Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________________________________________ FORM 10-Q ________________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-11713 ____________________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________________________________________ FORM 10-Q ________________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 Registrant's telephone number, including area code: (732) 240-4500 ________________________________________________ Securities registered pursuant to Section 12(b) of the Act: | Title ...

```markdown PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (unaudited)](index=19&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) Presents unaudited consolidated financial statements, including statements of financial condition, income, comprehensive income, equity changes, cash flows, and detailed accounting notes [Consolidated Statements of Financial Condition](index=19&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Selected Financial Condition Data | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Total assets | $13,555,175 | $13,103,896 | | Loans receivable, net | $9,986,949 | $9,868,718 | | Deposits | $9,993,095 | $9,675,206 | | Total stockholders' equity | $1,610,371 | $1,585,464 | [Consolidated Statements of Income](index=21&type=section&id=Consolidated%20Statements%20of%20Income) Selected Operating Data | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net interest income | $98,802 | $84,227 | | Provision for credit losses | $3,013 | $1,851 | | Other income | $2,073 | $8,852 | | Operating expenses | $61,309 | $57,495 | | Net income | $27,899 | $25,759 | | Net income available to common stockholders | $26,879 | $24,755 | | Diluted earnings per share | $0.46 | $0.42 | [Consolidated Statements of Comprehensive Income](index=22&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive Income Data | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net income | $27,899 | $25,759 | | Net unrealized gain (loss) on debt securities (net of tax) | $5,547 | $(12,372) | | Total other comprehensive income (loss), net of tax | $6,667 | $(12,349) | | Total comprehensive income | $34,566 | $13,410 | [Consolidated Statements of Changes in Stockholders' Equity](index=23&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Key Changes in Stockholders' Equity | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Balance at beginning of period (Dec 31) | $1,585,464 | $1,516,553 | | Net income | $27,899 | $25,759 | | Other comprehensive income (loss), net of tax | $6,667 | $(12,349) | | Cash dividend per share | $0.20 | $0.17 | | Total stockholders' equity at end of period | $1,610,371 | $1,519,334 | [Consolidated Statements of Cash Flows](index=24&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $24,374 | $57,644 | | Net cash used in investing activities | $(146,648) | $(424,685) | | Net cash provided by financing activities | $450,521 | $353,433 | | Net increase (decrease) in cash and due from banks and restricted cash | $328,247 | $(13,608) | | Cash and due from banks and restricted cash at end of period | $496,233 | $211,176 | [Notes to Unaudited Consolidated Financial Statements](index=26&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=26&type=section&id=Note%201.%20Basis%20of%20Presentation) - The consolidated financial statements include OceanFirst Financial Corp., OceanFirst Bank N.A., and their wholly-owned subsidiaries, along with a majority controlling interest in Trident Abstract Title Agency, LLC[105](index=105&type=chunk) - Management's preparation of financial statements requires estimates and assumptions, and actual results may differ[106](index=106&type=chunk) [Note 2. Business Combinations](index=27&type=section&id=Note%202.%20Business%20Combinations) - On April 1, **2022**, the Company acquired a **60%** majority controlling interest in Trident Abstract Title Agency, LLC, which provides commercial and residential title services[110](index=110&type=chunk) Trident Acquisition Financials (April 1, 2022) | Metric | Estimated Fair Value (in thousands) | | :--------------------------------- | :-------------------------------- | | Total purchase price | $7,084 | | Total assets acquired | $46,809 | | Total liabilities assumed | $44,716 | | Net assets acquired | $2,093 | | Goodwill recorded | $5,827 | [Note 3. Earnings per Share](index=28&type=section&id=Note%203.%20Earnings%20per%20Share) Earnings Per Share Calculation (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Weighted average shares outstanding | 59,291 | 59,303 | | Average basic shares outstanding | 58,774 | 58,739 | | Average diluted shares outstanding | 58,918 | 58,943 | - Antidilutive stock options of **852,000** and **904,000** were excluded from EPS calculation for Q1 **2023** and Q1 **2022**, respectively[115](index=115&type=chunk) [Note 4. Securities](index=29&type=section&id=Note%204.%20Securities) Debt Securities Summary (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Total debt securities available-for-sale (Fair Value) | $452,195 | $457,648 | | Total debt securities held-to-maturity (Fair Value) | $1,149,673 | $1,110,041 | | Total debt securities (Fair Value) | $1,601,868 | $1,567,689 | | Total debt securities (Amortized Cost) | $1,738,569 | $1,727,968 | | Total Gross Unrealized Losses | $(139,252) | $(161,524) | - The Company concluded that debt securities were not impaired at March 31, **2023**, as issuers made all contractually due payments, and unrealized losses were primarily due to general credit and interest rate environment changes, not credit quality[127](index=127&type=chunk) Equity Investments Net Loss (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net loss on equity investments | $(6,801) | $(2,786) | | Net (losses) gains recognized on equity investments sold | $(4,608) | $1,582 | | Unrealized losses recognized on equity investments still held | $(2,193) | $(4,368) | [Note 5. Loans Receivable, Net](index=33&type=section&id=Note%205.%20Loans%20Receivable,%20Net) Loans Receivable, Net (March 31, 2023 vs. December 31, 2022) | Loan Type | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Commercial real estate – investor | $5,296,661 | $5,171,952 | | Commercial real estate – owner occupied | $986,366 | $997,367 | | Commercial and industrial | $622,201 | $622,372 | | Residential real estate | $2,881,811 | $2,861,991 | | Other consumer | $252,773 | $264,372 | | Total loans receivable | $10,039,812 | $9,918,054 | | Allowance for loan credit losses | $(60,195) | $(56,824) | Non-Performing Loans (March 31, 2023 vs. December 31, 2022) | Loan Type | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Commercial real estate – investor | $13,643 | $10,483 | | Commercial real estate – owner occupied | $251 | $4,025 | | Commercial and industrial | $162 | $331 | | Residential real estate | $5,650 | $5,969 | | Other consumer | $2,731 | $2,457 | | Total non-accrual loans | $22,437 | $23,265 | - At March 31, **2023**, TDR loans totaled **$13.7 million**, with **$6.3 million** included in non-accrual loans[147](index=147&type=chunk) - The Company ceased recognizing new TDRs after January 1, **2023**, due to ASU **2022-02** adoption[148](index=148&type=chunk) [Note 6. Deposits](index=38&type=section&id=Note%206.%20Deposits) Deposit Composition (March 31, 2023 vs. December 31, 2022) | Type of Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Non-interest-bearing | $1,984,197 | $2,101,308 | | Interest-bearing checking | $3,697,223 | $3,829,683 | | Money market deposit | $615,993 | $714,386 | | Savings | $1,308,715 | $1,487,809 | | Time deposits | $2,386,967 | $1,542,020 | | Total deposits | $9,993,095 | $9,675,206 | - Time deposits increased significantly, including brokered deposits of **$1.24 billion** at March 31, **2023**, up from **$873.4 million** at December 31, **2022**[151](index=151&type=chunk) [Note 7. Borrowed Funds](index=38&type=section&id=Note%207.%20Borrowed%20Funds) Borrowed Funds (March 31, 2023 vs. December 31, 2022) | Type of Borrowing | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | FHLB advances | $1,346,566 | $1,211,166 | | Securities sold under agreements to repurchase | $70,938 | $69,097 | | Other borrowings | $195,663 | $195,403 | | Total borrowed funds | $1,613,167 | $1,475,666 | Pledged Assets (March 31, 2023 vs. December 31, 2022) | Pledged To | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | FHLB and FRB (Loans & Debt Securities) | $8,172,980 | $7,318,037 | | Repurchase agreements (Debt Securities) | $75,859 | $105,294 | | Total pledged assets | $8,248,839 | $7,423,331 | [Note 8. Fair Value Measurements](index=39&type=section&id=Note%208.%20Fair%20Value%20Measurements) - Fair value measurements are categorized into Level **1** (unadjusted quoted prices in active markets), Level **2** (observable inputs other than Level **1**), and Level **3** (significant unobservable inputs)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) Financial Assets and Liabilities Measured at Fair Value (March 31, 2023) | Item | Total Fair Value (in thousands) | Level 1 Inputs (in thousands) | Level 2 Inputs (in thousands) | Level 3 Inputs (in thousands) | | :--------------------------------- | :------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | | Debt securities available-for-sale | $452,195 | $0 | $452,195 | $0 | | Equity investments (recurring) | $54,440 | $272 | $54,168 | $0 | | Interest rate derivative asset | $92,302 | $0 | $92,302 | $0 | | Interest rate derivative liability | $(91,701) | $0 | $(91,701) | $0 | | Equity investments (non-recurring) | $46,567 | $0 | $0 | $43,576 | | Loans measured for impairment | $9,700 | $0 | $0 | $9,700 | [Note 9. Derivatives and Hedging Activities](index=44&type=section&id=Note%209.%20Derivatives%20and%20Hedging%20Activities) - The Company uses interest rate swaps and cap contracts to convert variable-rate commercial loans to fixed-rate for customers and to economically hedge its own exposure[190](index=190&type=chunk) - A three-year interest rate swap was designated as a cash flow hedge in Q4 **2022** to manage exposure to floating rate commercial loans, with changes in fair value reported in other comprehensive income[192](index=192&type=chunk) Derivative Notional Amounts and Fair Values (March 31, 2023 vs. December 31, 2022) | Derivative Type | Notional (in thousands) | Fair Value (Asset) (in thousands) | Fair Value (Liability) (in thousands) | | :--------------------------------- | :------------------------------ | :-------------------------------- | :---------------------------------- | | Derivatives Not Designated as Hedging Instruments (March 31, 2023) | $1,456,913 | $91,659 | $91,701 | | Derivatives Designated as Cash Flow Hedge (March 31, 2023) | $100,000 | $643 | $0 | | Total Derivatives (March 31, 2023) | $1,556,913 | $92,302 | $91,701 | | Total Derivatives (December 31, 2022) | $1,468,245 | $113,420 | $113,473 | [Note 10. Leases](index=46&type=section&id=Note%2010.%20Leases) Lease ROU Assets and Liabilities (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Operating lease ROU assets | $20,081 | $19,055 | | Finance lease ROU asset | $1,474 | $1,532 | | Total lease ROU assets | $21,555 | $20,587 | | Operating lease liabilities | $21,084 | $20,053 | | Finance lease liability | $1,873 | $1,934 | | Total lease liabilities | $22,957 | $21,987 | - The weighted-average remaining lease term for operating leases was **6.67 years** (**6.87 years** at Dec 31, **2022**) and for finance leases was **6.35 years** (**6.60 years** at Dec 31, **2022**)[203](index=203&type=chunk) [Note 11. Variable Interest Entity](index=47&type=section&id=Note%2011.%20Variable%20Interest%20Entity) - The Company consolidates Trident Abstract Title Agency, LLC as a variable interest entity (VIE), being its primary beneficiary[208](index=208&type=chunk) Summarized Financial Information for Consolidated VIE (Trident) (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Cash and cash equivalents | $27,557 | $30,062 | | Total assets | $28,414 | $31,003 | | Other liabilities | $26,369 | $28,998 | | Net assets | $2,045 | $2,005 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=4&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial condition and operating results, highlighting key performance indicators, changes, and strategic responses to market and regulatory developments for Q1 2023 [Financial Summary & Key Developments](index=4&type=section&id=Financial%20Summary%20%26%20Key%20Developments) Selected Financial Highlights (Q1 2023 vs. Q4 2022 vs. Q1 2022) | Metric | March 31, 2023 | December 31, 2022 | March 31, 2022 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Total assets (in thousands) | $13,555,175 | $13,103,896 | $12,164,945 | | Net interest income (in thousands) | $98,802 | $106,488 | $84,227 | | Net income (in thousands) | $27,899 | $53,311 | $25,759 | | Diluted earnings per share | $0.46 | $0.89 | $0.42 | | Net interest margin | 3.34% | 3.64% | 3.18% | | Loans-to-deposits ratio | 100.50% | 102.50% | 90.60% | - Net income available to common stockholders increased to **$26.9 million** (**$0.46** diluted EPS) for Q1 **2023**, up from **$24.8 million** (**$0.42** diluted EPS) in Q1 **2022**[18](index=18&type=chunk) - The Company increased on-balance sheet liquidity by **$328.2 million**, resulting in **$3.6 billion** in total available liquidity and funding capacity at March 31, **2023**[20](index=20&type=chunk) - The Bank received a "**Needs to Improve**" CRA rating due to a Fair Housing Act violation, which restricts certain expansionary activities like mergers and branch establishments[24](index=24&type=chunk)[25](index=25&type=chunk) [Analysis of Net Interest Income](index=8&type=section&id=Analysis%20of%20Net%20Interest%20Income) Net Interest Income Analysis (Three Months Ended March 31, 2023 vs. 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Total interest income | $139,034 | $90,983 | | Total interest expense | $40,232 | $6,756 | | Net interest income | $98,802 | $84,227 | | Average yield on interest-earning assets | 4.68% | 3.43% | | Average cost of interest-bearing liabilities | 1.76% | 0.35% | | Net interest margin | 3.34% | 3.18% | - Interest income increased by **$48.0 million**, primarily due to a **$1.28 billion** increase in average interest-earning assets and a higher yield (**4.68%** vs. **3.43%**)[39](index=39&type=chunk) - Interest expense rose by **$33.4 million**, driven by increased cost of funds (**1.76%** vs. **0.35%**) and higher average balances of FHLB advances and interest-bearing deposits[40](index=40&type=chunk) [Comparison of Financial Condition](index=10&type=section&id=Comparison%20of%20Financial%20Condition) - Total assets increased by **$451.3 million** to **$13.56 billion**, primarily due to higher cash (**$328.2 million** increase) and loans (**$121.8 million** increase)[33](index=33&type=chunk) - Deposits increased by **$317.9 million** to **$9.99 billion**, with time deposits rising to **$2.39 billion** (**23.9%** of total deposits) from **$1.54 billion** (**15.9%**)[34](index=34&type=chunk) - The loans-to-deposit ratio improved to **100.5%** from **102.5%** at December 31, **2022**[34](index=34&type=chunk) - Total stockholders' equity increased to **$1.61 billion**, reflecting net income and a **$6.7 million** net gain on available-for-sale debt securities[36](index=36&type=chunk) [Comparison of Operating Results](index=10&type=section&id=Comparison%20of%20Operating%20Results) Net Income Available to Common Stockholders (Q1 2023 vs. Q1 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net income available to common stockholders | $26,900 | $24,800 | | Diluted earnings per share | $0.46 | $0.42 | - Q1 **2023** net income was reduced by **$5.8 million** (net of tax) due to merger-related expenses, branch consolidation, and net losses on equity and other investments[38](index=38&type=chunk) - Q1 **2022** net income was reduced by **$4.0 million** (net of tax) due to similar merger-related expenses, branch consolidation, and net loss on equity investments[38](index=38&type=chunk) [Provision for Credit Losses](index=11&type=section&id=Provision%20for%20Credit%20Losses) Provision for Credit Losses (Q1 2023 vs. Q1 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Provision for credit losses | $3,013 | $1,851 | | Net loan recoveries | $47 | $92 | | Non-performing loans | $22,400 | $26,900 | - Non-performing loans decreased to **$22.4 million** from **$26.9 million**, mainly due to payoffs and loans returning to accrual status[42](index=42&type=chunk) [Non-interest Income](index=11&type=section&id=Non-interest%20Income) Other Income Components (Q1 2023 vs. Q1 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Total other income | $2,073 | $8,852 | | Net loss on equity investments | $(6,801) | $(2,786) | | Net loss on sale of investments | $(5,300) | N/A (implied from total other income change) | | Bankcard services revenue | $1,330 | $2,963 | | Commercial loan swap income | $701 | $2,781 | | Title-related fees and service charges (Trident) | $2,200 | N/A | - The decrease was largely due to a **$2.2 million** net loss on equity investments and a **$5.3 million** net loss on sale of investments in Q1 **2023**[43](index=43&type=chunk) [Non-interest Expense](index=11&type=section&id=Non-interest%20Expense) Operating Expenses (Q1 2023 vs. Q1 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Total operating expenses | $61,309 | $57,495 | | Compensation and employee benefits | $33,920 | $30,695 | | Professional fees | $5,098 | $3,322 | | Merger related expenses | $22 | $1,965 | | Branch consolidation expense, net | $70 | $402 | - The acquisition of Trident added **$2.1 million** in expenses, and compensation and benefits increased by **$1.9 million** due to inflation adjustments and merit increases[44](index=44&type=chunk) [Income Tax Expense](index=11&type=section&id=Income%20Tax%20Expense) Income Tax Expense (Q1 2023 vs. Q1 2022) | Metric | March 31, 2023 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------ | | Provision for income taxes | $8,654 | $7,974 | | Effective tax rate | 23.7% | 23.6% | [Liquidity and Capital Resources](index=12&type=section&id=Liquidity%20and%20Capital%20Resources) [Liquidity Management](index=12&type=section&id=Liquidity%20Management) - The Company increased on-balance-sheet liquidity and funding capacity to **$3.6 billion** as of March 31, **2023**, in response to recent industry events[49](index=49&type=chunk) - Estimated adjusted uninsured deposits were **$1.9 billion** (**19%** of total deposits) at March 31, **2023**, with on-balance-sheet liquidity and funding capacity representing **192%** of these uninsured deposits[50](index=50&type=chunk) - The Parent Company received **$29.5 million** in dividends from the Bank and held **$53.7 million** in cash for Q1 **2023**[51](index=51&type=chunk) [Off-Balance Sheet Commitments and Contractual Obligations](index=12&type=section&id=Off-Balance%20Sheet%20Commitments%20and%20Contractual%20Obligations) Off-Balance Sheet Commitments (March 31, 2023) | Commitment Type | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Outstanding commitments to originate loans | $318,400 | | Outstanding undrawn lines of credit | $1,730,000 | - Contractual obligations at March 31, **2023**, included **$1.6 billion** in debt obligations and **$21.1 million** in operating lease obligations[57](index=57&type=chunk) [Liquidity Used in Stock Repurchases and Cash Dividends](index=13&type=section&id=Liquidity%20Used%20in%20Stock%20Repurchases%20and%20Cash%20Dividends) - No shares were repurchased under the stock repurchase program in Q1 **2023**; **2,934,438 shares** remained available for repurchase[58](index=58&type=chunk) Cash Dividends Paid (Q1 2023) | Dividend Type | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Common stock dividends | $11,800 | | Preferred stock dividends | $1,000 | - The Company's ability to pay future dividends depends on capital distributions from the Bank, which are subject to regulatory restraints[59](index=59&type=chunk) [Capital Management](index=13&type=section&id=Capital%20Management) - The Company performs quarterly capital stress tests, varying loan growth, earnings, capital market access, credit losses, and mark-to-market losses in the investment portfolio[61](index=61&type=chunk) - Both the Bank and Parent Company maintain adequate capital under all stress scenarios, including a scenario where all investment portfolio losses are realized[61](index=61&type=chunk) [Regulatory Capital Requirements](index=14&type=section&id=Regulatory%20Capital%20Requirements) Regulatory Capital Ratios (March 31, 2023) | Capital Ratio | Company Actual | Company Minimum for Adequacy | Bank Actual | Bank Minimum for Adequacy | Bank Minimum for Well-Capitalized | | :--------------------------------- | :------------- | :--------------------------- | :---------- | :-------------------------- | :-------------------------------- | | Tier 1 capital (to average assets) | 9.23% | 4.00% | 9.00% | 4.00% | 5.00% | | Common equity Tier 1 (to risk-weighted assets) | 10.02% | 7.00% | 11.01% | 7.00% | 6.50% | | Tier 1 capital (to risk-weighted assets) | 11.26% | 8.50% | 11.01% | 8.50% | 8.00% | | Total capital (to risk-weighted assets) | 13.08% | 10.50% | 11.63% | 10.50% | 10.00% | - The Company and the Bank satisfied the criteria to be "**well-capitalized**" under Prompt Corrective Action regulations[64](index=64&type=chunk) - Stockholders' equity to total assets ratio was **11.88%** at March 31, **2023**, down from **12.10%** at December 31, **2022**[64](index=64&type=chunk) [Non-Performing Assets](index=15&type=section&id=Non-Performing%20Assets) Non-Performing Loans and Ratios (March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Total non-performing loans and assets | $22,437 | $23,265 | | Allowance for loan credit losses | $60,200 | $56,800 | | Allowance for loan credit losses as a percent of total loans | 0.60% | 0.57% | | Non-performing loans as a percent of total loans receivable | 0.22% | 0.23% | - Non-performing loans decreased by **$0.8 million**, mainly due to payoffs and loans returning to accrual status[67](index=67&type=chunk) Special Mention and Substandard Assets (March 31, 2023 vs. December 31, 2022) | Classification | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Special Mention | $23,980 | $48,214 | | Substandard | $86,765 | $50,776 | [Critical Accounting Policies](index=16&type=section&id=Critical%20Accounting%20Policies) - The methodology for determining the allowance for credit losses is a critical accounting policy, involving complex and subjective judgments and estimates[70](index=70&type=chunk) - This policy is reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors[70](index=70&type=chunk) [Impact of New Accounting Pronouncements](index=16&type=section&id=Impact%20of%20New%20Accounting%20Pronouncements) - Adoption of ASU **2022-01** (Fair Value Hedging – Portfolio Layer Method) had no impact as the Company has no fair value hedges[71](index=71&type=chunk) - Adoption of ASU **2022-02** (Troubled Debt Restructurings and Vintage Disclosures) prospectively eliminated TDR accounting guidance for creditors and had no impact on consolidated financial statements[72](index=72&type=chunk) - The Company is evaluating the impact of ASU **2023-02** (Accounting for Investments in Tax Credit Structures) for future periods[74](index=74&type=chunk) [Private Securities Litigation Reform Act Safe Harbor Statement](index=16&type=section&id=Private%20Securities%20Litigation%20Reform%20Act%20Safe%20Harbor%20Statement) - The report contains forward-looking statements based on assumptions about future plans, strategies, and expectations, which are inherently uncertain[75](index=75&type=chunk) - Key risk factors include changes in interest rates, inflation, general economic conditions, potential recession, legislative/regulatory changes, and the quality of loan/investment portfolios[76](index=76&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details interest rate risk (IRR) management, objectives, strategies, and modeling to assess interest rate impact on EVE and net interest income [Management of Interest Rate Risk ("IRR")](index=18&type=section&id=Management%20of%20Interest%20Rate%20Risk%20(%22IRR%22)) - The Company's profitability and market value of investment securities are affected by interest rate fluctuations[79](index=79&type=chunk) - The Asset Liability Committee (ALCO) manages IRR through strategies like managing loan profiles, emphasizing core deposits, using interest rate swaps/caps, and managing investment portfolio IRR[80](index=80&type=chunk)[81](index=81&type=chunk) - IRR is monitored using a model that measures changes in Economic Value of Equity (EVE) and net interest income under various interest rate scenarios[82](index=82&type=chunk) Interest Rate Sensitivity Scenarios (March 31, 2023) | Change in Interest Rates (Basis Points) | Economic Value of Equity (Amount, in thousands) | EVE % Change | Net Interest Income (Amount, in thousands) | NII % Change | | :-------------------------------------- | :-------------------------------------------- | :------------- | :----------------------------------------- | :------------- | | 200 | $1,357,372 | (13.0)% | $405,929 | 3.0% | | 100 | $1,445,725 | (7.3)% | $400,033 | 1.5% | | Static | $1,559,654 | — | $394,125 | — | | (100) | $1,700,426 | 9.0% | $384,961 | (2.3)% | | (200) | $1,810,221 | 16.1% | $371,839 | (5.7)% | [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Addresses effectiveness of disclosure controls and procedures, reporting material changes to internal control over financial reporting [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, **2023**[86](index=86&type=chunk) - Disclosure controls are designed to ensure timely recording, processing, summarizing, and reporting of information required by the Exchange Act[86](index=86&type=chunk) [Changes in Internal Control Over Financial Reporting](index=19&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during Q1 **2023**[87](index=87&type=chunk) PART II. Other Information [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Confirms no significant legal proceedings beyond routine, immaterial matters affecting financial condition or operations - The Company is not involved in any material legal proceedings beyond routine business operations[210](index=210&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting new risks from CRA rating, rising interest rates on securities, and banking industry volatility post-bank failures - The "**Needs to Improve**" CRA rating restricts certain expansionary activities, including mergers, acquisitions, and branch establishments[212](index=212&type=chunk)[213](index=213&type=chunk) - Rising interest rates have significantly decreased the value of the Company's fixed-income securities portfolio, and forced sales could result in losses and impair capital[215](index=215&type=chunk) - Recent bank failures have led to increased scrutiny of liquidity, deposit composition (especially uninsured deposits), capital levels, and interest rate risk management, potentially impacting the Company's stock price and financial condition[216](index=216&type=chunk)[218](index=218&type=chunk) - Eroded customer confidence in the banking system due to recent failures could lead to deposit outflows to larger institutions or higher-yielding securities, adversely affecting the Company's liquidity and net interest margin[219](index=219&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no common stock repurchases in Q1 2023, with significant shares remaining available for future repurchases - No common stock shares were repurchased in Q1 **2023**[220](index=220&type=chunk) - **2,934,438 shares** remain available for repurchase under the existing program as of March 31, **2023**[220](index=220&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities for the reporting period - Not Applicable[221](index=221&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures applicable to the Company for the reporting period - Not Applicable[222](index=222&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No other information to report for the period - Not Applicable[223](index=223&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and XBRL financial statements - Exhibits include certifications (CEO, CFO), XBRL formatted financial statements (Consolidated Statements of Financial Condition, Income, Comprehensive Income, Changes in Stockholders' Equity, Cash Flows, and Notes), and the Cover Page Interactive Data File[225](index=225&type=chunk) Signatures - The report is signed by Christopher D. Maher (Chairman and CEO) and Patrick S. Barrett (EVP and CFO) on May 1, **2023**[228](index=228&type=chunk) ```

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-11713 OceanFirst Financial Corp. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organizat ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents OceanFirst Financial Corp.'s unaudited consolidated financial statements and management's analysis of financial condition and operations [Item 1. Consolidated Financial Statements (Unaudited)](index=19&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents OceanFirst Financial Corp.'s unaudited consolidated financial statements, including condition, income, comprehensive income, equity changes, and cash flows, with detailed explanatory notes [Consolidated Statements of Financial Condition](index=19&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This section presents the consolidated financial condition, detailing assets, liabilities, and equity at specific reporting dates **Consolidated Statements of Financial Condition (September 30, 2022 vs. December 31, 2021)** | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $12,683,453 | $11,739,616 | | Loans receivable, net | $9,672,488 | $8,583,352 | | Deposits | $9,959,469 | $9,732,816 | | Total liabilities | $11,143,237 | $10,223,063 | | Total stockholders' equity | $1,540,216 | $1,516,553 | [Consolidated Statements of Income](index=20&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the consolidated statements of income, detailing revenues, expenses, and net income for the reporting periods **Consolidated Statements of Income (Three Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Total interest income | $110,499 | $85,420 | | Total interest expense | $14,534 | $8,288 | | Net interest income | $95,965 | $77,132 | | Credit loss expense (benefit) | $1,016 | $(3,179) | | Total other income | $15,150 | $9,883 | | Total operating expenses | $58,997 | $58,673 | | Net income | $38,804 | $24,167 | | Net income available to common stockholders | $37,607 | $23,163 | | Diluted earnings per share | $0.64 | $0.39 | **Consolidated Statements of Income (Nine Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Total interest income | $300,898 | $253,635 | | Total interest expense | $29,909 | $28,883 | | Net interest income | $270,989 | $224,752 | | Credit loss expense (benefit) | $4,121 | $(10,259) | | Total other income | $31,543 | $42,521 | | Total operating expenses | $175,153 | $162,026 | | Net income | $94,046 | $87,419 | | Net income available to common stockholders | $90,319 | $84,407 | | Diluted earnings per share | $1.53 | $1.41 | [Consolidated Statements of Comprehensive Income](index=21&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the consolidated statements of comprehensive income, including net income and other comprehensive income/loss **Consolidated Statements of Comprehensive Income (Three Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Net income | $38,804 | $24,167 | | Total other comprehensive loss, net of tax | $(9,403) | $(760) | | Total comprehensive income | $29,401 | $23,407 | **Consolidated Statements of Comprehensive Income (Nine Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Net income | $94,046 | $87,419 | | Total other comprehensive loss, net of tax | $(35,675) | $(1,355) | | Total comprehensive income | $58,371 | $86,064 | [Consolidated Statements of Changes in Stockholders' Equity](index=22&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details changes in stockholders' equity, including net income, dividends, and other comprehensive loss **Changes in Stockholders' Equity (Nine Months Ended September 30, 2022)** | Item | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | Balance at December 31, 2021 | $1,516,553 | | Net income | $93,331 | | Other comprehensive loss, net of tax | $(35,675) | | Stock compensation | $5,019 | | Allocation of ESOP stock | $1,848 | | Cash dividend ($0.54 per share) | $(31,767) | | Exercise of stock options | $346 | | Repurchase 373,223 shares of common stock | $(7,396) | | Preferred stock dividend | $(3,012) | | Acquisition of Trident Abstract Title Agency, LLC | $836 | | Distributions to non-controlling interest | $(582) | | Balance at September 30, 2022 | $1,540,216 | [Consolidated Statements of Cash Flows](index=24&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing **Consolidated Statements of Cash Flows (Nine Months Ended September 30)** | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $209,998 | $119,051 | | Net cash used in investing activities | $(909,178) | $(726,475) | | Net cash provided by financing activities | $645,104 | $296,435 | | Net decrease in cash and due from banks and restricted cash | $(54,076) | $(310,989) | | Cash and due from banks and restricted cash at end of period | $170,708 | $1,007,672 | [Notes to Unaudited Consolidated Financial Statements](index=26&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the unaudited consolidated financial statements, covering the basis of presentation, significant accounting policies, and specific financial line items [Note 1. Basis of Presentation](index=26&type=section&id=Note%201.%20Basis%20of%20Presentation) This note outlines the consolidation principles and the nature of interim financial reporting - The consolidated financial statements include OceanFirst Financial Corp., its wholly-owned subsidiaries, and a majority controlling interest in Trident Abstract Title Agency, LLC, with all significant intercompany accounts and transactions eliminated[98](index=98&type=chunk) - Interim consolidated financial statements reflect normal and recurring adjustments, with results for the three and nine months ended September 30, 2022, not necessarily indicative of full-year results[99](index=99&type=chunk) [Note 2. Business Combinations](index=27&type=section&id=Note%202.%20Business%20Combinations) This note details the acquisition of Trident Abstract Title Agency, LLC and its accounting treatment - On April 1, 2022, the Company acquired a **60% majority controlling interest** in Trident Abstract Title Agency, LLC for **$7.1 million**, resulting in **$5.8 million** in goodwill, complementary to the Company's lending business[103](index=103&type=chunk) - The acquisition was accounted for using the acquisition method, allocating the purchase price to acquired assets and assumed liabilities based on fair values, with goodwill calculation subject to change for up to one year[104](index=104&type=chunk)[106](index=106&type=chunk) [Note 3. Earnings per Share](index=28&type=section&id=Note%203.%20Earnings%20per%20Share) This note provides details on basic and diluted earnings per share calculations and outstanding shares **Earnings Per Share (Three Months Ended September 30)** | Metric | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Average basic shares outstanding (in thousands) | 58,681 | 59,311 | | Average diluted shares outstanding (in thousands) | 58,801 | 59,515 | **Earnings Per Share (Nine Months Ended September 30)** | Metric | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Average basic shares outstanding (in thousands) | 58,777 | 59,619 | | Average diluted shares outstanding (in thousands) | 58,918 | 59,862 | - Antidilutive stock options of **1,552,000** for the three and nine months ended September 30, 2022, and **1,573,000** and **1,566,000** for the corresponding 2021 periods, were excluded from EPS calculations[109](index=109&type=chunk) [Note 4. Securities](index=29&type=section&id=Note%204.%20Securities) This note details the Company's debt and equity securities, including fair value and unrealized gains/losses **Debt Securities Available-for-Sale (September 30, 2022)** | Category | Amortized Cost (in thousands) | Estimated Fair Value (in thousands) | Gross Unrealized Losses (in thousands) | | :--------------------------------------- | :---------------------------- | :-------------------------------- | :----------------------------------- | | U.S. government and agency obligations | $107,198 | $99,099 | $(8,099) | | Corporate debt securities | $5,000 | $4,372 | $(628) | | Asset-backed securities | $296,228 | $274,873 | $(21,355) | | Agency commercial MBS | $110,871 | $91,956 | $(18,915) | | **Total** | **$519,297** | **$470,300** | **$(48,997)** | **Debt Securities Held-to-Maturity (September 30, 2022)** | Category | Amortized Cost (in thousands) | Estimated Fair Value (in thousands) | Gross Unrealized Losses (in thousands) | | :--------------------------------------- | :---------------------------- | :-------------------------------- | :----------------------------------- | | State, municipal and sovereign debt obligations | $263,614 | $232,562 | $(31,052) | | Corporate debt securities | $59,000 | $56,268 | $(3,135) | | Mortgage-backed securities | $708,769 | $616,596 | $(92,282) | | **Total** | **$1,031,383** | **$905,426** | **$(126,469)** | - The Company concluded that debt securities were not impaired at September 30, 2022, as issuers made all contractual payments, and unrealized losses were primarily due to interest rate movements and credit spread widening, not credit quality[122](index=122&type=chunk) **Equity Investments (September 30, 2022 vs. December 31, 2021)** | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Equity investments | $81,722 | $101,155 | **Net Gain (Loss) on Equity Investments (Three Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Net gain (loss) on equity investments | $3,362 | $(466) | **Net Gain (Loss) on Equity Investments (Nine Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Net gain (loss) on equity investments | $(7,502) | $8,397 | [Note 5. Loans Receivable, Net](index=34&type=section&id=Note%205.%20Loans%20Receivable,%20Net) This note provides a breakdown of loans receivable, allowance for credit losses, and non-accrual loans **Loans Receivable, Net (September 30, 2022 vs. December 31, 2021)** | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Commercial real estate – investor | $5,007,637 | $4,378,061 | | Commercial real estate – owner occupied | $983,784 | $1,055,065 | | Commercial and industrial | $652,620 | $449,224 | | Residential real estate | $2,813,209 | $2,479,701 | | Other consumer | $261,510 | $260,819 | | **Total loans receivable** | **$9,718,760** | **$8,622,870** | | Allowance for loan credit losses | $(53,521) | $(48,850) | | **Total loans receivable, net** | **$9,672,488** | **$8,583,352** | **Allowance for Credit Losses on Loans (Nine Months Ended September 30)** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | | Balance at beginning of period | $48,850 | $60,735 | | Credit loss (benefit) expense | $4,336 | $(11,024) | | Charge-offs | $(435) | $(939) | | Recoveries | $770 | $1,381 | | **Balance at end of period** | **$53,521** | **$50,153** | **Non-Accrual Loans (September 30, 2022 vs. December 31, 2021)** | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Commercial real estate – investor | $9,866 | $3,614 | | Commercial real estate – owner occupied | $1,976 | $11,904 | | Commercial and industrial | $321 | $277 | | Residential real estate | $5,958 | $6,114 | | Other consumer | $3,377 | $3,585 | | **Total** | **$21,498** | **$25,494** | - Troubled Debt Restructuring (TDR) loans totaled **$16.1 million** at September 30, 2022, down from **$23.6 million** at December 31, 2021, with **$10.0 million** of TDRs being non-accrual at September 30, 2022[142](index=142&type=chunk) [Note 6. Deposits](index=39&type=section&id=Note%206.%20Deposits) This note details the composition of deposits by type, including non-interest-bearing and time deposits **Deposits by Type (September 30, 2022 vs. December 31, 2021)** | Type of Account | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Non-interest-bearing | $2,325,547 | $2,412,056 | | Interest-bearing checking | $3,909,864 | $4,201,736 | | Money market deposit | $749,229 | $736,090 | | Savings | $1,570,472 | $1,607,933 | | Time deposits | $1,404,357 | $775,001 | | **Total deposits** | **$9,959,469** | **$9,732,816** | - Brokered time deposits significantly increased to **$828.7 million** at September 30, 2022, from **$25.0 million** at December 31, 2021[145](index=145&type=chunk) [Note 7. Borrowed Funds](index=40&type=section&id=Note%207.%20Borrowed%20Funds) This note outlines the Company's borrowed funds, including FHLB advances and other borrowings **Borrowed Funds (September 30, 2022 vs. December 31, 2021)** | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | FHLB advances | $514,200 | $0 | | Securities sold under agreements to repurchase with customers | $96,289 | $118,769 | | Other borrowings | $194,914 | $229,141 | | **Total borrowed funds** | **$805,403** | **$347,910** | - The Company redeemed **$35.0 million** of subordinated debt in March 2022[149](index=149&type=chunk) [Note 8. Fair Value Measurements](index=41&type=section&id=Note%208.%20Fair%20Value%20Measurements) This note explains the fair value hierarchy and measurements for financial assets and liabilities - Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants, using valuation techniques consistent with market, income, and/or cost approaches[152](index=152&type=chunk) - The fair value hierarchy prioritizes inputs: **Level 1** (unadjusted quoted prices in active markets), **Level 2** (observable inputs other than Level 1 quoted prices), and **Level 3** (significant unobservable inputs reflecting entity's own assumptions)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) **Financial Assets and Liabilities Measured at Fair Value (September 30, 2022, in thousands)** | Item | Total Fair Value | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | | :--------------------------------------- | :--------------- | :------------- | :------------- | :------------- | | Debt securities available-for-sale | $470,300 | $0 | $470,300 | $0 | | Equity investments (recurring) | $62,343 | $566 | $61,777 | $0 | | Interest rate derivative asset | $122,605 | $0 | $122,605 | $0 | | Interest rate derivative liability | $(122,618) | $0 | $(122,618) | $0 | | Equity investments (non-recurring) | $19,379 | $0 | $0 | $19,379 | | Loans measured for impairment | $7,268 | $0 | $0 | $7,268 | - During the nine months ended September 30, 2022, the Company converted **$2.7 million** of preferred stock into common stock, resulting in a transfer from Level 3 to Level 1[166](index=166&type=chunk) [Note 9. Derivatives, Hedging Activities and Other Financial Instruments](index=46&type=section&id=Note%209.%20Derivatives,%20Hedging%20Activities%20and%20Other%20Financial%20Instruments) This note describes the Company's use of derivative instruments to manage interest rate risk - The Company uses derivative financial instruments (interest rate swaps and cap contracts) to manage interest rate risk for commercial loan customers, economically hedging its exposure with third-party agreements, which are not designated as hedges and are marked to market through earnings[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) **Notional Amount of Derivatives Not Designated as Hedging Instruments** | Date | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | September 30, 2022 | $1,300,000 | | December 31, 2021 | $938,700 | - The Company has credit risk-related contingent features with third-party broker-dealers, requiring collateral transfers upon margin calls, with **$112.1 million** in collateral received from third parties at September 30, 2022, up from **$0** at December 31, 2021[188](index=188&type=chunk) [Note 10. Leases](index=47&type=section&id=Note%2010.%20Leases) This note provides details on the Company's operating and finance lease right-of-use assets and liabilities **Lease Right-of-Use (ROU) Assets and Liabilities (September 30, 2022 vs. December 31, 2021)** | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Operating lease ROU assets | $19,474 | $17,442 | | Finance lease ROU asset | $1,347 | $1,495 | | Operating lease liabilities | $20,430 | $17,982 | | Finance lease liability | $1,750 | $1,904 | **Weighted-Average Lease Terms and Discount Rates (September 30, 2022)** | Metric | Operating Leases | Finance Lease | | :--------------------------------------- | :--------------- | :------------ | | Weighted-Average Remaining Lease Term | 7.04 years | 6.85 years | | Weighted-Average Discount Rate | 2.84% | 5.63% | [Note 11. Variable Interest Entity](index=49&type=section&id=Note%2011.%20Variable%20Interest%20Entity) This note explains the consolidation of Trident Abstract Title Agency, LLC as a Variable Interest Entity - The Company acquired a **60% ownership** in Trident on April 1, 2022, which is classified as a Variable Interest Entity (VIE) under ASC 810, with the Company considered the primary beneficiary and having consolidated Trident's assets and liabilities[199](index=199&type=chunk) **Summarized Financial Information for Consolidated VIE (Trident) as of September 30, 2022** | Metric | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | Cash and cash equivalents | $33,234 | | Other assets | $1,079 | | Total assets | $34,313 | | Other liabilities | $31,906 | | Net assets | $2,407 | [Note 12. Subsequent Events](index=49&type=section&id=Note%2012.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including the merger termination - On November 9, 2022, the Company and Partners Bancorp mutually agreed to terminate their Agreement and Plan of Merger, with each party bearing its own costs and no termination fee paid[201](index=201&type=chunk)[202](index=202&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=4&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the Company's financial condition and operating results, covering key metrics, balance sheet and income statement changes, liquidity, capital, asset quality, and market risks - OceanFirst Financial Corp. is a regional bank holding company serving business and retail customers across New Jersey and major metropolitan areas, with operations primarily dependent on net interest income[16](index=16&type=chunk) - Key developments for the three months ended September 30, 2022, include strengthening net interest income and margin, loan and deposit growth, and the impact of the Durbin amendment on interchange fees[17](index=17&type=chunk)[19](index=19&type=chunk) - The Company's Board of Directors declared a quarterly cash dividend of **$0.20 per common share** and **$0.4375 per preferred depositary share**[19](index=19&type=chunk) - The proposed merger with Partners Bancorp was mutually terminated on November 9, 2022, with **no termination fees**[19](index=19&type=chunk) [Financial Summary](index=4&type=section&id=(1)%20FINANCIAL%20SUMMARY) This section provides a high-level overview of key financial condition and operating data, including ratios **Selected Financial Condition Data (in thousands)** | Metric | Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | :----------- | | Total assets | $12,683,453 | $12,438,653 | $11,829,688 | | Loans receivable, net | $9,672,488 | $9,380,688 | $8,139,961 | | Deposits | $9,959,469 | $9,831,484 | $9,774,097 | | Total stockholders' equity | $1,540,216 | $1,521,432 | $1,513,249 | **Selected Operating Data (in thousands, except per share)** | Metric | Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | :----------- | | Net interest income | $95,965 | $90,797 | $77,132 | | Net income | $38,804 | $29,483 | $24,167 | | Diluted earnings per share | $0.64 | $0.47 | $0.39 | **Selected Financial Ratios** | Metric | Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | :----------- | | Return on average assets | 1.19% | 0.92% | 0.78% | | Return on average stockholders' equity | 9.68% | 7.31% | 6.05% | | Net interest margin | 3.36% | 3.29% | 2.93% | | Efficiency ratio | 53.10% | 59.65% | 67.43% | | Non-performing loans as a percent of total loans receivable | 0.22% | 0.22% | 0.37% | [Analysis of Net Interest Income](index=7&type=section&id=Analysis%20of%20Net%20Interest%20Income) This section analyzes the drivers of net interest income and margin, including interest-earning assets and interest-bearing liabilities **Net Interest Income and Margin (Three Months Ended September 30)** | Metric | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Net interest income (in thousands) | $95,965 | $77,132 | | Net interest rate spread | 3.19% | 2.80% | | Net interest margin | 3.36% | 2.93% | | Total cost of deposits | 0.36% | 0.22% | **Net Interest Income and Margin (Nine Months Ended September 30)** | Metric | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Net interest income (in thousands) | $270,989 | $224,752 | | Net interest rate spread | 3.15% | 2.77% | | Net interest margin | 3.28% | 2.91% | | Total cost of deposits | 0.24% | 0.28% | - The increase in net interest income and margin was largely driven by the rising rate environment's impact on interest-earning assets and an increase in loan balances, partly offset by higher cost of funds and lower prepayment fees[19](index=19&type=chunk)[34](index=34&type=chunk) [Comparison of Financial Condition at September 30, 2022 and December 31, 2021](index=9&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030,%202022%20and%20December%2031,%202021) This section compares the Company's balance sheet items, including assets, liabilities, and equity, between the two reporting dates **Key Financial Condition Changes (September 30, 2022 vs. December 31, 2021)** | Metric | Sep 30, 2022 (in millions) | Dec 31, 2021 (in millions) | Change (in millions) | | :--------------------------------------- | :------------------------- | :------------------------- | :------------------- | | Total assets | $12,680 | $11,740 | +$940 | | Total loans | $9,720 | $8,620 | +$1,100 | | Total debt securities | $1,550 | $1,760 | $(210) | | Total liabilities | $11,140 | $10,220 | +$920 | | Deposits | $9,960 | $9,730 | +$230 | | Time deposits | $1,400 | $775 | +$625 | | FHLB advances | $514 | $0 | +$514 | | Stockholders' equity | $1,540 | $1,520 | +$20 | | Accumulated other comprehensive loss | $(38.5) | $(2.8) | $(35.7) | | Loans-to-deposits ratio | 97.6% | 88.6% | +9.0% | | Stockholders' equity per common share | $26.04 | $25.63 | +$0.41 | - The increase in total assets was primarily driven by strong loan originations, while debt securities decreased due to principal repayments, maturities, and increased unrealized losses from rising interest rates[26](index=26&type=chunk) - Deposit growth was mainly in time deposits, particularly brokered time deposits, while other deposit categories saw a net runoff[27](index=27&type=chunk) [Comparison of Operating Results for the Three and Nine Months Ended September 30, 2022 and September 30, 2021](index=9&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030,%202022%20and%20September%2030,%202021) This section compares the Company's income statement performance for the three and nine months, detailing changes in revenues and expenses [General](index=9&type=section&id=General) This subsection provides an overview of net income and diluted EPS, including the impact of non-recurring items **Net Income Available to Common Stockholders (in millions, except per share)** | Period | 2022 Net Income | 2021 Net Income | 2022 Diluted EPS | 2021 Diluted EPS | | :--------------------------------------- | :-------------- | :-------------- | :--------------- | :--------------- | | Three months ended Sep 30 | $37.6 | $23.2 | $0.64 | $0.39 | | Nine months ended Sep 30 | $90.3 | $84.4 | $1.53 | $1.41 | - Net income for the three months ended September 30, 2022, included a net benefit of **$2.6 million** (net of tax) from merger-related expenses, branch consolidation benefit, and gain on equity investments; for the nine months, it included a net decrease of **$8.1 million** (net of tax) from these items[30](index=30&type=chunk) [Interest Income](index=9&type=section&id=Interest%20Income) This subsection analyzes the changes in interest income and yield on average interest-earning assets **Interest Income (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $110.5 | $85.4 | | Nine months ended Sep 30 | $300.9 | $253.6 | **Yield on Average Interest-Earning Assets** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | 3.88% | 3.24% | | Nine months ended Sep 30 | 3.64% | 3.29% | - Interest income increased due to growth in average interest-earning assets (loans and securities) and a higher yield, driven by the redeployment of excess cash and the rising rate environment[31](index=31&type=chunk)[32](index=32&type=chunk) [Interest Expense](index=10&type=section&id=Interest%20Expense) This subsection analyzes the changes in interest expense and cost of average interest-bearing liabilities **Interest Expense (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $14.5 | $8.3 | | Nine months ended Sep 30 | $29.9 | $28.9 | **Cost of Average Interest-Bearing Liabilities** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | 0.69% | 0.44% | | Nine months ended Sep 30 | 0.49% | 0.52% | - Interest expense for the three months increased due to higher costs associated with FHLB advances and time deposits in an elevated rate environment; for the nine months, the cost decreased due to prior year deposit repricing, partly offset by recent rising rates and FHLB costs[33](index=33&type=chunk) [Net Interest Income and Margin](index=10&type=section&id=Net%20Interest%20Income%20and%20Margin) This subsection details the trends in net interest income and net interest margin, highlighting key drivers **Net Interest Income (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $96.0 | $77.1 | | Nine months ended Sep 30 | $271.0 | $224.8 | **Net Interest Margin** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | 3.36% | 2.93% | | Nine months ended Sep 30 | 3.28% | 2.91% | - Net interest margin expanded due to the redeployment of excess cash into loans and the positive impact of the rising rate environment on interest-earning assets, partially offset by increased cost of funds and growth in interest-bearing liabilities[34](index=34&type=chunk) [Credit Loss Expense (Benefit)](index=10&type=section&id=Credit%20Loss%20Expense%20(Benefit)) This subsection discusses the factors influencing credit loss expense, including loan growth and macroeconomic forecasts **Credit Loss Expense (Benefit) (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $1.0 | $(3.2) | | Nine months ended Sep 30 | $4.1 | $(10.3) | - The credit loss expense for 2022 was influenced by loan growth, slowing prepayment rates, and uncertain macroeconomic forecasts (rising interest rates, inflation), partly offset by positive trends in criticized and classified assets[35](index=35&type=chunk) - Non-performing loans decreased to **$21.5 million** at September 30, 2022, from **$30.3 million** at September 30, 2021, primarily due to payoffs and loans returning to accrual status[35](index=35&type=chunk) [Non-interest Income](index=10&type=section&id=Non-interest%20Income) This subsection analyzes changes in non-interest income, including gains/losses on investments and fee income **Other Income (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $15.2 | $9.9 | | Nine months ended Sep 30 | $31.5 | $42.5 | - For the three months, other income increased due to a **$3.4 million** gain on equity investments and **$3.3 million** in title-related fees from the Trident acquisition, partially offset by a **$1.7 million** decrease in bankcard services revenue due to the Durbin amendment[36](index=36&type=chunk) - For the nine months, other income decreased due to a **$7.5 million** net loss on equity investments (vs. **$8.4 million** gain in prior year), lower net gain on sale of loans, and reduced bankcard services revenue, partly offset by **$7.8 million** from Trident and increased commercial loan swap income[37](index=37&type=chunk) [Non-interest Expense](index=10&type=section&id=Non-interest%20Expense) This subsection details the components of non-interest expense, including compensation, data processing, and acquisition-related costs **Operating Expenses (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $59.0 | $58.7 | | Nine months ended Sep 30 | $175.2 | $162.0 | - For the three months, operating expenses increased by **$4.6 million** (excluding merger/consolidation items), driven by **$2.8 million** from the Trident acquisition, **$1.8 million** in compensation and benefits (medical claims), and **$1.2 million** in data processing (new core banking system)[38](index=38&type=chunk)[39](index=39&type=chunk) - For the nine months, operating expenses increased by **$16.2 million** (excluding merger/consolidation items), primarily due to **$6.0 million** from Trident, **$5.3 million** in compensation and benefits (commercial banking strategy/hires), and **$4.6 million** in data processing[40](index=40&type=chunk) [Income Tax Expense](index=11&type=section&id=Income%20Tax%20Expense) This subsection presents the provision for income taxes and the effective tax rate for the reporting periods **Provision for Income Taxes (in millions)** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | $12.3 | $7.4 | | Nine months ended Sep 30 | $29.2 | $28.1 | **Effective Tax Rate** | Period | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Three months ended Sep 30 | 24.1% | 23.3% | | Nine months ended Sep 30 | 23.7% | 24.3% | [Liquidity and Capital Resources](index=12&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's liquidity management, funding sources, and regulatory capital adequacy - Primary liquidity sources for the holding company are Bank dividends, investment sales, and stock/debt issuance; the Bank's primary sources are deposits, loan/investment payments, FHLB advances, and other borrowings[43](index=43&type=chunk)[44](index=44&type=chunk) - FHLB advances increased to **$514.2 million** at September 30, 2022, from **$0** at December 31, 2021, to fund liquidity needs, including loan originations and residential loan pool purchases[28](index=28&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - The Company has **$439.5 million** in outstanding commitments to originate loans and **$1.72 billion** in undrawn lines of credit at September 30, 2022[47](index=47&type=chunk) **Regulatory Capital Ratios (September 30, 2022)** | Metric | Actual Ratio | Required for Capital Adequacy | Required to be Well-Capitalized | | :--------------------------------------- | :----------- | :---------------------------- | :------------------------------ | | Bank Tier 1 capital (to average assets) | 9.23% | 4.00% | 5.00% | | Bank Common equity Tier 1 (to risk-weighted assets) | 10.98% | 7.00% | 6.50% | | Bank Total capital (to risk-weighted assets) | 11.55% | 10.50% | 10.00% | | Company Tier 1 capital (to average assets) | 9.30% | 4.00% | N/A | | Company Common equity Tier 1 (to risk-weighted assets) | 9.69% | 7.00% | N/A | | Company Total capital (to risk-weighted assets) | 12.78% | 10.50% | N/A | - The Company and the Bank satisfied the criteria to be 'well-capitalized' under Prompt Corrective Action Regulations[56](index=56&type=chunk) [Non-Performing Assets](index=14&type=section&id=Non-Performing%20Assets) This section analyzes trends in non-performing loans and assets, and the adequacy of the allowance for credit losses **Non-Performing Assets (in thousands)** | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--------------------------------------- | :----------- | :----------- | | Total non-performing loans | $21,498 | $25,494 | | Total non-performing assets | $21,498 | $25,600 | | Allowance for loan credit losses as a percent of total loans | 0.55% | 0.57% | | Allowance for loan credit losses as a percent of total non-performing loans | 248.96% | 191.61% | | Non-performing loans as a percent of total loans receivable | 0.22% | 0.30% | | Non-performing assets as a percent of total assets | 0.17% | 0.22% | - Non-performing loans decreased primarily due to loans being paid off and returning to accrual status; special mention and substandard loans also decreased due to improved borrower profitability and ability to service loans[58](index=58&type=chunk)[59](index=59&type=chunk) [Critical Accounting Policies](index=15&type=section&id=Critical%20Accounting%20Policies) This section highlights accounting policies requiring significant estimates and judgments, particularly for credit losses - The methodology used to determine the allowance for credit losses is a critical accounting policy due to its importance and reliance on estimation techniques, valuation assumptions, and subjective assessments[61](index=61&type=chunk) - The critical accounting policy and its application are reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors[61](index=61&type=chunk) [Impact of New Accounting Pronouncements](index=15&type=section&id=Impact%20of%20New%20Accounting%20Pronouncements) This section discusses the adoption of new accounting standards and their expected or actual impact on financial statements [Accounting Pronouncements Adopted in 2022](index=15&type=section&id=Accounting%20Pronouncements%20Adopted%20in%202022) This subsection details accounting pronouncements adopted in 2022 and their impact - The adoption of ASU 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes," effective for periods beginning after December 15, 2021, did not have a material impact on the consolidated financial statements[62](index=62&type=chunk) [Recent Accounting Pronouncements Not Yet Adopted](index=15&type=section&id=Recent%20Accounting%20Pronouncements%20Not%20Yet%20Adopted) This subsection outlines recent accounting pronouncements not yet adopted and their anticipated impact - ASU 2022-03, "Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions," effective for periods beginning after December 15, 2023, is not expected to have a material impact[63](index=63&type=chunk) - ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," effective for periods beginning after December 15, 2022, will be adopted on January 1, 2023, and its impact is currently being evaluated[64](index=64&type=chunk) - ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method," effective for periods beginning after December 15, 2022, is not expected to have a material impact[65](index=65&type=chunk) [Private Securities Litigation Reform Act Safe Harbor Statement](index=15&type=section&id=Private%20Securities%20Litigation%20Reform%20Act%20Safe%20Harbor%20Statement) This section provides a safe harbor statement for forward-looking information, outlining potential risk factors - Forward-looking statements are based on assumptions and describe future plans, strategies, and expectations, identified by words like "believe," "expect," "intend," etc[66](index=66&type=chunk) - Factors that could materially adversely affect operations include the termination of the Partners Bancorp merger, changes in interest rates, inflation, general economic conditions, real estate values, legislative/regulatory changes, and cybersecurity risks[67](index=67&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company monitors interest rate sensitivity using gap analysis and EVE/NII modeling, with exposure impacted by asset deployment and market rate shifts - The Company's interest rate sensitivity is monitored using interest rate risk (IRR) modeling, including gap analysis[70](index=70&type=chunk) **Interest Sensitivity Gap (September 30, 2022)** | Period | Interest Sensitivity Gap (in thousands) | Cumulative Gap as % of Total Interest-Earning Assets | | :--------------------------------------- | :------------------------------------ | :--------------------------------------------------- | | 3 Months or Less | $798,392 | 6.97% | | 3 Months to 1 Year | $107,332 | 7.90% | | 1 Year to 3 Years | $794,288 | 14.83% | | 3 Years to 5 Years | $1,005,171 | 23.60% | | More than 5 Years | $316,891 | 26.37% | | **Total** | **$3,022,074** | **26.37%** | - The Company's one-year gap was **positive 7.90%** at September 30, 2022, down from **positive 14.15%** at December 31, 2021[70](index=70&type=chunk) - Interest rate sensitivity was impacted by the deployment of cash into loans, a shift from overnight to short-term borrowings, slower loan and securities prepayment speeds, and a significant increase in market interest rates[76](index=76&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were effective, with no material changes in internal control over financial reporting during the quarter [(a) Disclosure Controls and Procedures](index=18&type=section&id=(a)%20Disclosure%20Controls%20and%20Procedures) This subsection confirms the effectiveness of the Company's disclosure controls and procedures - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022, ensuring timely and accurate reporting of required information[78](index=78&type=chunk) [(b) Changes in Internal Control Over Financial Reporting](index=18&type=section&id=(b)%20Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This subsection reports on any material changes in internal control over financial reporting during the quarter - There were no changes in the Company's internal control over financial reporting during the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[79](index=79&type=chunk) [PART II. OTHER INFORMATION](index=50&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The Company and the Bank are not involved in any material legal proceedings beyond routine matters occurring in the ordinary course of business - 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, which are considered immaterial to financial condition or results of operations[203](index=203&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the Company's risk factors since December 31, 2021, as detailed in the 2021 Form 10-K - There have been no material changes to risk factors relevant to the Company's operations since December 31, 2021, as summarized in the 2021 Form 10-K[204](index=204&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not repurchase any common stock during the quarter ended September 30, 2022, but has 2,934,438 shares remaining available under its authorized stock repurchase program - The Company did not repurchase any shares of its common stock during the three months ended September 30, 2022[205](index=205&type=chunk) - As of September 30, 2022, **2,934,438 shares** were available for repurchase under the Company's stock repurchase program[205](index=205&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the Company for the reporting period [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL financial data, and the interactive data file - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.0), XBRL formatted financial statements (101.0), and the Cover Page Interactive Data File (104.0)[210](index=210&type=chunk) [Signatures](index=52&type=section&id=Signatures) The report is duly signed on behalf of the registrant by Christopher D. Maher, Chairman and Chief Executive Officer, and Patrick S. Barrett, Executive Vice President and Chief Financial Officer - The report was signed on November 9, 2022, by Christopher D. Maher, Chairman and Chief Executive Officer, and Patrick S. Barrett, Executive Vice President and Chief Financial Officer[211](index=211&type=chunk)[212](index=212&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________________________________________ FORM 10-Q ________________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-11713 _________________________ ...

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (unaudited)](index=19&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited consolidated financial statements of OceanFirst Financial Corp. for the quarter ended March 31, 2022, including the statements of financial condition, income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes [Consolidated Statements of Financial Condition](index=19&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The Consolidated Statements of Financial Condition provide a snapshot of the company's assets, liabilities, and stockholders' equity at March 31, 2022, and December 31, 2021. Key changes include increases in total assets, loans receivable, and deposits, alongside a slight increase in stockholders' equity Consolidated Statements of Financial Condition (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total assets | $12,164,945 | $11,739,616 | | Loans receivable, net of allowance for loan credit losses | $9,065,679 | $8,583,352 | | Deposits | $10,056,233 | $9,732,816 | | Stockholders' equity | $1,519,334 | $1,516,553 | - Total assets increased by **$425.3 million**, primarily driven by a **$486.1 million** increase in total loans. Deposits also grew by **$323.4 million**[25](index=25&type=chunk)[26](index=26&type=chunk) [Consolidated Statements of Income](index=20&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income detail the company's revenues, expenses, and net income for the three months ended March 31, 2022, and 2021. Net interest income increased significantly, while other income decreased due to a net loss on equity investments in 2022 compared to a gain in 2021 Consolidated Statements of Income (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Interest income | $90,983 | $84,874 | | Interest expense | $6,756 | $11,270 | | Net interest income | $84,227 | $73,604 | | Credit loss expense (benefit) | $1,851 | $(620) | | Other income | $8,852 | $20,835 | | Operating expenses | $57,495 | $51,683 | | Net income | $25,759 | $32,697 | | Net income available to common stockholders | $24,755 | $31,693 | | Diluted earnings per share | $0.42 | $0.53 | - Net interest income increased by **$10.6 million** YoY, while other income decreased by **$11.98 million**, largely due to a shift from a net gain on equity investments in 2021 to a net loss in 2022[81](index=81&type=chunk)[33](index=33&type=chunk) [Consolidated Statements of Comprehensive Income](index=21&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income present the net income and other comprehensive income (loss) components, primarily driven by increased unrealized losses on debt securities in 2022 due to higher interest rates Consolidated Statements of Comprehensive Income (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $25,759 | $32,697 | | Net unrealized loss on debt securities (net of tax benefit) | $(12,372) | $(416) | | Total comprehensive income | $13,410 | $32,388 | | Comprehensive income available to common stockholders | $12,406 | $31,384 | - Accumulated other comprehensive loss increased by **$12.3 million**, primarily due to unrealized losses on debt securities available-for-sale, impacted by higher interest rates[27](index=27&type=chunk)[83](index=83&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=22&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) The Consolidated Statements of Changes in Stockholders' Equity detail the movements in equity, including net income, other comprehensive loss, stock compensation, dividends, and stock repurchases, resulting in a slight increase in total stockholders' equity Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at December 31, 2021 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | | :----------------------------------- | :---------------------------------------- | :--------------------------------------- | | Balance at beginning of period | $1,516,553 | $1,516,553 | | Net income | — | $25,759 | | Other comprehensive loss, net of tax | — | $(12,349) | | Cash dividend $0.17 per share | — | $(9,993) | | Repurchase 100,444 shares of common stock | — | $(2,144) | | Balance at end of period | — | $1,519,334 | - Stockholders' equity remained relatively stable at **$1.52 billion**, as net income was largely offset by increased accumulated other comprehensive loss and common/preferred stock dividends[27](index=27&type=chunk)[86](index=86&type=chunk) [Consolidated Statements of Cash Flows](index=23&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows outline cash flows from operating, investing, and financing activities. Operating cash flow increased, while investing activities saw significant cash usage for loan originations and purchases. Financing activities were primarily driven by deposit increases and FHLB advances Consolidated Statements of Cash Flows (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $57,644 | $36,873 | | Net cash used in investing activities | $(424,685) | $(223,159) | | Net cash provided by financing activities | $353,433 | $57,378 | | Net decrease in cash and due from banks and restricted cash | $(13,608) | $(128,908) | - Cash needs for Q1 2022 were met by increased deposits and FHLB advances, primarily used for loan originations and residential loan pool purchases[41](index=41&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=25&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide additional details and explanations for the unaudited consolidated financial statements, covering areas such as basis of presentation, earnings per share, securities, loans, deposits, borrowed funds, fair value measurements, derivatives, leases, and subsequent events [Note 1. Basis of Presentation](index=25&type=section&id=Note%201.%20Basis%20of%20Presentation) This note explains that the consolidated financial statements include OceanFirst Financial Corp. and its subsidiaries, reflecting normal recurring adjustments and management estimates. It also notes that certain disclosures are condensed per SEC rules and should be read in conjunction with the 2021 Form 10-K - The financial statements are consolidated for OceanFirst Financial Corp. and its wholly-owned subsidiaries, including OceanFirst Bank N.A.[94](index=94&type=chunk) - Interim statements include management estimates and assumptions, and actual results could differ from these estimates[95](index=95&type=chunk) [Note 2. Earnings per Share](index=26&type=section&id=Note%202.%20Earnings%20per%20Share) This note reconciles the weighted average shares outstanding for basic and diluted earnings per share calculations for the three months ended March 31, 2022 and 2021, noting the exclusion of antidilutive stock options Earnings per Share (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Average basic shares outstanding | 58,739 | 59,840 | | Average diluted shares outstanding | 58,943 | 60,101 | - Antidilutive stock options of **904,000** (2022) and **1,672,000** (2021) were excluded from EPS calculations[100](index=100&type=chunk) [Note 3. Securities](index=27&type=section&id=Note%203.%20Securities) This note provides detailed information on debt securities available-for-sale and held-to-maturity, including amortized cost, fair value, and unrealized gains/losses. It also covers equity investments and the allowance for securities credit losses. The company concluded that debt securities were not impaired at March 31, 2022 Debt Securities (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total debt securities (Amortized Cost) | $1,668,106 | $1,713,422 | | Total debt securities (Estimated Fair Value) | $1,597,362 | $1,720,999 | | Total Gross Unrealized Losses | $(72,736) | $(12,665) | - The increase in net unrealized losses on debt securities was primarily due to changes in the general interest rate environment, not credit quality[110](index=110&type=chunk) Equity Investments (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net (loss) gain on equity investments | $(2,786) | $8,287 | | Unrealized (loss) gain recognized on equity securities still held | $(4,368) | $164 | [Note 4. Loans Receivable, Net](index=31&type=section&id=Note%204.%20Loans%20Receivable%2C%20Net) This note details the composition of the loan portfolio by commercial and consumer categories, including risk classifications (Pass, Special Mention, Substandard, Doubtful). It also provides an analysis of the allowance for credit losses and information on non-accrual and troubled debt restructuring (TDR) loans Loans Receivable and Allowance for Credit Losses (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total loans receivable | $9,108,976 | $8,622,870 | | Allowance for loan credit losses | $(50,598) | $(48,850) | Allowance for Credit Losses on Loans (in thousands) | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Allowance for credit losses on loans (Beginning balance) | $48,850 | $60,735 | | Credit loss (benefit) expense | $1,656 | $(1,039) | | Allowance for credit losses on loans (Ending balance) | $50,598 | $59,976 | Non-Performing Loans (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total non-performing loans | $26,925 | $25,494 | | Non-performing loans as a percent of total loans receivable | 0.30 % | 0.30 % | - The credit loss expense for Q1 2022 was driven by slowing prepayment rate assumptions in the residential real estate portfolio, strong loan growth, and macroeconomic uncertainty related to the Russia-Ukraine war, partly offset by positive trends in criticized assets[32](index=32&type=chunk) [Note 5. Deposits](index=36&type=section&id=Note%205.%20Deposits) This note provides a breakdown of deposit types, showing an overall increase in total deposits, with non-interest-bearing and interest-bearing checking accounts being the largest categories Deposits by Type (in thousands) | Type of Account | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Non-interest-bearing | $2,444,833 | $2,412,056 | | Interest-bearing checking | $4,287,745 | $4,201,736 | | Money market deposit | $811,588 | $736,090 | | Savings | $1,624,751 | $1,607,933 | | Time deposits | $887,316 | $775,001 | | Total deposits | $10,056,233 | $9,732,816 | - Deposits increased by **$323.4 million**, with organic growth across all deposit categories except time deposits, which saw an increase in brokered time deposits[26](index=26&type=chunk) [Note 6. Borrowed Funds](index=36&type=section&id=Note%206.%20Borrowed%20Funds) This note details the composition of borrowed funds, highlighting an increase in FHLB advances to fund loan growth and a decrease in other borrowings due to the redemption of subordinated debt Borrowed Funds (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | FHLB advances | $75,002 | $0 | | Securities sold under agreements to repurchase with customers | $117,782 | $118,769 | | Other borrowings | $194,396 | $229,141 | | Total borrowed funds | $387,180 | $347,910 | - The Company redeemed **$35.0 million** of subordinated debt due September 30, 2026, which carried an interest rate of **4.14%**[137](index=137&type=chunk) [Note 7. Fair Value Measurements](index=37&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note explains the company's methodology for fair value measurements, categorizing assets and liabilities into Level 1, 2, or 3 inputs based on observability. It provides tables summarizing financial instruments measured at fair value on both a recurring and non-recurring basis, as well as those disclosed at fair value - Fair value measurements are categorized into **Level 1** (unadjusted quoted prices in active markets), **Level 2** (observable inputs other than Level 1 quoted prices), and **Level 3** (significant unobservable inputs)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) Financial Instruments Measured at Fair Value on a Recurring Basis (in thousands) | Item Measured on a Recurring Basis (March 31, 2022) | Total Fair Value (in thousands) | Level 1 Inputs (in thousands) | Level 2 Inputs (in thousands) | Level 3 Inputs (in thousands) | | :-------------------------------------------------- | :------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | | Debt securities available-for-sale | $546,470 | $— | $546,470 | $— | | Equity investments | $81,588 | $12,517 | $69,071 | $— | | Interest rate derivative asset | $45,611 | $— | $45,611 | $— | | Interest rate derivative liability | $(45,643) | $— | $(45,643) | $— | | Item Measured on a Non-Recurring Basis (March 31, 2022) | | | | | | Equity investments | $12,300 | $— | $— | $12,300 | | Other real estate owned | $106 | $— | $— | $106 | | Loans measured for impairment based on the fair value of the underlying collateral | $16,477 | $— | $— | $16,477 | - During Q1 2022, the Company converted **$2.7 million** preferred stock into common stock, resulting in a transfer from **Level 3** into **Level 1**[152](index=152&type=chunk) [Note 8. Derivatives, Hedging Activities and Other Financial Instruments](index=43&type=section&id=Note%208.%20Derivatives%2C%20Hedging%20Activities%20and%20Other%20Financial%20Instruments) This note describes the company's use of derivative financial instruments, primarily interest rate swaps and cap contracts, to manage interest rate risk for commercial loan customers. These derivatives are not designated as hedges under FASB ASC Topic 815 and are marked to market through earnings - The Company uses interest rate swaps and cap contracts to allow commercial loan customers to effectively convert variable-rate loans to fixed-rate or cap variable rates, and then enters into offsetting agreements with third parties[172](index=172&type=chunk) - These derivatives are not designated as hedging instruments and are marked to market through earnings, with fair value adjustments related to credit quality variations potentially impacting earnings[173](index=173&type=chunk) Notional Amount of Derivatives | Metric | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Notional amount of derivatives not designated as hedging instruments | $1.10 billion | $938.7 million | [Note 9. Leases](index=44&type=section&id=Note%209.%20Leases) This note details the company's lease arrangements, including operating and finance leases for branches and office space. It provides information on ROU assets, lease liabilities, weighted-average lease terms, discount rates, and lease expenses. The company also consolidated branches, leading to accelerated lease expense recognition Lease Assets and Liabilities (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total lease ROU assets | $15,695 | $18,937 | | Total lease liabilities | $16,574 | $19,886 | - The Company completed the consolidation of **10** branches and one deposit gathering location in early 2022, resulting in accelerated lease expense recognition of **$62,000** for the three months ended March 31, 2022[185](index=185&type=chunk) [Note 10. Subsequent Event](index=46&type=section&id=Note%2010.%20Subsequent%20Event) This note reports the acquisition of a 60% majority interest in Trident Abstract Title Agency, LLC on April 1, 2022, for $7.1 million, with an estimated goodwill of $5.7 million. This acquisition is expected to complement the company's existing consumer and commercial lending business - On **April 1, 2022**, OceanFirst Financial Corp. acquired a **60%** majority interest in Trident Abstract Title Agency, LLC[189](index=189&type=chunk) - The purchase price was **$7.1 million**, with an estimated goodwill of **$5.7 million**, and the acquisition is expected to complement existing lending businesses[189](index=189&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=4&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of OceanFirst Financial Corp.'s financial condition and results of operations for the three months ended March 31, 2022, compared to prior periods. It covers key financial metrics, balance sheet changes, income statement performance, liquidity, capital resources, asset quality, accounting policies, and forward-looking statements [Financial Summary](index=4&type=section&id=Financial%20Summary) This summary provides an overview of OceanFirst Financial Corp.'s financial performance and condition, highlighting key metrics for the quarter ended March 31, 2022, compared to prior periods. It notes increases in total assets, loans, and deposits, alongside improved net interest income and margin, but a decrease in net income available to common stockholders due to specific expenses and a net loss on equity investments Financial Summary (in thousands) | Metric | Mar 31, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Mar 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total assets | $12,164,945 | $11,739,616 | $11,577,472 | | Loans receivable, net of allowance for loan credit losses | $9,065,679 | $8,583,352 | $7,820,590 | | Deposits | $10,056,233 | $9,732,816 | $9,502,812 | | Stockholders' equity | $1,519,334 | $1,516,553 | $1,498,719 | | Net interest income | $84,227 | $80,586 | $73,604 | | Net income | $25,759 | $22,657 | $32,697 | | Diluted earnings per share | $0.42 | $0.37 | $0.53 | - Net income available to common stockholders for Q1 2022 was **$24.8 million** (**$0.42** diluted EPS), down from **$31.7 million** (**$0.53** diluted EPS) for the corresponding prior year period, impacted by merger-related expenses, branch consolidation expenses, and a net loss on equity investments[17](index=17&type=chunk) - The Company remains well-capitalized with a stockholders' equity to total assets ratio of **12.49%** at March 31, 2022[18](index=18&type=chunk) - Loan growth for the quarter was **$486.1 million**, reflecting record loan originations and residential loan pool purchases. Deposits increased **$323.4 million**, and the loans-to-deposits ratio increased to **90.60%**[19](index=19&type=chunk) [Analysis of Net Interest Income](index=7&type=section&id=Analysis%20of%20Net%20Interest%20Income) This section explains that net interest income is the difference between interest earned on assets and interest paid on liabilities. It presents detailed tables showing average balances, interest income/expense, and yields/costs for interest-earning assets and interest-bearing liabilities for the three months ended March 31, 2022 and 2021 Net Interest Income Analysis (in thousands) | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Total interest income (in thousands) | $90,983 | $84,874 | | Total interest expense (in thousands) | $6,756 | $11,270 | | Net interest income (in thousands) | $84,227 | $73,604 | | Net interest rate spread | 3.08 % | 2.78 % | | Net interest margin | 3.18 % | 2.93 % | | Total cost of deposits (including non-interest-bearing deposits) | 0.16 % | 0.37 % | - Interest income included net loan fees of **$970,000** for Q1 2022, down from **$1.4 million** in Q1 2021[20](index=20&type=chunk) [Comparison of Financial Condition at March 31, 2022 and December 31, 2021](index=9&type=section&id=Comparison%20of%20Financial%20Condition%20at%20March%2031%2C%202022%20and%20December%2031%2C%202021) This section compares the company's financial condition at the end of Q1 2022 to the end of Q4 2021, highlighting growth in total assets, loans, and deposits, and changes in debt securities and borrowings. Stockholders' equity remained stable, impacted by net income, comprehensive loss, and stock repurchases - Total assets increased by **$425.3 million** to **$12.16 billion**, driven by a **$486.1 million** increase in total loans, primarily from commercial and residential real estate originations and purchases[25](index=25&type=chunk) - Deposits increased by **$323.4 million** to **$10.06 billion**, with organic growth in all deposit categories except time deposits, which saw an increase in brokered time deposits[26](index=26&type=chunk) - The loans-to-deposit ratio increased to **90.6%** from **88.6%**. FHLB advances increased to **$75.0 million** to fund loan growth, while other borrowings decreased due to subordinated debt extinguishment[26](index=26&type=chunk) - Stockholders' equity was stable at **$1.52 billion**, as net income was offset by a **$12.3 million** increase in accumulated other comprehensive loss (due to unrealized losses on debt securities from higher interest rates) and **$11.0 million** in dividends[27](index=27&type=chunk) [Comparison of Operating Results for the Three Months Ended March 31, 2022 and March 31, 2021](index=9&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%20March%2031%2C%202021) This section compares the company's operating results for Q1 2022 against Q1 2021, detailing changes in net income, interest income and expense, credit loss provisions, non-interest income and expense, and income tax expense [General](index=9&type=section&id=General) This subsection provides an overview of the net income available to common stockholders and diluted earnings per share for Q1 2022 compared to Q1 2021, noting the impact of specific expenses and gains/losses Net Income and Diluted EPS (in millions) | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Net income available to common stockholders | $24.8 million | $31.7 million | | Diluted earnings per share | $0.42 | $0.53 | - Q1 2022 net income was reduced by **$4.0 million** (net of tax) due to merger-related expenses (**$2.0 million**), net branch consolidation expenses (**$402,000**), and a net loss on equity investments (**$2.8 million**)[28](index=28&type=chunk) - Q1 2021 net income was increased by **$5.2 million** (net of tax) due to merger-related expenses (**$381,000**), net branch consolidation expenses (**$1.0 million**), and a net gain on equity investments (**$8.3 million**)[28](index=28&type=chunk) [Interest Income](index=9&type=section&id=Interest%20Income) This subsection discusses the increase in interest income for Q1 2022 compared to Q1 2021, primarily driven by growth in average interest-earning assets and a higher yield on these assets due to the deployment of lower-yielding cash into higher-yielding loans and securities - Interest income increased to **$91.0 million** in Q1 2022 from **$84.9 million** in Q1 2021[29](index=29&type=chunk) - Average interest-earning assets increased by **$551.7 million**, with average loans receivable increasing by **$1.07 billion**[29](index=29&type=chunk) - The yield on average interest-earning assets increased to **3.43%** from **3.38%**, mainly due to shifting cash into higher-yielding loans and securities[29](index=29&type=chunk) [Interest Expense](index=9&type=section&id=Interest%20Expense) This subsection highlights the decrease in interest expense for Q1 2022 compared to Q1 2021, attributed to the downward repricing of deposits, despite an increase in average interest-bearing liabilities - Interest expense decreased to **$6.8 million** in Q1 2022 from **$11.3 million** in Q1 2021[30](index=30&type=chunk) - The cost of average interest-bearing liabilities decreased to **0.35%** from **0.60%** due to deposit repricing[30](index=30&type=chunk) - The total cost of deposits (including non-interest-bearing) was **0.16%** in Q1 2022, down from **0.37%** in Q1 2021[30](index=30&type=chunk) [Net Interest Income and Margin](index=10&type=section&id=Net%20Interest%20Income%20and%20Margin) This subsection reports the increase in net interest income and net interest margin for Q1 2022 compared to Q1 2021, primarily due to the strategic deployment of excess balance sheet liquidity - Net interest income increased to **$84.2 million** in Q1 2022 from **$73.6 million** in Q1 2021[31](index=31&type=chunk) - Net interest margin expanded to **3.18%** from **2.93%** YoY[31](index=31&type=chunk) - Margin expansion was mainly due to using excess balance sheet liquidity to fund loan and securities growth[31](index=31&type=chunk) [Provision/Benefit for Credit Losses](index=10&type=section&id=Provision%2FBenefit%20for%20Credit%20Losses) This subsection discusses the shift from a credit loss benefit in Q1 2021 to a credit loss expense in Q1 2022, driven by factors such as slowing prepayment rates, loan growth, and macroeconomic uncertainty, partially offset by improved asset quality - Credit loss expense was **$1.9 million** in Q1 2022, compared to a **$620,000** benefit in Q1 2021[32](index=32&type=chunk) - The expense was due to slowing prepayment rate assumptions (residential real estate), strong loan growth, and Russia-Ukraine war macroeconomic forecast uncertainty, partially offset by positive trends in criticized assets and favorable employment outlook[32](index=32&type=chunk) - Non-performing loans decreased to **$26.9 million** at March 31, 2022, from **$42.8 million** at March 31, 2021[32](index=32&type=chunk) [Non-interest Income](index=10&type=section&id=Non-interest%20Income) This subsection explains the significant decrease in non-interest income for Q1 2022 compared to Q1 2021, primarily due to a net loss on equity investments in 2022 versus a net gain in 2021, and decreases in loan sales gains and PPP loan fees - Other income decreased to **$8.9 million** in Q1 2022 from **$20.8 million** in Q1 2021[33](index=33&type=chunk) - This decrease was largely due to a **$2.8 million** net loss on equity investments in Q1 2022, compared to an **$8.3 million** net gain in Q1 2021[33](index=33&type=chunk) - Further decreases came from a **$1.7 million** drop in net gain on sales of loans and **$662,000** less in Paycheck Protection Program loan origination referral fees, partially offset by a **$1.7 million** increase in commercial loan swap income[33](index=33&type=chunk) [Non-interest Expense](index=10&type=section&id=Non-interest%20Expense) This subsection details the increase in operating expenses for Q1 2022 compared to Q1 2021, driven by higher compensation and benefits, data processing, and occupancy expenses, including merger-related and branch consolidation costs - Operating expenses increased to **$57.5 million** for Q1 2022, compared to **$51.7 million** in Q1 2021[34](index=34&type=chunk) - This includes **$2.4 million** (2022) vs. **$1.4 million** (2021) in merger-related and net branch consolidation expenses[34](index=34&type=chunk) - The remaining **$4.8 million** increase was primarily due to **$2.3 million** in compensation and benefits (commercial banking strategy and hires), **$1.7 million** in data processing (new core banking system migration), and **$683,000** in occupancy expense[34](index=34&type=chunk) [Income Tax Expense](index=10&type=section&id=Income%20Tax%20Expense) This subsection reports a decrease in income tax provision and a lower effective tax rate for Q1 2022 compared to Q1 2021 - Provision for income taxes was **$8.0 million** for Q1 2022, down from **$10.7 million** for Q1 2021[35](index=35&type=chunk) - The effective tax rate decreased to **23.6%** for Q1 2022 from **24.6%** for Q1 2021[35](index=35&type=chunk) [Liquidity and Capital Resources](index=11&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity sources, including dividends from the Bank, proceeds from investments, and stock/debt issuance. It highlights the Bank's funding sources like deposits and FHLB advances, and details cash utilization for loan growth and debt redemption. The company maintains strong capital ratios and monitors liquidity through stress testing - OceanFirst Financial Corp. received a **$20.0 million** dividend payment from the Bank in Q1 2022 and held **$45.1 million** in cash at March 31, 2022[37](index=37&type=chunk) - The Bank's primary sources of funds are deposits, principal and interest payments on loans, FHLB advances, access to the Federal Reserve discount window, other borrowings, investment maturities, and proceeds from the sale of loans and investments[38](index=38&type=chunk) - FHLB advances increased to **$75.0 million** at March 31, 2022, from **$0** at December 31, 2021, to fund short-term liquidity needs and loan growth[39](index=39&type=chunk)[41](index=41&type=chunk) Capital Ratios | Metric | Bank (Mar 31, 2022 Ratio) | Bank (Dec 31, 2021 Ratio) | Company (Mar 31, 2022 Ratio) | Company (Dec 31, 2021 Ratio) | Required for Well-Capitalized | | :----------------------------------- | :------------------------ | :------------------------ | :--------------------------- | :--------------------------- | :---------------------------- | | Tier 1 capital (to average assets) | 9.24 % | 9.08 % | 9.42 % | 9.22 % | 5.00 % | | Common equity Tier 1 (to risk-weighted assets) | 11.15 % | 11.62 % | 9.91 % | 10.26 % | 6.50 % | | Total capital (to risk-weighted assets) | 11.73 % | 12.21 % | 13.16 % | 14.06 % | 10.00 % | [Non-Performing Assets](index=13&type=section&id=Non-Performing%20Assets) This section provides a breakdown of non-performing assets, including non-performing loans and other real estate owned. It details changes in non-performing loans and the allowance for loan credit losses, and discusses the impact of COVID-19 related loan modification programs Non-Performing Assets (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Total non-performing loans | $26,925 | $25,494 | | Other real estate owned | $106 | $106 | | Total non-performing assets | $27,031 | $25,600 | | Allowance for loan credit losses as a percent of total loans receivable | 0.56 % | 0.57 % | | Non-performing loans as a percent of total loans receivable | 0.30 % | 0.30 % | - Non-performing loans increased slightly to **$26.9 million** at March 31, 2022, from **$25.5 million** at December 31, 2021[53](index=53&type=chunk) - The allowance for loan credit losses totaled **$50.6 million** (**0.56%** of total loans) at March 31, 2022, compared to **$48.9 million** (**0.57%** of total loans) at December 31, 2021[53](index=53&type=chunk) - The decrease in substandard loans was primarily due to improved profitability of borrowers and their ability to service their loans[55](index=55&type=chunk) [Critical Accounting Policies](index=14&type=section&id=Critical%20Accounting%20Policies) This section refers to the 2021 Form 10-K for a summary of significant accounting policies and highlights the methodology for determining the allowance for credit losses as a critical accounting policy due to its importance and reliance on estimates and subjective judgments - 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, involving a higher degree of complexity and requiring difficult and subjective judgments[56](index=56&type=chunk) - This critical accounting policy and its application are reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors[56](index=56&type=chunk) [Impact of New Accounting Pronouncements](index=14&type=section&id=Impact%20of%20New%20Accounting%20Pronouncements) This section discusses recently adopted and not-yet-adopted accounting pronouncements. ASU 2019-12 (Income Taxes) was adopted in 2022 with no material impact. ASU 2022-01 (Derivatives and Hedging) and ASU 2022-02 (Credit Losses, TDRs) are not yet adopted, and the company is evaluating their potential impact - ASU 2019-12, "Income Taxes," was adopted in 2022 and did not have a material impact on the Company's financial statements[57](index=57&type=chunk) - ASU 2022-01, "Derivatives and Hedging," and ASU 2022-02, "Financial Instruments - Credit Losses," are effective for fiscal years beginning after December 15, 2022, and the Company is currently evaluating their potential impact[58](index=58&type=chunk)[59](index=59&type=chunk) [Private Securities Litigation Reform Act Safe Harbor Statement](index=14&type=section&id=Private%20Securities%20Litigation%20Reform%20Act%20Safe%20Harbor%20Statement) This section provides a safe harbor statement regarding forward-looking statements, outlining various factors that could materially affect the company's operations, including changes in interest rates, economic conditions, regulatory policies, and the ongoing impact of the COVID-19 pandemic - This quarterly report contains forward-looking statements based on certain assumptions and describes future plans, strategies, and expectations of OceanFirst Financial Corp.[60](index=60&type=chunk) - Factors which could have a material adverse effect on operations include changes in interest rates, general economic conditions, inflation, public health crises (such as COVID-19), levels of unemployment, real estate market values, and legislative/regulatory changes[61](index=61&type=chunk)[63](index=63&type=chunk) - The continuing impact of the COVID-19 outbreak on the Company's business is difficult to predict and could lead to risks such as declining demand for products/services, increased loan delinquencies, and higher credit losses[64](index=64&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's interest rate sensitivity through gap analysis and Economic Value of Equity (EVE) and Net Interest Income (NII) modeling. It shows a positive one-year interest sensitivity gap and analyzes the impact of varying rate shocks on EVE and NII, while acknowledging inherent limitations in these models - The Company's interest rate sensitivity is monitored through IRR modeling, with a one-year gap of **positive 10.82%** at March 31, 2022, compared to **positive 14.15%** at December 31, 2021[67](index=67&type=chunk) Cumulative Interest Sensitivity Gap (in thousands) | Period | Cumulative Interest Sensitivity Gap (in thousands) | Cumulative Interest Sensitivity Gap as a percent of total interest-earning assets | | :----------------------------------- | :--------------------------------------- | :-------------------------------------------------------------------------------- | | 3 Months or Less | $750,503 | 6.84 % | | More than 3 Months to 1 Year | $1,188,015 | 10.82 % | | More than 1 Year to 3 Years | $2,451,282 | 22.33 % | | More than 3 Years to 5 Years | $3,263,786 | 29.73 % | | More than 5 Years | $2,979,955 | 27.14 % | Interest Rate Sensitivity Analysis | Change in Interest Rates (Basis Points) | EVE % Change (March 31, 2022) | Net Interest Income % Change (March 31, 2022) | | :-------------------------------------- | :---------------------------- | :-------------------------------------------- | | 300 | 4.7 % | 16.2 % | | 200 | 5.0 % | 5.3 % | | 100 | 3.7 % | 2.7 % | | (100) | (6.7) % | (4.2) % | - The change in interest rate sensitivity quarter over quarter was impacted by the deployment of cash into loans, an increase in overnight borrowings, shorter-term time deposits, and a significant increase in market interest rates[73](index=73&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) This section states that the company's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of March 31, 2022. No material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated by management, including the principal executive officer and principal financial officer, and concluded to be effective as of March 31, 2022[75](index=75&type=chunk) - There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[76](index=76&type=chunk) PART II. Other Information [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company and the Bank are not involved in any legal proceedings other than routine matters considered immaterial to financial condition or results of operations - 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, which are believed to be immaterial to the Company's financial condition or results of operations[191](index=191&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the 2021 Form 10-K for a summary of risk factors and states that no material changes to these factors have occurred since December 31, 2021. It also notes the possibility of additional unknown or currently immaterial risks - There have been no material changes to risk factors relevant to the Company's operations since December 31, 2021, as summarized in the 2021 Form 10-K[192](index=192&type=chunk) - Additional risks not presently known to the Company, or that the Company currently deems immaterial, may also adversely affect the business, financial condition or results of operations[192](index=192&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase programs, including authorizations and shares repurchased during the quarter ended March 31, 2022 - The Board of Directors authorized two common stock repurchase programs, totaling up to **5.5 million** shares (**5%** and an additional **5%** of outstanding common stock), with no expiration date[193](index=193&type=chunk) Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------------- | :----------------------------- | :--------------------------- | | March 1, 2022 through March 31, 2022 | 100,444 | $21.35 | - As of March 31, 2022, there were **3,207,217** shares available for repurchase under the Company's stock repurchase programs[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no defaults upon senior securities - Not Applicable[195](index=195&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Not Applicable[196](index=196&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - Not Applicable[197](index=197&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including executive employment agreements, certifications (302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial statements - Exhibits include executive employment agreements, certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, and XBRL formatted financial statements[199](index=199&type=chunk) [Signatures](index=49&type=section&id=Signatures) This section contains the signatures of Christopher D. Maher (Chairman and Chief Executive Officer) and Michael J. Fitzpatrick (Executive Vice President and Chief Financial Officer), certifying the report on May 5, 2022 - The report is signed by Christopher D. Maher, Chairman and Chief Executive Officer, and Michael J. Fitzpatrick, Executive Vice President and Chief Financial Officer, on May 5, 2022[201](index=201&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-11713 OceanFirst Financial Corp. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organizat ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ________________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-11713 ________________________________________________ OceanFirst Financial ...

Financial Performance - Net income available to common stockholders for Q2 2021 was $29.6 million, or $0.49 per diluted share, compared to $18.6 million, or $0.31 per diluted share, in Q2 2020[18]. - Operating expenses for Q2 2021 were $51.7 million, reflecting the impact of new commercial banking hires and savings from branch consolidations[20]. - The provision for income taxes was $10.1 million for Q2 2021, with an effective tax rate of 24.8%, up from 24.0% in Q2 2020[41]. - Non-interest income for the six months ended June 30, 2021 increased to $32.6 million from $25.1 million in the same period of 2020, including a net gain on equity investments of $8.9 million[39]. - Cash dividends on common stock declared during the first six months of 2021 were $20.3 million, slightly down from $20.5 million in the same period of 2020[49]. Assets and Liabilities - Total assets as of June 30, 2021, were $11.48 billion, a slight decrease from $11.58 billion in the previous quarter[10]. - Total assets increased by $35.6 million to $11.48 billion at June 30, 2021, from $11.45 billion at December 31, 2020[31]. - Total loans, excluding PPP loans, increased by $77.1 million to $7.74 billion at June 30, 2021, from $7.66 billion at December 31, 2020[31]. - Deposits decreased by $12.3 million to $9.42 billion at June 30, 2021, from $9.43 billion at December 31, 2020[32]. - Total interest-earning assets amounted to $10,252,090 thousand, while total interest-bearing liabilities were $7,279,970 thousand as of June 30, 2021[72]. Loan Performance - The company reported a record loan pipeline of $628.6 million as of June 30, 2021, following the addition of seven commercial bankers in the quarter[20]. - Non-performing loans as a percentage of total loans receivable was 0.41% as of June 30, 2021, compared to 0.43% in the previous quarter[10]. - Non-performing loans decreased to $31.7 million at June 30, 2021, from $36.4 million at December 31, 2020, representing a reduction of approximately 18.8%[62]. - The allowance for loan credit losses was $53.9 million, or 0.69% of total loans, as of June 30, 2021, down from $60.7 million, or 0.78% of total loans, at December 31, 2020[62]. - The Company has implemented short-term modification programs for borrowers impacted by COVID-19, allowing for deferral of principal and interest payments[63]. Capital and Equity - The stockholders' equity to total assets ratio was 13.14% at June 30, 2021, indicating a well-capitalized position[19]. - Stockholders' equity increased to $1.51 billion at June 30, 2021, compared to $1.48 billion at December 31, 2020[33]. - As of June 30, 2021, the Company maintained a Tier 1 capital ratio of 12.69% and a total capital ratio of 15.37%, exceeding the regulatory requirements[53]. - The Company's stockholders' equity to total assets ratio was 13.14% as of June 30, 2021, compared to 12.96% as of December 31, 2020[54]. Interest Income and Margin - Net interest income increased to $74.0 million in Q2 2021 from $73.6 million in the prior quarter, driven by a growth in non-interest bearing deposits by $372.2 million year-to-date[20]. - Net interest income for the three months ended June 30, 2021, was $74,016 thousand, compared to $78,667 thousand for the same period in 2020[28]. - The net interest margin for the three months ended June 30, 2021, was 2.89%, down from 3.24% for the same period in 2020[28]. - Interest income for the six months ended June 30, 2021 decreased to $168.2 million from $194.1 million in the same period of 2020, with average interest-earning assets increasing by $791.3 million[35]. - Net interest income for the six months ended June 30, 2021 decreased to $147.6 million, reflecting a net interest margin reduction to 2.91% from 3.37% in the prior year[37]. Risk Factors - The Company faces significant risks due to the ongoing COVID-19 pandemic, which may adversely affect demand for its products and services, potentially leading to increased loan delinquencies and reduced income[68]. - The Company’s allowance for loan credit losses may increase due to borrowers experiencing financial difficulties, impacting net income[68]. - The Company’s cyber security risks have increased due to a rise in online banking usage and remote work[68]. Share Repurchase - The company repurchased 1.0 million shares at a weighted average cost of $20.94 under its stock repurchase program[33]. - The Company repurchased 500,000 shares of common stock in Q2 2021, totaling 1.0 million shares repurchased for the six months ended June 30, 2021[48].