OceanFirst Financial Corp. Announces First Quarter Financial Results

RED BANK, New Jersey, April 29, 2021 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced that net income available to common stockholders was $31.7 million, or $0.53 per diluted share, for the quarter ended March 31, 2021 as compared to $16.5 million, or $0.27 per diluted share, for the corresponding prior year period. The current quarter results benefited from the modest release of credit loss expense and improved levels of core operating expenses, which resulted in return on average assets of 1.12%, return on average tangible stockholders’ equity of 13.22%, and efficiency ratio of 54.73%, as compared to 0.64%, 7.50%, and 67.28%, respectively, in the prior year period.

Core earnings for the quarter ended March 31, 2021 amounted to $26.5 million, or $0.44 per diluted share. Core return on average assets, core return on average tangible stockholders’ equity, and core efficiency ratio were 0.94%, 11.04%, and 58.37%, respectively, for the quarter ended March 31, 2021. Core earnings is a non-GAAP (“generally accepted accounting principles”) measure. For the periods presented they exclude merger related expenses, branch consolidation expenses, net (gain) loss on equity investments, Federal Home Loan Bank (“FHLB”) advance prepayment fees, gain on sale of Paycheck Protection Program (“PPP”) loans, 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”) (collectively referred to as “non-core” operations). Non-core operations had a favorable impact of $5.2 million, net of tax, for the quarter ended March 31, 2021. Refer to “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:

• Loan and Deposit Growth: Total loan growth for the quarter was $116.4 million, reflecting record loan originations of $747.8 million. Deposits increased $75.2 million, as compared to the prior linked quarter.
• Operations: The Company continues to expand its commercial banking activities with the hiring of nine commercial bankers. The additional lenders are expected to help fuel organic loan growth throughout the remainder of the year. Additionally, the Company consolidated four branches in April 2021 bringing the total number of branches consolidated to 57 over the past five years. These consolidations will increase the average branch size to $164 million and will help further offset operating expenses in the second quarter.
• Net Interest Margin: Net interest margin for the quarter was 2.93%, as compared to 2.97% in the prior linked quarter. Excluding purchase accounting accretion and prepayment fees, net interest margin expanded four basis points, to 2.75% in the current quarter, from 2.71% in the prior linked quarter, driven by a decrease in the cost of deposits to 0.37% from 0.45%, respectively.
  

"Strong first quarter results continued our earnings momentum through decreased expenses, core margin expansion, record loan originations, and strong deposit growth. The Bank’s credit risk indicators demonstrated strong asset quality while broader economic indicators are strengthening; the combination of which supported a modest negative credit provision,” said Chairman and Chief Executive Officer, Christopher D. Maher about the Company’s results. Mr. Maher added, “We remain focused on organic loan production, and the continued additions of experienced commercial bankers to drive our growth initiatives.” Mr. Maher also remarked on the COVID-19 pandemic, "We are so appreciative of our employees who for over a year have continued to persevere through the unprecedented times of the pandemic and provide uninterrupted essential banking services to our customers. While we are encouraged by progress with vaccine distribution and transmission trends in many communities, we know this is not behind us and we must remain vigilant in our efforts as our customers and neighbors continue to count on us.”

The Company’s Board of Directors declared its ninety-seventh consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on May 21, 2021 to common stockholders of record on May 10, 2021. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depositary share, representing 1/40th interest in the Series A Preferred Stock. This dividend will be paid on May 17, 2021 to preferred stockholders of record on April 30, 2021.

Results of Operations
Net income was favorably impacted by $5.2 million, net of tax, and adversely impacted by $10.4 million, net of tax, of non-core operations for the quarters ended March 31, 2021 and 2020, respectively. Core earnings for the quarter ended March 31, 2021 were $26.5 million, or $0.44 per diluted share, a decrease from core earnings of $27.0 million, or $0.45 per diluted share for the corresponding prior year period. Core earnings for quarter ended March 31, 2021 increased from $23.2 million, or $0.39 per diluted share for the prior linked quarter.

Net Interest Income and Margin
Net interest income for the quarter ended March 31, 2021 decreased to $73.6 million, as compared to $79.6 million for the same prior year period, reflecting a reduction in net interest margin, partly offset by an increase in interest-earning assets. Average interest-earning assets increased by $1.08 billion for the quarter ended March 31, 2021, as compared to the same prior year period, primarily concentrated in interest-earning deposits. Average loans receivable, net of allowance for loan credit losses, decreased by $120.9 million for the quarter ended March 31, 2021, as compared to the same prior year period. Net interest margin for the quarter ended March 31, 2021 decreased to 2.93% from 3.52% for the same prior year period. The net interest margin compression was primarily due to the excess balance sheet liquidity, driven by a strategic decision to accumulate liquidity entering the economic downturn, the lower interest rate environment, and to a lesser extent, the origination of low-yielding PPP loans. For the quarter ended March 31, 2021, the cost of average interest-bearing liabilities decreased to 0.60%, from 1.05% for the corresponding prior year period. The total cost of deposits (including non-interest bearing deposits) was 0.37% for the quarter ended March 31, 2021, compared to 0.70% for the same prior year period.

Net interest income for the quarter ended March 31, 2021 decreased by $4.2 million, as compared to the prior linked quarter, while the net interest margin decreased to 2.93%, compared to 2.97%. Excluding the impact of purchase accounting accretion and prepayment fees, the net interest margin increased to 2.75% from 2.71%. The yield on average interest-earning assets decreased to 3.38% from 3.53% in the prior linked quarter, primarily due to lower purchase accounting accretion and a reduction in average loans receivable, net. The total cost of interest-bearing liabilities was 0.60% for the quarter ended March 31, 2021, as compared to 0.74% for the quarter ended December 31, 2020, due to lower deposit costs and the repayment of all FHLB advances in the prior quarter.

Benefit/Provision for Credit Losses
For the quarter ended March 31, 2021, the benefit for credit loss expense was $620,000, as compared to a provision for credit loss expense of $10.0 million for the corresponding prior year period, and $4.1 million in the prior linked quarter. The benefit for credit loss expense for the quarter was significantly influenced by an improved economic outlook with expectations for strong GDP growth and improved employment levels.

Net loan recoveries were $280,000 for the quarter ended March 31, 2021, as compared to net loan charge-offs of $1.2 million for the corresponding prior year period, and $2.9 million for the prior linked quarter. Non-performing loans totaled $34.1 million at March 31, 2021, as compared to $36.4 million at December 31, 2020 and $16.3 million at March 31, 2020.

Non-interest Income
For the quarter ended March 31, 2021, other income increased to $20.8 million, as compared to $13.7 million for the corresponding prior year period. Other income for the quarter ended March 31, 2021 included $8.3 million of net gain on equity investments related to non-core operations. The net gain on equity investments was primarily a result of several programs implemented by the Company in 2020 to invest excess liquidity in high quality equity securities with attractive dividend yields which were sold in January 2021. Excluding this item, the decrease in other income for the quarter ended March 31, 2021, as compared to the corresponding prior year period, was primarily due to decreases in commercial loan swap income of $2.9 million and fees and service charges of $1.1 million, partially offset by an increase in gain on sale of loans of $1.7 million, and referral fees of $662,000 related to the origination of PPP loans.

Excluding the non-core operations, other income for the quarter ended March 31, 2021, increased $1.5 million, as compared to the prior linked quarter, primarily due to increases in commercial loan swap income of $1.0 million, gain on sale of loans of $669,000, and the referral fees on PPP loans of $662,000.

Non-interest Expense
Operating expenses decreased to $51.7 million for the quarter ended March 31, 2021, as compared to $62.8 million in the same prior year period. Operating expenses for the quarter ended March 31, 2021 included $1.4 million of expenses related to non-core operations, as compared to $11.1 million in the same prior year period. Excluding the impact of non-core operations, the $1.4 million decrease in operating expenses for the quarter ended March 31, 2021 was primarily due to decreases in compensation and benefits expense of $1.5 million and occupancy and equipment of $580,000, partially offset by an increase in federal deposit insurance expense of $1.2 million.

Excluding expenses related to non-core operations, operating expenses for the quarter ended March 31, 2021, decreased $2.8 million, as compared to the prior linked quarter. The change was due to decreases in professional fees of $1.1 million and data processing expense of $593,000.

Income Tax Expense
The provision for income taxes was $10.7 million for the quarter ended March 31, 2021, as compared to $4.0 million for the same prior year period, and $10.4 million for the prior linked quarter. The effective tax rate was 24.6% for the quarter ended March 31, 2021, as compared to 19.7% for the same prior year period, and 24.0% for the prior linked quarter. The higher effective tax rate for the current year period, as compared to the prior year period, is primarily due to the impact of a New Jersey tax code change and a higher allocation of taxable income to New York.

Financial Condition
Total assets increased $129.2 million, to $11.58 billion at March 31, 2021, from $11.45 billion at December 31, 2020. Cash and due from banks decreased $98.5 million, to $1.17 billion at March 31, 2021, from $1.27 billion at December 31, 2020. Total debt securities increased by $230.3 million at March 31, 2021, as compared to December 31, 2020, which was partly offset by a decrease in equity investments of $56.9 million due to sales. Loans receivable, net of allowance for loan credit losses, increased by $115.7 million, to $7.82 billion at March 31, 2021, from $7.70 billion at December 31, 2020.

Deposits increased $75.2 million, to $9.50 billion at March 31, 2021, from $9.43 billion at December 31, 2020. The loan-to-deposit ratio at March 31, 2021 was 82.8%, as compared to 82.3% at December 31, 2020.

Stockholders’ equity increased to $1.50 billion at March 31, 2021, as compared to $1.48 billion at December 31, 2020. For the quarter ended March 31, 2021, the Company repurchased 500,000 shares under its stock repurchase program at a weighted average cost of $19.94, and there were 1.5 million shares available for repurchase at March 31, 2021 under the existing repurchase program. Tangible common equity per common share increased to $15.26 at March 31, 2021, as compared to $14.98 at December 31, 2020.

Asset Quality
The Company’s non-performing loans decreased to $34.1 million at March 31, 2021, as compared to $36.4 million at December 31, 2020. Non-performing loans do not include $44.4 million of purchased with credit deterioration (“PCD”) loans from prior bank acquisitions.

The Company’s allowance for loan credit losses was 0.76% of total loans at March 31, 2021 as compared to 0.78% at December 31, 2020. The allowance for loan credit losses does not reflect the net unamortized credit and PCD marks of $25.7 million. The allowance for loan credit losses plus the unamortized credit and PCD marks amounted to $85.7 million, or 1.09% of loans. The allowance for loan credit losses as a percentage of non-performing loans was 175.7% at March 31, 2021, as compared to 166.8% at December 31, 2020.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with 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 the 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, April 30, 2021 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 10153816 from one hour after the end of the call until July 29, 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 $11.6 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, 2020, 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.

 

Company Contact:
  
Michael J. Fitzpatrick
Chief Financial Officer
OceanFirst Financial Corp.
Tel: [phone], ext. 7506
Email: [e-mail]

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

		March 31, 2021				December 31, 2020				March 31, 2020
		(Unaudited)								(Unaudited)
Assets
Cash and due from banks		$	1,173,665			$	1,272,134			$	256,470
Debt securities available-for-sale, at estimated fair value		268,511				183,302				153,738
Debt securities held-to-maturity, net of allowance for securities credit losses of $1,717 at March 31, 2021, $1,715 at December 31, 2020 and $2,529 at March 31, 2020 (estimated fair value of $1,099,745 at March 31, 2021, $968,466 at December 31, 2020 and $928,582 at March 31, 2020)		1,082,326				937,253				914,255
Equity investments, at estimated fair value		50,159				107,079				14,409
Restricted equity investments, at cost		52,199				51,705				81,005
Loans receivable, net of allowance for loan credit losses of $59,976 at March 31, 2021, $60,735 at December 31, 2020 and $29,635 at March 31, 2020		7,820,590				7,704,857				7,913,541
Loans held-for-sale		43,175				45,524				17,782
Interest and dividends receivable		32,819				35,269				27,930
Other real estate owned		106				106				484
Premises and equipment, net		110,093				107,094				104,560
Bank owned life insurance		264,548				265,253				261,270
Assets held for sale		5,340				5,782				3,785
Goodwill		500,319				500,319				500,093
Core deposit intangible		22,273				23,668				28,276
Other assets		151,349				208,968				211,476
Total assets		$	11,577,472			$	11,448,313			$	10,489,074
Liabilities and Stockholders’ Equity
Deposits		$	9,502,812			$	9,427,616			$	7,892,067
Federal Home Loan Bank advances		—				—				825,824
Securities sold under agreements to repurchase with retail customers		134,465				128,454				90,175
Other borrowings		228,176				235,471				120,213
Advances by borrowers for taxes and insurance		20,980				17,296				24,931
Other liabilities		192,320				155,346				126,030
Total liabilities		10,078,753				9,964,183				9,079,240
Total stockholders’ equity		1,498,719				1,484,130				1,409,834
Total liabilities and stockholders’ equity		$	11,577,472			$	11,448,313			$	10,489,074

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

		For the Three Months Ended,
		March 31, 2021				December 31, 2020				March 31, 2020
		|-------------------- (Unaudited) --------------------|
Interest income:
Loans		$	77,908			$	84,997			$	89,944
Debt securities		5,355				5,539				6,772
Equity investments and other		1,611				2,026				1,491
Total interest income		84,874				92,562				98,207
Interest expense:
Deposits		8,496				10,679				13,936
Borrowed funds		2,774				4,032				4,626
Total interest expense		11,270				14,711				18,562
Net interest income		73,604				77,851				79,645
Credit loss (benefit) expense		(620		)		4,072				9,969
Net interest income after credit loss (benefit) expense		74,224				73,779				69,676
Other income:
Bankcard services revenue		3,052				3,098				2,481
Trust and asset management revenue		599				492				515
Fees and service charges		3,737				3,950				4,873
Net gain on sales of loans		1,916				6,348				173
Net gain on equity investments		8,287				24,487				155
Net (loss) gain from other real estate operations		(8		)		23				(150		)
Income from bank owned life insurance		1,415				1,798				1,575
Commercial loan swap income		1,111				116				4,050
Other		726				308				25
Total other income		20,835				40,620				13,697
Operating expenses:
Compensation and employee benefits		28,366				27,323				29,885
Occupancy		5,061				4,968				5,276
Equipment		1,578				1,938				1,943
Marketing		434				632				769
Federal deposit insurance and regulatory assessments		1,864				1,859				667
Data processing		4,031				4,624				4,177
Check card processing		1,372				1,507				1,276
Professional fees		2,837				3,908				2,302
Other operating expense		3,353				4,768				3,802
FHLB advance prepayment fees		—				13,333				—
Amortization of core deposit intangible		1,395				1,526				1,578
Branch consolidation expense		1,011				3,336				2,594
Merger related expenses		381				1,194				8,527
Total operating expenses		51,683				70,916				62,796
Income before provision for income taxes		43,376				43,483				20,577
Provision for income taxes		10,679				10,419				4,044
Net income		32,697				33,064				16,533
Dividends on preferred shares		1,004				1,004				—
Net income available to common stockholders		$	31,693			$	32,060			$	16,533
Basic earnings per share		$	0.53			$	0.53			$	0.28
Diluted earnings per share		$	0.53			$	0.54			$	0.27
Average basic shares outstanding		59,840				59,961				59,876
Average diluted shares outstanding		60,101				60,057				60,479

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

LOANS RECEIVABLE				At
				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020
Commercial:
Commercial and industrial				$	498,245			$	470,656			$	599,188			$	910,762			$	502,760
Commercial real estate - owner-occupied				1,066,351				1,145,065				1,176,529				1,199,742				1,220,983
Commercial real estate - investor				3,804,351				3,491,464				3,453,276				3,449,160				3,331,662
Total commercial				5,368,947				5,107,185				5,228,993				5,559,664				5,055,405
Consumer:
Residential real estate				2,189,348				2,309,459				2,407,178				2,426,277				2,458,641
Home equity loans and lines				267,591				285,016				301,712				320,627				335,624
Other consumer				46,651				54,446				63,095				71,721				82,920
Total consumer				2,503,590				2,648,921				2,771,985				2,818,625				2,877,185
Total loans				7,872,537				7,756,106				8,000,978				8,378,289				7,932,590
Deferred origination costs (fees), net				8,029				9,486				(1,238		)		(4,300		)		10,586
Allowance for loan credit losses				(59,976		)		(60,735		)		(56,350		)		(38,509		)		(29,635		)
Loans receivable, net				$	7,820,590			$	7,704,857			$	7,943,390			$	8,335,480			$	7,913,541
Mortgage loans serviced for others				$	74,037			$	95,789			$	88,210			$	101,840			$	51,399
	At March 31, 2021 Average Yield
Loan pipeline (1):
Commercial	3.76	%		$	154,946			$	210,024			$	154,700			$	169,093			$	293,820
Residential real estate	3.15			178,352				151,152				212,107				181,800				223,032
Home equity loans and lines	3.96			11,031				6,630				10,301				8,282				8,429
Total	3.45	%		$	344,329			$	367,806			$	377,108			$	359,175			$	525,281

	For the Three Months Ended
	March 31, 2021								December 31, 2020					September 30, 2020				June 30, 2020					March 31, 2020
	Average Yield
Loan originations:
Commercial	3.21	%		$	547,591		(2	)	$	173,715				$	187,747			$	216,979		(2	)	$	266,882
Residential real estate	3.10			189,942					222,780					219,325				242,137					148,675
Home equity loans and lines	4.14			10,278					13,435					10,966				12,128					10,666
Total	3.20	%		$	747,811				$	409,930				$	418,038			$	471,244				$	426,223
Loans sold				$	67,500				$	56,126		(3	)	$	56,722			$	104,600		(3	)	$	7,500		(3	)

(1)	Loan pipeline includes loans approved but not funded.
(2)	Excludes loans originated through the PPP of $60 million and $504 million for the three months ended March 31, 2021 and June 30, 2020, respectively.
(3)	Excludes the sale of PPP loans of $298.1 million, higher risk commercial loans of $64.8 million, net of charge-offs and under-performing residential and home equity loans and lines of $10.5 million, net of charge-offs, for the three months ended December 31, 2020, the sale of under-performing commercial loans of $4.9 million for the three months ended June 30, 2020, and the sale of under-performing residential loans of $4.0 million and commercial loans of $5.1 million for the three months ended March 31, 2020.

 

DEPOSITS	At
	March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020
Type of Account
Non-interest-bearing	$	2,417,935			$	2,133,195			$	2,240,799			$	2,161,766			$	1,783,216
Interest-bearing checking	3,623,132				3,646,866				3,317,296				3,022,887				2,647,487
Money market deposit	782,459				783,521				691,872				680,199				620,145
Savings	1,568,528				1,491,251				1,471,554				1,456,931				1,420,628
Time deposits	1,110,758				1,372,783				1,561,767				1,645,971				1,420,591
	$	9,502,812			$	9,427,616			$	9,283,288			$	8,967,754			$	7,892,067

OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITY	March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020
Non-performing loans held-for-investment:
Commercial and industrial	$	1,616			$	1,551			$	586			$	1,586			$	207
Commercial real estate - owner-occupied	11,676				13,054				11,365				4,582				4,219
Commercial real estate - investor	12,366				10,660				2,978				5,274				3,384
Residential real estate	6,398				8,642				11,518				6,568				5,920
Home equity loans and lines	2,072				2,503				3,448				3,034				2,533
Total non-performing loans held-for-investment	34,128				36,410				29,895				21,044				16,263
Non-performing loans held-for-sale	—				—				67,489				—				—
Other real estate owned	106				106				106				248				484
Total non-performing assets	$	34,234			$	36,516			$	97,490			$	21,292			$	16,747
PCD loans (1)	$	44,421			$	48,488			$	56,422			$	61,694			$	59,783
Delinquent loans 30 to 89 days	$	16,477			$	34,683			$	13,753			$	13,640			$	48,905
Troubled debt restructurings:
Non-performing (included in total non-performing loans above)	$	4,785			$	5,158			$	9,866			$	6,189			$	6,249
Performing	11,466				12,009				12,777				16,365				16,102
Total troubled debt restructurings	$	16,251			$	17,167			$	22,643			$	22,554			$	22,351
Allowance for loan credit losses	$	59,976			$	60,735			$	56,350			$	38,509			$	29,635
Allowance for loan credit losses as a percent of total loans receivable (2)	0.76		%		0.78		%		0.70		%		0.46		%		0.37		%
Allowance for loan credit losses as a percent of total non-performing loans held-for-investment	175.74				166.81				188.49				182.99				182.22
Non-performing loans held-for-investment as a percent of total loans receivable	0.43				0.47				0.37				0.25				0.21
Non-performing assets as a percent of total assets	0.30				0.32				0.84				0.19				0.16

(1)	PCD loans are not included in non-performing loans held-for-investment or delinquent loans totals.
(2)	The loans acquired from prior bank acquisitions were recorded at fair value. The net credit mark on these loans, not reflected in the allowance for loan credit losses, was $25,695, $27,951, $31,617, $35,439 and $38,272 at March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020 respectively.

NET RECOVERIES (CHARGE-OFFS)	For the Three Months Ended
	March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020
Net recoveries (charge-offs):
Loan charge-offs	$	(356	)		$	(3,220	)		$	(15,411	)		$	(169	)		$	(1,384	)
Recoveries on loans	636				278				416				401				230
Net loan recoveries (charge-offs)	$	280			$	(2,942	)	(1)	$	(14,995	)	(2)	$	232			$	(1,154	)	(3)
Net loan recoveries (charge-offs) to average total loans (annualized)	NM*				0.15		%		0.71		%		NM*				0.06		%
Net loan recoveries (charge-offs) detail:
Commercial	$	126			$	(775	)		$	(14,801	)		$	30			$	59
Residential real estate	(203		)		(1,731		)		314				212				(1,112		)
Home equity loans and lines	352				(451		)		(490		)		(3		)		(36		)
Other consumer	5				15				(18		)		(7		)		(65		)
Net loan recoveries (charge-offs)	$	280			$	(2,942	)	(1)	$	(14,995	)	(2)	$	232			$	(1,154	)	(3)

(1)	Included in net loan charge-offs for the three months ended December 31, 2020 is $2.3 million relating to under-performing residential and consumer loans sold.
(2)	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.
(3)	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
	March 31, 2021											December 31, 2020											March 31, 2020
(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	$	1,138,911			$	277			0.10	%		$	1,223,472			$	341			0.11	%		$	63,726			$	342			2.16	%
Securities (1)	1,311,683				6,689				2.07			1,209,543				7,224				2.38			1,186,535				7,921				2.68
Loans receivable, net (2)
Commercial	5,127,940				53,670				4.24			5,271,633				58,776				4.44			4,960,991				59,875				4.85
Residential real estate	2,327,838				20,069				3.45			2,420,494				21,530				3.56			2,473,410				24,628				3.98
Home equity loans and lines	275,943				3,523				5.18			293,746				3,930				5.32			339,003				4,070				4.83
Other consumer	50,964				646				5.14			58,174				761				5.20			87,478				1,371				6.30
Allowance for loan credit losses, net of deferred loan fees	(52,887		)		—				—			(51,682		)		—				—			(10,220		)		—				—
Loans receivable, net	7,729,798				77,908				4.09			7,992,365				84,997				4.23			7,850,662				89,944				4.61
Total interest-earning assets	10,180,392				84,874				3.38			10,425,380				92,562				3.53			9,100,923				98,207				4.34
Non-interest-earning assets	1,259,109											1,322,112											1,231,886
Total assets	$	11,439,501										$	11,747,492										$	10,332,809
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking	$	3,711,976			4,311				0.47	%		$	3,601,814			4,836				0.53	%		$	2,807,793			$	5,132			0.74	%
Money market	757,634				367				0.20			766,866				586				0.30			614,062				1,040				0.68
Savings	1,522,603				179				0.05			1,489,853				240				0.06			1,403,338				1,555				0.45
Time deposits	1,221,123				3,639				1.21			1,437,770				5,017				1.39			1,459,348				6,209				1.71
Total	7,213,336				8,496				0.48			7,296,303				10,679				0.58			6,284,541				13,936				0.89
FHLB Advances	—				—				—			204,880				779				1.51			631,329				2,824				1.80
Securities sold under agreements to repurchase	129,444				95				0.30			143,385				154				0.43			82,105				95				0.47
Other borrowings	228,368				2,679				4.76			242,030				3,099				5.09			118,851				1,707				5.78
Total borrowings	357,812				2,774				3.14			590,295				4,032				2.72			832,285				4,626				2.24
Total interest-bearing liabilities	7,571,148				11,270				0.60			7,886,598				14,711				0.74			7,116,826				18,562				1.05
Non-interest-bearing deposits	2,212,273											2,209,532											1,687,582
Non-interest-bearing liabilities	160,500											176,274											113,477
Total liabilities	9,943,921											10,272,404											8,917,885
Stockholders’ equity	1,495,580											1,475,088											1,414,924
Total liabilities and equity	$	11,439,501										$	11,747,492										$	10,332,809
Net interest income					$	73,604										$	77,851										$	79,645
Net interest rate spread (3)									2.78	%										2.79	%										3.29	%
Net interest margin (4)									2.93	%										2.97	%										3.52	%
Total cost of deposits (including non-interest-bearing deposits)									0.37	%										0.45	%										0.70	%

⁽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 securities credit losses.
⁽²⁾ Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and allowance for loan 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)

		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Selected Financial Condition Data:
Total assets		$	11,577,472			$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074
Debt securities available-for-sale, at estimated fair value		268,511				183,302				169,634				153,239				153,738
Debt securities held-to-maturity, net of allowance for securities credit losses		1,082,326				937,253				871,688				867,959				914,255
Equity investments, at estimated fair value		50,159				107,079				63,846				13,830				14,409
Restricted equity investments, at cost		52,199				51,705				67,505				68,091				81,005
Loans receivable, net of allowance for loan credit losses		7,820,590				7,704,857				7,943,390				8,335,480				7,913,541
Deposits		9,502,812				9,427,616				9,283,288				8,967,754				7,892,067
Federal Home Loan Bank advances		—				—				343,452				343,392				825,824
Securities sold under agreements to repurchase and other borrowings		362,641				363,925				389,764				399,661				210,388
Stockholders’ equity		1,498,719				1,484,130				1,461,714				1,476,434				1,409,834

		For the Three Months Ended,
		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Selected Operating Data:
Interest income		$	84,874			$	92,562			$	92,962			$	95,877			$	98,207
Interest expense		11,270				14,711				16,174				17,210				18,562
Net interest income		73,604				77,851				76,788				78,667				79,645
Credit loss (benefit) expense		(620		)		4,072				35,714				9,649				9,969
Net interest income after credit loss (benefit) expense		74,224				73,779				41,074				69,018				69,676
Other income (excluding net gain (loss) on equity investments and gain on sale of PPP loans)		12,548				11,032				11,755				11,430				13,697
Net gain (loss) on equity investments		8,287				24,487				(3,576		)		—				—
Gain on sale of PPP loans		—				5,101				—				—				—
Operating expenses (excluding FHLB advance prepayment fees, branch consolidation and merger related expenses)		50,291				53,053				52,801				51,075				51,675
FHLB advance prepayment fees		—				13,333				—				924				—
Branch consolidation expense		1,011				3,336				830				863				2,594
Merger related expenses		381				1,194				3,156				3,070				8,527
Income (loss) before provision (benefit) for income taxes		43,376				43,483				(7,534		)		24,516				20,577
Provision (benefit) for income taxes		10,679				10,419				(2,608		)		5,878				4,044
Net income (loss)		$	32,697			$	33,064			$	(4,926	)		$	18,638			$	16,533
Net income (loss) available to common stockholders		$	31,693			$	32,060			$	(6,019	)		$	18,638			$	16,533
Diluted earnings (loss) per share		$	0.53			$	0.54			$	(0.10	)		$	0.31			$	0.27
Net accretion/amortization of purchase accounting adjustments included in net interest income		$	3,650			$	6,186			$	4,364			$	5,536			$	5,533

		At or For the Three Months Ended
		March 31,			December 31,			September 30,			June 30,			March 31,
		2021			2020			2020			2020			2020
Selected Financial Ratios and Other Data(1):
Performance Ratios (Annualized):
Return on average assets (2)		1.12	%		1.09	%		(0.21	)%		0.67	%		0.64	%
Return on average tangible assets (2) (3)		1.18			1.14			(0.22	)		0.71			0.68
Return on average stockholders’ equity (2)		8.59			8.65			(1.61	)		5.16			4.70
Return on average tangible stockholders’ equity (2) (3)		13.22			13.43			(2.51	)		8.10			7.50
Stockholders’ equity to total assets		12.95			12.96			12.55			13.01			13.44
Tangible stockholders’ equity to tangible assets (3)		8.83			8.79			8.41			8.77			8.85
Tangible common equity to tangible assets (3)		8.33			8.28			7.91			8.25			8.85
Net interest rate spread		2.78			2.79			2.77			3.02			3.29
Net interest margin		2.93			2.97			2.97			3.24			3.52
Operating expenses to average assets (2)		1.83			2.40			1.94			2.02			2.44
Efficiency ratio (2) (4)		54.73			59.86			66.83			62.08			67.28
Loans to deposits		82.84			82.27			86.19			93.43			100.51

		At or For the Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Trust and Asset Management:
Wealth assets under administration		$	274,172			$	245,175			$	232,292			$	224,042			$	173,856
Nest Egg		101,701				93,237				80,472				57,383				43,528
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		24.84				24.57				24.21				24.47				23.38
Tangible common equity per common share at end of period (3)		15.26				14.98				14.58				14.79				14.62
Common shares outstanding at end of period		60,329,504				60,392,043				60,378,120				60,343,077				60,311,717
Preferred shares outstanding at end of period		57,370				57,370				57,370				57,370				—
Number of full-service customer facilities:		62				62				62				62				75
Quarterly Average Balances
Total securities		$	1,311,683			$	1,209,543			$	1,112,174			$	1,130,779			$	1,186,535
Loans receivable, net		7,729,798				7,992,365				8,350,797				8,295,622				7,850,662
Total interest-earning assets		10,180,392				10,425,380				10,268,834				9,780,417				9,100,923
Total assets		11,439,501				11,747,439				11,621,969				11,114,586				10,332,809
Interest-bearing transaction deposits		5,992,213				5,858,533				5,425,392				5,065,069				4,825,193
Time deposits		1,221,123				1,437,770				1,606,632				1,623,890				1,459,348
Total borrowed funds		357,812				590,295				735,035				828,928				832,285
Total interest-bearing liabilities		7,571,148				7,886,598				7,767,059				7,517,887				7,116,826
Non-interest bearing deposits		2,212,273				2,209,532				2,209,241				2,018,044				1,687,582
Stockholders’ equity		1,495,580				1,475,088				1,482,682				1,453,658				1,414,924
Total deposits		9,425,609				9,505,835				9,241,265				8,707,003				7,972,123
Quarterly Yields
Total securities		2.07		%		2.38		%		2.43		%		2.64		%		2.68		%
Loans receivable, net		4.09				4.23				4.09				4.28				4.61
Total interest-earning assets		3.38				3.53				3.60				3.94				4.34
Interest-bearing transaction deposits		0.33				0.38				0.40				0.47				0.64
Time deposits		1.21				1.39				1.45				1.58				1.71
Total borrowed funds		3.14				2.72				2.60				2.38				2.24
Total interest-bearing liabilities		0.60				0.74				0.83				0.92				1.05
Net interest spread		2.78				2.79				2.77				3.02				3.29
Net interest margin		2.93				2.97				2.97				3.24				3.52
Total deposits		0.37				0.45				0.49				0.57				0.70

⁽¹⁾ With the exception of end of quarter ratios, all ratios are based on average daily balances.
⁽²⁾ Performance ratios for each period are presented on a GAAP basis and include non-core operations. Refer to “Non-GAAP Reconciliation.”
⁽³⁾ Tangible stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible. Tangible common equity excludes goodwill, core deposit intangible and 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
		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Core Earnings:
Net income (loss) available to common stockholders (GAAP)		$	31,693			$	32,060			$	(6,019	)		$	18,638			$	16,533
Add (less) non-recurring and non-core items:
Merger related expenses		381				1,194				3,156				3,070				8,527
Branch consolidation expenses		1,011				3,336				830				863				2,594
Net (gain) loss on equity investments		(8,287		)		(24,487		)		3,576				—				—
FHLB advance prepayment fees		—				13,333				—				924				—
Gain on sale of PPP loans		—				(5,101		)		—				—				—
Two River and Country Bank opening credit loss expense under the CECL model		—				—				—				—				2,447
Income tax expense (benefit) on items		1,666				2,832				(1,809		)		(1,190		)		(3,121		)
Core earnings (loss) (Non-GAAP)		$	26,464			$	23,167			$	(266	)		$	22,305			$	26,980
Core diluted earnings (loss) per share		$	0.44			$	0.39			$	—			$	0.37			$	0.45
Core Ratios (Annualized):
Return on average assets		0.94		%		0.78		%		(0.01		)%		0.81		%		1.05		%
Return on average tangible assets		0.98				0.82				(0.01		)		0.85				1.11
Return on average tangible stockholders’ equity		11.04				9.71				(0.11		)		9.69				12.25
Efficiency ratio		58.37				59.69				59.63				56.69				55.36

COMPUTATION OF TOTAL TANGIBLE STOCKHOLDERS’ EQUITY TO TANGIBLE ASSETS

		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Total stockholders’ equity		$	1,498,719			$	1,484,130			$	1,461,714			$	1,476,434			$	1,409,834
Less:
Goodwill		500,319				500,319				500,849				501,472				500,093
Core deposit intangible		22,273				23,668				25,194				26,732				28,276
Tangible stockholders’ equity		$	976,127			$	960,143			$	935,671			$	948,230			$	881,465
Total assets		$	11,577,472			$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074
Less:
Goodwill		500,319				500,319				500,849				501,472				500,093
Core deposit intangible		22,273				23,668				25,194				26,732				28,276
Tangible assets		$	11,054,880			$	10,924,326			$	11,125,254			$	10,817,161			$	9,960,705
Tangible stockholders’ equity to tangible assets		8.83		%		8.79		%		8.41		%		8.77		%		8.85		%

COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

		March 31,				December 31,				September 30,				June 30,				March 31,
		2021				2020				2020				2020				2020
Total stockholders’ equity		$	1,498,719			$	1,484,130			$	1,461,714			$	1,476,434			$	1,409,834
Less:
Goodwill		500,319				500,319				500,849				501,472				500,093
Core deposit intangible		22,273				23,668				25,194				26,732				28,276
Preferred stock		55,527				55,527				55,544				55,711				—
Tangible common equity		$	920,600			$	904,616			$	880,127			$	892,519			$	881,465
Total assets		$	11,577,472			$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074
Less:
Goodwill		500,319				500,319				500,849				501,472				500,093
Core deposit intangible		22,273				23,668				25,194				26,732				28,276
Tangible assets		$	11,054,880			$	10,924,326			$	11,125,254			$	10,817,161			$	9,960,705
Tangible common equity to tangible assets		8.33		%		8.28		%		7.91		%		8.25		%		8.85		%