferred stock dividend — — — ( 1,004 ) — — — — ( 1,004 )

Acquisition of Trident Abstract Title Agency, LLC (“Trident”) — — — — — — — 836 836

Distributions to non-controlling interest — — — ( 2 ) — — — ( 174 ) ( 176 )

Balance at September 30, 2022 $ 1 $ 612 $ 1,153,072 $ 499,967 $ ( 38,496 ) $ ( 6,797 ) $ ( 69,106 ) $ 963 $ 1,540,216

Balance at June 30, 2023 $ 1 $ 613 $ 1,159,394 $ 569,867 $ ( 30,348 ) $ ( 4,986 ) $ ( 69,106 ) $ 848 $ 1,626,283

Balance at March 31, 2023 $ 1 $ 613 $ 1,158,007 $ 554,941 $ ( 29,315 ) $ ( 5,588 ) $ ( 69,106 ) $ 818 $ 1,610,371

Net income — — — 27,797 — — — 85 27,882

Other comprehensive loss, net of tax — — — — ( 1,033 ) — — — ( 1,033 )

Net income (loss) — — — 20,667 — — — ( 135 ) 20,532

Other comprehensive income, net of tax — — — — 1,537 — — — 1,537

Stock compensation — — 1,574 — — — — — 1,574

2 unchanged sentences

— — — ( 11,822 ) — — — — ( 11,822 )

Exercise of stock options — — 15 ( 30 ) — — — — ( 15 )

Preferred stock dividend — — — ( 1,004 ) — — — — ( 1,004 )

Distributions to non-controlling interest — — — — — — — ( 55 ) ( 55 )

Balance at June 30, 2023 $ 1 $ 613 $ 1,159,394 $ 569,867 $ ( 30,348 ) $ ( 4,986 ) $ ( 69,106 ) $ 848 $ 1,626,283

Balance at September 30, 2023 $ 1 $ 613 $ 1,160,869 $ 577,708 $ ( 28,811 ) $ ( 4,383 ) $ ( 69,106 ) $ 713 $ 1,637,604

OceanFirst Financial Corp.

1 unchanged sentence

(dollars in thousands, except per share amounts)

For the Six Months Ended June 30, 2023 and 2022

For the Nine Months Ended September 30, 2023 and 2022

Stock Additional

16 unchanged sentences

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

Acquisition of Trident — — — — — — — 836 836

Acquisition of Trident Abstract Title Agency, LLC (“Trident”) — — — — — — — 836 836

Distributions to non-controlling interest — — — 6 — — — ( 588 ) ( 582 )

Balance at June 30, 2022 $ 1 $ 612 $ 1,151,363 $ 474,114 $ ( 29,093 ) $ ( 7,403 ) $ ( 69,106 ) $ 944 $ 1,521,432

Balance at September 30, 2022 $ 1 $ 612 $ 1,153,072 $ 499,967 $ ( 38,496 ) $ ( 6,797 ) $ ( 69,106 ) $ 963 $ 1,540,216

Balance at December 31, 2022 $ 1 $ 612 $ 1,154,821 $ 540,507 $ ( 35,982 ) $ ( 6,191 ) $ ( 69,106 ) $ 802 $ 1,585,464

Net income — — — 55,680 — — — 101 55,781

Net income (loss) — — — 76,347 — — — ( 34 ) 76,313

Other comprehensive income, net of tax — — — — 7,171 — — — 7,171

6 unchanged sentences

Distributions to non-controlling interest — — — — — — — ( 55 ) ( 55 )

Balance at June 30, 2023 $ 1 $ 613 $ 1,159,394 $ 569,867 $ ( 30,348 ) $ ( 4,986 ) $ ( 69,106 ) $ 848 $ 1,626,283

Balance at September 30, 2023 $ 1 $ 613 $ 1,160,869 $ 577,708 $ ( 28,811 ) $ ( 4,383 ) $ ( 69,106 ) $ 713 $ 1,637,604

See accompanying Notes to Unaudited Consolidated Financial Statements.

OceanFirst Financial Corp.

Consolidated Statements of Cash Flows

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

24 unchanged sentences

Deferred tax benefit ( 93 ) ( 66 )

Decrease (increase) in other assets 6,424 ( 55,494 )

Increase in other assets ( 22,350 ) ( 84,582 )

Increase in other liabilities 66,016 185,927

20 unchanged sentences

Purchases of premises and equipment ( 6,062 ) ( 14,358 )

Purchases of operating lease equipment — ( 4,789 )

Net cash consideration received for acquisition — 38,609

1 unchanged sentence

OceanFirst Financial Corp.

Consolidated Statements of Cash Flows (Continued)

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

(dollars in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from financing activities:

1 unchanged sentence

Increase (decrease) in short-term borrowings 13,807 ( 22,480 )

Net proceeds from FHLB advances ( 119,500 ) 488,750

Net (repayment) proceeds from FHLB advances ( 605,110 ) 514,200

Repayments of other borrowings — ( 35,076 )

48 unchanged sentences

The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the full year 2023 or any other period.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results of operations that may be expected for the full year 2023 or any other period.

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

5 unchanged sentences

Earnings per Share

The following reconciles shares outstanding for basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022 (in thousands):

The following reconciles shares outstanding for basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

Average diluted shares outstanding 59,111 58,801 59,068 58,918

For the three and six months ended June 30, 2023, antidilutive stock options of 1,986,000 and 1,540,000 , respectively, were excluded from the earnings per share calculation.

For the three and six months ended June 30, 2022, antidilutive stock options of 1,577,000 and 1,573,000 , respectively, were excluded from the earnings per share calculation.

For the three and nine months ended September 30, 2023, antidilutive stock options of 1,961,000 and 1,525,000 , respectively, were excluded from the earnings per share calculation.

For both the three and nine months ended September 30, 2022, antidilutive stock options of 1,552,000 were excluded from the earnings per share calculation.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The amortized cost, estimated fair value, and allowance for securities credit losses of debt securities available-for-sale and held-to-maturity at June 30, 2023 and December 31, 2022 are as follows (in thousands):

The amortized cost, estimated fair value, and allowance for securities credit losses of debt securities available-for-sale and held-to-maturity at September 30, 2023 and December 31, 2022 are as follows (in thousands):

Losses Estimated

Value Allowance for Credit Losses

At June 30, 2023

At September 30, 2023

Debt securities available-for-sale:

31 unchanged sentences

Total debt securities $ 1,727,968 $ 1,245 $ ( 161,524 ) $ 1,567,689 $ ( 1,128 )

There was no allowance for securities credit losses on debt securities available-for-sale at June 30, 2023 or December 31, 2022.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

There was no allowance for securities credit losses on debt securities available-for-sale at September 30, 2023 or December 31, 2022.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three and nine months ended September 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

3 unchanged sentences

Total ending allowance balance $ ( 932 ) $ ( 1,234 ) $ ( 932 ) $ ( 1,234 )

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

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

1 unchanged sentence

Where multiple ratings are available, the Company considers the lowest rating when determining the allowance for securities credit losses.

Under this approach, the amortized cost of debt securities held-to-maturity at June 30, 2023, aggregated by credit quality indicator, are as follows (in thousands):

Under this approach, the amortized cost of debt securities held-to-maturity at September 30, 2023, aggregated by credit quality indicator, are as follows (in thousands):

Investment Grade Non-Investment Grade/Non-rated Total

As of June 30, 2023

As of September 30, 2023

State and municipal debt obligations $ 228,779 $ — $ 228,779

Corporate debt securities 57,050 14,380 71,430

Agency commercial MBS 83,323 — 83,323

Non-agency commercial MBS 20,760 — 20,760

2 unchanged sentences

The securities transferred had an unrealized net loss of $ 209,000 and $ 13.3 million at the time of transfer in 2021 and 2013, respectively, which continues to be reflected in accumulated other comprehensive loss on the Consolidated Statement of Financial Condition, net of subsequent amortization, which is being recognized over the life of the securities.

The carrying value of debt securities held-to-maturity at June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, December 31,

The carrying value of debt securities held-to-maturity at September 30, 2023 and December 31, 2022 was as follows (in thousands):

September 30, December 31,

Amortized cost $ 1,192,166 $ 1,224,564

3 unchanged sentences

Carrying value $ 1,189,339 $ 1,221,138

There were no realized losses and $ 697,000 of realized losses on sale of debt securities available-for-sale for the three and six months ended June 30, 2023, respectively, as compared to $ 21,000 and $ 108,000 for the corresponding prior year periods.

These realized losses on debt securities are presented within Other under Total other income of the Consolidated Statements of Income.

The amortized cost and estimated fair value of debt securities at June 30, 2023 by contractual maturity are shown below (in thousands):

June 30, 2023 Amortized

There were $ 0 realized gains/losses and $ 697,000 of realized losses on sale of debt securities available-for-sale for the three and nine months ended September 30, 2023, respectively, as compared to realized gains of $ 131,000 and $ 23,000 for the corresponding prior year periods, respectively.

These realized gains/losses on debt securities are presented within Other under Total other income of the Consolidated Statements of Income.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The amortized cost and estimated fair value of debt securities at September 30, 2023 by contractual maturity are shown below (in thousands):

September 30, 2023 Amortized

Cost Estimated

5 unchanged sentences

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

At June 30, 2023, corporate debt securities, state and municipal obligations, and asset-backed securities with an amortized cost of $ 64.0 million, $ 82.3 million, and $ 296.2 million, respectively, and an estimated fair value of $ 57.6 million, $ 78.0 million, and $ 284.8 million, respectively, were callable prior to the maturity date.

At September 30, 2023, corporate debt securities, state and municipal obligations, and asset-backed securities with an amortized cost of $ 80.4 million, $ 63.9 million, and $ 296.2 million, respectively, and an estimated fair value of $ 73.6 million, $ 59.6 million, and $ 290.4 million, respectively, were callable prior to the maturity date.

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

1 unchanged sentence

Notes to Unaudited Consolidated Financial Statements (Continued)

The estimated fair value and unrealized losses for debt securities available-for-sale and held-to-maturity at June 30, 2023 and December 31, 2022, segregated by the duration of the unrealized losses, are as follows (in thousands):

The estimated fair value and unrealized losses for debt securities available-for-sale and held-to-maturity at September 30, 2023 and December 31, 2022, segregated by the duration of the unrealized losses, are as follows (in thousands):

Less than 12 months 12 months or longer Total

4 unchanged sentences

Value Unrealized

At June 30, 2023

At September 30, 2023

Debt securities available-for-sale:

29 unchanged sentences

Total debt securities $ 669,487 $ ( 39,222 ) $ 812,090 $ ( 122,302 ) $ 1,481,577 $ ( 161,524 )

The Company concluded that debt securities were not impaired at June 30, 2023 based on consideration of several factors.

The Company concluded that debt securities were not impaired at September 30, 2023 based on consideration of several factors.

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

6 unchanged sentences

Equity Investments

At June 30, 2023 and December 31, 2022, the Company held equity investments of $ 96.5 million and $ 102.0 million, respectively.

At September 30, 2023 and December 31, 2022, the Company held equity investments of $ 97.9 million and $ 102.0 million, respectively.

The equity investments are primarily comprised of select financial services institutions’ preferred stocks, investments in funds and other financial institutions.

The realized and unrealized gains or losses on equity securities for the three and six months ended June 30, 2023 and 2022 are shown in the table below (in thousands):

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

The realized and unrealized gains or losses on equity securities for the three and nine months ended September 30, 2023 and 2022 are shown in the table below (in thousands):

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

2023 2022 2023 2022

Net loss on equity investments $ ( 559 ) $ ( 8,078 ) $ ( 7,360 ) $ ( 10,864 )

Net gain (loss) on equity investments $ 1,452 $ 3,362 $ ( 5,908 ) $ ( 7,502 )

Net (losses) gains recognized on equity investments sold — — ( 5,462 ) 1,351

3 unchanged sentences

Loans Receivable, Net

Loans receivable, net at June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, December 31,

Loans receivable, net at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, December 31,

Commercial real estate – investor $ 5,334,279 $ 5,171,952

26 unchanged sentences

2023 2022 2021 2020 2019 2018 and prior Revolving lines of credit Total

June 30, 2023

September 30, 2023

Commercial real estate - investor

20 unchanged sentences

Pass 26,676 20,640 21,656 13,339 13,142 124,084 30,481 250,018

Special Mention — — — — — 109 — 109

Substandard — — — 1 6 1,673 — 1,680

35 unchanged sentences

Notes to Unaudited Consolidated Financial Statements (Continued)

An analysis of the allowance for credit losses on loans for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):

An analysis of the allowance for credit losses on loans for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Real Estate –

4 unchanged sentences

Real Estate Other Consumer Total

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Allowance for credit losses on loans

5 unchanged sentences

Balance at end of period $ 25,735 $ 4,464 $ 6,562 $ 26,264 $ 852 $ 63,877

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Allowance for credit losses on loans

Balance at beginning of period $ 22,608 $ 5,021 $ 5,240 $ 18,196 $ 996 $ 52,061

(Benefit) provision for credit losses ( 1,080 ) ( 116 ) 572 1,966 130 1,472

Provision (benefit) for credit losses 82 ( 1,047 ) 554 1,618 1 1,208

Charge-offs ( 3 ) — — — ( 2 ) ( 5 )

1 unchanged sentence

Balance at end of period $ 22,690 $ 4,022 $ 5,863 $ 19,858 $ 1,088 $ 53,521

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Allowance for credit losses on loans

5 unchanged sentences

Balance at end of period $ 25,735 $ 4,464 $ 6,562 $ 26,264 $ 852 $ 63,877

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Allowance for credit losses on loans

4 unchanged sentences

Balance at end of period $ 22,690 $ 4,022 $ 5,863 $ 19,858 $ 1,088 $ 53,521

(1) Gross charge-offs for the three and six months ended June 30, 2023 of $ 206,000 and $ 216,000 , respectively, related to loans that were originated in and prior to 2018.

(1) Gross charge-offs for the three and nine months ended September 30, 2023 of $ 8.4 million and $ 8.6 million, respectively, primarily related to one commercial relationship, which was originated in 2019 and had a partial charge-off of $ 8.4 million in the third quarter of 2023 to its estimated realizable value of $ 8.8 million.

The remainder of the charge-offs were related to loans that were originated in and prior to 2018.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral and, therefore, is classified as non-accruing.

At June 30, 2023 and December 31, 2022, the Company had collateral dependent loans with an amortized cost balance as follows:

commercial real estate - investor of $ 7.3 million and $ 4.6 million, respectively, commercial real estate - owner occupied of $ 565,000 and $ 4.0 million, respectively, and commercial and industrial of $ 199,000 and $ 160,000 , respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 1.6 million and $ 858,000 at June 30, 2023 and December 31, 2022, respectively.

The following table presents the recorded investment in non-accrual loans, by loan portfolio segment as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, December 31,

At September 30, 2023 and December 31, 2022, the Company had collateral dependent loans with an amortized cost balance as follows:

commercial real estate - investor of $ 15.1 million and $ 4.6 million, respectively, commercial real estate - owner occupied of $ 240,000 and $ 4.0 million, respectively, and commercial and industrial of $ 1.1 million and $ 160,000 , respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 2.7 million and $ 858,000 at September 30, 2023 and December 31, 2022, respectively.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table presents the recorded investment in non-accrual loans, by loan portfolio segment as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, December 31,

Commercial real estate – investor (1)

$ 20,723 $ 10,483

Commercial real estate – owner occupied 240 4,025

3 unchanged sentences

$ 30,098 $ 23,265

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

At June 30, 2023 and December 31, 2022, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At June 30, 2023, there were no loans that were past due 90 days or greater and still accruing interest.

(1) At September 30, 2023, non-performing loans included the remaining exposure of $ 8.8 million on a commercial real estate relationship that was partially charged-off during the three months ended September 30, 2023.

At September 30, 2023 and December 31, 2022, non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At September 30, 2023, there were no loans that were past due 90 days or greater and still accruing interest.

At December 31, 2022, there was one Paycheck Protection Program (“PPP”) loan for $ 14,000 that was past due 90 days or greater and still accrued interest, which subsequently became current.

1 unchanged sentence

Given these servicing guidelines, PPP loans that are 90 to 120 days past due will be reported as accruing loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2023 and December 31, 2022 by loan portfolio segment (in thousands):

The following table presents the aging of the recorded investment in past due loans as of September 30, 2023 and December 31, 2022 by loan portfolio segment (in thousands):

Past Due 60-89

2 unchanged sentences

Past Due Total

June 30, 2023

September 30, 2023

Commercial real estate – investor (1)

$ 999 $ 11,266 $ 3,791 $ 16,056 $ 5,318,223 $ 5,334,279

Commercial real estate – owner occupied 799 1,529 35 2,363 954,853 957,216

10 unchanged sentences

$ 8,095 $ 6,052 $ 11,581 $ 25,728 $ 9,892,326 $ 9,918,054

(1) At September 30, 2023, 60-89 days past due loans included the remaining exposure of $ 8.8 million on a commercial real estate relationship that was partially charged-off during the three months ended September 30, 2023.

The Company adopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023.

1 unchanged sentence

These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay.

At June 30, 2023, loans with modifications to borrowers experiencing financial difficulty totaled $ 898,000 related to term extensions, which included residential real estate of $ 658,000 and other consumer of $ 240,000 .

At September 30, 2023, loans with modifications to borrowers experiencing financial difficulty totaled $ 1.1 million related to term extensions and interest rate reductions, which included residential real estate loans of $ 723,000 and other consumer loans of $ 410,000 .

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

Of the $ 898,000 loans with modifications to borrowers experiencing financial difficulty, $ 755,000 were current and one residential loan of $ 143,000 had a payment default during the three and six months ended June 30, 2023.

Of the $ 1.1 million loans with modifications to borrowers experiencing financial difficulty, $ 994,000 were current and one residential loan of $ 140,000 had a payment default during the three and nine months ended September 30, 2023.

Prior to the adoption of ASU 2022-02, the Company classified certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty were modified in accordance with ASC 310-40.

Since adoption of this ASU, the Company has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 remain until settled.

At June 30, 2023 and December 31, 2022, TDR loans totaled $ 13.5 million and $ 13.9 million, respectively.

At June 30, 2023 and December 31, 2022, there were $ 6.2 million and $ 6.4 million, respectively, of TDR loans included in the non-accrual loan totals.

At June 30, 2023 and December 31, 2022, the Company had $ 436,000 and $ 590,000 , respectively, of specific reserve allocated to one loan that was classified as a TDR loan.

At September 30, 2023 and December 31, 2022, TDR loans totaled $ 13.2 million and $ 13.9 million, respectively.

At September 30, 2023 and December 31, 2022, there were $ 5.8 million and $ 6.4 million, respectively, of TDR loans included in the non-accrual loan totals.

At September 30, 2023 and December 31, 2022, the Company had $ 354,000 and $ 590,000 , respectively, of specific reserve allocated to one loan that was classified as a TDR loan.

Non-accrual loans which become TDR loans are generally returned to accrual status after six months of performance.

In addition to the TDR loans included in non-accrual loans, the Company also has TDR loans classified as accruing loans, which totaled $ 7.3 million and $ 7.5 million at June 30, 2023 and December 31, 2022, respectively.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table presents information about TDR loans which occurred during the three and six months ended June 30, 2022 (dollars in thousands):

In addition to the TDR loans included in non-accrual loans, the Company also has TDR loans classified as accruing loans, which totaled $ 7.4 million and $ 7.5 million at September 30, 2023 and December 31, 2022, respectively.

The following table presents information about TDR loans which occurred during the three and nine months ended September 30, 2022 (dollars in thousands):

Number of Loans Pre-modification

1 unchanged sentence

Recorded Investment

Three months ended June 30, 2022

Three months ended September 30, 2022

Troubled debt restructurings:

None None None

Six months ended June 30, 2022

Other consumer 3 $ 114 $ 124

Nine months ended September 30, 2022

Troubled debt restructurings:

Commercial and industrial 1 65 65

Consumer 3 991 1,109

There were no TDR loans that defaulted during the three and six months ended June 30, 2023 and 2022, which were modified within the preceding year.

Other consumer 6 1,105 1,233

There were no TDR loans that defaulted during the three and nine months ended September 30, 2023 and 2022, which were modified within the preceding year.

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

The major types of deposits at June 30, 2023 and December 31, 2022 were as follows (in thousands):

Type of Account June 30, December 31,

The major types of deposits at September 30, 2023 and December 31, 2022 were as follows (in thousands):

Type of Account September 30, December 31,

Non-interest-bearing $ 1,827,381 $ 2,101,308

4 unchanged sentences

Total deposits $ 10,533,929 $ 9,675,206

Included in time deposits at June 30, 2023 and December 31, 2022 was $ 310.6 million and $ 117.7 million, respectively, in deposits of $250,000 or more.

Time deposits also include brokered deposits of $ 1.42 billion and $ 873.4 million at June 30, 2023 and December 31, 2022, respectively.

Included in time deposits at September 30, 2023 and December 31, 2022 was $ 381.4 million and $ 117.7 million, respectively, of deposits of $250,000 or more.

Time deposits also include brokered deposits of $ 995.5 million and $ 873.4 million at September 30, 2023 and December 31, 2022, respectively.

Borrowed Funds

Borrowed funds at June 30, 2023 and December 31, 2022 were as follows (in thousands):

June 30, December 31,

Borrowed funds at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, December 31,

FHLB advances $ 606,056 $ 1,211,166

2 unchanged sentences

Total borrowed funds $ 885,220 $ 1,475,666

The Company had no FHLB overnight advances or borrowings from the Federal Reserve Bank (“FRB”) Discount Window or Bank Term Funding Program at June 30, 2023 and December 31, 2022.

The Company had no FHLB overnight advances and no borrowings from the Federal Reserve Bank (“FRB”) Discount Window or Bank Term Funding Program at September 30, 2023 and December 31, 2022.

Pledged assets

1 unchanged sentence

Loans Debt securities Total

June 30, 2023

September 30, 2023

FHLB and FRB $ 7,253,277 $ 997,973 $ 8,251,250

34 unchanged sentences

Debt securities classified as available-for-sale are reported at fair value.

Fair value for these debt securities is determined using inputs other than quoted prices that are based on market observable information (Level 2).

Fair value of U.S.

Treasuries are determined using quoted prices in active markets (Level 1).

The majority of the other debt securities are determined using inputs other than quoted prices that are based on market observable information (Level 2).

Level 2 debt securities are priced through third-party pricing services or security industry sources that actively participate in the buying and selling of securities.

14 unchanged sentences

Loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs.

Fair value is based on independent appraisals (Level 3).

The following table summarizes financial assets and financial liabilities measured at fair value as of June 30, 2023 and December 31, 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

Fair value is generally based on independent appraisals (Level 3), which may be adjusted by management for qualitative factors, such as economic factors and estimated liquidation expenses.

The following table summarizes financial assets and financial liabilities measured at fair value as of September 30, 2023 and December 31, 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

Fair Value Measurements at Reporting Date Using:

2 unchanged sentences

Inputs Level 3

June 30, 2023

September 30, 2023

Items measured on a recurring basis:

23 unchanged sentences

9,635 — — 9,635

(1) As of June 30, 2023 and December 31, 2022, primarily consists of $ 43.6 million and $ 37.1 million, respectively, of equity investments measured under the measurement alternative.

This included no unrealized gains or losses for the six months ended June 30, 2023 as a result of observable price changes in the investment and $ 20.0 million of unrealized gains for the year ended December 31, 2022.

(2) As of June 30, 2023 and December 31, 2022, equity investments of $ 47.0 million and $ 40.1 million, respectively, included $ 3.4 million and $ 3.0 million of certain equity investment funds measured at NAV per share (or its equivalent) as a practical expedient to fair value and these equity investments have not been classified in the fair value hierarchy levels.

(1) As of September 30, 2023 and December 31, 2022, primarily consists of $ 43.6 million and $ 37.1 million, respectively, of equity investments measured under the measurement alternative.

This included no unrealized gains or losses for the nine months ended September 30, 2023 and $ 20.0 million of unrealized gains for the year ended December 31, 2022.

(2) As of September 30, 2023 and December 31, 2022, equity investments of $ 47.0 million and $ 40.1 million, respectively, included $ 3.4 million and $ 3.0 million, respectively, of certain equity investment funds measured at NAV per share (or its equivalent) as a practical expedient to fair value and these equity investments have not been classified in the fair value hierarchy levels.

(3) Primarily consists of commercial loans, which are collateral dependent.

The amounts are based on independent appraisals, which may be adjusted by management for qualitative factors, such as economic factors and estimated liquidation expenses.

The range may vary but is generally 0 % to 8 % on the discount for costs to sell and 0 % to 10 % on appraisal adjustments.

2 unchanged sentences

The following table reconciles the beginning and ending balances for equity investments that are recognized at fair value on a recurring basis, in the Consolidated Statements of Financial Condition, using significant unobservable inputs (in thousands):

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Beginning balance $ 2,718

2 unchanged sentences

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

There were no assets in Level 3 that were recognized at fair value on a recurring basis or transfers into or out of Level 3 for the three and six months ended June 30, 2023.

During the six months ended June 30, 2022, the Company executed its right to convert $ 2.7 million of preferred stock into common stock, which resulted in a transfer from Level 3 into Level 1.

There were no assets in Level 3 that were recognized at fair value on a recurring basis or transfers into or out of Level 3 for the three and nine months ended September 30, 2023.

During the nine months ended September 30, 2022, the Company executed its right to convert $ 2.7 million of preferred stock into common stock, which resulted in a transfer from Level 3 into Level 1.

Assets and Liabilities Disclosed at Fair Value

32 unchanged sentences

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

The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of June 30, 2023 and December 31, 2022 are presented in the following tables (in thousands):

The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of September 30, 2023 and December 31, 2022 are presented in the following tables (in thousands):

Fair Value Measurements at Reporting Date Using:

2 unchanged sentences

Inputs Level 3

June 30, 2023

September 30, 2023

Financial Assets:

21 unchanged sentences

Securities sold under agreements to repurchase with customers 69,097 69,097 — —

(1) The estimated fair value of non-maturity deposits does not consider any inherent value and represents amount payable on demand.

(1) The estimated fair value of non-maturity deposits does not consider any inherent value and represents the amount payable on demand.

However, non-maturity deposits do contain significant inherent value to the Company, particularly when overnight funding costs are greater than the deposit costs.

1 unchanged sentence

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

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

Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience,

OceanFirst Financial Corp.

Notes to Unaudited Consolidated Financial Statements (Continued)

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

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

22 unchanged sentences

however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC Topic 820, Fair Value Measurements.

The Company recognized gains of $ 22,000 and $ 0 in commercial loan swap income resulting from the fair value adjustment for the three and six months ended June 30, 2023, respectively, as compared to gains of $ 0 and $ 37,000 for the corresponding prior year periods.

The Company recognized losses of $ 2,000 and $ 2,000 in commercial loan swap income resulting from the fair value adjustment for the three and nine months ended September 30, 2023, respectively, as compared to gains of $ 19,000 and $ 56,000 for the corresponding prior year periods.

Derivatives Designated as Hedging Instruments

6 unchanged sentences

The table below presents the effect on the Company’s accumulated other comprehensive income/loss (“AOCI” or “AOCL”) attributable to the cash flow hedge derivative, net of tax, and the related gains/(losses) reclassified from AOCI into income (in thousands):

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

AOCI (AOCL) balance at beginning of period, net of tax $ 488 $ ( 25 )

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

AOCL balance at beginning of period, net of tax $ ( 909 ) $ ( 25 )

Unrealized losses recognized in OCI ( 622 ) ( 1,798 )

3 unchanged sentences

Notes to Unaudited Consolidated Financial Statements (Continued)

During the next twelve months, the Company estimates that an additional $ 1.2 million will be reclassified as a reduction to interest income.

During the next twelve months ending September 30, 2024, the Company estimates that an additional $ 1.4 million will be reclassified as a reduction to interest income.

The table below presents the notional amount and fair value of derivatives designated and not designated as hedging instruments, as well as their location on the Consolidated Statements of Financial Condition (in thousands):

1 unchanged sentence

Other assets Other liabilities

As of June 30, 2023

As of September 30, 2023

Derivatives Not Designated as Hedging Instruments

3 unchanged sentences

Total Derivatives $ 1,520,826 $ 137,090 $ 138,806

December 31, 2022

As of December 31, 2022

Derivatives Not Designated as Hedging Instruments

7 unchanged sentences

This requirement is dependent on certain specified credit measures.

The amount of collateral posted with third parties was $ 0 and $ 40,000 at June 30, 2023 and December 31, 2022, respectively.

The amount of collateral received from third parties was $ 112.5 million and $ 104.5 million at June 30, 2023 and December 31, 2022, respectively.

The amount of collateral posted with third parties was $ 0 and $ 40,000 at September 30, 2023 and December 31, 2022, respectively.

The amount of collateral received from third parties was $ 142.3 million and $ 104.5 million at September 30, 2023 and December 31, 2022, respectively.

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

The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $ 110.9 million and $ 113.5 million at June 30, 2023 and December 31, 2022, respectively.

The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $ 138.8 million and $ 113.5 million at September 30, 2023 and December 31, 2022, respectively.

The interest rate derivatives which the Company executes with the commercial borrowers are collateralized by the borrowers’ commercial real estate financed by the Company.

5 unchanged sentences

The following table represents the classification of the Company’s ROU assets and lease liabilities on the Consolidated Statements of Financial Condition (in thousands):

June 30, December 31,

September 30, December 31,

Lease ROU Assets Classification

7 unchanged sentences

Total lease liabilities $ 22,393 $ 21,987

(1) Operating lease liabilities excludes liabilities for future rent and estimated lease termination payments related to closed branches of $ 6.8 million and $ 7.7 million at June 30, 2023 and December 31, 2022, respectively.

(1) Operating lease liabilities excludes liabilities for future rent and estimated lease termination payments related to closed branches of $ 6.3 million and $ 7.7 million at September 30, 2023 and December 31, 2022, respectively.

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

2 unchanged sentences

For the discount rate, ASC Topic 842, Leases requires the Company to use the rate implicit in the lease, provided the rate is readily determinable.

As this rate is not readily determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term.

As this rate is not readily determinable, the Company generally utilizes its incremental borrowing rate, at lease inception, over a similar term.

For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019.

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

June 30, December 31,

September 30, December 31,

Weighted-Average Remaining Lease Term

7 unchanged sentences

The following table represents lease expenses and other lease information (in thousands):

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

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

2023 2022 2023 2022

28 unchanged sentences

In accordance with ASC 810, Consolidation, the Company has consolidated Trident’s assets and liabilities.

The summarized financial information for the Company’s consolidated VIE at June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, 2023 December 31, 2022

The summarized financial information for the Company’s consolidated VIE at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 26,082 $ 30,062

8 unchanged sentences

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

What changed 10-Q

Item 4. Controls and Procedures