OceanFirst Financial Corp. Announces Third Quarter Financial Results

RED BANK, N.J., Oct. 29, 2020 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced a net loss available to common stockholders of $6.0 million, or $(0.10) per diluted share, for the three months ended September 30, 2020 as compared to net income available to common stockholders of $25.0 million, or $0.49 per diluted share, for the corresponding prior year period. For the nine months ended September 30, 2020, the Company reported net income available to common stockholders of $29.2 million, or $0.49 per diluted share, as compared to $65.1 million, or $1.28 per diluted share, for the corresponding prior year period. The quarter and year to date results were impacted by the COVID-19 pandemic, through both higher credit losses and increased operating expenses.

Core losses for the three months ended September 30, 2020 amounted to $266,000, or $0.00 per diluted share, while core earnings for the nine months ended September 30, 2020 were $48.3 million, or $0.80 per diluted share.

Core losses and earnings are non-GAAP measures that exclude merger related expenses, branch consolidation expenses, the opening credit loss expense under the Current Expected Credit Loss (“CECL”) model related to the acquisitions of Two River Bancorp (“Two River”) and Country Bank Holding Company, Inc. (“Country Bank”), net unrealized loss on equity investments, non-recurring professional fees, compensation expense due to the retirement of an executive officer, and income tax benefit related to change in the New Jersey tax code (collectively referred to as “non-core” operations). These non-core operations increased net loss by $5.8 million, net of tax, and decreased net income by $19.2 million, net of tax, for the three and nine months ended September 30, 2020, respectively. Refer to the “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” table for additional information regarding our non-GAAP measures and impact per period by operation.

Key developments for the recent quarter are described below:

  • COVID-19: The Company’s third quarter results were adversely impacted by the COVID-19 pandemic, including an elevated credit loss provision of $35.7 million and an additional $1.7 million in operating expenses. Net charge-offs, excluding $14.2 million related to higher risk commercial loans transferred to held-for-sale, amounted to a modest $748,000.
  • Credit Quality: The Company made a strategic decision to accelerate the resolution of credit losses through the sale of higher risk loans. As part of this strategy, the Company transferred $45.5 million of forbearance loans to held-for-sale at September 30, 2020. Excluding the loans held-for-sale, loans under full forbearance were $209.6 million, or 2.6% of total loans, at October 23, 2020, a significant reduction from a peak for all forbearance requests of almost 20% of total loans.
  • Deposits: Deposits increased by $315.5 million, of which $79.0 million were non-interest bearing deposits. The total cost of deposits decreased to 0.49% for the quarter ended September 30, 2020.
  • Capital: The Company continues to maintain strong capital levels with tangible stockholders’ equity of $935.7 million for a tangible stockholders’ equity to tangible assets ratio of 8.41%.
  • Sale of Paycheck Protection Program (“PPP”) loans: The Company made a strategic decision to sell $298 million in PPP loans to improve operational efficiency and continue the Company’s efforts to focus on the core business. The sale is expected to close in the fourth quarter of 2020.

Chairman and Chief Executive Officer, Christopher D. Maher, commented on the Company’s results, “The ongoing global pandemic has created significant challenges for individuals and businesses. In an effort to maintain a sharp focus on helping our borrowers rebuild the economy, we chose to accelerate efforts to address our highest risk loans by liquidating $67.5 million of those assets, thereby reducing the time and effort required to manage non-performing loans. As of the end of the quarter, we have also substantially strengthened our allowance for credit losses as a percentage of non-performing loans held-for-investment. While our quarterly results were disappointing, our disciplined actions and continued sound risk management have set the stage for improved results in future quarters.” Mr. Maher added, “Our focus remains firmly on the strong potential for business, and includes a variety of growth initiatives as well as proactive capital management.”

The Company’s Board of Directors declared its ninety-fifth consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on November 20, 2020 to common stockholders of record on November 9, 2020. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depository share, representing 1/40th interest in the Series A Preferred Stock. This dividend will be paid on November 16, 2020 to preferred stockholders of record on October 30, 2020.

Results of Operations
On January 31, 2019, the Company completed its acquisition of Capital Bank of New Jersey (“Capital Bank”) and its results of operations are included in the consolidated results for the three and nine months ended September 30, 2020, but are excluded from the results of operations for the period from January 1, 2019 to January 31, 2019.

On January 1, 2020, the Company completed its acquisitions of Two River and Country Bank and their respective results of operations from January 1, 2020 through September 30, 2020 are included in the consolidated results for the three and nine months ended September 30, 2020, but are not included in the results of operations for the corresponding prior year periods.

Net loss for the three months ended September 30, 2020 and net income for the three months ended September 30, 2019 were adversely impacted by non-core operations of $5.8 million, net of tax, and $2.6 million, net of tax, respectively. Net income for the nine months ended September 30, 2020 and 2019 was adversely impacted by non-core operations of $19.2 million, net of tax, and $14.0 million, net of tax, respectively. Core losses for the three months ended September 30, 2020 were $266,000 and core earnings for the nine months ended September 30, 2020 were $48.3 million, representing a decrease from core earnings of $27.5 million and $79.1 million for the same prior year periods, respectively. The decrease as compared to the prior periods was largely driven by the adverse impact of the COVID-19 pandemic.

Net Interest Income and Margin
Net interest income for the three and nine months ended September 30, 2020 increased to $76.8 million and $235.1 million, as compared to $63.4 million and $192.6 million for the same prior year periods, respectively, reflecting an increase in interest-earning assets, partly offset by a reduction in net interest margin. Average interest-earning assets increased by $3.18 billion and $2.68 billion for the three and nine months ended September 30, 2020, respectively, as compared to the same prior year periods. The averages for the three and nine months ended September 30, 2020 were favorably impacted by $1.81 billion and $1.80 billion, respectively, of interest-earning assets acquired from Two River and Country Bank and $461.6 million and $277.8 million, respectively, of interest-earning assets from PPP loans. Average loans receivable, net of allowance for credit losses, increased by $2.34 billion and $2.26 billion for the three and nine months ended September 30, 2020, respectively, as compared to the same prior year periods. The increases attributable to the acquisitions of Two River and Country Bank for the three and nine months ended September 30, 2020 were $1.60 billion and $1.58 billion, respectively. The net interest margin for the three and nine months ended September 30, 2020 decreased to 2.97% and 3.23%, respectively, from 3.55% and 3.66%, respectively, for the same prior year periods. The compression in net interest margin is primarily due to the lower interest rate environment, the origination of low-yielding PPP loans, and the excess balance sheet liquidity which the Company strategically accumulated entering the economic downturn. For the three and nine months ended September 30, 2020, the cost of average interest-bearing liabilities decreased to 0.83% and 0.93%, respectively, from 0.98% and 0.95%, respectively, in the corresponding prior year periods. The total cost of deposits (including non-interest bearing deposits) was 0.49% and 0.58% for the three and nine months ended September 30, 2020, respectively, as compared to 0.62% and 0.60%, respectively, in the same prior year periods.

Net interest income for the three months ended September 30, 2020 decreased by $1.9 million as compared to the prior linked quarter, as the net interest margin decreased to 2.97% as compared to 3.24% for the prior linked quarter. The yield on average interest-earning assets decreased to 3.60% from 3.94% in the prior linked quarter, primarily due to increasing balance sheet liquidity and the lower interest rate environment. The total cost of deposits (including non-interest bearing deposits) was 0.49% for the three months ended September 30, 2020, as compared to 0.57% for the three months ended June 30, 2020.

Provision for Credit Losses
For the three and nine months ended September 30, 2020, the credit loss expense was $35.7 million and $55.3 million, respectively, as compared to $305,000 and $1.3 million, respectively, for the corresponding prior year periods, and $9.6 million in the prior linked quarter. Net loan charge-offs were $15.0 million and $15.9 million for the three and nine months ended September 30, 2020, respectively, as compared to net loan recoveries of $196,000 and net loan charge-offs of $1.2 million for the three and nine months ended September 30, 2019, respectively, and net loan recoveries of $232,000 in the prior linked quarter. The three months ended September 30, 2020 included $14.2 million of charge-offs related to higher risk commercial loans transferred to held-for-sale. Non-performing loans held-for-investment totaled $29.9 million at September 30, 2020, as compared to $21.0 million at June 30, 2020 and $17.5 million at September 30, 2019. The increase in non-performing loans held-for-investment over the prior linked quarter is primarily due to the addition of one commercial real estate owner-occupied loan relationship totaling $6.3 million.

Credit loss expense for the three and nine months ended September 30, 2020 was significantly influenced by the decision to sell higher risk commercial loans as well as economic conditions related to the COVID-19 pandemic and estimates of how those conditions may impact the Company’s borrowers. COVID-19 related loans under full forbearance (excluding forbearance loans held-for-sale) decreased to $209.6 million, or 2.6% of total loans at October 23, 2020 as compared to a peak for all forbearance requests of almost 20% of total loans in mid-2020 as borrowers have returned to monthly payments. The Company continues to proactively address the pandemic’s impact on credit. Due to the U.S. government guarantee on PPP loans, there is no credit allowance on these loans. Refer to exhibits filed with the earnings release on Form 8-K for detailed information on loans under forbearance agreements.

Non-interest Income
For the three and nine months ended September 30, 2020, other income decreased to $8.2 million and increased to $33.3 million, respectively, as compared to $11.5 million and $30.9 million, respectively, for the corresponding prior year periods. Other income for both the three and nine months ended September 30, 2020 included $3.6 million of net unrealized loss on equity investments.

Excluding the Two River and Country Bank acquisitions, which added $882,000, and the impact of the net unrealized loss on equity investments, the decrease in other income for the three months ended September 30, 2020, compared to the corresponding prior year period, was due to a decrease in fees and service charges of $1.4 million, partly offset by an increase in net gain on sale of loans of $800,000.

For the nine months ended September 30, 2020, excluding the Two River and Country Bank acquisitions which added $2.3 million, and the impact of the net unrealized loss on equity investments, the increase in other income was due to increases in commercial loan swap income of $4.7 million and net gain on sales of loans of $1.5 million, partly offset by a decrease in fees and service charges of $3.2 million. The waiver of certain fees during the COVID-19 pandemic may continue to suppress deposit fee income for the remainder of the public health crisis.

For the three months ended September 30, 2020, other income, excluding net unrealized loss on equity investments, increased $325,000 as compared to the prior linked quarter.

Non-interest Expense
Operating expenses increased to $56.8 million and $175.5 million for the three and nine months ended September 30, 2020, respectively, as compared to $43.4 million and $141.5 million, respectively, in the same prior year periods. Operating expenses for the three and nine months ended September 30, 2020 included $4.0 million and $19.0 million, respectively, of net expenses related to non-core operations. Operating expenses for the three and nine months ended September 30, 2019 included $3.2 million and $17.5 million, respectively, of net expenses related to non-core operations. Excluding the impact of non-core operations, the change in operating expenses over the prior year was due to the Two River and Country Bank acquisitions, which added $6.9 million and $23.0 million, respectively, for the three and nine months ended September 30, 2020. The remaining increase in operating expenses for the three months ended September 30, 2020 was primarily due to operating expenses attributable to the COVID-19 pandemic of $1.7 million, increases in compensation and benefits expense of $3.0 million and federal deposit insurance expense of $770,000. The increase in operating expenses for the nine months ended September 30, 2020 was primarily due to operating expenses attributable to the COVID-19 pandemic of $3.8 million, increases in compensation and benefits expense of $6.3 million, professional fees of $2.3 million, and Federal Home Loan Bank (“FHLB”) prepayment penalty fee of $924,000, partly offset by decreases in occupancy expense of $1.5 million, and equipment expense of $1.4 million.

For the three months ended September 30, 2020, operating expenses, excluding net expenses related to non-core operations, increased $802,000, as compared to the prior linked quarter. The increases were due to operating expenses attributable to the COVID-19 pandemic of $609,000 and professional fees of $832,000, offset by a decrease in FHLB prepayment penalty fee of $924,000.

Income Tax (Benefit) Expense
The benefit for income taxes was $2.6 million for the three months ended September 30, 2020, and the provision for income taxes was $7.3 million for the nine months ended September 30, 2020 as compared to provision for income taxes of $6.3 million and $15.6 million, respectively, for the same prior year periods. The effective tax rate was 34.6% and 19.5% for the three and nine months ended September 30, 2020, respectively, as compared to 20.2% and 19.3%, respectively, for the same prior year periods. The higher effective tax rate for the three months ended September 30, 2020 is primarily attributable to the net loss recognized during the quarter. The three and nine months ended September 30, 2020 included the adverse impacts of a New Jersey tax code change and a higher allocation of taxable income to New York due to the acquisition of Country Bank.

Financial Condition
Total assets increased $3.41 billion, to $11.65 billion at September 30, 2020, from $8.25 billion at December 31, 2019, primarily as a result of the acquisitions of Two River and Country Bank, which added $2.03 billion to total assets. Cash and due from banks increased $860.3 million, to $980.9 million at September 30, 2020, from $120.5 million at December 31, 2019, due to increased deposits, the Company’s decision to build liquidity during the economic downturn and the cash received from the issuance of subordinated notes and non-cumulative perpetual preferred stock as described below. Loans receivable, net of allowance for credit losses, increased by $1.74 billion, to $7.94 billion at September 30, 2020, from $6.21 billion at December 31, 2019, due to acquired loans from Two River and Country Bank of $1.56 billion coupled with organic loan growth. Loans held-for-sale increased to $388.8 million at September 30, 2020, of which $298 million were PPP loans. Non-performing loans held-for-sale totaled $67.5 million at September 30, 2020. As part of the acquisitions of Two River and Country Bank, the Company’s goodwill balance increased to $500.8 million at September 30, 2020, from $374.6 million at December 31, 2019 and core deposit intangibles increased to $25.2 million, from $15.6 million. Other assets increased by $55.1 million to $224.6 million at September 30, 2020, from $169.5 million at December 31, 2019, primarily due to the increase in swap positions.

Deposits increased $2.95 billion, to $9.28 billion at September 30, 2020, from $6.33 billion at December 31, 2019, due to acquired deposits from Two River and Country Bank of $1.59 billion and organic deposit growth of $1.4 billion. The loan-to-deposit ratio at September 30, 2020 was 86.2%, as compared to 98.2% at December 31, 2019. The deposit growth funded a decrease in FHLB advances of $175.8 million to $343.5 million at September 30, 2020, from $519.3 million at December 31, 2019. The increase in other borrowings of $150.1 million to $246.9 million at September 30, 2020, from $96.8 million at December 31, 2019, primarily resulted from the May 2020 issuance of $125.0 million in subordinated notes at an initial rate of 5.25% and a stated maturity of May 15, 2030. Other liabilities increased $90.4 million to $153.0 million at September 30, 2020, from $62.6 million at December 31, 2019, primarily due to the increase in swap positions.

Stockholders’ equity increased to $1.46 billion at September 30, 2020, as compared to $1.15 billion at December 31, 2019. The acquisitions of Two River and Country Bank added $261.4 million to stockholders’ equity. During the three months ended June 30, 2020, the Company raised $55.7 million from the issuance of 7.0% fixed-to-floating rate non-cumulative perpetual preferred stock, with a par value of $0.01 and a liquidation price of $1,000 per share. Under the Company’s stock repurchase program, there were 2,019,145 shares available for repurchase at September 30, 2020. The Company suspended its repurchase activity on February 28, 2020. For the nine months ended September 30, 2020, the Company repurchased 648,851 shares under the repurchase program at a weighted average cost of $22.83.

Asset Quality
The Company’s non-performing loans held-for-investment increased to $29.9 million at September 30, 2020, as compared to $17.8 million at December 31, 2019. Non-performing loans do not include $56.4 million of purchased with credit deterioration (“PCD”) loans acquired in the Two River, Country Bank, Capital Bank, Sun Bancorp, Inc. (“Sun”), Ocean Shore Holding Co. (“Ocean Shore”), Cape Bancorp, Inc. (“Cape”), and Colonial American Bank (“Colonial American”) acquisitions (“Acquisition Transactions”). The Company’s other real estate owned totaled $106,000 at September 30, 2020, as compared to $264,000 at December 31, 2019.

The Company’s allowance for credit losses was 0.70% of total loans at September 30, 2020 as compared to 0.27% at December 31, 2019. The allowance for credit losses does not reflect the net unamortized credit mark of $31.6 million. The allowance for credit losses plus the unamortized credit mark amounted to $88.0 million, or 1.10% of loans held-for-investment. The allowance for credit losses as a percentage of non-performing loans held-for-investment was 188.5% at September 30, 2020, as compared to 94.4% at December 31, 2019.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management believes that the supplemental Non-GAAP information, which consists of reported net income excluding non-core operations, which can vary from period to period, provides a better comparison of period to period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to Non-GAAP performance measures which may be presented by other companies. Refer to Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.

Conference Call
As previously announced, the Company will host an earnings conference call on Friday, October 30, 2020 at 11:00 a.m. Eastern Time. The direct dial number for the call is (888) 338-7143. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877) 344-7529, Replay Conference Number 10148569 from one hour after the end of the call until January 28, 2021. The conference call, as well as the replay, are also available (listen-only) by internet webcast at www.oceanfirst.com in the Investor Relations section.

OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank N.A., founded in 1902, is a $11.7 billion regional bank operating throughout New Jersey, metropolitan Philadelphia and metropolitan New York City.  OceanFirst Bank delivers commercial and residential financing solutions, trust and asset management and deposit services and is one of the largest and oldest community-based financial institutions headquartered in New Jersey.

OceanFirst Financial Corp.’s press releases are available by visiting us at www.oceanfirst.com.

Forward-Looking Statements
        
In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “should,” “may,” “view,” “opportunity,” “potential,” or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: the impact of the COVID-19 pandemic on our operations and financial results and those of our customers, changes in interest rates, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, accounting principles and guidelines and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under Item 1A - Risk Factors and elsewhere, and subsequent securities filings and should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.



OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)

  September 30, 2020 June 30, 2020 December 31, 2019 September 30, 2019
  (Unaudited) (Unaudited)   (Unaudited)
Assets        
Cash and due from banks $980,870  $721,049  $120,544  $140,901 
Debt securities available-for-sale, at estimated fair value 169,634  153,239  150,960  127,308 
Debt securities held-to-maturity, net of allowance for credit losses of $2,393 at September 30, 2020 and $2,446 at June 30, 2020 (estimated fair value of $902,418 at September 30, 2020, $895,897 at June 30, 2020, $777,290 at December 31, 2019 and $826,964 at September 30, 2019) 871,688  867,959  768,873  819,253 
Equity investments, at estimated fair value 63,846  13,830  10,136  10,145 
Restricted equity investments, at cost 67,505  68,091  62,356  62,095 
Loans receivable, net of allowance for credit losses of $56,350 at September 30, 2020, $38,509 at June 30, 2020, $16,852 at December 31, 2019 and $16,636 at September 30, 2019 7,943,390  8,335,480  6,207,680  6,081,938 
Loans held-for-sale 388,763  21,799    110 
Interest and dividends receivable 40,671  37,811  21,674  21,739 
Other real estate owned 106  248  264  294 
Premises and equipment, net 103,249  100,576  102,691  103,721 
Bank owned life insurance 264,167  262,637  237,411  236,190 
Assets held for sale 6,717  7,828  3,785  5,156 
Goodwill 500,849  501,472  374,632  374,537 
Core deposit intangible 25,194  26,732  15,607  16,605 
Other assets 224,648  226,614  169,532  135,181 
Total assets $11,651,297  $11,345,365  $8,246,145  $8,135,173 
Liabilities and Stockholders’ Equity        
Deposits $9,283,288  $8,967,754  $6,328,777  $6,220,855 
Federal Home Loan Bank advances 343,452  343,392  519,260  512,149 
Securities sold under agreements to repurchase with retail customers 142,823  152,821  71,739  65,067 
Other borrowings 246,941  246,840  96,801  96,667 
Advances by borrowers for taxes and insurance 20,104  19,582  13,884  16,230 
Other liabilities 152,975  138,542  62,565  79,677 
Total liabilities 10,189,583  9,868,931  7,093,026  6,990,645 
Total stockholders’ equity 1,461,714  1,476,434  1,153,119  1,144,528 
Total liabilities and stockholders’ equity $11,651,297  $11,345,365  $8,246,145  $8,135,173 



OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)

  For the Three Months Ended, For the Nine Months Ended,
  September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
  |-------------------- (Unaudited) --------------------| |---------- (Unaudited) -----------|
Interest income:          
Loans $85,933  $88,347  $69,715  $264,224  $209,633 
Mortgage-backed securities 3,212  3,593  3,761  10,649  11,748 
Debt securities, equity investments and other 3,817  3,937  3,411  12,173  10,338 
Total interest income 92,962  95,877  76,887  287,046  231,719 
Interest expense:          
Deposits 11,370  12,305  9,817  37,611  28,218 
Borrowed funds 4,804  4,905  3,678  14,335  10,884 
Total interest expense 16,174  17,210  13,495  51,946  39,102 
Net interest income 76,788  78,667  63,392  235,100  192,617 
Credit loss expense 35,714  9,649  305  55,332  1,281 
Net interest income after credit loss expense 41,074  69,018  63,087  179,768  191,336 
Other income:          
Bankcard services revenue 3,097  2,741  2,658  8,319  7,622 
Trust and asset management revenue 490  555  557  1,560  1,624 
Fees and service charges 3,732  3,253  4,679  11,858  13,790 
Net gain on sales of loans 1,001  756    1,930  15 
Net (loss) gain on equity investments (3,576) 148  89  (3,273) 330 
Net gain (loss) from other real estate operations 214  (52) (108) 12  (235)
Income from bank owned life insurance 1,530  1,521  1,431  4,626  4,045 
Commercial loan swap income 1,425  2,489  2,138  7,964  3,223 
Other 266  19  99  310  520 
Total other income 8,179  11,430  11,543  33,306  30,934 
Operating expenses:          
Compensation and employee benefits 29,012  27,935  21,276  86,832  67,394 
Occupancy 5,270  5,268  4,159  15,814  13,088 
Equipment 1,906  1,982  2,062  5,831  5,944 
Marketing 963  753  562  2,485  2,629 
Federal deposit insurance and regulatory assessments 1,212  1,133  297  3,012  1,931 
Data processing 4,517  4,149  3,398  12,843  10,736 
Check card processing 1,385  1,290  1,639  3,951  4,399 
Professional fees 3,354  2,683  2,580  8,339  5,697 
Other operating expense 3,644  5,262  3,902  12,708  11,153 
Amortization of core deposit intangible 1,538  1,544  1,009  4,660  3,029 
Branch consolidation expense 830  863  1,696  4,287  8,782 
Merger related expenses 3,156  3,070  777  14,753  6,761 
Total operating expenses 56,787  55,932  43,357  175,515  141,543 
(Loss) income before (benefit) provision for income taxes (7,534) 24,516  31,273  37,559  80,727 
(Benefit) provision for income taxes (2,608) 5,878  6,302  7,314  15,603 
Net (loss) income (4,926) 18,638  24,971  30,245  65,124 
Dividends on preferred shares 1,093      1,093   
Net (loss) income available to common stockholders $(6,019) $18,638  $24,971  $29,152  $65,124 
Basic (loss) earnings per share $(0.10) $0.31  $0.50  $0.49  $1.30 
Diluted (loss) earnings per share $(0.10) $0.31  $0.49  $0.49  $1.28 
Average basic shares outstanding 59,935  59,877  50,491  59,901  50,242 
Average diluted shares outstanding 59,935  59,999  50,966  60,076  50,830 



OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)

LOANS RECEIVABLE  At
   September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Commercial:           
Commercial and industrial  $599,188  $910,762  $502,760  $396,434  $406,580 
Commercial real estate - owner - occupied 1,176,529  1,199,742  1,220,983  792,653  787,752 
Commercial real estate - investor 3,453,276  3,449,160  3,331,662  2,296,410  2,232,159 
Total commercial  5,228,993  5,559,664  5,055,405  3,485,497  3,426,491 
Consumer:           
Residential real estate  2,407,178  2,426,277  2,458,641  2,321,157  2,234,361 
Home equity loans and lines  301,712  320,627  335,624  318,576  330,446 
Other consumer  63,095  71,721  82,920  89,422  98,835 
Total consumer  2,771,985  2,818,625  2,877,185  2,729,155  2,663,642 
Total loans  8,000,978  8,378,289  7,932,590  6,214,652  6,090,133 
Deferred origination (fees) costs, net (1,238) (4,300) 10,586  9,880  8,441 
Allowance for credit losses  (56,350) (38,509) (29,635) (16,852) (16,636)
Loans receivable, net  $7,943,390  $8,335,480  $7,913,541  $6,207,680  $6,081,938 
Mortgage loans serviced for others $88,210  $101,840  $51,399  $50,042  $54,457 
 At September 30, 2020  Average Yield          
Loan pipeline (1):           
Commercial3.97% $154,700  $169,093  $293,820  $219,269  $126,578 
Residential real estate3.27  212,107  181,800  223,032  105,396  189,403 
Home equity loans and lines4.29  10,301  8,282  8,429  3,049  3,757 
Total3.59% $377,108  $359,175  $525,281  $327,714  $319,738 


 For the Three Months Ended 
 September 30, 2020 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
 Average Yield           
Loan originations:            
Commercial3.64% $187,747  $216,979 (2)$266,882  $264,938  $315,405  
Residential real estate3.29  219,325  242,137  148,675  226,492  156,308  
Home equity loans and lines4.33  10,966  12,128  10,666  12,961  10,498  
Total3.47% $418,038  $471,244  $426,223  $504,391  $482,211  
Loans sold  $56,722  $104,600 (3)$7,500 (3)$110  $ (3)

(1) Loan pipeline includes loans approved but not funded.
(2) Excludes loans originated through the Paycheck Protection Program of $504 million.
(3) Excludes the sale of under-performing commercial loans of $4.9 million for the three months ended June 30, 2020, under-performing residential loans of $4.0 million and commercial loans of $5.1 million for the three months ended March 31, 2020 and small business administration loans of $3.5 million for the three months ended September 30, 2019.

DEPOSITSAt
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Type of Account         
Non-interest-bearing$2,240,799  $2,161,766  $1,783,216  $1,377,396  $1,406,194 
Interest-bearing checking3,317,296  3,022,887  2,647,487  2,539,428  2,400,331 
Money market deposit691,872  680,199  620,145  578,147  593,457 
Savings1,471,554  1,456,931  1,420,628  898,174  901,168 
Time deposits1,561,767  1,645,971  1,420,591  935,632  919,705 
 $9,283,288  $8,967,754  $7,892,067  $6,328,777  $6,220,855 



OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITYSeptember 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Non-performing loans held-for-investment:         
Commercial and industrial$586  $1,586  $207  $207  $207 
Commercial real estate - owner-occupied11,365  4,582  4,219  4,811  4,537 
Commercial real estate - investor2,978  5,274  3,384  2,917  4,073 
Residential real estate11,518  6,568  5,920  7,181  5,953 
Home equity loans and lines3,448  3,034  2,533  2,733  2,683 
Total non-performing loans held-for-investment29,895  21,044  16,263  17,849  17,453 
Non-performing loans held-for-sale67,489         
Other real estate owned106  248  484  264  294 
Total non-performing assets$97,490  $21,292  $16,747  $18,113  $17,747 
PCD loans (1)$56,422  $61,694  $59,783  $13,265  $13,281 
Delinquent loans 30 to 89 days$13,753  $13,640  $48,905  $14,798  $19,905 
Troubled debt restructurings:         
Non-performing (included in total non-performing loans above)$9,866
  $6,189  $6,249  $6,566  $6,152 
Performing12,777
  16,365  16,102  18,042  18,977 
    Total troubled debt restructurings$22,643  $22,554  $22,351  $24,608  $25,129 
Allowance for credit losses$56,350  $38,509  $29,635  $16,852  $16,636 
Allowance for credit losses as a percent of total loans receivable (2)0.70% 0.46% 0.37% 0.27% 0.27%
Allowance for credit losses as a percent of total non-performing loans held-for-investment188.49  182.99  182.22  94.41  95.32 
Non-performing loans held-for-investment as a percent of total loans receivable0.37  0.25  0.21  0.29  0.29 
Non-performing assets as a percent of total assets0.84  0.19  0.16  0.22  0.22 

(1) PCD loans are not included in non-performing loans held-for-investment or delinquent loans totals.
(2) The loans acquired from Two River, Country Bank, Capital Bank, Sun, Ocean Shore, Cape, and Colonial American were recorded at fair value. The net credit mark on these loans, not reflected in the allowance for credit losses, was $31,617, $35,439, $38,272, $30,260 and $32,768 at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

NET CHARGE-OFFSFor the Three Months Ended
 September 30, 2020 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Net (charge-offs) recoveries:         
Loan charge-offs$(15,411) $(169) $(1,384) $(445) $(353)
Recoveries on loans416  401  230  306  549 
Net loan (charge-offs) recoveries$(14,995)(1)$232  $(1,154)(2)$(139) $196 
Net loan charge-offs to average total loans
(annualized)
0.71% NM* 0.06% 0.01% NM*
Net loan (charge-offs) recoveries detail:         
Commercial$(14,801) $30  $59  $163  $256 
Residential real estate314  212  (1,112) (61) 12 
Home equity loans and lines(490) (3) (36) (240) (10)
Other consumer(18) (7) (65) (1) (62)
Net loan (charge-offs) recoveries$(14,995)(1)$232  $(1,154)(2)$(139) $196 

(1) Included in net loan charge-offs for the three months ended September 30, 2020 is $14.2 million relating to loans transferred to held-for-sale.
(2) Included in net loan charge-offs for the three months ended March 31, 2020 is $949 relating to under-performing loans sold.

  *   Not meaningful


OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME

 For the Three Months Ended
 September 30, 2020 June 30, 2020 September 30, 2019
(dollars in thousands)Average
Balance
 Interest Average
Yield/
Cost
 Average
Balance
 Interest Average
Yield/
Cost
 Average
Balance
 Interest Average
Yield/
Cost
Assets:                 
Interest-earning assets:                 
Interest-earning deposits and short-term investments$805,863  $236  0.12% $354,016  $115  0.13% $40,932  $264  2.56%
Securities (1)1,112,174  6,793  2.43  1,130,779  7,415  2.64  1,039,560  6,908  2.64 
Loans receivable, net (2)                 
Commercial5,554,897  58,639  4.20  5,409,238  59,460  4.42  3,350,868  42,104  4.99 
Residential real estate2,462,513  23,091  3.75  2,507,076  23,870  3.81  2,225,837  21,527  3.87 
Home equity loans and lines311,802  3,330  4.25  328,144  3,853  4.72  335,691  4,678  5.53 
Other consumer67,497  873  5.15  76,382  1,164  6.13  104,310  1,406  5.35 
Allowance for credit losses, net of deferred loan fees(45,912)     (25,218)     (8,381)    
Loans receivable, net8,350,797  85,933  4.09  8,295,622  88,347  4.28  6,008,325  69,715  4.60 
Total interest-earning assets10,268,834  92,962  3.60  9,780,417  95,877  3.94  7,088,817  76,887  4.30 
Non-interest-earning assets1,353,135      1,334,169      984,421     
Total assets$11,621,969      $11,114,586      $8,073,238     
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing checking$3,289,319  4,627  0.56% $2,966,631  4,800  0.65% $2,467,879  $4,311  0.69%
Money market675,841  571  0.34  652,485  705  0.43  597,896  1,208  0.80 
Savings1,460,232  296  0.08  1,445,953  414  0.12  905,605  300  0.13 
Time deposits1,606,632  5,876  1.45  1,623,890  6,386  1.58  920,032  3,998  1.72 
Total7,032,024  11,370  0.64  6,688,959  12,305  0.74  4,891,412  9,817  0.80 
FHLB advances343,412  1,470  1.70  476,598  1,946  1.64  394,124  2,208  2.22 
Securities sold under agreements to repurchase144,720  174  0.48  131,382  138  0.42  62,296  73  0.46 
Other borrowings246,903  3,160  5.09  220,948  2,821  5.14  96,578  1,397  5.74 
Total interest-bearing
liabilities
7,767,059  16,174  0.83  7,517,887  17,210  0.92  5,444,410  13,495  0.98 
Non-interest-bearing deposits2,209,241      2,018,044      1,396,259     
Non-interest-bearing liabilities162,987      124,997      88,868     
Total liabilities10,139,287      9,660,928      6,929,537     
Stockholders’ equity1,482,682      1,453,658      1,143,701     
Total liabilities and equity$11,621,969      $11,114,586      $8,073,238     
Net interest income  $76,788      $78,667      $63,392   
Net interest rate spread (3)    2.77%     3.02%     3.32%
Net interest margin (4)    2.97%     3.24%     3.55%
Total cost of deposits (including non-interest-bearing deposits)    0.49%     0.57%     0.62%


            
 For the Nine Months Ended
 September 30, 2020 September 30, 2019
(dollars in thousands)Average
Balance
 Interest Average
Yield/
Cost
 Average
Balance
 Interest Average
Yield/
Cost
Assets:           
Interest-earning assets:           
Interest-earning deposits and short-term investments$409,321  $693  0.23% $62,543  $1,103  2.36%
Securities (1)1,143,049  22,129  2.59  1,062,366  20,983  2.64 
Loans receivable, net (2)           
Commercial5,309,275  177,973  4.48  3,291,189  126,091  5.12 
Residential real estate2,480,932  71,590  3.85  2,169,611  65,260  4.01 
Home equity loans and lines326,263  11,253  4.61  345,294  14,041  5.44 
Other consumer77,085  3,408  5.91  112,162  4,241  5.06 
Allowance for credit losses, net of deferred loan fees(27,186)     (9,200)    
Loans receivable, net8,166,369  264,224  4.32  5,909,056  209,633  4.74 
Total interest-earning assets9,718,739  287,046  3.95  7,033,965  231,719  4.40 
Non-interest-earning assets1,306,568      960,709     
Total assets$11,025,307      $7,994,674     
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing checking$3,023,093  14,559  0.64% $2,501,660  12,343  0.66%
Money market647,566  2,316  0.48  610,153  3,676  0.81 
Savings1,436,594  2,266  0.21  908,457  887  0.13 
Time deposits1,563,449  18,470  1.58  928,903  11,312  1.63 
Total6,670,702  37,611  0.75  4,949,173  28,218  0.76 
FHLB Advances483,267  6,239  1.72  379,786  6,367  2.24 
Securities sold under agreements to repurchase119,495  408  0.46  63,267  192  0.41 
Other borrowings195,754  7,688  5.25  98,562  4,325  5.87 
Total interest-bearing liabilities7,469,218  51,946  0.93  5,490,788  39,102  0.95 
Non-interest-bearing deposits1,971,622      1,303,447     
Non-interest-bearing liabilities133,928      75,988     
Total liabilities9,574,768      6,870,223     
Stockholders’ equity1,450,539      1,124,451     
Total liabilities and equity$11,025,307      $7,994,674     
Net interest income  $235,100      $192,617   
Net interest rate spread (3)    3.02%     3.45%
Net interest margin (4)    3.23%     3.66%
Total cost of deposits (including non-interest-bearing deposits)    0.58%     0.60%

(1) Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost, net of allowance for credit losses.
(2) Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated allowance for credit losses and includes loans held for sale and non-performing loans.
(3) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.


OceanFirst Financial Corp.
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share amounts)

  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
           
Selected Financial Condition Data:          
Total assets $11,651,297  $11,345,365  $10,489,074  $8,246,145  $8,135,173 
Debt securities available-for-sale, at estimated fair value 169,634  153,239  153,738  150,960  127,308 
Debt securities held-to-maturity, net of allowance for credit losses 871,688  867,959  914,255  768,873  819,253 
Equity investments, at estimated fair value 63,846  13,830  14,409  10,136  10,145 
Restricted equity investments, at cost 67,505  68,091  81,005  62,356  62,095 
Loans receivable, net of allowance for credit losses 7,943,390  8,335,480  7,913,541  6,207,680  6,081,938 
Deposits 9,283,288  8,967,754  7,892,067  6,328,777  6,220,855 
Federal Home Loan Bank advances 343,452  343,392  825,824  519,260  512,149 
Securities sold under agreements to repurchase and other borrowings 389,764  399,661  210,388  168,540  161,734 
Stockholders’ equity 1,461,714  1,476,434  1,409,834  1,153,119  1,144,528 


  For the Three Months Ended,
  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Selected Operating Data:          
Interest income $92,962  $95,877  $98,207  $77,075  $76,887 
Interest expense 16,174  17,210  18,562  13,721  13,495 
Net interest income 76,788  78,667  79,645  63,354  63,392 
Credit loss expense 35,714  9,649  9,969  355  305 
Net interest income after credit loss expense 41,074  69,018  69,676  62,999  63,087 
Other income 8,179  11,430  13,697  11,231  11,543 
Operating expenses (excluding branch consolidation and merger related expenses) 52,801  51,999  51,675  43,589  40,884 
Branch consolidation expense 830  863  2,594  268  1,696 
Merger related expenses 3,156  3,070  8,527  3,742  777 
(Loss) income before (benefit) provision for income taxes (7,534) 24,516  20,577  26,631  31,273 
(Benefit) provision for income taxes (2,608) 5,878  4,044  3,181  6,302 
Net (loss) income $(4,926) $18,638  $16,533  $23,450  $24,971 
Net (loss) income available to common stockholders $(6,019) $18,638  $16,533  $23,450  $24,971 
Diluted (loss) earnings per share $(0.10) $0.31  $0.27  $0.47  $0.49 
Net accretion/amortization of purchase accounting adjustments included in net interest income $4,364  $5,536  $5,533  $3,501  $2,769 


  At or For the Three Months Ended
  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Selected Financial Ratios and Other Data(1):          
           
Performance Ratios (Annualized):          
Return on average assets (2) (0.17)% 0.67% 0.64% 1.14% 1.23%
Return on average tangible assets (2) (3) (0.18) 0.71  0.68  1.19  1.29 
Return on average stockholders’ equity (2) (1.32) 5.16  4.70  8.12  8.66 
Return on average tangible stockholders’ equity (2) (3) (2.05) 8.10  7.50  12.33  13.18 
Stockholders’ equity to total assets 12.55  13.01  13.44  13.98  14.07 
Tangible stockholders’ equity to tangible assets (3) 8.41  8.77  8.85  9.71  9.73 
Tangible common stockholders’ equity to tangible assets (3) 7.91  8.25  8.85  9.71  9.73 
Net interest rate spread 2.77  3.02  3.29  3.26  3.32 
Net interest margin 2.97  3.24  3.52  3.48  3.55 
Operating expenses to average assets (2) 1.94  2.02  2.44  2.31  2.13 
Efficiency ratio (2) (4) 66.83  62.08  67.28  63.82  57.86 
Loans to deposits 86.19  93.43  100.51  98.20  97.90 


  For the Nine Months Ended September 30,
  2020 2019
Performance Ratios (Annualized):    
Return on average assets (2) 0.37% 1.09%
Return on average tangible assets (2) (3) 0.38  1.14 
Return on average stockholders’ equity (2) 2.79  7.74 
Return on average tangible stockholders’ equity (2) (3) 4.38  11.83 
Net interest rate spread 3.02  3.45 
Net interest margin 3.23  3.66 
Operating expenses to average assets (2) 2.13  2.37 
Efficiency ratio (2) (4) 65.39  63.32 

(continued)

  At or For the Three Months Ended
  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Trust and Asset Management:          
Wealth assets under administration $232,292  $224,042  $173,856  $195,415  $194,137 
Nest Egg 80,472  57,383  43,528  34,865  23,946 
Per Share Data:          
Cash dividends per common share $0.17  $0.17  $0.17  $0.17  $0.17 
Stockholders’ equity per common share at end of  period 24.21  24.47  23.38  22.88  22.57 
Tangible common stockholders’ equity per common share at end of period (3) 14.58  14.79  14.62  15.13  14.86 
Common shares outstanding at end of period 60,378,120  60,343,077  60,311,717  50,405,048  50,700,586 
Preferred shares outstanding at end of period 57,370  57,370       
Number of full-service customer facilities: 62  62  75  56  56 
Quarterly Average Balances          
Total securities $1,112,174  $1,130,779  $1,186,535  $1,008,461  $1,039,560 
Loans receivable, net 8,350,797  8,295,622  7,850,662  6,162,808  6,008,325 
Total interest-earning assets 10,268,834  9,780,417  9,100,923  7,214,764  7,088,817 
Total assets 11,621,969  11,114,586  10,332,809  8,192,177  8,073,238 
Interest-bearing transaction deposits 5,425,392  5,065,069  4,825,193  4,053,226  3,971,380 
Time deposits 1,606,632  1,623,890  1,459,348  931,228  920,032 
Total borrowed funds 735,035  828,928  832,285  577,042  552,998 
Total interest-bearing liabilities 7,767,059  7,517,887  7,116,826  5,561,496  5,444,410 
Non-interest bearing deposits 2,209,241  2,018,044  1,687,582  1,393,002  1,396,259 
Stockholders’ equity 1,482,682  1,453,658  1,414,924  1,145,665  1,143,701 
Total deposits 9,241,265  8,707,003  7,972,123  6,377,456  6,287,671 
Quarterly Yields          
Total securities 2.43% 2.64% 2.68% 2.59% 2.64%
Loans receivable, net 4.09  4.28  4.61  4.53  4.60 
Total interest-earning assets 3.60  3.94  4.34  4.24  4.30 
Interest-bearing transaction deposits 0.40  0.47  0.64  0.59  0.58 
Time deposits 1.45  1.58  1.71  1.78  1.72 
Borrowed funds 2.60  2.38  2.24  2.41  2.64 
Total interest-bearing liabilities 0.83  0.92  1.05  0.98  0.98 
Net interest spread 2.77  3.02  3.29  3.26  3.32 
Net interest margin 2.97  3.24  3.52  3.48  3.55 
Total deposits 0.49  0.57  0.70  0.64  0.62 

(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Performance ratios for each period include non-core operations. Refer to “Non-GAAP Reconciliation” table under “Supplemental Information” for additional information.
(3) Tangible common stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible. Tangible common stockholders’ equity also excludes preferred equity.
(4) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.


OceanFirst Financial Corp.
SUPPLEMENTAL INFORMATION
 (dollars in thousands, except per share amounts)

NON-GAAP RECONCILIATION

  For the Three Months Ended
  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Core Earnings:          
Net (loss) income available to common stockholders (GAAP) $(6,019) $18,638  $16,533  $23,450  $24,971 
Add (less) non-recurring and non-core items:          
Merger related expenses 3,156  3,070  8,527  3,742  777 
Branch consolidation expenses 830  863  2,594  268  1,696 
Two River and Country Bank opening credit loss expense under the CECL model     2,447     
Net unrealized loss on equity investments 3,576         
Non-recurring professional fees       1,274  750 
Income tax benefit related to change in New Jersey tax code       (2,205)  
Income tax expense on items (1,809) (966) (3,121) (793) (663)
Core (loss) earnings (Non-GAAP) $(266) $21,605  $26,980  $25,736  $27,531 
Core diluted (loss) earnings per share $  $0.36  $0.45  $0.51  $0.54 
           
Core Ratios (Annualized):          
Return on average assets (0.01)% 0.78% 1.05% 1.25% 1.35%
Return on average tangible assets (0.01) 0.82  1.11  1.31  1.42 
Return on average tangible stockholders’ equity (0.11) 9.39  12.25  13.53  14.53 
Efficiency ratio 59.63  57.71  55.36  56.73  53.56 


  For the Nine Months Ended September 30,
  2020 2019
Core Earnings:    
Net income available to common stockholders (GAAP) $29,152  $65,124 
Add (less) non-recurring and non-core items:    
Merger related expenses 14,753  6,761 
Branch consolidation expenses 4,287  8,782 
Two River and Country Bank opening credit loss expense under the CECL model 2,447   
Net unrealized loss on equity investments 3,576   
Non-recurring professional fees   750 
Compensation expense due to the retirement of an executive officer   1,256 
Income tax expense on items $(5,896) $(3,569)
Core earnings (Non-GAAP) $48,319  $79,104 
Core diluted earnings per share $0.80  $1.56 
     
Core Ratios (Annualized):    
Return on average assets 0.59% 1.32%
Return on average tangible assets 0.61  1.39 
Return on average tangible stockholders’ equity 7.00  14.37 
Efficiency ratio 57.53  55.47 


COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS

  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Total stockholders’ equity $1,461,714  $1,476,434  $1,409,834  $1,153,119  $1,144,528 
Less:          
Goodwill 500,849  501,472  500,093  374,632  374,537 
Core deposit intangible 25,194  26,732  28,276  15,607  16,605 
Tangible stockholders’ equity $935,671  $948,230  $881,465  $762,880  $753,386 
           
Total assets $11,651,297  $11,345,365  $10,489,074  $8,246,145  $8,135,173 
Less:          
Goodwill 500,849  501,472  500,093  374,632  374,537 
Core deposit intangible 25,194  26,732  28,276  15,607  16,605 
Tangible assets $11,125,254  $10,817,161  $9,960,705  $7,855,906  $7,744,031 
Tangible stockholders’ equity to tangible assets 8.41% 8.77% 8.85% 9.71% 9.73%

COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TOTAL TANGIBLE ASSETS

  September 30, June 30, March 31, December 31, September 30,
  2020 2020 2020 2019 2019
Total stockholders’ equity $1,461,714  $1,476,434  $1,409,834  $1,153,119  $1,144,528 
Less:          
Goodwill 500,849  501,472  500,093  374,632  374,537 
Core deposit intangible 25,194  26,732  28,276  15,607  16,605 
Preferred stock 55,544  55,711       
Tangible common stockholders’ equity $880,127  $892,519  $881,465  $762,880  $753,386 
           
Total assets $11,651,297  $11,345,365  $10,489,074  $8,246,145  $8,135,173 
Less:          
Goodwill 500,849  501,472  500,093  374,632  374,537 
Core deposit intangible 25,194  26,732  28,276  15,607  16,605 
Tangible assets $11,125,254  $10,817,161  $9,960,705  $7,855,906  $7,744,031 
Tangible common stockholders’ equity to tangible assets 7.91% 8.25% 8.85% 9.71% 9.73%



ACQUISITION DATE - FAIR VALUE BALANCE SHEET

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Two River, net of the total consideration paid (in thousands):

 At January 1, 2020
 Two River
Book Value
 Purchase
Accounting
Adjustments
 Estimated
Fair Value
Total purchase price:    $197,050 
Assets acquired:     
Cash and cash equivalents$51,102  $  $51,102 
Securities62,832  1,549  64,381 
Loans940,885  (813) 940,072 
Accrued interest receivable2,382    2,382 
Bank owned life insurance22,440    22,440 
Deferred tax asset5,201  (1,623) 3,578 
Other assets18,662  (2,706) 15,956 
Core deposit intangible  12,130  12,130 
Total assets acquired1,103,504  8,537  1,112,041 
Liabilities assumed:     
Deposits(939,132) (2,618) (941,750)
Other liabilities(58,935) (71) (59,006)
Total liabilities assumed(998,067) (2,689) (1,000,756)
Net assets acquired$105,437  $5,848  $111,285 
Goodwill recorded in the merger    $85,765 

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to recorded carrying values may be required.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Country Bank, net of the total consideration paid (in thousands):

 At January 1, 2020
 Country Bank Book Value Purchase
Accounting
Adjustments
 Estimated
Fair Value
Total purchase price:    $112,836 
Assets acquired:     
Cash and cash equivalents$20,799  $  $20,799 
Securities144,460  39  144,499 
Loans614,285  4,123  618,408 
Accrued interest receivable1,779    1,779 
Deferred tax asset(3,254) (833) (4,087)
Other assets10,327  (1,132) 9,195 
Core deposit intangible  2,117  2,117 
Total assets acquired788,396  4,314  792,710 
Liabilities assumed:     
Deposits(649,399) (3,254) (652,653)
Other liabilities(69,244) 2,004  (67,240)
Total liabilities assumed(718,643) (1,250) (719,893)
Net assets acquired$69,753  $3,064  $72,817 
Goodwill recorded in the merger    $40,019 

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to recorded carrying values may be required.


Company Contact:
  
Michael J. Fitzpatrick
Chief Financial Officer
OceanFirst Financial Corp.
Tel: (732) 240-4500, ext. 7506
Email: Mfitzpatrick@oceanfirst.com

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