OCEANFIRST FINANCIAL CORP 10-Q

Item 4. Controls and Procedures (a) Disclosure Controls and Procedures The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 19 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except per share amounts) September 30, December 31, 2024 2023 (Unaudited) Assets Cash and due from banks $ 214,171 $ 153,718 Debt securities available-for-sale, at estimated fair value 911,753 753,892 Debt securities held-to-maturity, net of allowance for securities credit losses of $ 902 at September 30, 2024 and $ 1,133 at December 31, 2023 (estimated fair value of $ 1,007,781 at September 30, 2024 and $ 1,068,438 at December 31, 2023) 1,075,131 1,159,735 Equity investments 95,688 100,163 Restricted equity investments, at cost 98,545 93,766 Loans receivable, net of allowance for loan credit losses of $ 69,066 at September 30, 2024 and $ 67,137 at December 31, 2023 9,963,598 10,136,721 Loans held-for-sale 23,036 5,166 Interest and dividends receivable 48,821 51,874 Premises and equipment, net 116,087 121,372 Bank owned life insurance 269,138 266,498 Assets held for sale — 28 Goodwill 506,146 506,146 Core deposit intangible 7,056 9,513 Other assets 159,313 179,661 Total assets $ 13,488,483 $ 13,538,253 Liabilities and Stockholders’ Equity Deposits $ 10,116,167 $ 10,434,949 Federal Home Loan Bank (“FHLB”) advances 891,860 848,636 Securities sold under agreements to repurchase with customers 81,163 73,148 Other borrowings 419,927 196,456 Advances by borrowers for taxes and insurance 27,282 22,407 Other liabilities 257,576 300,712 Total liabilities 11,793,975 11,876,308 Stockholders’ equity: Preferred stock, $ 0.01 par value, $ 1,000 liquidation preference, 5,000,000 shares authorized, and 57,370 shares issued at both September 30, 2024 and December 31, 2023 1 1 Common stock, $ 0.01 par value, 150,000,000 shares authorized, 62,515,415 and 62,182,767 shares issued at September 30, 2024 and December 31, 2023, respectively; and 58,397,094 and 59,447,684 shares outstanding at September 30, 2024 and December 31, 2023, respectively 613 613 Additional paid-in capital 1,166,218 1,161,755 Retained earnings 632,476 592,542 Accumulated other comprehensive loss ( 12,185 ) ( 20,862 ) Less: Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") ( 2,852 ) ( 3,780 ) Treasury stock, 4,118,321 and 2,735,083 shares at September 30, 2024 and December 31, 2023, respectively ( 90,617 ) ( 69,106 ) OceanFirst Financial Corp. stockholders’ equity 1,693,654 1,661,163 Non-controlling interest 854 782 Total stockholders’ equity 1,694,508 1,661,945 Total liabilities and stockholders’ equity $ 13,488,483 $ 13,538,253 See accompanying Notes to Unaudited Consolidated Financial Statements. 20 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (Unaudited) (Unaudited) Interest income: Loans $ 136,635 $ 133,931 $ 409,805 $ 384,755 Debt securities 19,449 15,223 58,349 43,829 Equity investments and other 5,441 9,256 14,399 18,956 Total interest income 161,525 158,410 482,553 447,540 Interest expense: Deposits 62,318 53,287 182,244 112,551 Borrowed funds 16,988 14,127 49,603 53,082 Total interest expense 79,306 67,414 231,847 165,633 Net interest income 82,219 90,996 250,706 281,907 Provision for credit losses 517 10,283 4,222 14,525 Net interest income after provision for credit losses 81,702 80,713 246,484 267,382 Other income: Bankcard services revenue 1,615 1,507 4,602 4,381 Trust and asset management revenue 384 662 1,329 1,919 Fees and service charges 6,096 5,178 15,584 15,939 Net gain on sales of loans 505 66 1,282 119 Net gain (loss) on equity investments 1,420 1,452 4,230 ( 5,908 ) Income from bank owned life insurance 1,779 1,390 5,367 3,853 Commercial loan swap income 414 11 793 712 Other 2,471 496 4,768 748 Total other income 14,684 10,762 37,955 21,763 Operating expenses: Compensation and employee benefits 35,844 35,534 101,739 103,676 Occupancy 5,157 5,466 15,531 15,970 Equipment 1,026 1,172 3,224 3,478 Marketing 1,385 1,183 3,550 3,126 Federal deposit insurance and regulatory assessments 2,618 2,557 8,438 6,771 Data processing 5,940 6,086 17,914 18,405 Check card processing 1,153 1,154 3,278 3,649 Professional fees 1,970 5,258 6,863 15,439 Amortization of core deposit intangible 803 987 2,457 3,008 Branch consolidation expense, net — — — 70 Merger related expenses 1,669 — 1,669 22 Other operating expense 6,171 5,087 16,365 15,109 Total operating expenses 63,736 64,484 181,028 188,723 Income before provision for income taxes 32,650 26,991 103,411 100,422 Provision for income taxes 7,464 6,459 25,183 24,109 Net income 25,186 20,532 78,228 76,313 Net income attributable to non-controlling interest 70 ( 135 ) 72 ( 34 ) Net income attributable to OceanFirst Financial Corp. 25,116 20,667 78,156 76,347 Dividends on preferred shares 1,004 1,004 3,012 3,012 Net income available to common stockholders $ 24,112 $ 19,663 $ 75,144 $ 73,335 Basic earnings per share $ 0.42 $ 0.33 $ 1.29 $ 1.24 Diluted earnings per share $ 0.42 $ 0.33 $ 1.29 $ 1.24 Average basic shares outstanding 58,065 59,104 58,405 59,037 Average diluted shares outstanding 58,068 59,111 58,407 59,068 See accompanying Notes to Unaudited Consolidated Financial Statements. 21 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (Unaudited) (Unaudited) Net income $ 25,186 $ 20,532 $ 78,228 $ 76,313 Other comprehensive income: Net unrealized gain on debt securities (net of tax expense of $ 1,225 and $ 2,569 in 2024 and $ 572 and $ 2,430 in 2023, respectively) 3,847 1,797 8,066 7,626 Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $ 43 and $ 125 in 2024 and $ 66 and $ 176 in 2023, respectively) 62 116 180 277 Unrealized gain (loss) on derivative hedges (net of tax expense of $ 267 and tax benefit of $ 133 in 2024 and tax benefit of $ 198 and $ 573 in 2023, respectively) 837 ( 622 ) ( 418 ) ( 1,798 ) Reclassification adjustment for losses included in net income (net of tax expense of $ 80 and $ 270 in 2024 and $ 78 and $ 340 in 2023, respectively) 254 246 849 1,066 Total other comprehensive income, net of tax 5,000 1,537 8,677 7,171 Total comprehensive income 30,186 22,069 86,905 83,484 Less: comprehensive income (loss) attributable to non-controlling interest 70 ( 135 ) 72 ( 34 ) Comprehensive income attributable to OceanFirst Financial Corp. 30,116 22,204 86,833 83,518 Less: Dividends on preferred shares 1,004 1,004 3,012 3,012 Total comprehensive income available to common stockholders $ 29,112 $ 21,200 $ 83,821 $ 80,506 See accompanying Notes to Unaudited Consolidated Financial Statements. 22 OceanFirst Financial Corp. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (dollars in thousands, except per share amounts) (Unaudited) For the Three Months Ended September 30, 2024 and 2023 Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Employee Stock Ownership Plan Treasury Stock Non-Controlling Interest Total Balance at June 30, 2023 $ 1 $ 613 $ 1,159,394 $ 569,867 $ ( 30,348 ) $ ( 4,986 ) $ ( 69,106 ) $ 848 $ 1,626,283 Net income (loss) — — — 20,667 — — — ( 135 ) 20,532 Other comprehensive income, net of tax — — — — 1,537 — — — 1,537 Stock compensation — — 1,574 — — — — — 1,574 Allocation of ESOP stock — — ( 99 ) — — 603 — — 504 Cash dividend $ 0.20 per share — — — ( 11,822 ) — — — — ( 11,822 ) Preferred stock dividend — — — ( 1,004 ) — — — — ( 1,004 ) Balance at September 30, 2023 $ 1 $ 613 $ 1,160,869 $ 577,708 $ ( 28,811 ) $ ( 4,383 ) $ ( 69,106 ) $ 713 $ 1,637,604 Balance at June 30, 2024 $ 1 $ 613 $ 1,164,813 $ 620,021 $ ( 17,185 ) $ ( 3,161 ) $ ( 89,217 ) $ 784 $ 1,676,669 Net income — — — 25,116 — — — 70 25,186 Other comprehensive income, net of tax — — — — 5,000 — — — 5,000 Stock compensation — — 1,383 — — — — — 1,383 Allocation of ESOP stock — — ( 27 ) — — 309 — — 282 Cash dividend $ 0.20 per share — — — ( 11,657 ) — — — — ( 11,657 ) Exercise of stock options — — 48 — — — — — 48 Repurchase of 87,324 shares of common stock — — 1 — — — ( 1,400 ) — ( 1,399 ) Preferred stock dividend — — — ( 1,004 ) — — — — ( 1,004 ) Balance at September 30, 2024 $ 1 $ 613 $ 1,166,218 $ 632,476 $ ( 12,185 ) $ ( 2,852 ) $ ( 90,617 ) $ 854 $ 1,694,508 23 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (dollars in thousands, except per share amounts) (Unaudited) For the Nine Months Ended September 30, 2024 and 2023 Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Employee Stock Ownership Plan Treasury Stock Non-Controlling Interest Total Balance at December 31, 2022 $ 1 $ 612 $ 1,154,821 $ 540,507 $ ( 35,982 ) $ ( 6,191 ) $ ( 69,106 ) $ 802 $ 1,585,464 Net income (loss) — — — 76,347 — — — ( 34 ) 76,313 Other comprehensive income, net of tax — — — — 7,171 — — — 7,171 Stock compensation — — 4,910 — — — — — 4,910 Allocation of ESOP stock — — ( 174 ) — — 1,808 — — 1,634 Cash dividend $ 0.60 per share — — — ( 35,414 ) — — — — ( 35,414 ) Exercise of stock options — 1 1,312 ( 720 ) — — — — 593 Preferred stock dividend — — — ( 3,012 ) — — — — ( 3,012 ) Distributions to non-controlling interest — — — — — — — ( 55 ) ( 55 ) Balance at September 30, 2023 $ 1 $ 613 $ 1,160,869 $ 577,708 $ ( 28,811 ) $ ( 4,383 ) $ ( 69,106 ) $ 713 $ 1,637,604 Balance at December 31, 2023 $ 1 $ 613 $ 1,161,755 $ 592,542 $ ( 20,862 ) $ ( 3,780 ) $ ( 69,106 ) $ 782 $ 1,661,945 Net income — — — 78,156 — — — 72 78,228 Other comprehensive income, net of tax — — — — 8,677 — — — 8,677 Stock compensation — — 4,515 — — — — — 4,515 Allocation of ESOP stock — — ( 130 ) — — 928 — — 798 Cash dividend $ 0.60 per share — — — ( 35,210 ) — — — — ( 35,210 ) Exercise of stock options — — 48 — — — — — 48 Repurchase 1,383,238 shares of common stock — — 30 — — — ( 21,511 ) — ( 21,481 ) Preferred stock dividend — — — ( 3,012 ) — — — — ( 3,012 ) Balance at September 30, 2024 $ 1 $ 613 $ 1,166,218 $ 632,476 $ ( 12,185 ) $ ( 2,852 ) $ ( 90,617 ) $ 854 $ 1,694,508 See accompanying Notes to Unaudited Consolidated Financial Statements. 24 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) For the Nine Months Ended September 30, 2024 2023 (Unaudited) Cash flows from operating activities: Net income $ 78,228 $ 76,313 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of premises and equipment 8,277 9,164 Allocation of ESOP stock 798 1,634 Stock compensation 4,515 4,910 Net excess tax expense on stock compensation 365 243 Amortization of servicing asset 261 54 Net premium amortization in excess of discount accretion on securities 561 3,818 Net amortization of deferred costs on borrowings 463 445 Amortization of core deposit intangible 2,457 3,008 Net accretion of purchase accounting adjustments ( 2,826 ) ( 4,219 ) Net amortization of deferred fees/costs and premiums/discounts on loans ( 1,574 ) ( 940 ) Provision for credit losses 4,222 14,525 Net write down of fixed assets held-for-sale to net realizable value — 459 Net gain on sale of fixed assets ( 131 ) ( 26 ) Net loss on sales of available-for-sale securities 106 697 Net (gain) loss on equity investments ( 4,230 ) 5,908 Net gain on sales of loans ( 1,282 ) ( 119 ) Proceeds from sales of residential loans held for sale 141,588 38,048 Residential loans originated for sale ( 158,176 ) ( 37,239 ) Increase in value of bank owned life insurance ( 4,796 ) ( 3,853 ) Net (gain) loss on sale of assets held for sale ( 855 ) 7 Decrease (increase) in interest and dividends receivable 3,053 ( 5,326 ) Deferred tax provision (benefit) 935 ( 93 ) Decrease (increase) in other assets 19,330 ( 22,350 ) (Decrease) increase in other liabilities ( 43,849 ) 66,016 Total adjustments ( 30,788 ) 74,771 Net cash provided by operating activities 47,440 151,084 Cash flows from investing activities: Net decrease (increase) in loans receivable 173,444 ( 210,412 ) Purchase of debt securities available-for-sale ( 243,795 ) ( 4,287 ) Purchase of debt securities held-to-maturity ( 6,971 ) ( 65,567 ) Purchase of equity investments ( 3,032 ) ( 7,383 ) Proceeds from maturities and calls of debt securities available-for-sale 15,870 16,950 Proceeds from maturities and calls of debt securities held-to-maturity 19,202 13,940 Proceeds from sales of debt securities available-for-sale 2,121 1,300 Proceeds from calls and sales of equity investments 11,256 4,822 Principal repayments on debt securities available-for-sale 78,413 — Principal repayments on debt securities held-to-maturity 73,799 82,661 Proceeds from bank owned life insurance 2,156 385 Proceeds from the redemption of restricted equity investments 71,927 128,544 Purchases of restricted equity investments ( 76,706 ) ( 101,745 ) Proceeds from sales of assets held-for-sale 883 969 Purchases of premises and equipment ( 5,949 ) ( 6,062 ) Proceeds from disposal of premises and equipment 3,380 — Net cash consideration paid for acquisition ( 1,000 ) — Net cash provided by (used in) investing activities 114,998 ( 145,885 ) 25 Table of Contents OceanFirst Financial Corp. CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) (dollars in thousands) For the Nine Months Ended September 30, 2024 2023 (Unaudited) Cash flows from financing activities: (Decrease) increase in deposits $ ( 318,686 ) $ 858,947 Increase in short-term borrowings 7,949 13,807 Net proceeds (repayment) of FHLB advances 43,224 ( 605,110 ) Net proceeds from other borrowings 222,662 — Increase in advances by borrowers for taxes and insurance 4,875 8,291 Exercise of stock options 48 593 Payment of employee taxes withheld from stock awards and phantom stock units ( 2,354 ) ( 2,350 ) Purchase of treasury stock ( 21,481 ) — Dividends paid ( 38,222 ) ( 38,426 ) Distributions to non-controlling interest — ( 55 ) Net cash (used in) provided by financing activities ( 101,985 ) 235,697 Net increase in cash and due from banks and restricted cash 60,453 240,896 Cash and due from banks and restricted cash at beginning of period 153,718 167,986 Cash and due from banks and restricted cash at end of period $ 214,171 $ 408,882 Supplemental Disclosure of Cash Flow Information: Cash and due from banks at beginning of period $ 153,718 $ 167,946 Restricted cash at beginning of period — 40 Cash and due from banks and restricted cash at beginning of period $ 153,718 $ 167,986 Cash and due from banks at end of period $ 214,171 $ 408,882 Restricted cash at end of period — — Cash and due from banks and restricted cash at end of period $ 214,171 $ 408,882 Cash paid during the period for: Interest $ 219,314 $ 148,950 Income taxes 26,890 28,151 Non-cash activities: Accretion of unrealized loss on securities reclassified to held-to-maturity 305 453 Net loan charge-offs 1,713 8,271 Transfer of securities from held-to-maturity to available-for-sale 500 — Transfer of premises and equipment to assets held-for-sale — 1,302 See accompanying Notes to Unaudited Consolidated Financial Statements. 26 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements Note 1. Basis of Presentation The consolidated financial statements include the accounts of: OceanFirst Financial Corp. (the “Company”); its wholly-owned subsidiaries, OceanFirst Bank N.A. (the “Bank”) and OceanFirst Risk Management, Inc.; the Bank’s direct and indirect wholly-owned subsidiaries, OceanFirst REIT Holdings, Inc., OceanFirst Management Corp., OceanFirst Realty Corp., Casaba Real Estate Holdings Corporation, Country Property Holdings, Inc., OFB Acquisition LLC; and a majority controlling interest in Trident Abstract Title Agency, LLC (“Trident”). All significant intercompany accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that may be expected for the full year 2024 or any other period. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and the results of operations for the periods presented. Actual results could differ from these estimates. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 27 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 2. Earnings per Share The following reconciles shares outstanding for basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Weighted average shares outstanding 58,439 59,422 58,770 59,388 Less: Unallocated ESOP shares ( 157 ) ( 243 ) ( 173 ) ( 272 ) Unallocated incentive award shares ( 217 ) ( 75 ) ( 192 ) ( 79 ) Average basic shares outstanding 58,065 59,104 58,405 59,037 Add: Effect of dilutive securities: Incentive awards 3 7 2 31 Average diluted shares outstanding 58,068 59,111 58,407 59,068 For the three and nine months ended September 30, 2024, antidilutive stock options of 1,668,000 and 1,790,000 , 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. 28 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 3. Securities 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, 2024 and December 31, 2023 are as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Securities Credit Losses At September 30, 2024 Debt securities available-for-sale: U.S. government and agency obligations $ 60,860 $ 12 $ ( 4,179 ) $ 56,693 $ — Corporate debt securities 15,967 38 ( 795 ) 15,210 — Asset-backed securities 251,986 294 ( 147 ) 252,133 — Mortgage-backed securities (“MBS”): Agency residential 489,515 1,427 ( 195 ) 490,747 — Agency commercial 108,865 — ( 11,895 ) 96,970 — Total mortgage-backed securities 598,380 1,427 ( 12,090 ) 587,717 — Total debt securities available-for-sale $ 927,193 $ 1,771 $ ( 17,211 ) $ 911,753 $ — Debt securities held-to-maturity: State and municipal debt obligations $ 203,822 $ 296 $ ( 10,668 ) $ 193,450 $ ( 34 ) Corporate debt securities 66,721 508 ( 1,378 ) 65,851 ( 763 ) Mortgage-backed securities: Agency residential 703,899 2,299 ( 54,907 ) 651,291 — Agency commercial 81,137 10 ( 3,435 ) 77,712 — Non-agency commercial 20,454 — ( 977 ) 19,477 ( 105 ) Total mortgage-backed securities 805,490 2,309 ( 59,319 ) 748,480 ( 105 ) Total debt securities held-to-maturity $ 1,076,033 $ 3,113 $ ( 71,365 ) $ 1,007,781 $ ( 902 ) Total debt securities $ 2,003,226 $ 4,884 $ ( 88,576 ) $ 1,919,534 $ ( 902 ) At December 31, 2023 Debt securities available-for-sale: U.S. government and agency obligations $ 66,490 $ — $ ( 5,796 ) $ 60,694 $ — Corporate debt securities 10,096 11 ( 981 ) 9,126 — Asset-backed securities 295,796 — ( 4,252 ) 291,544 — Mortgage-backed securities: Agency residential 298,107 183 ( 97 ) 298,193 — Agency commercial 109,590 — ( 15,255 ) 94,335 — Total mortgage-backed securities 407,697 183 ( 15,352 ) 392,528 — Total debt securities available-for-sale $ 780,079 $ 194 $ ( 26,381 ) $ 753,892 $ — Debt securities held-to-maturity: State and municipal debt obligations $ 222,009 $ 251 $ ( 14,550 ) $ 207,710 $ ( 39 ) Corporate debt securities 69,809 391 ( 3,941 ) 66,259 ( 987 ) Mortgage-backed securities: Agency residential 765,632 901 ( 70,040 ) 696,493 — Agency commercial 82,734 10 ( 3,678 ) 79,066 — Non-agency commercial 20,684 — ( 1,774 ) 18,910 ( 107 ) Total mortgage-backed securities 869,050 911 ( 75,492 ) 794,469 ( 107 ) Total debt securities held-to-maturity $ 1,160,868 $ 1,553 $ ( 93,983 ) $ 1,068,438 $ ( 1,133 ) Total debt securities $ 1,940,947 $ 1,747 $ ( 120,364 ) $ 1,822,330 $ ( 1,133 ) 29 Table of Contents 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, 2024 and 2023 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Allowance for securities credit losses Beginning balance $ ( 958 ) $ ( 964 ) $ ( 1,133 ) $ ( 1,128 ) Benefit for credit losses 56 32 231 196 Total ending allowance balance $ ( 902 ) $ ( 932 ) $ ( 902 ) $ ( 932 ) The Company monitors the credit quality of debt securities held-to-maturity on a quarterly basis through the use of internal credit analysis supplemented by external credit ratings. Credit ratings of BBB- or Baa3 or higher are considered investment grade. Where multiple ratings are available, the Company considers the lowest rating when determining the allowance for securities credit losses. Under this approach, the amortized cost of debt securities held-to-maturity at September 30, 2024, aggregated by credit quality indicator, are as follows (in thousands): Investment Grade Non-Investment Grade/Non-rated Total As of September 30, 2024 State and municipal debt obligations $ 202,983 $ 839 $ 203,822 Corporate debt securities 52,730 13,991 66,721 Non-agency commercial MBS 20,454 — 20,454 Total debt securities held-to-maturity $ 276,167 $ 14,830 $ 290,997 There were no realized gains/losses and $ 106,000 of realized losses on sale of debt securities available-for-sale for the three and nine months ended September 30, 2024, respectively as compared to no realized gains/losses and $ 697,000 of realized losses for the corresponding prior year periods. These realized gains/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 September 30, 2024 by contractual maturity are shown below (in thousands): September 30, 2024 Amortized Cost Estimated Fair Value Less than one year $ 32,613 $ 32,323 Due after one year through five years 188,400 179,988 Due after five years through ten years 223,941 220,655 Due after ten years 154,402 150,371 $ 599,356 $ 583,337 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 September 30, 2024, corporate debt securities, state and municipal obligations, and asset-backed securities with an amortized cost of $ 81.6 million, $ 58.3 million, and $ 252.0 million, respectively, and an estimated fair value of $ 80.0 million, $ 57.4 million, and $ 252.1 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. 30 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The estimated fair value and unrealized losses for debt securities available-for-sale and held-to-maturity at September 30, 2024 and December 31, 2023, segregated by the duration of the unrealized losses, are as follows (in thousands): Less than 12 months 12 months or longer Total Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses At September 30, 2024 Debt securities available-for-sale: U.S. government and agency obligations $ 2,103 $ ( 6 ) $ 50,871 $ ( 4,173 ) $ 52,974 $ ( 4,179 ) Corporate debt securities 4,788 ( 54 ) 5,988 ( 741 ) 10,776 ( 795 ) Asset-backed securities 42,325 ( 40 ) 89,004 ( 107 ) 131,329 ( 147 ) MBS: Agency residential 143,284 ( 195 ) — — 143,284 ( 195 ) Agency commercial — — 96,970 ( 11,895 ) 96,970 ( 11,895 ) Total MBS 143,284 ( 195 ) 96,970 ( 11,895 ) 240,254 ( 12,090 ) Total debt securities available-for-sale 192,500 ( 295 ) 242,833 ( 16,916 ) 435,333 ( 17,211 ) Debt securities held-to-maturity: State and municipal debt obligations 5,041 ( 361 ) 175,161 ( 10,307 ) 180,202 ( 10,668 ) Corporate debt securities — — 38,713 ( 1,378 ) 38,713 ( 1,378 ) MBS: Agency residential — — 514,518 ( 54,907 ) 514,518 ( 54,907 ) Agency commercial 1,276 ( 10 ) 73,251 ( 3,425 ) 74,527 ( 3,435 ) Non-agency commercial — — 19,477 ( 977 ) 19,477 ( 977 ) Total MBS 1,276 ( 10 ) 607,246 ( 59,309 ) 608,522 ( 59,319 ) Total debt securities held-to-maturity 6,317 ( 371 ) 821,120 ( 70,994 ) 827,437 ( 71,365 ) Total debt securities $ 198,817 $ ( 666 ) $ 1,063,953 $ ( 87,910 ) $ 1,262,770 $ ( 88,576 ) At December 31, 2023 Debt securities available-for-sale: U.S. government and agency obligations $ 833 $ ( 2 ) $ 59,861 $ ( 5,794 ) $ 60,694 $ ( 5,796 ) Corporate debt securities 1,543 ( 165 ) 6,116 ( 816 ) 7,659 ( 981 ) Asset-backed securities — — 291,544 ( 4,252 ) 291,544 ( 4,252 ) MBS: Agency residential 169,000 ( 97 ) — — 169,000 ( 97 ) Agency commercial — — 94,335 ( 15,255 ) 94,335 ( 15,255 ) Total MBS 169,000 ( 97 ) 94,335 ( 15,255 ) 263,335 ( 15,352 ) Total debt securities available-for-sale 171,376 ( 264 ) 451,856 ( 26,117 ) 623,232 ( 26,381 ) Debt securities held-to-maturity: State and municipal debt obligations 6,671 ( 23 ) 191,511 ( 14,527 ) 198,182 ( 14,550 ) Corporate debt securities 3,084 ( 473 ) 58,386 ( 3,468 ) 61,470 ( 3,941 ) MBS: Agency residential 95,776 ( 693 ) 525,751 ( 69,347 ) 621,527 ( 70,040 ) Agency commercial 18,902 ( 370 ) 55,051 ( 3,308 ) 73,953 ( 3,678 ) Non-agency commercial — — 18,910 ( 1,774 ) 18,910 ( 1,774 ) Total MBS 114,678 ( 1,063 ) 599,712 ( 74,429 ) 714,390 ( 75,492 ) Total debt securities held-to-maturity 124,433 ( 1,559 ) 849,609 ( 92,424 ) 974,042 ( 93,983 ) Total debt securities $ 295,809 $ ( 1,823 ) $ 1,301,465 $ ( 118,541 ) $ 1,597,274 $ ( 120,364 ) The Company concluded that no debt securities were impaired at September 30, 2024 based on consideration of several factors. The Company noted that each issuer made all contractually due payments when required. There were no defaults on principal or interest payments, and no interest payments were deferred. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the net unrealized losses were primarily due to changes in the general credit and interest rate environment and not credit quality. Additionally, the Company has not utilized securities sales as a source of liquidity and the Company’s liquidity plans include adequate sources of liquidity outside securities sales. 31 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Equity Investments At September 30, 2024 and December 31, 2023, the Company held equity investments of $ 95.7 million and $ 100.2 million, respectively. The equity investments are primarily comprised of select financial services institutions’ preferred stocks, investments in other financial institutions and funds. The realized and unrealized gains or losses on equity securities for the three and nine months ended September 30, 2024 and 2023 are shown in the table below (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net gain (loss) on equity investments $ 1,420 $ 1,452 $ 4,230 $ ( 5,908 ) Less: Net losses recognized on equity investments sold — — — ( 5,462 ) Unrealized gains (losses) recognized on equity investments still held $ 1,420 $ 1,452 $ 4,230 $ ( 446 ) 32 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 4. Loans Receivable, Net Loans receivable, net at September 30, 2024 and December 31, 2023 consisted of the following (in thousands): September 30, December 31, 2024 2023 Commercial: Commercial real estate – investor $ 5,273,159 $ 5,353,974 Commercial real estate – owner occupied 841,930 943,891 Commercial and industrial 660,879 666,532 Total commercial 6,775,968 6,964,397 Consumer: Residential real estate 3,003,213 2,979,534 Home equity loans and lines and other consumer (“other consumer”) 242,975 250,664 Total consumer 3,246,188 3,230,198 Total loans receivable 10,022,156 10,194,595 Deferred origination costs, net of fees 10,508 9,263 Allowance for loan credit losses ( 69,066 ) ( 67,137 ) Total loans receivable, net $ 9,963,598 $ 10,136,721 The Company categorizes all loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company evaluates risk ratings on an ongoing basis. The Company uses the following definitions for risk ratings: Pass : Loans classified as Pass are well protected by the paying capacity and net worth of the borrower. Special Mention : Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Substandard : Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the collection or the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful : Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. 33 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The following tables summarize total loans by year of origination, internally assigned credit grades and risk characteristics (in thousands): 2024 2023 2022 2021 2020 2019 and prior Revolving lines of credit Total September 30, 2024 Commercial real estate - investor Pass $ 66,729 $ 138,564 $ 1,147,606 $ 1,307,012 $ 524,774 $ 1,288,200 $ 669,660 $ 5,142,545 Special Mention — — 21,405 2,340 — 42,018 — 65,763 Substandard — — 1,869 595 4,523 50,536 7,328 64,851 Total commercial real estate - investor 66,729 138,564 1,170,880 1,309,947 529,297 1,380,754 676,988 5,273,159 Commercial real estate - owner occupied Pass 28,705 62,077 111,308 91,752 42,050 465,999 22,742 824,633 Special Mention — — — — — 4,130 — 4,130 Substandard — — — — 257 12,287 623 13,167 Total commercial real estate - owner occupied 28,705 62,077 111,308 91,752 42,307 482,416 23,365 841,930 Commercial and industrial Pass 62,399 75,414 41,917 15,638 4,990 47,784 384,477 632,619 Special Mention — 8,663 — — — — 106 8,769 Substandard — 652 3,609 775 — 541 13,914 19,491 Total commercial and industrial 62,399 84,729 45,526 16,413 4,990 48,325 398,497 660,879 Residential real estate (1) Pass 176,774 274,782 555,502 806,071 372,414 807,021 — 2,992,564 Special Mention 2,925 — 250 657 — 2,040 — 5,872 Substandard — 415 1,495 — — 2,867 — 4,777 Total residential real estate 179,699 275,197 557,247 806,728 372,414 811,928 — 3,003,213 Other consumer (1) Pass 21,864 28,253 17,743 17,671 11,992 113,644 29,523 240,690 Special Mention — 97 34 343 — 713 — 1,187 Substandard — — — 72 — 1,026 — 1,098 Total other consumer 21,864 28,350 17,777 18,086 11,992 115,383 29,523 242,975 Total loans $ 359,396 $ 588,917 $ 1,902,738 $ 2,242,926 $ 961,000 $ 2,838,806 $ 1,128,373 $ 10,022,156 (1) For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity. 34 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) 2023 2022 2021 2020 2019 2018 and prior Revolving lines of credit Total December 31, 2023 Commercial real estate - investor Pass $ 137,028 $ 1,165,955 $ 1,328,012 $ 529,745 $ 490,438 $ 930,337 $ 679,804 $ 5,261,319 Special Mention — — 2,413 790 1,446 22,147 — 26,796 Substandard — — 648 3,750 13,275 48,186 — 65,859 Total commercial real estate - investor 137,028 1,165,955 1,331,073 534,285 505,159 1,000,670 679,804 5,353,974 Commercial real estate - owner occupied Pass 66,642 120,280 103,104 59,179 102,703 441,713 21,052 914,673 Special Mention — — — — 1,272 8,314 — 9,586 Substandard — — — — 2,019 16,900 713 19,632 Total commercial real estate - owner occupied 66,642 120,280 103,104 59,179 105,994 466,927 21,765 943,891 Commercial and industrial Pass 112,914 64,770 19,473 8,645 7,778 51,082 383,013 647,675 Special Mention — — — — — 184 2,859 3,043 Substandard — 622 117 — 145 1,385 13,545 15,814 Total commercial and industrial 112,914 65,392 19,590 8,645 7,923 52,651 399,417 666,532 Residential real estate (1) Pass 283,296 916,153 564,515 388,392 223,247 600,118 — 2,975,721 Special Mention — — — — 131 271 — 402 Substandard 323 366 — 258 487 1,977 — 3,411 Total residential real estate 283,619 916,519 564,515 388,650 223,865 602,366 — 2,979,534 Other consumer (1) Pass 32,859 19,918 20,737 12,675 12,937 118,486 30,658 248,270 Special Mention — 172 — — — 386 — 558 Substandard — — — — 6 1,698 132 1,836 Total other consumer 32,859 20,090 20,737 12,675 12,943 120,570 30,790 250,664 Total loans $ 633,062 $ 2,288,236 $ 2,039,019 $ 1,003,434 $ 855,884 $ 2,243,184 $ 1,131,776 $ 10,194,595 (1) For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity. 35 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) An analysis of the allowance for credit losses on loans for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands): Commercial Real Estate – Investor Commercial Real Estate – Owner Occupied Commercial and Industrial Residential Real Estate Other Consumer Total For the three months ended September 30, 2024 Allowance for credit losses on loans Balance at beginning of period $ 27,853 $ 3,931 $ 7,915 $ 27,833 $ 1,307 $ 68,839 Provision (benefit) for credit losses 3,074 ( 220 ) 1,767 ( 4,564 ) 82 139 Charge-offs — — — ( 35 ) ( 89 ) ( 124 ) Recoveries 123 4 2 29 54 212 Balance at end of period $ 31,050 $ 3,715 $ 9,684 $ 23,263 $ 1,354 $ 69,066 For the three months ended September 30, 2023 Allowance for credit losses on loans Balance at beginning of period $ 24,481 $ 4,342 $ 5,945 $ 26,152 $ 871 $ 61,791 Provision (benefit) for credit losses 9,602 119 604 95 ( 63 ) 10,357 Charge-offs ( 8,350 ) — — — ( 29 ) ( 8,379 ) Recoveries 2 3 13 17 73 108 Balance at end of period $ 25,735 $ 4,464 $ 6,562 $ 26,264 $ 852 $ 63,877 For the nine months ended September 30, 2024 Allowance for credit losses on loans Balance at beginning of period $ 27,899 $ 4,354 $ 6,867 $ 27,029 $ 988 $ 67,137 Provision (benefit) for credit losses 4,671 ( 668 ) 2,808 ( 3,913 ) 744 3,642 Charge-offs ( 1,646 ) — — ( 35 ) ( 484 ) ( 2,165 ) Recoveries 126 29 9 182 106 452 Balance at end of period $ 31,050 $ 3,715 $ 9,684 $ 23,263 $ 1,354 $ 69,066 For the nine months ended September 30, 2023 Allowance for credit losses on loans Balance at beginning of period $ 21,070 $ 4,423 $ 5,695 $ 24,530 $ 1,106 $ 56,824 Provision (benefit) for credit losses 13,010 38 974 1,700 ( 322 ) 15,400 Charge-offs ( 8,350 ) ( 6 ) ( 128 ) — ( 111 ) ( 8,595 ) Recoveries 5 9 21 34 179 248 Balance at end of period $ 25,735 $ 4,464 $ 6,562 $ 26,264 $ 852 $ 63,877 The following tables summarize gross charge-offs by vintage (in thousands): 2023 2021 2019 and prior Total For the three months ended September 30, 2024 Residential real estate $ ( 33 ) $ — $ ( 2 ) $ ( 35 ) Other consumer — — ( 89 ) ( 89 ) Total charge-offs $ ( 33 ) $ — $ ( 91 ) $ ( 124 ) For the nine months ended September 30, 2024 Commercial real estate – investor (1) $ — $ ( 46 ) $ ( 1,600 ) $ ( 1,646 ) Residential real estate ( 33 ) — ( 2 ) ( 35 ) Other consumer — — ( 484 ) ( 484 ) Total charge-offs $ ( 33 ) $ ( 46 ) $ ( 2,086 ) $ ( 2,165 ) 36 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) 2019 2018 and prior Total For the three months ended September 30, 2023 Commercial real estate – investor (1) $ ( 8,350 ) $ — $ ( 8,350 ) Other consumer — ( 29 ) ( 29 ) Total charge-offs $ ( 8,350 ) $ ( 29 ) $ ( 8,379 ) For the nine months ended September 30, 2023 Commercial real estate – investor (1) $ ( 8,350 ) $ — $ ( 8,350 ) Commercial real estate – owner occupied — ( 6 ) ( 6 ) Commercial and industrial — ( 128 ) ( 128 ) Other consumer — ( 111 ) ( 111 ) Total charge-offs $ ( 8,350 ) $ ( 245 ) $ ( 8,595 ) (1) Gross charge-offs of $ 1.6 million and $ 8.4 million primarily related to a single commercial relationship which had partial charge-offs during the nine months ended September 30, 2024 and the three and nine months ended September 30, 2023. This was resolved via sale of collateral during the current quarter. 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 September 30, 2024 and December 31, 2023, the Company had collateral dependent loans with an amortized cost balance as follows: commercial real estate - investor of $ 7.1 million and $ 15.2 million, respectively, commercial real estate - owner occupied of $ 3.7 million and $ 352,000 , respectively, and commercial and industrial of $ 122,000 and $ 304,000 , respectively. In addition, the Company had collateral dependent residential and consumer loans with an amortized cost balance of $ 5.9 million and $ 2.6 million at September 30, 2024 and December 31, 2023, respectively. The following table presents the recorded investment in non-accrual loans, by loan portfolio segment as of September 30, 2024 and December 31, 2023 (in thousands): September 30, December 31, 2024 2023 Commercial real estate – investor (1) $ 12,478 $ 20,820 Commercial real estate – owner occupied 4,368 351 Commercial and industrial 122 304 Residential real estate 9,108 5,542 Other consumer 2,063 2,531 $ 28,139 $ 29,548 (1) December 31, 2023 includes the exposure of $ 8.8 million of the single commercial real estate relationship resolved during the quarter. At September 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, there were no loans that were past due 90 days or greater and still accruing interest. 37 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The following table presents the aging of the recorded investment in past due loans as of September 30, 2024 and December 31, 2023 by loan portfolio segment (in thousands): 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Loans Not Past Due Total September 30, 2024 Commercial real estate – investor (1) $ 366 $ 1,604 $ 6,828 $ 8,798 $ 5,264,361 $ 5,273,159 Commercial real estate – owner occupied 924 — 1,447 2,371 839,559 841,930 Commercial and industrial 266 17 122 405 660,474 660,879 Residential real estate 1,700 5,872 4,777 12,349 2,990,864 3,003,213 Other consumer 3,522 1,187 1,098 5,807 237,168 242,975 $ 6,778 $ 8,680 $ 14,272 $ 29,730 $ 9,992,426 $ 10,022,156 December 31, 2023 Commercial real estate – investor (1) $ 978 $ 684 $ 15,201 $ 16,863 $ 5,337,111 $ 5,353,974 Commercial real estate – owner occupied 335 352 293 980 942,911 943,891 Commercial and industrial 163 — 145 308 666,224 666,532 Residential real estate 14,858 402 3,411 18,671 2,960,863 2,979,534 Other consumer 872 558 1,836 3,266 247,398 250,664 $ 17,206 $ 1,996 $ 20,886 $ 40,088 $ 10,154,507 $ 10,194,595 (1) December 31, 2023 includes the exposure of $ 8.8 million of the single commercial real estate relationship resolved during the quarter. Loan Modifications to Borrowers Experiencing Financial Difficulty The Company adopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023. Since adoption, the Company has modified and may modify in the future certain loans to borrowers experiencing financial difficulty. These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount, and the allowance for credit losses is subsequently adjusted by an amount equal to the total loss rate as applied to the reduced amortized cost basis. As of September 30, 2024 and December 31, 2023, loans with modifications to borrowers experiencing financial difficulty totaled $ 23.7 million and $ 8.9 million, respectively. There were no outstanding commitments to lend additional funds to such borrowers with loan modifications as of September 30, 2024 or December 31, 2023. 38 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The following table presents loans modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 and 2023 (in thousands): Term Extension Interest Rate Reduction Combination of Term Extension and Interest Rate Reduction Other Than Insignificant Payment Delay Total % of Total by Loan Portfolio Segment For the three months ended September 30, 2024 $ — $ — $ — $ — $ — — % For the three months ended September 30, 2023 Residential real estate $ 65 $ — $ — $ — $ 65 — % Other consumer — — 170 — 170 0.07 $ 65 $ — $ 170 $ — $ 235 — % For the nine months ended September 30, 2024 Commercial real estate – investor $ — $ 4,878 $ 7,000 $ — $ 11,878 0.23 % Commercial real estate – owner occupied — — — 2,994 2,994 0.36 Residential real estate 129 — — — 129 — Other consumer — — 148 — 148 0.06 $ 129 $ 4,878 $ 7,148 $ 2,994 $ 15,149 0.15 % For the nine months ended September 30, 2023 Residential real estate $ 723 $ — $ — $ — $ 723 0.02 % Other consumer 240 — 170 — 410 0.16 $ 963 $ — $ 170 $ — $ 1,133 0.01 % The modifications during the periods presented had an insignificant financial effect on the Company. 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. The following table provides the performance of loans modified to borrowers experiencing financial difficulty during the twelve months ended September 30, 2024 and since adoption of the standard for September 30, 2023 (in thousands): Current 60 - 89 Days past due 90 Days or Greater past due Total September 30, 2024 Commercial real estate – investor $ 19,645 $ — $ — $ 19,645 Commercial real estate – owner occupied 2,896 — — 2,896 Residential real estate 128 — — 128 Other consumer 47 147 — 194 $ 22,716 $ 147 $ — $ 22,863 September 30, 2023 Residential real estate $ 583 $ — $ 140 (1) $ 723 Other consumer 410 — — 410 $ 993 $ — $ 140 $ 1,133 (1) Represents one residential loan that defaulted during the three and nine months ended September 30, 2023, which had been modified since the adoption of the standard. 39 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 5. Deposits The major types of deposits at September 30, 2024 and December 31, 2023 were as follows (in thousands): Type of Account September 30, December 31, 2024 2023 Non-interest-bearing $ 1,638,447 $ 1,657,119 Interest-bearing checking 3,896,348 3,911,766 Money market deposit 1,288,555 1,021,805 Savings 1,071,946 1,398,837 Time deposits 2,220,871 2,445,422 Total deposits $ 10,116,167 $ 10,434,949 Included in time deposits at September 30, 2024 and December 31, 2023 was $ 451.1 million and $ 412.0 million, respectively, of deposits of $250,000 or more. Time deposits also include brokered deposits of $ 201.0 million and $ 631.5 million at September 30, 2024 and December 31, 2023, respectively. Note 6. Borrowed Funds Borrowed funds at September 30, 2024 and December 31, 2023 were as follows (in thousands): September 30, December 31, 2024 2023 FHLB advances $ 891,860 $ 848,636 Securities sold under agreements to repurchase with customers 81,163 73,148 Other borrowings 419,927 196,456 Total borrowed funds $ 1,392,950 $ 1,118,240 At September 30, 2024, there were $ 831.9 million of FHLB term advances and $ 60.0 million outstanding in overnight borrowings from the FHLB, as compared to $ 848.6 million and $ 0 at December 31, 2023, respectively. At September 30, 2024, there were $ 419.9 million of other borrowings as compared to $ 196.5 million at December 31, 2023 as a result of lower-cost funding availability. Pledged assets The following table presents the assets pledged to secure borrowings, borrowing capacity, repurchase agreements, letters of credit, and for other purposes required by law at carrying value (in thousands): Loans Debt securities Total September 30, 2024 FHLB and FRB $ 7,399,276 $ 1,131,698 $ 8,530,974 Repurchase agreements — 86,440 86,440 Total pledged assets $ 7,399,276 $ 1,218,138 $ 8,617,414 December 31, 2023 FHLB and FRB $ 7,255,671 $ 1,051,558 $ 8,307,229 Repurchase agreements — 103,416 103,416 Total pledged assets $ 7,255,671 $ 1,154,974 $ 8,410,645 The securities that collateralize the repurchase agreements are delivered to the lender, with whom each transaction is executed, to a third-party custodian, or held at the Company. The lender agrees to resell to the Company substantially the same securities at the maturity of the repurchase agreements. 40 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 7. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The Company uses valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability and developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability and developed based on the best information available in the circumstances. In that regard, a fair value hierarchy has been established for valuation inputs that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means. Level 3 Inputs – Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities. Assets and Liabilities Measured at Fair Value A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Debt Securities Available-for-Sale Debt securities classified as available-for-sale are reported at fair value. Fair value 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. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing is a mathematical technique used principally to value certain debt securities without relying exclusively on quoted prices for the specific securities, but comparing the debt securities to benchmark or comparable debt securities. Equity Investments Equity investments with readily determinable fair value are reported at fair value. Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1) or using inputs other than quoted prices that are based on market observable information (Level 2). Equity investments without readily determinable fair values are carried at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer (measurement alternative). Certain equity investments without readily determinable fair values are measured at net asset value (“NAV”) per share as a practical expedient, which are excluded from the fair value hierarchy levels in the table below. 41 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Interest Rate Derivatives The Company’s interest rate swaps and cap contracts are reported at fair value utilizing discounted cash flow models provided by an independent, third-party and observable market data (Level 2). When entering into an interest rate swap or cap contract, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of the contract counterparty. Loans Individually Measured for Impairment Loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs. Fair value is 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, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands): Fair Value Measurements at Reporting Date Using: Total Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs September 30, 2024 Items measured on a recurring basis: Debt securities available-for-sale $ 911,753 $ 48,542 $ 863,211 $ — Equity investments 45,631 — 45,631 — Interest rate derivative asset 67,791 — 67,791 — Interest rate derivative liability ( 67,415 ) — ( 67,415 ) — Items measured on a non-recurring basis: Equity investments (1) (2) 50,057 — — 46,176 Loans measured for impairment based on the fair value of the underlying collateral (3) 16,814 — — 16,814 December 31, 2023 Items measured on a recurring basis: Debt securities available-for-sale $ 753,892 $ 43,036 $ 710,856 $ — Equity investments 53,166 — 53,166 — Interest rate derivative asset 87,776 — 87,776 — Interest rate derivative liability ( 87,848 ) — ( 87,848 ) — Items measured on a non-recurring basis: Equity investments (1) (2) 46,997 — — 43,576 Loans measured for impairment based on the fair value of the underlying collateral (3) 18,509 — — 18,509 (1) As of September 30, 2024 and December 31, 2023, equity investments included $ 46.2 million and $ 43.6 million, respectively, of equity investments measured under the measurement alternative. This included no unrealized gains or losses for the nine months ended September 30, 2024 and the year ended December 31, 2023. (2) As of September 30, 2024 and December 31, 2023, equity investments included $ 3.9 million and $ 3.4 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 range may vary but is generally 0 % to 8 % on the discount for costs to sell and 0 % to 10 % on appraisal adjustments. 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 nine months ended September 30, 2024 and 2023. 42 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Assets and Liabilities Disclosed at Fair Value A description of the valuation methodologies used for assets and liabilities disclosed at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy is set forth below. Cash and Due from Banks For cash and due from banks, the carrying amount approximates fair value. Debt Securities Held-to-Maturity Debt securities classified as held-to-maturity are carried at amortized cost, as the Company has the positive intent and ability to hold these debt securities to maturity. The Company determines the fair value of the debt securities utilizing Level 2 inputs. Most of the Company’s debt securities are fixed income instruments that are not quoted on an exchange, but are bought and sold in active markets. Prices for these instruments are obtained through third-party pricing vendors or security industry sources that actively participate in the buying and selling of debt securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing is a mathematical technique used principally to value certain debt securities without relying exclusively on quoted prices for the specific debt securities, but comparing the debt securities to benchmark or comparable debt securities. Management’s policy is to obtain and review all available documentation from the third-party pricing service relating to their fair value determinations, including their methodology and summary of inputs. Management reviews this documentation, makes inquiries of the third-party pricing service and decides as to the level of the valuation inputs. Based on the Company’s review of the available documentation from the third-party pricing service, management concluded that Level 2 inputs were utilized for all securities. Restricted Equity Investments The fair value of these investments, which are primarily Federal Home Loan Bank of New York and Federal Reserve Bank stock, is its carrying value since this is the amount for which it could be redeemed. There is no active market for this stock and the Company is required to maintain a minimum investment as stipulated by the respective entities. Loans Receivable and Loans Held-for-Sale Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential real estate, consumer and commercial. Each loan category is further segmented into fixed and adjustable rate interest terms. Fair value of performing and non-performing loans, which is based on an exit price notion, was estimated by discounting the future cash flows, net of estimated prepayments, at market discount rates that reflect the credit and interest rate risk inherent in the loan. Loans held for sale are carried at the lower of unpaid principal balance, net, or estimated fair value on an aggregate basis. Estimated fair value is generally determined based on bid quotations from secondary markets. Deposits Other than Time Deposits The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, and interest-bearing checking accounts and money market accounts is, by definition, equal to the amount payable on demand. The related insensitivity of the majority of these deposits to interest rate changes creates a significant inherent value which is not reflected in the fair value reported. Time Deposits The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. Securities Sold Under Agreements to Repurchase with Customers Fair value approximates the carrying amount as these borrowings are payable on demand and the interest rate adjusts monthly. FHLB Advances and Other Borrowings Fair value estimates are based on discounting contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities. 43 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The book value and estimated fair value of the Company’s significant financial instruments not recorded at fair value as of September 30, 2024 and December 31, 2023 are presented in the following tables (in thousands): Fair Value Measurements at Reporting Date Using: Book Value Level 1 Inputs Level 2 Inputs Level 3 Inputs September 30, 2024 Financial Assets: Cash and due from banks $ 214,171 $ 214,171 $ — $ — Debt securities held-to-maturity 1,075,131 — 1,007,781 — Restricted equity investments 98,545 — — 98,545 Loans receivable, net and loans held-for-sale 9,986,634 — — 9,545,091 Financial Liabilities: Deposits other than time deposits (1) 7,895,296 — 7,895,296 — Time deposits 2,220,871 — 2,220,572 — FHLB advances and other borrowings 1,311,787 — 1,308,840 — Securities sold under agreements to repurchase with customers 81,163 81,163 — — December 31, 2023 Financial Assets: Cash and due from banks $ 153,718 $ 153,718 $ — $ — Debt securities held-to-maturity 1,159,735 — 1,068,438 — Restricted equity investments 93,766 — — 93,766 Loans receivable, net and loans held-for-sale 10,141,887 — — 9,606,498 Financial Liabilities: Deposits other than time deposits (1) 7,989,527 — 7,989,527 — Time deposits 2,445,422 — 2,421,058 — FHLB advances and other borrowings 1,045,092 — 1,008,351 — Securities sold under agreements to repurchase with customers 73,148 73,148 — — (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. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, bank owned life insurance, deferred tax assets and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. 44 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 8. Derivatives and Hedging Activities The Company enters into derivative financial instruments which involve, to varying degrees, interest rate and credit risk. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures, seeking to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes derivative financial instruments to accommodate the business needs of its customers as well as to economically hedge the exposure that this creates for the Company. Additionally, the Company enters into certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The Company does not use derivative financial instruments for trading purposes. Customer Derivatives – Interest Rate Swaps and Cap Contracts Derivatives Not Designated as Hedging Instruments The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The Company also enters into interest rate cap contracts that enable commercial loan customers to lock in a cap on a variable-rate commercial loan agreement. This feature prevents the loan from repricing to a level that exceeds the cap contract’s specified interest rate, which serves to hedge the risk from rising interest rates. The Company then enters into an offsetting interest rate cap contract with a third party in order to economically hedge its exposure through the customer agreement. These interest rate swaps and cap contracts with both the customers and third parties are not designated as hedges under ASC Topic 815, Derivatives and Hedging, therefore changes in fair value are reported in earnings. As the interest rate swaps and cap contracts are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC Topic 820, Fair Value Measurements. The Company recognized losses of $ 25,000 and $ 14,000 in commercial loan swap income resulting from the fair value adjustments for the three and nine months ended September 30, 2024, respectively, as compared to losses of $ 2,000 and $ 2,000 for the corresponding prior year periods. Derivatives Designated as Hedging Instruments During 2022, the Company entered into a three-year interest rate swap intended to add stability to its net interest income and to manage its exposure to future interest rate movements associated with a pool of floating-rate commercial loans. The swap requires the Company to pay variable-rate amounts indexed to one-month term Secured Overnight Financing Rate (“SOFR”) to the counterparty in exchange for the receipt of fixed-rate amounts at 4.0 % from the counterparty. The swap was designated and qualified as a cash flow hedge under ASC Topic 815, Derivatives and Hedging. The changes in the fair value of cash flow hedges are initially reported in other comprehensive income. Amounts are subsequently reclassified from accumulated other comprehensive income to earnings when the hedged transactions occur, specifically within the same line item as the hedged item (interest income). Therefore, a portion of the balance reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income as interest payments are made or received on the Company’s interest rate swaps. The table below presents the effect on the Company’s accumulated other comprehensive income/loss (“AOCI” or “AOCL”) attributable to the cash flow hedge derivative, net of tax, and the related gains/(losses) reclassified from AOCI into income (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 AOCL balance at beginning of period, net of tax $ ( 776 ) $ ( 909 ) $ ( 36 ) $ ( 25 ) Unrealized gains (losses) recognized in OCI 837 ( 622 ) ( 418 ) ( 1,798 ) Losses reclassified from AOCI into interest income 253 246 768 538 AOCI (AOCL) balance at end of period, net of tax $ 314 $ ( 1,285 ) $ 314 $ ( 1,285 ) During the next twelve months ending September 30, 2025, the Company estimates that an additional $ 174,000 will be reclassified as an addition to interest income. 45 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) 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): Notional Fair Value Other assets Other liabilities As of September 30, 2024 Derivatives Not Designated as Hedging Instruments Interest rate swaps and cap contracts $ 1,488,359 $ 67,376 $ 67,415 Derivatives Designated as Cash Flow Hedge Interest rate swap contract 100,000 415 — Total Derivatives $ 1,588,359 $ 67,791 $ 67,415 As of December 31, 2023 Derivatives Not Designated as Hedging Instruments Interest rate swaps and cap contracts $ 1,418,276 $ 87,776 $ 87,801 Derivatives Designated as Cash Flow Hedge Interest rate swap contract 100,000 — 47 Total Derivatives $ 1,518,276 $ 87,776 $ 87,848 Credit Risk-Related Contingent Features The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by being a party to International Swaps and Derivatives Association agreements with third-party broker-dealers that require a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties was $ 0 at both September 30, 2024 and December 31, 2023. The amount of collateral received from third parties was $ 55.8 million and $ 88.3 million at September 30, 2024 and December 31, 2023, 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 $ 67.4 million and $ 87.8 million at September 30, 2024 and December 31, 2023, 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. 46 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 9. Leases A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company’s leases are comprised of real estate property for branches, automated teller machine locations and office space with terms extending through 2038. The Company has one existing finance lease, which has a lease term through 2029. The following table represents the classification of the Company’s Right of Use (“ROU”) assets and lease liabilities on the Consolidated Statements of Financial Condition (in thousands): September 30, December 31, 2024 2023 Lease ROU Assets Classification Operating lease ROU assets Other assets $ 16,098 $ 18,979 Finance lease ROU asset Premises and equipment, net 1,129 1,304 Total lease ROU assets $ 17,227 $ 20,283 Lease Liabilities Operating lease liabilities (1) Other liabilities $ 17,831 $ 20,018 Finance lease liability Other borrowings 1,489 1,685 Total lease liabilities $ 19,320 $ 21,703 (1) Operating lease liabilities excludes liabilities for future rent and estimated lease termination payments related to closed branches of $ 4.8 million and $ 5.9 million at September 30, 2024 and December 31, 2023, respectively. The calculated amount of the ROU assets and lease liabilities are impacted by the lease term and the discount rate used to calculate the present value of the minimum lease payments. Lease agreements often include one or more options to renew the lease at the Company’s discretion. If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the ROU asset and lease liability. For the discount rate, 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 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. September 30, December 31, 2024 2023 Weighted-Average Remaining Lease Term Operating leases 6.01 years 6.52 years Finance lease 4.85 years 5.60 years Weighted-Average Discount Rate Operating leases 3.09 % 3.02 % Finance lease 5.63 5.63 47 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) The following table represents lease expenses and other lease information (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Lease Expense Operating lease expense $ 1,136 $ 1,153 $ 3,441 $ 3,472 Finance lease expense: Amortization of ROU assets 59 58 175 170 Interest on lease liabilities (1) 21 25 66 77 Total $ 1,216 $ 1,236 $ 3,682 $ 3,719 Other Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,214 $ 1,154 $ 3,336 $ 3,414 Operating cash flows from finance leases 21 25 66 77 Financing cash flows from finance leases 66 63 196 186 (1) Included in borrowed funds interest expense on the Consolidated Statements of Income. All other costs are included in occupancy expense on the Consolidated Statements of Income. Future minimum payments for the finance lease and operating leases with initial or remaining terms were as follows (in thousands): Finance Lease Operating Leases For the Year Ending December 31, 2024 $ 88 $ 1,226 2025 350 4,719 2026 350 4,070 2027 350 2,696 2028 350 1,524 Thereafter 208 5,545 Total 1,696 19,780 Less: Imputed interest ( 207 ) ( 1,949 ) Total lease liabilities $ 1,489 $ 17,831 Note 10. Variable Interest Entity The Company accounts for Trident as a variable interest entity (“VIE”) under ASC 810, Consolidation, for which the Company is considered the primary beneficiary (i.e. the party that has a controlling financial interest). In accordance with ASC 810, Consolidation, the Company has consolidated Trident’s assets and liabilities. The summarized financial information for the Company’s consolidated VIE at September 30, 2024 and December 31, 2023 consisted of the following (in thousands): September 30, 2024 December 31, 2023 Cash and cash equivalents $ 26,936 $ 22,151 Other assets 440 606 Total assets 27,376 22,757 Other liabilities 25,243 20,803 Net assets $ 2,133 $ 1,954 48 Table of Contents OceanFirst Financial Corp. Notes to Unaudited Consolidated Financial Statements (Continued) Note 11. Subsequent Events On October 1, 2024, the Company completed the acquisition of Spring Garden Capital Group, LLC (“Spring Garden”) for a purchase price of $ 68 million. The transaction will be complementary to the Company’s existing products and will expand the Company’s specialty finance offerings. 49 Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company and the Bank are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.