OCEANFIRST FINANCIAL CORP (Form: 10-K, Received: 03/17/2008 12:55:46)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

¨	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: 0-27428

OceanFirst Financial Corp.

(Exact name of registrant as specified in its charter)

DELAWARE

22-3412577

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

975 Hooper Avenue, Toms River, New Jersey 08753

(Address of principal executive offices)

Registrant’s telephone number, including area code: (732) 240-4500

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share

(Title of class)

The Nasdaq Stock Market LLC

(Name of each exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x .

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, i.e., persons other than the directors and executive officers of the registrant, was $200,100,366, based upon the closing price of such common equity as of the last business day of the registrant’s most recently completed second fiscal quarter.

The number of shares outstanding of the registrant’s Common Stock as of March 10, 2008 was 12,358,203.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the year ended December 31, 2007, are incorporated by reference into Part II of this Form 10-K.

Portions of the Proxy Statement for the 2008 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

INDEX


		PAGE
	PART I
Item 1.	Business	1

Item 1A.	Risk Factors	30

Item 1B.	Unresolved Staff Comments	32

Item 2.	Properties	32

Item 3.	Legal Proceedings	32

Item 4.	Submission of Matters to a Vote of Security Holders	32

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32

Item 6.	Selected Financial Data	34

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations

		34

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 8.	Financial Statements and Supplementary Data	34

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34

Item 9A.	Controls and Procedures	34

Item 9B.	Other Information	35

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	36

Item 11.	Executive Compensation	36

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36

Item 13.	Certain Relationships and Related Transactions and Director Independence	37

Item 14.	Principal Accountant Fees and Services	37

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	37

Signatures		39

PART I

Item 1. Business

General

OceanFirst Financial Corp. (the “Company”) was organized by the Board of Directors of OceanFirst Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in connection with the Bank’s conversion from mutual to stock form, which was completed on July 2, 1996. At December 31, 2007, the Company had consolidated total assets of $1.9 billion and total stockholders’ equity of $124.3 million. The Company was incorporated under Delaware law and is a savings and loan holding company subject to regulation by the Office of Thrift Supervision (“OTS”), the Federal Deposit Insurance Corporation (“FDIC”) and the Securities and Exchange Commission (“SEC”). Currently, the Company does not transact any material business other than through its subsidiary, the Bank.

The Bank was originally founded as a state-chartered building and loan association in 1902, and converted to a federal savings and loan association in 1945. The Bank became a Federally-chartered mutual savings bank in 1989. The Bank’s principal business has been and continues to be attracting retail deposits from the general public in the communities surrounding its branch offices and investing those deposits, together with funds generated from operations and borrowings, primarily in single-family, owner-occupied residential mortgage loans. To a lesser extent, the Bank invests in other types of loans including commercial real estate, multi-family, construction, consumer and commercial loans. The Bank also invests in mortgage-backed securities, securities issued by the U.S. Government and agencies thereof, corporate securities and other investments permitted by applicable law and regulations. On August 18, 2000 the Bank acquired Columbia Home Loans, LLC (“Columbia”), a mortgage banking company based in Westchester County, New York. As a mortgage banking subsidiary of the Bank, Columbia originated, sold and serviced a full product line of residential mortgage loans. Columbia sold virtually all loan production into the secondary market, except that the Bank often purchased adjustable-rate and fixed-rate mortgage loans originated by Columbia for inclusion in its loan portfolio. In September 2007, the Bank discontinued all of the loan origination activity of Columbia. The Bank retained Columbia’s loan servicing portfolio. The Bank periodically sells part of its mortgage loan production in order to manage interest rate risk and liquidity. Presently, servicing rights are retained in connection with most loan sales. The Bank’s revenues are derived principally from interest on its loans, and to a lesser extent, interest on its investment and mortgage-backed securities. The Bank also receives income from fees and service charges on loan and deposit products, including reverse mortgage loans, and from the sale of trust and asset management services and alternative investment products, e.g., mutual funds, annuities and life insurance. The Bank’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities (“MBS”), proceeds from the sale of loans, Federal Home Loan Bank (“FHLB”) advances and other borrowings and to a lesser extent, investment maturities.

The Company’s website address is www.oceanfirst.com . The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through its website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

In addition to historical information, this Form 10-K contains certain forward-looking statements which are based on certain assumptions and describes future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or

investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake and specifically disclaims any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Market Area and Competition

The Bank is a community-oriented financial institution, offering a wide variety of financial services to meet the needs of the communities it serves. The Bank conducts its business through an administrative and branch office located in Toms River, New Jersey, and nineteen additional branch offices. Sixteen of the twenty branch offices are located in Ocean County with three located in Monmouth County and one located in Middlesex County, New Jersey. The Bank’s deposit gathering base is concentrated in the communities surrounding its offices. While the Bank’s lending activities are concentrated in the sub markets served by its branch office network, lending activities extend throughout New Jersey. Lending activities are also supported by a loan production office in Kenilworth, New Jersey.

The Bank is the oldest and largest community-based financial institution headquartered in Ocean County, New Jersey, which is located along the central New Jersey shore. Ocean County is among the fastest growing population areas in New Jersey and has a significant number of retired residents who have traditionally provided the Bank with a stable source of deposit funds. The economy in the Bank’s primary market area is based upon a mixture of service and retail trade. Other employment is provided by a variety of wholesale trade, manufacturing, Federal, state and local government, hospitals and utilities. The area is also home to commuters working in New Jersey suburban areas around New York and Philadelphia.

The Bank faces significant competition both in making loans and in attracting deposits. The State of New Jersey has a high density of financial institutions, many of which are branches of significantly larger institutions headquartered out-of-market which have greater financial resources than the Bank, all of which are competitors of the Bank to varying degrees. The Bank’s competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies and insurance companies. Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations and credit unions although the Bank also faces increasing competition for deposits from short-term money market funds, other corporate and government securities funds, Internet-only providers and from other financial service institutions such as brokerage firms and insurance companies.

Lending Activities

Loan Portfolio Composition . The Bank’s loan portfolio consists primarily of conventional first mortgage loans secured by one-to-four family residences. At December 31, 2007, the Bank had total loans outstanding of $1.690 billion, of which $1.085 billion or 64.2% of total loans were one-to-four family, residential mortgage loans. The remainder of the portfolio consisted of $326.7 million of commercial real estate, multi-family and land loans, or 19.3% of total loans; $10.8 million of real estate construction loans, or 0.7% of total loans; $213.3 million of consumer loans, primarily home equity loans and lines of credit, or 12.6% of total loans; and $54.3 million of commercial loans, or 3.2% of total loans. Included in total loans are $6.1 million in loans held for sale at December 31, 2007. At that same date, 54.7% of the Bank’s total loans had adjustable interest rates.

The types of loans that the Bank may originate are subject to Federal and state law and regulations. Interest rates charged by the Bank on loans are affected by the demand for such loans and the supply of money available for lending purposes and the rates offered by competitors. These factors are, in turn, affected by, among other things, economic conditions, monetary policies of the Federal government, including the Federal Reserve Board, and legislative tax policies.

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


	At December 31,
	2007					2006					2005					2004					2003
	Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total
											(Dollars in thousands)
Real estate:
One-to-four family	$	1,084,687		64.20	%	$	1,231,716		68.77	%	$	1,187,226		69.83	%	$	1,126,585		72.70	%	$	1,081,901		75.50	%
Commercial real estate, multi-family and land		326,707		19.33			306,288		17.10			281,585		16.56			243,299		15.70			205,066		14.31
Construction		10,816		.64			13,475		.75			22,739		1.34			19,189		1.23			11,274		.79
Consumer (1)		213,282		12.62			190,029		10.61			146,911		8.64			99,279		6.41			81,455		5.68
Commercial		54,279		3.21			49,693		2.77			61,637		3.63			61,290		3.96			53,231		3.72

Total loans		1,689,771		100.00	%		1,791,201		100.00	%		1,700,098		100.00	%		1,549,642		100.00	%		1,432,927		100.00	%

Loans in process		(2,452	)				(2,318	)				(7,646	)				(5,970	)				(3,829	)
Deferred origination costs, net		5,140					5,723					4,596					3,888					4,136
Unamortized discount, net		—					—					—					(4	)				(5	)
Allowance for loan losses		(10,468	)				(10,238	)				(10,460	)				(10,688	)				(10,802	)

Total loans, net		1,681,991					1,784,368					1,686,588					1,536,868					1,422,427
Less:
Mortgage loans held for sale		6,072					82,943					32,044					63,961					33,207

Loans receivable, net	$	1,675,919				$	1,701,425				$	1,654,544				$	1,472,907				$	1,389,220

Total loans:
Adjustable rate	$	924,117		54.69	%	$	885,342		49.43	%	$	975,672		57.39	%	$	849,034		54.79	%	$	670,398		46.79	%
Fixed rate		765,654		45.31			905,859		50.57			724,426		42.61			700,608		45.21			762,529		53.21

	$	1,689,771		100.00	%	$	1,791,201		100.00	%	$	1,700,098		100.00	%	$	1,549,642		100.00	%	$	1,432,927		100.00	%

(1)	Consists primarily of home equity loans and lines of credit, and to a lesser extent, loans on savings accounts and automobile loans.

Loan Maturity . The following table shows the contractual maturity of the Bank’s total loans at December 31, 2007. The table does not include principal repayments. Principal repayments, including prepayments on total loans was $561.6 million, $563.7 million, and $444.0 million for the years ended December 31, 2007, 2006 and 2005, respectively.


	At December 31, 2007
	One-to- Four Family		Commercial real estate, multi- family and land		Construction		Consumer		Commercial		Total Loans Receivable
					(In thousands)
One year or less	$	8,796	$	66,669	$	10,816	$	958	$	28,262	$	115,501

After one year:
More than one year to three years		1,365		70,078		—		2,203		9,670		83,316
More than three years to five years		7,449		50,993		—		6,560		6,063		71,065
More than five years to ten years		86,613		89,620		—		29,215		6,784		212,232
More than ten years to twenty years		179,187		39,870		—		174,346		3,500		396,903
More than twenty years		801,277		9,477		—		—		—		810,754

Total due after December 31, 2008		1,075,891		260,038		—		212,324		26,017		1,574,270

Total amount due	$	1,084,687	$	326,707	$	10,816	$	213,282	$	54,279		1,689,771

Loans in process												(2,452	)
Deferred origination costs, net												5,140
Allowance for loan losses												(10,468	)

Total loans, net												1,681,991
Less: Mortgage loans held for sale												6,072

Loans receivable, net											$	1,675,919

The following table sets forth at December 31, 2007, the dollar amount of total loans receivable contractually due after December 31, 2008, and whether such loans have fixed interest rates or adjustable interest rates.


	Due After December 31, 2008
	Fixed		Adjustable		Total
			(In thousands)
Real estate loans:
One-to-four family	$	403,014	$	672,877	$	1,075,891
Commercial real estate, multi-family and land		174,913		85,125		260,038
Consumer		139,411		72,913		212,324
Commercial		10,552		15,465		26,017

Total loans receivable	$	727,890	$	846,380	$	1,574,270

Origination, Sale, Servicing and Purchase of Loans . The Bank’s residential mortgage lending activities are conducted primarily by commissioned loan representatives in the exclusive employment of the Bank. The Bank originates both adjustable-rate and fixed-rate loans. The type of loan originated is dependent upon the relative customer demand for fixed-rate or adjustable-rate mortgage (“ARM”) loans, which is affected by the current and expected future level of interest rates. Columbia, as a mortgage banker, sold virtually all loan production except that the Bank may have purchased adjustable-rate and fixed-rate mortgage loans originated by Columbia for inclusion in its loan portfolio. Based upon availability and best execution Columbia sold its loan production on both a servicing released and servicing retained basis.

In September 2007, the Bank discontinued all loan origination activity at Columbia. Columbia entered into loan sale agreements with investors in the normal course of business. The loan sale agreements may have required Columbia to repurchase certain loans previously sold in the event of an Early Payment Default, generally defined as the failure by the borrower to make a payment within a designated period early in the loan term. Columbia may also have been required to repurchase loans in the event of a breach of a representation or warranty or a misrepresentation during the loan origination process. A portion of Columbia’s loan production consisted of subprime and Alt-A mortgage loans which were made to individuals whose borrowing needs were generally not fulfilled by traditional loan products because they did not satisfy the credit documentation or other underwriting standards prescribed by conventional mortgage lenders and loan buyers. These mortgage loans were generally underwritten to investor specifications, subjected to investor due diligence and subsequently sold to investors. Despite these procedures, the risk of an Early Payment Default and subsequent repurchase of these loans is significantly greater than conventional mortgage loans. For the year ended December 31, 2007, Columbia originated $241.0 million in total loans, of which $38.6 million was in subprime loans, representing 16.0% of the total loans it originated. For the year ended December 31, 2006, Columbia originated $728.3 million in total loans, of which $299.8 million was in subprime loans, representing 41.2% of the total loans it originated. Included in these amounts are $8.7 million and $148.2 million for the years ended December 31, 2007 and 2006, respectively, of a new subprime loan product which Columbia began offering in 2006. This product provided the borrower with 100% financing relative to the value of the underlying property. In March of 2007, Columbia discontinued the origination of subprime loans. For the year ended December 31, 2007, the Bank utilized $15.5 million to repurchase loans from investors of which $12.2 million were subsequently resold. At December 31, 2007, the Bank was holding subprime loans with a gross principal balance of $6.6 million and a carrying value, net of reserves and lower of cost or market adjustment, of $4.1 million. Also, at December 31, 2007, the Bank

was holding Alt-A loans, originally originated by Columbia, with a gross principal balance of $7.7 million and a carrying value, net of reserves and lower of cost or market adjustment, of $6.7 million.

At December 31, 2007 the Bank maintained a reserve for repurchased loans of $2.4 million related to potential losses on loans sold which may have to be repurchased due to an Early Payment Default or a violation of a representation or warranty. Provisions for losses are charged to gain on sale of loans and credited to the reserve while actual losses are charged to the reserve. In order to estimate an appropriate reserve for repurchased loans, the Bank considers recent and historical experience, product type and volume of recent whole loan sales and the general economic environment. Management believes that the Bank has established and maintained the reserve for repurchased loans at adequate levels, however, future adjustments to the reserve may be necessary due to economic, operating or other conditions beyond the Bank’s control.

The Bank also periodically sells part of its mortgage production in order to manage interest rate risk and liquidity. See “Loan Servicing.” At December 31, 2007 there were $6.1 million in loans categorized as held for sale which are recorded at the lower of cost or fair market value.

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


	For the Year December 31,
	2007		2006		2005
			(In thousands)
Total loans:
Beginning balance	$	1,791,201	$	1,700,098	$	1,549,642

Loans originated:
One-to-four family		487,289		900,595		1,008,342
Commercial real estate, multi-family and land		94,981		93,555		83,511
Construction		4,175		8,814		9,617
Consumer		166,158		225,663		172,146
Commercial		78,896		115,814		32,820

Total loans originated		831,499		1,344,441		1,306,436

Total		2,622,700		3,044,539		2,856,078
Loans repurchased from investors		15,495		—		—
Less:
Principal repayments		561,621		563,707		444,028
Sales of loans		385,962		689,561		711,952
Transfer to REO		841		70		—

Total loans	$	1,689,771	$	1,791,201	$	1,700,098

One-to-Four Family Mortgage Lending . The Bank offers both fixed-rate, regular amortizing adjustable-rate and interest-only mortgage loans secured by one-to-four family residences with maturities up to 30 years. The majority of such loans are secured by property located in the Bank’s primary market area. Loan originations are typically generated by commissioned loan representatives and their contacts within the local real estate industry, members of the local communities and the Bank’s existing or past customers.

At December 31, 2007, the Bank’s total loans outstanding were $1.690 billion, of which $1.085 billion, or 64.2%, were one-to-four family residential mortgage loans, primarily single-family and owner-occupied. To a lesser extent and included in this activity are residential mortgage loans secured by seasonal second

homes and non-owner occupied investment properties. The average size of the Bank’s one-to-four family mortgage loan was approximately $184,000 at December 31, 2007. The Bank currently offers a number of ARM loan programs with interest rates which adjust every one-, three-, five- or ten-years. The Bank’s ARM loans generally provide for periodic (not less than 2%) and overall (not more than 6%) caps on the increase or decrease in the interest rate at any adjustment date and over the life of the loan. The interest rate on these loans is indexed to the applicable one-, three-, five- or ten-year U.S. Treasury constant maturity yield, with a repricing margin which ranges generally from 2.50% to 3.25% above the index. The Bank also offers three-, five-, seven- and ten-year ARM loans which operate as fixed-rate loans for the first three, five, seven or ten years and then convert to one-year ARM loans for the remainder of the term. The ARM loans are then indexed to a margin of generally 2.50% to 3.25% above the one-year U.S. Treasury constant maturity yield.

Generally, ARM loans pose credit risks different than risks inherent in fixed-rate loans, primarily because as interest rates rise, the payments of the borrower rise, thereby increasing the potential for delinquency and default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. In order to minimize risks, borrowers of one-year ARM loans with a loan-to-value ratio of 75% or less are qualified at the fully-indexed rate (the applicable U.S. Treasury index plus the margin, rounded to the nearest one-eighth of one percent), and borrowers of one-year ARM loans with a loan-to-value ratio over 75% are qualified at the higher of the fully indexed rate or the initial rate plus the 2% annual interest rate cap. The Bank does not originate ARM loans which provide for negative amortization. The Bank does offer interest-only ARM loans in which the borrower makes only interest payments for the first five, seven or ten years of the mortgage loan term and then convert to a fully amortizing loan until maturity. Borrowers for interest-only ARM loans originated for portfolio are qualified at the fully indexed rate when the loan reprices in less than five years and are qualified at the fully amortized payment when the loan reprices in more than five years. The interest-only feature will result in future increases in the borrower’s loan repayment when the contractually required payments increase due to the required amortization of the principal amount. These payment increases could affect a borrower’s ability to repay the loan. The amount of interest-only one-to-four family mortgage loans at December 31, 2007 was $202.6 million, or 18.7% of total one-to-four family mortgages.

The Bank’s fixed-rate mortgage loans currently are made for terms from 10 to 30 years. The normal terms for fixed-rate loan commitments provide for a maximum of 60 days rate lock upon receipt of a 0.5% to 1.0% fee charged on the mortgage amount which typically becomes non-refundable in the event the loan does not close prior to expiration of the rate lock. The Bank may periodically sell some of the fixed-rate residential mortgage loans that it originates. The Bank retains the servicing on all loans sold. The Bank generally retains for its portfolio shorter term, fixed-rate loans and certain longer term fixed-rate loans, generally consisting of loans to facilitate the sale of Real Estate Owned (“REO”) and loans to officers, directors or employees of the Bank. The Bank may retain a portion of its longer term fixed-rate loans after considering volume and yield and after evaluating interest rate risk and capital management considerations. The retention of fixed-rate mortgage loans may increase the level of interest rate risk exposure of the Bank, as the rates on these loans will not adjust during periods of rising interest rates and the loans can be subject to substantial increases in prepayments during periods of falling interest rates.

The Bank’s policy is to originate one-to-four family residential mortgage loans in amounts up to 80% of the lower of the appraised value or the selling price of the property securing the loan and up to 97% of the appraised value or selling price if private mortgage insurance is obtained (up to 100% for certain Community Reinvestment Act related programs covered by private mortgage insurance). Generally, independent appraisals are obtained for loans secured by real property, however, as allowed by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), under certain

defined circumstances, a real estate collateral analysis is obtained instead. The average loan-to-value ratio of the Bank’s one-to-four family mortgage loans was 62% at December 31, 2007. Title insurance is required for all first mortgage loans. Mortgage loans originated by the Bank include due-on-sale clauses which provide the Bank with the contractual right to declare the loan immediately due and payable in the event the borrower transfers ownership of the property without the Bank’s consent. Due-on-sale clauses are an important means of adjusting the rates on the Bank’s fixed-rate mortgage loan portfolio and the Bank has generally exercised its rights under these clauses.

While the Bank obtains full verification of income on the majority of residential borrowers, it also originates stated income (no income verified) loans on a limited basis. The Bank currently offers stated income loans only to self-employed borrowers for purposes of financing primary residences and second home properties. In approving stated income loans, the Bank assesses the reasonableness of the stated income as compared with the borrower’s profession. Borrowers for stated income loans generally require good to excellent credit profiles, lower loan to value ratios and a higher level of verified liquidity. The Bank currently offers stated income loans up to a maximum 75% loan to value for loan amounts up to $500,000. To qualify under this product, the borrower must have a minimum FICO credit score of 680 and have liquid reserves equal to or greater than 20% of the loan amount. The Bank also offers stated income loans up to a maximum of 70% loan to value for loan amounts up to $650,000. To qualify under this product, the borrower must show a minimum FICO credit score of 700 and have liquid reserves equal to or greater than 20% of the loan amount. The amount of stated income loans at December 31, 2007 was $65.8 million, or 6.1% of total one-to-four family mortgages.

Commercial Real Estate, Multi-Family and Land Lending . The Bank originates commercial real estate loans that are secured by properties, or properties under construction, generally used for business purposes such as small office buildings or retail facilities, the majority of which are located in the Bank’s primary market area. The Bank’s underwriting procedures provide that commercial real estate loans may be made in amounts up to 80% of the appraised value of the property. The Bank currently originates commercial real estate loans with terms of up to twenty five years with fixed or adjustable rates which are indexed to a margin above the corresponding U.S. Treasury constant maturity yield. The loans typically contain prepayment penalties over the initial three to five years. In reaching its decision on whether to make a commercial real estate loan, the Bank considers the net operating income of the property and the borrower’s expertise, credit history, profitability and the term and quantity of leases. The Bank has generally required that the properties securing commercial real estate loans have debt service coverage ratios of at least 130%. The Bank generally requires the personal guarantee of the principal for all commercial real estate loans. The Bank’s commercial real estate loan portfolio at December 31, 2007 was $326.7 million, or 19.3% of total loans. The largest commercial real estate loan in the Bank’s portfolio at December 31, 2007 was a performing loan for which the Bank had an outstanding carrying balance of $8.5 million, secured by a first mortgage on commercial real estate used as a health care facility. The average size of the Bank’s commercial real estate loans at December 31, 2007 was approximately $542,000.

The commercial real estate portfolio includes loans for the construction of commercial properties. Typically, these loans are underwritten based upon commercial leases in place prior to funding. In many cases, commercial construction loans are extended to owners that intend to occupy the property for business operations, in which case the loan is based upon the financial capacity of the related business and the owner of the business. At December 31, 2007 the Bank had an outstanding balance in commercial construction loans of $19.7 million.

The Bank also originates multi-family mortgage loans and land loans on a limited and highly selective basis. The Bank’s multi-family loans and land loans at December 31, 2007 and 2006, totaled $2.8 million and $3.5 million, respectively.

Loans secured by multi-family residential properties are generally larger and involve a greater degree of risk than one-to-four family residential mortgage loans. Because payments on loans secured by multi-family properties are often dependent on successful operation or management of the properties, repayment of such loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks through its underwriting policies, which require such loans to be qualified at origination on the basis of the property’s income and debt coverage ratio.

Residential Construction Lending . At December 31, 2007, residential construction loans totaled $10.8 million, or 0.6%, of the Bank’s total loans outstanding. The Bank originates residential construction loans primarily on a construction/permanent basis with such loans converting to an amortizing loan following the completion of the construction phase. Most of the Bank’s construction loans are made to individuals building their primary residence, while, to a lesser extent, loans are made to finance a second home or to developers known to the Bank in order to build single-family houses for sale, which loans become due and payable over terms generally not exceeding 18 months. The current policy of the Bank is to charge interest rates on its construction loans which float at margins which are generally 0.5% to 2.0% above the prime rate (as published in the Wall Street Journal ). The Bank’s construction loans increase the interest rate sensitivity of its earning assets. At December 31, 2007, the Bank had 26 residential construction loans, with the largest exposure relating to a $1.1 million performing loan. The Bank may originate construction loans to individuals and contractors on approved building lots in amounts typically no greater than 75% of the appraised value of the land and the building. Once construction is complete, the loans are either paid in full or converted to permanent amortizing loans with maturities similar to the Bank’s other one-to-four family mortgage products. The Bank requires an appraisal of the property, credit reports, and financial statements on all principals and guarantors, among other items, for all construction loans.

Construction lending, by its nature, entails additional risks compared to one-to-four family mortgage lending, attributable primarily to the fact that funds are advanced based upon a security interest in a project which is not yet complete. As a result, construction lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower or guarantor to repay the loan. Because of these factors, the analysis of prospective construction loan projects requires an expertise that is different in significant respects from that which is required for residential mortgage lending. The Bank seeks to address these risks through its underwriting procedures.

Consumer Loans . The Bank also offers consumer loans. At December 31, 2007, the Bank’s consumer loans totaled $213.3 million, or 12.6% of the Bank’s total loan portfolio. Of that amount, home equity loans comprised $139.6 million, or 65.5%; home equity lines of credit comprised $73.0 million, or 34.1%; loans on savings accounts totaled $341,000, or 0.2%; and automobile and overdraft line of credit loans totaled $349,000 or 0.2%.

The Bank originates home equity loans typically secured by second liens on one-to-four family residences. These loans are originated as either adjustable-rate or fixed-rate loans with terms ranging from 5 to 20 years. Home equity loans are typically made on owner-occupied, one-to-four family residences and generally to Bank customers. Generally, these loans are subject to an 80% loan-to-value limitation, including any other outstanding mortgages or liens, although the Bank will also originate loans with loan-to-value limitations of up to 90%, subject to more restrictive underwriting requirements.

The Bank also offers a variable-rate home equity line of credit which extends a credit line based on the applicant’s income and equity in the home. Generally, the credit line, when combined with the balance of the first mortgage lien, may not exceed 80% of the appraised value of the property at the time of the loan commitment, although the Bank will also originate loans with loan-to-value limitations of up to 90%, subject to more restrictive underwriting requirements. Home equity lines of credit are secured by a mortgage on the underlying real estate. The Bank presently charges no origination fees for these loans, but may in the future charge origination fees for its home equity lines of credit. The Bank does, however, charge early termination fees should a line of credit be closed within three years of origination. A borrower is required to make monthly payments of principal and interest, at a minimum of $50, based upon a 10, 15 or 20 year amortization period. The Bank also offers home equity lines of credit which require the payment of interest only during the first five years with fully amortizing payments thereafter. Generally, the adjustable rate of interest charged is based upon the prime rate of interest (as published in the Wall Street Journal ), although the range of interest rates charged may vary from 1.0% below prime to 1.5% over prime. The loans have an 18% lifetime cap on interest rate adjustments.

Commercial Lending . At December 31, 2007, commercial loans totaled $54.3 million, or 3.2% of the Bank’s total loans outstanding. The Commercial Lending group’s primary function is to service the business communities’ banking and financing needs in the Bank’s primary market area. The Commercial Lending group originates both commercial real estate loans and commercial loans (including loans for working capital; fixed asset purchases; and acquisition, receivable and inventory financing). Credit facilities such as lines of credit and term loans will be used to facilitate these requests. In all cases, the Bank will review and analyze financial history and capacity, collateral value, strength and character of the principals, and general payment history of the borrower and principals in coming to a credit decision. The Bank generally requires the personal guarantee of the principal borrowers for all commercial loans.

A well-defined credit policy has been approved by the Bank’s Board of Directors. This policy discourages high risk credits, while focusing on quality underwriting, sound financial strength and close monitoring. Commercial business lending, both secured and unsecured, is generally considered to involve a higher degree of risk than secured residential real estate lending. Risk of loss on a commercial business loan is dependent largely on the borrower’s ability to remain financially able to repay the loan from ongoing operations. If the Bank’s estimate of the borrower’s financial ability is inaccurate, the Bank may be confronted with a loss of principal on the loan. The Bank’s largest commercial loan at December 31, 2007 was a performing loan with an outstanding balance of $4.0 million which was secured by a first lien on all corporate assets. The average size of the Bank’s commercial loans at December 31, 2007 was approximately $138,000.

Loan Approval Procedures and Authority . The Board of Directors establishes the loan approval policies of the Bank based on total exposure to the individual borrower. The Board of Directors has authorized the approval of loans by various officers of the Bank or a Management Credit Committee, on a scale which requires approval by personnel with progressively higher levels of responsibility as the loan amount increases. Loans with a total exposure in excess of $3.0 million require approval by the Management Credit Committee. Loans with a total exposure in excess of $7.0 million require approval by the Board of Directors. A minimum of two employees’ signatures are required to approve residential loans over conforming loan limits. The Bank’s loan approval policies previously delegated approval authority to specified employees at Columbia within assigned exposure limits for loans originated for the Bank’s portfolio. Columbia maintained a Credit Policy that established the delegated authority levels for loans originated for sale. Pursuant to OTS regulations, loans to one borrower generally cannot exceed 15% of the Bank’s unimpaired capital, which at December 31, 2007 amounted to $20.7 million. At December 31, 2007, the Bank’s maximum loan exposure to a single borrower was $13.2 million,

although the amount outstanding at December 31, 2007 was only $4.2 million. This relationship consists of five separate credit facilities and several of the notes have separate and distinct guarantors. The largest outstanding balance to a single borrower was $9.3 million, net of participations sold. This relationship consists of eight separate credit facilities and several of the notes have separate and distinct guarantors.

Loan Servicing . Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, making inspections as required of mortgaged premises, contacting delinquent borrowers, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. The Bank also services mortgage loans for others. All of the loans currently being serviced for others are loans which have been sold by the Bank or Columbia. At December 31, 2007, the Bank was servicing $1.026 billion of loans for others. At December 31, 2007, 2006 and 2005 the balance of mortgage servicing rights totaled $8.9 million, $9.8 million and $9.7 million, respectively. For the years ended December 31, 2007, 2006 and 2005, loan servicing income, net of related amortization totaled $468,000, $515,000 and $280,000, respectively. The Bank evaluates mortgage servicing rights for impairment on a quarterly basis. The valuation of mortgage servicing rights is determined through a discounted analysis of future cash flows, incorporating numerous assumptions which are subject to significant change in the near term. Generally, a decline in market interest rates will cause expected repayment speeds to increase resulting in a lower valuation for mortgage servicing rights and ultimately lower future servicing fee income.

Delinquencies and Classified Assets . The Board of Directors performs a monthly review of all delinquent loan totals which includes loans sixty days or more past due, and the detail of each loan thirty days or more past due that was originated within the past year. In addition, the Chief Risk Officer compiles a quarterly list of all classified loans and a narrative report of classified commercial, commercial real estate, multi-family, land and construction loans. The steps taken by the Bank with respect to delinquencies vary depending on the nature of the loan and period of delinquency. When a borrower fails to make a required payment on a loan, the Bank takes a number of steps to have the borrower cure the delinquency and restore the loan to current status. The Bank generally sends the borrower a written notice of non-payment after the loan is first past due. In the event payment is not then received, additional letters and phone calls generally are made. In the case of residential mortgage loans, the Bank may offer to modify the terms or take other forbearance actions which afford the borrower an opportunity to remain in their home and satisfy the loan terms. The Bank plans to utilize the HOPE NOW alliance loan modification reporting standards for subprime adjustable rate mortgages. HOPE NOW is an alliance between counselors, mortgage market participants and mortgage servicers to create a unified, coordinated plan to reach and help as many homeowners as possible. If the loan is still not brought current and it becomes necessary for the Bank to take legal action, which typically occurs after a loan is delinquent at least 90 days or more, the Bank will commence litigation to realize on the collateral, including foreclosure proceedings against any real property that secures the loan. If a foreclosure action is instituted and the loan is not brought current, paid in full, or an acceptable workout accommodation is not agreed upon before the foreclosure sale, the real property securing the loan generally is sold at foreclosure.

The Bank’s Internal Asset Classification Committee, which is chaired by the Chief Risk Officer who reports directly to the Audit Committee of the Board of Directors, reviews and classifies the Bank’s assets quarterly and reports the results of its review to the Board of Directors. The Bank classifies assets in accordance with certain regulatory guidelines established by the OTS which are applicable to all savings institutions. At December 31, 2007, the Bank had $12.4 million of assets, including all REO, classified as “Substandard”, $15,000 of assets classified as “Doubtful” and no assets classified as “Loss”. Loans and other assets may also be placed on a watch list as “Special Mention” assets. Assets which do not

currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated “Special Mention.” Special Mention assets totaled $8.2 million at December 31, 2007. Loans are classified as Special Mention due to past delinquencies or other identifiable weaknesses. The Substandard classification includes $4.5 million of commercial loans, the largest being a $2.2 million relationship for a start-up business for which operating revenue is not currently supporting the debt obligation. The loans are current as to payments, but was classified due to negative cash flow from the business. The loans are secured by real estate and business assets. The largest Special Mention relationship was a $4.4 million credit to a real estate agency which was current as to payments, but classified due to declining revenue and net income of the borrower. The loans are secured by commercial real estate, corporate assets and the personal guarantees of the principals.

Non-Accrual Loans and REO

The following table sets forth information regarding non-accrual loans and REO. The Bank had no troubled-debt restructured loans and three REO properties at December 31, 2007. It is the policy of the Bank to cease accruing interest on loans 90 days or more past due or in the process of foreclosure. For the years ended December 31, 2007, 2006, 2005, 2004 and 2003, respectively, the amount of interest income that would have been recognized on non-accrual loans if such loans had continued to perform in accordance with their contractual terms was $210,000, $189,000, $115,000, $128,000 and $96,000.


	December 31,
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Non-accrual loans:
Real estate:
One-to-four family	$	6,620		$	2,703		$	1,084		$	1,337		$	1,712
Commercial real estate, multi-family and land		1,040			286			—			744			242
Consumer		586			281			299			784			90
Commercial		495			1,255			212			623			118

Total		8,741			4,525			1,595			3,488			2,162
REO, net(1)		438			288			278			288			252

Total non-performing assets	$	9,179		$	4,813		$	1,873		$	3,776		$	2,414

Allowance for loan losses as a percent of total loans receivable (2)		.62	%		.57	%		.62	%		.69	%		.75	%
Allowance for loan losses as a percent of total non-performing loans (3)		119.76			226.25			655.80			306.42			499.63
Non-performing loans as a percent of total loans receivable (2)(3)		.52			.25			.09			.23			.15
Non-performing assets as a percent of total assets (3)		.48			.23			.09			.20			.14

(1)	REO balances are shown net of related loss allowances.

(2)	Total loans includes loans receivable and mortgage loans held for sale.

(3)	Non-performing assets consist of non-performing loans and REO. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure.

The non-performing loan total includes $1.2 million of repurchased one-to-four family and consumer loans and $2.8 million of one-to-four family and consumer loans previously held-for-sale, which were written down to their fair market value.

Allowance for Loan Losses . The allowance for loan losses is a valuation account that reflects probable incurred losses in the loan portfolio based on management’s evaluation of the risks inherent in its loan portfolio and the general economy. The Bank maintains the allowance for loan losses through provisions for loan losses that are charged to income. Charge-offs against the allowance for loan losses are taken on loans where management determines that the collection of loan principal is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for loan losses.

The allowance for loan losses is maintained at an amount management considers sufficient to provide for probable losses based on evaluating known and inherent risks in the loan portfolio resulting from management’s continuing analysis of the factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectibility may not be assured, and the determination of the existence and realizable value of the collateral and guarantees securing the loan.

The Bank’s allowance for loan losses consists of a specific allowance and a general allowance, each updated on a quarterly basis. A specific allowance is determined for all impaired assets classified as Substandard, Doubtful or Loss where the value of the underlying collateral can reasonably be evaluated, generally loans which are secured by real estate. The Bank obtains an updated appraisal whenever a loan secured by real estate becomes 90 days delinquent. The specific allowance represents the difference between the Bank’s recorded investment in the loan and the fair value of the collateral, less estimated disposal costs. A general allowance is determined for all other classified and non-classified loans. In determining the level of the general allowance, the Bank segments the loan portfolio into various risk tranches based on type of loan (mortgage, consumer and commercial); and certain underwriting characteristics. An estimated loss factor is then applied to each risk tranche. The loss factors are determined based upon historical loan loss experience, current economic conditions, underwriting standards, internal loan review results and other factors.

An overwhelming percentage of the Bank’s loan portfolio, whether one-to-four family, consumer or commercial, is secured by real estate. Additionally, most of the Bank’s borrowers are located in Ocean and Monmouth Counties, New Jersey and the surrounding area. These concentrations may adversely affect the Bank’s loan loss experience should local real estate values decline or should the markets served experience an adverse economic shock.

Management believes the primary risks inherent in the portfolio are possible increases in interest rates, a decline in the economy, generally, and a decline in real estate market values. Any one or a combination of these events may adversely affect the borrowers’ ability to repay the loans, resulting in increased delinquencies, loan losses and future levels of provisions. Accordingly, the Bank has provided for loan losses at the current level to address the current risk in the loan portfolio.

Although management believes that the Bank has established and maintained the allowance for loan losses at adequate levels to reserve for inherent losses probable in its loan portfolio, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to make

additional provisions for loan losses based upon information available to them at the time of their examination. Although management uses the best information available, future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Bank’s control.

As of December 31, 2007 and 2006, the Bank’s allowance for loan losses was .62% and .57%, respectively, of total loans. The Bank had non-accrual loans of $8.7 million and $4.5 million at December 31, 2007 and 2006, respectively. The Bank will continue to monitor and modify its allowance for loan losses as conditions dictate.

The following table sets forth activity in the Bank’s allowance for loan losses for the periods set forth in the table.


	At or for the Year Ended
	2007			2006			2005			2004			2003
	(Dollars in thousands)
Balance at beginning of year	$	10,238		$	10,460		$	10,688		$	10,802		$	10,074

Charge-offs:
Real Estate:
One-to-four family		107			113			11			175			78
Commercial real estate, multi-family and land		—			—			—			—			—
Consumer		—			6			—			—			—
Commercial		370			450			673			312			180

Total		477			569			684			487			258
Recoveries		7			197			106			73			298

Net charge-offs (recoveries)		470			372			578			414			(40	)

Provision for loan losses		700			150			350			300			688

Balance at end of year	$	10,468		$	10,238		$	10,460		$	10,688		$	10,802

Ratio of net charge-offs during the year to average net loans outstanding during the year		.03	%		.02	%		.04	%		.03	%		.00	%

The following table sets forth the Bank’s percent of allowance for loan losses to total allowance and the percent of loans to total loans in each of the categories listed at the dates indicated (Dollars in thousands).


	At December 31,
	2007						2006						2005						2004						2003
	Amount		Percent of Allowance to Total Allowance		Percent of Loans in Each Category to Total Loans		Amount		Percent of Allowance to Total Allowance		Percent of Loans in Each Category to Total Loans		Amount		Percent of Allowance to Total Allowance		Percent of Loans in Each Category to Total Loans		Amount		Percent of Allowance to Total Allowance		Percent of Loans in Each Category to Total Loans		Amount		Percent of Allowance to Total Allowance		Percent of Loans in Each Category to Total Loans
One- to- Four family	$	2,238	21.38	%	64.20	%	$	2,828	27.62	%	68.77	%	$	2,181	20.85	%	69.83	%	$	1,940	18.15	%	72.70	%	$	1,978	18.31	%	75.50	%
Commercial real estate, multi- family and land		3,547	33.88		19.33			3,034	29.64		17.10			3,080	29.44		16.56			3,895	36.44		15.70			4,347	40.24		14.31
Construction		63	.60		.64			84	.82		.75			113	1.08		1.34			144	1.35		1.23			81	.75		.79
Consumer		1,587	15.16		12.62			1,490	14.55		10.61			1,146	10.96		8.64			1,037	9.70		6.41			781	7.23		5.68
Commercial		1,329	12.70		3.21			1,324	12.93		2.77			1,909	18.25		3.63			1,970	18.43		3.96			1,415	13.10		3.72
Unallocated		1,704	16.28		—			1,478	14.44		—			2,031	19.42		—			1,702	15.93		—			2,200	20.37		—

Total	$	10,468	100.00	%	100.00	%	$	10,238	100.00	%	100.00	%	$	10,460	100.00	%	100.00	%	$	10,688	100.00	%	100.00	%	$	10,802	100.00	%	100.00	%

Investment Activities

Federally-chartered savings institutions have the authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various Federal agencies, certificates of deposit of insured banks and savings institutions, bankers’ acceptances, repurchase agreements and Federal funds. Subject to various restrictions, Federally-chartered savings institutions may also invest in commercial paper, investment-grade corporate debt securities and mutual funds whose assets conform to the investments that a Federally-chartered savings institution is otherwise authorized to make directly.

The investment policy of the Bank as established by the Board of Directors attempts to provide and maintain liquidity, generate a favorable return on investments without incurring undue interest rate and credit risk, and complement the Bank’s lending activities. Specifically, the Bank’s policies generally limit investments to government and Federal agency-backed securities and other non-government guaranteed securities, including corporate debt obligations, that are investment grade. The Bank’s policies provide that all investment purchases must be approved by two officers (either the Vice President/Treasurer, the Executive Vice President/Chief Financial Officer or the President/Chief Executive Officer) and must be ratified by the Board of Directors.

Investment and mortgage-backed securities identified as held to maturity are carried at cost, adjusted for amortization of premium and accretion of discount, which are recognized as adjustments to interest income. Management determines the appropriate classification of securities at the time of purchase. If the Bank has the intent and the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity. Securities to be held for indefinite periods of time, but not necessarily to maturity are classified as available for sale. Securities available for sale include securities that management intends to use as part of its asset/liability management strategy. Such securities are carried at fair value and unrealized gains and losses, net of related tax effect, are excluded from earnings, but are included as a separate component of stockholders’ equity. At December 31, 2007, all of the Bank’s investment and mortgage-backed securities were classified as available for sale.

Mortgage-backed Securities . Mortgage-backed securities represent a participation interest in a pool of single-family or multi-family mortgages, the principal and interest payments on which, in general, are passed from the mortgage originators, through intermediaries that pool and repackage the participation interests in the form of securities, to investors such as the Bank. Such intermediaries may be private issuers, or agencies including the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”) and the Government National Mortgage Association (“GNMA”) that guarantee the payment of principal and interest to investors. Mortgage-backed securities typically are issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates that are within a certain range and with varying maturities. The underlying pool of mortgages can be composed of either fixed-rate or ARM loans.

The actual maturity of a mortgage-backed security varies, depending on when the mortgagors repay or prepay the underlying mortgages. Prepayments of the underlying mortgages may shorten the life of the security, thereby affecting its yield to maturity and the related market value of the mortgage-backed security. The prepayments of the underlying mortgages depend on many factors, including the type of mortgages, the coupon rates, the age of mortgages, the geographical location of the underlying real estate collateralizing the mortgages, the general levels of market interest rates, and general economic conditions. GNMA mortgage-backed securities that are backed by assumable Federal Housing Authority (“FHA”) or Department of Veterans Affairs (“VA”) loans generally have a longer life than conventional non-assumable loans underlying FHLMC and FNMA mortgage-backed securities. During periods of

falling mortgage interest rates, prepayments generally increase, as opposed to periods of increasing interest rates when prepayments generally decrease. If the interest rate of underlying mortgages significantly exceeds the prevailing market interest rates offered for mortgage loans, refinancing generally increases and accelerates the prepayment of the underlying mortgages. Prepayment experience is more difficult to estimate for adjustable-rate mortgage-backed securities.

The Bank has investments in mortgage-backed securities and has utilized such investments to complement its lending activities. The Bank invests in a large variety of mortgage-backed securities, including ARM, balloon and fixed-rate mortgage-backed securities, the majority of which are directly insured or guaranteed by FHLMC, FNMA and GNMA. At December 31, 2007, mortgage-backed securities totaled $54.1 million, or 2.8% of total assets.

The following table sets forth the Bank’s mortgage-backed securities activities for the periods indicated.


	For the Year Ended December 31,
	2007			2006			2005
				(In thousands)
Beginning balance	$	68,369		$	85,025		$	124,478
Mortgage-backed securities purchased		—			6,439			7,704
Less: Principal repayments		(14,653	)		(17,117	)		(37,473	)
Amortization of premium		(197	)		(353	)		(871	)
Sales		—			(6,389	)		(7,745	)
Change in net unrealized loss on mortgage-backed securities available for sale		618			764			(1,068	)

Ending balance	$	54,137		$	68,369		$	85,025

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


	At December 31,
	2007				2006				2005
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
	(In thousands)
Mortgage-backed securities:
FHLMC	$	11,845	$	11,862	$	14,726	$	14,649	$	10,964	$	10,809
FNMA		40,559		40,482		52,264		51,684		72,861		71,531
GNMA		1,696		1,793		1,960		2,036		2,545		2,685

Total mortgage-backed securities	$	54,100	$	54,137	$	68,950	$	68,369	$	86,370	$	85,025

Investment Securities . The following table sets forth certain information regarding the amortized cost and market values of the Company’s investment securities at the dates indicated.


	At December 31,
	2007				2006				2005
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
					(In thousands)
Investment securities:
U.S. agency obligations	$	297	$	298	$	290	$	289	$	201	$	200
State and municipal obligations		1,747		1,756		1,747		1,768		4,131		4,157
Corporate debt securities		54,973		49,674		75,655		74,060		75,528		73,630
Equity investments		5,586		5,897		4,905		6,267		4,724		5,874

Total investment securities	$	62,603	$	57,625	$	82,597	$	82,384	$	84,584	$	83,861

The table below sets forth certain information regarding the amortized cost, weighted average yields and contractual maturities, excluding scheduled principal amortization, of the Bank’s investment and mortgage-backed securities, excluding equity securities, as of December 31, 2007. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	At December 31, 2007
													Total
	One Year or Less Amortized Cost			More than One Year to Five Years Amortized Cost			More than Five Years to Ten Years Amortized Cost			More than Ten Years Amortized Cost			Amortized Cost			Estimated Market Value
	(Dollars in thousands)
Investment securities:
U.S. agency obligations	$	297		$	—			—		$	—		$	297		$	298
State and municipal obligations (1)		—			—			—			1,747			1,747			1,756
Corporate debt securities (2)		—			—			—			54,973			54,973			49,674

Total investment securities	$	297		$	—			—		$	56,720		$	57,017		$	51,728

Weighted average yield		4.90	%		—			—			5.73	%		5.72	%

Mortgage-backed securities:
FHLMC	$	—		$	10		$	—		$	11,835		$	11,845		$	11,862
FNMA		—			—			6			40,553			40,559			40,482
GNMA		—			18			14			1,664			1,696			1,793

Total mortgage-backed securities	$	—		$	28		$	20		$	54,052		$	54,100		$	54,137

Weighted average yield		—			12.61	%		11.86	%		4.81	%		4.82	%

(1)	State and municipal obligations are reported at tax equivalent yield.

(2)	All of the Bank’s corporate debt securities with maturities over one year carry interest rates which adjust to a spread over LIBOR on a quarterly basis.

Sources of Funds

General . Deposits, loan and mortgage-backed securities repayments and prepayments, proceeds from sales of loans, investment maturities, cash flows generated from operations and FHLB advances and other borrowings are the primary sources of the Bank’s funds for use in lending, investing and for other general purposes.

Deposits . The Bank offers a variety of deposit accounts with a range of interest rates and terms. The Bank’s deposits consist of money market accounts, savings accounts, interest-bearing checking accounts, non-interest bearing accounts and time deposits. For the year ended December 31, 2007, time deposits constituted 37.0% of total average deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. The Bank’s deposits are obtained predominantly from the areas in which its branch offices are located. The Bank relies on its community-banking focus stressing customer service and long-standing relationships with customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions significantly affect the Bank’s ability to attract and retain deposits. The Bank does not currently use brokers to obtain deposits.

The following table presents the deposit activity of the Bank for the periods indicated:


	For the Year Ended December 31,
	2007			2006			2005
	(In thousands)
Net (withdrawals) deposits	$	(124,410	)	$	(16,844	)	$	63,919
Interest credited on deposit accounts		35,872			32,604			22,114

Total (decrease) increase in deposit accounts	$	(88,538	)	$	15,760		$	86,033

At December 31, 2007, the Bank had $98.5 million in time deposits in amounts of $100,000 or more maturing as follows:


Maturity Period	Amount		Weighted Average Rate
	(Dollars in thousands)
Three months or less	$	45,427	4.59	%
Over three through six months		31,959	4.50
Over six through 12 months		14,363	4.26
Over 12 months		6,765	4.22

Total	$	98,514	4.49

The following table sets forth the distribution of the Bank’s average deposit accounts and the average rate paid on those deposits for the periods indicated.


	For the Years Ended December 31,
	2007						2006						2005
	Average Balance		Percent of Total Average Deposits		Average Rate Paid		Average Balance		Percent of Total Average Deposits		Average Rate Paid		Average Balance		Percent of Total Average Deposits		Average Rate Paid
	(Dollars in thousands)
Money market deposit accounts	$	94,374	7.10	%	1.67	%	$	117,935	8.59	%	1.69	%	$	135,907	10.10	%	1.18	%
Savings accounts		195,948	14.73		.99			219,879	16.02		.79			260,655	19.38		.71
Interest-bearing checking accounts		435,433	32.74		2.60			379,997	27.69		2.16			350,839	26.09		1.33
Non-interest-bearing accounts		112,649	8.47		—			120,482	8.78		—			115,681	8.60		—
Total time deposits		491,465	36.96		4.42			534,056	38.92		4.02			481,585	35.83		3.05

Total average deposits	$	1,329,869	100.00	%	2.75	%	$	1,372,349	100.00	%	2.43	%	$	1,344,667	100.00	%	1.70	%

Borrowings . From time-to-time the Bank has obtained term advances from the Federal Home Loan Bank of New York (“FHLB-NY”) as an alternative to retail deposit funds and may do so in the future as part of its operating strategy. FHLB-NY term advances may also be used to acquire certain other assets as may be deemed appropriate for investment purposes. These term advances are collateralized primarily by certain of the Bank’s mortgage loans and investment and mortgage-backed securities and secondarily by the Bank’s investment in capital stock of the FHLB-NY. In addition, the Bank has an available overnight line of credit with the FHLB-NY for $100 million which expires July 31, 2008. The Bank also has available from the FHLB-NY a one-month, overnight repricing line of credit for $100 million which also expires on July 31, 2008. The Bank expects both lines to be renewed upon expiration. When utilized, both lines carry a floating interest rate of 10-15 basis points over the current Federal funds rate and are secured by the Bank’s mortgage loans, and FHLB-NY stock. The maximum amount that the FHLB-NY will advance to member institutions, including the Bank, fluctuates from time to time in accordance with the policies of the OTS and the FHLB-NY. At December 31, 2007, the Bank had $58.0 million borrowed under the FHLB-NY lines of credit and $335.0 million under various term advances.

The Bank also borrows funds using securities sold under agreements to repurchase. Under this form of borrowing specific U.S. Government agency, corporates and/or mortgage-backed securities are pledged as collateral to secure the borrowing. These pledged securities are held by a third party custodian. At December 31, 2007, the Bank had borrowed $81.8 million through securities sold under agreements to repurchase.

Subsidiary Activities

At December 31, 2007 the Bank owned three subsidiaries – Columbia Home Loans, LLC, OceanFirst Services, LLC and OceanFirst REIT Holdings, LLC.

Columbia Home Loans, LLC was acquired by the Bank on August 18, 2000 and operated as a mortgage banking subsidiary based in Westchester County, New York. Columbia originated, sold and serviced a full product line of residential mortgage loans primarily in New York and New Jersey. Loans were originated through retail branches and a network of independent mortgage brokers and, to a lesser extent direct Internet sales. Columbia sold virtually all loan production in the secondary market or, to a lesser extent, the Bank. In September 2007, the Bank discontinued all of the loan origination activity of Columbia. The Bank retained Columbia’s loan servicing portfolio.

OceanFirst Services, LLC was originally organized in 1982 under the name Dome Financial Services, Inc., to engage in the sale of all-savers life insurance. Prior to 1998 the subsidiary was inactive, however, in 1998, the Bank began to sell non-deposit investment products (annuities, mutual funds and insurance) through a third-party marketing firm to Bank customers through this subsidiary, recognizing fee income from such sales. OFB Reinsurance, Ltd. was established in 2002 as a subsidiary of OceanFirst Services, LLC to reinsure a percentage of the private mortgage insurance risks on one-to-four family residential mortgages originated by the Bank and Columbia.

OceanFirst REIT Holdings, LLC. was established in 2007 and acts as the holding company for OceanFirst Realty Corp. OceanFirst Realty Corp. was established in 1997 and is intended to qualify as a real estate investment trust, which may, among other things, be utilized by the Company to raise capital in the future. Upon formation of OceanFirst Realty Corp., the Bank transferred $668 million of mortgage loans to this subsidiary.

Personnel

As of December 31, 2007, the Bank had 351 full-time employees and 62 part-time employees. The employees are not represented by a collective bargaining unit and the Bank considers its relationship with its employees to be good.

REGULATION AND SUPERVISION

General

As a savings and loan holding company, the Company is required by Federal law to file reports with, and otherwise comply with, the rules and regulations of the OTS. The Bank is subject to extensive regulation, examination and supervision by the OTS, as its primary Federal regulator, and the FDIC, as the deposit insurer. The Bank is a member of the Federal Home Loan Bank System and, with respect to deposit insurance, of the Deposit Insurance Fund managed by the FDIC. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other insured depository institutions. The OTS and/or the FDIC conduct periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors and to ensure the safe and sound operation of the Bank. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulatory requirements and policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on the Company, the Bank and their operations. Certain of the regulatory requirements applicable to the Bank and to the Company are referred to below or elsewhere herein. The description of statutory provisions and regulations applicable to savings institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Bank and the Company and is qualified in its entirety by reference to the actual laws and regulations involved.

Holding Company Regulation

The Company is a nondiversified unitary savings and loan holding company within the meaning of Federal law. Under prior law, a unitary savings and loan holding company, such as the Company, was not generally restricted as to the types of business activities in which it may engage, provided that the Bank continued to be a qualified thrift lender (“QTL”). See “Federal Savings Institution Regulation - QTL Test.” The Gramm-Leach-Bliley Act of 1999 provides that no company may acquire control of a savings association after May 4, 1999 unless it engages only in the financial activities permitted for financial holding companies under the law or for multiple savings and loan holding companies as described below. Further, the Gramm-Leach-Bliley Act specifies that existing savings and loan holding companies may only engage in such activities. The Gramm-Leach-Bliley Act, however, grandfathered the unrestricted authority for activities with respect to unitary savings and loan holding companies existing prior to May 4, 1999, such as the Company, so long as the Bank continues to comply with the QTL test. The Company qualifies for the grandfather provision. Upon any non-supervisory acquisition by the Company of another savings institution or savings bank that meets the QTL test and is deemed to be a savings institution by the OTS, the Company would become a multiple savings and loan holding company (if the acquired institution is held as a separate subsidiary) and would generally be limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the OTS, and certain activities authorized by OTS regulation. However, the OTS has issued an interpretation concluding that multiple savings and loan holding companies may also engage in activities permitted for financial holding companies.

A savings and loan holding company is prohibited from, directly or indirectly, acquiring more than 5% of

the voting stock of another savings institution or savings and loan holding company without prior written approval of the OTS and from acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the OTS considers the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the deposit insurance funds, the convenience and needs of the community and competitive factors.

The OTS may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Although savings and loan holding companies are not subject to specific capital requirements or specific restrictions on the payment of dividends or other capital distributions, Federal regulations do prescribe such restrictions on subsidiary savings institutions as described below. The Bank must notify the OTS 30 days before declaring any dividend to the Company. In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the OTS which has the authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

Acquisition of the Company . Under the Federal Change in Bank Control Act (“CBCA”) and OTS regulations, a notice must be submitted to the OTS if any person (including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s outstanding voting stock, unless the OTS has found that the acquisition will not result in a change of control of the Company. Under CBCA, the OTS has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan holding company.

Federal Savings Institution Regulation

Business Activities . The activities of Federal savings institutions are governed by Federal law and regulations. These laws and regulations delineate the nature and extent of the activities in which Federal savings banks may engage. In particular, many types of lending authority for Federal savings banks, e.g . , commercial, non-residential real property loans and consumer loans, are limited to a specified percentage of the institution’s capital or assets.

Capital Requirements . The OTS capital regulations require savings institutions to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system), and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The OTS regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings institutions requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet activities, are multiplied by a risk-weight factor of 0% to 100%, assigned by the OTS capital regulation based on the risks believed inherent in the type of asset. Core (Tier 1) capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual

preferred stock and related surplus, and minority interests in equity accounts of consolidated subsidiaries less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. The OTS has authority to establish individual minimum capital requirements in cases where it is determined that a particular institution’s capital level is, or may, become inadequate in light of the circumstances involved.

The following table presents the Bank’s capital position at December 31, 2007. The Bank met each of its capital requirements at that date.


							Capital
	Actual Capital		Required Capital		Excess Amount		Actual Percent		Required Percent
	(Dollars in thousands)
Tangible	$	138,275	$	28,930	$	109,345	7.17	%	1.50	%
Core (Leverage)		138,275		57,860		80,415	7.17		3.00
Risk-based		148,440		105,921		42,519	11.21		8.00

Prompt Corrective Regulatory Action . The OTS is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. Generally, a savings institution that has a ratio of total capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.” A savings institution that has a total risk-based capital ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and a savings institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.” Subject to a narrow exception, the OTS is required to appoint a receiver or conservator for an institution that is “critically undercapitalized.” The regulation also provides that a capital restoration plan must be filed with the OTS within 45 days of the date a savings institution receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. The OTS could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionary measures.

Insurance of Deposit Accounts . Deposit accounts at the Bank are insured by the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation. The Bank’s deposits, therefore, are subject to Federal Deposit Insurance Corporation deposit insurance assessments and the Federal Deposit Insurance Corporation has adopted a risk-based system for determining deposit insurance assessments.

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

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

In February 2006, the “Federal Deposit Insurance Reform Act of 2005,” or the 2005 Deposit Act, was signed into law. The 2005 Deposit Act contains provisions designed to reform and modernize the Federal deposit insurance system. Effective in 2006, the 2005 Deposit Act merged the previously separate insurance funds into the new DIF; indexed the current $100,000 deposit insurance limit to inflation beginning in April 2010 and every succeeding five years; and increased the deposit insurance limit for certain retirement accounts to $250,000 and indexed that limit to inflation as well.

Prior to January 1, 2007, an institution’s assessment rate depended on the capital category and supervisory category to which it was assigned. Under this risk-based assessment system, there were nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates were applied. If the FDIC determined that assessment rates should be increased, institutions in all risk categories would be affected.

Effective January 1, 2007, the FDIC established a new risk-based assessment system for determining the deposit insurance assessments to be paid by insured depository institutions. The FDIC consolidated the previous nine assessment rate categories into four new categories. The FDIC has the flexibility to adjust rates, without further notice-and-comment rulemaking, provided that no such adjustment can be greater than three basis points above or below the base rates and that rates cannot be negative. The FDIC also established 1.25% of estimated insured deposits as the designated reserve ratio of the DIF. The FDIC is authorized to change the assessment rates as necessary, subject to the previously discussed limitations, to maintain the required reserve ratio of 1.25%.

Under the Deposit Insurance Funds Act of 1996 (“Funds Act”), the assessment base for the payments on bonds issued in the late 1980’s by the Financing Corporation (“FICO”) to recapitalize the now defunct Federal Savings and Loan Insurance Corporation was expanded to include, beginning January 1, 1997, the deposits of certain insured institutions, including the Bank. The bonds issued by FICO are due to mature in 2017 through 2019. The FICO payments are in addition to the deposit insurance assessment.

The total expense incurred in 2007 for the deposit insurance assessment and the FICO payments was $297,000. The FDIC has approved a One-Time Assessment Credit to institutions that were in existence on December 31, 1996 and paid deposit insurance assessments prior to that date, or are a successor to such an institution. The Bank is entitled to a One-Time Assessment Credit of $1.3 million of which $626,000 was used to offset part of the 2007 calendar year deposit insurance assessment, excluding the FICO payments. The remaining credit of $687,000 will be used to offset part of the 2008 calendar year deposit insurance assessment.

Loans to One Borrower . Federal law provides that savings institutions are generally subject to the limits on loans to one borrower applicable to national banks. Subject to certain exceptions, a savings institution may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral. At December 31, 2007, the Bank’s limit on loans to one borrower was $20.7 million. At December 31, 2007, the Bank’s maximum loan exposure to a single borrower was $13.2 million, although the amount outstanding at December 31, 2007 was only $4.2 million. The largest outstanding balance to a single borrower was $9.3 million, net of participations sold.

Qualified Thrift Lender Test . The Home Owners Loan Act requires savings institutions to meet a qualified thrift lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (1) specified liquid assets up to 20% of total assets; (2) intangibles, including goodwill; and (3) the value of property used to conduct business) in certain “qualified thrift

investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least nine months out of each 12 month period. Additionally, education loans, credit card loans and small business loans may be considered “qualified thrift investments.”

A savings institution that fails the qualified thrift lender test is subject to certain operating restrictions and may be required to convert to a bank charter. As of December 31, 2007, the Bank met the qualified thrift lender test.

Limitation on Capital Distributions . OTS regulations impose limitations upon all capital distributions by a savings institution, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and the approval of the OTS is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OTS regulations ( i.e. , generally, examination ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OTS. If an application is not required, the institution must still provide prior notice to the OTS of the capital distribution if, like the Bank, it is a subsidiary of a holding company. In the event the Bank’s capital fell below its regulatory requirements or the OTS notified it that it was in need of more than normal supervision, the Bank’s ability to make capital distributions could be restricted. In addition, the OTS could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafe or unsound practice. The OTS has notified the Bank that it does not object to the payment of capital dividends, so long as the Bank remains well capitalized after each capital distribution, and also maintains a tier one core leverage ratio above 6.0% and a total risk-based capital ratio above 10.5% after each capital distribution.

Assessments . Savings institutions are required to pay assessments to the OTS to fund the agency’s operations. The assessments, paid on a semi-annual basis, are based upon the institution’s total assets, including consolidated subsidiaries as reported in the Bank’s latest quarterly thrift financial report, as well as the institution’s regulatory rating and complexity component. The assessments paid by the Bank for the fiscal year ended December 31, 2007 totaled $486,000.

Transactions with Related Parties . The Bank’s authority to engage in transactions with “affiliates” ( e.g ., any company that controls or is under common control with an institution, including the Company and its non-savings institution subsidiaries) is limited by Federal law. The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institution’s capital and surplus. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type described in Federal law. The purchase of low quality assets from affiliates is generally prohibited. The transactions with affiliates must be on terms and under circumstances, that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act of 2002, generally prohibits loans by the Company to its executive officers and directors. However, the Act contains a specific exemption for loans from the Bank to its executive officers and directors in compliance with Federal banking laws. Under such laws, the Bank’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited. The law limits both the individual and aggregate amount of loans the Bank may make to insiders based, in part, on the Bank’s capital position and requires certain board approval procedures to be followed. Such loans must not involve more than the normal risk of repayment and are required to be made on terms substantially the same as those offered to unaffiliated individuals, except

for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional restrictions.

Enforcement . The OTS has primary enforcement responsibility over savings institutions and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to the institution of receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases. The FDIC has the authority to recommend to the Director of the OTS that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

Standards for Safety and Soundness . The Federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the Federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the OTS determines that a savings institution fails to meet any standard prescribed by the guidelines, the OTS may require the institution to submit an acceptable plan to achieve compliance with the standard.

Federal Home Loan Bank System

The Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional FHLBs. Each FHLB provides member institutions with a central credit facility. The Bank, as a member of the FHLB-NY is required to acquire and hold shares of capital stock in that FHLB in an amount at least equal to 0.20% of mortgage related assets and 4.5% of the specified value of certain transactions with the FHLB. The Bank was in compliance with this requirement with an investment in FHLB-NY stock at December 31, 2007 of $22.9 million.

The FHLBs are required to provide funds for the previous resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of dividends that the FHLBs pay to their members and could also result in the FHLB imposing a higher rate of interest on advances to their members. If dividends were reduced, or interest on future FHLB advances increased, the Bank’s net interest income would likely also be reduced.

Federal Reserve System

The Federal Reserve Board regulations require savings institutions to maintain non-interest earning reserves against their transaction accounts (primarily interest-bearing checking and regular checking accounts). The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows: a 3% reserve ratio is assessed on net transaction accounts up to and including $43.9 million; a 10% reserve ratio is applied above $43.9 million. The first $9.3 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempt from the reserve requirements. The amounts are adjusted annually. The Bank complies with the foregoing requirements.

FEDERAL AND STATE TAXATION

Federal Taxation

General . The Company and the Bank report their income on a calendar year basis using the accrual method of accounting, and are subject to Federal income taxation in the same manner as other

corporations with some exceptions, including particularly the Bank’s reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company. The Bank has not been audited by the IRS in over 10 years. For its 2007 taxable year, the Bank is subject to a maximum Federal income tax rate of 35%.

Distributions . Under the 1996 Act, if the Bank makes “non-dividend distributions” to the Company, such distributions will be considered to have been made from the Bank’s unrecaptured tax bad debt reserves (including the balance of its reserves as of December 31, 1987) to the extent thereof, and then from the Bank’s supplemental reserve for losses on loans, to the extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in the Bank’s income. Non-dividend distributions include distributions in excess of the Bank’s current and accumulated earnings and profits, as calculated for Federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of the Bank’s current or accumulated earnings and profits will not be so included in the Bank’s income.

The amount of additional taxable income triggered by a non-dividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, if the Bank makes a non-dividend distribution to the Company, approximately one and one-half times the amount of such distribution (but not in excess of the amount of such reserves) would be includable in income for Federal income tax purposes, assuming a 35% Federal corporate income tax rate. The Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

Corporate Alternative Minimum Tax . The Internal Revenue Code of 1986, as amended (the “Code”) imposes a tax on alternative minimum taxable income (“AMTI”) at a rate of 20%. The excess of the bad debt reserve deduction using the percentage of taxable income method over the deduction that would have been allowable under the experience method is treated as a preference item for purposes of computing the AMTI. Only 90% of AMTI can be offset by net operating loss carryovers of which the Bank currently has none. AMTI is increased by an amount equal to 75% of the amount by which the Bank’s adjusted current earnings exceeds its AMTI (determined without regard to this preference and prior to reduction for net operating losses). The Bank does not expect to be subject to the AMTI.

Dividends Received Deduction and Other Matters . The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is generally 70% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank own more than 20% of the stock of a corporation distributing a dividend then 80% of any dividends received may be deducted.

State and Local Taxation

New Jersey Taxation . The Bank files New Jersey income tax returns. For New Jersey income tax purposes, the Bank is subject to a tax rate of 9% of taxable income. For this purpose, “taxable income” generally means Federal taxable income, subject to certain adjustments (including addition of interest income on State and municipal obligations).

The Bank was also subject to an Alternative Minimum Assessment (AMA) tax based on the larger of gross receipts or gross profits, as defined, from 2002 through 2006. This tax expired in 2007.

The Company is required to file a New Jersey income tax return because it does business in New Jersey. For New Jersey tax purposes, regular corporations are presently taxed at a rate equal to 9% of taxable income. However, if the Company meets certain requirements, it may be eligible to elect to be taxed as a New Jersey Investment Company at a tax rate presently equal to 3.60% (40% of 9%) of taxable income.

On February 6, 2006, the State of New Jersey published a regulation to disallow the dividends received deduction for the direct receipt of a dividend from a Real Estate Investment Trust (“REIT”) to its corporate parent. The regulation applies to dividends paid on and after February 6, 2006. The regulation may cause the Company’s effective state tax rate to increase by approximately 3.6% (2.34% after Federal benefit), however, the Company may be able to employ alternative tax planning strategies to mitigate this increase.

New York Taxation . The Bank is subject to New York State income tax. The tax is measured by “entire net income” which is Federal taxable income with adjustments.

Delaware Taxation . As a Delaware holding company not earning income in Delaware, the Company is exempted from Delaware corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.

Item 1A. Risk Factors

Changes in Interest Rates Could Adversely Affect Results of Operations and Financial Condition . The Bank’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates. The interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities are generally fixed for a contractual period of time. Interest-bearing liabilities generally have shorter contractual maturities than interest-earning assets. This imbalance can create significant earnings volatility, because market interest rates change over time. In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates causes increased prepayments of loans and mortgage-backed and related securities as borrowers refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that the Bank may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans or securities. Conversely, an increase in interest rates generally reduces prepayments. Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.

Changes in interest rates also affect the current market value of the interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. Unrealized net losses on securities-available-for-sale are reported as a separate component of equity. To the extent interest rates increase and the value of the available-for-sale portfolio decreases, stockholders’ equity will be adversely affected.

Increased emphasis on commercial lending may expose the Bank to increased lending risks . At December 31, 2007, $381.0 million, or 22.5%, of the Bank’s total loans consisted of commercial, multi-family and land real estate loans, and commercial business loans. This portfolio has grown in recent years and the Bank intends to continue to emphasize these types of lending. These types of loans generally expose a lender to greater risk of non-payment and loss than one-to-four family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. Also, many of the Bank’s commercial borrowers have more than one loan outstanding. Consequently, an adverse development with respect to one loan or one credit relationship can expose the Bank to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential mortgage loan.

A downturn in the local economy or a decline in real estate values could hurt profits . Most of the Bank’s loans are secured by real estate or are made to businesses in Ocean and Monmouth Counties, New Jersey and the surrounding area. As a result of this concentration, a downturn in the local economy could cause significant increases in nonperforming loans, which would hurt profits. In prior years there has been a significant increase in real estate values in the Bank’s market area. A decline in real estate values could cause some mortgage loans to become inadequately collateralized, which would expose the Bank to a greater risk of loss.

The Bank operates in a highly regulated environment and may be adversely affected by changes in laws and regulations . The Bank is subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, the Bank’s chartering authority, and by the Federal Deposit Insurance Corporation, as insurer of deposits. The Company and the Bank are subject to regulation and supervision by the Office of Thrift Supervision. Such regulation and supervision governs the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the insurance fund and depositors. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of assets and determination of the level of the allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on operations.

The Company’s allowance for loan losses may be inadequate, which could hurt the Company’s earnings . The Company’s allowance for loan losses may prove to be inadequate to cover actual loan losses and if the Company is required to increase its allowance, current earnings may be reduced. When borrowers default and do not repay the loans that the Bank makes to them, the Company may lose money. The Company’s experience shows that some borrowers either will not pay on time or will not pay at all, which will require the Company to cancel or “charge-off” the defaulted loan or loans. The Company provides for losses by reserving what it believes to be an adequate amount to absorb any probable inherent losses. A “charge-off” reduces the Company’s reserve for possible loan losses. If the Company’s reserves were insufficient, it would be required to record a larger reserve, which would reduce earnings for that period.

The Bank may be required to repurchase mortgage loans for an Early Payment Default or a breach of representations and warranties, which could harm the Company’s earnings . The Bank’s subsidiary, Columbia, entered into loan sale agreements with investors in the normal course of business. The loan sale agreements generally required the repurchase of certain loans previously sold in the event of an Early Payment Default or a violation of various representations and warranties customary to the mortgage banking industry. The repurchased mortgage loans could typically only be resold at a significant discount to the unpaid principal balance. The Bank maintains a reserve for repurchased loans, however, if repurchase activity is significant, the reserve may prove to be inadequate to cover actual losses which could harm future earnings.

In September 2007, all loan origination activity at Columbia was discontinued. A portion of Columbia’s loan production consisted of “subprime” loans, which are loans made to individuals whose borrowing needs are generally not fulfilled by traditional loan products because they do not satisfy the credit documentation or other underwriting standards prescribed by conventional mortgage lenders and loan buyers. In March 2007, Columbia discontinued the origination of sub-prime loans. In the event the Bank is required to repurchase a significant amount of subprime loans, the Bank may be required to hold such loans in portfolio for an extended period of time or to maturity, if such loans cannot be later resold. Subprime loans generally have a higher incidence of delinquency, foreclosure and bankruptcy, which may be substantially higher than that experienced by mortgage loans underwritten in a more traditional manner. Such risk associated with subprime loans may be increased during periods of economic slow-downs, increasing interest rates, and events that affect specifically the geographic areas in which the loans are made. Moreover, as many of the subprime loans made by Columbia have loan-to-value ratios of 100%, there would be little, if any, equity to fully recover the net carrying value of the loan in the event of default and foreclosure. In such event, the Company may be required to substantially increase

its allowance for loan losses which would reduce earnings for that period. The Bank has entered into settlements with some investors which may limit the Bank’s obligation to repurchase mortgage loans for an Early Payment Default or a breach of a representation or warranty. For the year ended December 31, 2007 Columbia originated subprime loans of $38.6 million, or 16.0% of the total loans Columbia originated. For the year ended December 31, 2006, Columbia originated subprime loans of $299.8 million, or 41.2% of the total loans Columbia originated.

The Company’s mortgage servicing rights may become impaired which could hurt profits . Mortgage servicing rights are carried at the lower of cost or fair value. Any impairment is recognized as a reduction to servicing fee income. In the event that loan prepayments increase due to increased loan refinancing, the fair value of mortgage servicing rights would likely decline.

The Company’s inability to achieve profitability on new branches may negatively affect earnings . The Bank continues to expand its presence within the market area through de novo branching. The profitability of this expansion strategy will depend on whether the income from the new branches will offset the increased expenses resulting from operating these branches. It is expected to take a period of time before these branches can become profitable. During this period, the expense of operating these branches may negatively affect net income.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

The Bank conducts its business through its administrative office, which includes a branch office, and 19 other full service offices located in Ocean, Monmouth and Middlesex Counties, and through a loan production office.

Item 3. Legal Proceedings

The Company and the Bank are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such other routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The following graph shows a comparison of total stockholder return on OceanFirst Financial Corp.’s common stock, based on the market price of the Company’s common stock with the cumulative total return of companies in the Nasdaq Market Index and the SNL Thrift Index for the period December 31, 2002 through December 31, 2007. The graph may not be indicative of possible future performance of the Company’s common stock.

LOGO


	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
OceanFirst Financial Corp.	100.00	124.94	117.40	112.22	117.07	84.56
All Nasdaq US Stocks	100.00	149.52	162.72	166.18	182.57	197.98
SNL Thrift Index	100.00	141.57	157.73	163.30	190.35	114.19

Notes:

A.	The lines represent annual index levels derived from compounded daily returns that include all dividends.

B.	The indexes are reweighted daily, using the market capitalization on the previous trading day.

C.	If the annual interval, based on the fiscal year end, is not a trading day, the preceding trading day is used.

D.	The index level for all series was set to $100 on 12/31/02.

For the years ended December 31, 2007 and 2006, the Company paid a quarterly cash dividend of $.20 per share.

Information relating to the market for Registrant’s common equity and related stockholder matters appears under “Shareholder Information” on the Inside Back Cover in the Registrant’s 2007 Annual Report to Stockholders and is incorporated herein by reference.

Information regarding the Company’s common stock repurchases for the three month period ended December 31, 2007 is as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2007 through October 31, 2007	-0-	—	-0-	489,062
November 1, 2007 through November 30, 2007	-0-	—	-0-	489,062
December 1, 2007 through December 31, 2007	-0-	—	-0-	489,062

On July 19, 2006, the Company announced its intention to repurchase up to 615,883 shares or 5% of its outstanding common stock.

Item 6. Selected Financial Data

The above-captioned information appears under “Selected Consolidated Financial and Other Data of the Company” in the Registrant’s 2007 Annual Report to Stockholders on pages 5 and 6 is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The above-captioned information appears under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Registrant’s 2007 Annual Report to Stockholders on pages 7 through 19 and is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The above captioned information appears under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management of Interest Rate Risk” in the Registrant’s 2007 Annual Report to Stockholders on pages 17 through 19 and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The Consolidated Financial Statements of OceanFirst Financial Corp. and its subsidiary, together with the report thereon by KPMG LLP appears in the Registrant’s 2007 Annual Report to Stockholders on pages 20 through 37 and are incorporated herein by reference.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended,

(the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

At December 31, 2006, the Company’s policies and procedures were not effective to provide for the proper evaluation and assessment of the adequacy of its reserve for repurchased loans at its mortgage banking subsidiary. Specifically, the Company lacked an effective process to ensure that the exercise of loan repurchase requests by purchasers of its loans were timely identified and incorporated properly in the analysis of its reserve for repurchased loans. This deficiency resulted in material misstatement in the Company’s reserve for repurchased loans and amounts recorded as a gain on sales of loans at December 31, 2006 and resulted in more than a remote likelihood that a material misstatement of the Company’s annual or interim consolidated financial statements would not be prevented or detected. These misstatements were corrected in the consolidated financial statements included in the December 31, 2006 Form 10-K.

During 2007, the Company implemented a remediation plan to address the material weakness in internal control over financial reporting which existed at December 31, 2006. To address the material weakness, during the first quarter of 2007, the Company enhanced its policies and procedures related to the quarterly evaluation of the adequacy of the reserve for repurchased loans. All repurchase requests received must be reported to a committee of senior officers at the Bank for evaluation and incorporation into the analysis of the reserve for repurchased loans. The Company proactively monitors the receipt of repurchase requests. Additionally, the Company’s mortgage banking subsidiary modified its mortgage loan product menu to eliminate the origination of subprime loans. Furthermore, the Company has taken disciplinary action against certain officers of the mortgage banking subsidiary responsible for not following established policies and procedures. Finally, in September 2007 the Bank discontinued all of the loan origination activity of Columbia.

Except as described above, there were no changes in the Company’s internal control over financial reporting for the year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(b) Management Report on Internal Control Over Financial Reporting . The Management Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm appear in the Registrant’s 2007 Annual Report to Stockholders on pages 38 and 39 and are incorporated herein by reference.

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information relating to directors, executive officers and corporate governance and the Registrant’s compliance with Section 16(a) of the Exchange Act required by Part III is incorporated herein by reference from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 2008 at pages 3, 4, 8 through 9, and 30.

Item 11. Executive Compensation

The information relating to executive compensation required by Part III is incorporated herein by reference from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 2008 at pages 12 through 30.

OceanFirst Financial Corp. (the “Company”) and OceanFirst Bank (the “Bank”) approved new Employment Agreements between each of the Company and the Bank and Vito R. Nardelli. The employment agreements with Mr. Nardelli replace former change in control agreements with each of the Company and the Bank. In addition, each of the Company and the Bank approved amended and restated Employment Agreements with executive officers Michael J. Fitzpatrick and John R. Garbarino. Additionally, the Company and the Bank approved amended and restated Change in Control Agreements between each of the Company and the Bank and executive officers John K. Kelly and Joseph R. Iantosca. The terms of the amended and restated Employment Agreements and Change in Control Agreements are substantially similar to the current agreements with the executives, except that amendments were made to incorporate certain revisions required for the agreements to comply with the final regulations promulgated under Section 409A of the Internal Revenue Code of 1986, as amended. Each of the Company and Bank agreements is substantially the same as to form and are included as exhibits.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information relating to security ownership of certain beneficial owners and management and related stockholder matters required by Part III is incorporated herein by reference from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 2008 at pages 5 through 7.

Information regarding the Company’s equity compensation plans existing as of December 31, 2007 is as follows:


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	1,385,203	$	21.10	1,194,699
Equity compensation plans not approved by security holders	—		—	—
Total	1,385,203	$	21.10	1,194,699

Item 13. Certain Relationships and Related Transactions and Director Independence

The information relating to certain relationships and related transactions and director independence required by Part III is incorporated herein by reference from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 2008 at pages 30 to 31.

Item 14. Principal Accountant Fees and Services

The information relating to the principal accounting fees and services is incorporated by reference to the Registrant’s Proxy Statement for the Annual Meeting to be held on May 9, 2008 at page 10.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	The following documents are filed as a part of this report:

(1)	Consolidated Financial Statements of the Company are incorporated by reference to the following indicated pages of the 2007 Annual Report to Stockholders.


		PAGE
Report of Independent Registered Public Accounting Firm		37

Consolidated Statements of Financial Condition at December 31, 2007 and 2006		20

Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005		21

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2007, 2006 and 2005		22

Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005		23

Notes to Consolidated Financial Statements for the Years Ended December 31, 2007, 2006 and 2005		24-36

The remaining information appearing in the 2007 Annual Report to Stockholders is not deemed to be filed as part of this report, except as expressly provided herein.

(2)	All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.


2.1		Stock Purchase Agreement by and among Richard S. Pardes (the sole stockholder of Columbia Home Loans, LLC) and Columbia Home Loans, LLC and OceanFirst Bank as buyer, dated June 27, 2000 (without exhibits) (2)
3.1		Certificate of Incorporation of OceanFirst Financial Corp. (1)
3.2		Bylaws of OceanFirst Financial Corp. (6)
3.3		Certificate of Ownership Merging Ocean Interim, Inc. into OceanFirst Financial Corp. (6)
4.0		Stock Certificate of OceanFirst Financial Corp.(1)
10.1		Form of OceanFirst Bank Employee Stock Ownership Plan (1)
10.1(a)		Amendment to OceanFirst Bank Employee Stock Ownership Plan (3)
10.1(b)		Amended Employee Stock Ownership Plan (filed herewith)


10.1(c)		Form of Matching Contribution Employee Stock Ownership Plan (filed herewith)
10.2		OceanFirst Bank Employees’ Savings and Profit Sharing Plan (1)
10.3		OceanFirst Bank 1995 Supplemental Executive Retirement Plan (1)
10.4		OceanFirst Bank Deferred Compensation Plan for Directors (1)
10.5		OceanFirst Bank Deferred Compensation Plan for Officers (1)
10.8		Amended and Restated OceanFirst Financial Corp. 1997 Incentive Plan (4)
10.9		Form of Employment Agreement between OceanFirst Bank and certain executive officers, including Robert M. Pardes (1)
10.10		Form of Employment Agreement between OceanFirst Financial Corp. and certain executive officers, including Robert M. Pardes (1)
10.13		2000 Stock Option Plan (5)
10.14		Form of Employment Agreement between Columbia Home Loans, LLC and Robert M. Pardes (6)
10.15		Amendment of the OceanFirst Financial Corp. 2000 Stock Option Plan (7)
10.16		Form of OceanFirst Financial Corp. 2000 Stock Option Plan Non-Statutory Option Award Agreement (9)
10.17		Form of Amended and Restated OceanFirst Financial Corp. 1997 Incentive Plan Stock Award Agreement (9)
10.18		Amendment and form of OceanFirst Bank Employee Severance Compensation Plan (10)
10.19		Form of OceanFirst Financial Corp. Deferred Incentive Compensation Award Program (11)
10.20		2006 Stock Incentive Plan (12)
10.21		Form of Employment Agreement between OceanFirst Financial Corp. and certain executive
		officers, including Michael J. Fitzpatrick, John R. Garbarino and Vito R. Nardelli (filed
		herewith)
10.22		Form of Employment Agreement between OceanFirst Bank and certain executive officers, including Michael J. Fitzpatrick, John R. Garbarino and Vito R. Nardelli (filed herewith)
10.23		Form of Change in Control Agreement between OceanFirst Financial Corp. and certain
		executive officers, including John K. Kelly and Joseph R. Iantosca (filed herewith)
10.24		Form of Change in Control Agreement between OceanFirst Bank and certain executive officers, including John K. Kelly and Joseph R. Iantosca (filed herewith)
13.0		Portions of 2007 Annual Report to Stockholders (filed herewith)
14.0		OceanFirst Financial Corp. Code of Ethics and Standards of Personal Conduct (8)
21.0		Subsidiary information is incorporated herein by reference to “Part I - Subsidiaries”
23.0		Consent of KPMG LLP (filed herewith)
31.1		Rule 13a-14(a)/15d-14(c) Certification of Chief Executive Officer (filed herewith)
31.2		Rule 13a-14(a)/15d-14(c) Certification of Chief Financial Officer (filed herewith)
32.1		Section 1350 Certifications (filed herewith)

(1)	Incorporated herein by reference from the Exhibits to Form S-1, Registration Statement, effective May 13, 1996 as amended, Registration No. 33-80123.

(2)	Incorporated herein by reference from the Exhibits to Form 8-K filed on June 28, 2000.

(3)	Incorporated herein by reference from the Exhibits to Form 10-K filed on March 25, 1997.

(4)	Incorporated herein by reference from Form 14-A Definitive Proxy Statement filed on March 19, 1998.

(5)	Incorporated herein by reference from Form 14-A Definitive Proxy Statement filed on March 17, 2000.

(6)	Incorporated herein by reference from the Exhibits to Form 10-K filed on March 23, 2003.

(7)	Incorporated herein by reference from the Form 14-A Definitive Proxy Statement filed on March 21, 2003.

(8)	Incorporated herein by reference from the Exhibits to Form 10-K filed on March 15, 2004.

(9)	Incorporated herein by reference from Exhibits to Form 10-K filed on March 15, 2005

(10)	Incorporated herein by reference from Exhibits to Form 10-Q filed on August 9, 2005

(11)	Incorporated herein by reference from Exhibits to Form 10-K filed on March 14, 2006

(12)	Incorporated herein by reference from Form 14-A Definitive Proxy Statement filed on March 14, 2006.

CONFORMED

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


OceanFirst Financial Corp.

By:		/s/ John R. Garbarino
		John R. Garbarino
		Chairman of the Board, President and Chief Executive Officer and Director




Date:		March 7, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.


Name				Date

/s/ John R. Garbarino				March 7, 2008
John R. Garbarino
Chairman of the Board, President and Chief Executive Officer (principal executive officer)

/s/ Michael J. Fitzpatrick				March 7, 2008
Michael J. Fitzpatrick
Executive Vice President and Chief Financial Officer
(principal accounting and financial officer)

/s/ Joseph J. Burke				March 7, 2008
Joseph J. Burke
Director

/s/ Angelo Catania				March 7, 2008
Angelo Catania
Director

/s/ Carl Feltz, Jr.				March 7, 2008
Carl Feltz, Jr.
Director


/s/ John W. Chadwick				March 7, 2008
John W. Chadwick
Director

/s/ Donald E. McLaughlin				March 7, 2008
Donald E. McLaughlin
Director

/s/ Diane F. Rhine				March 7, 2008
Diane F. Rhine
Director

/s/ John E. Walsh				March 7, 2008
John E. Walsh
Director

Exhibit 10.1(b)

OceanFirst Bank

Employee Stock Ownership Plan

Effective January 1, 2001

(as amended and restated through December 31, 2006)

OceanFirst Bank

Employee Stock Ownership Plan

Table of Contents


		Page
Section 1	Introduction	1

Section 2	Definitions	3

Section 3	Eligibility and Participation	11

Section 4	Contributions	13

Section 5	Plan Accounting	16

Section 6	Vesting	24

Section 7	Distributions	27

Section 8	Voting of Company Stock and Tender Offers	32

Section 9	The Committee and Plan Administration	33

Section 10	Rules Governing Benefit Claims	37

Section 11	The Trust	38

Section 12	Adoption, Amendment and Termination	39

Section 13	General Provisions	41

Section 14	Top-Heavy Provisions	43

OceanFirst Bank

Employee Stock Ownership Plan

Section 1

Introduction

Section 1.01 Nature of the Plan.

OceanFirst Bank, formerly Ocean Federal Savings Bank (the “Bank”), originally adopted the OceanFirst Bank Employee Stock Ownership Plan, formerly known as the Ocean Federal Savings Bank Employee Stock Ownership Plan (the “Plan”), effective as of January 1, 1996.

The Plan was amended and restated most recently effective as of January 1, 2001, to comply with requirements of the General Agreement on Tariffs and Trade, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998 and the Community Renewal Tax Relief Act of 2000. The Plan received a favorable determination letter from the IRS on July 15, 2002.

The January 1, 2001, amendment and restatement included certain provisions intended to constitute good faith compliance with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Except as otherwise provided, provisions related to EGTRRA are effective as of the last day of the first Plan Year beginning after December 31, 2001.

Effective January 1, 2006, the Plan is amended and restated to include amendments reflecting statutory provisions and associated guidance listed in IRS Notice 2005-101. In addition, effective as of December 27, 2006, the matching contribution feature of the Plan is being spun off and renamed the OceanFirst Bank Matching Contribution Employee Stock Ownership Plan. The spinoff and related transfer of trust assets attributable to matching contributions is intended to enable the Plan to satisfy requirements of Code Section 401(a)(35)(E)(ii) beginning in the 2007 Plan Year.

The Bank sponsors the Plan to enable Eligible Employees (as defined in Section 2.01(r) of the Plan) to acquire stock ownership interests in OceanFirst Financial Corp., the holding company of the Bank (the “Company”). The Bank intends this Plan to be a tax-qualified stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and an employee stock ownership plan within the meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest primarily in the common stock of the Company, which stock constitutes “qualifying employer securities” within the meaning of Section 407(d)(5) of ERISA and Sections 409(1) and 4975(e)(8) of the Code. Accordingly, the Plan and Trust Agreement (as defined in Section 2.01(rr) of the Plan) shall be interpreted and applied in a manner consistent with the Bank’s intent for it to be a tax-qualified plan designed to invest primarily in qualifying employer securities.

Section 1.02 Employers and Affiliates.

The Bank and each of its Affiliates (as defined in Section 2.01(c) of the Plan) that adopt the Plan with the consent of the Bank and pursuant to the provisions of Section 12.01 of the Plan are collectively referred to as the “Employers” and individually as an “Employer.” The Plan shall be treated as a single plan with respect to all participating Employers.

Section 2

Definitions

Section 2.01 Definitions.

In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms “he,” “his,” and “him,” shall refer to a Participant or Beneficiary, as the case may be, and, except as otherwise provided, or unless the context otherwise requires, the capitalized terms shall have the following meanings:

(a) “Account” or “Accounts” mean a Participant’s or Beneficiary’s Company Stock Account and/or his Other Investments Account, as the context so requires.

(b) “Acquisition Loan” means a loan (or other extension of credit, including an installment obligation to a “party in interest” (as defined in Section 3(14) of ERISA)) incurred by the Trustee in connection with the purchase of Company Stock.

(c) “Affiliate” means any corporation, trade or business, which, at the time of reference, is together with the Bank, a member of a controlled group of corporations, a group of trades or businesses (whether or not incorporated) under common control, or an affiliated service group, as described in Sections 414(b), 414(c), and 414(m) of the Code, respectively, or any other organization treated as a single employer with the Bank under Section 414(o) of the Code; provided, however, that, where the context so requires, the term “Affiliate” shall be construed to give full effect to the provisions of Sections 409(1)(4) and 415(h) of the Code.

(d) “Bank” means OceanFirst Bank and any entity that succeeds to the business of OceanFirst Bank and adopts this Plan in accordance with the provisions of Section 12.02 of the Plan or by written agreement assuming the obligations under the Plan.

(e) “Beneficiary” means the person(s) entitled to receive benefits under the Plan, pursuant to Section 7.03 of the Plan, following a Participant’s death.

(f) “Change in Control” means, with respect to the Bank or the Company, an event of a nature that; (i) would be required to be reported in response to Item 1 of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the Company within the meaning of the Home Owners’ Loan Act of 1933, as amended and the Rules and Regulations promulgated by the Office of Thrift Supervision (“OTS”) (or its predecessor agency), as in effect on the date hereof (provided, that in applying the definition of change in control as set forth under the rules and regulations of the OTS, the Board shall substitute its judgment for that of the OTS); or (iii) without limitation such a Change in Control shall be deemed to have occurred at such time as (A) any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or the Company representing 20% or more of the Bank’s or the Company’s outstanding securities except for any securities of the Bank purchased by the Company in connection with the conversion of the Bank to the stock form, securities purchased by any tax qualified employee

benefit plan of the Bank or securities acquired by the OceanFirst Foundation; or (B) individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (B), considered as though he were a member of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Company or similar transaction occurs in which the Bank or Company is not the resulting entity; or (D) solicitations of shareholders of the Company, by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or Bank or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Bank or the Company shall be distributed; or (E) a tender offer is made for 51 % or more of the voting securities of the Bank or the Company.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Committee” means the individual(s) responsible for the administration of the Plan in accordance with Section 9 of the Plan.

(i) “Company” means OceanFirst Financial Corp. and any entity which succeeds to the business of OceanFirst Financial Corp.

(j) “Company Stock” means shares of the voting common stock or preferred stock, meeting the requirements of Section 409 of the Code and Section 407(d)(5) of ERISA, issued by the Company or its Affiliates.

(k) “Company Stock Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund invested in Company Stock.

(l) “Compensation” means

(i) an Employee’s regular basic monthly salary or wages.

(ii) Notwithstanding the above, Compensation shall include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the gross income of the employee under Sections 125 and 402(e)(3), but shall exclude overtime, bonuses, fees and special payments.

Notwithstanding the foregoing, to the extent this definition of compensation does not satisfy the requirements of Section 414(s) of the Code for any particular Plan Year, then, for that Plan Year, Compensation shall have the meaning set forth in Sections 1.415-2(d)(2) and (3) of the Treasury Regulations. For Plan Years prior to January 1, 2002, Participant’s Compensation shall not exceed $150,000 (as periodically adjusted pursuant to Section 401(a)(17) of the Code). For Plan Years after December 31, 2001, a Participant’s Compensation shall not exceed $200,000 (as

periodically adjusted pursuant to Section 401(a)(17) of the Code). If a Participant’s Compensation is determined on the basis of a period of less than twelve (12) calendar months, then the Compensation limit for such Participant shall be the limit in effect for the Plan Year in which the period begins, multiplied by a ratio obtained by dividing the number of full months in the period by twelve (12).

(m) “Disability” means a condition which renders the Participant totally and permanently disabled due to sickness or injury, such disability is likely to be continuous and permanent, and renders the Participant unable to continue a like gainful occupation. In any event, the Committee’s good faith decision as to whether a Participant’s Service has been terminated by Disability shall be final and conclusive.

(n) “Early Retirement Age” means the date a Participant attains age 55 with ten (10) Years of Service with an Employer.

(o) “Early Retirement Date” means the first day of the month following the date the Participant attains Early Retirement Age.

(p) “Effective Date” means January 1, 2006, as amended and restated, except as otherwise provided for in Section 1.01 of the Plan.

(q) “Eligibility ^, Computation Period” means a twelve (12) consecutive month period. An Employee’s first Eligibility Computation Period shall begin on the date he first performs an Hour of Service for the Employer (“employment commencement date”). Subsequent Eligibility Computation Periods shall be the Plan Year, commencing with the Plan Year that includes the first anniversary date of the Employee’s employment commencement date. To determine the first Eligibility Computation Period after a One Year Break in Service, the Plan shall use the twelve (12) consecutive month period beginning on the date the Employee again performs an Hour of Service for the Employer.

(r) “Eligible Employee” means any Employee who is not precluded from participating in the Plan by reason of the provisions of Section 3.02 of the Plan.

(s) “Employee” means any person who is employed by the Bank or an Affiliate in any capacity, any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Bank or an Affiliate, as well as any other person qualifying as a common-law employee of the Bank or an Affiliate, except that such term shall not include:

(i) Any individual who performs services for the Bank or an Affiliate and who is classified and paid as an independent contractor (regardless of his classification for federal tax or other legal purposes) by the Bank or an Affiliate, and

(ii) Any individual, whether a “leased employee” (within the meaning of Section 414(n) of the Code) or otherwise, who pursuant to an agreement with the Employer and any other person, including a leasing organization, has performed services for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least

one year, and such services are performed under the primary direction and control of the Employer.

(t) “Employer” or “Employers” means the Bank and any of its Affiliates that adopt the Plan in accordance with the provisions of Section 12.01 of the Plan, and any entity that succeeds to the business of the Bank or its Affiliates and adopts the Plan in accordance with the provisions of Section 12.02 of the Plan or by written agreement assumes the obligations under the Plan.

(u) “Entry Date” means the first day of each January and July coinciding with or next following the date the Employee satisfies the eligibility requirements under Section 3.01 of the Plan.

(v) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(w) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(x) “Financed Shares” means shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan, which shall constitute “qualifying employer securities” under Section 409(1) of the Code and any shares of Company Stock received upon conversion or exchange of such shares.

(y) “Highly Compensated Employee” means an Employee who, for a particular Plan Year, satisfies one of the following conditions:

(i) was a “5-percent owner” (as defined in Section 414(q)(2) of the Code) during the year or the preceding year, or

(ii) for the preceding year had “compensation” (as defined in Section 414(q)(4) of the Code) from the Bank and its Affiliates exceeding $80,000 (as periodically adjusted pursuant to Section 414(q)(1) of the Code).

(z) “Hours of Service” means:

(i) Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period.

(ii) Each hour for which an Employee is paid, or entitled to payment, for a period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence, no credit shall be given to the Employee for:

(A) more than 501 hours under this clause (ii) because of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period);

(B) an hour for which the Employee is directly or indirectly paid, or entitled to payment, because of a period in which no duties are performed if such payment is

made or due under a plan maintained solely for the purpose of complying with applicable worker’s or workmen’s compensation, or unemployment, or disability insurance laws; or

(C) an hour or a payment which solely reimburses the Employee for medical or medically-related expenses incurred by the Employee.

(iii) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer; provided, however, that hours credited under either clause (i) or (ii) above shall not also be credited under this clause (iii). Crediting of hours for back pay awarded or agreed to with respect to periods described in clause (ii) above will be subject to the limitations set forth in that clause.

The crediting of Hours of Service shall be determined by the Committee in accordance with the rules set forth in Section 2530.200b-2 of the regulations prescribed by the Department of Labor, which rules shall be consistently applied with respect to all Employees within the same job classification. If an Employer finds it impracticable to count actual Hours of Service for any class or group of non-hourly Employees, each Employee in that class or group shall be credited with 45 Hours of Service for each weekly period in which he has at least an Hour of Service. However, an Employee shall be credited with Hours of Service only for his normal working hours during a paid absence. Hours of Service will be credited for employment with an Affiliate.

For purposes of determining whether an Employee has incurred a One Year Break in Service and for vesting and participation purposes, if an Employee begins a maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the Code, his Hours of Service shall include the Hours of Service that would have been credited to him if he had not been so absent (or 45 Hours of Service for each week of such absence if the actual Hours of Service cannot be determined). An Employee shall be credited for such Hours of Service (up to a maximum of 501 Hours of Service) in the Plan Year in which his absence begins (if such crediting will prevent him from incurring a One Year Break in Service in such Plan Year) or, in all other cases, in the following Plan Year. An absence from employment for maternity or paternity reasons means an absence:

(i) by reason of pregnancy of the Employee,

(ii) by reason of a birth of a child of the Employee,

(iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or

(iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(aa) “Loan Suspense Account” means that portion Trust Fund consisting of Company Stock acquired with an Acquisition Loan which has not yet been allocated to the Participants’ Accounts.

(bb) “Normal Retirement Age” means age sixty-five (65).

(cc) “Normal Retirement Date” means the first day of the month coincident with or next following the Participant’s attainment of Normal Retirement Age.

(dd) “One Year Break in Service” means a twelve (12) consecutive month period during which the Participant does not complete more than 500 Hours of Service.

(ee) “One Year Period of Severance” means a twelve (12) consecutive month period following an Employee’s termination of Service with the Employer during which the Employee did not perform an Hour of Service. Notwithstanding the foregoing, if an Employee is absent from employment for maternity or paternity reasons, such absence during the twenty-four (24) month period commencing on the first date of such absence shall not constitute a One Year Period of Severance. An absence from employment for maternity or paternity reasons means an absence:

(i) by reason of the pregnancy of the Employee;

(ii) by reason of the birth of a child of the Employee;

(iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee; or

(iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(ff) “Other Investments Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund, other than Company Stock.

(gg) “Participant” means any active Employee who has become a participant in accordance with Section 3.01 of the Plan or any other person with an Account balance under the Plan.

(hh) “Period of Service” means a period commencing on the date an Employee first performs an Hour of Service for the Employer upon initial employment or, if applicable, upon reemployment, and ending on the date such Employee first incurs a Termination of Service. Notwithstanding the foregoing, the period between the first and second anniversary of the first date of a maternity or paternity absence described under Section 2.01(ee) of the Plan shall not be included in determining a Period of Service. A period during which an individual was not employed by the Employer shall nevertheless be deemed to be a Period of Service if such individual incurred a Termination of Service and:

(i) such Termination of Service was the result of resignation, discharge or retirement and such individual is reemployed by the Employer within one(1) year after such Termination of Service; or

(ii) such Termination of Service occurred when the individual was otherwise absent for less than one (1) year and he was reemployed by the Employer within one (1) year of the date such absence began.

All Periods of Service not disregarded under Section 6.03 of the Plan shall be aggregated. Whenever used in the Plan, a Period of Service means the quotient obtained by dividing the days in all Periods of Service not disregarded hereunder by 365 and disregarding any fractional remainder.

(ii) “Plan” means this OceanFirst Bank Employee Stock Ownership Plan, as amended from time to time.

(jj) “Plan Year” means the calendar year.

(kk) “Postponed Retirement Date” means the first day of the month coincident with or next following a Participant’s date of actual retirement which occurs after his Normal Retirement Date.

(ll) “Recognized Absence” means a period for which:

(i) an Employer grants an Employee a leave of absence for a limited period of time, but only if an Employer grants such leaves of absence on a nondiscriminatory basis to all Eligible Employees; or

(ii) an Employee is temporarily laid off by an Employer because of a change in the business conditions of the Employer; or

(iii) an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 (38 U.S.C. sec. 2021).

(mm) “Retirement Date” means a Participant’s Early Retirement Date, Normal Retirement Date or Postponed Retirement Date, whichever is applicable.

(nn) “Service” means employment with the Bank or an Affiliate.

(oo) “Termination of Service” means the earlier of (a) the date on which an Employee’s Service is terminated by reason of his resignation, retirement, discharge, death or Disability or (b) the first anniversary date on which such Employee’s service for disability of a short-term nature or any other reason. Service in the Armed Forces of the United States shall not constitute a Termination of Service but shall be considered to be a period of employment by the Employer provided (i) such military service is caused by war or other emergency or the Employee is required to serve under the laws of conscription in a time of peace, (ii) the Employee returns to employment with the Employer within six (6) months following discharge from such military service, and (iii) such Employee is reemployed by the Employer at a time when the Employee had a right to reemployment at his former position or substantially similar position upon separation from such military duty in accordance with seniority rights as protected under the laws of the United States. A leave of absence granted to an Employee by the Employer shall not constitute a Termination of Service provided that the Participant returns to the active service of the Employer at the expiration of any such period for which leave has been granted. Notwithstanding the foregoing, an Employee who is absent from service with the Employer beyond the first anniversary of the first date of his absence for maternity or paternity reasons set

forth in Section 2.01(ee) of the Plan shall incur a Termination of Service for purposes of the Plan on the second anniversary of the date of such absence.

(pp) “Treasury Regulations” means the regulations promulgated by the Department of the Treasury under the Code.

(qq) “Trust” means the trust agreement(s) created in connection with the operation of this Plan.

(rr) “Trust Agreement” means the trust agreement establishing the Trust.

(ss) “Trust Fund” means the assets held in the Trust for the benefit of Participants and their Beneficiaries.

(tt) “Trustee” means the trustee or trustees from time to time in office under the Trust Agreement.

(uu) “Valuation Date” means the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Trust Fund and adjust the Participants’ Accounts accordingly.

(vv) “Valuation Period” means the period following a Valuation Date and ending with the next Valuation Date.

(ww) “Year of Service” means an applicable twelve month period during which an Employee completes at least 1,000 Hours of Service, for eligibility and vesting purposes in Plan Years ending prior to January 1, 2002. With respect to the vesting provisions of the Plan, for Plan Years beginning on or after January 1, 2002, Year of Service means a one year Period of Service.

Section 3

Eligibility and Participation

Section 3.01 Participation.

(a) Participants as of the Effective Date . Notwithstanding any other provision of this Section 3, since this Plan is a restatement of an existing plan, all Employees and all former Employees who were Participants in the plan and who have an Account balance on the date of restatement shall remain Participants in this Plan. Any former Employee who was a Participant in the Plan prior to its restatement and who received a distribution of his entire nonforfeitable Account balance on account of termination of Service may become eligible to participate in this Plan upon re-employment either as a newly-hired Employee or by satisfaction of the eligibility requirements of Section 3.04 of the Plan.

(b) Other Employees . An Eligible Employee who is not a Participant as of the Effective Date of the Plan shall become eligible to enter the Plan upon the completion of one (1) Year of Service during an Eligibility Computation Period and attainment of age 21. Notwithstanding anything in the Plan to the Contrary, Service with Columbia Home Loans, LLC, formerly known as Columbia Equities, Ltd., prior to August 14, 2000 shall be counted for purposes of determining eligibility to participate in the Plan.

(c) An Eligible Employee who has satisfied the eligibility requirements of paragraph (b) of this Section 3.01 shall enter the Plan and become a Participant on the Entry Date coincident with or next following the date he satisfies such requirements.

Section 3.02 Certain Employees Ineligible.

The following Employees are ineligible to participate in the Plan:

(a) Employees covered by a collective bargaining agreement between the Employer and the Employee’s collective bargaining representative if:

(i) retirement benefits have been the subject of good faith bargaining between the Employer and the representative, and

(ii) the collective bargaining agreement does not expressly provide that Employees of such unit be covered under the Plan;

(b) Employees who are nonresident aliens and who receive no earned income from an Employer which constitutes income from sources within the United States; and

Section 3.03 Transfer to and from Eligible Employment.

(a) If an Employee, ineligible to participate in the Plan by reason of Section 3.02 of the Plan, transfers to employment as an Eligible Employee, he shall enter the Plan as of the later of:

(i) the first Entry Date after the date of transfer, or

(ii) the first Entry Date on which he could have become a Participant pursuant to Section 3.01 of the Plan if his prior employment with the Bank or Affiliate had been as an Eligible Employee.

(b) If a Participant transfers to a position of employment that is not eligible to participate in the Plan by reason of Section 3.02 of the Plan, he shall cease active participation in the Plan as of the date of such transfer and his transfer shall be treated for all purposes of the Plan as any other termination of Service.

Section 3.04 Participation After Reemployment.

(a) Any Employee re-entering Service with an Employer after a One Year Break in Service who has never satisfied the eligibility requirements of Section 3.01(b) of the Plan shall not receive credit for prior Service with an Employer and shall be required to meet the eligibility requirements of Section 3.01(b) of the Plan before becoming a Participant.

(b) An Employee who has satisfied the eligibility requirements of Section 3.01(b) of the Plan, but who terminates Service prior to entering the Plan and becoming a Participant in accordance with Section 3.01(c) of the Plan, will become a Participant on the later of:

(i) the first Entry Date on which he would have entered the Plan had he not terminated Service, or

(ii) the date he re-commences Service.

(c) A Participant whose Service terminates will re-enter the Plan as a Participant on the date he recommences Service, provided the Participant returns to Service prior to incurring five consecutive One Year Breaks in Service. A Participant who terminates Service and then returns to Service following five consecutive One Year Breaks in Service shall not receive credit for prior Service with an Employer and shall be required to meet the eligibility requirements of Section 3.01(b) of the Plan before again becoming a Participant.

Section 3.05 Participation Not Guarantee of Employment.

Participation in the Plan does not constitute a guarantee or contract of employment and will not give any Employee the right to be retained in the employ of the Bank or any of its Affiliates nor any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the Plan.

Section 4

Contributions

Section 4.01 Employer Contributions.

(a) Discretionary Contributions . Each Plan Year, each Employer, in its discretion, may make a contribution to the Trust. Each Employer making a contribution for any Plan Year under this Section 4.01(a) will contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the Employer shall determine by resolution. Notwithstanding the Employer’s discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code.

(b) Employer Contributions for Acquisition Loans . Each Plan Year, the Employers shall, subject to any regulatory prohibitions, contribute an amount of cash (including amounts contributed under paragraph (c) of this Section 4.01) sufficient to enable the Trustee to discharge any indebtedness incurred with respect to an Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers’ obligation to make contributions under this Section 4.01(b) shall be reduced to the extent of any investment earnings attributable to such contributions and any cash dividends paid with respect to Company Stock held by the Trustee in the Loan Suspense Account. If there is more than one Acquisition Loan, the Employers shall designate the one to which any contribution pursuant to this Section 4.01(b) is to be applied.

(c) Employer Matching Contributions under the Savings Plan . For each Plan Year prior to the 2007 Plan Year, each Employer, in its discretion, may make a contribution to the Trust equal to a percentage of the Employee’s voluntary contributions made for the Plan Year under the Savings Plan (as defined below). Each Employer making a contribution for any Plan Year under this Section 4.01(c) shall contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the employer shall determine by resolution or as shall be set forth pursuant to a formula under the Savings Plan, as applicable. Notwithstanding the Employer’s discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code. For purposes of this Plan, “Savings Plan” means a defined contribution tax-qualified retirement plan sponsored by the Employer under which Participants may defer compensation pursuant to Section 401(k) of the Code.

Section 4.02 Limitations on Contributions.

In no event shall an Employer’s contribution(s) made under Section 4.01 of the Plan for any Plan Year exceed the lesser of:

(a) The maximum amount deductible under Section 404 of the Code by that Employer as an expense for Federal income tax purposes; and

(b) The maximum amount which can be credited for that Plan Year in accordance with the allocation limitation provisions of Section 5.05 of the Plan.

Section 4.03 Acquisition Loans.

The Trustee may incur Acquisition Loans from time to time to finance the acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and shall not be payable on demand except in the event of default, and shall be primarily for the benefit of Participants and Beneficiaries of the Plan. An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired and any other Plan assets which are permissible securities within the provisions of Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Trust assets. Any pledge of Financed Shares must provide for the release of shares so pledged on a basis equal to the principal and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), paid by the Trustee on the Acquisition Loan. The released Financed Shares shall be allocated to Participants’ Accounts in accordance with the provisions of Section 5.04 or Section 5.08 of the Plan, whichever is applicable. Payment of principal and interest on any Acquisition Loan shall be made by the Trustee only from the Employer contributions paid in cash to enable the Trustee to repay such loan in accordance with Section 4.01(b) of the Plan, from earnings attributable to such contributions, and any cash dividends received by the Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan (including contributions, earnings and dividends received during or prior to the year of repayment, less such payments in prior years), whether or not allocated. Financed Shares shall initially be credited to the Loan Suspense Account and shall be transferred for allocation to the Company Stock Accounts of Participants only as payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants’ Company Stock Accounts for each Plan Year shall be based on the ratio that the payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan for that Plan Year bear to the sum of the payments of principal and interest on the Acquisition Loan for that Plan Year plus the total remaining payments of principal and interest projected (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.05 of the Plan.

Section 4.04 Conditions as to Contributions.

Any amount contributed by an Employer due to a good faith mistake of fact, or based upon a good faith but erroneous determination of its deductibility under Section 404 of the Code, shall be returned to the Employer within one (1) year after the date on which the Employer originally made such contribution, or within one (1) year after its nondeductibility has been finally determined. However, the amount to be returned shall be reduced to take account for any adverse investment experience within the Trust in order that the balance credited to each Participant’s Accounts is not less that it would have been if the contribution had never been made by the Employer.

Section 4.05 Employee Contributions.

Employee contributions are neither required nor permitted under the Plan.

Section 4.06 Rollover Contributions.

Rollover contributions of assets from other tax-qualified retirement plans are not permitted under the Plan.

Section 4.07 Trustee-to-Trustee Transfers.

Trustee-to-trustee transfers of assets from other tax-qualified retirement plans are not permitted under the Plan.

Section 5

Plan Accounting

Section 5.01 Accounting for Allocations.

The Committee shall establish the Accounts (and sub-accounts, if deemed necessary) for each Participant, and the accounting procedures for purposes of making allocations to the Participants’ Accounts provided for in this Section 5. The Committee shall maintain adequate records of the cost basis of shares of Company Stock allocated to each Participant’s Company Stock Account. The Committee also shall keep separate records of Financed Shares attributable to each Acquisition Loan and of contributions made by the Employers (and any earnings thereon) made for the purpose of enabling the Trustee to repay any Acquisition Loan. From time to time, the Committee may modify its accounting procedures for the purpose of achieving equitable and nondiscriminatory allocations among the Participants’ Accounts, in accordance with the provisions of this Section 5 and the applicable requirements of the Code and ERISA. In accordance with Section 9 of the Plan, the Committee may delegate the responsibility for maintaining Accounts and records.

Section 5.02 Maintenance of Participants’ Company Stock Accounts.

As of each Valuation Date, the Committee shall adjust the Company Stock Account of each Participant to reflect activity during the Valuation Period as follows:

(a) First, charge to each Participant’s Company Stock Account all distributions, payments and expenses that have not been previously charged;

(b) Next, credit to each Participant’s Company Stock Account the shares of Company Stock, if any, that have been purchased with amounts from his Other Investments Account, and adjust such Other Investments Account in accordance with the provisions of Section 5.03 of the Plan; and

(c) Next, credit to each Participant’s Company Stock Account the shares of Company Stock representing contributions made by the Employers in the form of Company Stock and the number of Financed Shares released from the Loan Suspense Account under Section 4.03 of the Plan that are to be allocated and credited as of that date in accordance with the provisions of Section 5.04 of the Plan; and

(d) Finally, credit to each Participant’s Company Stock Account the shares of Company Stock released from the Loan Suspense Account that are to be allocated in accordance with the provisions of Section 5.09 of the Plan.

Section 5.03 Maintenance of Participants’ Other Investments Accounts.

As of each Valuation Date, the Committee shall adjust the Other Investments Account of each Participant to reflect activity during the Valuation Period as follows:

(a) First, charge to each Participant’s Other Investments Account all distributions, payments and expenses that have not previously been charged;

(b) Next, if Company Stock is purchased with assets from a Participant’s Other Investments Account, the Participant’s Other Investments Account shall be charged accordingly;

(c) Next, subject to the dividend provisions of Section 5.08 of the Plan, credit to the Other Investments Account of each Participant any cash dividends paid to the Trustee on shares of Company Stock held in that Participant’s Company Stock Account (as of the record date for such cash dividends) and dividends paid on shares of Company Stock held in the Loan Suspense Account that have not been used to repay any Acquisition Loan. Subject to the provisions of Section 5.08 of the Plan, cash dividends that have not been used to repay an Acquisition Loan and have been credited to a Participant’s Other Investments Account shall, from time to time, be applied by the Trustee to purchase shares of Company Stock, which shares shall then be credited to the Company Stock Account of such Participant. The Participant’s Other Investments Account shall then be charged by the amount of cash used to purchase such Company Stock or used to repay any Acquisition Loan. In addition, any earnings on:

(i) Other Investments Accounts will be allocated to Participants’ Other Investments Accounts, pro rata, based on such Other Investment Account balances as of the first day of the Valuation Period, and

(ii) The Loan Suspense Account, other than dividends used to repay the Acquisition Loan, will be allocated to Participants’ Other Investments Accounts, pro rata, based on their Other Investment Account balances as of the first day of the Valuation Period.

(d) Next, allocate and credit the Employer contributions made pursuant to Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan in accordance with Section 5.04 of the Plan. Such amount shall then be used to repay any Acquisition Loan and each Participant’s Other Investments Account shall be charged accordingly; and

(e) Next, allocate and credit the Employer contributions (other than amounts contributed to repay an Acquisition Loan) that are made in cash (or property other than Company Stock) for the Plan Year to the Other Investments Account of each Participant in accordance with Section 5.04 of the Plan; and

(f) Finally, credit to each Participant’s Other Investments Account the proceeds from the disposition of shares of Company Stock from the Loan Suspense Account that are to be allocated in accordance with the provisions of Section 5.09 of the Plan.

Section 5.04 Allocation and Crediting of Employer Contributions.

(a) Except as otherwise provided for in Section 5.08 and Section 5.09 of the Plan, as of the Valuation Date for each Plan Year:

(i) Company Stock released from the Loan Suspense Account for that year and shares of Company Stock contributed directly to the Plan shall be allocated and credited to each Active Participant’s Account (as defined in paragraph Section 5.04(b) of this Section 5.04) as follows:

(A) first, for each Plan Year prior to the 2007 Plan Year, the number of shares of Company Stock with a fair market value (valued as of the last day of each calendar quarter) equal to the matching contributions made under Section 4.01(c) of the Plan on behalf of an Active Participant shall be credited to the Active Participant’s Company Stock Account (and a matching contribution sub-account); and then

(B) the remaining number of shares of Company Stock that bears the same ratio as the Active Participant’s Compensation while a Participant bears to the aggregate Compensation of all Active Participants (while Participants) for the Plan Year shall be credited to such Active Participant’s Company Stock Account.

(ii) The cash contributions not used to repay an Acquisition Loan and any other property (other than shares of Company Stock) contributed for that year shall be allocated and credited to each Active Participant’s Account as follows:

(A) first, cash contributions made pursuant to Section 4.01(c) of the Plan shall be allocated to each Participant’s Other Investments Account; and then

(B) additional cash contributions shall be allocated to each Participant’s Other Investments Account based on the ratio determined by comparing each Active Participant’s Compensation while a Participant to the aggregate Compensation of all Active Participants (while Participants) for the Plan Year.

(b) For purposes of this Section 5.04, the term “Active Participant” means those Employees who:

(i) completed 1,000 Hours of Service during the Plan Year, and

(ii) were employed by an Employer, including Employees on a Recognized Absence, on the last day of the Plan Year or terminated employment during the Plan Year by reason of death, Disability, or attainment of their Retirement Date.

Notwithstanding the above, a Participant shall be considered an Active Participant for purposes of allocations of matching contributions made pursuant to Section 4.01(c) of the Plan if the Participant would otherwise be eligible for an allocation of matching contributions under the Savings Plan.

Section 5.05 Limitations on Allocations.

(a) In General . Subject to the provisions of this Section 5.05, Section 415 of the Code shall be incorporated by reference into the terms of the Plan. No allocation shall be made under Section 5.04 of the Plan that would result in a violation of Section 415 of the Code.

(b) Code Section 415 Compensation . For purposes of this Section 5.05, Compensation shall be adjusted to reflect the general rule of Section 1.415-2(d) of the Treasury Regulations.

Limitation Year . The “limitation year” (within the meaning of Section 415 of the Code) shall be the calendar year. For limitation years beginning on or after January 1, 2001, for purposes of applying the limitations described in this Section 5.05 and as required by Section 415 of the Code, Compensation paid or made available under such limitation years shall include elective amounts that are not includible in the gross income of the employee by reason of Section 132(f) of the Code.

(c) Multiple Defined Contribution Plans . In any case where a Participant also participates in another defined contribution plan of the Bank or its Affiliates, the appropriate committee of such other plan shall first reduce the after-tax contributions under any such plan, shall then reduce any elective deferrals under any such plan subject to Section 401(k) of the Code, shall then reduce all other contributions under any other such plan and, if necessary, shall then reduce contributions under this Plan, subject to the provisions of paragraph Section 5.05(d) of this Section 5.05.

(d) Excess Allocations . If, after applying the allocation provisions under Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would otherwise result in a Participant’s account being in violation of Section 415 of the Code, the Committee shall reduce the Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for that Participant if that Participant is covered by the Plan as of the end of the limitation year. However, if that Participant is not covered by the Plan as of the end of the limitation year, then the excess amounts shall be held unallocated in a suspense account for the limitation year and allocated and reallocated in the next limitation year to all the remaining Participants in the Plan; furthermore, the excess amounts shall be used to reduce Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for all the remaining Participants in the Plan.

(e) Allocations Pursuant to Section 5.09 . For purposes of this Section 5.05, no amount credited to any Participant’s Account pursuant to Section 5.09 of the Plan shall be counted as an “annual addition” for purposes of Section 415 of the Code.

Section 5.06 Other Limitations.

Aside from the limitations set forth in Section 5.05 of the Plan, in no event shall more than one-third of the Employer contributions to the Plan for any Plan Year be allocated to the Accounts of Highly Compensated Employees. In order to ensure such allocations are not made, the Committee shall, beginning with the Participants whose Compensation exceeds the limit then in effect under Section 401(a)(17) of the Code, reduce the amount of Compensation of such Highly Compensated Employees on a pro-rata basis per individual that would otherwise be taken into account for purposes of allocating benefits under Section 5.04 of the Plan. If, in order to satisfy this Section 5.06, any such Participant’s Compensation must be reduced to an amount that is lower than the Compensation of the next highest paid (based on such Participant’s Compensation) Highly Compensated Employee (the “breakpoint amount”), then, for purposes of allocating benefits under Section 5.04 of the Plan, the Compensation of all concerned Participants shall be reduced to an amount not to exceed such breakpoint amount.

Section 5.07 Limitations as to Certain Section 1042 Transactions.

To the extent that a shareholder of Company Stock sells qualifying Company Stock to the Plan and elects (with the consent of the Bank) nonrecognition of gain under Section 1042 of the Code, no portion of the Company Stock purchased in such nonrecognition transaction (or dividends or other income attributable thereto) may accrue or be allocated during the nonallocation period (the ten (10) year period beginning on the later of the date of the sale of the qualified Company Stock or the date of the Plan allocation attributable to the final payment of an Acquisition Loan incurred in connection with such sale) for the benefit of:

(a) The selling shareholder;

(b) The spouse, brothers or sisters (whether by the whole or half blood), ancestors or lineal descendants of the selling shareholder or descendant referred to in (a) above; or

(i) any class of outstanding stock of the Bank or any Affiliate, or

(ii) the total value of any class of outstanding stock of the Bank or any Affiliate.

For purposes of this Section 5.07, Section 318(a) of the Code shall be applied without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the Code.

Section 5.08 Dividends.

(a) Stock Dividends . Dividends on Company Stock which are received by the Trustee in the form of additional Company Stock shall be retained in the portion of the Trust Fund consisting of Company Stock, and shall be allocated among Participants’ Accounts and the Loan Suspense Account in accordance with their holdings of the Company Stock on which the dividends have been paid.

(b) Cash Dividends on Allocated Shares . Dividends on Company Stock credited to Participants’ Accounts which are received by the Trustee in the form of cash shall be, at the direction of the Bank, either be:

(i) credited to Participants’ Accounts in accordance with Section 5.03 of the Plan and invested as part of the Trust Fund;

(ii) distributed immediately to the Participants;

(iii) distributed to the Participants within ninety (90) days of the close of the Plan Year in which paid; or

(iv) used to repay first principal and then, if available, interest on the Acquisition Loan used to acquire Company Stock on which the dividends were paid.

In addition to the above methods of treating dividends on allocated shares, for Plan Years beginning after December 31, 2001, at the sole discretion of the Committee, Participants may elect that dividends on Company Stock credited to their Accounts which are received by the Trustee in the form of cash shall either be:

(v) paid to the Plan and reinvested in Company Stock and credited to the Participant’s Account;

(vi) distributed in cash to the Participant; or

(vii) distributed to the Participant within ninety (90) days of the close of the Plan Year in which paid.

Dividends subject to an election under this paragraph (and any Stock acquired therewith pursuant to a Participant’s election) shall at all times be fully vested. To the extent the Committee allows elections pursuant to this Section, the Committee will establish policies and procedures consistent with guidance issued under Section 404(k) of the Code or which the Committee believes is consistent with the provisions of Section 404(k) of the Code in the absence of relevant regulatory guidance.

(c) Cash Dividends on Unallocated Shares . Dividends on Company Stock held in the Loan Suspense Account which are received by the Trustee in the form of cash shall be applied as soon as practicable to payments of first principal and then, if available, interest under the Acquisition Loan incurred with the purchase of the Company Stock.

(d) Financed Shares . Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to such Company Stock shall be allocated under Section 5.03 and Section 5.04 of the Plan as follows:

(i) First, Financed Shares with a fair market value at least equal to the dividends paid with respect to the Company Stock allocated to Participants’ Accounts shall be allocated among and credited to the Accounts of such Participants, pro rata, according to the number of shares of Company Stock held in such accounts on the date such dividend is declared by the Company;

(ii) Then, any remaining Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to Company Stock held in the Loan Suspense Account shall be allocated among and credited to the Accounts of all Participants, pro rata, according to each Participant’s Compensation.

Section 5.09 Change in Control Provisions.

(a) Upon a Change in Control, the Committee shall direct the Trustee to sell or otherwise dispose of a sufficient number of shares of Company Stock held in the Loan Suspense Account, and the proceeds of such sale or disposition shall be used to repay in full any outstanding Acquisition Loan of the Plan. After repayment of any Acquisition Loans, all remaining shares of Company Stock held in the Loan Suspense Account and any cash proceeds from the sale or other disposition of any shares of Company Stock held in the Loan Suspense Account shall be

allocated among the Accounts of all Affected Participants (as defined below). Such allocation of shares or cash proceeds shall be credited as of the date on which the Change in Control occurs to the Accounts of each Participant who is either in active Service with an Employer immediately preceding the date on which the Change in Control occurs or is on a Recognized Absence immediately preceding the date on which the Change in Control occurs (each an “Affected Participant”), in proportion to the opening balances in their Accounts as of the first day of the current Valuation Period.

(b) Notwithstanding any other provision of the Plan, this Section 5.09 may not be amended on or after the effective date of a Change in Control, unless required by the Internal Revenue Service as a condition of the continued treatment of the Plan as a tax-qualified plan under Section 401(a) of the Code.

(c) This Section 5.09 shall have no force and effect unless the price paid for the Company Stock in connection with the Change in Control is greater than the average basis of the unallocated Company Stock held in the Loan Suspense Account as of the date of the Change in Control.

Section 5.10 Nondiscrimination Test for Matching Contributions.

(a) Notwithstanding anything herein to the contrary, the Plan shall meet the nondiscrimination test of Section 401(m) of the Code for each Plan Year. In order to meet the nondiscrimination test, any or all of the following steps may be taken:

(i) At any time during the Plan Year, the Committee may limit the amount of matching contributions that may be made on behalf of Highly Compensated Employees;

(ii) The Committee may distribute to Highly Compensated Employees the excess aggregate contributions made for the Plan Year, to the extent necessary to meet the requirements of Section 401(m) of Code, on the basis of the amount of contributions on behalf of, or by, each Highly Compensated Employee;

(iii) The Committee may recommend to the Board of Directors of the Bank that the Employer make an additional matching contribution to the Plan for the benefit of Participants who are not Highly Compensated Employees to the extent necessary to meet the requirements of Section 401(m) of the Code; and

(iv) The Committee may take any other steps that the Committee deems appropriate.

(b) For Plan Years beginning after 2005, excess aggregate contributions distributed pursuant to Section 5.10(a)(ii) shall be adjusted for any income and loss up to the date of distribution equal to income or loss allocable to the Participant’s Company Stock Account and Other Investments Account multiplied by a fraction, the numerator which is such Participant’s excess aggregate contributions for the year and the denominator of which is the Participant’s account balance(s) attributable to Matching Contributions, without regard to any income or loss during the Plan Year.

(c) The nondiscrimination requirements of Section 401(m) of the Code require that, in each Plan Year, the “Contribution Percentage” (as defined below) of the eligible Highly Compensated Employees for such Plan Year shall not exceed the greater of:

(i) The Contribution Percentage of all other eligible Employees for the preceding Plan Year multiplied by 1.25; or

(ii) The lesser of the Contribution Percentage of all other eligible Employees for the preceding Plan Year multiplied by 2, or the Contribution Percentage of all other eligible Employees for the preceding Plan Year plus 2 percentage points. (For Plan Years prior to January 1, 2002, use of this alternative limitation shall be subject to the provisions of Section 1.401(m)-2 of the Treasury Regulations regarding the multiple use of the alternative deferral tests set forth in Section 401(k) and 401(m) of the Code.)

The Committee may elect to calculate the Contribution Percentages using the current Plan Year rather than the preceding Plan Year; provided, however, that if the Committee so elects, the election may only be changed as provided by the Secretary of the Treasury.

(d) The “Contribution Percentage” for a group of Employees is the average of the ratios, calculated separately for each Employee in the group, of the amount of Matching Contributions that are credited under the Plan on behalf of each Employee for the Plan Year, to each Employee’s Compensation for the Plan Year.

(e) This Section 5.10 is effective for Plan Years beginning before 2007.

Section 6

Vesting

Section 6.01 Deferred Vesting in Accounts.

(a) A Participant shall become vested in his Accounts with respect to contributions made pursuant to Section 4.01(a) or Section 4.01(b) of the Plan in accordance with the following schedule:


Years of Service	Vested Percentage
Fewer than 5 years	0	%
5 or more years	100	%

A Participant shall become vested in matching contributions made to his Account pursuant to Section 4.01(c) of the Plan in accordance with the following schedule:


Years of Service	Vested Percentage
Fewer than 2 years	0	%
2 years	20	%
3 years	40	%
4 years	60	%
5 years	80	%
6 or more years	100	%

(b) For purposes of determining a Participant’s Years of Service under this Section 6.01, employment with the Bank or an Affiliate shall be deemed employment with the Employer. Except as otherwise provided for in this Section 6.01 and in Section 6.05 of the Plan, for purposes of determining the Vested Percentage of all Participants, all Service with an Employer shall be included, beginning with the Employee’s initial Service with the Employer. For Plan Years ending prior to January 1, 2002, an Employee’s initial Year of Service shall be the twelve (12) consecutive month period beginning with the day the Employee first completes an Hour of Service, and a Participant’s subsequent Years of Service shall be the twelve (12) consecutive month periods coinciding with the calendar year, commencing with the calendar year which includes the date the Participant first completed an Hour of Service with the Employer. For Plan Years beginning on and after January 1, 2002, a Year of Service shall be the twelve (12) consecutive month Period of Service beginning on the Employee’s date of Hire.

(c) Notwithstanding anything in this Plan to the contrary, Service with Columbia Home Loans, LLC, formerly known as Columbia Equities, Ltd., prior to August 14, 2000 shall not be counted for purposes of determining a Participant’s Vested Percentage under this Section 6.

(d) Notwithstanding anything in this Plan to the contrary, matching contributions shall not be made to the Plan in Plan Years after 2006.

Section 6.02 Immediate Vesting in Certain Situations.

(a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become fully vested in his Accounts upon the earlier of:

(i) Termination of the Plan or upon the permanent and complete discontinuance of contributions by the Employer to the Plan; provided, however, that in the event of a partial termination, the interest of each Participant shall fully vest only with respect to that part of the Plan which is terminated;

(ii) Termination of Service on or after the Participant’s Early Retirement Date;

(iii) A Change in Control; or

(iv) Termination of Service by reason of death or Disability.

Section 6.03 Treatment of Forfeitures.

(a) If a Participant who is not fully vested in his Accounts terminates employment, that portion of his Accounts in which he is not vested shall be forfeited upon the earlier of:

(i) The date the Participant receives or is deemed to have received a distribution of his entire vested benefits under the Plan, or

(ii) For Plan Years ending prior to January 1, 2002, the date at which the Participant incurs five (5) consecutive One Year Breaks in Service, and for Plan Years beginning on or after January 1, 2002, the date at which the Participant incurs five (5) consecutive One Year Periods of Severance; or

(iii) The date at which the Participant attains Normal Retirement Age.

(b) If a Participant who has terminated employment and has received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer prior to incurring five (5) consecutive One Year Breaks in Service (for Plan Years ending prior to January 1, 2002) or five (5) consecutive One Year Periods of Severance (for Plan Years beginning on or after January 1, 2002), he shall have the portion of his Accounts which was previously forfeited restored to his Accounts, provided he repays to the Trustee within five (5) years of his subsequent employment date an amount equal to the distribution. The amount restored to the Participant’s Account shall be credited to his Account as of the last day of the Plan Year in which the Participant repays the distributed amount to the Trustee and the restored amount shall come from other Employees’ forfeitures and, if such forfeitures are insufficient, from a special contribution by his Employer for that year. If a Participant’s employment terminates prior to his Account having become vested, such Participant shall be deemed to have received a distribution of his entire vested interest as of the Valuation Date next following his termination of employment.

(c) If a Participant who has terminated employment, but has not received a distribution of his entire vested benefits under the Plan, is subsequently reemployed by an Employer subsequent to

incurring five (5) consecutive One Year Breaks in Service (for Plan Years ending prior to January l, 2002) or five (5) consecutive One Year Periods of Severance (for Plan Years beginning on or after January 1, 2002) any undistributed balance of his Account from his prior participation which was not forfeited shall be maintained as a fully vested subaccount with his Account.

(d) If a portion of a Participant’s Account is forfeited, assets other than Company Stock must be forfeited before any Company Stock may be forfeited.

(e) Forfeitures shall be applied to reduce future Employer contributions or reallocated among the other Participants in the Plan.

Section 6.04 Accounting for Forfeitures.

A forfeiture shall be-charged to a Participant’s Account as of the first day of the first Valuation Period in which the forfeiture becomes certain pursuant to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of the Plan, at the discretion of the Committee, a forfeiture shall be used to reduce any matching contributions made by the terminated Participant’s Employer under Section 4.01(c) or be added to the contributions of the terminated Participant’s Employer which are to be credited to other Participants pursuant to Section 5, as of the last day of the Plan Year in which the forfeiture becomes certain.

Section 6.05 Vesting Upon Reemployment.

(a) If an Employee is not vested in his Accounts, incurs a One Year Break in Service (for Plan Years ending prior to January 1, 2002) or a One Year Period of Severance (for Plan Years beginning on or after January 1, 2002) and again performs an Hour of Service, such Employee shall receive credit for his Years of Service prior to his One Year Break in Service or One Year Period of Severance, as applicable, only if the number of consecutive One Year Breaks in Service or One Year Periods of Severance is less than the greater of: (i) five (5) years or (ii) the aggregate number of his years of Service credited before his One Year Break in Service or One Year Period of Severance.

(b) If a Participant is partially vested in his Accounts, incurs a One Year Break in Service (for Plan Years ending prior to January 1, 2002) or a One Year Period of Severance (for Plan Years beginning on or after January 1, 2002) and again performs an Hour of Service, such Participant shall receive credit for his years of Service prior to his One Year Break in Service or One Year Period of Severance, as applicable; provided, however, that after five (5) consecutive One Year Breaks in Service or five (5) consecutive One Year Periods of Severance, a former Participant’s vested interest in his Accounts attributable to Service prior to his One Year Break in Service or One Year Period of Severance shall not be increased as a result of his years of Service following his reemployment date.

(c) If a Participant is fully vested in his Accounts, incurs a One Year Break in Service (for Plan Years ending prior to January 1, 2002) or a One Year Period of Severance (for Plan Years beginning on or after January 1, 2002) and again performs an Hour of Service, such Participant shall receive credit for all his years of Service prior to his One Year Break in Service or One Year Period of Severance.

Section 7

Distributions

Section 7.01 Distribution of Benefit Upon a Termination of Employment.

(a) Subject to the requirements of Section 7.02, a Participant whose Service terminates for any reason shall receive the entire vested portion of his Accounts in a single payment on a date selected by the Committee; provided, however, that such date shall be as soon as practicable after the end of the Plan Year in which the Participant’s employment terminated. The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment. Subject to the provisions of Section 7.05 of the Plan, if the Committee so provides, a Participant may elect that his benefits be distributed to him in the form of either Company Stock, cash, or some combination thereof.

(b) Notwithstanding paragraph (a) of this Section 7.01, if the balance credited to a Participant’s Accounts exceeds $1,000, his benefits shall not be paid before 60 days after the latest of the close of the Plan Year in which the Participant attains age 65 or in which occurs the 10 ^th anniversary of the year in which he commenced participation in the Plan, unless he elects an early payment date in a written election filed with the Committee. Such an election is not valid unless it is made after the Participant has received the required notice under Section 1.411(a)-11(c) of the Treasury Regulations that provides a general description of the material features of a lump sum distribution and the Participant’s right to defer receipt of his benefits under the Plan. The notice shall be provided no less than 30 days and no more than 90 days before the first day on which all events have occurred which entitle the Participant to such benefit. Written consent of the Participant to the distribution generally may not be made within 30 days of the date the Participant receives the notice and shall not be made more than 90 days from the date the Participant receives the notice. However, a distribution may be made less than 30 days after the notice provided under Section 1.411(a)-11(c) of the Treasury Regulations is given, if:

(i) the Committee clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and if applicable, a particular distribution option), and

(ii) the Participant, after receiving the notice, affirmatively elects a distribution.

A Participant may modify such an election at any time, provided any new benefit payment date is at least 30 days after a modified election is delivered to the Committee.

Section 7.02 Minimum Distribution Requirements.

With respect to all Participants, other than those who are “5% owners” (as defined in Section 416 of the Code), benefits shall be paid no later than the April 1 ^st of the later of:

(i) the calendar year following the calendar year in which the Participant attains age 70- ¹ / 2 , or

(ii) the calendar year in which the Participant retires.

With respect to all Participants who are 5% owners within the meaning of Section 416 of the Code, such Participants benefits shall be paid no later than the April 1 ^st of the calendar year following the calendar year in which the Participant attains age 70- ¹ / 2 .

Section 7.03 Benefits on a Participant’s Death.

(a) If a Participant dies before his benefits are paid pursuant to Section 7.01 of the Plan, the balance credited to his Accounts shall be paid to his Beneficiary in a single distribution on or before the 60 ^th day after the end of the Plan Year in which the Participant died. If the Participant has not named a Beneficiary or if his named Beneficiary should not survive him, then the balance in his Account shall be paid to his estate. The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment.

(b) If a married Participant dies before his benefit payments begin, then, unless he has specifically elected otherwise, the Committee shall cause the balance in his Accounts to be paid to his spouse, as Beneficiary. A married Participant may name an individual other than his spouse as his Beneficiary, provided that such election is accompanied by the spouse’s written consent, which must:

(i) acknowledge the effect of the election;

(ii) explicitly provide either that the designated Beneficiary may not subsequently be changed by the Participant without the spouse’s further consent or that it may be changed without such consent; and

(iii) must be witnessed by the Committee, its representative, or a notary public.

This requirement shall not apply if the Participant establishes to the Committee’s satisfaction that the spouse may not be located.

(c) The Committee shall from time to time take whatever steps it deems appropriate to keep informed of each Participant’s marital status. Each Employer shall provide the Committee with the most reliable information in the Employer’s possession regarding its Participants’ marital status, and the Committee may, in its discretion, require a notarized affidavit from any Participant as to his marital status. The Committee, the Plan, the Trustee, and the Employers shall be fully protected and discharged from any liability to the extent of any benefit payments made as a result of the Committee’s good faith and reasonable reliance upon information obtained from a Participant as to the Participant’s marital status.

Section 7.04 Delay In Benefit Determination.

If the Committee is unable to determine the benefits payable to a Participant or Beneficiary on or before the latest date prescribed for payment pursuant to this Section 7, the benefits shall in any event be paid as soon as practicable after they can first be determined, with whatever makeup payments may be appropriate in view of the delay.

Section 7.05 Options to Receive and Sell Stock.

(a) Unless ownership of virtually all Company Stock is restricted to active Employees and qualified retirement plans for the benefit of Employees pursuant to the certificates of incorporation or by-laws of the Employers issuing Company Stock, a terminated Participant or the Beneficiary of a deceased Participant may instruct the Committee to distribute the Participant’s entire vested interest in his Accounts in the form of Company Stock. In that event, the Committee shall apply the Participant’s vested interest in his Other Investments Account to purchase sufficient Company Stock to make the required distribution.

(b) Any Participant who receives Company Stock pursuant to this Section 7, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall have the right to require the Employer which issued the Company Stock to purchase the Company Stock for its current fair market value (hereinafter referred to as the “put right”). The put right shall be exercisable by written notice to the Committee during the first 60 days after the Company Stock is distributed by the Plan, and, if not exercised in that period, during the first 60 days in the following Plan Year after the Committee has communicated to the Participant its determination as to the Company Stock’s current fair market value. If the put right is exercised, the Trustee may, if so directed by the Committee in its sole discretion, assume the Employer’s rights and obligations with respect to purchasing the Stock. However, the put right shall not apply to the extent that the Company Stock, at the time the put right would otherwise be exercisable, may be sold on an established market in accordance with federal and state securities laws and regulations.

(c) With respect to a put right, the Employer or the Trustee, as the case may be, may elect to pay for the Company Stock in equal periodic installments, not less frequently than annually, over a period not longer than five (5) years from the 30th day after the put right is exercised pursuant to paragraph (b) of this Section 7.05, with adequate security and interest at a reasonable rate on the unpaid balance, all such terms to be set forth in a promissory note delivered to the seller with normal terms as to acceleration upon any uncured default.

(d) Nothing contained in this Section 7.05 shall be deemed to obligate any Employer to register any Company Stock under any federal or state securities law or to create or maintain a public market to facilitate the transfer or disposition of any Company Stock. The put right described in this Section 7.05 may only be exercised by a person described in the paragraph Section 7.05(b) of this Section 7.05, and may not be transferred with any Company Stock to any other person. As to all Company Stock purchased by the Plan in exchange for any Acquisition Loan, the put right be nonterminable. The put right for Company Stock acquired through a Acquisition Loan shall continue with respect to such Company Stock after the Acquisition Loan is repaid or the Plan ceases to be an employee stock ownership plan. Except as provided above, in accordance with the provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no Company Stock acquired with the proceeds of an Acquisition Loan may be subject to any put, call or other option or buy-sell or similar arrangement while held by, and when distributed from, the Plan, whether or not the Plan is then an employee stock ownership plan.

Section 7.06 Restrictions on Disposition of Stock.

Except in the case of Company Stock which is traded on an established market, a Participant who receives Company Stock pursuant to this Section 7, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall, prior to any sale or other transfer of the Company Stock to any other person, first offer the Company Stock to the issuing Employer and to the Plan at its current fair market value. This restriction shall apply to any transfer, whether voluntary, involuntary, or by operation of law, and whether for consideration or gratuitous. Either the Employer or the Trustee may accept the offer within 14 days after it is delivered. Any Company Stock distributed by the Plan shall bear a conspicuous legend describing the right of first refusal under this Section 7.06, as applicable, as well as any other restrictions upon the transfer of the Company Stock imposed by federal and state securities laws and regulations.

Section 7.07 Direct Transfer of Eligible Plan Distributions.

(a) A Participant or Beneficiary may direct that an “eligible rollover distribution” (as defined below) included in a payment made pursuant to this Section 7 be paid directly to an “eligible retirement plan” (as defined below).

(b) To effect such a direct transfer, the Participant or Beneficiary must notify the Committee that a direct transfer is desired and provide to the Committee all necessary information regarding the eligible retirement plan to which the payment is to be made. Such notice shall be made in such form and at such time as the Committee may prescribe. Upon receipt of such notice, the Committee shall direct the Trustee to make a trustee-to-trustee transfer of the eligible rollover distribution to the specified eligible retirement plan.

(c) For purposes of this Section 7.07, an “eligible rollover distribution” shall have the meaning set forth in Section 402(c)(4) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not inconsistent with the above references, an eligible rollover distribution shall mean any distribution of all or any portion of the Participant’s Account, except that such term shall not include any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made (i) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and a designated Beneficiary, or (ii) for a period of ten (10) years or more. Further, the term “eligible rollover distribution” shall not include any distribution required to be made under Section 401(a)(9) of the Code, the portion of any distribution that is not includible in gross income (determined without regard to the exclusions for net unrealized appreciation with respect to Company Stock) or, to the extent applicable under the Plan, any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.

(ii) an individual retirement annuity described in Section 408(b) of the Code (other than an endowment contract), (iii) a qualified trust described in Section 401(a) of the Code and exempt under Section 501(a) of the Code, and (iv) an annuity plan described in Section 403(a) of the Code.

Section 8

Voting of Company Stock and Tender Offers

Section 8.01 Voting, of Company Stock.

(a) In General . The Trustee shall generally vote all shares of Company Stock held in the Trust in accordance with the provisions of this Section 8.01.

(b) Allocated Shares . Shares of Company Stock which have been allocated to Participants’ Accounts shall be voted by the Trustee in accordance with the Participants’ written instructions.

(c) Uninstructed and Unallocated Shares . Shares of Company Stock which have been allocated to Participants’ Accounts, but for which no written instructions have been received by the Trustee regarding voting, shall be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Shares of unallocated Company Stock shall also be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Notwithstanding the preceding two sentences, all shares of Company Stock which have been allocated to Participants’ Accounts and for which the Trustee has not timely received written instructions regarding voting, and all unallocated shares of Company Stock, must be voted by the Trustee in a manner determined by the Trustee to be solely in the best interests of the Participants and Beneficiaries.

(d) Procedure and Confidentiality . Whenever such voting rights are to be exercised, the Employers, the Committee and the Trustee shall see that all Participants and Beneficiaries are provided with the same notices and other materials as are provided to other holders of the Company Stock, and are provided with adequate opportunity to deliver their instructions to the Trustee regarding the voting of Company Stock allocated to their Accounts or deemed allocated to their Accounts for purposes of voting. The instructions of the Participants with respect to the voting of shares of Company Stock shall be confidential.

Section 8.02 Tender Offers.

In the event of a tender offer, Company Stock shall be tendered by the Trustee in the same manner set forth in Section 8.01 of the Plan regarding the voting of Company Stock.

Section 9

The Committee and Plan Administration

Section 9.01 Identity of the Committee.

The Committee shall consist of three (3) or more individuals selected by the Bank. Any individual, including a director, trustee, shareholder, officer, or Employee of an Employer, shall be eligible to serve as a member of the Committee. The Bank shall have the power to remove any individual serving on the Committee at any time without cause upon ten (10) days written notice to such individual and any individual may resign from the Committee at any time without reason upon ten (10) days written notice to the Bank. The Bank shall notify the Trustee of any change in membership of the Committee.

Section 9.02 Authority of Committee.

(a) The Committee shall be the “plan administrator” within the meaning of ERISA and shall have exclusive responsibility and authority to control and manage the operation and administration of the Plan, including the interpretation and application of its provisions, except to the extent such responsibility and authority are otherwise specifically:

(i) allocated to the Bank, the Employer, or the Trustee under the Plan and Trust Agreement;

(ii) delegated in writing to other persons by the Bank, the Employer, the Committee, or the Trustee; or

(iii) allocated to other parties by operation of law.

(b) The Committee shall have exclusive responsibility regarding decisions concerning the payment of benefits under the Plan.

(c) The Committee shall have full investment responsibility with respect to the Investment Fund except to the extent, if any, specifically provided in the Trust Agreement.

(d) In the discharge of its duties, the Committee may employ accountants, actuaries, legal counsel, and other agents (who also may be employed by an Employer or the Trustee in the same or some other capacity) and may pay such individuals reasonable compensation and expenses for services rendered with respect to the operation or administration of the Plan to the extent such payments are not otherwise prohibited by law.

Section 9.03 Duties of Committee.

(a) The Committee shall keep whatever records may be necessary in connection with the maintenance of the Plan and shall furnish to the Employers whatever reports may be required from time to time by the Employers. The Committee shall furnish to the Trustee whatever information may be necessary to properly administer the Trust. The Committee shall see to the filing with the appropriate government agencies of all reports and returns required with respect to the Plan under ERISA and the Code and other applicable laws.

(b) The Committee shall have exclusive responsibility and authority with respect to the Plan’s holdings of Company Stock and shall direct the Trustee in all respects regarding the purchase, retention, sale, exchange, and pledge of Company Stock and the creation and satisfaction of any Acquisition Loan to the extent such responsibilities are not set forth in the Trust Agreement.

(c) The Committee shall at all times act consistently with the Bank’s long-term intention that the Plan, as an employee stock ownership plan, be invested primarily in Company Stock. Subject to the direction of the Committee with respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of the Plan, and subject to the provisions of Section 7.05 and Section 11.04 of the Plan as to Participants’ rights under certain circumstances to have their Accounts invested in Company Stock or in assets other than Company Stock, the Committee shall determine, in its sole discretion, the extent to which assets of the Trust shall be used to repay any Acquisition Loan, to purchase Company Stock, or to invest in other assets selected by the Committee or an investment manager. No provision of the Plan relating to the allocation or vesting of any interests in the Company Stock or investments other than Company Stock shall restrict the Committee from changing any holdings of the Trust Fund, whether the changes involve an increase or a decrease in the Company Stock or other assets credited to Participants’ Accounts. In determining the proper extent of the Trust Fund’s investment in Company Stock, the Committee shall be authorized to employ investment counsel, legal counsel, appraisers, and other agents and to pay their reasonable compensation and expenses to the extent such payments are not prohibited by law.

(d) If the valuation of any Company Stock is not established by reported trading on a generally recognized public market, then the Committee shall have the exclusive authority and responsibility to determine the value of the Company Stock for all purposes under the Plan. Such value shall be determined as of each Valuation Date and any other date on which the Trustee purchases or sells Company Stock in a manner consistent with Section 4975 of the Code and the Treasury Regulations thereunder. The Committee shall use generally accepted methods of valuing stock of similar corporations for purposes of arm’s length business and investment transactions, and in this connection the Committee shall obtain, and shall be protected in relying upon, the valuation of Company Stock as determined by an independent appraiser experienced in preparing valuations of similar businesses.

Section 9.04 Compliance with ERISA and the Code.

The Committee shall perform all acts necessary to ensure the Plan’s compliance with ERISA and the Code. Each individual member of the Committee shall discharge his duties in good faith and in accordance with the applicable requirements of ERISA and the Code.

Section 9.05 Action by Committee.

All actions of the Committee shall be governed by the affirmative vote of a majority of the total number of members of the Committee. The members of the Committee may meet informally and may take any action without meeting as a group.

Section 9.06 Execution of Documents.

Any instrument executed by the Committee may be signed by any member of the Committee.

Section 9.07 Adoption of Rules.

The Committee shall adopt such rules and regulations of uniform applicability as it deems necessary or appropriate for the proper operation, administration and interpretation of the Plan.

Section 9.08 Responsibilities to Participants.

The Committee shall determine which Employees qualify to participate in the Plan. The Committee shall furnish to each Eligible Employee whatever summary plan descriptions, summary annual reports, and other notices and information may be required under ERISA. The Committee also shall determine when a Participant or his Beneficiary qualifies for the payment of benefits under the Plan. The Committee shall furnish to each such Participant or Beneficiary whatever information is required under ERISA or the Code (or is otherwise appropriate) to enable the Participant or Beneficiary to make whatever elections may be available pursuant to Section 7, and the Committee shall provide for the payment of benefits in the proper form and amount from the Trust. The Committee may decide in its sole discretion to permit modifications of elections and to defer or accelerate benefits to the extent consistent with the terms of the Plan, applicable law, and the best interests of the individuals concerned.

Section 9.09 Alternative Payees in Event of Incapacity.

If the Committee finds at any time that an individual qualifying for benefits under this Plan is a minor or is incompetent, the Committee may direct the benefits to be paid, in the case of a minor, to his parents, his legal guardian, a custodian for him under the Uniform Transfers to Minors Act, or the person having actual custody of him, or, in the case of an incompetent, to his spouse, his legal guardian, or the person having actual custody of him. The Committee and the Trustee shall not be obligated to inquire as to the actual use of the funds by the person receiving them under this Section 9.09, and any such payment shall completely discharge the obligations of the Plan, the Trustee, the Committee, and the Employers to the extent of the payment.

Section 9.10 Indemnification by Employers.

Except as separately agreed in writing, the Committee, and any member or employee of the Committee, shall be indemnified and held harmless by the Employers, jointly and severally, to the fullest extent permitted by law, against any and all costs, damages, expenses, and liabilities reasonably incurred by or imposed upon the Committee or such individual in connection with any claim made against the Committee or such individual or in which the Committee or such individual may be involved by reason of being, or having been, the Committee, or a member or employee of the Committee, to the extent such amounts are not paid by insurance.

Section 9.11 Abstention by Interested Member.

Any member of the Committee who also is a Participant in the Plan shall take no part in any determination specifically relating to his own participation or benefits under the Plan, unless his abstention would render the Committee incapable of acting on the matter.

Section 10

Rules Governing Benefit Claims

Section 10.01 Claim for Benefits.

Any Participant or Beneficiary who qualifies for the payment of benefits shall file a claim for benefits with the Committee on a form provided by the Committee. The claim, including any election of an alternative benefit form, shall be filed at least thirty (30) days before the date on which the benefits are to begin. If a Participant or Beneficiary fails to file a claim by the 30th day before the date on which benefits become payable, he shall be presumed to have filed a claim for payment for the Participant’s benefits in the standard form prescribed by Section 7 of the Plan.

Section 10.02 Notification by Committee.

Within ninety (90) days after receiving a claim for benefits (or within one hundred and eighty (180) days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary within 90 days after receiving the claim for benefits), the Committee shall notify the Participant or Beneficiary whether the claim has been approved or denied. If the Committee denies a claim in any respect, the Committee shall set forth in a written notice to the Participant or Beneficiary:

(a) each specific reason for the denial;

(b) specific references to the pertinent Plan provisions on which the denial is based;

(c) a description of any additional material or information which could be submitted by the Participant or Beneficiary to support his claim, with an explanation of the relevance of such information; and

(d) an explanation of the claims review procedures set forth in Section 10.03 of the Plan.

Section 10.03 Claims Review Procedure.

Within sixty (60) days after a Participant or Beneficiary receives notice from the Committee that his claim for benefits has been denied in any respect, he may file with the Committee a written notice of appeal setting forth his reasons for disputing the Committee’s determination. In connection with his appeal the Participant or Beneficiary or his representative may inspect or purchase copies of pertinent documents and records to the extent not inconsistent with other Participants’ and Beneficiaries’ rights of privacy. Within 60 days after receiving a notice of appeal from a prior determination (or within one hundred and twenty (120) days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary and his representative within 60 days after receiving the notice of appeal), the Committee shall furnish to the Participant or Beneficiary and his representative, if any, a written statement of the Committee’s final decision with respect to his claim, including the reasons for such decision and the particular Plan provisions upon which it is based.

Section 11

The Trust

Section 11.01 Creation of Trust Fund.

All amounts received under the Plan from an Employer and investments shall beheld in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement. The benefits described in this Plan shall be payable only from the assets of the Trust Fund. Neither the Bank, any other Employer, its board of directors or trustees, its stockholders, its officers, its employees, the Committee, nor the Trustee shall be liable for payment of any benefit under this Plan except from the Trust Fund.

Section 11.02 Company Stock and Other Investments.

The Trust Fund held by the Trustee shall be divided into Company Stock and investments other than Company Stock. The Trustee shall have no investment responsibility for the portion of the Trust Fund consisting of Company Stock, but shall accept any Employer contributions made in the form of Company Stock, and shall acquire, sell, exchange, distribute, and otherwise deal with and dispose of Company Stock in accordance with the instructions of the Committee.

Section 11.03 Acquisition of Company Stock.

From time to time the Committee may, in its sole discretion, direct the Trustee to acquire Company Stock from the issuing Employer or from shareholders, including shareholders who are or have been Employees, Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for such Company Stock no more than its fair market value, which shall be determined conclusively by the Committee pursuant to Section 9.03(d) of the Plan. The Committee may direct the Trustee to finance the acquisition of Company Stock through an Acquisition Loan subject to the provisions of Section 4.03 of the Plan.

Section 11.04 Participants’ Option to Diversify.

The Committee shall provide for a procedure under which each Participant may, during the first five (5) years of a certain six-year period, elect to have up to twenty-five percent (25%) of the value of his Accounts committed to alternative investment options within an “Investment Fund”. For the sixth year in this period, the Participant may elect to have up to fifty percent (50%) of the value of his Accounts committed to other investments. The six-year period shall begin with the Plan Year following the first Plan Year in which the Participant has both reached age 55 and completed 10 years of participation in the Plan; a Participant’s election to diversify his Accounts must be made within the 90-day period immediately following the last day of each of the six (6) Plan Years. The Committee shall see that the Investment Fund includes a sufficient number of investment options to comply with Section 401(a)(28)(B) of the Code. The Committee may, in its discretion, permit a transfer of a portion of the Participant’s Accounts to the Savings Plan in order to satisfy this Section 11.04, provided such investments comply with Section 401(a)(28)(B) and such transfer is not otherwise prohibited under the Code or ERISA. The Trustee shall comply with any investment directions received from Participants in accordance with the procedures adopted from time to time by the Committee under this Section 11.04.

Section 12

Adoption, Amendment and Termination

Section 12.01 Adoption of Plan by Other Employers.

With the consent of the Bank, any entity may become a participating Employer under the Plan by:

(a) taking such action as shall be necessary to adopt the Plan;

(b) becoming a party to the Trust Agreement establishing the Trust Fund; and

(c) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to the entity’s Employees.

Section 12.02 Adoption of Plan by Successor.

In the event that any Employer shall be reorganized by way of merger, consolidation, transfer of assets or otherwise, so that an entity other than an Employer shall succeed to all or substantially all of the Employer’s business, the successor entity may be substituted for the Employer under the Plan by adopting the Plan and becoming a party to the Trust Agreement. Contributions by the Employer shall be automatically suspended from the effective date of any such reorganization until the date upon which the substitution of the successor entity for the Employer under the Plan becomes effective. If, within 90 days following the effective date of any such reorganization, the successor entity shall not have elected to become a party to the Plan, or if the Employer shall adopt a plan of complete liquidation other than in connection with a reorganization, the Plan shall be automatically terminated with respect to Employees of the Employer as of the close of business on the 90th day following the effective date of the reorganization, or as of the close of business on the date of adoption of a plan of complete liquidation, as the case may be.

Section 12.03 Plan Adoption Subject to Qualification.

Notwithstanding any other provision of the Plan, the adoption of the Plan and the execution of the Trust Agreement are conditioned upon their being determined initially by the Internal Revenue Service to meet the tax qualification requirements of Section 401(a) of the Code, so that the Employers may deduct currently for federal income tax purposes their contributions to the Trust and so that the Participants may exclude the contributions from their gross income and recognize income only when they receive benefits. In the event that this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code, the Plan may be amended retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure qualification under Section 401(a) of the Code. In the event that this Plan is amended after its initial qualification and the Plan as amended is held by the Internal Revenue Service not to qualify under Section 401(a) of the Code, the amendment may be modified retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure approval of the amendment under Section 401(a) of the Code.

Section 12.04 Right to Amend or Terminate.

The Bank intends to continue this Plan as a permanent program. However, each participating Employer separately reserves the right to suspend, supersede, or terminate the Plan at any time and for any reason, as it applies to that Employer’s Employees, and the Bank reserves the right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at any time and for any reason, as it applies to the Employees of all Employers. No amendment, suspension, supersession, merger, consolidation, or termination of the Plan shall reduce any Participant’s or Beneficiary’s proportionate interest in the Trust Fund, or shall divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. Except as is required for purposes of compliance with the Code or ERISA, the provisions of Section 4.04 relating to the crediting of contributions, forfeitures and shares of Company Stock released from the Loan Suspense Account, nor any other provision of the Plan relating to the allocation of benefits to Participants, may be amended more frequently than once every six months. Moreover, there shall not be any transfer of assets to a successor plan or merger or consolidation with another plan unless, in the event of the termination of the successor plan or the surviving plan immediately following such transfer, merger, or consolidation, each participant or beneficiary would be entitled to a benefit equal to or greater than the benefit he would have been entitled to if the plan in which he was previously a participant or beneficiary had terminated immediately prior to such transfer, merger, or consolidation. Following a termination of this Plan by the Bank, the Trustee shall continue to administer the Trust and pay benefits in accordance with the Plan and the Committee’s instructions.

Section 13

General Provisions

Section 13.01 Nonassignability of Benefits.

The interests of Participants and other persons entitled to benefits under the Plan shall not be subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or transferred, except to the extent provided for under Section 401(a)(13)(C) of the Code. The prohibitions set forth in this Section 13.01 shall also apply to any judgment, decree, or order (including approval of a property or settlement agreement) which relates to the provision of child support, alimony, or property rights to a present or former spouse, child or other dependent of a Participant pursuant to a domestic relations order, unless such judgment, decree or order is determined to be a “qualified domestic relations order” as defined in Section 414(p) of the Code or is subject to a special rule for certain judgments and settlements described in Section 401(a)(13)(C) of the Code.

Section 13.02 Limit of Employer Liability.

The liability of the Employers with respect to ^- Participants and other persons entitled to benefits under the Plan shall be limited to making contributions to the Trust from time to time, in accordance with Section 4 of the Plan.

Section 13.03 Plan Expenses.

All expenses incurred by the Committee or the Trustee in connection with administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent the expenses have not been paid or assumed by the Employers or by the Trustee.

Section 13.04 Nondiversion of Assets.

Except as provided in Section 5.05 and Section 12.03 of the Plan, under no circumstances shall any portion of the Trust Fund be diverted to or used for any purpose other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan.

Section 13.05 Separability of Provisions.

If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.

Section 13.06 Service of Process.

The agent for service of process upon the Plan shall be the president of the Bank and the Trustee, or such other person as may be designated from time to time by the Bank.

Section 13.07 Governing Law.

The Plan is established under, and its validity, construction and effect shall be governed by the laws of New Jersey to the extent those laws are not preempted by federal law, including the provisions of ERISA.

Section 13.08 Special Rules for Persons Subject to Section 16(b) Requirements.

Notwithstanding anything herein to the contrary, any former Participant who is subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, who becomes eligible to again participate in the Plan, may not become a Participant prior to the date that is six months from the date such former Participant terminated participation in the Plan. In addition, any person subject to the provisions of Section 16(b) of the 1934 Act receiving a distribution of Company Stock from the Plan must hold such Company Stock for a period of 6 months commencing with the date of distribution. However, this restriction will not apply to Company Stock distributions made in connection with death, retirement, disability or termination of employment, or made pursuant to the terms of a qualified domestic relations order.

Section 13.09 Rules Relating to Military Service.

Notwithstanding anything in the Plan to the contrary, contributions, benefits and Service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.

Section 14

Top-Heavy Provisions

Section 14.01 Top-Heavy Provisions.

If, as of the last day of the first Plan Year, or thereafter, if as of the day next preceding the beginning of any Plan Year (the “Determination Date”), the Plan is a “top-heavy plan” (determined in accordance with the provisions of Section 416(g) of the Code); that is, the aggregate present value of the accrued benefits and account balances of all “Key Employees” (within the meaning of Section 416(i) of the Code and for this purpose using the definition of Compensation, as modified under Section 5.05(b) of the Plan) and their Beneficiaries exceeds 60% of the aggregate present value of the accrued benefits and account balances of all employees and their Beneficiaries, the provision specified in this Section 14.01 will automatically become effective as of the first day of the Plan Year. For purposes of the above sentence, the aggregate present value of the accrued benefits and account balances of a Participant who has not performed any services for the Bank or any of its Affiliates during the five-year period ending on the Determination Date shall not be taken into account. This calculation shall be made in accordance with Section 416(g) of the Code, taking into consideration plans which are considered part of the Aggregation Group. The term “Aggregation Group” shall include each plan of the Bank or any of its Affiliates that includes a Key Employee, each terminated plan of the Bank or any of its Affiliates that included a Key Employee within the five-year period ending on the Determination Date, and each plan of the Bank or any of its Affiliates that allows the Plan to meet the requirements of Section 401(a)(4) of the Code or Section 410 of the Code. The Aggregation Group may include any other plan of the Bank or any of its Affiliates, if the Aggregation Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code.

Section 14.02 Plan Modifications Upon Becoming Top-Heavy.

(a) Minimum Accruals . Section 5.04 of the Plan will be modified to provide that the aggregate amount of Employer contributions allocated in each Plan Year to the Accounts of each Participant who is a Non-Key Employee (within the meaning of Section 416(i)(1) of the Code), and who is employed by an Employer as of the last day of the Plan Year, may not be less than the lesser of

(i) three percent (3%) of his Compensation for the Plan Year; and

(ii) a percentage of his Compensation equal to the largest percentage obtained by dividing the sum of the amount credited to the Accounts of any Key Employee by that Key Employee’s Compensation.

(b) Vesting . If a Participant’s vested interest in his Account is to be determined in a top-heavy year, it shall be based on the following schedule:


Years of Service	Vested Percentage
Fewer than 2 years	0	%
2 years	33 ¹ / 3	%
3 years	66 ² / 3	%
4 or more years	100	%

* * *

IN WITNESS WHEREOF, OceanFirst Bank has caused this amended and restated OceanFirst Bank Employee Stock Ownership Plan to be executed and delivered on its behalf by its President and Chief Executive Officer.


Date:	By:
		John R. Garbarino
		President and Chief Executive Officer

Exhibit 10.1(C)

OceanFirst Bank

Matching Contribution Employee Stock Ownership Plan

Effective December 27, 2006

OceanFirst Bank

Matching Contribution Employee Stock Ownership Plan

Table of Contents


		Page
Section 1	Introduction	1

Section 2	Definitions	3

Section 3	Eligibility and Participation	11

Section 4	Contributions	13

Section 5	Plan Accounting	16

Section 6	Vesting	24

Section 7	Distributions	26

Section 8	Voting of Company Stock and Tender Offers	31

Section 9	The Committee and Plan Administration	32

Section 10	Rules Governing Benefit Claims	36

Section 11	The Trust	37

Section 12	Adoption, Amendment and Termination	39

Section 13	General Provisions	41

Section 14	Top-Heavy Provisions	43

OceanFirst Bank

Matching Contribution Employee Stock Ownership Plan

Section 1

Introduction

Section 1.01 Nature of the Plan.

OceanFirst Bank established the OceanFirst Bank Matching Contribution Employee Stock Ownership Plan (the “Plan”) effective of December 27, 2006 as a spinoff plan containing the matching contribution feature of the OceanFirst Bank Employee Stock Ownership Plan. The intent of the spinoff transaction is to enable the OceanFirst Bank Employee Stock Ownership Plan (the “ Predecessor Plan ”) to satisfy requirements of Code Section 401(a)(35)(E)(ii) beginning in the 2007 Plan Year.

The Bank sponsors the Plan to enable Eligible Employees (as defined in Section 2.01(r) of the Plan) to acquire stock ownership interests in OceanFirst Financial Corp., the holding company of the Bank (the “Company”). The Bank intends this Plan to be a tax-qualified stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and an employee stock ownership plan within the meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest primarily in the common stock of the Company, which stock constitutes “qualifying employer securities” within the meaning of Section 407(d)(5) of ERISA and Sections 409(1) and 4975(e)(8) of the Code. Accordingly, the Plan and Trust Agreement (as defined in Section 2.01(qq) of the Plan) shall be interpreted and applied in a manner consistent with the Bank’s intent for it to be a tax-qualified plan designed to invest primarily in qualifying employer securities.

Section 1.02 Employers and Affiliates.

Section 2

Definitions

Section 2.01 Definitions.

(a) “Account” or “Accounts” mean a Participant’s or Beneficiary’s Company Stock Account and/or his Other Investments Account, as the context so requires.

(b) “Acquisition Loan” means a loan (or other extension of credit, including an installment obligation to a “party in interest” (as defined in Section 3(14) of ERISA)) incurred or assumed by the Trustee in connection with the purchase of Company Stock.

(e) “Beneficiary” means the person(s) entitled to receive benefits under the Plan, pursuant to Section 7.03 of the Plan, following a Participant’s death.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Committee” means the individual(s) responsible for the administration of the Plan in accordance with Section 9 of the Plan.

(i) “Company” means OceanFirst Financial Corp. and any entity which succeeds to the business of OceanFirst Financial Corp.

(k) “Company Stock Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund invested in Company Stock.

(l) “Compensation” means

(i) an Employee’s regular basic monthly salary or wages.

Notwithstanding the foregoing, to the extent this definition of compensation does not satisfy the requirements of Section 414(s) of the Code for any particular Plan Year, then, for that Plan Year, Compensation shall have the meaning set forth in Sections 1.415-2(d)(2) and (3) of the Treasury Regulations. A Participant’s Compensation shall not exceed $200,000 (as periodically adjusted pursuant to Section 401(a)(17) of the Code). If a Participant’s Compensation is determined on the basis of a period of less than twelve (12) calendar months, then the Compensation limit for

such Participant shall be the limit in effect for the Plan Year in which the period begins, multiplied by a ratio obtained by dividing the number of full months in the period by twelve (12).

(n) “Early Retirement Age” means the date a Participant attains age 55 with ten (10) Years of Service with an Employer.

(o) “Early Retirement Date” means the first day of the month following the date the Participant attains Early Retirement Age.

(p) “Effective Date” means December 27, 2006.

(r) “Eligible Employee” means any Employee who is not precluded from participating in the Plan by reason of the provisions of Section 3.02 of the Plan.

(u) “Entry Date” means the first day of each January and July coinciding with or next following the date the Employee satisfies the eligibility requirements under Section 3.01 of the Plan.

(v) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(w) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(x) “Financed Shares” means shares of Company Stock transferred from the Predecessor Plan that have been acquired by the Predecessor Plan Trustee with the proceeds of an Acquisition Loan, which shall constitute “qualifying employer securities” under Section 409(1) of the Code and any shares of Company Stock received upon conversion or exchange of such shares.

(y) “Highly Compensated Employee” means an Employee who, for a particular Plan Year, satisfies one of the following conditions:

(i) was a “5-percent owner” (as defined in Section 414(q)(2) of the Code) during the year or the preceding year, or

(z) “Hours of Service” means:

(i) Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period.

(A) more than 501 hours under this clause (ii) because of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period);

(B) an hour for which the Employee is directly or indirectly paid, or entitled to payment, because of a period in which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with

applicable worker’s or workmen’s compensation, or unemployment, or disability insurance laws; or

(C) an hour or a payment which solely reimburses the Employee for medical or medically-related expenses incurred by the Employee.

(i) by reason of pregnancy of the Employee,

(ii) by reason of a birth of a child of the Employee,

(iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or

(iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(aa) “Loan Suspense Account” means that portion Trust Fund consisting of Company Stock acquired with an Acquisition Loan which has not yet been allocated to the Participants’ Accounts.

(bb) “Normal Retirement Age” means age sixty-five (65).

(cc) “Normal Retirement Date” means the first day of the month coincident with or next following the Participant’s attainment of Normal Retirement Age.

(dd) “One Year Period of Severance” means a twelve (12) consecutive month period following an Employee’s termination of Service with the Employer during which the Employee did not perform an Hour of Service. Notwithstanding the foregoing, if an Employee is absent from employment for maternity or paternity reasons, such absence during the twenty-four (24) month period commencing on the first date of such absence shall not constitute a One Year Period of Severance. An absence from employment for maternity or paternity reasons means an absence:

(i) by reason of the pregnancy of the Employee;

(ii) by reason of the birth of a child of the Employee;

(iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee; or

(iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(ee) “Other Investments Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund, other than Company Stock.

(ff) “Participant” means any active Employee who has become a participant in accordance with Section 3.01 of the Plan or any other person with an Account balance under the Plan.

(gg) “Period of Service” means a period commencing on the date an Employee first performs an Hour of Service for the Employer upon initial employment or, if applicable, upon reemployment, and ending on the date such Employee first incurs a Termination of Service. Notwithstanding the foregoing, the period between the first and second anniversary of the first date of a maternity or paternity absence described under Section 2.01(dd) of the Plan shall not be included in determining a Period of Service. A period during which an individual was not employed by the Employer shall nevertheless be deemed to be a Period of Service if such individual incurred a Termination of Service and:

(i) such Termination of Service was the result of resignation, discharge or retirement and such individual is reemployed by the Employer within one(1) year after such Termination of Service; or

(ii) such Termination of Service occurred when the individual was otherwise absent for less than one (1) year and he was reemployed by the Employer within one (1) year of the date such absence began.

All Periods of Service not disregarded under Section 6.03 of the Plan shall be aggregated. Whenever used in the Plan, a Period of Service means the quotient obtained by dividing the days

in all Periods of Service not disregarded hereunder by 365 and disregarding any fractional remainder.

(hh) “Plan” means this OceanFirst Bank Matching Contribution Employee Stock Ownership Plan, as amended from time to time.

(ii) “Plan Year” means the calendar year.

(jj) “Postponed Retirement Date” means the first day of the month coincident with or next following a Participant’s date of actual retirement which occurs after his Normal Retirement Date.

(kk) “Recognized Absence” means a period for which:

(i) an Employer grants an Employee a leave of absence for a limited period of time, but only if an Employer grants such leaves of absence on a nondiscriminatory basis to all Eligible Employees; or

(ii) an Employee is temporarily laid off by an Employer because of a change in the business conditions of the Employer; or

(iii) an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 (38 U.S.C. sec. 2021).

(ll) “Retirement Date” means a Participant’s Early Retirement Date, Normal Retirement Date or Postponed Retirement Date, whichever is applicable.

(mm) “Service” means employment with the Bank or an Affiliate. Participants shall be given credit for Service while covered by the Predecessor Plan in determining Service under the Plan.

(nn) “Termination of Service” means the earlier of (a) the date on which an Employee’s Service is terminated by reason of his resignation, retirement, discharge, death or Disability or (b) the first anniversary date on which such Employee’s service for disability of a short-term nature or any other reason. Service in the Armed Forces of the United States shall not constitute a Termination of Service but shall be considered to be a period of employment by the Employer provided (i) such military service is caused by war or other emergency or the Employee is required to serve under the laws of conscription in a time of peace, (ii) the Employee returns to employment with the Employer within six (6) months following discharge from such military service, and (iii) such Employee is reemployed by the Employer at a time when the Employee had a right to reemployment at his former position or substantially similar position upon separation from such military duty in accordance with seniority rights as protected under the laws of the United States. A leave of absence granted to an Employee by the Employer shall not constitute a Termination of Service provided that the Participant returns to the active service of the Employer at the expiration of any such period for which leave has been granted. Notwithstanding the foregoing, an Employee who is absent from service with the Employer beyond the first anniversary of the first date of his absence for maternity or paternity reasons set forth in Section 2.01(dd) of the Plan shall incur a Termination of Service for purposes of the Plan on the second anniversary of the date of such absence.

(oo) “Treasury Regulations” means the regulations promulgated by the Department of the Treasury under the Code.

(pp) “Trust” means the trust agreement(s) created in connection with the operation of this Plan.

(qq) “Trust Agreement” means the trust agreement establishing the Trust.

(rr) “Trust Fund” means the assets held in the Trust for the benefit of Participants and their Beneficiaries.

(ss) “Trustee” means the trustee or trustees from time to time in office under the Trust Agreement.

(tt) “Valuation Date” means the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Trust Fund and adjust the Participants’ Accounts accordingly.

(uu) “Valuation Period” means the period following a Valuation Date and ending with the next Valuation Date.

(vv) “Year of Service” means an applicable twelve month period during which an Employee completes at least 1,000 Hours of Service for eligibility purposes. With respect to the vesting provisions of the Plan, Year of Service means a one year Period of Service.

Section 3

Eligibility and Participation

Section 3.01 Participation.

(a) Participants as of the Effective Date . Notwithstanding any other provision of this Section 3, since this Plan is formed by the spinoff of a portion of the Predecessor Plan, all Employees and all former Employees who were Participants in the Predecessor Plan as of the Effective Date shall remain Participants in this Plan. Any former Employee who was a Participant in the Predecessor Plan prior to the Effective Date and who received a distribution of his entire nonforfeitable Account balance on account of termination of Service may become eligible to participate in this Plan upon re-employment either as a newly-hired Employee or by satisfaction of the eligibility requirements of Section 3.04 of the Plan.

Section 3.02 Certain Employees Ineligible.

The following Employees are ineligible to participate in the Plan:

(a) Employees covered by a collective bargaining agreement between the Employer and the Employee’s collective bargaining representative if:

(i) retirement benefits have been the subject of good faith bargaining between the Employer and the representative, and

(ii) the collective bargaining agreement does not expressly provide that Employees of such unit be covered under the Plan;

(b) Employees who are nonresident aliens and who receive no earned income from an Employer which constitutes income from sources within the United States; and

Section 3.03 Transfer to and from Eligible Employment.

(a) If an Employee, ineligible to participate in the Plan by reason of Section 3.02 of the Plan, transfers to employment as an Eligible Employee, he shall enter the Plan as of the later of:

(i) the first Entry Date after the date of transfer, or

(ii) the first Entry Date on which he could have become a Participant pursuant to Section 3.01 of the Plan if his prior employment with the Bank or Affiliate had been as an Eligible Employee.

Section 3.04 Participation After Reemployment.

(i) the first Entry Date on which he would have entered the Plan had he not terminated Service, or

(ii) the date he re-commences Service.

Section 3.05 Participation Not Guarantee of Employment.

Section 4

Contributions

Section 4.01 Employer Contributions.

(a) Employer Matching Contributions under the Savings Plan . For each Plan Year each Employer, in its discretion, may make a contribution to the Trust equal to a percentage of the Employee’s voluntary contributions made for the Plan Year under the Savings Plan (as defined below). Each Employer making a contribution for any Plan Year under this Section 4.01(a) shall contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the employer shall determine by resolution or as shall be set forth pursuant to a formula under the Savings Plan, as applicable. Notwithstanding the Employer’s discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code. For purposes of this Plan, “Savings Plan” means a defined contribution tax-qualified retirement plan sponsored by the Employer under which Participants may defer compensation pursuant to Section 401(k) of the Code.

(b) Employer Contributions for Acquisition Loans . Each Plan Year, the Employers shall, subject to any regulatory prohibitions, contribute an amount of cash (including amounts contributed under paragraph (a) of this Section 4.01) sufficient to enable the Trustee to discharge any indebtedness incurred with respect to an Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers’ obligation to make contributions under this Section 4.01(b) shall be reduced to the extent of any investment earnings attributable to such contributions and any cash dividends paid with respect to Company Stock held by the Trustee in the Loan Suspense Account. If there is more than one Acquisition Loan, the Employers shall designate the one to which any contribution pursuant to this Section 4.01(b) is to be applied.

Section 4.02 Limitations on Contributions.

In no event shall an Employer’s contribution(s) made under Section 4.01 of the Plan for any Plan Year exceed the lesser of:

(a) The maximum amount deductible under Section 404 of the Code by that Employer as an expense for Federal income tax purposes; and

(b) The maximum amount which can be credited for that Plan Year in accordance with the allocation limitation provisions of Section 5.05 of the Plan.

Section 4.03 Acquisition Loans.

the provisions of Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Trust assets. Any pledge of Financed Shares must provide for the release of shares so pledged on a basis equal to the principal and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), paid by the Trustee on the Acquisition Loan. The released Financed Shares shall be allocated to Participants’ Accounts in accordance with the provisions of Section 5.04 or Section 5.08 of the Plan, whichever is applicable. Payment of principal and interest on any Acquisition Loan shall be made by the Trustee only from the Employer contributions paid in cash to enable the Trustee to repay such loan in accordance with Section 4.01(b) of the Plan, from earnings attributable to such contributions, and any cash dividends received by the Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan (including contributions, earnings and dividends received during or prior to the year of repayment, less such payments in prior years), whether or not allocated. Financed Shares shall initially be credited to the Loan Suspense Account and shall be transferred for allocation to the Company Stock Accounts of Participants only as payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants’ Company Stock Accounts for each Plan Year shall be based on the ratio that the payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan for that Plan Year bear to the sum of the payments of principal and interest on the Acquisition Loan for that Plan Year plus the total remaining payments of principal and interest projected (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.05 of the Plan.

Section 4.04 Conditions as to Contributions.

Section 4.05 Employee Contributions.

Employee contributions are neither required nor permitted under the Plan.

Section 4.06 Rollover Contributions.

Rollover contributions of assets from other tax-qualified retirement plans are not permitted under the Plan.

Section 4.07 Trustee-to-Trustee Transfers.

Except for assets transferred from the Predecessor Plan in connection with the establishment of the Plan, trustee-to-trustee transfers of assets from other tax-qualified retirement plans are not permitted under the Plan.