Form S-4
Table of Contents

As filed with the Securities and Exchange Commission on February 18, 2016

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

OCEANFIRST FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   6035   22-3412577

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

975 HOOPER AVENUE, TOMS RIVER, NEW JERSEY 08753

(732) 240-4500

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Christopher D. Maher

President and Chief Executive Officer

975 Hooper Avenue

Toms River, New Jersey 08753

(732) 240-4500

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

 

Steven J. Tsimbinos, Esq.

OceanFirst Financial Corp.

975 Hooper Avenue

Toms River, New Jersey 08753

Phone: (732) 240-4500

 

Michael D. Devlin

Cape Bancorp, Inc.

225 North Main Street

Cape May Court House, New Jersey 08210

Phone: (609) 465-5600

David C. Ingles, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, New York 10036

Phone: (212) 735-3000

 

Marc P. Levy, Esq.

Luse Gorman, PC

5335 Wisconsin Avenue, NW, Suite 780

Washington, D.C. 20015

Phone: (202) 274-2000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and the conditions to the closing of the merger described herein have been satisfied or waived.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Amount

to be

registered

 

Proposed

maximum

offering price

per share

 

Proposed

maximum

aggregate

offering price

  Amount of
registration fee

Common Stock, $0.01 par value per share

  9,271,224 shares(1)   N/A   $150,139,404.25(2)   $15,119.04(3)

 

 

(1) Represents the maximum number of shares of the common stock of OceanFirst Financial Corp. (“OceanFirst”) estimated to be issuable upon completion of the merger of Justice Merger Sub Corp., a wholly-owned subsidiary of OceanFirst (“Merger Sub”), with and into Cape Bancorp, Inc. (“Cape”). This number represents the sum of (a) the product of (i) 0.6375, the exchange ratio representing the stock portion of the merger consideration and (ii) 13,602,894, which is the sum of (A) 13,540,875, the number of shares of Cape’s common stock outstanding as of February 12, 2016, and (B) 62,014, the number of shares of Cape’s common stock underlying Cape’s restricted stock awards as of February 12, 2016, and (b) the product of (i) 0.75 and (ii) 799,171, the number of shares of Cape’s common stock reserved for issuance upon the exercise of the outstanding Cape stock options, in each case, pursuant to the terms of the Agreement and Plan of Merger, dated as of January 5, 2016, by and among Cape, OceanFirst and Merger Sub, which is attached to the joint proxy statement/prospectus as Annex A.
(2) Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended, and computed pursuant to Rules 457(f) and 457(c) under the Securities Act, based upon the market value of shares of Cape common stock in accordance with Rules 457(c) and 457(f) under the Securities Act as follows: (a) the product of (i) $12.55, the average of the high and low prices per share of Cape’s common stock as reported on the NASDAQ Global Select Market on February 12, 2016 and (ii) 14,402,065, the estimated maximum number of shares of Cape common stock that may be exchanged for shares of OceanFirst common stock minus (b) $30,606,511.50, the estimated aggregate amount of cash to be paid by OceanFirst in exchange for shares of Cape common stock.
(3) Determined in accordance with Section 6(b) of the Securities Act of 1933, as amended, at a rate equal to $100.70 per $1,000,000 of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY — SUBJECT TO COMPLETION — DATED FEBRUARY 18, 2016

 

Proxy Statement    Prospectus

 

 

LOGO

   LOGO

MERGER AND SHARE ISSUANCE PROPOSED — YOUR VOTE IS VERY IMPORTANT

Dear Stockholder:

On January 5, 2016, OceanFirst Financial Corp., a Delaware corporation (which we refer to as “OceanFirst”), Cape Bancorp, Inc., a Maryland corporation (which we refer to as “Cape”), and Justice Merger Sub Corp., a Maryland corporation and a wholly-owned subsidiary of OceanFirst (which we refer to as “Merger Sub”), entered into an Agreement and Plan of Merger (which we refer to as the “merger agreement”) that provides for the combination of OceanFirst and Cape. Under the terms of the merger agreement, (i) Merger Sub will merge with and into Cape (which we refer to as the “first-step merger”), with Cape continuing as the surviving corporation in the first-step merger and as a wholly-owned subsidiary of OceanFirst, (ii) immediately following the completion of the first-step merger, Cape will merge with and into OceanFirst (which we refer to as the “second-step merger” and, together with the first-step merger, the “integrated mergers”), with OceanFirst continuing as the surviving corporation in the second-step merger and (iii) immediately following the completion of the integrated mergers, Cape Bank, a New Jersey-chartered stock savings bank and a wholly-owned subsidiary of Cape (which we refer to as “Cape Bank”), will merge with and into OceanFirst Bank, a federally-chartered capital stock savings bank and a wholly-owned subsidiary of OceanFirst (which we refer to as “OceanFirst Bank”), with OceanFirst Bank being the surviving bank (which we refer to as the “bank merger” and, together with the integrated mergers, the “Transactions”).

At the effective time of the first-step merger, each outstanding share of the common stock, par value $0.01 per share, of Cape (which we refer to as “Cape common stock”), except for specified shares of Cape common stock owned by Cape or OceanFirst, will be converted into the right to receive $2.25 in cash, without interest (which we refer to as the “cash consideration”), and 0.6375 shares (such number being referred to as the “exchange ratio” and such shares being referred to as “stock consideration”) of the common stock, par value $0.01 per share, of OceanFirst (which we refer to as the “OceanFirst common stock”), together with cash in lieu of fractional shares. The cash consideration and the stock consideration are collectively referred to as the “merger consideration.”

Although the number of shares of OceanFirst common stock that holders of Cape common stock (which we refer to as the “Cape stockholders”) will be entitled to receive is fixed, the market value of the stock consideration will fluctuate with the market price of OceanFirst common stock and will not be known at the time Cape stockholders vote on the first-step merger. Based on the $19.95 closing price of OceanFirst common stock on the NASDAQ Global Select Market (which we refer to as the “NASDAQ”) on January 5, 2016, the last full trading day before the public announcement of the Transactions, the per share value of the stock consideration was equal to approximately $12.72 and the per share value of the merger consideration was equal to approximately $14.97. Based on the $[●] closing price of OceanFirst common stock on the NASDAQ on [●], 2016, the latest practicable trading day before the printing of this joint proxy statement/prospectus, the per share value of the stock consideration was equal to approximately $[●] and the per share value of the merger consideration was equal to approximately $[●]. Based on the 0.6375 exchange ratio and the number of shares of Cape common stock outstanding as of [●], 2016, together with the number of shares of Cape common stock underlying Cape’s restricted stock awards as of [●], 2016, the maximum number of shares of OceanFirst common stock estimated to be issuable at the effective time of the first-step merger is [●]. We urge you to obtain current market quotations for OceanFirst (trading symbol “OCFC”) and Cape (trading symbol “CBNJ”).

OceanFirst will hold a special meeting of its stockholders (which we refer to as the “OceanFirst special meeting”) in connection with the issuance of the shares of OceanFirst common stock representing a portion of the merger consideration (which we refer to as the “OceanFirst share issuance”). At the OceanFirst special meeting, the holders of OceanFirst common stock (which we refer to as the “OceanFirst stockholders”) will be asked to vote to approve the OceanFirst share issuance. Approval of the OceanFirst share issuance requires the affirmative vote of a majority of the total votes cast by the OceanFirst stockholders at the OceanFirst special meeting.

Cape will hold a special meeting of its stockholders (which we refer to as the “Cape special meeting”) in connection with the first-step merger. At the Cape special meeting, Cape stockholders will be asked to vote to approve the merger agreement and related matters as described in this joint proxy statement/prospectus. Under Maryland law, approval of the merger agreement requires the affirmative vote of the holders of a majority of the total number of outstanding shares of Cape common stock entitled to vote at the Cape special meeting.

The OceanFirst special meeting will be held on [●], 2016 at [●], at [●] local time. The Cape special meeting will be held on [●], 2016 at [●], at [●] local time.

The Cape board of directors unanimously recommends that Cape stockholders vote “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the first-step merger, and “FOR” the other matters to be considered at the Cape special meeting.

The OceanFirst board of directors unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance and “FOR” the other matter to be considered at the OceanFirst special meeting.

This joint proxy statement/prospectus describes the Cape special meeting, the OceanFirst special meeting, the Transactions, the OceanFirst share issuance, the documents related to the Transactions and other related matters. Please carefully read this entire joint proxy statement/prospectus, including “Risk Factors,” beginning on page [], for a discussion of the risks relating to the proposed merger and the OceanFirst share issuance. You also can obtain information about OceanFirst and Cape from documents that each has filed with the Securities and Exchange Commission.

 

LOGO

  

LOGO

Christopher D. Maher

President and Chief Executive Officer

OceanFirst Financial Corp.

  

Michael D. Devlin

President and Chief Executive Officer

Cape Bancorp, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the first-step merger or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The securities to be issued in the first-step merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either OceanFirst or Cape, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of this joint proxy statement/prospectus is [●], and it is first being mailed or otherwise delivered to the stockholders of OceanFirst and Cape on or about [●], 2016.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of OceanFirst:

OceanFirst will hold the OceanFirst special meeting at [●] local time, on [●], 2016, at [●] to consider and vote upon the following matters:

 

    a proposal to approve the issuance of shares of OceanFirst common stock in connection with the first-step merger (which we refer to as the “OceanFirst share issuance proposal”); and

 

    a proposal to adjourn the OceanFirst special meeting, if necessary or appropriate, to solicit additional proxies in favor of the OceanFirst share issuance proposal (which we refer to as the “OceanFirst adjournment proposal”).

We have fixed the close of business on [●], 2016 as the record date for the OceanFirst special meeting (which we refer to as the “OceanFirst record date”). Only OceanFirst stockholders of record as of the OceanFirst record date are entitled to notice of, and to vote at, the OceanFirst special meeting, or any adjournment of the OceanFirst special meeting. Approval of the OceanFirst share issuance proposal requires the affirmative vote of a majority of the total votes cast by the holders of OceanFirst common stock at the OceanFirst special meeting. The OceanFirst adjournment proposal will be approved if a majority of the votes cast by the holders of OceanFirst common stock at the OceanFirst special meeting are voted in favor of the adjournment proposal.

The OceanFirst board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the integrated mergers and the OceanFirst share issuance, and unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal and “FOR” the OceanFirst adjournment proposal.

Your vote is very important. We cannot complete the integrated mergers unless the OceanFirst stockholders approve the OceanFirst share issuance proposal.

Regardless of whether you plan to attend the OceanFirst special meeting, please vote as soon as possible. If you hold stock in your name as a stockholder of record of OceanFirst, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope. You may also vote through the Internet or by telephone. If you hold your stock in “street name” through a bank or broker, please follow the instructions on the voting instruction card furnished by the record holder.

This joint proxy statement/prospectus provides a detailed description of the OceanFirst special meeting, the Transactions, the OceanFirst share issuance, the documents related to the Transactions and other related matters. We urge you to read this entire joint proxy statement/prospectus, including any documents incorporated in the joint proxy statement/prospectus by reference, and its annexes carefully and in their entirety.

BY ORDER OF THE BOARD OF DIRECTORS,

 

LOGO

Christopher D. Maher

President and Chief Executive Officer


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Cape:

Cape will hold the Cape special meeting at [●] local time, on [●], 2016, at [●] to consider and vote upon the following matters:

 

    a proposal to approve the merger agreement and the first-step merger, pursuant to which Merger Sub will merge with and into Cape, each as more fully described in this joint proxy statement/prospectus (which we refer to as the “Cape merger proposal”);

 

    a proposal to approve, on an advisory (non-binding) basis, the compensation that certain executive officers of Cape may receive in connection with the first-step merger pursuant to existing agreements or arrangements with Cape (which we refer to as the “Cape merger-related compensation proposal”); and

 

    a proposal to adjourn the Cape special meeting, if necessary or appropriate, to solicit additional proxies in favor of the Cape merger proposal (which we refer to as the “Cape adjournment proposal”).

We have fixed the close of business on [●], 2016, as the record date for the Cape special meeting (which we refer to as the “Cape record date”). Only Cape stockholders of record as of the Cape record date are entitled to notice of, and to vote at, the Cape special meeting, or any adjournment of the Cape special meeting. Under Maryland law, approval of the Cape merger proposal requires the affirmative vote of the holders of a majority of the total number of outstanding shares of Cape common stock entitled to vote at the Cape special meeting. The Cape merger-related compensation proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal. The Cape adjournment proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal.

The Cape board of directors has unanimously approved the merger agreement, has determined that the merger agreement and the transactions contemplated thereby, including the first-step merger, are advisable and in the best interests of Cape and its stockholders, and unanimously recommends that Cape stockholders vote “FOR” the Cape merger proposal, “FOR” the Cape merger-related compensation proposal and “FOR” the Cape adjournment proposal.

Your vote is very important. We cannot complete the integrated mergers unless the Cape stockholders approve the Cape merger proposal.

Regardless of whether you plan to attend the Cape special meeting, please vote as soon as possible. If you hold stock in your name as a stockholder of record of Cape, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope. You may also vote through the Internet or by telephone. If you hold your stock in “street name” through a bank or broker, please follow the instructions on the voting instruction card furnished by the record holder.

This joint proxy statement/prospectus provides a detailed description of the Cape special meeting, the Transactions, the documents related to the Transactions and other related matters. We urge you to read the joint proxy statement/prospectus, including any documents incorporated in the joint proxy statement/prospectus by reference, and its annexes carefully and in their entirety.

BY ORDER OF THE BOARD OF DIRECTORS,

 

LOGO

Michael D. Devlin

President and Chief Executive Officer


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REFERENCES TO ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about OceanFirst and Cape from documents filed with the Securities and Exchange Commission (which we refer to as the “SEC”) that are not included in or delivered with this joint proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by OceanFirst and/or Cape at no cost from the SEC’s website at http://www.sec.gov. You may also request copies of these documents, including documents incorporated by reference in this joint proxy statement/prospectus, at no cost by contacting the appropriate company at the following address:

 

OceanFirst Financial Corp.

975 Hooper Avenue

Toms River, New Jersey 08753

(732) 240-4500

  

Cape Bancorp, Inc.

225 North Main Street

Cape May Court House, New Jersey 08210

(609) 465-5600

You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five business days before the date of your meeting. This means that OceanFirst stockholders requesting documents must do so by [], 2016, in order to receive them before the OceanFirst special meeting, and Cape stockholders requesting documents must do so by [], 2016, in order to receive them before the Cape special meeting.

You should rely only on the information contained in, or incorporated by reference into, this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated [●], 2016, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document, and neither the mailing of this document to Cape stockholders or OceanFirst stockholders nor the issuance by OceanFirst of shares of OceanFirst common stock in connection with the first-step merger will create any implication to the contrary.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this document regarding Cape has been provided by Cape and information contained in this document regarding OceanFirst has been provided by OceanFirst.

See “Where You Can Find More Information” beginning on page [●] for more details.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     1   

SUMMARY

     9   

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF OCEANFIRST

     18   

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CAPE

     20   

SELECTED UNAUDITED PRO FORMA FINANCIAL DATA

     22   

RISK FACTORS

     23   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     28   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     29   

UNAUDITED COMPARATIVE PER SHARE DATA

     37   

THE CAPE SPECIAL MEETING

     38   

Date, Time and Place of the Cape Special Meeting

     38   

Matters to Be Considered

     38   

Recommendation of the Cape Board

     38   

Cape Record Date and Quorum

     38   

Required Vote; Treatment of Abstentions, Broker Non-Votes and Failure to Vote

     39   

Shares Held by Officers, Directors and Certain Stockholders

     39   

Voting of Proxies; Incomplete Proxies

     39   

Shares Held in “Street Name”

     40   

Revocability of Proxies and Changes to a Cape Stockholder’s Vote

     40   

Solicitation of Proxies

     41   

Attending the Cape Special Meeting

     41   

Delivery of Proxy Materials to Cape Stockholders Sharing an Address

     41   

Assistance

     41   

CAPE PROPOSALS

     42   

Proposal No. 1 Cape Merger Proposal

     42   

Proposal No. 2 Cape Merger-Related Compensation Proposal

     42   

Proposal No. 3 Cape Adjournment Proposal

     42   

THE OCEANFIRST SPECIAL MEETING

     44   

Date, Time and Place of the OceanFirst Special Meeting

     44   

Matters to Be Considered

     44   

Recommendation of the OceanFirst Board

     44   

OceanFirst Record Date and Quorum

     44   

Required Vote; Treatment of Abstentions, Broker Non-Votes and Failure to Vote

     45   

 

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     Page  

Shares Held by Officers, Directors and Certain Stockholders

     45   

Voting of Proxies; Incomplete Proxies

     45   

Shares Held in “Street Name”

     46   

Revocability of Proxies and Changes to an OceanFirst Stockholder’s Vote

     46   

Solicitation of Proxies

     47   

Attending the OceanFirst Special Meeting

     47   

Delivery of Proxy Materials to OceanFirst Stockholders Sharing an Address

     47   

Assistance

     47   

OCEANFIRST PROPOSALS

     48   

Proposal No. 1 OceanFirst Share Issuance Proposal

     48   

Proposal No. 2 OceanFirst Adjournment Proposal

     48   

INFORMATION ABOUT OCEANFIRST

     49   

INFORMATION ABOUT MERGER SUB

     50   

INFORMATION ABOUT CAPE

     51   

THE TRANSACTIONS

     52   

Structure of the Transactions

     52   

Background of the Transactions

     52   

Cape’s Reasons for the Transactions; Recommendation of the Cape Board

     57   

Opinion of Cape’s Financial Advisor

     59   

OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board

     67   

Opinion of OceanFirst’s Financial Advisor

     68   

Interests of Cape’s Directors and Executive Officers in the Transactions

     81   

Public Trading Markets

     84   

Dividend Policy

     85   

No Dissenters’ Rights

     85   

Regulatory Approvals Required for the Transactions

     85   

THE MERGER AGREEMENT

     87   

ACCOUNTING TREATMENT

     105   

U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE INTEGRATED MERGERS

     106   

DESCRIPTION OF CAPITAL STOCK OF OCEANFIRST

     109   

Authorized Capital Stock

     109   

Common Stock

     109   

Preferred Stock

     110   

COMPARISON OF STOCKHOLDERS’ RIGHTS

     111   

COMPARATIVE MARKET PRICES AND DIVIDENDS

     120   

 

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     Page  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF OCEANFIRST

     121   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CAPE

     123   

LEGAL MATTERS

     125   

EXPERTS

     125   

OceanFirst

     125   

Cape

     125   

Colonial

     125   

DEADLINES FOR SUBMITTING STOCKHOLDER PROPOSALS

     125   

OceanFirst

     125   

Cape

     126   

WHERE YOU CAN FIND MORE INFORMATION

     126   

 

Annexes

 

Annex A — Agreement and Plan of Merger

  A-i

Annex B — Form of Voting Agreement with Cape Stockholders

  B-1

Annex C — Form of Voting Agreement with OceanFirst Stockholders

  C-1

Annex D — Opinion of Raymond James & Associates, Inc.

  D-1

Annex E — Opinion of Sandler O’Neill & Partners, L.P.

  E-1

 

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QUESTIONS AND ANSWERS

The following are some questions that you, as an OceanFirst stockholder or a Cape stockholder, may have about the Transactions, the OceanFirst share issuance, the OceanFirst special meeting or the Cape special meeting, as applicable, and brief answers to those questions. We urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the Transactions, the OceanFirst share issuance, the OceanFirst special meeting or the Cape special meeting, as applicable. For details about where you can find additional important information, please see the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [].

Unless the context otherwise requires, references in this joint proxy statement/prospectus to “OceanFirst” refer to OceanFirst Financial Corp., a Delaware corporation, and its affiliates, and references to “Cape” refer to Cape Bancorp, Inc., a Maryland corporation, and its affiliates.

Q: What are the Transactions?

A: OceanFirst, Cape and Merger Sub entered into the merger agreement on January 5, 2016. The first-step merger is the first step in a series of transactions to combine OceanFirst and Cape, and their respective subsidiary banks, OceanFirst Bank and Cape Bank.

Under the terms of the merger agreement:

 

    Merger Sub will merge with and into Cape, with Cape continuing as the surviving corporation in such merger and as a wholly-owned subsidiary of OceanFirst (which we refer to as the “first-step merger”).

 

    Immediately following the completion of the first-step merger, Cape, as the surviving corporation in the first-step merger, will merge with and into OceanFirst, with OceanFirst being the surviving corporation (which we refer to as the “second-step merger” and, together with the first-step merger, the “integrated mergers”).

 

    Immediately following the completion of the integrated mergers, Cape Bank will merge with and into OceanFirst Bank, with OceanFirst Bank being the surviving bank (which we refer to as the “bank merger”, and together with the integrated mergers, the “Transactions”).

A copy of the merger agreement is included in this joint proxy statement/prospectus as Annex A.

The integrated mergers cannot be completed unless, among other things:

 

    The holders (which we refer to as the “OceanFirst stockholders”) of the common stock, par value $0.01 per share, of OceanFirst (which we refer to as the “OceanFirst common stock”) approve the issuance of the shares of OceanFirst common stock in connection with the first-step merger (which we refer to as the “OceanFirst share issuance”).

 

    The holders (which we refer to as the “Cape stockholders”) of the common stock, par value $0.01 per share, of Cape (which we refer to as the “Cape common stock”) approve the merger agreement and the transactions contemplated thereby, including the first-step merger.

Additional conditions to completing the integrated mergers are discussed in the section entitled “The Merger AgreementConditions to Complete the Integrated Mergers” beginning on page [●].

Q: Why am I receiving this joint proxy statement/prospectus?

A: We are delivering this document to you because it is a joint proxy statement being used by both the OceanFirst board of directors (which we refer to as the “OceanFirst board”) and the Cape board of directors

 

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(which we refer to as the “Cape board”) to solicit proxies of their respective stockholders in connection with approval of the OceanFirst share issuance and the first-step merger, as applicable, and related matters.

In order to approve the OceanFirst share issuance, OceanFirst has called a special meeting of the OceanFirst stockholders (which we refer to as the “OceanFirst special meeting”). In order to approve the merger agreement and the transactions contemplated thereby, including the first-step merger, Cape has called a special meeting of the Cape stockholders (which we refer to as the “Cape special meeting”). This document serves as a joint proxy statement for the OceanFirst special meeting and the Cape special meeting and describes the proposals to be presented at each special meeting.

In addition, this document is also a prospectus that is being delivered to Cape stockholders because OceanFirst is offering shares of its common stock to Cape stockholders in connection with the first-step merger. It also constitutes a notice of special meeting with respect to the OceanFirst special meeting and the Cape special meeting.

This joint proxy statement/prospectus contains important information about the Transactions, the OceanFirst share issuance and the other proposal being voted on at the OceanFirst special meeting and the Cape special meeting, respectively. You should read this carefully and in its entirety. The enclosed materials allow you to have your shares voted by proxy without attending your special meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.

Q: In addition to the OceanFirst share issuance, what else are OceanFirst stockholders being asked to vote on at the OceanFirst special meeting?

A: In addition to a proposal to approve the OceanFirst share issuance (which we refer to as the “OceanFirst share issuance proposal”), OceanFirst is soliciting proxies from the OceanFirst stockholders with respect to a proposal to adjourn the OceanFirst special meeting, if necessary or appropriate, to solicit additional proxies in favor of the OceanFirst share issuance proposal (which we refer to as the “OceanFirst adjournment proposal”). Completion of the integrated mergers is not conditioned upon approval of the OceanFirst adjournment proposal.

Q: In addition to the approval of the merger agreement and the first-step merger, what else are Cape stockholders being asked to vote on at the Cape special meeting?

A: In addition to a proposal to approve the merger agreement and the transactions contemplated thereby, including the first-step merger (which we refer to as the “Cape merger proposal”), Cape is soliciting proxies from the Cape stockholders with respect to a proposal to approve, on an advisory (non-binding) basis, the compensation that certain executive officers of Cape may receive in connection with the first-step merger pursuant to agreements or arrangements with Cape (which we refer to as the “Cape merger-related compensation proposal”) and a proposal to adjourn the Cape special meeting, if necessary or appropriate, to solicit additional proxies in favor of the Cape merger proposal (which we refer to as the “Cape adjournment proposal”). Completion of the integrated mergers is not conditioned upon approval of the Cape merger-related compensation proposal or the Cape adjournment proposal.

Q: What will Cape stockholders be entitled to receive in the first-step merger?

A: If the first-step merger is completed, each outstanding share of Cape common stock except for certain shares of Cape common stock owned by Cape or OceanFirst, will be converted into the right to receive $2.25 in cash, without interest, and 0.6375 shares of OceanFirst common stock, together with cash in lieu of fractional shares. OceanFirst will not issue any fractional shares of OceanFirst common stock in the first-step merger. Cape stockholders who would otherwise be entitled to receive a fractional share of OceanFirst common stock upon the completion of the first-step merger will instead be entitled to receive an amount in cash (rounded to the nearest cent) based on the average closing-sale price per share of OceanFirst common stock for the five full trading days ending on the day preceding the day on which the first-step merger is completed.

 

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Q: What will OceanFirst stockholders be entitled to receive in the first-step merger?

A: OceanFirst stockholders will not be entitled to receive any merger consideration and will continue to hold the shares of OceanFirst common stock that they held immediately prior to the completion of the first-step merger.

Q: How will the first-step merger affect Cape equity awards?

A: The Cape equity awards will be affected as follows:

Restricted Stock Awards: At the effective time of the first-step merger (which we refer to as the “effective time”), each restricted stock award granted by Cape (or assumed by Cape from a prior acquisition) will become fully vested and each holder of such restricted stock awards will be entitled to receive the per share merger consideration for each share of Cape common stock held by such holder.

Stock Options: Also at the effective time, each stock option granted by Cape (or assumed by Cape from a prior acquisition) will be assumed and converted into an option to purchase a number of shares of OceanFirst common stock (rounded down to the nearest whole share) determined by multiplying (i) the number of shares of Cape common stock subject to such stock option by (ii) 0.75, at a per share exercise price (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (a) the per share exercise price for each share of Cape common stock subject to such stock option by (b) 0.75.

Q: Will the value of the merger consideration change between the date of this joint proxy statement/prospectus and the time that the first-step merger is completed?

A: Yes. Although the exchange ratio is fixed, the value of the stock portion of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus and the closing date because the market value for OceanFirst common stock fluctuates. The cash consideration is fixed.

Q: How does the OceanFirst board recommend that I vote at the OceanFirst special meeting?

A: The OceanFirst board unanimously recommends that you vote “FOR” the OceanFirst share issuance proposal and “FOR” the OceanFirst adjournment proposal.

Q: How does the Cape board recommend that I vote at the Cape special meeting?

A: The Cape board unanimously recommends that you vote “FOR” the Cape merger proposal, “FOR” the Cape merger-related compensation proposal and “FOR” the Cape adjournment proposal.

Q: When and where are the meetings?

A: The OceanFirst special meeting will be held at [●] on [●], 2016, at [●] local time.

The Cape special meeting will be held at [●] on [●], 2016, at [●] local time.

Q: What do I need to do now?

A: After you have carefully read this entire joint proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted at your special meeting. If you hold your shares in your name as a stockholder of record, you must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible. Alternatively, you may vote through the Internet or by telephone. Information and applicable deadlines for voting through the Internet or by telephone are set forth in the enclosed proxy card instructions. If you hold your shares in “street name” through a bank or broker, you must direct your bank or broker how to vote in accordance with the instructions you have received from your bank or broker. “Street name” stockholders who wish to vote in person at their special meeting will need to obtain a legal proxy from the institution that holds their shares.

 

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Q: What constitutes a quorum for the OceanFirst special meeting?

A: The presence at the OceanFirst special meeting, in person or by proxy, of holders representing at least a majority of the outstanding shares of OceanFirst common stock entitled to be voted at the OceanFirst special meeting will constitute a quorum for the transaction of business at the OceanFirst special meeting. Once a share is represented for any purpose at the OceanFirst special meeting, it is deemed present for quorum purposes for the remainder of the OceanFirst special meeting or for any adjournment(s) thereof. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

Q: What constitutes a quorum for the Cape special meeting?

A: The presence at the Cape special meeting, in person or by proxy, of holders representing at least a majority of the issued and outstanding shares of Cape common stock entitled to be voted at the Cape special meeting will constitute a quorum for the transaction of business at the Cape special meeting. Once a share is represented for any purpose at the Cape special meeting, it is deemed present for quorum purposes for the remainder of the Cape special meeting or for any adjournment(s) thereof. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

Q: What is the vote required to approve each proposal at the OceanFirst special meeting?

A: OceanFirst share issuance proposal:

 

    Standard: Approval of the OceanFirst share issuance proposal requires the affirmative vote of a majority of the total votes cast by the holders of OceanFirst common stock at the OceanFirst special meeting.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the OceanFirst special meeting, or fail to instruct your bank or broker how to vote with respect to the OceanFirst share issuance proposal, it will have no effect on the OceanFirst share issuance proposal.

OceanFirst adjournment proposal:

 

    Standard: The OceanFirst adjournment proposal will be approved if a majority of the votes cast by the holders of OceanFirst common stock at the OceanFirst special meeting are voted in favor of the OceanFirst adjournment proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the OceanFirst special meeting, or fail to instruct your bank or broker how to vote with respect to the OceanFirst adjournment proposal, it will have no effect on the proposal.

Q: What is the vote required to approve each proposal at the Cape special meeting?

A: Cape merger proposal:

 

    Standard: Approval of the Cape merger proposal requires the affirmative vote of the holders of a majority of the total number of outstanding shares of Cape common stock.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape merger proposal, it will have the same effect as a vote “AGAINST” the Cape merger proposal.

 

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Cape merger-related compensation proposal:

 

    Standard: The Cape merger-related compensation proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, fail to submit a proxy card or vote in person at the Cape special meeting or fail to instruct your bank or broker how to vote with respect to the Cape merger-related compensation proposal, it will have no effect on such proposal.

Cape adjournment proposal:

 

    Standard: The Cape adjournment proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, fail to submit a proxy card or vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape adjournment proposal, it will have no effect on such proposal.

Q: Why is my vote important?

A: If you do not vote, it will be more difficult for OceanFirst or Cape to obtain the necessary quorum to hold their respective special meetings. In addition, if you are a Cape stockholder, your failure to submit a proxy or vote in person, or failure to instruct your bank or broker how to vote, or abstention with respect to the Cape merger proposal will have the same effect as a vote “AGAINST” approval of the Cape merger proposal. Separately, if you are an OceanFirst stockholder, your failure to submit a proxy or vote in person, or failure to instruct your bank or broker how to vote, or abstention with respect to the OceanFirst share issuance proposal will not be counted as a vote cast and will have no effect on the approval of such proposal, even though such approval is a condition to the completion of the integrated mergers. The merger agreement must be approved by the affirmative vote of at least a majority of the outstanding shares of Cape common stock. The OceanFirst share issuance must be approved by the affirmative vote of at least a majority of the total votes cast by the OceanFirst stockholders at the OceanFirst special meeting. The OceanFirst board unanimously recommends that the OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal and the Cape board unanimously recommends that the Cape stockholders vote “FOR” the Cape merger proposal.

Q: If my shares of common stock are held in “street name” by my bank or broker, will my bank or broker automatically vote my shares for me?

A: No. Your bank or broker cannot vote your shares without instructions from you. You should instruct your bank or broker how to vote your shares in accordance with the instructions provided to you. Please check the voting form used by your bank or broker.

Q: If I am a participant in Cape’s ESOP or Cape’s 401(k) Plan, how will shares owned through such plans be voted?

A: If you participate in the Cape Bank Employee Stock Ownership Plan (which we refer to as the “Cape ESOP”) or if you hold shares of Cape common stock through the Cape Bank Employees’ Savings & Profit Sharing Plan (which we refer to as the “Cape 401(k) Plan”) or the Colonial Bank 401(k) Savings Plan that was assumed by Cape (which we refer to as the “Colonial 401(k) Plan,” and together with the Cape 401(k) Plan, the “401(k) Plans”), you will receive a proxy card for each plan in which you have an interest in Cape common stock that reflects all of the shares you may direct the trustee to vote on your behalf under the plans. Under the terms of the Cape ESOP, the Cape ESOP trustee votes all shares held by the Cape ESOP, but each Cape ESOP participant may direct the trustee how to vote the shares of Cape common stock allocated to his or her account. The Cape ESOP trustee, subject to the exercise of its fiduciary responsibilities, will vote all unallocated shares of Cape common stock held by the Cape ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions.

 

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Under the terms of the Cape 401(k) Plan and under the terms of the trust agreement for the Colonial 401(k) Plan, a participant is entitled to provide voting instructions for all shares credited to his or her 401(k) Plan account and held in the Stock Fund of such 401(k) Plan. Shares for which no voting instructions are given or for which voting instructions were not timely received will be voted in the same proportion as shares for which voting instructions were received.

The deadline for returning your voting instructions is [].

Q: If I am a participant in OceanFirst’s ESOP or OceanFirst’s 401(k) Plan, how will shares owned through such plans be voted?

A: If you participate in the OceanFirst Bank Employee Stock Ownership Plan or the OceanFirst Bank Matching Contribution Employee Stock Ownership Plan (which we collectively refer to as the “OceanFirst ESOP”), or the OceanFirst Bank Retirement Plan (which we refer to as the “OceanFirst 401(k) Plan”), you will receive a voting instruction form for each plan that reflects all shares that may vote under the particular plan. Under the terms of the OceanFirst ESOP, the OceanFirst ESOP trustee votes all shares held by the OceanFirst ESOP, but each OceanFirst ESOP participant may direct the trustee how to vote the shares of OceanFirst common stock allocated to his or her account. The OceanFirst ESOP trustee, subject to the exercise of its fiduciary responsibilities, will vote all unallocated shares of OceanFirst common stock held by the OceanFirst ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions.

Under the terms of the OceanFirst 401(k) Plan, a participant is entitled to provide instructions for all shares credited to his or her OceanFirst 401(k) Plan account. The trustee will vote all shares for which no directions are given or for which timely instructions were not received in the same proportion as shares for which voting instructions were timely received.

The deadline for returning your voting instructions is [].

Q: Can I attend the meeting and vote my shares in person?

A: Yes. All stockholders of OceanFirst and Cape, including stockholders of record and stockholders who hold their shares “in street name” through banks, brokers, nominees or any other holder of record, are invited to attend their respective meetings. Holders of record of OceanFirst and Cape common stock can vote in person at the OceanFirst special meeting and Cape special meeting, respectively. If you are not a stockholder of record, you must obtain a proxy card, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at your meeting. If you plan to attend your meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. OceanFirst and Cape reserve the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meetings is prohibited without OceanFirst’s or Cape’s express written consent, respectively.

Q: Can I change my vote?

A: OceanFirst stockholders: Yes. If you are a holder of record of OceanFirst common stock, you may change your vote or revoke any proxy at any time before it is voted by (i) signing and returning a proxy card with a later date, (ii) delivering a written revocation letter to OceanFirst’s corporate secretary, (iii) attending the OceanFirst special meeting in person, notifying the corporate secretary and voting by ballot at the OceanFirst special meeting or (iv) voting by telephone or the Internet at a later time. Attendance at the OceanFirst special meeting will not automatically revoke your proxy. A revocation or later-dated proxy received by OceanFirst after the vote will not affect the vote. OceanFirst’s corporate secretary’s mailing address is: Corporate Secretary, OceanFirst Financial Corp., 975 Hooper Avenue, Toms River, New Jersey 08753.

 

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Cape stockholders: Yes. If you are a holder of record of Cape common stock, you may change your vote or revoke any proxy at any time before it is voted by (i) signing and returning a proxy card with a later date, (ii) delivering a written revocation letter to Cape’s corporate secretary, (iii) attending the Cape special meeting in person, notifying the corporate secretary and voting by ballot at the Cape special meeting or (iv) voting by telephone or the Internet at a later time. Attendance at the Cape special meeting by itself will not automatically revoke your proxy. A revocation or later-dated proxy received by Cape after the vote will not affect the vote. Cape’s corporate secretary’s mailing address is: Corporate Secretary, Cape Bancorp, Inc., 225 North Main Street, Cape May Court House, New Jersey 08210.

If you hold your shares of OceanFirst common stock or Cape common stock in “street name” through a bank or broker, you should contact your bank or broker to change your vote or revoke your proxy.

Q: Will OceanFirst be required to submit the OceanFirst share issuance proposal to its stockholders even if the OceanFirst board has withdrawn, modified or qualified its recommendation?

A: Yes. Unless the merger agreement is terminated before the OceanFirst special meeting, OceanFirst is required to submit the OceanFirst share issuance proposal to its stockholders even if the OceanFirst board has withdrawn, modified or qualified its recommendation.

Q: Will Cape be required to submit the Cape merger proposal to its stockholders even if the Cape board has withdrawn, modified or qualified its recommendation?

A: Yes. Unless the merger agreement is terminated before the Cape special meeting, Cape is required to submit the Cape merger proposal to its stockholders even if the Cape board has withdrawn, modified or qualified its recommendation.

Q: What are the U.S. federal income tax consequences of the integrated mergers to Cape stockholders?

A: The obligations of Cape and OceanFirst to complete the integrated mergers are subject to, among other customary closing conditions described in this joint proxy statement/prospectus, the receipt by each of Cape and OceanFirst of the opinion of its counsel to the effect that the integrated mergers together will be treated as an integrated transaction that qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”). Assuming that the integrated mergers qualify as a reorganization, Cape stockholders generally will recognize gain (but not loss) in an amount not to exceed the cash portion of the merger consideration for U.S. federal income tax purposes.

You should read the section of this joint proxy statement/prospectus entitled “U.S. Federal Income Tax Consequences of the Integrated Mergers” beginning on page [●] for a more complete discussion of the U.S. federal income tax consequences of the integrated mergers. Tax matters can be complicated and the tax consequences of the integrated mergers to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the integrated mergers to you.

Q: Are Cape stockholders entitled to dissenters’ rights?

A: No. Cape stockholders are not entitled to exercise dissenters’ rights in connection with the Transactions. For further information, see “The Transactions — No Dissenters’ Rights” beginning on page [●].

Q: If I am a Cape stockholder, should I send in my Cape stock certificates now?

A: No. Please do not send in your Cape stock certificates with your proxy. Promptly following the completion of the first-step merger, an exchange agent will send you instructions for exchanging Cape stock certificates for the merger consideration. See “The Merger Agreement — Conversion of Shares; Exchange of Certificates” beginning on page [●].

 

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Q: What should I do if I hold my shares of Cape common stock in book-entry form?

A: You are not required to take any special additional actions if your shares of Cape common stock are held in book-entry form. Promptly following the completion of the first-step merger, shares of Cape common stock held in book-entry form automatically will be exchanged for shares of OceanFirst common stock in book-entry form and cash to be paid in exchange for fractional shares, if any.

Q: Whom may I contact if I cannot locate my Cape stock certificate(s)?

A: If you are unable to locate your original Cape stock certificate(s), you should contact [●], Cape’s transfer agent, at ([●]) [●]-[●].

Q: What should I do if I receive more than one set of voting materials?

A: OceanFirst stockholders and Cape stockholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of OceanFirst and/or Cape common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of OceanFirst common stock or Cape common stock and your shares are registered in more than one name, you will receive more than one proxy card. In addition, if you are a holder of both OceanFirst common stock and Cape common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this joint proxy statement/prospectus to ensure that you vote every share of OceanFirst common stock and/or Cape common stock that you own.

Q: When do you expect to complete the Transactions?

A: OceanFirst and Cape currently expect to complete the Transactions in the summer of 2016. However, neither OceanFirst nor Cape can assure you of when, or if, the Transactions will be completed. The completion of the integrated mergers is subject to the fulfillment of customary closing conditions, including the approval by the OceanFirst stockholders of the OceanFirst share issuance proposal, the approval by the Cape stockholders of the Cape merger proposal and the receipt of necessary regulatory approvals.

Q: What happens if the first-step merger is not completed?

A: If the first-step merger is not completed, Cape stockholders will not receive any consideration for their shares in connection with the first-step merger. Instead, Cape will remain an independent public company and its common stock will continue to be listed and traded on the NASDAQ. In addition, if the merger agreement is terminated in certain circumstances, a termination fee may be required to be paid by either OceanFirst or Cape. For a more detailed discussion of the circumstances under which such payments will be required to be paid, please see the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Termination Fee” beginning on page [●].

Q: Whom should I call with questions?

A: OceanFirst stockholders: If you have any questions concerning the Transactions or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of OceanFirst common stock, please contact Investor Relations at (732) 240-4500 OceanFirst’s proxy solicitor, [●], at [●].

Cape stockholders: If you have any questions concerning the Transactions or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of Cape common stock, please contact Investor Relations at (800) 858-2265 (ex 4506) or Cape’s proxy solicitor, Laurel Hill Advisory Group, LLC, at (888) 742-1305.

 

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SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It may not contain all of the information that is important to you. We urge you to read carefully the entire joint proxy statement/prospectus, including the annexes, and the other documents to which we refer in order to fully understand the Transactions. See “Where You Can Find More Information” beginning on page []. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

In the First-Step Merger, Cape Stockholders will be Entitled to Receive the Merger Consideration (page [])

OceanFirst and Cape are proposing a strategic merger. If the first-step merger is completed, each outstanding share of Cape common stock, except for certain shares of Cape common stock owned by Cape or OceanFirst, will be converted into the right to receive $2.25 in cash, without interest, and 0.6375 shares of OceanFirst, together with cash in lieu of fractional shares common stock. OceanFirst will not issue any fractional shares of OceanFirst common stock in the first-step merger. Cape stockholders who would otherwise be entitled to receive a fraction of a share of OceanFirst common stock upon the completion of the first-step merger will instead be entitled to receive an amount in cash, rounded to the nearest cent, determined by multiplying the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of OceanFirst common stock to which the holder would otherwise be entitled by the average closing-sale price per share of OceanFirst common stock on the NASDAQ (as reported by The Wall Street Journal) for the five full trading days ending on the day preceding the day on which the first-step merger is completed.

OceanFirst common stock is listed on the NASDAQ under the symbol “OCFC” and Cape common stock is listed on the NASDAQ under the symbol “CBNJ.” The following table shows the closing sale prices of OceanFirst common stock and Cape common stock as reported on the NASDAQ on January 5, 2016, the last full trading day before the public announcement of the Transactions, and on [●], 2016 the latest practicable trading day before the printing of this joint proxy statement/prospectus. This table also shows the implied value of the merger consideration payable for each share of Cape common stock, which was calculated by first multiplying the closing price of OceanFirst common stock on those dates by the exchange ratio of 0.6375, and then adding $2.25, representing the per share cash consideration.

 

     OceanFirst
Common Stock
     Cape
Common Stock
     Implied Value of
Merger
Consideration
 

January 5, 2016

   $ 19.95       $ 12.39       $ 14.97   

[●]

   $ [●]       $ [●]       $ [●]   

The merger agreement governs the integrated mergers. The merger agreement is included in this joint proxy statement/prospectus as Annex A. All descriptions in this summary and elsewhere in this joint proxy statement/prospectus of the terms and conditions of the integrated mergers are qualified by reference to the merger agreement. Please read the merger agreement carefully for a more complete understanding of the integrated mergers.

The OceanFirst Board Unanimously Recommends that OceanFirst Stockholders Vote “FOR” the OceanFirst Share Issuance Proposal and the Other Proposal Presented at the OceanFirst Special Meeting (page [])

The OceanFirst board has unanimously approved the merger agreement. The OceanFirst board unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal and “FOR” the other proposal presented at the OceanFirst special meeting. For the factors considered by the OceanFirst board in

 



 

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reaching its decision to approve the merger agreement, see the section of this joint proxy statement/prospectus entitled “The Transactions — OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board” beginning on page [●].

Each of OceanFirst’s directors has entered into separate voting agreements with Cape, solely in his or her capacity as an OceanFirst stockholder, pursuant to which each such OceanFirst director has agreed to vote in favor of the OceanFirst share issuance proposal. For more information regarding the voting agreements, see the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Voting Agreements” beginning on page [●].

The Cape Board Unanimously Recommends that Cape Stockholders Vote “FOR” the Cape Merger Proposal and the Other Proposals Presented at the Cape Special Meeting (page [])

The Cape board has determined that the merger agreement and the transactions contemplated by the merger agreement, including the first-step merger, are advisable and in the best interests of Cape and its stockholders and has unanimously approved the merger agreement. The Cape board unanimously recommends that Cape stockholders vote “FOR” the Cape merger proposal and “FOR” the other proposals presented at the Cape special meeting. For the factors considered by the Cape board in reaching its decision to approve the merger agreement, see the section of this joint proxy statement/prospectus entitled “The Transactions — Cape’s Reasons for the Transactions; Recommendation of the Cape Board” beginning on page [●].

Each of Cape’s directors and certain of its executive officers, and other Cape stockholders, have entered into separate voting agreements with OceanFirst, solely in his or her or its capacity as a Cape stockholder, pursuant to which they have agreed to vote in favor of the Cape merger proposal and certain related matters and against alternative transactions. For more information regarding the voting agreements, see the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Voting Agreements” beginning on page [●].

Opinion of Cape’s Financial Advisor (page [] and Annex D)

On January 5, 2016, Raymond James & Associates, Inc. (which we refer to as “Raymond James”) rendered its written opinion to the Cape board that as of the date of the opinion, and based upon and subject to the factors and assumptions set forth in the opinion, the merger consideration in the first-step merger was fair, from a financial point of view, to Cape stockholders. The full text of the Raymond James written opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this document as Annex D. Cape stockholders are urged to read the opinion in its entirety. The Raymond James written opinion is addressed to the Cape board, is directed only to the merger consideration, and does not constitute a recommendation as to how any Cape stockholder should vote with respect to the Cape merger proposal, the Cape merger-related compensation proposal, or any proposals presented at the Cape special meeting.

Opinion of OceanFirst’s Financial Advisor (page [] and Annex E)

On January 5, 2016, Sandler O’Neill & Partners, L.P. (which we refer to as “Sandler O’Neill”) rendered its written opinion to the OceanFirst board that, as of the date of the opinion, and based upon and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations set forth in the opinion, the merger consideration was fair, from a financial point of view, to OceanFirst. The full text of the Sandler O’Neill written opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this document as Annex E. OceanFirst stockholders are urged to read the opinion in its entirety. Sandler O’Neill’s opinion speaks only as of the date of the opinion and was necessarily based on financial, economic, market and other conditions as they existed on, and the information made available to Sandler O’Neill as of, the date of Sandler O’Neill’s

 



 

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opinion. The Sandler O’Neill written opinion is addressed to the OceanFirst board, is directed only to the merger consideration, and does not constitute a recommendation as to how any holder of OceanFirst common stock should vote with respect to the OceanFirst share issuance proposal or any other matter.

What Holders of Cape Equity-Based Awards will be Entitled to Receive (page [])

The Cape equity awards will be affected as follows:

Restricted Stock Awards: At the effective time, each restricted stock award granted by Cape (or assumed by Cape from a prior acquisition) will become fully vested and each holder of such restricted stock awards will be entitled to receive the per share merger consideration for each share of Cape common stock held by such holder.

Stock Options: Also at the effective time, each stock option granted by Cape (or assumed by Cape from a prior acquisition) will be assumed and converted into an option to purchase a number of shares of OceanFirst common stock (rounded down to the nearest whole share) determined by multiplying (i) the number of shares of Cape common stock subject to such stock option by (ii) 0.75, at a per share exercise price (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (a) the per share exercise price for each share of Cape common stock subject to such stock option by (b) 0.75.

OceanFirst Will Hold the OceanFirst Special Meeting on [], 2016 (page [])

The OceanFirst special meeting will be held on [●], 2016, at [●] local time, at [●]. At the OceanFirst special meeting, OceanFirst stockholders will be asked to approve the OceanFirst share issuance proposal and approve the OceanFirst adjournment proposal.

Only holders of record of OceanFirst common stock at the close of business on [●], 2016 (which we refer to as the “OceanFirst record date”), will be entitled to notice of, and to vote at, the OceanFirst special meeting. Subject to the ten percent voting limitation set forth in OceanFirst’s certificate of incorporation, each share of OceanFirst common stock is entitled to one vote on each proposal to be considered at the OceanFirst special meeting. As of the OceanFirst record date, there were [●] shares of OceanFirst common stock entitled to vote at the OceanFirst special meeting.

As of the OceanFirst record date, the directors and executive officers of OceanFirst and their affiliates beneficially owned and were entitled to vote approximately [●] shares of OceanFirst common stock representing approximately [●]% of the shares of OceanFirst common stock outstanding on that date.

Each of OceanFirst’s directors has entered into separate voting agreements with Cape, solely in his or her capacity as an OceanFirst stockholder, pursuant to which each such OceanFirst director has agreed to vote in favor of the OceanFirst share issuance proposal.

Approval of the OceanFirst share issuance requires the affirmative vote of a majority of the total votes cast by the OceanFirst stockholders at the OceanFirst special meeting. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the OceanFirst special meeting or fail to instruct your bank or broker how to vote with respect to the OceanFirst share issuance proposal, it will have no effect on the OceanFirst share issuance proposal.

The OceanFirst adjournment proposal will be approved if a majority of the votes cast by the holders of OceanFirst common stock at the OceanFirst special meeting are voted in favor of such proposal. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the OceanFirst special meeting or fail to

 



 

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instruct your bank or broker how to vote with respect to the OceanFirst adjournment proposal, it will have no effect on the proposal.

Cape Will Hold the Cape Special Meeting on [], 2016 (page [])

The Cape special meeting will be held on [●], 2016, at [●] local time, at [●]. At the Cape special meeting, Cape stockholders will be asked to approve the Cape merger proposal, approve the Cape merger-related compensation proposal and approve the Cape adjournment proposal.

Only holders of record of Cape common stock at the close of business on [●], 2016 (which we refer to as the “Cape record date”), will be entitled to notice of, and to vote at, the Cape special meeting. Subject to the ten percent voting limitation set forth in Cape’s articles of incorporation, each share of Cape common stock is entitled to one vote on each proposal to be considered at the Cape special meeting. As of the Cape record date, there were [●] shares of Cape common stock entitled to vote at the Cape special meeting.

As of the Cape record date, the directors and executive officers of Cape and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Cape common stock representing approximately [●]% of the shares of Cape common stock outstanding on that date. As of the Cape record date, Patriot Financial Partners, GP, LLC and certain of its affiliates (which we collectively refer to as “Patriot”) owned beneficially and of record [1,626,360] shares of Cape common stock representing approximately [●]% of the shares of Cape common stock outstanding on that date.

Certain Cape stockholders, including Patriot, and each of the directors and certain executive officers of Cape, have entered into separate voting agreements with OceanFirst, solely in his or her or its capacity as a Cape stockholder, pursuant to which they have agreed to vote in favor of the Cape merger proposal.

Approval of the Cape merger proposal requires the affirmative vote of the holders of a majority of the total number of outstanding shares of Cape common stock entitled to vote at the Cape special meeting. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

The Cape merger-related compensation proposal and the Cape adjournment proposal will each be approved if a majority of the votes cast on each such proposal at the Cape special meeting are voted in favor of each such proposal at the Cape special meeting. If you mark “ABSTAIN” on your proxy, fail to submit a proxy or vote in person at the Cape special meeting or fail to instruct your bank or broker how to vote with respect to either such proposal, it will have no effect on the Cape merger-related compensation proposal or the Cape adjournment proposal.

U.S. Federal Income Tax Consequences of the Integrated Mergers (page [])

The obligations of Cape and OceanFirst to complete the integrated mergers are subject to, among other customary closing conditions described in this joint proxy statement/prospectus, the receipt by each of Cape and OceanFirst of the opinion of its counsel to the effect that the integrated mergers together will be treated as an integrated transaction that qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming that the integrated mergers qualify as a reorganization, Cape stockholders generally will recognize gain (but not loss) in an amount not to exceed the cash portion of the merger consideration for U.S. federal income tax purposes.

You should read the section of this joint proxy statement/prospectus entitled “U.S. Federal Income Tax Consequences of the Integrated Mergers” beginning on page [●] for a more complete discussion of the U.S.

 



 

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federal income tax consequences of the integrated mergers. Tax matters can be complicated and the tax consequences of the integrated mergers to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the integrated mergers to you.

Cape’s Directors and Officers Have Financial Interests in the Transactions that Differ from Your Interests (page [])

In considering the recommendation of the Cape board to adopt the merger agreement, Cape stockholders should be aware that officers and directors of Cape have employment and other compensation agreements or plans that give them interests in the Transactions that are different from, or in addition to, their interests as Cape stockholders. The Cape board was aware of these circumstances at the time it approved the merger agreement. These interests include:

 

    The employment agreement of Michael D. Devlin, President and Chief Executive Officer of Cape, that provides for a cash severance payment, life insurance and medical and dental benefits in the event of a termination of employment without cause or for good reason following a change in control;

 

    Change in control agreements for Edward J. Geletka, Executive Vice President and Chief Operating Officer, Guy Hackney, Executive Vice President and Chief Financial Officer, James F. McGowan, Executive Vice President and Chief Credit Officer, Michelle Pollack, Executive Vice President and Chief Lending Officer, and Charles L. Pinto, Executive Vice President and Chief Banking Officer, as well as twelve other individuals that provide for cash severance payments, life insurance and medical and dental benefits in the event of a termination of employment without cause or for good reason following a change in control;

 

    Michael D. Devlin, President and Chief Executive Officer, is expected to be appointed as a member of the OceanFirst board and the OceanFirst Bank board, or, if Mr. Devlin is unable to serve, an alternative member of Cape’s current board shall be appointed to the OceanFirst and OceanFirst Bank boards;

 

    Cape has made awards of stock options to certain officers and directors under its equity incentive plan. In addition, certain former officers and directors of Colonial Financial Services, Inc. (which we refer to as “Colonial”), which was acquired by Cape on April 1, 2015, continue to vest in stock options under Colonial’s equity plan as officers and directors of Cape. As a result of the first-step merger, each stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to closing will be converted into an option to acquire a number of shares of OceanFirst common stock (rounded down to the nearest whole share) determined by multiplying (x) the number of shares of Cape common stock subject to such Cape option immediately prior to the effective time by (y) 0.75; and the exercise per share of the new option (rounded up to the nearest whole cent) will be equal to the quotient obtained by dividing (i) the per share exercise price for the shares of Cape common stock subject to such Cape option by (ii) 0.75;

 

    Cape has made awards of restricted stock to certain of its directors under its equity incentive plan. In addition, certain former officers and directors of Colonial, continue to vest, as officers and directors of Cape, in restricted stock granted to them under Colonial’s equity plan. As a result of the first-step merger, each restricted stock award shall become fully vested and each holder will be entitled to receive the per share merger consideration for each share of Cape common stock held by such holder; and

 

    Rights of Cape officers and directors to continued indemnification coverage and continued coverage under directors’ and officers’ liability insurance policies.

Cape Stockholders Are NOT Entitled to Assert Dissenters’ Rights (page [])

Cape stockholders are not entitled to exercise any rights of an objecting stockholder provided for under Maryland law because Cape’s articles of incorporation provide that the holders of Cape common stock are not

 



 

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entitled to exercise such dissenters’ rights unless the Cape board determines that such rights apply with respect to one or more transactions. However, the merger agreement contains certain restrictions on Cape’s ability to take actions that would cause the Cape stockholders to be entitled to dissenters’ rights. For further information, see “The Transactions — No Dissenters’ Rights” beginning on page [●].

Completion of the Transactions; Conditions That Must Be Fulfilled For The Integrated Mergers To Occur (page [])

Currently, Cape and OceanFirst expect to complete the Transactions in the summer of 2016. As more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the integrated mergers depends on a number of customary closing conditions being satisfied or, where legally permissible, waived. These conditions include:

 

    approval of the merger agreement by the Cape stockholders and approval of the issuance of shares of OceanFirst common stock in connection with the first-step merger by the OceanFirst stockholders;

 

    authorization for listing on the NASDAQ of the shares of OceanFirst common stock to be issued in the first-step merger;

 

    the receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System (which we refer to as the “Federal Reserve Board”) and the Office of the Comptroller of the Currency (which we refer to as the “OCC”). In addition, certain notices need to be filed with the Department of Banking and Insurance of the State of New Jersey (which we refer to as the “NJ Department”);

 

    effectiveness of the registration statement of which this joint proxy statement/prospectus is a part;

 

    the absence of any order, injunction or other legal restraint preventing the completion of the integrated mergers or making the completion of the integrated mergers illegal;

 

    subject to the materiality standards provided in the merger agreement, the accuracy of the representations and warranties of OceanFirst and Cape in the merger agreement;

 

    subject to the materiality standards set forth in the merger agreement, performance by each of OceanFirst and Cape of its obligations under the merger agreement; and

 

    receipt by each of OceanFirst and Cape of an opinion from its counsel as to certain tax matters. Neither Cape nor OceanFirst can be certain when, or if, the conditions to the integrated mergers will be satisfied or waived, or that the integrated mergers will be completed.

Termination of the Merger Agreement (page [])

The merger agreement can be terminated at any time prior to completion of the first-step merger in the following circumstances:

 

    by mutual written consent, if the OceanFirst board and the Cape board so determine;

 

    by the OceanFirst board or the Cape board if (i) any governmental entity denies any requisite regulatory approval in connection with the Transactions and such denial has become final and nonappealable, or (ii) any governmental entity of competent jurisdiction has issued a final and nonappealable order prohibiting or making illegal the consummation of the transactions contemplated by the merger agreement, unless the failure to obtain a requisite regulatory approval is due to the failure of the terminating party to perform or observe its obligations under the merger agreement;

 

   

by the OceanFirst board or the Cape board if the integrated mergers have not been completed on or before the one year anniversary of the date of the merger agreement (which we refer to as the

 



 

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“termination date”), unless the failure of the integrated mergers to be completed by such date is due to the failure of the terminating party to perform or observe its obligations under the merger agreement;

 

    by the OceanFirst board or the Cape board (except that the terminating party cannot then be in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement) if the other party breaches any of its obligations or any of its representations and warranties (or any such representation or warranty ceases to be true) set forth in the merger agreement which either individually or in the aggregate would constitute, if occurring or continuing on the closing date, the failure of a closing condition of the terminating party and such breach is not cured within 45 days following written notice to the party committing such breach, or such breach cannot be cured during such period;

 

    by Cape, if the OceanFirst board (i) fails to recommend in this joint proxy statement/prospectus that the OceanFirst stockholders approve the OceanFirst share issuance, or takes certain adverse actions with respect to such recommendation, or (ii) breaches certain obligations, including with respect to calling a meeting of its stockholders and recommending that they approve the OceanFirst share issuance, in any material respect;

 

    by OceanFirst, if the Cape board (i) fails to recommend in this joint proxy statement/prospectus that the Cape stockholders approve the merger agreement, or takes certain adverse actions with respect to such recommendation, (ii) fails to recommend against acceptance of a tender offer or exchange offer for outstanding Cape common stock that has been publicly disclosed (other than by OceanFirst or an affiliate of OceanFirst) within ten business days after the commencement of such tender or exchange offer, (iii) recommends or endorses an acquisition proposal, or (iv) breaches certain obligations, including with respect to acquisition proposals or calling a meeting of its stockholders and recommending that they approve the merger agreement, in any material respect; or

 

    by Cape, if the market value of OceanFirst common stock on the determination date is less than $15.74 and OceanFirst common stock underperforms an index of financial institutions by more than a specified threshold calculated pursuant to a prescribed formula set forth in the merger agreement and described in more detail in the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Termination of the Merger Agreement” beginning on page [●].

Termination Fee (page [])

If the merger agreement is terminated under certain circumstances, including circumstances involving alternative acquisition proposals with respect to Cape, changes in the recommendation of the Cape board or changes in the recommendation of the OceanFirst board, Cape or OceanFirst, as applicable, may be required to pay to the other party a termination fee equal to $7.2 million (which we refer to as the “termination fee”). The termination fee could discourage other companies from seeking to acquire or merge with Cape or OceanFirst.

Regulatory Approvals Required for the Integrated Mergers and the Bank Merger (page [])

Subject to the terms of the merger agreement, both Cape and OceanFirst have agreed to cooperate with each other and use their reasonable best efforts to obtain all regulatory approvals necessary or advisable to complete the transactions contemplated by the merger agreement. These include approvals from, among others, the Federal Reserve Board and the OCC. Additionally, certain notices need to be filed with the NJ Department. OceanFirst and Cape have filed the required applications and notices. Although neither Cape nor OceanFirst knows of any reason why it cannot obtain these regulatory approvals in a timely manner, Cape and OceanFirst cannot be certain when, or if, they will be obtained.

 



 

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The Rights of Cape Stockholders Will Change as a Result of the First-Step Merger (page [])

OceanFirst is incorporated under the laws of the State of Delaware and Cape is incorporated under the laws of the State of Maryland. Accordingly, Delaware law governs the OceanFirst stockholders and Maryland law governs the Cape stockholders. As a result of the first-step merger, Cape stockholders will become stockholders of OceanFirst. Thus, following the completion of the first-step merger, the rights of Cape stockholders who become OceanFirst stockholders in the first-step merger will be governed by the corporate law of the State of Delaware and will also then be governed by OceanFirst’s certificate of incorporation and bylaws, rather than by the corporate law of the State of Maryland and Cape’s articles of incorporation and bylaws.

See “Comparison of Stockholders’ Rights” for a description of the material differences in stockholders’ rights under the laws of the State of Delaware, the laws of the State of Maryland and each of the OceanFirst and Cape governing documents.

Information About the Companies (page [])

OceanFirst

OceanFirst is the holding company for OceanFirst Bank. OceanFirst Bank, founded in 1902, is a community bank with $2.6 billion in assets and 27 branches located in Ocean, Monmouth and Middlesex Counties, New Jersey. OceanFirst Bank delivers commercial and residential financing solutions, wealth management, and deposit services throughout the central New Jersey region and is the largest and oldest community-based financial institution headquartered in Ocean County, New Jersey. OceanFirst’s website is www.oceanfirstonline.com.

OceanFirst common stock is traded on the NASDAQ under the symbol “OCFC.”

OceanFirst’s principal executive office is located at 975 Hooper Avenue, Toms River, New Jersey 08753 and its telephone number at that location is (732) 240-4500. Additional information about OceanFirst and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [●].

Merger Sub

Merger Sub is a Maryland corporation and a wholly-owned subsidiary of OceanFirst. Merger Sub was formed by OceanFirst for the sole purpose of consummating the integrated mergers. See the section of this joint proxy statement/prospectus entitled “Information About Merger Sub” beginning on page [●].

Cape

Cape Bancorp, Inc. is the holding company for Cape Bank, a full service institution providing a complete line of high quality banking services to small and mid-sized businesses, professionals and individuals located in its primary market area of Atlantic, Cape May, Cumberland and Gloucester Counties, New Jersey and metropolitan Philadelphia. Cape Bank offers a full menu of deposit and lending options designed to fit any need. The goal of Cape Bank is to develop strong customer relationships by providing these services through its 22 branches. Cape Bancorp, Inc. is headquartered in Cape May Court House, New Jersey. Cape’s website is www.capebanknj.com.

Cape common stock is traded on the NASDAQ under the symbol “CBNJ.”

 



 

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Cape’s principal executive offices are located at 225 North Main Street, Cape May Court House, New Jersey 08210 and its telephone number at that location is (609) 465-5600. Additional information about Cape and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [●].

Risk Factors (page [])

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in this joint proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page [●].

 



 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF OCEANFIRST

The following tables set forth selected consolidated financial data for OceanFirst for each of the periods and as of the dates indicated. The summary information presented below at or for years ended December 31, 2014 and 2013 is derived in part from and should be read in conjunction with the consolidated financial statements of OceanFirst for the years ended December 31, 2014 and 2013 and the related notes thereto incorporated by reference in this joint proxy statement/prospectus. The summary information presented below for the nine months ended September 30, 2015 and 2014 are derived from OceanFirst’s unaudited consolidated financial statements incorporated by reference into this joint proxy statement/prospectus. You should read this information in conjunction with OceanFirst’s consolidated financial statements and related notes included in OceanFirst’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference in this joint proxy statement/prospectus from which this information is derived.

 

    As of or for the
Nine Months
Ended September 30,
    As of and for the Year
Ended December 31,
 
(Dollars in thousands, except per share data)   2015(*)     2014     2014     2013     2012     2011     2010  

Operating Data

             

Interest income

  $ 62,715      $ 59,785      $ 79,853      $ 80,157      $ 87,615      $ 95,387      $ 101,367   

Interest expense

    6,574        5,461        7,505        9,628        14,103        18,060        24,253   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    56,141        54,324        72,348        70,529        73,512        77,327        77,114   

Provision for loan losses

    975        1,805        2,630        2,800        7,900        7,750        8,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    55,166        52,519        69,718        67,729        65,612        69,577        69,114   

Non-interest income

    12,309        13,957        18,577        16,458        17,724        15,301        15,312   

Non-interest expense

    44,277        43,368        57,764        59,244        52,389        52,664        53,647   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    23,198        23,108        30,531        24,943        30,947        32,214        30,779   

Provision for income taxes

    8,105        8,120        10,611        8,613        10,927        11,473        10,401   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 15,093      $ 14,988      $ 19,920      $ 16,330      $ 20,020      $ 20,741      $ 20,378   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Common Share

             

Net income, basic

  $ 0.91      $ 0.89      $ 1.19      $ 0.96      $ 1.13      $ 1.14      $ 1.12   

Net income, diluted

    0.90        0.89        1.19        0.95        1.12        1.14        1.12   

Book value

    13.58        12.77        12.91        12.33        12.28        11.61        10.69   

Tangible book value

    13.46        12.77        12.91        12.33        12.28        11.61        10.69   

Cash dividends declared

    0.39        0.36        0.49        0.48        0.48        0.48        0.48   

Weighted-average number of shares outstanding:

             

Basic

    16,522        16,748        16,687        17,071        17,730        18,191        18,142   

Diluted

    16,746        16,865        16,797        17,157        17,829        18,240        18,191   

Number of shares outstanding

    17,277        17,118        16,902        17,387        17,895        18,683        18,822   

Selected Balance Sheet Data

             

Total assets

  $ 2,557,898      $ 2,308,701      $ 2,356,714      $ 2,249,711      $ 2,269,228      $ 2,302,094      $ 2,251,330   

Investment securities(1)

    439,010        522,287        508,391        553,953        564,457        548,370        450,021   

Loans(2)

    1,938,972        1,635,122        1,693,047        1,542,245        1,529,946        1,572,316        1,667,462   

Allowance for loan losses

    16,638        16,310        16,317        20,930        20,510        18,230        19,700   

Deposits

    1,967,771        1,781,227        1,720,135        1,746,763        1,719,671        1,706,083        1,663,968   

Total borrowings

    338,499        294,153        400,550        270,804        313,291        359,601        360,364   

Stockholders’ equity

    234,688        218,650        218,259        214,350        219,792        216,849        201,251   

Selected Performance Ratios

             

Return on average assets (annualized)(6)

    0.83     0.87     0.86     0.71     0.87     0.91     0.93

Return on average equity (annualized)(6)

    8.94     9.23     9.18     7.51     9.15     9.88     10.62

Net interest margin(7)

    3.24     3.33     3.31     3.24     3.37     3.59     3.69

Efficiency ratio(3)(6)

    64.69     63.51     63.53     68.11     57.42     56.64     57.83

Tangible common equity to tangible assets(4)

    8.94     9.23     9.26     9.53     9.69     9.41     8.94

Asset Quality Ratios

             

Net charge-offs to average loans (annualized)(10)

    0.05     0.53     0.45     0.16     0.36     0.57     0.18

Allowance for loan losses to total loans receivable(8)(9)(10)

    0.85     0.98     0.95     1.33     1.32     1.15     1.17

Nonperforming loans to total loans receivable(8)(9)(10)

    1.24     1.11     1.06     2.88     2.80     2.77     2.23

Nonperforming assets to total assets(9)(10)

    1.08     1.08     0.97     2.21     2.05     2.00     1.77

Capital Ratios

             

Total risk-based capital

    13.60     15.30     15.08     15.97     16.11     16.40     15.28

Tier 1 risk-based capital

    12.67     14.25     14.05     14.72     14.86     15.42     14.40

Common equity Tier 1(5)

    12.67     —          —          —          —          —          —     

Tier 1 leverage

    8.91     9.57     9.46     9.66     9.49     9.41     9.13

 



 

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(*) OceanFirst closed its merger with Colonial American Bank on July 31, 2015.
(1)  Investment securities include available-for-sale and held-to-maturity securities and Federal Home Loan Bank stock.
(2)  Loans include loans held for sale and is net of undisbursed loan funds and net deferred origination costs.
(3)  Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income.
(4)  Tangible common equity to tangible assets is total stockholder’s equity less goodwill and other intangible assets divided by total assets less goodwill and other intangible assets.
(5)  OceanFirst Bank became subject to new Basel III regulatory capital ratios in 2015. The common equity Tier I ratio was not reported in prior years.
(6)  Performance ratios for 2013 include non-recurring expenses relating to the payment of Federal Home Loan Bank advances of $4.3 million and the consolidation of two branches into newer, in-market facilities, at a cost of $579,000. The total after tax cost was $3.1 million. Performance ratios for 2012 include an additional loan loss provision of $1.8 million relating to the superstorm Sandy and $687,000 in net severance expense. The total after tax cost was $1.6 million.
(7)  The net interest margin represents net interest income as a percentage of average interest-earning assets.
(8)  Total loans receivable includes loans receivable and loans held-for-sale.
(9)  Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure. It is OceanFirst’s policy to cease accruing interest on all such loans and to reverse previously accrued interest.
(10)  During the fourth quarter of 2011, OceanFirst modified its charge-off policy on problem loans secured by real estate so that losses are charged off in the period the loans are deemed uncollectible rather than when the foreclosure process is completed. The change in the charge-off policy resulted in additional charge-offs in the fourth quarter of 2011 of $5.7 million.

 



 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CAPE

The following tables set forth selected consolidated financial data for Cape for each of the periods and as of the dates indicated. The summary information presented below at or for years ended December 31, 2014 and 2013 is derived in part from and should be read in conjunction with the consolidated financial statements of Cape for the years ended December 31, 2014 and 2013 and the related notes thereto incorporated by reference in this joint proxy statement/prospectus. The summary information presented below for the nine months ended September 30, 2015 and 2014 are derived from Cape’s unaudited consolidated financial statements incorporated by reference into this joint proxy statement/prospectus. You should read this information in conjunction with Cape’s consolidated financial statements and related notes included in Cape’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference in this joint proxy statement/prospectus from which this information is derived.

 

    As of or for the
Nine Months
Ended September 30,
    As of and for the Year Ended December 31,  
(Dollars in thousands, except per
share data)
  2015(*)     2014     2014     2013     2012     2011     2010  

Selected Financial Condition Data:

             

Total assets

  $ 1,563,241      $ 1,081,737      $ 1,079,894      $ 1,092,879      $ 1,040,798      $ 1,071,128      $ 1,061,042   

Cash and cash equivalents

  $ 25,094      $ 18,533      $ 31,472      $ 24,861      $ 24,228      $ 25,475      $ 14,997   

Investment securities available for sale, at fair value

  $ 260,898      $ 157,290      $ 147,788      $ 157,166      $ 170,857      $ 190,714      $ 157,407   

Investment securities held to maturity

  $ 15,112      $ 17,796      $ 17,924      $ 9,102        —          —          —     

Loans held for sale

  $ 428        —          —        $ 1,814      $ 8,795      $ 7,657      $ 1,224   

Loans, net of allowance

  $ 1,115,338      $ 772,397      $ 770,289      $ 780,127      $ 714,396      $ 716,341      $ 772,318   

Federal Home Loan Bank of New York stock, at cost

  $ 5,612      $ 6,873      $ 7,053      $ 7,747      $ 5,775      $ 7,533      $ 8,721   

Bank owned life insurance

  $ 46,907      $ 31,080      $ 31,305      $ 31,177      $ 30,226      $ 29,249      $ 28,252   

Deposits

  $ 1,289,340      $ 800,866      $ 797,056      $ 798,422      $ 784,591      $ 774,403      $ 753,068   

Borrowings

  $ 94,215      $ 132,085      $ 136,342      $ 143,935      $ 97,965      $ 144,019      $ 169,637   

Total stockholders’ equity

  $ 169,650      $ 139,864      $ 140,878      $ 140,427      $ 150,826      $ 145,719      $ 132,154   

Selected Operating Data:

             

Interest income

  $ 37,176      $ 30,616      $ 40,635      $ 41,041      $ 43,684      $ 46,467      $ 50,269   

Interest expense

    4,484        3,831        5,208        5,292        8,204        11,611        14,539   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    32,692        26,785        35,427        35,749        35,480        34,856        35,730   

Provision for loan losses

    2,675        2,480        3,014        2,011        4,461        19,607        7,496   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    30,017        24,305        32,413        33,738        31,019        15,249        28,234   

Non-interest income

    11,237        5,452        6,651        5,966        7,814        5,311        2,851   

Non-interest expense

    28,838        20,443        28,027        29,922        31,622        30,928        28,534   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense

    12,416        9,314        11,037        9,782        7,211        (10,368     2,551   

Income tax expense (benefit)

    2,159        3,551        4,253        4,231        2,655        (18,355     (1,490
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 10,257      $ 5,763      $ 6,784      $ 5,551      $ 4,556      $ 7,987      $ 4,041   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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    As of or for the
Nine Months
Ended September 30,
    As of and for the Year Ended December 31,  
(Dollars in thousands, except per
share data)
  2015(*)     2014     2014     2013     2012     2011     2010  

Selected Financial Ratios and Other Data:

             

Performance Ratios:

             

Return on assets (ratio of net income to average total assets) (annualized)

    0.98     0.71     0.62     0.53     0.43     0.75     0.38

Return on equity (ratio of net income to average equity) (annualized)

    8.40     5.44     4.80     3.80     3.05     5.61     3.06

Earnings (loss) per share — fully diluted

  $ 0.81      $ 0.52      $ 0.61      $ 0.46      $ 0.37      $ 0.64      $ 0.33   

Average interest rate spread(1)

    3.32     3.53     3.49     3.66     3.61     3.42     3.46

Net interest margin(2)

    3.39     3.61     3.58     3.76     3.75     3.60     3.66

Efficiency ratio

    68.74     65.98     66.45     70.47     71.68     72.93     68.59

Non-interest expense to average total assets

    2.43     2.45     2.44     2.85     3.01     2.90     2.68

Average interest-earning assets to average interest-bearing liabilities

    116.57     116.36     116.60     117.78     116.52     114.71    
 

113.67
 

Asset Quality Ratios:

             

Non-performing assets to total assets

    0.86     1.20     1.25     1.35     2.61     3.38     4.41

Non-performing loans to total loans

    0.84     0.99     1.06     0.93     2.67     3.77     5.54

Allowance for loan losses to non-performing loans

    105.99     127.00     113.67     127.05     50.86     46.10     28.84

Allowance for loan losses to total loans

    0.89     1.25     1.20     1.18     1.36     1.74     1.60

Capital Ratios:

             

Total capital (to risk-weighted assets)

    12.67     14.28     14.55     14.29     15.36     13.82     13.90

Tier I capital (to risk-weighted assets)

    11.79     13.03     13.34     13.07     14.11     12.57     12.65

Tier I capital (to average assets)

    8.87     9.60     9.94     9.53     10.35     9.15     9.96

Equity to assets

    10.85     12.93     13.06     12.85     14.49     13.60     12.46

Other Data:

             

Number of full service offices

    22        14        14        14        15        16        17   

Full time equivalent employees

    259        174        178        190        193        191        205   

 

(*)  Cape completed its merger with Colonial on April 1, 2015.
(1)  Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
(2)  Represents net interest income as a percent of average earning assets.

 



 

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SELECTED UNAUDITED PRO FORMA FINANCIAL DATA

The following table shows selected unaudited pro forma condensed combined financial data about the financial condition and results of operations of OceanFirst giving effect to the Transactions. The selected unaudited pro forma condensed combined financial information assumes that the Transactions are accounted for under the acquisition method of accounting with OceanFirst treated as the acquirer. Under the acquisition method of accounting, the assets and liabilities of Cape, as of the effective date, will be recorded by OceanFirst at their respective estimated fair values and the excess of the merger consideration over the fair value of Cape’s net assets will be allocated to goodwill.

The table sets forth the information as if the Transactions had become effective on September 30, 2015, with respect to financial condition data, and at the beginning of the periods presented, with respect to the results of operations data. The selected unaudited pro forma condensed combined financial data has been derived from and should be read in conjunction with the unaudited pro forma condensed combined financial information, including the notes thereto, which is included in this joint proxy statement/prospectus under the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements.” The selected unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the periods presented. The selected unaudited pro forma condensed combined financial data also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors. Further, as explained in more detail in the notes accompanying the more detailed unaudited pro forma condensed combined financial information included under “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page [●], the pro forma allocation of purchase price reflected in the selected unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the Transactions are completed. Additionally, the adjustments made in the unaudited pro forma condensed financial information, which are described in those notes, are preliminary and may be revised.

 

Pro Forma Condensed Consolidated Combined Statement of Financial Condition Data

   As of
September 30, 2015
 
(Dollars in thousands)       

Securities and Federal Home Loan Bank Stock

   $ 719,336   

Loans, net of allowance for loan losses

     3,048,909   

Total assets

     4,106,161   

Deposits

     3,256,880   

Borrowings

     437,487   

Stockholders’ equity

     378,818   

 

Pro Forma Condensed Consolidated Combined Statement of Income Data

   Nine months ended
September 30, 2015
     Year Ended
December 31, 2014
 
(Dollars in thousands, except per share data)              

Pro Forma Condensed Consolidated Combined Statement of Income Data

     

Net interest income

   $ 89,356       $ 120,508   

Provision for loan losses

     3,650         5,677   

Non-interest income

     23,546         26,311   

Non-interest expense

     74,869         101,262   

Net income before income taxes

     34,383         39,880   

Net income

     24,550         25,357   

Pro Forma Condensed Consolidated Combined Per Share Data

     

Net income per share — basic

   $ 1.00       $ 1.00   

Net income per share — diluted

     0.99         0.99   

 



 

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RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under the section “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [] you should carefully consider the following risk factors in deciding how to vote for the proposals presented in this joint proxy statement/prospectus. You should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [].

Because the market price of OceanFirst common stock may fluctuate, Cape stockholders cannot be certain of the precise value of the stock portion of the merger consideration they will be entitled to receive.

At the time the first-step merger is completed, each issued and outstanding share of Cape common stock, except for certain specified shares owned by OceanFirst or Cape, will be converted into the right to receive $2.25 in cash, without interest, and 0.6375 shares of OceanFirst common stock, together with cash in lieu of fractional shares. There will be a time lapse between each of the date of this joint proxy statement/prospectus, the date of the OceanFirst special meeting, the date of the Cape special meeting and the date on which Cape stockholders entitled to receive the merger consideration actually receive the merger consideration. The market value of OceanFirst common stock may fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in OceanFirst’s businesses, operations and prospects and regulatory considerations. Many of these factors are outside of the control of OceanFirst and Cape. Consequently, at the time Cape stockholders must decide whether to approve the merger agreement, they will not know the actual market value of the shares of OceanFirst common stock they may receive when the first-step merger is completed. Although the value of the cash portion of the merger consideration is fixed at $2.25 per share of Cape common stock, the value of the portion of the merger consideration that is represented by shares of OceanFirst common stock will depend on the market value of shares of OceanFirst common stock on the date the merger consideration is received. This value will not be known at the time of the Cape special meeting and may be more or less than the current price of OceanFirst common stock or the price of OceanFirst common stock at the time of the Cape special meeting.

The market price of OceanFirst common stock after the first-step merger is completed may be affected by factors different from those affecting the market price of Cape or OceanFirst common stock currently.

Upon completion of the first-step merger, Cape stockholders will become OceanFirst stockholders. OceanFirst’s business differs in important respects from that of Cape, and, accordingly, the results of operations of the combined company and the market price of OceanFirst common stock after the completion of the first-step merger may be affected by factors different from those currently affecting the independent results of operations of each of OceanFirst and Cape. For a discussion of the businesses of OceanFirst and Cape and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this joint proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page [●].

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Transactions.

Before the Transactions can be completed, OceanFirst and Cape must obtain approvals from the Federal Reserve Board and the OCC, and also file certain notices with the NJ Department. Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals, waivers and consents the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under the section of this joint proxy statement/prospectus entitled “The Transactions — Regulatory Approvals Required for the Completion of the Transactions” beginning on page [●]. An adverse

 

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development in either party’s regulatory standing or these factors could result in an inability to obtain approval or delay their receipt. These regulators may impose conditions on the completion of the Transactions or require changes to the terms of the Transactions. Such conditions or changes could have the effect of delaying or preventing completion of the Transactions or imposing additional costs on or limiting the revenues of the combined company following the completion of the Transactions, any of which might have an adverse effect on the combined company following the completion of the Transactions. However, under the terms of the merger agreement, in connection with obtaining such regulatory approvals, neither party is required to take any action, or commit to take any action, or agree to any condition or restriction, that would reasonably be expected to have a material adverse effect (measured on a scale relative to Cape) on any of OceanFirst, Cape or the surviving corporation, after giving effect to the integrated mergers (which we refer to as a “materially burdensome regulatory condition”). For more information, see the section of this joint proxy statement/prospectus entitled “The Transactions — Regulatory Approvals Required for the Transactions” beginning on page [●].

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the Transactions may not be realized.

OceanFirst and Cape have operated and, until the completion of the Transactions, will continue to operate, independently. The success of the Transactions, including anticipated benefits and cost savings, will depend, in part, on OceanFirst’s ability to successfully combine and integrate the businesses of OceanFirst and Cape in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, employees and other constituents or to achieve the anticipated benefits and cost savings of the Transactions. The loss of key employees could adversely affect OceanFirst’s ability to successfully conduct its business, which could have an adverse effect on OceanFirst’s financial results and the value of its common stock. If OceanFirst experiences difficulties with the integration process, the anticipated benefits of the Transactions may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause OceanFirst and/or Cape to lose customers or cause customers to remove their accounts from OceanFirst and/or Cape and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Cape and OceanFirst during this transition period and for an undetermined period after completion of the Transaction on the combined company. In addition, the actual cost savings of the Transactions could be less than anticipated.

The unaudited pro forma condensed combined financial statements included in this document are preliminary and the actual financial condition and results of operations after the Transactions may differ materially.

The unaudited pro forma condensed combined financial statements in this joint proxy statement/prospectus are presented for illustrative purposes only and are not necessarily indicative of what OceanFirst’s actual financial condition or results of operations would have been had the Transaction been completed on the dates indicated. The unaudited pro forma condensed combined financial statements reflect adjustments to illustrate the effect of the Transactions had they been completed on the dates indicated, which are based upon preliminary estimates, to record the Cape identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation for the first-step merger reflected in this joint proxy statement/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Cape as of the date of the completion of the Transactions. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. For more information, see the section of this joint proxy statement/prospectus entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page [●].

 

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Certain of Cape’s directors and executive officers have interests in the Transactions that may differ from the interests of the Cape stockholders.

The Cape stockholders should be aware that some of Cape’s directors and executive officers have interests in the Transactions and have arrangements that are different from, or in addition to, those of Cape stockholders generally. The Cape board was aware of these interests and considered these interests, among other matters, when making its decision to approve the merger agreement, and in recommending that Cape stockholders vote in favor of the Cape merger proposal and certain related matters and against alternative transactions.

The material interests considered by the Cape board were as follows:

 

    The employment agreement of Michael D. Devlin, President and Chief Executive Officer of Cape, that provides for a cash severance payment, life insurance and medical and dental benefits in the event of a termination of employment without cause or for good reason following a change in control;

 

    Change in control agreements for Edward J. Geletka, Executive Vice President and Chief Operating Officer of Cape, Guy Hackney, Executive Vice President and Chief Financial Officer of Cape, James F. McGowan, Executive Vice President and Chief Credit Officer of Cape, Michelle Pollack, Executive Vice President and Chief Lending Officer of Cape, and Charles L. Pinto, Executive Vice President and Chief Banking Officer of Cape, as well as twelve other individuals that provide for cash severance payments, life insurance and medical and dental benefits in the event of a termination of employment without cause or for good reason following a change in control;

 

    Subject to the terms and conditions of the merger agreement, OceanFirst and OceanFirst Bank have agreed to appoint Michael D. Devlin, President and Chief Executive Officer of Cape, to serve as a member of the OceanFirst board and the OceanFirst Bank board with a term expiring at the 2018 annual meeting of OceanFirst stockholders, or, if Mr. Devlin is unable to serve, an alternative member of Cape’s current board shall be appointed to the OceanFirst and OceanFirst Bank boards;

 

    Cape has made awards of stock options to certain of its officers and directors under the Cape Bancorp, Inc. 2008 Equity Incentive Plan. In addition, certain former officers and directors of Colonial, which was acquired by Cape on April 1, 2015, continue to vest in stock options under Colonial’s equity plan as officers, employees and directors of Cape. As a result of the first-step merger, each stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to closing will be converted into an option to acquire a number of shares of OceanFirst common stock (rounded down to the nearest whole share) determined by multiplying (x) the number of shares of Cape common stock subject to such Cape option immediately prior to the effective time by (y) 0.75; and the exercise per share of the new option (rounded up to the nearest whole cent) will be equal to the quotient obtained by dividing (i) the per share exercise price for the shares of Cape common stock subject to such Cape option by (ii) 0.75;

 

    Cape has made awards of restricted stock to certain directors under its equity incentive plan. In addition, certain former officers and directors of Colonial, continue to vest, as officers and directors of Cape, in restricted stock granted to them under Colonial’s equity plan. As a result of the first-step merger each restricted stock award shall become fully vested and the holder will be entitled to receive the per share merger consideration for each share of Cape common stock held by such holder; and

 

    Rights of Cape officers and directors to continued indemnification coverage and continued coverage under directors’ and officers’ liability insurance policies.

For a more complete description of these interests, see the section of this joint proxy statement/prospectus entitled “The Transactions — Interests of Cape’s Directors and Executive Officers in the Transactions” beginning on page [●].

Termination of the merger agreement could negatively impact Cape or OceanFirst.

If the merger agreement is terminated, there may be various consequences. For example, Cape’s or OceanFirst’s businesses may have been impacted adversely by the failure to pursue other opportunities due to

 

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management’s focus on the Transactions, without realizing any of the anticipated benefits of completing the Transactions. Additionally, if the merger agreement is terminated, the market price of the Cape common stock or the OceanFirst common stock could decline to the extent that the current market prices reflect a market assumption that the Transactions will be completed. If the merger agreement is terminated under certain circumstances, Cape or OceanFirst may be required to pay to the other party a termination fee of $7.2 million.

Cape and OceanFirst will be subject to business uncertainties and contractual restrictions while the Transactions are pending.

Uncertainty about the effect of the Transactions on employees and customers may have an adverse effect on Cape or OceanFirst. These uncertainties may impair Cape’s or OceanFirst’s ability to attract, retain and motivate key personnel until the Transactions are completed, and could cause customers and others that deal with Cape or OceanFirst to seek to change existing business relationships with Cape or OceanFirst. Retention of certain employees by Cape or OceanFirst may be challenging while the Transactions are pending, as certain employees may experience uncertainty about their future roles with OceanFirst. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Cape or OceanFirst, Cape’s business or OceanFirst’s business could be harmed. In addition, subject to certain exceptions, Cape has agreed to operate its business in the ordinary course prior to closing, and each of Cape and OceanFirst has agreed to certain restrictive covenants. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Covenants and Agreements” beginning on page [●] for a description of the restrictive covenants applicable to Cape and OceanFirst.

If the Transactions are not completed, OceanFirst and Cape will have incurred substantial expenses without realizing the expected benefits of the Transactions.

Each of OceanFirst and Cape has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this joint proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the first-step merger. If the Transactions are not completed, OceanFirst and Cape would have to recognize these expenses without realizing the expected benefits of the Transactions.

The merger agreement limits Cape’s ability to pursue acquisition proposals and requires either company to pay a termination fee of $7.2 million under limited circumstances, including circumstances relating to acquisition proposals for Cape. Additionally, certain provisions of Cape’s articles of incorporation and bylaws may deter potential acquirers.

The merger agreement prohibits Cape from initiating, soliciting, knowingly encouraging or knowingly facilitating certain third-party acquisition proposals. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Agreement Not to Solicit Other Offers” beginning on page [●]. In addition, unless the merger agreement has been terminated in accordance with its terms, Cape has an unqualified obligation to submit the Cape merger proposal to a vote by Cape stockholders, even if Cape receives a proposal that the Cape board believes is superior to the Transactions. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Stockholder Meetings and Recommendation of the Boards of Directors of Cape and OceanFirst” beginning on page [●]. The merger agreement also provides that OceanFirst or Cape must pay a termination fee in the amount of $7.2 million in the event that the merger agreement is terminated under certain circumstances, including Cape’s failure to abide by certain obligations not to solicit acquisition proposals. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Termination Fee” beginning on page [●]. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Cape from considering or proposing such an acquisition. Certain Cape stockholders, including Patriot, each director and certain executive officers of Cape, solely in his or her or its capacity as a Cape stockholder, have entered into separate voting agreements and have agreed to vote their shares of Cape common stock in favor of the Cape merger proposal and certain related

 

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matters, and against alternative transactions. The Cape stockholders that are party to these voting agreements beneficially own and are entitled to vote in the aggregate approximately [●]% of the outstanding shares of Cape common stock as of the Cape record date. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Voting Agreements” beginning on page [●]. Additionally, certain provisions of Cape’s articles of incorporation or bylaws or of the Maryland General Corporation Law (which we refer to as the “MGCL”) could make it more difficult for a third-party to acquire control of Cape or may discourage a potential competing acquirer.

The shares of OceanFirst common stock to be received by Cape stockholders as a result of the first-step merger will have different rights from the shares of Cape common stock.

The rights of Cape stockholders are currently governed by the MGCL, Cape’s articles of incorporation and Cape’s bylaws. Upon completion of the first-step merger, Cape stockholders will become OceanFirst stockholders and their rights as stockholders will then be governed by the Delaware General Corporation Law (which we refer to as the “DGCL”), the OceanFirst certificate of incorporation and the OceanFirst bylaws. The rights associated with Cape common stock are different from the rights associated with OceanFirst common stock. See the section of this joint proxy statement/prospectus entitled “Comparison of Stockholders’ Rights” beginning on page [●] for a discussion of the different rights associated with OceanFirst common stock.

Holders of Cape and OceanFirst common stock will have a reduced ownership and voting interest after the first-step merger and will exercise less influence over management.

Holders of Cape and OceanFirst common stock currently have the right to vote in the election of the board of directors and on other matters affecting Cape and OceanFirst, respectively. Upon the completion of the first-step merger, each Cape stockholder who receives shares of OceanFirst common stock will become an OceanFirst stockholder with a percentage ownership of OceanFirst that is smaller than the stockholder’s percentage ownership of Cape. It is currently expected that the former Cape stockholders as a group will receive shares in the first-step merger constituting approximately [●]% of the outstanding shares of OceanFirst common stock immediately after the first-step merger. As a result, current OceanFirst stockholders as a group will own approximately [●]% of the outstanding shares of OceanFirst common stock immediately after the first-step merger. Because of this, Cape stockholders may have less influence on the management and policies of OceanFirst than they now have on the management and policies of Cape, and current OceanFirst stockholders may have less influence than they now have on the management and policies of OceanFirst. Upon consummation of the Transactions, OceanFirst has agreed to increase the size of the OceanFirst board to ten members and to appoint Mr. Devlin (or, if Mr. Devlin is unable to serve, an alternative member of Cape’s current board selected by OceanFirst and OceanFirst Bank, respectively) to the boards of directors of OceanFirst and OceanFirst Bank as a member of the class of directors with a term expiring at the 2018 annual meeting of OceanFirst stockholders.

Cape stockholders do not have dissenters’ or appraisal rights in the first-step merger.

Dissenters’ rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value of their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Under Maryland law, a corporation may eliminate dissenters’ rights for one or more classes of stock by explicitly denying such rights in its articles of incorporation. Cape’s articles of incorporation provide that holders of Cape common stock are not entitled to exercise the rights of an objecting stockholder provided for under the MGCL, unless the Cape board adopts a resolution determining that such rights will apply. However, the merger agreement contains certain restrictions on Cape’s ability to take actions that would cause the Cape stockholders to be entitled to dissenters’ rights. Accordingly, holders of Cape common stock are not entitled to dissenters’ rights in connection with the first-step merger.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains forward-looking statements. These forward-looking statements may include: management plans relating to the Transaction; the expected timing of the completion of the Transaction; the ability to complete the Transaction; the ability to obtain any required regulatory, stockholder or other approvals; any statements of the plans and objectives of management for future operations, products or services, including the execution of integration plans; any statements of expectation or belief; projections related to certain financial metrics; and any statements of assumptions underlying any of the foregoing. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time and are beyond our control. Forward-looking statements speak only as of the date they are made. Neither OceanFirst nor Cape assumes any duty and does not undertake to update forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that OceanFirst or Cape anticipated in its forward-looking statements and future results could differ materially from historical performance. Factors that could cause or contribute to such differences include, but are not limited to, those included under Item 1A “Risk Factors” in OceanFirst’s Annual Report on Form 10-K, those included under Item 1A “Risk Factors” in Cape’s Annual Report on Form 10-K, those disclosed in OceanFirst’s and Cape’s respective other periodic reports filed with the SEC, as well as the possibility: that expected benefits may not materialize in the timeframe expected or at all, or may be more costly to achieve; that the Transaction may not be timely completed, if at all; that prior to the completion of the Transaction or thereafter, OceanFirst’s and Cape’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors; that the parties are unable to successfully implement integration strategies; that required regulatory, stockholder or other approvals are not obtained or other customary closing conditions are not satisfied in a timely manner or at all; reputational risks and the reaction of the companies’ customers, employees and other constituents to the Transaction; and diversion of management time on merger-related matters. For any forward-looking statements made in this joint proxy statement/prospectus or in any documents, OceanFirst and Cape claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Annualized, pro forma, projected and estimated numbers are used for illustrative purposes only, are not forecasts and may not reflect actual results.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed combined financial statements present the pro forma consolidated financial position and results of operations of OceanFirst giving effect to the Transactions. The unaudited pro forma condensed combined financial statements are derived from and should be read in conjunction with the following historical financial statements, after giving effect to the Transactions, and adjustments described in the following footnotes, and are intended to reflect the impact of the proposed Transactions on OceanFirst:

 

    separate historical audited consolidated financial statements of Cape as of and for the year ended December 31, 2014, and the related notes thereto, which are available in Cape’s Annual Report on 10-K for the year ended December 31, 2014 and are incorporated by reference in this joint proxy statement/prospectus;

 

    separate historical consolidated financial statements of Cape as of and for the nine months ended September 30, 2015, and the related notes thereto, which are available in Cape’s Quarterly Report on 10-Q for the quarter ended September 30, 2015 and are incorporated by reference in this joint proxy statement/prospectus;

 

    separate historical audited consolidated financial statements of OceanFirst as of and for the year ended December 31, 2014, and the related notes thereto, which are available in OceanFirst’s Annual Report on 10-K for the year ended December 31, 2014 and are incorporated by reference in this joint proxy statement/prospectus;

 

    separate historical consolidated financial statements of OceanFirst as of and for the nine months ended September 30, 2015, and the related notes thereto, which are available in OceanFirst’s Quarterly Report on 10-Q for the quarter ended September 30, 2015 and are incorporated by reference in this joint proxy statement/prospectus; and

 

    separate historical audited consolidated financial statements of Colonial as of and for the years then ended December 31, 2014 and 2013, and the related notes thereto, which are incorporated by reference in this joint proxy statement/prospectus from Colonial’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

The accompanying unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not reflect the realization of potential cost savings, revenue synergies or any potential restructuring costs. Certain cost savings and revenue synergies may result from the Transactions. However, there can be no assurance that these cost savings or revenue synergies will be achieved. Cost savings, if achieved, could result from, among other things, the reduction of operating expenses, changes in corporate infrastructure and governance, the elimination of duplicative operating systems and the combination of regulatory and financial reporting requirements under one federally-chartered bank. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Transactions been completed at the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company after completion of the Transactions.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION

AS OF SEPTEMBER 30, 2015

REFLECTING THE INTEGRATED MERGERS

 

     OceanFirst
Financial
Corp.
(As Reported)
    Cape
Bancorp, Inc.
(As Reported)
    DR (CR)
Adjustments
to Reflect
Acquisition
of Cape
Bancorp, Inc.
         OceanFirst
Financial
Corp. (Pro-forma)
 
(Dollars in thousands)                              

Assets

           

Cash, and due from financial institutions, interest-bearing bank balances and interest-bearing time deposits

   $ 50,576      $ 33,256      $ (38,925   (a)    $ 44,907   

Securities and Federal Home Loan Bank Stock

     439,010        281,622        (1,296   (b)      719,336   

Loans receivable, net

     1,938,972        1,115,338        (5,401   (c)      3,048,909   

Mortgage loans held for sale

     2,306        428        —             2,734   

Other assets

     106,622        92,256        (2,200   (d)      196,678   

Deferred tax asset

     18,298        15,459        3,287      (e)      37,044   

Core deposit intangible

     269        942        13,349      (f)      14,560   

Goodwill

     1,845        23,940        16,208      (g)      41,993   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 2,557,898      $ 1,563,241      $ (14,978      $ 4,106,161   
  

 

 

   

 

 

   

 

 

      

 

 

 

Liabilities and Stockholders’ Equity

           

Deposits

   $ 1,967,771      $ 1,289,340      $ (231   (h)    $ 3,256,880   

Federal Home Loan Bank advances and other borrowings

     338,499        94,215        4,773      (i)      437,487   

Other liabilities

     16,940        10,036        6,000      (j)      32,976   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     2,323,210        1,393,591        10,542           3,727,343   
  

 

 

   

 

 

   

 

 

      

 

 

 

Stockholders’ equity

           

Common stock

     336        161        (161   (k)      336   

Additional paid-in capital

     269,332        155,523        (11,393   (k)      413,462   

Retained earnings

     226,115        46,657        (46,657   (k)      226,115   

Accumulated other comprehensive loss

     (6,326     (940     940      (k)      (6,326

Less: Unallocated common stock held by

           

Employee Stock Ownership Plan

     (3,116     (7,357     7,357      (k)      (3,116

Treasury stock

     (251,653     (24,394     24,394      (k)      (251,653
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     234,688        169,650        (25,520        378,818   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and stockholders’ equity

   $ 2,557,898      $ 1,563,241      $ (14,978      $ 4,106,161   
  

 

 

   

 

 

   

 

 

      

 

 

 

See “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” below for additional information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

REFLECTING THE INTEGRATED MERGERS

 

    OceanFirst
Financial
Corp.
(As Reported)
    Cape
Bancorp. Inc.
(As Reported)
    Adjustments
to Reflect
OceanFirst
Financial
Corp.’s
Acquisition
of Cape
Bancorp,
Inc.
        OceanFirst
Financial
Corp.
(Pro forma)
 
(Dollars in thousands, except per share data)                            

INTEREST INCOME

         

Loans

  $ 56,553      $ 33,776      $ (445   (l)   $ 89,884   

Investment securities and other

    6,162        3,400        398      (m)     9,960   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total interest income

    62,715        37,176        (47       99,844   
 

 

 

   

 

 

   

 

 

     

 

 

 

INTEREST EXPENSE

         

Deposits

    3,084        2,695        —        (n)     5,779   

Borrowed funds

    3,490        1,789        (570   (o)     4,709   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total interest expense

    6,574        4,484        (570       10,488   
 

 

 

   

 

 

   

 

 

     

 

 

 

Net interest income

    56,141        32,692        523          89,356   

Provision for loan losses

    975        2,675        —            3,650   
 

 

 

   

 

 

   

 

 

     

 

 

 

Net interest income after provision for loan losses

    55,166        30,017        523          85,706   
 

 

 

   

 

 

   

 

 

     

 

 

 

NON-INTEREST INCOME

         

Fees and service charges

    10,496        3,054        —            13,550   

Net gain on sale of loan servicing

    111        —          —            111   

Net gain on sale of loans available for sale

    637        61        —            698   

Net gain on sale of investment securities available for sale

    —          116        —            116   

Net loss from other real estate operations

    (111     (332     —            (443

Income from Bank Owned Life Insurance

    1,158        880        —            2,038   

Bargain purchase gain

    —          6,746        —            6,746   

Other

    18        712        —            730   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total non-interest income

    12,309        11,237        —            23,546   
 

 

 

   

 

 

   

 

 

     

 

 

 

NON-INTEREST EXPENSE

         

Compensation and employee benefits

    23,508        13,771        —            37,279   

Occupancy and equipment

    6,766        2,922        —            9,688   

Other operating expense

    12,731        10,083        —            22,814   

Amortization of core deposit intangible

    8        96        1,754      (p)     1,858   

Merger related expense

    1,264        1,966        —            3,230   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total non-interest expense

    44,277        28,838        1,754          74,869   
 

 

 

   

 

 

   

 

 

     

 

 

 

Income before provision for income taxes

    23,198        12,416        (1,231       34,383   

Provision (benefit) for income taxes

    8,105        2,159        (431   (q)     9,833   
 

 

 

   

 

 

   

 

 

     

 

 

 

Net income

  $ 15,093      $ 10,257      $ (800     $ 24,550   
 

 

 

   

 

 

   

 

 

     

 

 

 

Net income per common share

    —          —          —            —     

Basic

  $ 0.91      $ 0.83        —            1.00   

Diluted

  $ 0.90      $ 0.81        —            0.99   

Weighted average common shares

         

Basic

    16,522        12,429        (4,506   (r)     24,445   

Diluted

    16,746        12,597        (4,566   (r)     24,777   

See “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” below for additional information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2014

REFLECTING THE INTEGRATED MERGERS

 

    OceanFirst
Financial
Corp. (As
Reported)
    Cape
Bancorp,
Inc. (As
Reported)
    Adjustments
to Reflect
OceanFirst
Financial
Corp.’s
Acquisition
of Cape
Bancorp,
Inc.
        Colonial
Financial
Services,
Inc. (As
reported
for 2014)
    Adjustments
to Reflect
Cape
Bancorp,
Inc.’s
Acquisition
of Colonial
Financial
Service
        OceanFirst
Financial
Corp.
(Pro-forma)
 
(Dollars in thousands, except per share data)                                            

INTEREST INCOME

  

       

Loans

  $ 70,564      $ 36,990      $ (593   (l)   $ 12,071      $ (894   (l)   $ 118,138   

Investment securities and other

    9,289        3,645        530      (m)     3,465        (129   (s)     16,800   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total interest income

    79,853        40,635        (63       15,536        (1,023       134,938   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

INTEREST EXPENSE

           

Deposits

    4,103        2,753        231      (n)     2,634        (405   (t)     9,316   

Borrowed funds

    3,402        2,455        (760   (o)     17        —            5,114   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total interest expense

    7,505        5,208        (529       2,651        (405       14,430   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net interest income

    72,348        35,427        466          12,885        (618       120,508   

Provision for loan losses

    2,630        3,014        —            33        —            5,677   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net interest income after provision for loan losses

    69,718        32,413        466          12,852        (618       114,831   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

NON-INTEREST INCOME

           

Fees and service charges

    15,163        2,938        —            1,139        —            19,240   

Net gain on sale of loan servicing

    408        —          —            —          —            408   

Net gain on sale of loans available for sale

    772        432        —            —          —            1,204   

Net gain on sale of investment securities available for sale

    1,031        2,297        —            704        —            4,032   

Net loss from other real estate operations

    (390     (274     —            (1,243     —            (1,907

Income from Bank Owned Life Insurance

    1,477        889        —            424        —            2,790   

Bargain purchase gain

    —          —          —            —          —            —     

Other

    116        369        —            59        —            544   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total non-interest income

    18,577        6,651        —            1,083        —            26,311   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

NON-INTEREST EXPENSE

           

Compensation and employee benefits

    31,427        13,872        —            5,701        —            51,000   

Occupancy and equipment

    8,788        1,939        —            1,618        —            12,345   

Other operating expense

    17,549        11,396        —            4,326        —            33,271   

Amortization of core deposit intangible

    —          —          2,598      (p)     —          145      (u)     2,743   

Merger related expense

    —          820        —            1,083        —            1,903   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total non-interest expense

    57,764        28,027        2,598          12,728        145          101,262   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Income before provision for income taxes

    30,531        11,037        (2,132       1,207        (763   (q)     39,880   

Provision (benefit) for income taxes

    10,611        4,253        (746   (q)     672        (267   (q)     14,523   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net Income

  $ 19,920      $ 6,784      $ (1,386     $ 535      $ (496     $ 25,357   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net income per common share

             

Basic

  $ 1.19      $ 0.62        —          $ 0.14        —          $ 1.00   

Diluted

  $ 1.19      $ 0.61        —          $ 0.14        —          $ 0.99   

Weighted average common shares

               

Basic

    16,687        10,894        (3,949   (r)     3,747        (2,074   (v)     25,305   

Diluted

    16,797        11,015        (3,993   (r)     3,753        (2,077   (v)     25,495   

See “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” below for additional information.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1. Description of Transaction

On January 5, 2016, OceanFirst and Cape publicly announced that they had entered into the merger agreement pursuant to which, Merger Sub will merge with and into Cape, with Cape surviving and, immediately following such first-step merger, Cape will merge with and into OceanFirst, with OceanFirst surviving.

If the first-step merger is completed, each outstanding share of Cape common stock, except for certain shares of Cape common stock owned by Cape or OceanFirst, will be converted into the right to receive $2.25 in cash, without interest, and 0.6375 shares of OceanFirst, together with cash in lieu of fractional shares common stock. OceanFirst will not issue any fractional shares of OceanFirst common stock in the first-step merger. Cape stockholders who would otherwise be entitled to receive a fraction of a share of OceanFirst common stock upon the completion of the first-step merger will instead be entitled to receive an amount in cash, rounded to the nearest cent, determined by multiplying the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of OceanFirst common stock to which the holder would otherwise be entitled by the average closing-sale price per share of OceanFirst common stock on the NASDAQ (as reported by The Wall Street Journal) for the five full trading days ending on the day preceding the day on which the first-step merger is completed.

Note 2. Basis of Presentation

The unaudited pro forma condensed combined financial statements included herein have been prepared pursuant to the rules and regulations of the SEC. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (which we refer to as “GAAP”) have been omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading.

The unaudited pro forma condensed combined statements of operations reflect the Transactions as if they had been consummated at the beginning of the periods presented and combine OceanFirst’s historical results for the nine months ended September 30, 2015 and the year ended December 31, 2014 with Cape’s historical results for the same periods.

The unaudited pro forma condensed combined financial statements have been prepared to illustrate the effects of the Transactions under the acquisition method of accounting in accordance with Section 805 of the FASB Codification and upon the assumption set forth in the notes to the unaudited pro forma condensed combined financial statements. The pro forma adjustments included herein are subject to change depending on changes in interest rates and the components of assets and liabilities and as additional information becomes available and additional analyses are performed.

The unaudited pro forma condensed combined statement of financial condition has been adjusted to reflect the preliminary allocation of the estimated purchase price to identifiable net assets acquired. The estimated purchase price was calculated based upon $16.83 per share, the closing trading price of OceanFirst common stock on February 12, 2016, which was the latest practicable trading date before the date of this document. The final allocation of the purchase price will be determined after the completion of the Transactions. This allocation is dependent upon certain valuations and other studies that have not progressed to a stage where sufficient information is available to make a definitive allocation. The purchase price allocation adjustments and related amortization reflected in the following unaudited pro forma combined financial statements are preliminary and have been made solely for the purpose of preparing these statements. The final allocation of the purchase price will be determined after the Transactions are completed and after completion of a thorough analysis to determine the fair value of Cape’s tangible and identifiable intangible assets and liabilities as of the date that the Transactions are completed.

 

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The unaudited pro forma condensed combined financial statements have been prepared based upon available information and certain assumptions that OceanFirst and Cape believe are reasonable under the circumstances. A final determination of the fair value of the assets acquired and liabilities assumed, which cannot be made prior to the completion of the Transactions, may differ materially from the preliminary estimates. The final valuation may change the purchase price allocation, which could affect the fair value assigned to the assets acquired and liabilities assumed and could result in a change to the unaudited pro forma combined financial statements.

OceanFirst expects to incur costs associated with integrating Cape. The unaudited pro forma condensed combined financial statements do not reflect nonrecurring transaction costs (unless indicated otherwise), the cost of any integration activities or the benefits that may result from synergies that may be derived from any integration activities.

Note 3. Purchase Price Allocation

Below is a summary of the purchase price allocation that was used to develop the pro forma condensed combined balance sheet as of September 30, 2015.

 

     Cape Bancorp, Inc.
(As Reported)
     Adjustments to
Reflect Acquisition of
Cape Bancorp, Inc.
    Cape Bancorp, Inc.
(as Adjusted for
Acquisition
Accounting)
 
(Dollars in thousands)                    

Fair value of assets acquired:

       

Cash, due from banks and interest bearing time deposits

   $ 33,256       $ (9,516   $ 23,740   

Securities and Federal Home Loan Bank Stock

     281,622         (1,296     280,326   

Loans receivable, net

     1,115,338         (5,401     1,109,937   

Mortgage loans held for sale

     428         —          428   

Other assets

     92,256         (2,200     90,056   

Deferred tax asset

     15,459         3,287        18,746   

Core deposit intangible

     942         13,349        14,291   
  

 

 

    

 

 

   

 

 

 

Total assets acquired

     1,539,301         (1,777     1,537,524   
  

 

 

    

 

 

   

 

 

 

Fair value of liabilities acquired:

       

Deposits

     1,289,340         (231     1,289,109   

Federal Home Loan Bank advances and other borrowings

     94,215         4,773        98,988   

Other liabilities

     10,036         6,000        16,036   
  

 

 

    

 

 

   

 

 

 

Total liabilities acquired

     1,393,591         10,542        1,404,133   
  

 

 

    

 

 

   

 

 

 

Net assets acquired

     145,710         (12,319     133,391   
  

 

 

    

 

 

   

 

 

 

Purchase price

     —           —          173,539   
  

 

 

    

 

 

   

 

 

 

Goodwill

     —           —        $ 40,148   
  

 

 

    

 

 

   

 

 

 

Note 4. Pro Forma Adjustments

 

  (a) Adjustment reflects payment of transaction expenses of $9.5 million (which includes certain cash payments expected to be made to certain Cape executive officers pursuant to the terms of the change in control agreements described in the section entitled “The Transactions — Interests of Cape’s Directors and Executive Officers in the Transactions — Change in Control Agreements with Cape” beginning on page [●]) and payment of cash consideration of $29.4 million to Cape stockholders, representing $2.25 for each share of Cape common stock held by Cape stockholders.

 

  (b) Adjustment reflects the fair value premium on investment securities held to maturity and fair value discount on outstanding interest rate swaps.

 

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  (c) Adjustment reflects elimination of Cape’s historical allowance for loan losses of $10.0 million, a fair value premium due to interest rates of $2.4 million, net of deferred fees, and a fair value discount due to credit of $17.8 million.

 

  (d) Adjustment reflects the fair value discount on premises and equipment.

 

  (e) Adjustment reflects the tax impact of pro forma accounting fair value adjustments.

 

  (f) Adjustment reflects the fair value of acquired core deposit intangible of $14.3 million, net of Cape’s existing core deposit intangible of $1.0 million. The core deposit intangible is calculated as the present value of the difference between a market participant’s cost of obtaining alternative funds and the cost to maintain the acquired deposit base. Deposit accounts that are evaluated as part of the core deposit intangible include demand deposit, money market and savings accounts.

 

  (g) Adjustment reflects the excess of the purchase price over the fair value of net assets acquired, net of Cape’s existing goodwill balance. The purchase price is based upon $16.83 per share, the closing trading price of OceanFirst common stock on February 12, 2016, the latest practicable trading date prior to the date of this joint proxy statement/prospectus. The purchase price will not be finalized until the Transactions are complete and will be based on the share price of OceanFirst common stock on that date. See “Purchase Price Allocation” above for more information regarding the allocation of the estimated OceanFirst purchase price.

 

  (h) Adjustment reflects the fair value discount on time deposits which was calculated by discounting future contractual payments at a current market interest rate.

 

  (i) Adjustment reflects the fair value premium on borrowings, which includes the elimination of Cape’s deferred prepayment penalty on Federal Home Loan Bank borrowings of $3.3 million and a fair value premium due to interest rates, which was calculated by discounting future contractual payments at a current market interest rate.

 

  (j) Adjustment reflects an increase in the obligation for Cape’s defined benefit pension plan based on estimated termination value.

 

  (k) Adjustment reflects elimination of Cape’s historical stockholder’s equity and the issuance of OceanFirst common stock by OceanFirst as a portion of the merger consideration.

 

  (l) Interest income on loans was adjusted to reflect the difference between the contractual interest rate earned on loans and estimated premium amortization over the remaining life of the acquired loans based on current market yields for similar loans.

 

  (m) Interest income on securities was adjusted to reflect the difference between the contractual interest rate earned on securities and estimated discount accretion over the remaining life of the securities based on current market yields for similar securities.

 

  (n) Interest expense on deposits was adjusted to reflect the accretion of the time deposit fair value discount over the remaining life of the deposits.

 

  (o) Interest expense on borrowings was adjusted to reflect the amortization of the estimated fair value premium over the remaining life of the borrowings.

 

  (p) Adjustment reflects the amortization of core deposit intangible over an estimated ten year useful life and calculated on a sum of the years digits basis.

 

  (q) Adjustment reflects the tax impact of the pro forma purchase accounting adjustments.

 

  (r) Adjustment reflects the conversion of pro forma weighted average shares (basic and diluted) reported by Cape into equivalent shares of OceanFirst common stock based on the exchange ratio.

 

  (s) Interest income on securities was adjusted to reflect the difference between the contractual interest rate earned on securities and estimated premium amortization over the remaining life of the securities based on current market yields for similar securities.

 

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  (t) Interest expense on deposits was adjusted to reflect the amortization of the estimated fair value premium over the remaining life of the deposits.

 

  (u) Adjustment reflects the amortization of core deposit intangible over an estimated ten year useful life and calculated on a sum of the years digits basis.

 

  (v) Adjustment reflects the conversion of pro forma weighted average shares (basic and diluted) reported by Colonial for the year ended December 31, 2014 into equivalent shares of Cape common stock based on the “exchange ratio” in that transaction, followed thereafter by the conversion of such shares of Cape common stock into equivalent shares of OceanFirst common stock based on the 0.6375 exchange ratio described in the Merger agreement.

 

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UNAUDITED COMPARATIVE PER SHARE DATA

Presented below for OceanFirst and Cape is historical, unaudited pro forma combined and pro forma equivalent per share financial data. The information presented below should be read together with the historical consolidated financial statements of OceanFirst and Cape, including the related notes, filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.” The unaudited pro forma combined and pro forma equivalent per share information gives effect to the Transactions as if they had been effective on September 30, 2015 in the case of the book value data, and as if the Transactions had been effective as of the beginning of the periods presented, in the case of the earnings per share and the cash dividends data. The unaudited pro forma earnings per share data and dividend data combines the historical results of Cape into OceanFirst’s consolidated statement of income. While certain adjustments to the book value data were made for the estimated impact of fair value adjustments and other acquisition-related activity, they are not indicative of what could have occurred had the acquisition taken place on [●]. In addition, the unaudited pro forma data includes adjustments that are preliminary and may be revised. The unaudited pro forma data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of factors that may result as a consequence of the Transactions or consider any potential impacts of current market conditions or the Transactions on revenues, expense efficiencies, asset dispositions and share repurchases, among other factors, nor the impact of possible business model changes. As a result, unaudited pro forma data is presented for illustrative purposes only and does not represent an attempt to predict or suggest future results.

Unaudited Comparative Per Share Data

 

     OceanFirst
Financial
Corp.
Historical
     Cape Bancorp,
Inc.
     Pro Forma
Combined
     Per
Equivalent
Cape
Bancorp,

Inc. Share(1)
 

Book value per share:

           

At September 30, 2015

   $ 13.58       $ 12.45       $ 15.57       $ 9.93   

At December 31, 2014

   $ 12.91       $ 12.28       $ 14.83       $ 9.45   

Cash dividends declared per share:

           

Nine months ended September 30, 2015

   $ 0.39       $ 0.22       $ 0.39       $ 0.25   

Year ended December 31, 2014

   $ 0.49       $ 0.24       $ 0.49       $ 0.31   

Basic earnings per share:

           

Nine months ended September 30, 2015

   $ 0.91       $ 0.83       $ 1.00       $ 0.64   

Year ended December 31, 2014

   $ 1.19       $ 0.62       $ 1.00       $ 0.64   

Diluted earnings per share:

           

Nine months ended September 30, 2015

   $ 0.90       $ 0.81       $ 1.00       $ 0.64   

Year ended December 31, 2014

   $ 1.19       $ 0.61       $ 0.99       $ 0.63   

Market Value

           

January 5, 2016(2)

   $ 19.95       $ 12.39       $ 19.95       $ 12.72   

 

 

(1)  Reflects Cape shares at the exchange ratio of 0.6375.
(2)  The last full trading date before the Transactions were publicly announced.

 

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THE CAPE SPECIAL MEETING

This section contains information for Cape stockholders about the Cape special meeting that Cape has called to allow its stockholders to consider and vote on the Cape merger proposal, the Cape merger-related compensation proposal and the Cape adjournment proposal. Cape is mailing this joint proxy statement/prospectus to you, as a Cape stockholder, on or about [], 2016. This joint proxy statement/prospectus is accompanied by a notice of the Cape special meeting and a form of proxy card that the Cape board is soliciting for use at the Cape special meeting and at any adjournments or postponements of the Cape special meeting.

Date, Time and Place of the Cape Special Meeting

The Cape special meeting will be held at [●], at [●] local time, on [●], 2016. On or about [●], 2016, Cape commenced mailing this joint proxy statement/prospectus and the enclosed form of proxy card to its stockholders entitled to vote at the Cape special meeting.

Matters to Be Considered

At the Cape special meeting, you, as a Cape stockholder, will be asked to consider and vote upon the following matters:

 

    the Cape merger proposal;

 

    the Cape merger-related compensation proposal; and

 

    the Cape adjournment proposal.

Recommendation of the Cape Board

The Cape board has determined that the merger agreement and the transactions contemplated thereby, including the first-step merger, are advisable and in the best interests of Cape and its stockholders, has unanimously approved the merger agreement and unanimously recommends that the Cape stockholders vote “FOR” the Cape merger proposal, “FOR” the Cape merger-related compensation proposal and “FOR” the Cape adjournment proposal. See the section of this joint proxy statement/prospectus entitled “The Transactions — Cape’s Reasons for the Transactions; Recommendation of the Cape Board” beginning on page [●] for a more detailed discussion of the Cape board’s recommendation.

Cape Record Date and Quorum

The Cape board has fixed the close of business on [●], 2016, as the Cape record date for determining the Cape stockholders entitled to receive notice of, and to vote at, the Cape special meeting.

As of the Cape record date, there were [●] shares of Cape common stock outstanding and entitled to notice of, and to vote at, the Cape special meeting held by [●] holders of record. Subject to the ten percent voting limitation set forth in Cape’s articles of incorporation, each share of Cape common stock entitles the holder to one vote at the Cape special meeting on each proposal to be considered at the Cape special meeting.

The presence at the Cape special meeting, in person or by proxy, of holders representing at least a majority of the issued and outstanding shares of Cape common stock entitled to be voted at the Cape special meeting will constitute a quorum for the transaction of business at the Cape special meeting. Abstentions and broker non-votes, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the Cape special meeting.

 

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Required Vote; Treatment of Abstentions, Broker Non-Votes and Failure to Vote

Cape merger proposal:

 

    Standard: Approval of the Cape merger proposal requires the affirmative vote of the holders of a majority of the total number of outstanding shares of Cape common stock entitled to vote at the Cape special meeting.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or fail to vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape merger proposal, it will have the same effect as a vote “AGAINST” the Cape merger proposal.

Cape merger-related compensation proposal:

 

    Standard: The Cape merger-related compensation proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, fail to submit a proxy card or fail to vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape merger-related compensation proposal, it will have no effect on such proposal.

Cape adjournment proposal:

 

    Standard: The Cape adjournment proposal will be approved if a majority of the votes cast on such proposal at the Cape special meeting are voted in favor of such proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, fail to submit a proxy card or fail to vote in person at the Cape special meeting, or fail to instruct your bank or broker how to vote with respect to the Cape adjournment proposal, it will have no effect on such proposal.

Shares Held by Officers, Directors and Certain Stockholders

As of the Cape record date, there were [●] shares of Cape common stock outstanding, held by [●] holders of record. As of the Cape record date, the directors and executive officers of Cape and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Cape common stock, representing approximately [●]% of the shares of Cape common stock outstanding on that date. As of the Cape record date, Patriot owned beneficially and of record [1,626,360] shares of Cape common stock representing approximately [●]% of the shares of Cape common stock outstanding on that date.

Certain Cape stockholders, including Patriot and each of the directors and certain executive officers of Cape, have entered into separate voting agreements with OceanFirst, solely in their capacity as Cape stockholders, pursuant to which they have agreed to vote in favor of the Cape merger proposal and certain related matters and against alternative transactions. The Cape stockholders that are party to these voting agreements beneficially own and are entitled to vote in the aggregate approximately [●]% of the outstanding shares of Cape common stock as of the Cape record date. For more information regarding the voting agreements, see the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Voting Agreements” beginning on page [●]. As of the Cape record date, OceanFirst beneficially held [●] shares of Cape common stock.

Voting of Proxies; Incomplete Proxies

Any Cape stockholder may vote by proxy or in person at the Cape special meeting. If you hold your shares of Cape common stock in your name as a stockholder of record, to submit a proxy, you, as a Cape stockholder, may use one of the following methods:

 

    By telephone: by calling the toll-free number indicated on your proxy card and following the recorded instructions.

 

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    Through the Internet: by visiting the website indicated on your proxy card and following the instructions.

 

    Complete and return the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.

Cape requests that Cape stockholders vote by telephone, over the Internet or by completing and signing the accompanying proxy card and returning it to Cape as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of Cape common stock represented by it will be voted at the Cape special meeting in accordance with the instructions contained on the proxy card. If any proxy card is returned without indication as to how to vote, the shares of Cape common stock represented by the proxy card will be voted as recommended by the Cape board.

If any Cape stockholder’s shares are held in “street name” by a broker, bank, or other nominee, the stockholder should check the voting form used by that firm to determine whether it may vote by telephone or the Internet.

Every Cape stockholder’s vote is important. Accordingly, each Cape stockholder should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not the Cape stockholder plans to attend the Cape special meeting in person. Sending in your proxy card or voting by telephone or on the Internet will not prevent you from voting your shares personally at the meeting, since you may revoke your proxy at any time before it is voted.

Shares Held in “Street Name”

If you are a Cape stockholder and your shares are held in “street name” through a bank, broker or other holder of record, you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank or broker. You may not vote shares held in street name by returning a proxy card directly to Cape or by voting in person at the Cape special meeting unless you obtain a “legal proxy” from your broker, bank or other nominee. Furthermore, brokers, banks or other nominees who hold shares of Cape common stock on behalf of their customers will not vote your shares of Cape common stock or give a proxy to Cape to vote those shares with respect to the Cape merger proposal without specific instructions from you, as brokers, banks and other nominees do not have discretionary voting power on such proposal.

Revocability of Proxies and Changes to a Cape Stockholder’s Vote

You have the power to change your vote at any time before your shares of Cape common stock are voted at the Cape special meeting by:

 

    attending and voting in person at the Cape special meeting;

 

    giving notice of revocation of the proxy at the Cape special meeting;

 

    voting by telephone or the Internet at a later time; or

 

    delivering to the Corporate Secretary of Cape at 225 North Main Street, Cape May Court House, New Jersey 08210 (i) a written notice of revocation or (ii) a duly executed proxy card relating to the same shares, bearing a date later than the proxy card previously executed.

Attendance at the Cape special meeting will not in and of itself constitute a revocation of a proxy.

If you choose to send a completed proxy card bearing a later date than your original proxy card, the new proxy card must be received before the beginning of the Cape special meeting. If you have instructed a bank, broker or other nominee to vote your shares of Cape common stock, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your vote.

 

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Solicitation of Proxies

Cape will pay for the solicitation of proxies from the Cape stockholders. In addition to soliciting proxies by mail, Laurel Hill Advisory Group, LLC, Cape’s proxy solicitor, will assist Cape in soliciting proxies from the Cape stockholders. Cape has agreed to pay $6,000, plus expenses, for these services. Cape will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Additionally, directors, officers and employees of Cape may solicit proxies personally and by telephone. None of these persons will receive additional or special compensation for soliciting proxies.

Attending the Cape Special Meeting

All Cape stockholders, including holders of record and Cape stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the Cape special meeting. Cape stockholders of record can vote in person at the Cape special meeting. If you are not a Cape stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the Cape special meeting. If you plan to attend the Cape special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. Cape reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the Cape special meeting is prohibited without Cape’s express written consent.

Delivery of Proxy Materials to Cape Stockholders Sharing an Address

As permitted by the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), only one copy of this joint proxy statement/prospectus is being delivered to multiple Cape stockholders sharing an address unless Cape has previously received contrary instructions from one or more such stockholders. This is referred to as “householding.” Cape stockholders who hold their shares in “street name” can request further information on householding through their banks, brokers or other holders of record. On written or oral request to Investor Relations at (800) 858-2265 (ex 4506), or Cape’s proxy solicitor, Laurel Hill Advisory Group, LLC, at (888) 742-1305, Cape will promptly deliver a separate copy of this joint proxy statement/prospectus to a stockholder at a shared address to which a single copy of the document was delivered.

Assistance

If you need assistance in completing your proxy card, have questions regarding Cape’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Investor Relations at the following address 225 North Main Street, Cape May Court House, New Jersey 08210 or by telephone at (800) 858-2265 (ex 4506), or Cape’s proxy solicitor, Laurel Hill Advisory Group, LLC, at the following address and phone number: 2 Robbins Lane, Suite 201, Jericho, New York 11753, toll-free: (888) 742-1305.

 

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CAPE PROPOSALS

Proposal No. 1 Cape Merger Proposal

Cape is asking its stockholders to approve the merger agreement and the transactions contemplated thereby, including the first-step merger. Cape stockholders should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the Transactions. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

After careful consideration, the Cape board unanimously approved the merger agreement and declared the merger agreement and the transactions contemplated thereby, including the first-step merger, to be advisable and in the best interests of Cape and the Cape stockholders. See the section of this joint proxy statement/prospectus entitled “The Transactions — Cape’s Reasons for the Transactions; Recommendation of the Cape Board” beginning on page [●] for a more detailed discussion of the Cape board’s recommendation.

The Cape board unanimously recommends a vote “FOR” the Cape merger proposal.

Proposal No. 2 Cape Merger-Related Compensation Proposal

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Rule 14a-21(c) of the Exchange Act, Cape is seeking non-binding, advisory stockholder approval of the compensation of Cape’s named executive officers that is based on or otherwise relates to the first-step merger, as disclosed in “The Transactions — Interests of Cape Directors and Executive Officers in the Transactions — Merger-Related Compensation for Cape’s Named Executive Officers” beginning on page [●]. The proposal gives Cape stockholders the opportunity to express their views on the merger-related compensation of Cape’s named executive officers. Accordingly, Cape is requesting that stockholders adopt the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that may be paid or become payable to Cape’s named executive officers in connection with the first-step merger and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Transactions — Interests of Cape Directors and Executive Officers in the Transactions — Merger-Related Executive Compensation for Cape’s Named Executive Officers,” is hereby APPROVED.”

Approval of this proposal is not a condition to completion of the integrated mergers, and the vote with respect to this proposal is advisory only and will not be binding on Cape or OceanFirst. If the first-step merger is completed, the merger-related compensation may be paid to Cape’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if Cape stockholders fail to approve the advisory vote regarding merger-related compensation.

The Cape board unanimously recommends a vote “FOR,” on an advisory basis, the Cape merger-related compensation proposal.

Proposal No. 3 Cape Adjournment Proposal

The Cape special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Cape special meeting to approve the Cape merger proposal.

If, at the Cape special meeting, the number of shares of Cape common stock present or represented by proxy and voting in favor of the Cape merger proposal is insufficient to approve the Cape merger proposal, Cape intends to move to adjourn the Cape special meeting in order to enable the Cape board to solicit additional

 

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proxies for approval of the Cape merger proposal. In that event, Cape will ask its stockholders to vote upon the Cape adjournment proposal, but not the Cape merger proposal or the Cape merger-related compensation proposal.

In this proposal, Cape is asking its stockholders to authorize the holder of any proxy solicited by the Cape board on a discretionary basis to vote in favor of adjourning the Cape special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Cape stockholders who have previously voted.

The Cape board unanimously recommends a vote “FOR” the Cape adjournment proposal.

 

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THE OCEANFIRST SPECIAL MEETING

This section contains information for OceanFirst stockholders about the OceanFirst special meeting that OceanFirst has called to allow its stockholders to consider and vote on the OceanFirst share issuance proposal and the OceanFirst adjournment proposal. OceanFirst is mailing this joint proxy statement/prospectus to you, as an OceanFirst stockholder, on or about [], 2016. This joint proxy statement/prospectus is accompanied by a notice of the OceanFirst special meeting and a form of proxy card that the OceanFirst board is soliciting for use at the OceanFirst special meeting and at any adjournments or postponements of the OceanFirst special meeting.

Date, Time and Place of the OceanFirst Special Meeting

The OceanFirst special meeting will be held at [●], at [●] local time, on [●], 2016. On or about [●], 2016, OceanFirst commenced mailing this joint proxy statement/prospectus and the enclosed form of proxy card to its stockholders entitled to vote at the OceanFirst special meeting.

Matters to Be Considered

At the OceanFirst special meeting, you, as an OceanFirst stockholder, will be asked to consider and vote upon the following matters:

 

    the OceanFirst share issuance proposal; and

 

    the OceanFirst adjournment proposal.

Recommendation of the OceanFirst Board

The OceanFirst board has unanimously approved the merger agreement and unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal and “FOR” the OceanFirst adjournment proposal. See the section of this joint proxy statement/prospectus entitled “The Transactions — OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board” beginning on page [●] for a more detailed discussion of the OceanFirst board’s recommendation.

OceanFirst Record Date and Quorum

The OceanFirst board has fixed the close of business on [●], 2016 as the OceanFirst record date for determining the OceanFirst stockholders entitled to receive notice of and to vote at the OceanFirst special meeting.

As of the OceanFirst record date, there were [●] shares of OceanFirst common stock outstanding and entitled to notice of, and to vote at, the OceanFirst special meeting held by approximately [●] holders of record. Subject to the ten percent voting limitation set forth in OceanFirst’s certificate of incorporation, each share of OceanFirst common stock entitles the holder to one vote at the OceanFirst special meeting on each proposal to be considered at the OceanFirst special meeting.

The presence at the OceanFirst special meeting, in person or by proxy, of holders representing at least a majority of the outstanding shares of OceanFirst common stock entitled to be voted at the OceanFirst special meeting will constitute a quorum for the transaction of business at the OceanFirst special meeting. Once a share is represented for any purpose at the OceanFirst special meeting, it is deemed present for quorum purposes for the remainder of the OceanFirst special meeting or for any adjournment(s) thereof. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

 

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Required Vote; Treatment of Abstentions, Broker Non-Votes and Failure to Vote

OceanFirst share issuance proposal:

 

    Standard: Approval of the OceanFirst share issuance proposal requires the affirmative vote of a majority of the total votes cast by the holders of OceanFirst’s voting common stock at the OceanFirst special meeting.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or fail to vote in person at the OceanFirst special meeting, or fail to instruct your bank or broker how to vote with respect to the OceanFirst share issuance proposal, it will have no effect on the OceanFirst share issuance proposal.

OceanFirst adjournment proposal:

 

    Standard: The OceanFirst adjournment proposal will be approved if a majority of the votes cast by the holders of OceanFirst’s voting common stock at the OceanFirst special meeting are voted in favor of the OceanFirst adjournment proposal.

 

    Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy, fail to submit a proxy or fail to vote in person at the OceanFirst special meeting, or fail to instruct your bank or broker how to vote with respect to the OceanFirst adjournment proposal, it will have no effect on the proposal.

Shares Held by Officers, Directors and Certain Stockholders

As of the OceanFirst record date, there were [●] shares of OceanFirst common stock outstanding, held by [●] holders of record. As of the OceanFirst record date, the directors and executive officers of OceanFirst and their affiliates beneficially owned and were entitled to vote approximately [●] shares of OceanFirst common stock representing approximately [●]% of the shares of OceanFirst common stock outstanding on that date.

Each of the directors of OceanFirst has entered into separate voting agreements with Cape, solely in his or her capacity as an OceanFirst stockholder, pursuant to which each such OceanFirst director has agreed to vote in favor of the OceanFirst share issuance proposal. The OceanFirst directors beneficially own and are entitled to vote in the aggregate approximately [●]% of the outstanding shares of OceanFirst common stock as of the OceanFirst record date. For more information regarding the voting agreements, see the section of this joint proxy statement/prospectus entitled “The Merger Agreement — Voting Agreements” beginning on page [●]. As of the OceanFirst record date, Cape beneficially held [●] shares of OceanFirst common stock.

Voting of Proxies; Incomplete Proxies

Any OceanFirst stockholder may vote by proxy or in person at the OceanFirst special meeting. If you hold your shares of OceanFirst common stock in your name as a stockholder of record, to submit a proxy, you, as an OceanFirst stockholder, may use one of the following methods:

 

    By telephone: by calling the toll-free number indicated on your proxy card and following the recorded instructions.

 

    Through the Internet: by visiting the website indicated on your proxy card and following the instructions.

 

    Complete and return the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.

OceanFirst requests that OceanFirst stockholders vote by telephone, over the Internet or by completing and signing the accompanying proxy card and returning it to OceanFirst as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of OceanFirst

 

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common stock represented by it will be voted at the OceanFirst special meeting in accordance with the instructions contained on the proxy card. If any proxy card is returned without indication as to how to vote, the shares of OceanFirst common stock represented by the proxy card will be voted as recommended by the Cape board.

If an OceanFirst stockholder’s shares are held in “street name” by a broker, bank, or other nominee, the stockholder should check the voting form used by that firm to determine whether it may vote by telephone or the Internet.

Every OceanFirst stockholder’s vote is important. Accordingly, each OceanFirst stockholder should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not the OceanFirst stockholder plans to attend the OceanFirst special meeting in person. Sending in your proxy card or voting by telephone or on the Internet will not prevent you from voting your shares personally at the meeting, since you may revoke your proxy at any time before it is voted.

Shares Held in “Street Name”

Under NASDAQ rules, banks, brokers and other nominees who hold shares of OceanFirst common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine,” without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker, bank or other nominee that are represented at the OceanFirst special meeting, but with respect to which the broker, bank or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker, bank or nominee does not have discretionary voting power on such proposal. If your broker, bank or other nominee holds your shares of OceanFirst common stock in “street name,” your broker, bank or other nominee will vote your shares of OceanFirst common stock only if you provide instructions on how to vote by completing the voter instruction form sent to you by your broker, bank or other nominee.

Revocability of Proxies and Changes to an OceanFirst Stockholder’s Vote

You have the power to change your vote at any time before your shares of OceanFirst common stock are voted at the OceanFirst special meeting by:

 

    attending and voting in person at the OceanFirst special meeting;

 

    giving notice of revocation of the proxy at the OceanFirst special meeting;

 

    voting by telephone or the Internet at a later time; or

 

    delivering to the Corporate Secretary of OceanFirst at 975 Hooper Avenue, Toms River, New Jersey 08753 (i) a written notice of revocation or (ii) a duly executed proxy card relating to the same shares, bearing a date later than the proxy card previously executed.

Attendance at the OceanFirst special meeting will not in and of itself constitute a revocation of a proxy.

If you choose to send a completed proxy card bearing a later date than your original proxy card, the new proxy card must be received before the beginning of the OceanFirst special meeting. If you have instructed a bank, broker or other nominee to vote your shares of OceanFirst common stock, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your vote.

 

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Solicitation of Proxies

OceanFirst will pay for the solicitation of proxies from the OceanFirst stockholders. In addition to soliciting proxies by mail, [●], OceanFirst’s proxy solicitor, will assist OceanFirst in soliciting proxies from the OceanFirst stockholders. OceanFirst has agreed to pay $[●], plus expenses, for these services. OceanFirst will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Additionally, directors, officers and employees of OceanFirst may solicit proxies personally and by telephone. None of these persons will receive additional or special compensation for soliciting proxies.

Attending the OceanFirst Special Meeting

All OceanFirst stockholders, including holders of record and OceanFirst stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the OceanFirst special meeting. OceanFirst stockholders of record can vote in person at the OceanFirst special meeting. If you are not an OceanFirst stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the OceanFirst special meeting. If you plan to attend the OceanFirst special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. OceanFirst reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the OceanFirst special meeting is prohibited without OceanFirst’s express written consent.

Delivery of Proxy Materials to OceanFirst Stockholders Sharing an Address

As permitted by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to multiple OceanFirst stockholders sharing an address unless OceanFirst has previously received contrary instructions from one or more such stockholders. This is referred to as “householding.” OceanFirst stockholders who hold their shares in “street name” can request further information on householding through their banks, brokers or other holders of record. On written or oral request to Investor Relations at (732) 240-4500 OceanFirst’s proxy solicitor, [        ], at [        ], OceanFirst will deliver promptly a separate copy of this joint proxy statement/prospectus to a stockholder at a shared address to which a single copy of the document was delivered.

Assistance

If you need assistance in completing your proxy card, have questions regarding OceanFirst’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Investor Relations at the following address 975 Hooper Avenue, Toms River, New Jersey 08753 or by telephone at (732) 240-4500, or OceanFirst’s proxy solicitor, [●], at the following address or phone number: [●].

 

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OCEANFIRST PROPOSALS

Proposal No. 1 OceanFirst Share Issuance Proposal

OceanFirst is asking its stockholders to approve the OceanFirst share issuance. OceanFirst stockholders should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement, the Transactions and the OceanFirst share issuance. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

After careful consideration, the OceanFirst board unanimously approved the merger agreement. See the section of this joint proxy statement/prospectus entitled “The Transactions — OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board” beginning on page [●] for a more detailed discussion of the OceanFirst board’s recommendation.

The OceanFirst board unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal.

Proposal No. 2 OceanFirst Adjournment Proposal

The OceanFirst special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies as necessary to obtain additional votes in favor of the OceanFirst share issuance proposal.

If, at the OceanFirst special meeting, the number of shares of OceanFirst common stock present or represented by proxy and voting in favor of the OceanFirst share issuance proposal is insufficient to approve the OceanFirst share issuance proposal, OceanFirst intends to move to adjourn the OceanFirst special meeting in order to enable the OceanFirst board to solicit additional proxies for approval of the Cape share issuance proposal. In that event, OceanFirst will ask its stockholders to vote upon the OceanFirst adjournment proposal, but not the OceanFirst share issuance proposal.

In this proposal, OceanFirst is asking its stockholders to authorize the holder of any proxy solicited by the OceanFirst board on a discretionary basis to vote in favor of adjourning the OceanFirst special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from OceanFirst stockholders who have previously voted.

The OceanFirst board unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst adjournment proposal.

 

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INFORMATION ABOUT OCEANFIRST

OceanFirst is the holding company for OceanFirst Bank. OceanFirst Bank, founded in 1902, is a community bank with $2.6 billion in assets and 27 branches located in Ocean, Monmouth and Middlesex Counties, New Jersey. OceanFirst Bank delivers commercial and residential financing solutions, wealth management, and deposit services throughout the central New Jersey region and is the largest and oldest community-based financial institution headquartered in Ocean County, New Jersey. OceanFirst’s website is www.oceanfirstonline.com.

OceanFirst common stock is traded on the NASDAQ under the symbol “OCFC.”

OceanFirst’s principal executive office is located at 975 Hooper Avenue, Toms River, New Jersey 08753 and its telephone number at that location is (732) 240-4500. Additional information about OceanFirst and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [●].

 

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INFORMATION ABOUT MERGER SUB

Merger Sub is a Maryland corporation and a wholly-owned subsidiary of OceanFirst. Merger Sub was formed by OceanFirst for the sole purpose of consummating the integrated mergers.

 

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INFORMATION ABOUT CAPE

Cape Bancorp, Inc. is the holding company for Cape Bank, a full service institution providing a complete line of high quality banking services to small and mid-sized businesses, professionals and individuals located in its primary market area of Atlantic, Cape May, Cumberland and Gloucester Counties, New Jersey and metropolitan Philadelphia. Cape Bank offers a full menu of deposit and lending options. The goal of Cape Bank is to develop strong customer relationships by providing these services through its 22 branches. Cape Bancorp, Inc. is headquartered in Cape May Court House, New Jersey. Cape’s website is www.capebanknj.com.

Cape common stock is traded on the NASDAQ under the symbol “CBNJ.”

Cape’s principal executive offices are located at 225 North Main Street, Cape May Court House, New Jersey 08210 and its telephone number at that location is (609) 465-5600. Additional information about Cape and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section of this joint proxy statement/prospectus entitled “Where You Can Find More Information” beginning on page [●].

 

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THE TRANSACTIONS

The following discussion contains certain information about the Transactions. The discussion is subject, and qualified in its entirety by reference, to the merger agreement attached as Annex A to this joint proxy statement/prospectus and incorporated herein by reference. We urge you to read carefully this entire joint proxy statement/prospectus, including the merger agreement attached as Annex A, for a more complete understanding of the Transactions.

Structure of the Transactions

Each of the OceanFirst board and the Cape board has unanimously approved the merger agreement. The merger agreement provides that (i) Merger Sub will merge with and into Cape, with Cape continuing as the surviving corporation in the first-step merger and as a wholly-owned subsidiary of OceanFirst, (ii) immediately following the first-step merger, Cape will merge with and into OceanFirst, with OceanFirst continuing as the surviving corporation in the second-step merger and (iii) immediately following the completion of the integrated mergers, Cape Bank will merge with and into OceanFirst Bank, with OceanFirst Bank being the surviving entity in the bank merger.

At the effective time of the first-step merger, each issued and outstanding share of Cape common stock, except for certain specified shares owned by OceanFirst or Cape, will be converted into the right to receive the per share cash consideration of $2.25, without interest, and 0.6375 shares of OceanFirst common stock, together with cash in lieu of fractional shares. No fractional shares of OceanFirst common stock will be issued in connection with the first-step merger, and Cape stockholders will instead be entitled to receive cash in lieu thereof.

Cape stockholders are being asked to approve the merger agreement and the first-step merger. OceanFirst stockholders are being asked to approve the OceanFirst share issuance. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement” beginning on page [●] for additional and more detailed information regarding the legal documents that govern the Transactions, including information about the conditions to the completion of the integrated mergers and the provisions for terminating or amending the merger agreement.

Background of the Transactions

Since its demutualization and the concurrent purchase of Boardwalk Bank in 2008, Cape has periodically considered strategic alternatives to enhance stockholder value, including potential acquisitions of other financial institutions, strategic partnerships, merger transactions and remaining independent.

During the course of his banking career, Michael D. Devlin, President and Chief Executive Officer of Cape, has maintained a network of regional and local bank presidents with whom he communicates regularly. These informal meetings have covered a variety of topics, including merger and acquisition activity in the region. More specifically, on three occasions over the prior four year period, Cape contacted other financial institutions to gauge their interest in a possible business combination or a merger of equals, but these contacts did not lead to more formal discussions or proposals.

In the course of normal operations, the Cape board has routinely reviewed the financial performance of Cape Bank, the efficacy of its business model, and the limitations on the market value the investment community placed on financial institutions headquartered on the New Jersey shore. In addition, risk assessment, succession planning and opportunities for organic growth were also routinely reviewed by the Cape board. These efforts led to Cape’s restructuring of its product lines and balance sheet beginning in 2012 as well as its geographic expansion, including the acquisition of Colonial, a branch acquisition, a bulk loan purchase and the establishment of loan production offices in metropolitan Philadelphia.

 

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As part of his ongoing networking with bank presidents, Mr. Devlin met periodically with Christopher D. Maher, President and Chief Executive Officer of OceanFirst, to discuss the banking industry, their respective market areas, and merger and acquisition activity in the region. During these meetings, there was no specific discussion of a combination of Cape and OceanFirst.

On August 17, 2015, the Cape board held an executive session before the regular meeting of the Cape board to discuss merger and acquisition activity in its regional market and the implications of such activity for Cape’s strategic plan. The executive session included a discussion concerning Cape’s market value as an ongoing entity, as well as an acquisition target. Two likely acquirors were noted, one of which was OceanFirst, and the Cape board discussed the relative merits of both potential acquirors. Potential combinations with other financial institutions were also discussed, including Cape acquiring companies in southwestern New Jersey and the Philadelphia metropolitan area in an effort to continue its westward expansion. The Cape board also discussed the execution risk associated with its business plan, and the implications of a highly competitive market on its potential growth and market value. The Cape board recommended that an investment banking firm be invited to its meeting to discuss valuations and market conditions.

On September 21, 2015, Raymond James made a presentation to the Cape board regarding current market conditions for financial institutions. Raymond James discussed the intensifying competitive pressures faced by smaller financial institutions and the increased level of merger activity due to competitive pressures, increased compliance costs for financial institutions and a desire to improve earnings per share for Cape stockholders. Raymond James also discussed the high level of loans to deposits at some banks, which could prompt interest in financial institutions with strong deposit franchises. Further, Raymond James analyzed the positive effects of greater pro forma asset size on market value, which has increased consolidation efforts in the banking industry. The presentation included comments on the disparity in pricing and acquisition interest in southern New Jersey banks compared to those in northern New Jersey markets.

In assessing Cape, Raymond James noted Cape’s strong core deposit market share and low-cost deposit base, diversified balance sheet and successful westward expansion into the Philadelphia metropolitan area. Raymond James also noted demographic and economic trends in Cape’s market area, as well as costs related to Cape continuing as an independent entity. The Cape board discussed Mr. Devlin’s relationships with many regional and local bank presidents and encouraged Mr. Devlin to continue his informal discussions with such individuals.

In early October 2015, Mr. Devlin met with the President and Chief Executive Officer of Company A, a community banking institution (which we refer to as “Company A”), to discuss its interest in expanding into the southern New Jersey market. The President and Chief Executive Officer of Company A indicated that while it would be interested in considering a potential acquisition of Cape at a later time, it was not in a position to consider any near term partnerships in southern New Jersey.

Also in early October, Mr. Devlin contacted the President and Chief Executive Officer of Company B, a community banking institution (which we refer to as “Company B”), to discuss the merits of a potential merger of equals. The President and Chief Executive Officer of Company B indicated that the timing was not right for Company B to engage in such deliberations.

In late October, Mr. Devlin discussed merger and acquisition opportunities in the region with a representative of Raymond James. This discussion included strategies and the processes that could be utilized by Cape in order to increase Cape stockholder value through a possible acquisition of Cape by another party. Raymond James’s representative noted that it was likely that two parties, one of which was OceanFirst, would have the most interest in acquiring Cape, and Mr. Devlin previously had been in contact with both companies during his informal meetings referenced above.

On October 29, 2015, Mr. Devlin met with the President and Chief Executive Officer of Company C, a community banking institution (which we refer to as “Company C”), to discuss community banking and to gauge

 

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its interest in establishing a New Jersey presence. While some interest was expressed, it was clear that any discussions about a possible acquisition of Cape by Company C would not be in Company C’s near-term strategic plans.

On November 13, 2015, Mr. Devlin updated the Cape board on his discussions with other institutions and his discussions with Raymond James. He requested that the Cape board authorize an ad hoc committee to interview at least two investment banking firms with particular expertise in the regional mergers and acquisitions market and begin a more formal process.

Prior to the regularly scheduled board meeting on November 16, 2015, Mr. Devlin was contacted by Mr. Maher suggesting that the two meet to discuss a possible combination of Cape and OceanFirst. Although Messrs. Maher and Devlin informally discussed the relative merits of a proposed combination of the two companies, there was no specific discussion of the potential pricing of such a business combination.

At the November 16, 2015 board meeting, Mr. Devlin updated the Cape board on OceanFirst’s potential interest in combining the two companies. The Cape board indicated that OceanFirst’s proposal was worth pursuing, although it did not preclude Cape from considering other strategic alternatives if discussions with OceanFirst did not proceed. Also at such meeting, the Cape board established a strategic alternatives committee for the purpose of retaining an investment banking firm for Cape, and a December 1, 2015 date was set for meetings with Raymond James and a second investment banking firm.

On November 18, 2015, the OceanFirst board held a regularly scheduled meeting during which Mr. Maher discussed various strategic alternatives, including the potential acquisition of Cape or one alternative bank in substantive detail. The OceanFirst board determined that Mr. Maher should pursue the opportunities for a strategic acquisition and provide an update at the OceanFirst board meeting scheduled for December 16, 2015.

On December 1, 2015, the strategic alternatives committee of Cape met with and interviewed Raymond James and a second investment banking firm. Each investment banking firm presented its mergers and acquisitions credentials, its experience in advising banks in the local market and valuation metrics based on the assumption of a transaction with one of two potential acquirors of Cape, one of which was OceanFirst. Raymond James’s model included projected valuations for a combined OceanFirst and Cape with ranges based on analysts’ estimates of OceanFirst’s future earnings, as well as projected Cape valuation on a stand-alone basis. At the conclusion of this meeting, the strategic alternative committee chose to retain Raymond James to act as Cape’s financial advisor in a potential transaction, and Raymond James was instructed to prepare a formal engagement letter for Cape’s review.

On December 2, 2015, Messrs. Devlin and Maher met again to discuss the possible terms of a merger between Cape and OceanFirst. The discussion included a review of certain assumptions to be used in valuing Cape, the appropriate form and amount of consideration, and the anticipated reaction to such a merger by the companies’ respective stockholders and the investment community. At the conclusion of the meeting, Mr. Maher indicated that he would be in a position to provide a price range to Cape on December 16, 2015, pending OceanFirst board review and approval. Mr. Maher further indicated that, following the approval of Cape’s board to move forward with more detailed negotiations for a possible combination, he would approach the OceanFirst board and obtain its authorization to move to forward with merger negotiations. Messrs. Devlin and Maher agreed that it would be valuable for Mr. Maher to meet with the Cape board to give the Cape board an overview of OceanFirst and its strategic goals.

On December 3, 2015, Cape and OceanFirst executed a Non-Disclosure Agreement. On December 4, 2015, OceanFirst provided access to confidential due diligence materials to Cape’s management and representatives, including Cape’s special counsel and investment banking firm. Likewise, on December 4, 2015, Cape provided access to confidential due diligence materials to OceanFirst’s management and representatives, including OceanFirst’s special counsel and investment banking firm. The parties conducted due diligence from December 4, 2015 through January 4, 2016.

 

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On December 5, 2015, Cape formally engaged Raymond James as its financial advisor for a possible acquisition by OceanFirst. On December 10, 2015, OceanFirst engaged Sandler O’Neill as its financial advisor for the possible acquisition of Cape.

On December 11, 2015, Cape’s board met with Mr. Maher. Cape’s executive management team, special counsel and representatives of Raymond James also attended this meeting. Mr. Maher delivered a comprehensive presentation, which included an overview of OceanFirst, its structure, products, management team and long term goals. The Cape board then engaged in a discussion with Mr. Maher regarding specific aspects of his presentation. Mr. Maher indicated that he would consult with the OceanFirst board and seek its approval to present a non-binding proposal to Cape. Concurrently with the Cape board meeting, OceanFirst’s financial advisor, Sandler O’Neill, verbally provided an initial price range to Raymond James of between $14.00 and $14.50 per share of Cape stock, with the proposed merger consideration to be in the form of OceanFirst common stock and cash. After Mr. Maher’s presentation, the Cape board, with input from Raymond James and management, discussed the $14.00 through $14.50 price range. The Cape board thoroughly discussed the benefits of the combination as well as valuation metrics. The Cape board focused on the potential value and benefits to Cape stockholders associated with being part of a larger organization compared to continuing to operate independently. Raymond James also provided several models that suggested value ranges and discussed the assumptions employed by OceanFirst in its proposal. Upon completion of the discussion, the Cape board determined that it was appropriate to pursue the OceanFirst proposal further and authorized management to continue with due diligence and update the Cape board as due diligence progressed.

Also on December 16, 2015, the OceanFirst board met in a regularly scheduled board meeting, which included a detailed review of the opportunity to acquire Cape. As part of the discussion, Sandler O’Neill presented an overview of the current bank mergers and acquisitions environment, a preliminary assessment of the opportunity to acquire Cape, and a pro-forma financial model outlining the financial impact of OceanFirst’s proposed acquisition of Cape. The OceanFirst board provided Mr. Maher with authority to issue a written non-binding indication of interest with terms consistent with those discussed in the meeting.

On December 16, 2015, Cape received a written non-binding indication of interest from OceanFirst, which proposed merger consideration consisting of 85% OceanFirst common stock and 15% cash, with an exchange ratio of 0.6511 and cash of $2.11 for each share of Cape common stock. Based upon OceanFirst’s closing price on December 16, 2015 of $19.83, the per share proposed merger consideration was valued at $15.02 per share of Cape common stock. The indication of interest further provided that OceanFirst would require Cape to agree to exclusive negotiations of a merger transaction for a period of 30 days upon Cape’s acceptance of the indication of interest. The Cape board determined that, based upon its prior discussions of Cape’s market valuation, Mr. Devlin’s discussions with other potential bidders and the limited number of potential bidders, it was appropriate to enter into exclusive negotiations with OceanFirst and continue to pursue a merger transaction.

On December 18, 2015, the Cape board received a memorandum from Cape’s special counsel reviewing the Cape board’s fiduciary duties in a potential merger transaction, which special counsel reviewed with the Cape board on several occasions at various board meetings throughout the merger process.

Also on December 18, 2015, Cape’s special counsel received the initial draft of a merger agreement from OceanFirst’s special counsel.

On December 21, 2015, the Cape board met with management, Raymond James and Cape’s special counsel to discuss the initial terms of the merger agreement. Special counsel to Cape again reiterated the fiduciary duties of the Cape board with respect to a potential merger transaction that included a significant portion of the proposed merger consideration in the form of the acquiror’s common stock. Following this meeting, Mr. Devlin countersigned the indication of interest letter, and Cape’s special counsel revised the draft merger agreement with input from Cape senior management and board and subsequently began discussions with OceanFirst’s special counsel concerning the terms of the merger agreement.

 

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On December 22, 2015, Cape’s management, special counsel and Raymond James interviewed OceanFirst’s management as part of its due diligence effort, and thereafter continued its due diligence to determine if there were any issues concerning OceanFirst that may affect the suitability of OceanFirst as a merger partner or the pricing of the transaction. OceanFirst conducted similar interviews with selected Cape management with the participation and support of Sandler O’Neill.

On December 28, 2015, Cape’s management, Raymond James and special counsel presented a revised draft of the merger agreement to the Cape board, which included the changes to the original draft of the merger agreement that Cape management, Raymond James and special counsel had proposed. Following a lengthy discussion of material terms of the merger agreement and Cape’s obligations pursuant to the merger agreement, the Cape board authorized Cape management to provide the revised draft of the merger agreement to OceanFirst.

On December 31, 2015, Messrs. Devlin and Maher discussed OceanFirst’s analysis of Cape’s market value based on OceanFirst’s review of the confidential due diligence materials. Mr. Maher indicated that OceanFirst’s preference was to revise the consideration offered by OceanFirst in the proposed merger transaction based on OceanFirst’s analysis of certain transaction costs and pro forma earnings adjustments.

Beginning on December 31, 2015 and several times thereafter, Mr. Devlin updated the Cape board on the status of negotiations with OceanFirst, including the possibility of a change to the proposed merger consideration.

Between December 31, 2015 and January 2, 2016, the parties continued to discuss the assumptions supporting the transaction costs, credit marks, OceanFirst’s trading value and pro forma earnings. Following these discussions, on January 2, 2016, OceanFirst revised its proposal to offer Cape stockholders 0.6375 shares of OceanFirst common stock and $2.25 in cash per share. Based on OceanFirst’s closing price on December 31, 2015 of $20.03, the overall proposed merger consideration was valued at $15.02 per share of Cape common stock.

Between December 31, 2015 and January 3, 2016, counsel for both parties continued to negotiate the terms of the merger agreement. On January 4, 2016, the Cape board reviewed a revised draft merger agreement, which reflected the material terms of the transaction, including the mix of cash and stock consideration described above, and also a memorandum prepared by Cape’s special counsel summarizing the material terms of the merger agreement.

On January 5, 2016, the Cape board met to consider the proposed transaction. Representatives of Luse Gorman and Raymond James were present at that meeting. Representatives of Raymond James provided a financial analysis of the proposed transaction and a verbal fairness opinion, which was confirmed by delivery of a written opinion, dated January 5, 2016 and which is attached to this joint proxy statement/prospectus as Annex D, as to the fairness, as of the date of the opinion, from a financial point of view, to the Cape stockholders of the merger consideration. Representatives of Luse Gorman reviewed the Cape board’s fiduciary duties in connection with its consideration of the proposed transaction, as well as the terms of the proposed merger agreement. After extensive discussions, including a consideration of these presentations and the factors described in the section of this joint proxy statement/prospectus entitled “— Cape’s Reasons for the Transactions; Recommendation of the Cape Board,” the Cape board unanimously approved the merger agreement and determined to recommend that the Cape stockholders approve the merger agreement and the first-step merger.

Also on January 5, 2016, the OceanFirst board met to discuss the proposed transaction. Representatives of Sandler O’Neill and Skadden, Arps, Slate, Meagher & Flom LLP (which we refer to as “Skadden”) were present at that meeting. Representatives of Sandler O’Neill rendered its written opinion, a copy of which is attached to this joint proxy statement/prospectus as Annex E, to the OceanFirst board that, as of the date of the opinion, and based upon and subject to the factors and assumptions set forth in the opinion, the merger consideration in the first-step merger was fair, from a financial point of view, to OceanFirst. OceanFirst’s management team

 

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reviewed in detail the results of its due diligence investigation of Cape. A Representative of Skadden reviewed the terms of the proposed merger agreement with the OceanFirst board. After extensive discussions, including a consideration of these presentations and the factors described in the section of this joint proxy statement/prospectus entitled “— OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board,” the OceanFirst board unanimously approved the merger agreement and determined to recommend that the OceanFirst stockholders approve the OceanFirst share issuance.

Following the close of business on January 5, 2016, the parties executed the merger agreement and issued a joint press release announcing the Transactions.

Cape’s Reasons for the Transactions; Recommendation of the Cape Board

In reaching its decision to approve the merger agreement, and approve the integrated mergers and the other transactions contemplated by the merger agreement, and to recommend that Cape’s stockholders approve the merger agreement, the Cape board evaluated the Transactions in consultation with Cape’s management, as well as Cape’s financial and legal advisors, and considered a number of factors, including the following material factors:

 

    the Cape board’s knowledge of Cape’s business, markets, financial condition, results of operations and prospects, including but not limited to, its business plan and its potential for growth, development, productivity and profitability;

 

    the current and prospective environment in which Cape operates, including national and local economic conditions, the competitive environment for financial institutions generally, the increased regulatory burden on financial institutions generally and the trend toward consolidation in the financial services industry;

 

    the Cape board’s review, with the assistance of Cape’s management and legal and financial advisors, of strategic alternatives to the Transactions, including the possibility of remaining independent;

 

    the Cape board’s belief that Cape needs to continue to grow to be in a position to deliver a competitive return to its stockholders and the difficulty of sustained organic growth;

 

    results that could be expected to be obtained by Cape if it continued to operate independently, and the likely benefits to stockholders of such continued independence, while factoring in the risks of executing Cape’s strategic plans as compared to the value of the merger consideration being offered by OceanFirst;

 

    the Cape board’s review, based in part on the due diligence performed by Cape in connection with the Transactions, of OceanFirst’s business, financial condition, results of operations and management;

 

    the then-current value of the merger consideration offered by OceanFirst, which represented 139% of Cape’s September 30, 2015 tangible book value per share and approximately 22.8x Cape’s last twelve months core net income per share;

 

    the expectation that the Transactions will provide holders of Cape common stock the opportunity to receive a reasonable premium over the price they could expect to receive if they sold their shares of Cape common stock;

 

    the mixture of the stock consideration and the cash consideration to allow Cape stockholders to continue as OceanFirst stockholders;

 

    the fact that the integrated mergers are expected to be treated as an integrated transaction that qualifies as a “reorganization” for U.S. federal income tax purposes and therefore that Cape stockholders will not recognize gain or loss with respect to their receipt of the stock portion of the merger consideration;

 

    the board of directors’ assessment that it was unlikely that another acquirer had both the willingness and the financial capability to acquire Cape at a value that was materially higher than that being offered by OceanFirst;

 

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    the ability of OceanFirst to execute a merger transaction from a financial and regulatory perspective, and its recent history of being able to successfully integrate merged institutions into its existing franchise;

 

    the historical stock market performance of Cape and OceanFirst;

 

    that the transaction is estimated to be approximately 13% accretive on an earnings per share basis in the first full year after completion;

 

    the geographic fit between Cape’s and OceanFirst’s service areas;

 

    the Cape board’s expectation that the combined entity will have sufficient capital upon completion of the Transactions;

 

    the pro forma combined asset size and the pro forma combined deposits of the combined entity of nearly $4.3 billion and $3.4 billion, respectively, which could increase valuation multiples of the combined entity;

 

    the Cape board’s review with its legal and financial advisors of the financial and other terms of the merger agreement, including the fixed exchange ratio, tax treatment and termination fee provisions;

 

    the opinion, dated January 5, 2016, of Raymond James to the Cape board as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Cape common stock of the merger consideration, as more fully described below under “— Opinion of Cape’s Financial Advisor” on page [●];

 

    the similarity between Cape’s and OceanFirst’s management philosophies, approaches and commitments to the communities, customers and stockholders they each serve;

 

    the impact of the Transactions on depositors, customers and communities served by Cape, and the expectation that the combined entity will continue to provide quality service to the communities and customers currently served by Cape and will be able to offer a broader range of services (including mortgage lending and wealth management); and

 

    the degree of continuity to the Cape stockholders following the Transactions that is expected to result from OceanFirst’s agreement, upon the closing of the integrated mergers, to appoint Michael D. Devlin, or, if Mr. Devlin is unable to serve, an alternative member of Cape’s current board of directors, as a director of OceanFirst and OceanFirst Bank.

All business combinations, including the Transactions, include certain risks and disadvantages. The material potential risks and disadvantages to Cape stockholders identified by the Cape board and management include the following material matters, the order of which does not necessarily reflect their relative significance:

 

    the risk that, with the stock consideration to be paid to Cape stockholders being based on a fixed exchange ratio, such consideration could be adversely affected by a decrease in the value of OceanFirst common stock during the pendency of the integrated mergers;

 

    the regulatory and other approvals required in connection with the Transactions and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions;

 

    the potential for diversion of management and employee attention, and for employee attrition, during the period prior to the completion of the Transactions and the potential effect on Cape’s business and relations with customers, service providers and other stakeholders, whether or not the Transactions are completed;

 

    the merger agreement provisions generally requiring Cape to conduct its business in the ordinary course and the other restrictions on the conduct of Cape’s business prior to completion of the Transactions, which may delay or prevent Cape from undertaking business opportunities that may arise pending completion of the Transactions;

 

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    the risk that the expected benefits and synergies sought in the Transactions, including cost savings and OceanFirst’s ability to successfully market its financial products to Cape’s customers, may not be realized or may not be realized within the expected time period;

 

    the challenges of integrating the businesses, operations and employees of Cape and OceanFirst;

 

    certain provisions of the merger agreement prohibiting Cape from soliciting, and limiting its ability to respond to, proposals for alternative transactions;

 

    the risk that Cape’s obligation to pay OceanFirst a termination fee of $7.2 million in certain circumstances, as described in the section entitled “The Merger Agreement — Termination Fees” on page [●], may deter others from proposing an alternative transaction that may be more advantageous to Cape stockholders;

 

    that Cape’s directors and executive officers may have interests in the Transactions that are different from or in addition to those of its stockholders generally, as described in the section entitled “Interests of Cape’s Directors and Executive Officers in the Transactions” on page [●]; and

 

    the other risks described in the section entitled “Risk Factors” beginning on page [●].

The discussion of the information and factors considered by the Cape board is not exhaustive, but includes the material factors considered by the Cape board. In view of the wide variety of factors considered by the Cape board in connection with its evaluation of the Transactions and the complexity of these matters, the Cape board did not attempt to quantify, rank, or otherwise assign relative weights to the specific factors that it considered in reaching its decision. Furthermore, in considering the factors described above, individual members of the Cape board may have given different weights to different factors. The Cape board evaluated the factors described above and reached the unanimous decision that the Transactions were in the best interests of Cape and its stockholders. The Cape board realized that there can be no assurance about future results, including results expected or considered in the factors listed above. However, the Cape board concluded that the potential positive factors outweighed the potential risks of completing the Transactions. It should be noted that this explanation of the Cape board’s reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [●].

The Cape board unanimously recommends that Cape stockholders vote “FOR” the approval of the merger agreement and the first-step merger.

Opinion of Cape’s Financial Advisor

Cape retained Raymond James as financial advisor on December 5, 2015. Pursuant to that engagement, the Cape board requested that Raymond James evaluate the fairness, from a financial point of view, to the Cape stockholders of the merger consideration to be received by such Cape stockholders pursuant to the terms and conditions of the merger agreement.

At the January 5, 2016 meeting of the Cape board, a representative of Raymond James rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion to the Cape board dated January 5, 2016, as to the fairness, as of such date, from a financial point of view, to the Cape stockholders of the merger consideration to be received by such Cape stockholders in the first-step merger pursuant to the terms and conditions of the merger agreement, based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion.

The full text of the written opinion of Raymond James is attached as Annex D to this joint proxy statement/prospectus. The summary of the opinion of Raymond James set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such written opinion. Cape stockholders are urged to read this opinion in its entirety.

 

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Raymond James provided its opinion for the information of the Cape board (solely in its capacity as such) in connection with, and for purposes of, its consideration of the first-step merger and its opinion only addresses whether the merger consideration to be received by the Cape stockholders in the first-step merger pursuant to the merger agreement was fair, from a financial point of view, to such Cape stockholders. The opinion of Raymond James does not address any other term or aspect of the merger agreement or the transactions contemplated thereby. The Raymond James opinion does not constitute a recommendation to the Cape board or to any Cape stockholder as to how the Cape board, such Cape stockholder or any other person should vote or otherwise act with respect to the first-step merger or any other matter. Raymond James does not express any opinion as to the likely trading range of OceanFirst common stock following the Transactions, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of OceanFirst at that time.

In connection with its review of the proposed Transactions and the preparation of its opinion, Raymond James, among other things:

 

    reviewed the financial terms and conditions as stated in the draft of the merger agreement dated January 4, 2016 (which we refer to in this section as the “draft agreement”);

 

    reviewed certain information related to the historical, current and future operations, financial condition and prospects of Cape made available to Raymond James by Cape, including, but not limited to, financial projections prepared by the management of Cape relating to Cape for the periods ending December 31, 2015 — 2020, as approved for Raymond James’s use by Cape (which we refer to in this section as the “Cape projections”);

 

    reviewed Cape’s and OceanFirst’s recent public filings and certain other publicly available information regarding Cape and OceanFirst;

 

    reviewed financial, operating and other information regarding Cape and the industry in which it operates;

 

    reviewed the financial and operating performance of Cape and those of other selected public companies that Raymond James deemed to be relevant;

 

    considered the publicly available financial terms of certain transactions that Raymond James deemed to be relevant;

 

    reviewed the current and historical market prices and trading volume for Cape common stock, and the current market prices of the publicly traded securities of certain other companies that Raymond James deemed to be relevant;

 

    conducted such other financial studies, analyses and inquiries and considered such other information and factors as Raymond James deemed appropriate; and

 

    discussed with members of the senior management of Cape certain information relating to the aforementioned and any other matters which Raymond James deemed relevant to its inquiry.

With Cape’s consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of Cape, or otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify any of such information. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent or otherwise) of Cape or OceanFirst. With respect to the Cape projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James, with Cape’s consent, assumed that the Cape projections and such other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of Cape and Raymond James relied upon Cape to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. Raymond James

 

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expressed no opinion with respect to the Cape projections or the assumptions on which they were based. Based upon the terms and conditions of the merger agreement, Raymond James assumed that the integrated mergers will qualify as a tax-free reorganization under the provisions of Section 368(a) of the Code. Raymond James relied upon and assumed, without independent verification, that the final form of the merger agreement would be substantially similar to the draft agreement reviewed by Raymond James in all respects material to its analysis, and that the integrated mergers would be consummated in accordance with the terms of the merger agreement without waiver of or amendment to any of the conditions to the merger agreement. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct and that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement without being waived. Raymond James also relied upon and assumed, without independent verification, that (i) the integrated mergers would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory or other consents and approvals necessary for the consummation of the integrated mergers would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the integrated mergers or Cape that would be material to its analysis or opinion.

Raymond James expressed no opinion as to the underlying business decision to effect the Transactions, the structure or tax consequences of the Transactions, or the availability or advisability of any alternatives to the Transactions. The Raymond James opinion is limited to the fairness, from a financial point of view, of the merger consideration to be received by the Cape stockholders. Raymond James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of the Cape board to approve or consummate the first-step merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. Raymond James assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources. Furthermore, Raymond James relied, with the consent of Cape, on the fact that Cape was assisted by legal, accounting and tax advisors, and, with the consent of Cape relied upon and assumed the accuracy and completeness of the assessments by Cape and its advisors, as to all legal, accounting and tax matters with respect to Cape and the first-step merger.

In formulating its opinion, Raymond James considered only the merger consideration to be received by the Cape stockholders, and Raymond James did not consider, and its opinion did not address, the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Cape, or such class of persons, in connection with the Transactions whether relative to the merger consideration or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (1) the fairness of the first-step merger to the holders of any class of securities, creditors or other constituencies of Cape, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (2) the fairness of the first-step merger to any one class or group of Cape’s or any other party’s security holders or other constituents vis-à-vis any other class or group of Cape’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the first-step merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the Transactions on the solvency or viability of Cape or OceanFirst or the ability of Cape or OceanFirst to pay their respective obligations when they come due.

Material Financial Analyses. The following summarizes the material financial analyses reviewed by Raymond James with the Cape board at its meeting on January 5, 2016, which material was considered by Raymond James in rendering its opinion. No company or transaction used in the analyses described below is identical or directly comparable to Cape, OceanFirst or the transactions contemplated by the merger agreement.

Selected Companies Analysis. Raymond James analyzed the relative valuation multiples of 19 publicly-traded banks and thrifts in the Mid-Atlantic (Delaware, Maryland, New Jersey, New York and Pennsylvania) and

 

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Northeast (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont) with assets between $1.0 billion and $2.5 billion, LTM (as defined below), Core ROAA (as defined below) between 0.40% and 1.05% and nonperforming assets less than 4.0% that it deemed relevant, including:

 

•       Enterprise Bancorp, Inc.

  

•       First United Corporation

•       Suffolk Bancorp

  

•       Bankwell Financial Group, Inc.

•       Merchants Bancshares, Inc.

  

•       Penns Woods Bancorp, Inc.

•       Chemung Financial Corporation

  

•       Clifton Bancorp Inc.

•       ESSA Bancorp, Inc.

  

•       ACNB Corporation

•       Bar Harbor Bankshares

  

•       Shore Bancshares, Inc.

•       BCB Bancorp, Inc.

  

•       AmeriServ Financial, Inc.

•       First Bancorp, Inc.

  

•       Ocean Shore Holding Co.

•       Lake Sunapee Bank Group

  

•       Unity Bancorp, Inc.

•       Codorus Valley Bancorp, Inc.

  

Raymond James calculated various financial multiples for each company, including (i) price per share compared to tangible book value, referred to as “TBV,” per share as of September 30, 2015, (ii) price per share compared to core earnings per share (core earnings defined as net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of held to maturity and available for sale securities, amortization of intangibles, goodwill and nonrecurring items, as calculated by and sourced from SNL Financial LC) for the most recent actual twelve months’ results ended September 30, 2015, referred to as “LTM,” and (iii) price per share compared to Wall Street research analysts’ estimates for calendar year 2016 earnings per share. The estimates published by Wall Street research analysts were not prepared in connection with the integrated mergers or at the request of Raymond James and may or may not prove to be accurate. Raymond James reviewed the mean, median, 25th percentile and 75th percentile relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for Cape implied by the merger consideration. The results of the selected public companies analysis are summarized below:

 

     Price / TBV
per share
    Price / LTM
Core EPS
     Price / CY
‘16 Est. EPS
 

Mean

     122     15.2x         13.7x   

Median

     118     14.4x         13.1x   

25th Percentile

     103     12.9x         12.3x   

75th Percentile

     137     16.4x         15.2x   

Merger Consideration

     139     22.8x         19.7x   

Furthermore, Raymond James applied the mean, median, 25th percentile and 75th percentile relative valuation multiples for each of the metrics to Cape’s actual and projected financial results and determined the implied equity price per share of Cape common stock and then compared those implied equity values per share to the merger consideration of $14.79 per share. The results of this are summarized below:

 

     Price / TBV
per share
     Price /  LTM
Core EPS
     Price / CY
‘16 Est. EPS
 

Mean

   $ 12.91       $ 9.89       $ 10.31   

Median

     12.54         9.36         9.85   

25th Percentile

     10.91         8.40         9.23   

75th Percentile

     14.56         10.67         11.40   

Merger Consideration

   $ 14.79       $ 14.79       $ 14.79   

 

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Selected Transaction Analysis. Raymond James analyzed publicly available information relating to selected transactions announced since December 31, 2013 involving targets headquartered in the Mid-Atlantic and Northeast regions with assets between $300 million and $2.5 billion, LTM ROAA between 0.00% and 1.05% and non-performing assets / assets between 0.25% and 4.00%. The regional transactions that Raymond James analyzed consisted of targets headquartered in the following Mid-Atlantic states: Delaware, Maryland, New Jersey, New York and Pennsylvania, as well as the following Northeast states: Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont. Raymond James also analyzed publicly available information relating to selected transactions announced since December 31, 2014 involving nationwide targets with assets between $500 million and $2.5 billion, LTM ROAA between 0.00% and 1.05% and non-performing assets / assets between 0.25% and 4.00%. Raymond James prepared a summary of the relative valuation multiples paid in these transactions. The selected transactions used in the analysis included:

 

Regional:   
Acquiror    Target
Univest Corporation of Pennsylvania    Fox Chase Bancorp, Inc.
WSFS Financial Corporation    Penn Liberty Financial Corp.
Beneficial Bancorp, Inc.    Conestoga Bank
Northfield Bancorp, Inc.    Hopewell Valley Community Bank
Lakeland Bancorp, Inc.    Pascack Bancorp, Inc.
Liberty Bank    Naugatuck Valley Financial Corporation
Camden National Corporation    SBM Financial, Inc.
WSFS Financial Corporation    Alliance Bancorp, Inc. of Pennsylvania
Bridge Bancorp, Inc.    Community National Bank
ESB Bancorp MHC    Citizens National Bancorp, Inc.
Berkshire Hills Bancorp, Inc.    Hampden Bancorp, Inc.
WesBanco, Inc.    ESB Financial Corporation
Independent Bank Corp.    Peoples Federal Bancshares, Inc.
Bank of the Ozarks, Inc.    Intervest Bancshares Corporation
National Penn Bancshares, Inc.    TF Financial Corporation
Bryn Mawr Bank Corporation    Continental Bank Holdings, Inc.
CB Financial Services, Inc.    FedFirst Financial Corporation
Eastern Bank Corporation    Centrix Bank & Trust
Center Bancorp, Inc.    ConnectOne Bancorp, Inc.

National:

 

Acquiror    Target
Univest Corporation of Pennsylvania    Fox Chase Bancorp, Inc.
First Busey Corporation    Pulaski Financial Corp.
Great Western Bancorp, Inc.    HF Financial Corp.
MainSource Financial Group, Inc.    Cheviot Financial Corp.
WSFS Financial Corporation    Penn Liberty Financial Corp.
BNC Bancorp    High Point Bank Corporation
First Midwest Bancorp, Inc.    NI Bancshares Corporation
Bank of the Ozarks, Inc.    C1 Financial, Inc.
Heartland Financial USA, Inc.    CIC Bancshares, Inc.
Beneficial Bancorp, Inc.    Conestoga Bank
Pacific Premier Bancorp, Inc.    Security California Bancorp
Park Sterling Corporation    First Capital Bancorp, Inc.
Nicolet Bankshares, Inc.    Baylake Corp.
Prosperity Bancshares, Inc.    Tradition Bancshares, Inc.

 

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Acquiror    Target
Home BancShares, Inc.    Florida Bus. BancGroup, Inc.
Liberty Bank    Naugatuck Valley Financial Corporation
Valley National Bancorp    CNLBancshares, Inc.
Green Bancorp, Inc.    Patriot Bancshares, Inc.
Pinnacle Financial Partners, Inc.    Magna Bank
United Community Banks, Inc.    Palmetto Bancshares, Inc.
Pinnacle Financial Partners, Inc.    CapitalMark Bank & Trust
Camden National Corporation    SBM Financial, Inc.
Atlantic Capital Bancshares, Inc.    First Security Group, Inc.
Chemical Financial Corporation    Lake Michigan Financial Corporation

Raymond James examined valuation multiples of transaction value compared to the target companies’ most recent quarter tangible book value (which we refer to as “MRQ”), LTM core earnings and MRQ core deposits, where such information was publicly available. LTM core earnings is defined as net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of held to maturity and available for sale securities, amortization of intangibles, goodwill and nonrecurring items, as calculated by and sourced from SNL Financial LC. Raymond James reviewed the mean, median, 25th percentile and 75th percentile relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for Cape implied by the merger consideration. Furthermore, Raymond James applied the mean, median, 25th percentile and 75th percentile relative valuation multiples to Cape’s MRQ tangible book value, LTM core earnings and MRQ core deposits to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $14.79 per share, adjusted for the dilutive effect of Cape’s stock options. The results of the selected transactions analysis are summarized below:

Regional:

 

     Transaction Value /
MRQ TBV
    Implied Equity
Price Per Share
 

Mean

     156   $ 16.17   

Median

     154     15.94   

25th Percentile

     129     13.41   

75th Percentile

     185     19.06   

Merger Consideration

     142   $ 14.79   

 

     Transaction Value /
LTM Core Earnings
     Implied Equity
Price Per Share
 

Mean

     23.6x       $ 14.12   

Median

     21.8x         13.10   

25th Percentile

     19.7x         11.89   

75th Percentile

     26.2x         15.64   

Merger Consideration

     24.7x       $ 14.79   

 

     Premium to
Core Deposits
    Implied Equity
Price Per Share
 

Mean

     8.6   $ 17.38   

Median

     8.7     17.45   

25th Percentile

     5.2     14.71   

75th Percentile

     10.5     18.93   

Merger Consideration

     5.3   $ 14.79   

 

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National:

 

     Transaction Value /
MRQ TBV
    Implied Equity
Price Per Share
 

Mean

     168   $ 17.34   

Median

     162     16.76   

25th Percentile

     147     15.27   

75th Percentile

     181     18.66   

Merger Consideration

     142   $ 14.79   

 

     Transaction Value /
LTM Core Earnings
     Implied Equity
Price Per Share
 

Mean

     24.2x       $ 14.50   

Median

     24.8x         14.81   

25th Percentile

     19.2x         11.57   

75th Percentile

     29.5x         17.58   

Merger Consideration

     24.7x       $ 14.79   

 

     Premium to
Core Deposits
    Implied Equity
Price Per Share
 

Mean

     9.8   $ 18.32   

Median

     8.9     17.64   

25th Percentile

     7.1     16.21   

75th Percentile

     10.7     19.04   

Merger Consideration

     5.3   $ 14.79   

Discounted Cash Flow Analysis. Raymond James analyzed the discounted present value of Cape’s projected free cash flows for the quarter ending March 31, 2016 through the year ending December 31, 2020 on a standalone basis. Raymond James used tangible common equity in excess of a target ratio of 8.0% at the end of each projection period for free cash flow.

The discounted cash flow analysis was based on the Cape projections. Consistent with the periods included in the Cape projections, Raymond James used calendar year 2020 as the final year for the analysis and applied multiples, ranging from 13.0x to 16.0x, to calendar year 2020 net income in order to derive a range of terminal values for Cape in 2020.

The projected unleveraged free cash flows and terminal values were discounted using rates ranging from 12.0% to 15.0%. The resulting range of present equity values was divided by the number of diluted shares outstanding in order to arrive at a range of present values per Cape share. Raymond James reviewed the range of per share prices derived in the discounted cash flow analysis and compared them to the price per share for Cape implied by the merger consideration. The results of the discounted cash flow analysis are summarized below:

 

     Equity Value/
Per Share
 

Minimum

   $ 11.33   

Maximum

   $ 14.45   

Merger Consideration

   $ 14.79   

Additional Considerations. The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to

 

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significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value of Cape.

In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of Cape. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Cape board of directors (solely in its capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial point of view, to the Cape stockholders of the merger consideration to be received by such Cape stockholders in connection with the first-step merger pursuant to the terms and conditions of the merger agreement. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into account by the Cape board in making its determination to approve the first-step merger. Neither Raymond James’s opinion nor the analyses described above should be viewed as determinative of the Cape board’s or Cape management’s views with respect to Cape, OceanFirst or the first-step merger. Raymond James provided advice to Cape with respect to the transactions contemplated by the merger agreement. Raymond James did not, however, recommend any specific amount of consideration to the Board or that any specific merger consideration constituted the only appropriate consideration for the first-step merger. Cape placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.

The Raymond James opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it on January 4, 2016, and any material change in such circumstances and conditions may affect the opinion of Raymond James, but Raymond James does not have any obligation to update, revise or reaffirm that opinion. Raymond James relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Cape since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

During the two years preceding the date of Raymond James’s written opinion, Raymond James has been engaged by or otherwise performed services for Cape for which it was paid a fee (separately from any amounts that were paid to Raymond James under the engagement letter described in this proxy statement pursuant to which Raymond James was retained as a financial advisor to Cape to assist in reviewing strategic alternatives).

Cape has agreed to pay Raymond James a fee for advisory services in connection with the Transactions in an amount equal to 1.0% of the merger consideration at the closing of the Transactions. Cape has paid Raymond James a retainer fee of $100,000 in connection with its engagement as Cape’s financial advisor, which will be credited fully towards any transaction fee due at closing. For services rendered in connection with the delivery of its opinion, Cape paid Raymond James a fee of $250,000 upon delivery of its opinion, $50,000 of which will be credited towards any transaction fee due at closing. Cape has also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Cape and OceanFirst for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James may provide investment banking, financial advisory and other financial services to Cape and/or OceanFirst or other participants in the Transactions in the future, for which Raymond James may receive compensation.

 

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OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board

After careful consideration, the OceanFirst board, at a meeting held on January 5, 2016, unanimously approved the merger agreement. Accordingly, the OceanFirst board unanimously recommends that OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal.

In reaching its decision to approve the merger agreement, the integrated mergers and the other transactions contemplated by the merger agreement, and to recommend that its stockholders approve the OceanFirst share issuance, the OceanFirst board evaluated the merger agreement and the Transactions in consultation with OceanFirst management, as well as OceanFirst’s legal counsel and financial advisor, and considered a number of factors in favor of the Transactions, including the following material factors, which are not presented in order of priority:

 

    the effectiveness of the Transactions as a method of extending OceanFirst’s New Jersey branch network into complementary New Jersey markets, and that the Transactions are expected to create the preeminent New Jersey based community banking franchise operating throughout Central and Southern New Jersey;

 

    the fact that the Transactions are expected to diversify OceanFirst’s geographic loan concentration and provide a gateway into the demographically attractive Philadelphia metropolitan area;

 

    each of OceanFirst’s and Cape’s businesses, operations, financial condition, asset quality, earnings and prospects, including the view of the OceanFirst board that Cape’s business and operations complement OceanFirst’s existing operations and lines of business;

 

    the fact that the Transactions will enhance OceanFirst’s operating scale and core deposit funding base;

 

    the current and prospective environment in which OceanFirst and Cape operate, including national, regional and local economic conditions, the competitive environment for financial institutions generally, and the likely effect of these factors on OceanFirst both with and without the Transactions;

 

    its review and discussions with OceanFirst’s management and its legal counsel and financial advisor concerning the due diligence investigation of Cape and the potential financial impact of the Transactions on the combined company;

 

    management’s expectation that OceanFirst will retain its strong capital position upon completion of the Transactions;

 

    the financial presentation, dated January 5, 2016, of Sandler O’Neill to the OceanFirst board and the opinion, dated January 5, 2016, of Sandler O’Neill to the OceanFirst board as to the fairness, from a financial point of view and as of the date of the opinion, to OceanFirst of the merger consideration, as more fully described below under the section of this joint proxy statement/prospectus entitled “— Opinion of OceanFirst’s Financial Advisor”;

 

    the terms of the merger agreement, including the expected tax treatment and deal protection and termination fee provisions, which it reviewed with OceanFirst’s outside legal and financial advisors; and

 

    the regulatory and other approvals required in connection with the Transactions and the expectation that such regulatory and other approvals will be received in a timely manner and without the imposition of unacceptable conditions.

The OceanFirst board also considered potential risks associated with the Transactions in connection with its deliberations of the Transactions, including (i) the potential risk of diverting management attention and resources from the operation of OceanFirst’s business and towards the completion of the Transactions; (ii) the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating Cape’s business, operations and workforce with those of OceanFirst; and (iii) the other risks identified in the sections of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page [●] and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [●].

 

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The foregoing discussion of the factors considered by the OceanFirst board is not intended to be exhaustive, but, rather, includes the material factors considered by the OceanFirst board. In reaching its decision to approve the merger agreement, the integrated mergers and the other transactions contemplated by the merger agreement. The OceanFirst board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The OceanFirst board considered all these factors as a whole and overall considered the factors to be favorable to, and to support, its determination. It should be noted that this explanation of the OceanFirst board’s reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section of this joint proxy statement/prospectus entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [●].

For the reasons set forth above, the OceanFirst approved the merger agreement. The OceanFirst board unanimously recommends that the OceanFirst stockholders vote “FOR” the OceanFirst share issuance proposal and “FOR” the OceanFirst adjournment proposal.

Opinion of OceanFirst’s Financial Advisor

By letter dated December 10, 2015, OceanFirst retained Sandler O’Neill, to act as financial advisor to the OceanFirst board in connection with OceanFirst’s consideration of a possible business combination involving OceanFirst and Cape. Sandler O’Neill is a nationally recognized investment banking firm whose principal industry specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill acted as financial advisor in connection with the Transactions and participated in certain of the negotiations leading to the execution of the merger agreement. At the January 5, 2016 meeting at which the OceanFirst board considered and discussed the terms of the merger agreement and the Transactions, Sandler O’Neill delivered to the OceanFirst board its oral opinion, which was subsequently confirmed in writing, that, as of such date, the merger consideration was fair to OceanFirst from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Annex E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of OceanFirst common stock are urged to read the entire opinion carefully in connection with their consideration of the Transactions.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the OceanFirst board in connection with its consideration of the Transactions and is directed only to the fairness of the merger consideration to OceanFirst from a financial point of view. It does not address the underlying business decision of OceanFirst to engage in the Transactions or any other aspect of the Transactions and is not a recommendation to any holder of OceanFirst common stock as to how such stockholder should vote at the OceanFirst special meeting with respect to the OceanFirst share issuance or any other matter. Sandler O’Neill’s opinion does not address the underlying business decision of OceanFirst to engage in the Transactions or any other aspect of the Transactions, the relative merits of the Transactions as compared to any other alternative business strategies that might exist for OceanFirst or the effect of any other transaction in which OceanFirst might engage. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the Transactions by any OceanFirst or Cape officer, director or employee, or class of such persons, if any, relative to the amount of compensation to be received by any other stockholder.

 

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In connection with rendering its opinion, Sandler O’Neill reviewed and considered, among other things:

 

    a draft of the merger agreement, dated January 5, 2016;

 

    certain publicly available financial statements and other historical financial information of OceanFirst that Sandler O’Neill deemed relevant;

 

    certain publicly available financial statements and other historical financial information of Cape that Sandler O’Neill deemed relevant;

 

    publicly available consensus median analyst earnings per share estimates for OceanFirst for the quarter ended December 31, 2015 and years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings and dividend payout ratio for the years thereafter, as provided by and discussed with the senior management of OceanFirst;

 

    financial projections for Cape for the years ending December 31, 2015 through December 31, 2019, as provided by and confirmed with the senior management of OceanFirst;

 

    the pro forma financial impact of the integrated mergers on OceanFirst based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and an adjustment to Cape’s estimated provision expense, as discussed with and confirmed by the senior management of OceanFirst, as well as a core deposit intangible asset;

 

    the publicly reported historical price and trading activity for OceanFirst and Cape common stock, including a comparison of certain stock market information for OceanFirst and Cape common stock and certain stock indices as well as similar publicly available information for certain other similar companies the securities of which are publicly traded;

 

    a comparison of certain financial information for OceanFirst and Cape with similar institutions for which publicly available information is available;

 

    the financial terms of certain recent business combinations in the commercial banking industry on a national basis, to the extent publicly available;

 

    the current market environment generally and the banking environment in particular; and

 

    such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant.

Sandler O’Neill also discussed with certain members of senior management of OceanFirst the business, financial condition, results of operations and prospects of OceanFirst and held similar discussions with the senior management of Cape regarding the business, financial condition, results of operations and prospects of Cape.

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by OceanFirst and Cape, or that was otherwise reviewed by it, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Sandler O’Neill relied, at the direction of OceanFirst, without independent verification or investigation, on the assessments of the management of OceanFirst as to its existing and future relationships with key employees and partners, clients, products and services and Sandler O’Neill assumed, with OceanFirst’s consent, that there would be no developments with respect to any such matters that would affect its analyses or opinion. Sandler O’Neill further relied on the assurances of the senior management of each of OceanFirst and Cape that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading in any material respect. Sandler O’Neill was not asked to and did not undertake an independent verification of any such information and did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of OceanFirst or Cape, or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill did not render an opinion or evaluation on the collectability of any assets or the future performance of any loans of OceanFirst or Cape. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of

 

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OceanFirst, Cape or the combined entity after the Transactions and did not review any individual credit files relating to OceanFirst or Cape. Sandler O’Neill assumed, with OceanFirst’s consent, that the respective allowances for loan losses for both OceanFirst and Cape were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used publicly available consensus median analyst earnings per share estimates for OceanFirst for the quarter ended December 31, 2015 and years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings and dividend payout ratio for the years thereafter, as provided by and discussed with the senior management of OceanFirst, as well as financial projections for Cape for the years ending December 31, 2015 through December 31, 2019, as provided by and confirmed with the senior management of OceanFirst. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and an adjustment to Cape’s estimated provision expense, as discussed with and confirmed by the senior management of OceanFirst. With respect to the foregoing information, the senior management of OceanFirst confirmed to Sandler O’Neill that such information reflected (or, in the case of the publicly available median analyst earnings per share estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of the senior management of OceanFirst of the future financial performance of OceanFirst and Cape, and Sandler O’Neill assumed that such performance would be achieved. Sandler O’Neill expressed no opinion as to such projections, estimates or judgments, or the assumptions on which they are based. Sandler O’Neill also assumed that there was no material change in OceanFirst’s or Cape’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill assumed in all respects material to its analysis that OceanFirst and Cape would remain as going concerns for all periods relevant to its analyses.

Sandler O’Neill also assumed, with OceanFirst’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms of the merger agreement and all related agreements, that all of the representations and warranties contained in the merger agreement were true and correct in all material respects, that each of the parties to the merger agreement would perform in all material respects all of the covenants and other obligations required to be performed by such party under the merger agreement and that the conditions precedent in the merger agreement were not waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the integrated mergers, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on OceanFirst, Cape or the integrated mergers or any related transactions, (iii) the integrated mergers and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements, (iv) the Transactions will be consummated without Cape’s rights under Section 8.1(g) of the merger agreement having been triggered, and (v) the integrated mergers would together qualify as a tax-free reorganization for federal income tax purposes. Finally, with OceanFirst’s consent, Sandler O’Neill relied upon the advice that OceanFirst received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the integrated mergers and the other transactions contemplated by the merger agreement.

Sandler O’Neill’s analyses were necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion could materially affect Sander O’Neill’s opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of the opinion. Sandler O’Neill expressed no opinion as to the trading values of OceanFirst common stock or Cape common stock after the date of its opinion or what the value of OceanFirst common stock would be once it is actually received by the holders of Cape common stock. Sandler O’Neill’s opinion was approved by its fairness opinion committee.

 

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In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the OceanFirst board, but is a summary of all material analyses performed and presented by Sandler O’Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to OceanFirst or Cape and no transaction is identical to the Transactions. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of OceanFirst and Cape and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion; rather, Sandler O’Neill made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of OceanFirst, Cape and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the OceanFirst board at its January 5, 2016 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of OceanFirst common stock or the prices at which OceanFirst common stock or Cape common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by the OceanFirst board in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the OceanFirst board or management with respect to the fairness of the Transactions. See “—OceanFirst’s Reasons for the Transactions; Recommendation of the OceanFirst Board of Directors” for additional information on the factors the OceanFirst board considered in reaching its decision to approve the merger agreement.

 

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Summary of Proposed Merger Consideration and Implied Transaction Metrics. Sandler O’Neill reviewed the financial terms of the proposed Transactions. As described in the merger agreement, each share of Cape common stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive, without interest, (a) $2.25 in cash and (b) 0.6375 shares of OceanFirst common stock. Using OceanFirst’s January 4, 2016 closing stock price of $19.67, and based upon 13,540,875 shares of Cape common stock outstanding, which included outstanding restricted stock awards, and all options to purchase shares of Cape common stock outstanding rolled into options to purchase shares of OceanFirst common stock at an exchange ratio of 0.7500, based on the vested portion of the options using the Black Scholes model, Sandler O’Neill utilized an implied transaction price per share of $15.00 and calculated an aggregate implied transaction value of approximately $205.6 million. Based upon financial information for Cape as of or for the twelve months ended September 30, 2015, Sandler O’Neill calculated the following implied transaction metrics:

 

Transaction Price / Book Value Per Share:

     120

Transaction Price / Tangible Book Value Per Share:

     141

Transaction Price / 2015E Core Net Income(1):

     19.1

Transaction Price / 2016E Net Income(2):

     17.3

Transaction Price / 2016E Net Income with Estimated Cost Synergies(3):

     10.2

Tangible Book Premium/Core Deposits(4):

     4.7

Market Premium as of 1/4/16:

     21.4

 

(1)  Core net income and associated core ROAA and ROAE excludes a $6.7 million bargain purchase gain and $2.0 million of acquisition related expenses from Cape’s recently closed acquisition in April of 2015.
(2)  Estimated Cape EPS provided by and discussed with OceanFirst senior management.
(3)  Estimated 2016E net income includes $12.2 million of pre-tax estimated fully-phased in cost synergies in first full year (2017).
(4)  Core deposits are defined as total deposits as of September 30, 2015 less JUMBO deposits or time deposits over $100 thousand.

Stock Trading History. Sandler O’Neill reviewed the history of the publicly reported trading prices of OceanFirst common stock and Cape common stock for the one-year and three-year periods ended January 4, 2016. Sandler O’Neill then compared the relationship between the movements in the price of OceanFirst common stock and Cape common stock, respectively, to movements in their respective peer groups (as described on pages [●] and [●]) as well as certain stock indices.

OceanFirst’s One-Year Stock Performance

 

     Beginning Value
January 4, 2015
    Ending Value
January 4, 2016
 

OceanFirst

     100     117.9

OceanFirst Peer Group

     100     106.4

NASDAQ Bank Index

     100     104.7

S&P 500 Index

     100     97.8

Cape’s One-Year Stock Performance

 

     Beginning Value
January 4, 2015
    Ending Value
January 4, 2016
 

Cape

     100     132.3

Cape Peer Group

     100     102.8

NASDAQ Bank Index

     100     104.7

S&P 500 Index

     100     97.8

 

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OceanFirst’s Three-Year Stock Performance

 

     Beginning Value
January 4, 2013
    Ending Value
January 4, 2016
 

OceanFirst

     100     144.5

OceanFirst Peer Group

     100     129.8

NASDAQ Bank Index

     100     142.4

S&P 500 Index

     100     137.2

Cape’s Three-Year Stock Performance

 

     Beginning Value
January 4, 2013
    Ending Value
January 4, 2016
 

Cape

     100     135.8

Cape Peer Group

     100     132.8

NASDAQ Bank Index

     100     142.4

S&P 500 Index

     100     137.2

Comparable Company Analyses. Sandler O’Neill used publicly available information to compare selected financial information for OceanFirst with a group of financial institutions selected by Sandler O’Neill. The OceanFirst peer group consisted of banks headquartered in the Mid-Atlantic and with total assets between $2.0 billion and $4.0 billion, excluding announced merger targets and entities with pro forma total assets over $4.0 billion (the “OceanFirst peer group”). The OceanFirst peer group consisted of the following companies:

 

Arrow Financial Corp.

   Lakeland Bancorp

Bridge Bancorp Inc.

   Northfield Bancorp Inc.

Bryn Mawr Bank Corp.

   Oritani Financial Corp.

Canandaigua National Corp.

   Peapack-Gladstone Financial

CNB Financial Corp.

   Suffolk Bancorp

ConnectOne Bancorp, Inc.

   Sun Bancorp Inc.

Financial Institutions Inc.

   TriState Capital Holdings Inc.

First of Long Island Corp.

  

The analysis compared publicly available financial information for OceanFirst with the corresponding data for the OceanFirst peer group as of or for the twelve months ended September 30, 2015 (unless otherwise noted), with pricing data as of January 4, 2016. The table below sets forth the data for OceanFirst and the median and mean data for the OceanFirst peer group.

 

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OceanFirst Comparable Company Analysis

 

     OceanFirst(1)      OceanFirst
Peer Group
Median
     OceanFirst
Peer Group
Mean
 

Total Assets (in millions)

   $ 2,558       $ 3,130       $ 2,973   

Tangible Common Equity/Tangible Assets

     9.10%         8.25%         9.17%   

Tier 1 Leverage Ratio

     8.91%         9.30%         10.05%   

Total Risk-Based Capital Ratio

     13.60%         13.84%         15.12%   

LTM Return on Average Assets

     0.83%         0.93%         0.89%   

LTM Return on Average Tangible Common Equity

     9.0%         10.4%         10.5%   

LTM Net Interest Margin

     3.23%         3.35%         3.28%   

LTM Efficiency Ratio

     63.4%         61.7%         61.0%   

Loan Loss Reserves/Gross Loans

     0.85%         1.10%         1.04%   

Nonperforming Assets(2)/Total Assets

     2.13%         0.61%         0.69%   

Net Charge-offs/Average Loans

     0.04%         0.03%         0.06%   

Price/Tangible Book Value

     146%         168%         165%   

Price/LTM Earnings per share

     16.3x         14.9x         19.9x   

Price/2015 Earnings per share

     15.5x         15.9x         18.3x   

Price/2016 Earnings per share

     14.0x         13.8x         17.1x   

Current Dividend Yield

     2.6%         2.7%         2.3%   

LTM Dividend Payout Ratio

     43.0%         40.0%         37.8%   

Market Value (in millions)

   $ 340       $ 383       $ 431   

 

 

(1)  Bank level regulatory data used for Tier 1 Leverage Ratio and Total Risk-Based Capital Ratio.
(2)  Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.

Sandler O’Neill used publicly available information to perform a similar analysis for Cape and a group of financial institutions as selected by Sandler O’Neill. The Cape peer group consisted of banks and thrifts headquartered in the Mid-Atlantic, and with total assets between $1.0 billion and $2.5 billion and nonperforming assets/total assets less than 2.5%, excluding announced merger targets (the “Cape peer group”). The Cape peer group consisted of the following companies:

 

ACNB Corp.    Ocean Shore Holding Co.
Arrow Financial Corp.    Old Line Bancshares Inc.
Citizens & Northern Corp.    Orrstown Financial Services
Clifton Bancorp Inc.    Peoples Financial Services
CNB Financial Corp.    Suffolk Bancorp
Codorus Valley Bancorp Inc.    Unity Bancorp Inc.

The analysis compared publicly available financial information for Cape with the corresponding data for the Cape peer group as of or for the twelve months ended September 30, 2015 (unless otherwise noted), with pricing data as of January 4, 2016. The table below sets forth the data for Cape and the median and mean data for the Cape peer group.

 

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Cape Comparable Company Analysis

 

     Cape      Cape Peer
Group
Median
     Cape Peer
Group
Mean
 

Total Assets (in millions)

   $ 1,563       $ 1,303       $ 1,513   

Tangible Common Equity/Tangible Assets

     9.41%         9.55%         11.19%   

Tier 1 Leverage Ratio

     9.31%         9.91%         11.70%   

Total Risk-Based Capital Ratio

     13.40%         15.10%         19.43%   

LTM Core Income Return on Average Assets

     0.63%         0.95%         1.02%   

LTM Core Income Return on Average Equity

     5.28%         9.36%         9.65%   

LTM Net Interest Margin

     3.43%         3.66%         3.52%   

LTM Efficiency Ratio

     66.4%         63.6%         64.3%   

Loan Loss Reserves/Gross Loans

     0.89%         1.11%         1.09%   

Nonperforming Assets(1)/Total Assets

     1.07%         0.89%         0.86%   

Net Charge-offs/Average Loans

     0.27%         0.09%         0.07%   

Price/Tangible Book Value

     116%         138%         136%   

Price/LTM Earnings per share

     14.4x         14.5x         13.5x   

Price/2015 Earnings per share

     13.0x         15.1x         15.8x   

Price/2016 Earnings per share

     16.5x         14.3x         14.6x   

Current Dividend Yield

     3.2%         2.1%         2.6%   

LTM Dividend Payout Ratio

     32.6%         33.6%         38.7%   

Market Value (in millions)

   $ 168       $ 216       $ 221   

 

 

(1)  Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.

Analysis of Selected Merger Transactions. Sandler O’Neill reviewed a nationwide group of merger and acquisition transactions. The group consisted of transactions announced between June 30, 2014 and January 1, 2016, involving targets with assets between $1.0 billion and $3.0 billion with nonperforming assets/total assets of less than 3% (the “nationwide precedent transactions”). The nationwide precedent transactions group was composed of the following transactions:

 

Acquiror    Target
TowneBank    Monarch Financial Holdings Inc.
Univest Corp. of Pennsylvania    Fox Chase Bancorp Inc.
First Busey Corp.    Pulaski Financial Corp.
Great Western Bancorp    HF Financial Corp.
Capital Bank Financial Corp.    CommunityOne Bancorp
MB Financial Inc.    American Chartered Bancorp Inc.
United Bankshares Inc.    Bank of Georgetown
Bank of the Ozarks Inc.    C1 Financial Inc.
Yadkin Financial Corporation    NewBridge Bancorp
Valley National Bancorp    CNLBancshares Inc.
Green Bancorp Inc.    Patriot Bancshares Inc.
Atlantic Capital Bancshares Inc.    First Security Group Inc.
Western Alliance Bancorp    Bridge Capital Holdings
Chemical Financial Corp.    Lake Michigan Financial Corp.
UMB Financial Corp.    Marquette Financial Companies
Northwest Bancshares, Inc.    LNB Bancorp Inc.
Renasant Corp.    Heritage Financial Group Inc.
IBERIABANK Corp.    Georgia Commerce Bancshares
MidWestOne Financial Group Inc.    Central Bancshares Inc.

 

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Acquiror    Target
WesBanco Inc.    ESB Financial Corp.
IBERIABANK Corp.    Old Florida Bancshares Inc.
BB&T Corp.    Bank of Kentucky Financial Corporation

Using the latest publicly available financial information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following multiples: transaction price to last-twelve-months earnings per share, transaction price to tangible book value per share, and tangible book premium to core deposits. Sandler O’Neill compared the indicated transaction metrics for the Transactions to the median metrics of the nationwide precedent transaction group.

 

     OceanFirst /
Cape
    Nationwide Precedent
Transactions Group
Median
 

Transaction price/LTM Core Earnings per Share(1)

     19.1     22.8

Transaction price/Tangible Book Value per Share:

     140     193

Core Deposit Premium:

     4.7     11.3

 

 

(1)  Reflect core net income. Core net income is net income after tax adjusted for non-recurring items.

Net Present Value Analyses. Sandler O’Neill performed an analysis that estimated the net present value per share of OceanFirst common stock assuming OceanFirst performed in accordance with publicly available median analyst earnings per share estimates for OceanFirst for the quarter ending December 31, 2015 and years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings and dividend pay-out ratio for the years thereafter, as provided by and discussed with the senior management of OceanFirst. To approximate the terminal value of a share of OceanFirst common stock at December 31, 2019, Sandler O’Neill applied price to 2019 earnings multiples ranging from 13.0x to 20.5x and multiples of December 31, 2019 tangible book value ranging from 135% to 210%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of OceanFirst common stock. As illustrated in the following tables, the analysis indicates an imputed range of values per share of OceanFirst common stock of $15.08 to $28.28 when applying multiples of earnings and $15.32 to $28.38 when applying multiples of tangible book value.

Earnings Per Share Multiples

 

Discount Rate

   13.0x      14.5x      16.0x      17.5x      19.0x      20.5x  

9.0%

   $ 18.73       $ 20.64       $ 22.55       $ 24.46       $ 26.37       $ 28.28   

10.0%

     18.05         19.88         21.72         23.56         25.40         27.24   

11.0%

     17.40         19.16         20.93         22.70         24.47         26.24   

12.0%

     16.77         18.48         20.18         21.88         23.58         25.29   

13.0%

     16.18         17.82         19.46         21.10         22.74         24.38   

14.0%

     15.62         17.20         18.77         20.35         21.93         23.51   

15.0%

     15.08         16.60         18.12         19.64         21.16         22.68   

 

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Tangible Book Value Multiples

 

Discount Rate

   135%      150%      165%      180%      195%      210%  

9.0%

   $ 19.03       $ 20.90       $ 22.77       $ 24.64       $ 26.51       $ 28.38   

10.0%

     18.34         20.14         21.93         23.73         25.53         27.33   

11.0%

     17.68         19.41         21.14         22.87         24.60         26.33   

12.0%

     17.05         18.71         20.38         22.04         23.71         25.38   

13.0%

     16.44         18.05         19.65         21.26         22.86         24.47   

14.0%

     15.87         17.41         18.96         20.50         22.05         23.60   

15.0%

     15.32         16.81         18.30         19.79         21.28         22.77   

Sandler O’Neill also considered and discussed with the OceanFirst board how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming OceanFirst’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted in the following range of per share values for OceanFirst common stock, applying the price to 2019 earnings multiples range of 13.0x to 20.5x referred to above and a discount rate of 13.94%.

Earnings Per Share Multiples

 

Annual Budget Variance

   13.0x      14.5x      16.0x      17.5x      19.0x      20.5x  

(25.0%)

   $ 12.22       $ 13.41       $ 14.59       $ 15.78       $ 16.97       $ 18.16   

(20.0%)

     12.91         14.17         15.44         16.70         17.97         19.24   

(15.0%)

     13.59         14.94         16.28         17.63         18.97         20.32   

(10.0%)

     14.28         15.70         17.13         18.55         19.98         21.40   

(5.0%)

     14.96         16.47         17.97         19.47         20.98         22.48   

0.0%

     15.65         17.23         18.82         20.40         21.98         23.56   

5.0%

     16.34         18.00         19.66         21.32         22.98         24.64   

10.0%

     17.02         18.76         20.50         22.24         23.99         25.73   

15.0%

     17.71         19.53         21.35         23.17         24.99         26.81   

20.0%

     18.39         20.29         22.19         24.09         25.99         27.89   

25.0%

     19.08         21.06         23.04         25.01         26.99         28.97   

Sandler O’Neill also performed an analysis that estimated the net present value per share of Cape common stock assuming that Cape performed in accordance earning projections provided by and confirmed with OceanFirst senior management. To approximate the terminal value of Cape common stock at December 31, 2019, Sandler O’Neill applied price to 2019 earnings multiples ranging from 11.0x to 19.0x and multiples of December 31, 2019 tangible book value ranging from 100% to 190%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Cape common stock. As illustrated in the following tables, the analysis indicates an imputed range of values per share of Cape common stock of $7.35 to $14.42 when applying earnings multiples and $8.78 to $19.06 when applying multiples of tangible book value.

 

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Earnings Per Share Multiples

 

Discount Rate

   11.0x      12.6x      14.2x      15.8x      17.4x      19.0x  

9.0%

   $ 9.07       $ 10.14       $ 11.21       $ 12.28       $ 13.35       $ 14.42   

10.0%

     8.75         9.78         10.81         11.84         12.86         13.89   

11.0%

     8.44         9.43         10.42         11.41         12.40         13.39   

12.0%

     8.15         9.10         10.06         11.01         11.96         12.92   

13.0%

     7.87         8.79         9.71         10.63         11.54         12.46   

14.0%

     7.61         8.49         9.37         10.26         11.14         12.03   

15.0%

     7.35         8.20         9.05         9.91         10.76         11.61   

Tangible Book Value Multiples

 

Discount Rate

   100%      118%      136%      154%      172%      190%  

9.0%

   $ 10.86       $ 12.50       $ 14.14       $ 15.78       $ 17.42       $ 19.06   

10.0%

     10.47         12.05         13.63         15.20         16.78         18.36   

11.0%

     10.10         11.62         13.14         14.66         16.17         17.69   

12.0%

     9.75         11.21         12.67         14.13         15.59         17.06   

13.0%

     9.41         10.82         12.23         13.63         15.04         16.45   

14.0%

     9.09         10.44         11.80         13.15         14.51         15.87   

15.0%

     8.78         10.09         11.39         12.70         14.00         15.31   

Sandler O’Neill also considered and discussed with the OceanFirst board how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Cape’s net income varied from 25% above projections to 25% below projections. This analysis resulted in the following range of per share values for Cape common stock, applying the price to 2019 earnings multiples range of 11.0x to 19.0x referred to above and a discount rate of 13.94%.

Earnings Per Share Multiples

 

Annual Estimate Variance

   11.0x      12.6x      14.2x      15.8x      17.4x      19.0x  

(25.0%)

   $ 6.10       $ 6.76       $ 7.43       $ 8.09       $ 8.76       $ 9.42   

(20.0%)

     6.40         7.11         7.82         8.53         9.24         9.95   

(15.0%)

     6.71         7.46         8.21         8.97         9.72         10.47   

(10.0%)

     7.01         7.81         8.61         9.40         10.20         11.00   

(5.0%)

     7.32         8.16         9.00         9.84         10.68         11.53   

0.0%

     7.62         8.51         9.39         10.28         11.17         12.05   

5.0%

     7.93         8.86         9.79         10.72         11.65         12.58   

10.0%

     8.23         9.21         10.18         11.16         12.13         13.11   

15.0%

     8.54         9.55         10.57         11.59         12.61         13.63   

20.0%

     8.84         9.90         10.97         12.03         13.09         14.16   

25.0%

     9.14         10.25         11.36         12.47         13.58         14.68   

Sandler O’Neill also performed an analysis that estimated the net present value per share of Cape common stock assuming that Cape performed in accordance earning projections provided by and confirmed with OceanFirst senior management, inclusive of estimated cost synergies associated with the Transactions of $2.7 million for the year ending December 31, 2016, $12.2 million for the year ending December 31, 2017, $12.6 million for the year ending December 31, 2018, and $13.0 million for the year ending December 31, 2019, as discussed and confirmed with OceanFirst senior management. To approximate the terminal value of Cape

 

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common stock at December 31, 2019, Sandler O’Neill applied price to 2019 earnings multiples ranging from 11.0x to 19.0x and multiples of December 31, 2019 tangible book value ranging from 100% to 190%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Cape common stock. As illustrated in the following tables, the analysis indicates an imputed range of values per share of Cape common stock of $11.22 to $22.81 when applying earnings multiples and $9.90 to $21.74 when applying multiples of tangible book value.

Earnings Per Share Multiples

 

Discount Rate

   11.0x      12.6x      14.2x      15.8x      17.4x      19.0x  

  9.0%

   $ 13.93       $ 15.70       $ 17.48       $ 19.26       $ 21.03       $ 22.81   

10.0%

     13.42         15.13         16.84         18.55         20.26         21.97   

11.0%

     12.94         14.59         16.23         17.87         19.52         21.16   

12.0%

     12.48         14.06         15.65         17.23         18.81         20.40   

13.0%

     12.04         13.57         15.09         16.61         18.14         19.66   

14.0%

     11.62         13.09         14.56         16.03         17.50         18.96   

15.0%

     11.22         12.64         14.05         15.47         16.88         18.30   

Tangible Book Value Multiples

 

Discount Rate

   100%      118%      136%      154%      172%      190%  

  9.0%

   $ 12.27       $ 14.16       $ 16.05       $ 17.95       $ 19.84       $ 21.74   

10.0%

     11.83         13.65         15.47         17.29         19.11         20.93   

11.0%

     11.40         13.16         14.91         16.66         18.42         20.17   

12.0%

     11.00         12.69         14.38         16.06         17.75         19.44   

13.0%

     10.62         12.24         13.87         15.49         17.12         18.74   

14.0%

     10.25         11.82         13.38         14.95         16.51         18.08   

15.0%

     9.90         11.41         12.92         14.42         15.93         17.44   

Sandler O’Neill also considered and discussed with the OceanFirst board how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Cape’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted in the following range of per share values for Cape common stock, applying the price to 2019 earnings multiples range of 11.0x to 19.0x referred to above and a discount rate of 13.94%.

Earnings Per Share Multiples

 

Annual Estimate Variance

   11.0x      12.6x      14.2x      15.8x      17.4x      19.0x  

(25.0%)

   $ 10.12       $ 11.37       $ 12.62       $ 13.87       $ 15.12       $ 16.37   

(20.0%)

     10.43         11.72         13.02         14.31         15.61         16.90   

(15.0%)

     10.73         12.07         13.41         14.75         16.09         17.43   

(10.0%)

     11.04         12.42         13.80         15.19         16.57         17.95   

(5.0%)

     11.34         12.77         14.20         15.62         17.05         18.48   

0.0%

     11.65         13.12         14.59         16.06         17.53         19.00   

5.0%

     11.95         13.47         14.98         16.50         18.02         19.53   

10.0%

     12.26         13.82         15.38         16.94         18.50         20.06   

15.0%

     12.56         14.16         15.77         17.37         18.98         20.58   

20.0%

     12.86         14.51         16.16         17.81         19.46         21.11   

25.0%

     13.17         14.86         16.56         18.25         19.94         21.64   

 

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In connection with its analyses, Sandler O’Neill considered and discussed with the OceanFirst board how the present value analyses would be affected by changes in the underlying assumptions. Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis. Sandler O’Neill analyzed certain potential pro forma effects of the Transactions based on the following assumptions: (i) the Transactions close in the second calendar quarter of 2016; (ii) as described in the merger agreement, each share of Cape common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive, without interest, (a) $2.25 in cash and (b) 0.6375 shares of OceanFirst common stock; (iii) all outstanding Cape options are converted into OceanFirst options at an exchange ratio of 0.7500, based on the vested portion of the options using the Black Scholes model; and (iv) OceanFirst’s closing stock price of $19.67 on January 4, 2016. Sandler O’Neill also incorporated the following assumptions, each of which were discussed with and confirmed by OceanFirst’s senior management: (a) financial projections for Cape for the years ending December 31, 2015 through December 31, 2019; (b) estimated earnings per share projections for OceanFirst, based on publicly available analyst consensus median earnings per share estimates for the years ending December 31, 2016 and December 31, 2017 with an estimated long-term earnings growth rate for the years thereafter; (c) purchase accounting adjustments, including a gross credit mark on loans, a positive interest rate mark on held-to-maturity investment securities, a negative interest rate mark on available-for-sale investment securities and outstanding interest rate swaps, a gross loan positive interest rate mark, an owned real estate write-down, a negative interest rate mark on time deposits, a positive interest rate mark and write-off of pre-payment penalties associated with FHLB, and a pension obligation (liability) fair value adjustment; (d) the reversal of Cape’s existing allowance for loan and lease losses; (e) an estimated provision expense on Cape’s new loan growth; (f) estimated cost savings; and (g) pre-tax one-time transaction costs and expenses. In addition, Sandler O’Neill assumed a core deposit premium on Cape’s core deposits with sum of the years depreciation over 10 years and a pre-tax opportunity cost of cash of 1.25%. The analysis indicated that the Transactions would be accretive to OceanFirst’s estimated earnings per share in 2016 (excluding transaction expenses in 2016) and dilutive to estimated tangible book value per share at close.

In connection with this analyses, Sandler O’Neill considered and discussed with the OceanFirst board how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship. Sandler O’Neill is acting as financial advisor to the OceanFirst board in connection with the Transactions and, under the terms of Sandler O’Neill’s engagement letter, Sandler O’Neill is entitled to receive a transaction fee in an amount equal to 0.75% of the aggregate merger consideration; 10% of such fee was paid to Sandler O’Neill upon OceanFirst’s entry into the merger agreement and the remainder will become payable at the time of closing of the Transactions. In addition, Sandler O’Neill received a fee in an amount equal to $200,000 upon rendering its fairness opinion to the OceanFirst board in connection with the Transactions, which fairness opinion fee will be credited in full towards the portion of the transaction fee which becomes payable to Sandler O’Neill on the day of closing of the Transactions. OceanFirst has also agreed to reimburse Sandler O’Neill for its reasonable out-of-pocket expenses incurred in connection with its engagement, including the reasonable fees and disbursements of its legal counsel up to a maximum of $15,000 without OceanFirst’s prior approval. OceanFirst has also agreed to indemnify Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees and agents against certain expenses and liabilities, including liabilities under applicable federal or state law.

In the two years preceding the date of Sandler O’Neill’s opinion, Sandler O’Neill provided certain other investment banking services to OceanFirst and received fees for such services. In addition, in the two years preceding the date of Sandler O’Neill’s opinion, Sandler O’Neill Mortgage Finance L.P., an affiliate of Sandler

 

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O’Neill, acted as introducing broker to OceanFirst and received fees for such services. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to OceanFirst, Cape and their respective affiliates. Sandler O’Neill may also actively trade the equity and debt securities of OceanFirst and Cape or their respective affiliates for its own account and for the accounts of its customers.

Interests of Cape’s Directors and Executive Officers in the Transactions

In considering the recommendation of the Cape board that you vote to approve the Cape merger proposal, you should be aware that some of Cape’s officers and directors have employment and other compensation agreements or economic interests that are different from, or in addition to, those of Cape stockholders generally. The Cape board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and in recommending to the Cape stockholders that the merger agreement be approved.

Employment Agreement with Cape. Cape Bank is a party to an employment agreement with Michael D. Devlin, its president and chief executive officer, which provides for a lump sum cash severance payment upon his termination without cause or for good reason (as defined in the employment agreement) within one year following a change in control equal to two times Mr. Devlin’s then base salary and the average bonus earned (other than signing or retention bonuses) during the three years prior to the year in which the termination of employment occurs. In addition, he would also receive, at no cost to him, continued life and non-taxable medical and dental insurance coverage for a period of two years following his termination. Assuming the effective date of the first-step merger is July 1, 2016 and assuming that Mr. Devlin experiences a qualifying termination of employment at the effective time of the first-step merger, the cash severance payment to be made to Mr. Devlin is estimated to be approximately $959,609.

Change in Control Agreements with Cape. Cape Bank is also a party to change in control agreements with seventeen officers that provide severance benefits to the officer upon an involuntary termination of employment or a voluntary termination of employment for good reason (as defined in the change in control agreements) following a change in control. The change in control agreements provide that the officer will be paid a lump sum cash severance payment equal to either one times or two times his or her base salary (as applicable) and the average bonus earned by the officer during the three years preceding the year in which the termination occurs. In addition, the officer would be entitled to receive, at no cost to him or her, continued life insurance coverage and non-taxable medical and dental insurance coverage for 12 months to 24 months following termination of employment. Assuming the effective date of the first-step merger is July 1, 2016, the estimated cash severance payments which would be made to Messrs. Hackney, McGowan, Jr., Pinto and Geletka and to Ms. Pollack (Cape’s executive officers, each of whom have a cash severance multiple of two times) in connection with a qualifying termination of employment at the effective time of the first-step merger are $517,406, $455,964, $466,929, $379,000 and $605,857, respectively.

One New Director. Subject to the terms and conditions of the merger agreement, OceanFirst and OceanFirst Bank have agreed to appoint Michael D. Devlin to the boards of directors of OceanFirst and OceanFirst Bank as a member of the class of directors with a term expiring at the 2018 annual meeting of the stockholders.