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 [phone]. For those unable to participate in the conference call, a replay will be available. To access the replay, dial [phone], 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):
Commercial	3.97	%		$	154,700			$	169,093			$	293,820			$	219,269			$	126,578
Residential real estate	3.27			212,107				181,800				223,032				105,396				189,403
Home equity loans and lines	4.29			10,301				8,282				8,429				3,049				3,757
Total	3.59	%		$	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:
Commercial	3.64	%		$	187,747			$	216,979		(2	)	$	266,882				$	264,938			$	315,405
Residential real estate	3.29			219,325				242,137					148,675					226,492				156,308
Home equity loans and lines	4.33			10,966				12,128					10,666					12,961				10,498
Total	3.47	%		$	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.

DEPOSITS	At
	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 checking	3,317,296				3,022,887				2,647,487				2,539,428				2,400,331
Money market deposit	691,872				680,199				620,145				578,147				593,457
Savings	1,471,554				1,456,931				1,420,628				898,174				901,168
Time deposits	1,561,767				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 QUALITY	September 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-occupied	11,365				4,582				4,219				4,811				4,537
Commercial real estate - investor	2,978				5,274				3,384				2,917				4,073
Residential real estate	11,518				6,568				5,920				7,181				5,953
Home equity loans and lines	3,448				3,034				2,533				2,733				2,683
Total non-performing loans held-for-investment	29,895				21,044				16,263				17,849				17,453
Non-performing loans held-for-sale	67,489				—				—				—				—
Other real estate owned	106				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
Performing	12,777				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-investment	188.49				182.99				182.22				94.41				95.32
Non-performing loans held-for-investment as a percent of total loans receivable	0.37				0.25				0.21				0.29				0.29
Non-performing assets as a percent of total assets	0.84				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-OFFS	For 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 loans	416				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 estate	314				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)
Commercial	5,554,897				58,639				4.20			5,409,238				59,460				4.42			3,350,868				42,104				4.99
Residential real estate	2,462,513				23,091				3.75			2,507,076				23,870				3.81			2,225,837				21,527				3.87
Home equity loans and lines	311,802				3,330				4.25			328,144				3,853				4.72			335,691				4,678				5.53
Other consumer	67,497				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, net	8,350,797				85,933				4.09			8,295,622				88,347				4.28			6,008,325				69,715				4.60
Total interest-earning assets	10,268,834				92,962				3.60			9,780,417				95,877				3.94			7,088,817				76,887				4.30
Non-interest-earning assets	1,353,135											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 market	675,841				571				0.34			652,485				705				0.43			597,896				1,208				0.80
Savings	1,460,232				296				0.08			1,445,953				414				0.12			905,605				300				0.13
Time deposits	1,606,632				5,876				1.45			1,623,890				6,386				1.58			920,032				3,998				1.72
Total	7,032,024				11,370				0.64			6,688,959				12,305				0.74			4,891,412				9,817				0.80
FHLB advances	343,412				1,470				1.70			476,598				1,946				1.64			394,124				2,208				2.22
Securities sold under agreements to repurchase	144,720				174				0.48			131,382				138				0.42			62,296				73				0.46
Other borrowings	246,903				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 deposits	2,209,241											2,018,044											1,396,259
Non-interest-bearing liabilities	162,987											124,997											88,868
Total liabilities	10,139,287											9,660,928											6,929,537
Stockholders’ equity	1,482,682											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)
Commercial	5,309,275				177,973				4.48			3,291,189				126,091				5.12
Residential real estate	2,480,932				71,590				3.85			2,169,611				65,260				4.01
Home equity loans and lines	326,263				11,253				4.61			345,294				14,041				5.44
Other consumer	77,085				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, net	8,166,369				264,224				4.32			5,909,056				209,633				4.74
Total interest-earning assets	9,718,739				287,046				3.95			7,033,965				231,719				4.40
Non-interest-earning assets	1,306,568											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 market	647,566				2,316				0.48			610,153				3,676				0.81
Savings	1,436,594				2,266				0.21			908,457				887				0.13
Time deposits	1,563,449				18,470				1.58			928,903				11,312				1.63
Total	6,670,702				37,611				0.75			4,949,173				28,218				0.76
FHLB Advances	483,267				6,239				1.72			379,786				6,367				2.24
Securities sold under agreements to repurchase	119,495				408				0.46			63,267				192				0.41
Other borrowings	195,754				7,688				5.25			98,562				4,325				5.87
Total interest-bearing liabilities	7,469,218				51,946				0.93			5,490,788				39,102				0.95
Non-interest-bearing deposits	1,971,622											1,303,447
Non-interest-bearing liabilities	133,928											75,988
Total liabilities	9,574,768											6,870,223
Stockholders’ equity	1,450,539											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
Securities	62,832				1,549				64,381
Loans	940,885				(813		)		940,072
Accrued interest receivable	2,382				—				2,382
Bank owned life insurance	22,440				—				22,440
Deferred tax asset	5,201				(1,623		)		3,578
Other assets	18,662				(2,706		)		15,956
Core deposit intangible	—				12,130				12,130
Total assets acquired	1,103,504				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
Securities	144,460				39				144,499
Loans	614,285				4,123				618,408
Accrued interest receivable	1,779				—				1,779
Deferred tax asset	(3,254		)		(833		)		(4,087		)
Other assets	10,327				(1,132		)		9,195
Core deposit intangible	—				2,117				2,117
Total assets acquired	788,396				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: [phone], ext. 7506
Email: [e-mail]