Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FINANCIAL SUMMARY (1)
At or for the Quarters Ended
(dollars in thousands, except per share amounts) June 30, 2025 March 31, 2025 June 30, 2024
SELECTED FINANCIAL CONDITION DATA:
Total assets $ 13,327,847 $ 13,309,278 $ 13,321,755
Loans receivable, net of allowance for loan credit losses 10,119,781 10,058,072 9,961,117
Deposits 10,232,442 10,177,023 9,994,017
Total stockholders’ equity 1,643,680 1,709,117 1,676,669
SELECTED OPERATING DATA:
Net interest income 87,636 86,652 82,263
Provision for credit losses 3,039 5,340 3,114
Other income 11,733 11,253 10,985
Operating expenses 71,474 64,294 58,620
Net income 19,085 21,463 24,432
Net income attributable to OceanFirst Financial Corp. 19,046 21,509 24,373
Net income available to common stockholders 16,200 20,505 23,369
Diluted earnings per share 0.28 0.35 0.40
SELECTED FINANCIAL RATIOS:
Book value per common share at end of period 28.64 29.27 28.67
Cash dividend per share 0.20 0.20 0.20
Dividend payout ratio per common share 71.43 % 57.14 % 50.00 %
Stockholders’ equity to total assets 12.33 12.84 12.59
Return on average assets (2) (3) (4)
0.49 0.62 0.70
Return on average stockholders’ equity (2) (3) (4)
3.86 4.85 5.61
Net interest rate spread (5)
2.37 2.35 2.11
Net interest margin (2) (6)
2.91 2.90 2.71
Operating expenses to average assets (2) (4)
2.16 1.96 1.75
Efficiency ratio (4) (7)
71.93 65.67 62.86
Loan-to-deposit ratio (8)
99.50 99.50 100.30
ASSET QUALITY (9) :
Non-performing loans (10)
$ 33,511 $ 36,970 $ 33,422
Non-performing assets (10)
41,191 38,887 33,422
Allowance for loan credit losses as a percent of total loans receivable (8) (11)
0.78 % 0.78 % 0.69 %
Allowance for loan credit losses as a percent of total non-performing loans (10) (11)
236.54 213.14 205.97
Non-performing loans as a percent of total loans receivable (8) (10)
0.33 0.37 0.33
Non-performing assets as a percent of total assets (10)
0.31 0.29 0.25
(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Ratios are annualized.
(3) Ratios are based on net income available to common stockholders.
(4) Performance ratios for the three months ended June 30, 2025 included a loss on redemption of preferred stock of $1.8 million and a net gain on equity investments of $488,000, or $373,000, net of tax expense. Performance ratios for the three months ended March 31, 2025 included a net gain on equity investments of $205,000, or $156,000, net of tax expense. Performance ratios for the three months ended June 30, 2024 included a net gain on equity investments of $887,000, or $699,000, net of tax expense.
(5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(7) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.
(8) Total loans receivable excludes loans held-for-sale.
(9) The quarter ended June 30, 2024 included a single commercial relationship exposure of $7.2 million, which was subsequently resolved in 2024.
(10) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans and assets generally consist of all loans 90 days or more past due and other loans in the process of foreclosure. It is the Company’s policy to cease accruing interest on all such loans and to reverse previously accrued interest.
(11) Loans acquired from acquisitions were recorded at fair value. The net unamortized credit and purchased with credit deterioration (“PCD”) marks on these loans, not reflected in the allowance for loan credit losses, was $5.0 million, $5.6 million, and $6.1 million at June 30, 2025, March 31, 2025 and June 30, 2024, respectively.
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Summary
OceanFirst Financial Corp. is the holding company for OceanFirst Bank N.A. (the “Bank”), a regional bank serving business and retail customers throughout New Jersey and the major metropolitan areas between Massachusetts and Virginia. The term “Company” refers to OceanFirst Financial Corp., the Bank and all their subsidiaries on a consolidated basis. The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and investments, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income such as income from bankcard services, trust and asset management products and services, deposit account services, sales of loans and investments, bank owned life insurance and commercial loan swap income. The Company’s operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, federal deposit insurance and regulatory assessments, data processing, check card processing, professional fees and other general and administrative expenses. The Company’s results of operations are significantly affected by competition, general economic conditions, including levels of unemployment and real estate values, as well as changes in market interest rates, inflation, government policies, including the imposition of tariffs and retaliatory responses, and actions of regulatory agencies.
Key developments relating to the Company’s financial results and corporate activities for the three months ended June 30, 2025, as compared to the prior linked quarter, were as follows:
• Loan Growth: Total loans increased $59.8 million, representing a 2% annualized growth rate, which included $131.7 million of commercial and industrial loan growth. The commercial loan pipeline reached a record high of $790.8 million, which increased 111% from $375.6 million in the linked quarter.
• Premier Banking: Launched in mid-April and is demonstrating strong progress with approximately 200 new relationships and $115.0 million in new deposits in the first few weeks of operation.
• Capital: The Company repurchased 1,003,550 shares during the quarter and redeemed all of its preferred stock. Book value per share decreased $0.63 to $28.64 as compared to the linked quarter.
During the current quarter, the Company redeemed all of its preferred stock for an aggregate payment of $57.4 million, at a redemption price of $25.00 per share, which resulted in a net loss on redemption of $1.8 million. Additionally, the current quarter included professional fees of $1.6 million related to recruitment fees for the Company’s recent commercial banking hires and non-recurring benefits of $1.1 million in other income.
Net income available to common stockholders for the three and six months ended June 30, 2025 decreased to $16.2 million and $36.7 million, respectively, or $0.28 and $0.63 per diluted share, as compared to $23.4 million and $51.0 million, or $0.40 and $0.87 per diluted share, for the corresponding prior year periods. The dividends paid to preferred stockholders were $1.0 million and $2.0 million for each of the three and six months ended June 30, 2025 and 2024, respectively.
On July 24, 2025, the Company’s Board of Directors declared a quarterly cash dividend on common stock of $0.20 per share. The dividend, related to the quarter ended June 30, 2025, will be paid on August 15, 2025 to common stockholders of record on August 4, 2025.
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Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. For the three and six months ended June 30, 2025, interest income included net loan fees of $1.2 million and $2.6 million, respectively, as compared to $708,000 and $1.4 million for the same prior year periods.
The following tables set forth certain information relating to the Company for the three and six months ended June 30, 2025 and 2024. The yields and costs, which are annualized, are derived by dividing the income or expense by the average balance of the related assets or liabilities, respectively, for the periods shown except where noted otherwise. Average balances are derived from average daily balances. The yields and costs include certain fees and costs which are considered adjustments to yields.
For the Three Months Ended June 30,
2025 2024
(dollars in thousands) Average Balance Interest Average
Yield/
Cost (1)
Average Balance Interest Average
Yield/
Cost (1)
Assets:
Interest-earning assets:
Interest-earning deposits and short-term investments $ 111,631 $ 1,090 3.92 % $ 132,574 $ 1,770 5.37 %
Securities (2)
1,917,114 18,257 3.82 2,058,711 21,607 4.22
Loans receivable, net (3)
Commercial 6,786,611 100,004 5.91 6,845,988 102,620 6.03
Residential real estate 3,091,227 31,861 4.12 2,978,749 29,072 3.90
Home equity loans and lines and other consumer (“other consumer”) 225,311 3,613 6.43 246,024 4,357 7.12
Allowance for loan credit losses, net of deferred loan costs and fees (66,364) — — (58,270) — —
Loans receivable, net 10,036,785 135,478 5.41 10,012,491 136,049 5.46
Total interest-earning assets 12,065,530 154,825 5.14 12,203,776 159,426 5.25
Non-interest-earning assets 1,182,543 1,237,442
Total assets $ 13,248,073 $ 13,441,218
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking $ 3,990,602 20,605 2.07 % $ 3,862,060 21,043 2.19 %
Money market 1,342,194 9,718 2.90 1,183,429 10,482 3.56
Savings 1,029,490 1,680 0.65 1,164,203 2,604 0.90
Time deposits 2,175,564 20,270 3.74 2,337,458 25,942 4.46
Total 8,537,850 52,273 2.46 8,547,150 60,071 2.83
Federal Home Loan Bank (“FHLB”) advances 880,746 9,933 4.52 711,801 8,746 4.94
Securities sold under agreements to repurchase 60,477 419 2.78 72,305 478 2.66
Other borrowings 260,655 4,564 7.02 541,266 7,868 5.85
Total borrowings 1,201,878 14,916 4.98 1,325,372 17,092 5.19
Total interest-bearing liabilities 9,739,728 67,189 2.77 9,872,522 77,163 3.14
Non-interest-bearing deposits 1,639,045 1,626,165
Non-interest-bearing liabilities 186,653 268,078
Total liabilities 11,565,426 11,766,765
Stockholders’ equity 1,682,647 1,674,453
Total liabilities and stockholders’ equity $ 13,248,073 $ 13,441,218
Net interest income $ 87,636 $ 82,263
Net interest rate spread (4)
2.37 % 2.11 %
Net interest margin (5)
2.91 % 2.71 %
Total cost of deposits (including non-interest-bearing deposits) 2.06 % 2.37 %
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For the Six Months Ended June 30,
2025 2024
(dollars in thousands) Average
Balance Interest Average
Yield/
Cost (1)
Average
Balance Interest Average
Yield/
Cost (1)
Assets:
Interest-earning assets:
Interest-earning deposits and short-term investments $ 106,230 $ 2,073 3.94 % $ 147,883 $ 3,995 5.43 %
Securities (2)
1,959,922 37,958 3.91 2,078,566 43,863 4.24
Loans receivable, net (3)
Commercial 6,783,823 198,265 5.89 6,885,518 207,041 6.05
Residential real estate 3,078,524 63,131 4.10 2,976,608 57,668 3.87
Other consumer 226,923 7,101 6.31 247,210 8,461 6.88
Allowance for loan credit losses, net of deferred loan costs and fees (64,121) — — (58,705) — —
Loans receivable, net 10,025,149 268,497 5.39 10,050,631 273,170 5.46
Total interest-earning assets 12,091,301 308,528 5.14 12,277,080 321,028 5.25
Non-interest-earning assets 1,188,506 1,221,889
Total assets $ 13,279,807 $ 13,498,969
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking $ 4,062,502 42,039 2.09 % $ 3,894,013 41,838 2.16 %
Money market 1,332,154 19,070 2.89 1,137,716 19,653 3.47
Savings 1,043,674 3,465 0.67 1,259,960 7,066 1.13
Time deposits 2,046,927 38,745 3.82 2,375,760 51,369 4.35
Total 8,485,257 103,319 2.46 8,667,449 119,926 2.78
FHLB Advances 938,200 21,293 4.58 678,309 16,517 4.90
Securities sold under agreements to repurchase 62,385 846 2.73 70,403 889 2.54
Other borrowings 271,840 8,782 6.51 521,084 15,209 5.87
Total borrowings 1,272,425 30,921 4.90 1,269,796 32,615 5.17
Total interest-bearing liabilities 9,757,682 134,240 2.77 9,937,245 152,541 3.09
Non-interest-bearing deposits 1,618,622 1,630,374
Non-interest-bearing liabilities 204,702 257,603
Total liabilities 11,581,006 11,825,222
Stockholders’ equity 1,698,801 1,673,747
Total liabilities and stockholders’ equity $ 13,279,807 $ 13,498,969
Net interest income $ 174,288 $ 168,487
Net interest rate spread (4)
2.37 % 2.16 %
Net interest margin (5)
2.91 % 2.76 %
Total cost of deposits (including non-interest-bearing deposits) 2.06 % 2.34 %
(1) Average yields and costs are annualized.
(2) Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank (“FRB”) stock, and are recorded at average amortized cost, net of allowance for securities credit losses.
(3) Amount is net of deferred loan costs and fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, and includes loans held for sale and non-performing loans.
(4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
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Comparison of Financial Condition at June 30, 2025 and December 31, 2024
Total assets decreased by $93.4 million to $13.33 billion, from $13.42 billion, primarily due to decreases in total debt securities. Debt securities available-for-sale decreased by $91.9 million to $735.6 million, from $827.5 million, primarily due to principal reductions, maturities and calls. Debt securities held-to-maturity decreased by $76.9 million to $969.0 million, from $1.05 billion, primarily due to principal repayments. Total loans increased by $67.0 million to $10.19 billion, from $10.12 billion, while the loan pipeline increased by $648.1 million to $954.8 million, from $306.7 million, primarily due to an increase in commercial loans of $593.3 million. Other assets decreased by $33.4 million to $152.3 million, from $185.7 million, primarily due to a decrease in market values associated with customer interest rate swap programs.
Total liabilities decreased by $34.3 million to $11.68 billion, from $11.72 billion primarily related to a funding mix-shift. Deposits increased by $166.1 million to $10.23 billion, from $10.07 billion, primarily due to an increase in time deposits. Time deposits increased to $2.30 billion, from $2.08 billion, representing 22.5% and 20.7% of total deposits, respectively. Time deposits included an increase in brokered time deposits of $448.1 million, partly offset by a decrease in retail time deposits of $229.4 million. The loan-to-deposit ratio was 99.5%, as compared to 100.5%. FHLB advances decreased by $133.9 million to $938.7 million, from $1.07 billion partly driven by a shift to slightly favorably priced brokered deposits.
Other liabilities decreased by $63.6 million to $234.8 million, from $298.4 million, primarily due to a decrease in the market values of derivatives associated with customer interest rate swaps and related collateral received from counterparties.
Capital levels remain strong and in excess of “well-capitalized” regulatory levels at June 30, 2025, including the Company’s common equity tier one capital ratio which declined to 10.99%, driven primarily by stock repurchases and increased lending commitments.
Total stockholders’ equity decreased to $1.64 billion, as compared to $1.70 billion, primarily due to the redemption of preferred stock for $55.5 million and capital returns comprising of dividends and share repurchases, partially offset by net income. Additionally, accumulated other comprehensive loss decreased by $4.4 million primarily due to increases in the fair market value of available-for-sale debt securities, net of tax.
During the six months ended June 30, 2025, the Company repurchased 1,401,945 shares totaling $24.3 million representing a weighted average cost of $17.17. As of June 30, 2025, the Company had 226,284 shares available for repurchase under the authorized repurchase program. On July 16, 2025, the Company announced its Board of Directors authorized a 2025 Stock Repurchase Program to repurchase up to an additional 3.0 million shares.
The Company’s stockholders’ equity to assets ratio was 12.33%, as compared to 12.69% and book value per share decreased to $28.64, as compared to $29.08, due to drivers noted above.
Comparison of Operating Results for the Three and Six Months Ended June 30, 2025 and June 30, 2024
General
Net income available to common stockholders decreased to $16.2 million and $36.7 million, respectively, or $0.28 and $0.63 per diluted share, as compared to $23.4 million and $51.0 million, or $0.40 and $0.87 per diluted share, for the corresponding prior year periods. Net income for the three and six months ended June 30, 2025 included net gains on equity investments of $488,000 and $693,000, respectively, which increased net income by $373,000 and $529,000, net of tax. Additionally, net income available to common stockholders for the three and six months ended June 30, 2025 included a net loss on redemption of preferred stock of $1.8 million.
Net income for the three and six months ended June 30, 2024 included net gains on equity investments of $887,000 and $2.8 million, respectively. Net income for the six months ended June 30, 2024 also included a net gain on sale of a portion of its trust business of $1.2 million, and a special Federal Deposit Insurance Corporation (“FDIC”) assessment of $418,000. These items increased net income by $699,000 and $2.7 million, net of tax, for the three and six months ended June 30, 2024.
Interest Income
Interest income for the three and six months ended June 30, 2025 decreased to $154.8 million and $308.5 million, respectively, from $159.4 million and $321.0 million for the corresponding prior year periods. For the three and six months ended June 30, 2025, the average balance of interest-earning assets decreased by $138.2 million and $185.8 million, primarily due to a decrease in securities and, to a lesser extent, commercial loans. For the three and six months ended June 30, 2025, the yield on average interest-earning assets decreased to 5.14% for both current periods, from 5.25% for both the corresponding prior year periods.
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Interest Expense
Three months ended June 30, 2025 vs. June 30, 2024
Interest expense for the three months ended June 30, 2025 decreased to $67.2 million from $77.2 million in the corresponding prior year period. The average balance of interest-bearing liabilities decreased by $132.8 million, primarily due to decreases in other borrowings, partly offset by an increase in FHLB advances. The cost of average interest-bearing liabilities decreased to 2.77% from 3.14% for the corresponding prior year period, primarily due to lower cost of deposits and, to a lesser extent, FHLB advances. The total cost of deposits decreased to 2.06% from 2.37% for the same prior year period.
Six months ended June 30, 2025 vs. June 30, 2024
Interest expense for the six months ended June 30, 2025 decreased to $134.2 million from $152.5 million in the corresponding prior year period. The average balance of interest-bearing liabilities decreased by $179.6 million, primarily due to decreases in total deposits and other borrowings, partly offset by an increase in FHLB advances. The cost of average interest-bearing liabilities decreased to 2.77% from 3.09% for the corresponding prior year period. The total cost of deposits decreased to 2.06% from 2.34% for the same prior year period.
Net Interest Income and Margin
Net interest income for the three and six months ended June 30, 2025 increased to $87.6 million and $174.3 million, respectively, from $82.3 million and $168.5 million for the corresponding prior year periods, primarily reflecting the net impact of the decreasing interest rate environment. The net interest margin for the three and six months ended June 30, 2025 increased to 2.91% for both current periods, from 2.71% and 2.76% for the same prior year periods, primarily due to the decrease in cost of funds outpacing the decrease in the yield on average interest-earning assets.
Provision for Credit Losses
Provision for credit losses for the three and six months ended June 30, 2025 was $3.0 million and $8.4 million, respectively, as compared to $3.1 million and $3.7 million for the corresponding prior year periods. The current quarter provision was primarily driven by net loan charge-offs of $2.2 million, a net reserve build due to mix-shift into commercial and industrial loans, and an increase in unfunded credit commitments.
For the three and six months ended June 30, 2025 net loan charge-offs were $2.2 million and $2.9 million, respectively, as compared to $1.5 million and $1.8 million for the same prior year periods. The current quarter includes $1.6 million of charge-offs related to two commercial relationships related to the Company’s recent acquisition. Additionally, the current quarter includes charge-offs of $445,000 related to the sale of $2.2 million non-performing residential and consumer loans. The prior year includes the impact of a $1.6 million charge-off on a single commercial real estate relationship.
Non-interest Income
Three months ended June 30, 2025 vs. June 30, 2024
Other income increased to $11.7 million, as compared to $11.0 million. Other income was favorably impacted by non-core operations related to net gains on equity investments of $488,000 in the current quarter, and $887,000 for the prior year quarter. The remaining increase of $1.1 million was primarily driven by increases related to net gain on sale of loans of $757,000 and non-recurring other income of $1.1 million, partly offset by a loss on other real estate operations of $260,000.
Six months ended June 30, 2025 vs. June 30, 2024
Other income decreased to $23.0 million, as compared to $23.3 million. Other income was favorably impacted by non-core operations of $693,000 related to net gains on equity investments in the current quarter. The prior year other income was favorably impacted by non-core operations of $4.0 million related to net gains on equity investments and sale of a portion of the Company’s trust business. The remaining increase of $3.0 million was primarily driven by increases related to net gain on sale of loans of $1.3 million, commercial loan swap income of $448,000 and non-recurring other income of $1.9 million in the current period, partly offset by a loss on other real estate operations of $276,000.
Non-interest Expense
Three months ended June 30, 2025 vs. June 30, 2024
Operating expenses increased to $71.5 million, as compared to $58.6 million. The primary driver was an increase in compensation and benefits of $7.1 million, mostly due to acquisitions at the end of the prior year, annual merit increases, and
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the additional commercial banking teams hired during the current quarter. Additional drivers were increases in professional fees of $2.2 million, primarily due to recruitment fees, other operating expenses of $1.9 million, mostly due to additional loan servicing expense, data processing expense of $790,000, partly due to acquisitions at the end of the prior year, and increased marketing spend of $366,000.
Six months ended June 30, 2025 vs. June 30, 2024
Operating expenses increased to $135.8 million, as compared to $117.3 million. Operating expenses were adversely impacted by non-core operations related to FDIC special assessment in the prior year of $418,000. The remaining increase of $18.9 million was driven by an increase in compensation and benefits of $11.1 million, mostly due to acquisitions at the end of the prior year, annual merit increases, and the additional commercial banking team hires. Additional drivers were increases in other operating expenses of $2.9 million, mostly due to additional loan servicing expense, professional fees of $1.9 million, primarily due to the recruitment fees, data processing of $1.5 million, partly due to acquisitions at the end of the prior year, occupancy of $577,000, and marketing of $484,000.
Income Tax Expense
The provision for income taxes was $5.8 million and $12.6 million for the three and six months ended June 30, 2025, respectively, as compared to $7.1 million and $17.7 million for the same prior year periods. The effective tax rate was 23.2% and 23.7% for the three and six months ended June 30, 2025, respectively, as compared to 22.5% and 25.0% for the same prior year periods. The effective tax rate for the six months ended June 30, 2024 was negatively impacted by 1.6% due to a non-recurring write-off of a deferred tax asset of $1.2 million.
Liquidity and Capital Resources
Liquidity Management
The Company manages its liquidity and funding needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses liquidity and management monitors the adherence to policy limits to satisfy current and future cash flow needs. The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources and availability, stress testing, collateral management, and other qualitative and quantitative metrics.
Management monitors cash on a daily basis to determine the liquidity needs of the Bank and OceanFirst Financial Corp. (the “Parent Company”), a separate legal entity from the Bank. Additionally, management performs multiple liquidity stress test scenarios on a periodic basis. As of June 30, 2025, the Bank and the Parent Company continued to maintain adequate liquidity under all stress scenarios. The Company also has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management.
The Company continually evaluates its on-balance sheet liquidity, including cash and unpledged securities and funding capacity at the FHLB and FRB Discount Window, and periodically tests each of its lines of credit. As of June 30, 2025, total on-balance sheet liquidity and funding capacity was $3.5 billion.
The Company has a highly operational and granular deposit base, with long-standing client relationships across multiple customer segments providing stable funding. The vast majority of the government deposits are protected by FDIC insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank. At June 30, 2025, the Bank reported $6.11 billion of estimated uninsured deposits in its Call Report. This total included $2.54 billion of collateralized government deposits and $1.84 billion of intercompany deposits of fully consolidated subsidiaries, leaving estimated adjusted uninsured deposits of $1.73 billion, or 16.7% of total deposits. On-balance-sheet liquidity and funding capacity represented 199% of the estimated adjusted uninsured deposits.
The primary sources of liquidity specifically available to the Parent Company are dividends from the Bank, proceeds from the sale of investments, and the issuance of debt and common stock. For the six months ended June 30, 2025, the Parent Company received dividend payments of $62.0 million from the Bank. At June 30, 2025, the Parent Company held $61.6 million in cash and cash equivalents.
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The Bank’s primary sources of funds are deposits, principal and interest payments on loans and investments, FHLB advances, other borrowings and proceeds from the sale of loans and investments . While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment sales are greatly influenced by interest rates, economic conditions, and competition. The Bank has other sources of liquidity if a need for additional funds arises, including lines of credit at multiple financial institutions and access to the FRB Discount Window.
As of June 30, 2025, the Company pledged $7.32 billion of loans with the FHLB and FRB to enhance the Company’s borrowing capacity, which included collateral pledged to the FHLB to obtain a letter of credit to collateralize certain municipal deposits. The Company also pledged $983.6 million of securities to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law. The Company had $938.7 million of FHLB advances, including $137.0 million of overnight borrowings as of June 30, 2025, as compared to $1.07 billion of FHLB term advances and no outstanding overnight borrowings from the FHLB at December 31, 2024.
The Company’s cash needs for the six months ended June 30, 2025 were primarily satisfied by principal repayments of debt securities and the increase in deposits, and primarily utilized for the repayment of FHLB advances and the redemption of preferred stock.
Off-Balance Sheet Commitments and Contractual Obligations
In the normal course of business, the Bank routinely enters into various off-balance sheet commitments, primarily relating to the origination and funding of loans. At June 30, 2025, outstanding commitments to originate loans totaled $954.8 million and outstanding undrawn lines of credit totaled $1.45 billion, of which $1.15 billion were commitments to commercial and commercial construction borrowers and $298.5 million were commitments to consumer and residential construction borrowers. Commitments to fund undrawn lines of credit and commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the existing contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company’s exposure to credit risk is represented by the contractual amount of the instruments.
At June 30, 2025, the Company also had various contractual obligations, which included debt obligations of $1.20 billion, including finance lease obligations of $1.3 million, and an additional $16.5 million in operating lease obligations included in other liabilities. The Company expects to have sufficient funds available to meet current commitments in the normal course of business. Time deposits scheduled to mature in one year or less totaled $2.25 billion at June 30, 2025. If these deposits do not remain with the Company, it may need to seek other sources of funds, including other deposit products, advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, the Company may be required to pay higher rates on such deposits or borrowings than it currently pays.
Liquidity Used in Stock Repurchases and Cash Dividends
Under the Company’s stock repurchase program, shares of OceanFirst Financial Corp. common stock may be purchased in the open market and through other privately-negotiated transactions, from time-to-time, depending on market conditions. The repurchased shares are held as treasury stock for general corporate purposes. For the three and six months ended June 30, 2025, the Company repurchased 1,003,550 and 1,401,945 shares of its common stock, respectively, totaling $17.4 million and $24.3 million, respectively. Of these repurchased shares for the three and six months ended June 30, 2025, 971 and 77,029 shares were repurchased outside of the Company’s stock repurchase program. The Company repurchased these shares from employees that elected to sell shares to cover their withholding tax obligations on vested stock awards and options. At June 30, 2025, there were 226,284 shares available to be repurchased under the authorized stock repurchase program. On July 16, 2025, the Company announced its Board of Directors authorized a 2025 Stock Repurchase Program to repurchase up to an additional 3.0 million shares.
Cash dividends on common stock declared and paid during the six months ended June 30, 2025 were $23.3 million. Cash dividends on preferred stock declared and paid during the six months ended June 30, 2025 were $2.0 million. On May 15, 2025, the Company redeemed all 57,370 shares of its 7.00% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A. The aggregate payment of $57.4 million, at a redemption price of $25.00 per share, resulted in a net loss on redemption of $1.8 million.
The Company’s ability to continue to repurchase shares of common stock and pay dividends remains dependent upon capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations. If applicable regulations or regulators prevent the Bank from paying a dividend to the Company, the Company may not have the liquidity necessary to repurchase shares of common stock or pay a dividend in the future or pay a dividend at the same rate as
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historically paid or be able to meet current debt obligations. Additionally, regulations of the Federal Reserve may prevent the Company from either paying or increasing the cash dividend to common stockholders. These regulatory policies may affect the ability of the Parent Company to pay dividends, repurchase shares of common stock, or otherwise engage in capital distributions.
Capital Management
The Company manages its capital sources, uses, and expected future needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses capital and management monitors the adherence to policy limits to satisfy current and future capital needs. The policy includes internal limits, monitoring of key indicators, sources and availability, intercompany transactions, forecasts and stress testing, and other qualitative and quantitative metrics.
Additionally, management performs multiple capital stress test scenarios periodically, varying loan growth, earnings, access to the capital markets, credit losses, and mark-to-market losses in the investment portfolio, including both available-for-sale and held-to-maturity. As of June 30, 2025, the Bank and Parent Company continued to maintain adequate capital under all stress scenarios. The Bank and the Parent Company also have detailed contingency capital plans and obtain comprehensive reporting of capital trends on a regular basis, which are reviewed by management and the Board.
Regulatory Capital Requirements
As of June 30, 2025 and December 31, 2024, the Company and the Bank satisfied all regulatory capital requirements currently applicable as follows (dollars in thousands):
Actual For capital adequacy
purposes To be well-capitalized
under prompt
corrective action
As of June 30, 2025 Amount Ratio Amount Ratio Amount Ratio
Company:
Tier 1 capital (to average assets) $ 1,176,655 9.26 % $ 508,466 4.00 % N/A N/A
Common equity Tier 1 (to risk-weighted assets)
1,101,430 10.99 701,546 7.00 (1)
N/A N/A
Tier 1 capital (to risk-weighted assets) 1,176,655 11.74 851,878 8.50 (1)
N/A N/A
Total capital (to risk-weighted assets) 1,358,684 13.56 1,052,319 10.50 (1)
N/A N/A
Bank:
Tier 1 capital (to average assets) $ 1,148,368 9.10 % $ 504,941 4.00 % $ 631,176 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,148,368 11.56 695,569 7.00 (1)
645,886 6.50
Tier 1 capital (to risk-weighted assets) 1,148,368 11.56 844,620 8.50 (1)
794,936 8.00
Total capital (to risk-weighted assets) 1,230,397 12.38 1,043,354 10.50 (1)
993,670 10.00
As of December 31, 2024
Company:
Tier 1 capital (to average assets) $ 1,235,832 9.50 % $ 520,239 4.00 % N/A N/A
Common equity Tier 1 (to risk-weighted assets)
1,105,180 11.17 692,897 7.00 (1)
N/A N/A
Tier 1 capital (to risk-weighted assets) 1,235,832 12.49 841,375 8.50 (1)
N/A N/A
Total capital (to risk-weighted assets) 1,437,278 14.52 1,039,345 10.50 (1)
N/A N/A
Bank:
Tier 1 capital (to average assets) $ 1,161,564 8.99 % $ 516,798 4.00 % $ 645,998 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,161,564 11.83 687,383 7.00 (1)
638,284 6.50
Tier 1 capital (to risk-weighted assets) 1,161,564 11.83 834,679 8.50 (1)
785,580 8.00
Total capital (to risk-weighted assets) 1,238,011 12.61 1,031,074 10.50 (1)
981,975 10.00
(1) Includes the Capital Conservation Buffer of 2.50%.
At June 30, 2025 and December 31, 2024, the Company and the Bank satisfied the criteria to be “well-capitalized” under the Prompt Corrective Action regulations.
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At June 30, 2025 and December 31, 2024, the Company maintained a stockholders’ equity to total assets ratio of 12.33% and 12.69%, respectively.
Lending Activities
Loan Portfolio Composition . At June 30, 2025, the Company had total loans outstanding of $10.19 billion, of which $5.07 billion, or 49.8% of total loans, were investor owned commercial real estate, multi-family, and construction (including residential development loans), (collectively, “commercial real estate - investor”). The remainder of the portfolio consisted of commercial and industrial loans of which $914.4 million were commercial and industrial - real estate, or 9.0% of total loans; and $862.5 million were commercial and industrial - non-real estate loans, or 8.5% of total loans; $3.12 billion were residential real estate loans, or 30.6% of total loans; and $220.8 million were consumer loans, primarily home equity loans and lines of credit, or 2.2% of total loans.
The Company reclassified loans secured by owner-occupied commercial real estate to commercial and industrial - real estate to reflect the variation in the management and underlying risk profile of such loans as compared with non-owner-occupied (“investor”) commercial real estate loans. Similarly, the Company also reclassified commercial and industrial loans that were not secured by real estate to commercial and industrial - non-real estate. Collectively, these two loan portfolios are referred to as ‘Commercial and industrial” loans.
Commercial Real Estate - Investor Owne d . At June 30, 2025, the Bank’s total investor owned commercial real estate loans outstanding were $5.07 billion, or 49.8% of total loans, as compared to $5.29 billion, or 52.3% of total loans at December 31, 2024. Th e Bank originates investor owned commercial real estate loans that are secured by properties, or properties under construction, that are generally used for busin ess purposes such as office, industrial, multi-family, or retail facilities. A substantial majority of the Bank’s investor owned commercial real estate loans are located in its primary market area.
The Bank performs extensive due diligence in underwriting commercial real estate loans due to the larger loan amounts and the riskier nature of such loans. The Bank assesses and mitigates the risk in several ways, including inspection of all such properties and the review of the overall financial condition of the borrower and guarantors, which include, for example, the review of the rent rolls and applicable leases/lease terms and conditions and the verification of income. A tenant analysis and market analysis are part of the underwriting.
Investor owned commercial real estate loans are among the largest of the Bank’s loans and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy, as a result, the Bank is particularly vigilant of this portfolio. The Bank believes this portfolio is highly diversified with loans secured by a variety of property types and the portfolio exhibits stable credit quality.
The following table presents the Company’s commercial real estate - investor owned loans by industry as of June 30, 2025:
As of June 30, 2025
(dollars in thousands) Amount Percent of Total Weighted Average LTV (1)
Weighted Average Debt Service Coverage Ratio (2)
Office $ 491,150 11 % 48 % 1.9x
Medical 274,962 6 56 1.8
Credit Tenant 257,308 6 65 1.5
Total Office (3)
1,023,420 23 55 1.8
Retail 1,021,210 23 53 2.0
Multi-family (4)
833,065 19 62 1.7
Industrial/warehouse 731,256 16 48 2.2
Hospitality 174,935 4 46 2.0
Other (5)
671,282 15 59 1.1
Total 4,455,168 100 % 55 1.8
Construction 612,957
Total CRE investor owned $ 5,068,125
(1) Represents the weighted average of loan balances as of June 30, 2025 divided by their most recent appraisal value, which is generally obtained at the time of origination.
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(2) Represents the weighted average of net operating income on the property before debt service divided by the loan’s respective annual debt service based on the most recent credit review of the borrower.
(3) Central business district (“CBD”) exposure represented $120 million, or 7.3%, of the total office loan balance at June 30, 2025. Office CBD loans had a weighted average LTV of 54% and weighted average debt service coverage ratio of 1.8x at June 30, 2025. $85 million, or 71%, of the total office CBD exposure are to credit tenants, life sciences and medical borrowers at June 30, 2025. New York City office CBD loans represented $7 million, or 0.05% of the Company’s total assets at June 30, 2025.
(4) New York City rent-regulated multi-family loans, where the property has more than 50% of its units rent-regulated, represented $31 million, or 0.23% of the Company’s total assets at June 30, 2025.
(5) Other includes co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other.
The following table presents total commercial real estate - investor owned loans by geography (generally based on location of collateral) as of June 30, 2025:
As of June 30, 2025
(dollars in thousands) Amount Percent of Total
New York $ 1,388,009 31 %
Pennsylvania and Delaware 1,251,376 28
New Jersey 1,152,285 26
Massachusetts 127,915 3
Maryland and District of Columbia 142,770 3
Other 392,813 9
Total 4,455,168 100 %
Construction 612,957
Total CRE investor owned $ 5,068,125
Asset quality . The following table sets forth information regarding the Company’s non-performing assets, consisting of non-performing loans and other real estate acquired through foreclosure. It is the policy of the Company to cease accruing interest on loans 90 days or more past due or in the process of foreclosure.
June 30, December 31,
2025 2024
(dollars in thousands)
Non-performing assets (1) :
Commercial real estate – investor
$ 20,457 $ 17,000
Commercial and industrial:
Commercial and industrial - real estate 4,499 4,787
Commercial and industrial - non-real estate 311 32
Total commercial and industrial 4,810 4,819
Residential real estate (2)
5,318 10,644
Other consumer (2)
2,926 3,064
Total non-performing loans 33,511 35,527
Other real estate owned 7,680 1,811
Total non-performing assets $ 41,191 $ 37,338
PCD loans, net of allowance for loan credit losses
$ 20,934 $ 22,006
Delinquent loans 30-89 days $ 14,740 $ 36,550
Allowance for loan credit losses as a percent of total loans (3)
0.78 % 0.73 %
Allowance for loan credit losses as a percent of total non-performing loans (3)
236.54 207.19
Non-performing loans as a percent of total loans receivable 0.33 0.35
Non-performing assets as a percent of total assets 0.31 0.28
(1) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure.
(2) The six months ended June 30, 2025 included the sale of non-performing residential and consumer loans of $7.3 million.
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(3) Loans acquired from acquisitions were recorded at fair value. The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, were $5.0 million and $6.0 million at June 30, 2025 and December 31, 2024, respectively.
Overall asset quality metrics remained stable. The Company’s non-performing loans represented 0.33% and 0.35% of total loans, respectively. The allowance for loan credit losses as a percentage of total non-performing loans was 236.54%, as compared to 207.19%. The level of 30 to 89 days delinquent loans decreased to $14.7 million, from $36.6 million. The Company’s other real estate owned increased to $7.7 million from $1.8 million, primarily due to one commercial loan. The Company’s allowance for loan credit losses to total loans was 0.78%, as compared to 0.73%.
The Company classifies loans (other than loans held-for-sale) and other real estate owned in accordance with regulatory guidelines. The table below represents Special Mention and Substandard loans (other than loans held-for-sale) and other real estate owned (in thousands):
June 30, December 31,
2025 2024
Special Mention $ 21,521 $ 54,524
Substandard 131,792 105,344
Total $ 153,313 $ 159,868
Special mention and substandard loans (other than loans held-for-sale) and other real estate owned decreased by $6.6 million to $153.3 million at June 30, 2025 from $159.9 million at December 31, 2024. Net migrations from special mention to substandard were primarily due to one commercial relationship totaling $21.3 million which migrated during the six months ended June 30, 2025.
Critical Accounting Policies and Estimates
Note 1 to the Company’s Audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried on the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value.
Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of the Company’s financial condition and results of operations and high level of subjectivity. The critical accounting policy involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. The critical accounting policy and its application is reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors.
Goodwill in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other, was a critical accounting estimate in the preparation of the consolidated financial statements at June 30, 2025 and December 31, 2024.
Significant negative industry or economic trends, including declines in the market price of the Company’s stock, reduced estimates of future cash flows or business disruptions could result in impairments to goodwill in the future, which may result in recording an impairment loss. Any resulting impairment loss may have a material adverse impact on the Company’s financial condition and results of operations and is considered a non-cash event with no impact to the Company’s regulatory capital ratios, liquidity position, and ongoing operations.
Management continued to carefully assess and evaluate all available information for potential triggering events and concluded no triggering events were identified through the reporting period. The Company customarily performs its annual goodwill impairment assessment during the third quarter.
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Impact of New Accounting Pronouncements
Accounting Pronouncements Adopted in 2025
In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, “Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement”. The amendments in this ASU require that a joint venture, upon formation, apply a new basis of accounting and initially measure assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance. This update will be effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Early adoption is permitted. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this standard to have a material impact on the Company’s consolidated financial statements.
In November 2024, FASB issued ASU 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)”. The amendments in this ASU require expanded disclosure and disaggregation of certain costs and expenses including, but not limited to, purchases of inventory, employee compensation, depreciation, depletion, and amortization. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
In November 2024, FASB issued ASU 2024-04, “Debt - Debt with Conversion and Other Options (Subtopic 470-20)”. The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2025, and for interim periods beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
In May 2025, FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810)”. The amendments in this ASU require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquired is a variable interest entity, to determine which entity is the accounting acquirer. The amendment requires that an entity apply the new guidance prospectively to any acquisition transaction that occurs after the initial application date. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods within those annual reporting periods. Early adoption is permitted. The Company does not expect this standard to have a material impact on the Company’s consolidated financial statement.
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Private Securities Litigation Reform Act Safe Harbor Statement
In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project”, “will”, “should”, “may”, “view”, “opportunity”, “potential”, or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: changes in interest rates, inflation, general economic conditions, including potential recessionary conditions, levels of unemployment in the Company’s lending area, real estate market values in the Company’s lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, the imposition of tariffs or other domestic or international governmental policies and retaliatory responses, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company’s deposit portfolio and the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, competition, demand for financial services in the Company’s market area, changes in investor sentiment and consumer spending, borrowing and saving habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the impact of pandemics on our operations and financial results and those of our customers and the Bank’s ability to successfully integrate acquired operations.
These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, under Item 1A - Risk Factors and elsewhere, and subsequent securities filings. These risks should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.