OceanFirst Financial Corp. Announces Quarterly and Annual Earnings and Financial Results

Rhea-AI Summary

OceanFirst Financial Corp. (NASDAQ: OCFC) reported Q4 2020 net income of $32.1 million ($0.54 per diluted share), up from $23.5 million in Q4 2019. For the full year, net income was $61.2 million ($1.02 per diluted share), down from $88.6 million in 2019. Impacts included increased credit losses and net interest margin compression due to COVID-19. However, total assets rose to $11.45 billion, boosted by strategic acquisitions, and deposits increased by $3.10 billion. The company declared its 96th consecutive quarterly cash dividend of $0.17 per share, payable February 19, 2021.

Positive

• Record quarterly net income of $32.1 million, up 15% from prior year.
• Total assets increased to $11.45 billion, driven by acquisitions.
• Deposits rose by $3.10 billion, including $1.51 billion of organic growth.
• Tangible book value per share increased to $14.98.

Negative

• Annual net income declined to $61.2 million from $88.6 million year-over-year.
• Core earnings decreased to $23.2 million in Q4 2020 from $25.7 million in Q4 2019.
• Net interest margin compressed to 2.97% from 3.48% year-over-year.
• Provision for credit losses significantly increased to $4.1 million in Q4 2020.

RED BANK, N.J., Jan. 28, 2021 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced net income available to common stockholders of $32.1 million, or $0.54 per diluted share, for the quarter ended December 31, 2020, as compared to $23.5 million, or $0.47 per diluted share, for the corresponding prior year quarter. For the year ended December 31, 2020, the Company reported net income available to common stockholders of $61.2 million, or $1.02 per diluted share, as compared to $88.6 million, or $1.75 per diluted share, for the corresponding prior year. The quarter and annual results were impacted by the COVID-19 pandemic, through higher credit losses, net interest margin compression and increased operating expenses.

Core earnings for the quarter and year ended December 31, 2020 amounted to $23.2 million and $72.2 million, respectively, or $0.39 and $1.20 per diluted share, respectively.

Core earnings are non-GAAP (“generally accepted accounting principles”) measures. 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”), 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). Non-core operations had a favorable impact of $8.9 million, net of tax, and an unfavorable impact of $11.0 million, net of tax, to GAAP earnings for the quarter and year ended December 31, 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.

Key developments for the recent quarter and year are described below:

• Earnings: Achieved record quarterly GAAP earnings of $32.1 million, with diluted earnings per share increasing by 15%, to $0.54, as compared to the corresponding prior year quarter.

• Balance sheet: The Company ended 2020 with a strengthened balance sheet driven by a series of successfully executed strategic decisions throughout the year. As a result of these initiatives, tangible book value per share increased to $14.98 from $14.58 in the prior linked quarter and tangible stockholders’ equity to tangible assets ratio improved to 8.79% from 8.41% in the prior linked quarter. Highlights include:

○ The creation of a yield-focused debt and equity portfolio, which resulted in $23.6 million of net gains in the fourth quarter;
○ The sale of $298.1 million in PPP loans, which resulted in gains of $5.1 million;
○ The extinguishment of $343.5 million in high-cost borrowings with an average rate of 1.63%, providing a tailwind heading into 2021;
○ Total loan growth for the year was $1.54 billion, reflecting bank acquisitions and record loan originations of $2.23 billion (including PPP loan originations), partly offset by loan sales of $612.3 million. Deposits increased $3.10 billion for the year, including $1.51 billion of organic growth.

• Loan forbearance: COVID-19 related loans under full forbearance have been substantially resolved, which allows the Bank to focus on organic growth and gain earnings momentum in 2021.
  

“I’m pleased to announce record GAAP quarterly earnings of $32.1 million, completing a year which began with the closing of two whole bank acquisitions and quickly became a year filled with challenges to support our customers and communities during an unprecedented health crisis,” said Chairman and Chief Executive Officer, Christopher D. Maher. Mr. Maher added, “OceanFirst is well positioned for 2021 as our customers look forward to the opportunities that are on the horizon and our Country works to recover from the pandemic. At OceanFirst, we remain committed to growing our Company and will continue to focus on maintaining strong credit, fostering margin expansion, and controlling operating expenses while seeking growth opportunities.”

The Company expects to consolidate four branches in the second quarter, with an expected $1.1 million in annual savings. The latest branch consolidations bring the total number of branches consolidated to 57 over the past five years, helping to drive a targeted average branch size of $160 million.

The Company’s Board of Directors declared its ninety-sixth consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on February 19, 2021 to stockholders of record on February 8, 2021. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depository share, representing 1/40th interest in the Company’s Series A Preferred Stock. This dividend will be paid on February 15, 2021 to preferred stockholders of record on January 29, 2021.

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 quarter and year ended December 31, 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 December 31, 2020 are included in the consolidated results for the quarter and year ended December 31, 2020, but are not included in the results of operations for the corresponding prior year periods.

Net income was favorably impacted by $8.9 million, net of tax, and adversely impacted by $2.3 million, net of tax, of non-core operations for the quarters ended December 31, 2020 and 2019, respectively. Net income was adversely impacted by $11.0 million, net of tax, and $16.3 million, net of tax, of non-core operations for the years ended December 31, 2020 and 2019, respectively. Core earnings for the quarter and year ended December 31, 2020 were $23.2 million and $72.2 million, respectively, representing a decrease from core earnings of $25.7 million and $104.8 million, respectively, for the same prior year periods. 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 quarter and year ended December 31, 2020 increased to $77.9 million and $313.0 million, respectively, as compared to $63.4 million and $256.0 million, respectively, for the same prior year periods, reflecting an increase in interest-earning assets, partly offset by a reduction in net interest margin. Average interest-earning assets increased by $3.21 billion and $2.82 billion for the quarter and year ended December 31, 2020, respectively, as compared to the same prior year periods. The averages for the quarter and year ended December 31, 2020, were favorably impacted by $1.65 billion and $1.75 billion, respectively, of interest-earning assets acquired from Two River and Country Bank and $77.5 million and $227.5 million, respectively, of interest-earning assets from PPP loans. Average loans receivable, net of allowance for credit losses, increased by $1.83 billion and $2.15 billion for the quarter and year ended December 31, 2020, respectively, as compared to the same prior year periods. The increases attributable to the acquisition of Two River and Country Bank for the quarter and year ended December 31, 2020 were $1.46 billion and $1.55 billion, respectively. The net interest margin for the quarter and year ended December 31, 2020 decreased to 2.97% and 3.16%, respectively, from 3.48% and 3.62%, 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 quarter and the year ended December 31, 2020, the cost of average interest-bearing liabilities decreased to 0.74% and 0.88%, respectively, from 0.98% and 0.96%, respectively, in the corresponding prior year periods. The total cost of deposits (including non-interest bearing deposits) was 0.45% and 0.55% for the quarter and year ended December 31, 2020, respectively, as compared to 0.64% and 0.61%, respectively, in the same prior year periods.

Net interest income for the quarter ended December 31, 2020, increased by $1.1 million, as compared to the prior linked quarter, while net interest margin remained steady at 2.97%, as compared to the prior linked quarter. The yield on average interest-earning assets decreased to 3.53% from 3.60% in the prior linked quarter, primarily due to increasing balance sheet liquidity. The total cost of deposits (including non-interest bearing deposits) was 0.45% for the quarter ended December 31, 2020, as compared to 0.49% in the prior linked quarter.

Provision for Credit Losses

For the quarter and year ended December 31, 2020, the provision for credit loss expense was $4.1 million and $59.4 million, respectively, as compared to $355,000 and $1.6 million, respectively, for the corresponding prior year periods, and $35.7 million in the prior linked quarter. Credit loss expense for the year ended December 31, 2020 was significantly influenced by economic conditions related to the COVID-19 pandemic, as well as estimates of how those conditions may impact the Company’s borrowers, and the decision to sell higher risk commercial loans in the third quarter of 2020. At December 31, 2020, COVID-19 related loans under full forbearance have been substantially resolved.

Net loan charge-offs were $2.9 million and $18.9 million for the quarter and year ended December 31, 2020, respectively, as compared to net loan charge-offs of $139,000 and $1.4 million, respectively, in the corresponding prior year periods, and net loan charge-offs of $15.0 million in the prior linked quarter. The three months ended December 31, 2020 included $2.3 million of charge-offs related to the sale of under-performing residential and consumer loans. The year ended December 31, 2020 included $14.6 million of charge-offs related to the sale of higher risk commercial loans and $3.3 million of charge-offs related to the sale of under-performing residential and consumer loans. Non-performing loans held-for-investment totaled $36.4 million at December 31, 2020, as compared to $29.9 million at September 30, 2020, and $17.8 million at December 31, 2019.

Non-interest Income

For the quarter and year ended December 31, 2020, other income increased to $40.6 million and $73.9 million, respectively, as compared to $11.2 million and $42.2 million, respectively, for the corresponding prior year periods. Other income for the quarter and year ended December 31, 2020 included $29.6 million and $26.0 million, respectively, of net gains related to non-core operations.

The primary contributor to other income for the quarter and year ended December 31, 2020 was gains earned on equity investments. The Company implemented several programs in 2020 to invest excess liquidity in high quality interest or dividend bearing securities. In August 2020, the Company began purchasing select financial services institutions’ common stocks paying attractive dividends. The positive performance of the portfolio drove the decision to liquidate all of the positions in December 2020 and January 2021, which resulted in an additional $8.1 million of net gains recorded in January 2021.

Excluding the impact of non-core operations, the change in other income for the quarter ended December 31, 2020 over the prior year was due to Two River and Country Bank acquisitions which added $439,000. The remaining decrease in other income for the quarter ended December 31, 2020, compared to the corresponding prior year period, was due to decreases in commercial loan swap income of $1.9 million and fees and service charges of $1.2 million, partly offset by an increase in net gain on sale of loans of $1.0 million, and net gain on real estate operations of $695,000.

Excluding the impact of non-core operations, the change in other income for the year ended December 31, 2020 over the prior year was due to Two River and Country Bank acquisitions which added $2.8 million. The remaining increase in other income was due to increases in commercial loan swap income of $2.8 million, net gain on sales of loans of $2.5 million, net gain on real estate operations of $981,000, and bankcard services of $577,000, partly offset by a decrease in fees and service charges of $4.4 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.

Excluding the impact of non-core operations, other income for the quarter ended December 31, 2020, decreased $723,000 as compared to the prior linked quarter. The decrease was primarily related to a decrease in commercial loan swap income of $1.3 million.

Non-interest Expense

Operating expenses increased to $70.9 million and $246.4 million for the quarter and year ended December 31, 2020, respectively, as compared to $47.6 million and $189.1 million, respectively, in the same prior year periods. Operating expenses for the quarter and year ended December 31, 2020 included $17.9 million and $37.8 million, respectively, of net expenses related to non-core operations. Operating expenses for the quarter and year ended December 31, 2019 included $5.3 million and $22.8 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 Two River and Country Bank acquisitions, which added $6.3 million and $29.3 million for the quarter and year ended December 31, 2020, respectively. The remaining increase in operating expenses for the quarter ended December 31, 2020 was due to increases in federal deposit insurance expense of $1.4 million, compensation and benefits expense of $1.4 million, professional fees of $1.3 million, and operating expenses attributable to the COVID-19 pandemic of $707,000. The increase in operating expenses for the year ended December 31, 2020 was due to increases in compensation and benefits expense of $7.6 million, operating expenses attributable to the COVID-19 pandemic of $4.5 million, professional fees of $3.6 million, and federal deposit insurance expense of $2.0 million, partly offset by decreases in equipment expense of $1.8 million, occupancy expense of $1.6 million, and check card processing of $680,000.

For the quarter ended December 31, 2020, operating expenses, excluding net expenses related to non-core operations, increased $252,000 as compared to the prior linked quarter. The increase was due to increases in other operating expense of $788,000, federal deposit insurance expense of $648,000, and professional fees of $583,000, partly offset by decreases in compensation and benefits expense of $1.1 million and operating expenses attributable to the COVID-19 pandemic of $1.0 million.

Income Tax Expense

The provision for income taxes was $10.4 million and $17.7 million for the quarter and year ended December 31, 2020, respectively, as compared to $3.2 million and $18.8 million, respectively, for the same prior year periods. The effective tax rate was 24.0% and 21.9% for the quarter and year ended December 31, 2020, respectively, as compared to 11.9% and 17.5%, respectively, for the same prior year periods. The higher effective tax rates for the quarter and year ended December 31, 2020 are due to 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. The lower tax rates in the prior year periods were also due to the reduction in income tax expense of $2.2 million from the revaluation of state deferred tax assets as a result of the change in New Jersey tax code. Excluding the impact of the New Jersey tax code change, the effective tax rate for the quarter and year ended December 31, 2019 was 20.2% and 19.6%.

Financial Condition

Total assets increased by $3.20 billion to $11.45 billion at December 31, 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 by $1.15 billion to $1.27 billion at December 31, 2020, from $120.5 million at December 31, 2019, due to increased deposits, the Company’s decision to build liquidity during the economic downturn, the cash received from the issuance of subordinated notes and non-cumulative perpetual preferred stock as described below, and the cash received from loan sales throughout the year. Loans receivable, net of allowance for credit losses, increased by $1.50 billion, to $7.70 billion at December 31, 2020, from $6.21 billion at December 31, 2019, primarily due to acquired loans from Two River and Country Bank of $1.56 billion. As part of the acquisitions of Two River and Country Bank, the Company’s goodwill balance increased to $500.3 million at December 31, 2020, from $374.6 million at December 31, 2019 and core deposit intangibles increased to $23.7 million, from $15.6 million. Other assets increased by $39.4 million to $209.0 million at December 31, 2020, from $169.5 million at December 31, 2019, primarily due to an increase in swap positions.

Deposits increased by $3.10 billion, to $9.43 billion at December 31, 2020, from $6.33 billion at December 31, 2019, primarily due to acquired deposits from Two River and Country Bank of $1.59 billion and organic deposit growth of $1.51 billion. The loan-to-deposit ratio at December 31, 2020 was 82.3%, as compared to 98.2% at December 31, 2019. The Company utilized the excess liquidity to prepay all FHLB advances in the fourth quarter of 2020, bringing the balance to $0 at December 31, 2020 from $519.3 million at December 31, 2019. The increase in other borrowings of $138.7 million to $235.5 million at December 31, 2020, from $96.8 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 by $92.7 million to $155.3 million at December 31, 2020, from $62.6 million at December 31, 2019, primarily due to an increase in swap positions.

Stockholders’ equity increased to $1.48 billion at December 31, 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 December 31, 2020. The Company had suspended its repurchase activity on February 28, 2020, and has determined to recommence repurchases under its existing stock repurchase plan beginning February 1, 2021. For the year ended December 31, 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 totaled $36.4 million at December 31, 2020, as compared to $29.9 million at September 30, 2020, and $17.8 million at December 31, 2019. Non-performing loans held-for-investment do not include $48.5 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.

COVID-19 related loans under full forbearance have been substantially resolved and returned to payment terms. The Company’s special mention and substandard loans were $360.2 million as of December 31, 2020, as compared to $317.4 million as of September 30, 2020 and $107.7 million as of December 31, 2019. The increase as compared to the prior year reflects the addition of Two River and Country Bank portfolios, as well as borrowers that have been negatively impacted by the COVID-19 pandemic which primarily occurred during the third quarter as Coronavirus Aid, Relief and Economic Security (“CARES”) Act forbearance periods ended. A significant majority of these borrowers are current on their loan payments. The Company’s non-accrual loans as of December 31, 2020 were 0.47% of total loans, as compared to 0.37% as of September 30, 2020 and 0.29% as of December 31, 2019.

At December 31, 2020, the Company’s allowance for credit losses was 0.78% of total loans, an increase from 0.27% at December 31, 2019. The allowance for credit losses does not reflect the net unamortized credit mark of $28.0 million. The allowance for credit losses plus the unamortized credit mark amounted to $88.7 million, or 1.14% of loans held-for-investment. The allowance for credit losses as a percent of total non-performing loans held-for-investment was 166.81% at December 31, 2020, as compared to 94.41% at December 31, 2019.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance 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 at the end of this document for details on the earnings impact of these items.

Annual Meeting

The Company also announced today that its Annual Meeting of Stockholders will be virtually held on Wednesday, May 19, 2021 at 9:00 a.m. Eastern Time. The record date for stockholders to vote at the Annual Meeting is April 2, 2021. Additional information regarding virtual access to the meeting will be distributed prior to the meeting.

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, January 29, 2021 at 11:00 a.m. Eastern Time. The direct dial number for the call is (888) 338-7143. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877) 344-7529, Replay Conference Number 10150841 from one hour after the end of the call until April 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 an $11.45 billion regional bank operating throughout New Jersey, metropolitan Philadelphia and metropolitan New York City. OceanFirst Bank delivers commercial and residential financing solutions, wealth 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: 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)

		December 31, 2020				September 30, 2020				December 31, 2019
		(Unaudited)				(Unaudited)
Assets
Cash and due from banks		$	1,272,134			$	980,870			$	120,544
Debt securities available-for-sale, at estimated fair value		183,302				169,634				150,960
Debt securities held-to-maturity, net of allowance for credit losses of $1,715 at December 31, 2020 and $2,393 at September 30, 2020 (estimated fair value of $968,466 at December 31, 2020, $902,418 at September 30, 2020, and $777,290 at December 31, 2019)		937,253				871,688				768,873
Equity investments, at estimated fair value		107,079				63,846				10,136
Restricted equity investments, at cost		51,705				67,505				62,356
Loans receivable, net of allowance for credit losses of $60,735 at December 31, 2020, $56,350 at September 30, 2020, and $16,852 at December 31, 2019		7,704,857				7,943,390				6,207,680
Loans held-for-sale		45,524				388,763				—
Interest and dividends receivable		35,269				40,671				21,674
Other real estate owned		106				106				264
Premises and equipment, net		107,094				103,249				102,691
Bank owned life insurance		265,253				264,167				237,411
Assets held for sale		5,782				6,717				3,785
Goodwill		500,319				500,849				374,632
Core deposit intangible		23,668				25,194				15,607
Other assets		208,968				224,648				169,532
Total assets		$	11,448,313			$	11,651,297			$	8,246,145
Liabilities and Stockholders’ Equity
Deposits		$	9,427,616			$	9,283,288			$	6,328,777
Federal Home Loan Bank advances		—				343,452				519,260
Securities sold under agreements to repurchase with retail customers		128,454				142,823				71,739
Other borrowings		235,471				246,941				96,801
Advances by borrowers for taxes and insurance		17,296				20,104				13,884
Other liabilities		155,346				152,975				62,565
Total liabilities		9,964,183				10,189,583				7,093,026
Total stockholders’ equity		1,484,130				1,461,714				1,153,119
Total liabilities and stockholders’ equity		$	11,448,313			$	11,651,297			$	8,246,145

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

		For the Three Months Ended,														For the Year Ended
		December 31,				September 30,					December 31,					December 31,
		2020				2020					2019					2020				2019
		|--------------------- (Unaudited) ---------------------|														(Unaudited)
Interest income:
Loans		$	84,997			$	85,933				$	70,298				$	349,221			$	279,931
Mortgage-backed securities		3,388				3,212					3,552					14,037				15,300
Debt securities, equity investments and other		4,177				3,817					3,225					16,350				13,563
Total interest income		92,562				92,962					77,075					379,608				308,794
Interest expense:
Deposits		10,679				11,370					10,214					48,290				38,432
Borrowed funds		4,032				4,804					3,507					18,367				14,391
Total interest expense		14,711				16,174					13,721					66,657				52,823
Net interest income		77,851				76,788					63,354					312,951				255,971
Credit loss expense		4,072				35,714					355					59,404				1,636
Net interest income after credit loss expense		73,779				41,074					62,999					253,547				254,335
Other income:
Bankcard services revenue		3,098				3,097					2,641					11,417				10,263
Trust and asset management revenue		492				490					478					2,052				2,102
Fees and services charges		3,950				3,732					4,710					15,808				18,500
Net gain on sales of loans		6,348				1,001					1					8,278				16
Net gain (loss) on equity investments		24,487				(3,576		)			(63		)			21,214				267
Net gain (loss) from other real estate operations		23				214					(95		)			35				(330		)
Income from bank owned life insurance		1,798				1,530					1,375					6,424				5,420
Commercial loan swap income		116				1,425					2,062					8,080				5,285
Other		308				266					122					618				642
Total other income		40,620				8,179					11,231					73,926				42,165
Operating expenses:
Compensation and employee benefits		27,323				29,012					22,518					114,155				89,912
Occupancy		4,968				5,270					4,071					20,782				17,159
Equipment		1,938				1,906					1,775					7,769				7,719
Marketing		632				963					840					3,117				3,469
Federal deposit insurance and regulatory assessments		1,859				1,212					296					4,871				2,227
Data processing		4,624				4,517					4,078					17,467				14,814
Check card processing		1,507				1,385					1,557					5,458				5,956
Professional fees		3,908				3,354					3,641					12,247				9,338
Other operating expense		4,768				3,644					3,815					16,552				14,968
Amortization of core deposit intangible		1,526				1,538					998					6,186				4,027
FHLB advance prepayment fees		13,333				—					—					14,257				—
Branch consolidation expense		3,336				830					268					7,623				9,050
Merger related expenses		1,194				3,156					3,742					15,947				10,503
Total operating expenses		70,916				56,787					47,599					246,431				189,142
Income (loss) before provision (benefit) for income taxes		43,483				(7,534		)			26,631					81,042				107,358
Provision (benefit) for income taxes		10,419				(2,608		)			3,181					17,733				18,784
Net income (loss)		33,064				(4,926		)			23,450					63,309				88,574
Dividends on preferred shares		1,004				1,093					—					2,097				—
Net income (loss) available to common stockholders		$	32,060			$	(6,019	)			$	23,450				$	61,212			$	88,574
Basic earnings (loss) per share		$	0.53			$	(0.10	)			$	0.47				$	1.02			$	1.77
Diluted earnings (loss) per share		$	0.54			$	(0.10	)			$	0.47				$	1.02			$	1.75
Average basic shares outstanding		59,961				59,935					49,890					59,919				50,166
Average diluted shares outstanding		60,057				59,935					50,450					60,072				50,746

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

LOANS RECEIVABLE				At
				December 31, 2020					September 30, 2020					June 30, 2020					March 31, 2020					December 31, 2019
Commercial:
Commercial and industrial				$	470,656				$	599,188				$	910,762				$	502,760				$	396,434
Commercial real estate - owner-occupied				1,145,065					1,176,529					1,199,742					1,220,983					792,653
Commercial real estate - investor				3,491,464					3,453,276					3,449,160					3,331,662					2,296,410
Total commercial				5,107,185					5,228,993					5,559,664					5,055,405					3,485,497
Consumer:
Residential real estate				2,309,459					2,407,178					2,426,277					2,458,641					2,321,157
Home equity loans and lines				285,016					301,712					320,627					335,624					318,576
Other consumer				54,446					63,095					71,721					82,920					89,422
Total consumer				2,648,921					2,771,985					2,818,625					2,877,185					2,729,155
Total loans				7,756,106					8,000,978					8,378,289					7,932,590					6,214,652
Deferred origination costs (fees), net				9,486					(1,238		)			(4,300		)			10,586					9,880
Allowance for credit losses				(60,735		)			(56,350		)			(38,509		)			(29,635		)			(16,852		)
Loans receivable, net				$	7,704,857				$	7,943,390				$	8,335,480				$	7,913,541				$	6,207,680
Mortgage loans serviced for others				$	95,789				$	88,210				$	101,840				$	51,399				$	50,042
	At December 31, 2020 Average Yield
Loan pipeline (1):
Commercial	3.78	%		$	210,024				$	154,700				$	169,093				$	293,820				$	219,269
Residential real estate	3.16			151,152					212,107					181,800					223,032					105,396
Home equity loans and lines	4.14			6,630					10,301					8,282					8,429					3,049
Total	3.53	%		$	367,806				$	377,108				$	359,175				$	525,281				$	327,714

	For the Three Months Ended
	December 31, 2020							September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
	Average Yield
Loan originations:
Commercial	3.74	%		$	173,715			$	187,747			$	216,979		(2)	$	266,882			$	264,938
Residential real estate	3.23			222,780				219,325				242,137				148,675				226,492
Home equity loans and lines	4.18			13,435				10,966				12,128				10,666				12,961
Total	3.48	%		$	409,930			$	418,038			$	471,244			$	426,223			$	504,391
Loans sold				$	56,126		(3)	$	56,722			$	104,600		(3)	$	7,500		(3)	$	110

⁽¹⁾ Loan pipeline includes loans approved but not funded.
⁽²⁾ Excludes loans originated through the PPP of $504 million.
⁽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 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
		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
Type of Account
Non-interest-bearing		$	2,133,195			$	2,240,799			$	2,161,766			$	1,783,216			$	1,377,396
Interest-bearing checking		3,646,866				3,317,296				3,022,887				2,647,487				2,539,428
Money market deposit		783,521				691,872				680,199				620,145				578,147
Savings		1,491,251				1,471,554				1,456,931				1,420,628				898,174
Time deposits		1,372,783				1,561,767				1,645,971				1,420,591				935,632
		$	9,427,616			$	9,283,288			$	8,967,754			$	7,892,067			$	6,328,777

OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITY	December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
Non-performing loans held-for-investment:
Commercial and industrial	$	1,551			$	586			$	1,586			$	207			$	207
Commercial real estate - owner-occupied	13,054				11,365				4,582				4,219				4,811
Commercial real estate - investor	10,660				2,978				5,274				3,384				2,917
Residential real estate	8,642				11,518				6,568				5,920				7,181
Home equity loans and lines	2,503				3,448				3,034				2,533				2,733
Total non-performing loans held-for-investment	36,410				29,895				21,044				16,263				17,849
Non-performing loans held-for-sale	—				67,489				—				—				—
Other real estate owned	106				106				248				484				264
Total non-performing assets	$	36,516			$	97,490			$	21,292			$	16,747			$	18,113
PCD loans (1)	$	48,488			$	56,422			$	61,694			$	59,783			$	13,265
Delinquent loans 30 to 89 days	$	34,683			$	13,753			$	13,640			$	48,905			$	14,798
Troubled debt restructurings:
Non-performing (included in total non-performing loans above)	$	5,158			$	9,866			$	6,189			$	6,249			$	6,566
Performing	12,009				12,777				16,365				16,102				18,042
Total troubled debt restructurings	$	17,167			$	22,643			$	22,554			$	22,351			$	24,608
Allowance for credit losses	$	60,735			$	56,350			$	38,509			$	29,635			$	16,852
Allowance for credit losses as a percent of total loans receivable (2)	0.78		%		0.70		%		0.46		%		0.37		%		0.27		%
Allowance for credit losses as a percent of total non-performing loans held-for-investment	166.81				188.49				182.99				182.22				94.41
Non-performing loans as a percent of total loans receivable	0.47				0.37				0.25				0.21				0.29
Non-performing assets as a percent of total assets	0.32				0.84				0.19				0.16				0.22

⁽¹⁾ PCD loans are not included in non-performing loans held-for-investment, troubled debt restructurings 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 $27,951, $31,617, $35,439, $38,272, and $30,260 at December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively.

NET CHARGE-OFFS		For the Three Months Ended
		December 31, 2020				September 30, 2020					June 30, 2020					March 31, 2020				December 31, 2019
Net (charge-offs) recoveries:
Loan charge-offs		$	(3,220	)		$	(15,411	)			$	(169	)			$	(1,384	)		$	(445	)
Recoveries on loans		278				416					401					230				306
Net loan (charge-offs) recoveries		$	(2,942	)	(1)	$	(14,995	)		(2)	$	232				$	(1,154	)	(3)	$	(139	)
Net loan charge-offs to average total loans (annualized)		0.15		%		0.71		%			NM*					0.06		%		0.01		%
Net loan (charge-offs) recoveries details:
Commercial		$	(775	)		$	(14,801	)			$	30				$	59			$	163
Residential mortgage and construction		(1,731		)		314					212					(1,112		)		(61		)
Home equity loans and lines		(451		)		(490		)			(3		)			(36		)		(240		)
Other consumer		15				(18		)			(7		)			(65		)		(1		)
Net loan (charge-offs) recoveries		$	(2,942	)	(1)	$	(14,995	)		(2)	$	232				$	(1,154	)	(3)	$	(139	)

⁽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 residential loans sold.
* Not Meaningful

OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME

	For the Three Months Ended
	December 31, 2020												September 30, 2020												December 31, 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	$	1,223,472				$	341			0.11	%		$	805,863				$	236			0.12	%		$	43,495				$	196			1.79	%
Securities (1)	1,209,543					7,224				2.38			1,112,174					6,793				2.43			1,008,461					6,581				2.59
Loans receivable, net (2)
Commercial	5,271,633					58,776				4.44			5,554,897					58,639				4.20			3,442,771					42,416				4.89
Residential real estate	2,420,494					21,530				3.56			2,462,513					23,091				3.75			2,309,741					22,469				3.89
Home equity loans and lines	293,746					3,930				5.32			311,802					3,330				4.25			323,878					4,243				5.20
Other consumer	58,174					761				5.20			67,497					873				5.15			94,350					1,170				4.92
Allowance for credit losses, net of deferred loan fees	(51,682		)			—				—			(45,912		)			—				—			(7,932		)			—				—
Loans receivable, net	7,992,365					84,997				4.23			8,350,797					85,933				4.09			6,162,808					70,298				4.53
Total interest-earning assets	10,425,380					92,562				3.53			10,268,834					92,962				3.60			7,214,764					77,075				4.24
Non-interest-earning assets	1,322,112												1,353,135												977,413
Total assets	$	11,747,492											$	11,621,969											$	8,192,177
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking	$	3,601,814				4,836				0.53	%		$	3,289,319				4,627				0.56	%		$	2,562,059				4,477				0.69	%
Money market	766,866					586				0.30			675,841					571				0.34			592,116					1,243				0.83
Savings	1,489,853					240				0.06			1,460,232					296				0.08			899,051					308				0.14
Time deposits	1,437,770					5,017				1.39			1,606,632					5,876				1.45			931,228					4,186				1.78
Total	7,296,303					10,679				0.58			7,032,024					11,370				0.64			4,984,454					10,214				0.81
FHLB advances	204,880					779				1.51			343,412					1,470				1.70			412,073					2,075				2.00
Securities sold under agreements to repurchase	143,385					154				0.43			144,720					174				0.48			68,257					85				0.49
Other borrowings	242,030					3,099				5.09			246,903					3,160				5.09			96,712					1,347				5.53
Total interest-bearing liabilities	7,886,598					14,711				0.74			7,767,059					16,174				0.83			5,561,496					13,721				0.98
Non-interest-bearing deposits	2,209,532												2,209,241												1,393,002
Non-interest-bearing liabilities	176,274												162,987												92,014
Total liabilities	10,272,404												10,139,287												7,046,512
Stockholders’ equity	1,475,088												1,482,682												1,145,665
Total liabilities and equity	$	11,747,492											$	11,621,969											$	8,192,177
Net interest income						$	77,851											$	76,788											$	63,354
Net interest rate spread (3)										2.79	%											2.77	%											3.26	%
Net interest margin (4)										2.97	%											2.97	%											3.48	%
Total cost of deposits (including non-interest-bearing deposits)										0.45	%											0.49	%											0.64	%

		For the Year Ended
		December 31, 2020												December 31, 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		$	613,971				$	1,034			0.17	%		$	57,742				$	1,299			2.25	%
Securities (1)		1,159,764					29,353				2.53			1,048,779					27,564				2.63
Loans receivable, net (2)
Commercial		5,299,813					236,749				4.47			3,329,396					168,507				5.06
Residential real estate		2,465,740					93,120				3.78			2,204,931					87,729				3.98
Home equity loans and lines		318,090					15,183				4.77			339,896					18,284				5.38
Other consumer		72,331					4,169				5.76			107,672					5,411				5.03
Allowance for credit losses, net of deferred loan fees		(33,343		)			—				—			(8,880		)			—				—
Loans receivable, net		8,122,631					349,221				4.30			5,973,015					279,931				4.69
Total interest-earning assets		9,896,366					379,608				3.84			7,079,536					308,794				4.36
Non-interest-earning assets		1,310,474												964,920
Total assets		$	11,206,840											$	8,044,456
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking		$	3,168,889				19,395				0.61	%		$	2,517,068				16,820				0.67	%
Money market		677,554					2,902				0.43			605,607					4,919				0.81
Savings		1,449,982					2,505				0.17			906,086					1,195				0.13
Time deposits		1,531,857					23,488				1.53			929,488					15,498				1.67
Total		6,828,282					48,290				0.71			4,958,249					38,432				0.78
FHLB advances		413,290					7,018				1.70			387,925					8,441				2.18
Securities sold under agreements to repurchase		125,500					562				0.45			64,525					276				0.43
Other borrowings		207,386					10,787				5.20			98,095					5,674				5.78
Total interest-bearing liabilities		7,574,458					66,657				0.88			5,508,794					52,823				0.96
Non-interest-bearing deposits		2,031,100												1,325,836
Non-interest-bearing liabilities		144,571												80,028
Total liabilities		9,750,129												6,914,658
Stockholders’ equity		1,456,711												1,129,798
Total liabilities and equity		$	11,206,840											$	8,044,456
Net interest income							$	312,951											$	255,971
Net interest rate spread (3)											2.96	%											3.40	%
Net interest margin (4)											3.16	%											3.62	%
Total cost of deposits (including non-interest-bearing deposits)											0.55	%											0.61	%

⁽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
(dollars in thousands, except per share amounts)

		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
Selected Financial Condition Data:
Total assets		$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074			$	8,246,145
Debt securities available-for-sale, at estimated fair value		183,302				169,634				153,239				153,738				150,960
Debt securities held-to-maturity, net of allowance for credit losses		937,253				871,688				867,959				914,255				768,873
Equity investments, at estimated fair value		107,079				63,846				13,830				14,409				10,136
Restricted equity investments, at cost		51,705				67,505				68,091				81,005				62,356
Loans receivable, net of allowance for credit losses		7,704,857				7,943,390				8,335,480				7,913,541				6,207,680
Deposits		9,427,616				9,283,288				8,967,754				7,892,067				6,328,777
Federal Home Loan Bank advances		—				343,452				343,392				825,824				519,260
Securities sold under agreements to repurchase and other borrowings		363,925				389,764				399,661				210,388				168,540
Stockholders’ equity		1,484,130				1,461,714				1,476,434				1,409,834				1,153,119

		For the Three Months Ended
		December 31, 2020				September 30, 2020					June 30, 2020				March 31, 2020				December 31, 2019
Selected Operating Data:
Interest income		$	92,562			$	92,962				$	95,877			$	98,207			$	77,075
Interest expense		14,711				16,174					17,210				18,562				13,721
Net interest income		77,851				76,788					78,667				79,645				63,354
Credit loss expense		4,072				35,714					9,649				9,969				355
Net interest income after credit loss expense		73,779				41,074					69,018				69,676				62,999
Other income (excluding net gain (loss) on equity investments and gain on sale of PPP loans)		11,032				11,755					11,430				13,697				11,231
Net gain (loss) on equity investments		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)		53,053				52,801					51,075				51,675				43,589
FHLB advance prepayment fees		13,333				—					924				—				—
Branch consolidation expense		3,336				830					863				2,594				268
Merger related expenses		1,194				3,156					3,070				8,527				3,742
Income (loss) before provision (benefit) for income taxes		43,483				(7,534		)			24,516				20,577				26,631
Provision (benefit) for income taxes		10,419				(2,608		)			5,878				4,044				3,181
Net income (loss)		$	33,064			$	(4,926	)			$	18,638			$	16,533			$	23,450
Net income (loss) available to common stockholders		$	32,060			$	(6,019	)			$	18,638			$	16,533			$	23,450
Diluted earnings (loss) per share		$	0.54			$	(0.10	)			$	0.31			$	0.27			$	0.47
Net accretion/amortization of purchase accounting adjustments included in net interest income		$	6,186			$	4,364				$	5,536			$	5,533			$	3,501

		At or For the Three Months Ended
		December 31, 2020			September 30, 2020				June 30, 2020			March 31, 2020			December 31, 2019
Selected Financial Ratios and Other Data(1):
Performance Ratios (Annualized):
Return on average assets (2)		1.12	%		(0.17	)%			0.67	%		0.64	%		1.14	%
Return on average tangible assets (2) (3)		1.17			(0.18	)			0.71			0.68			1.19
Return on average stockholders' equity (2)		8.92			(1.32	)			5.16			4.70			8.12
Return on average tangible stockholders' equity (2) (3)		13.85			(2.05	)			8.10			7.50			12.33
Stockholders' equity to total assets		12.96			12.55				13.01			13.44			13.98
Tangible stockholders' equity to tangible assets (3)		8.79			8.41				8.77			8.85			9.71
Tangible common equity to tangible assets (3)		8.28			7.91				8.25			8.85			9.71
Net interest rate spread		2.79			2.77				3.02			3.29			3.26
Net interest margin		2.97			2.97				3.24			3.52			3.48
Operating expenses to average assets (2)		2.40			1.94				2.02			2.44			2.31
Efficiency ratio (2) (4)		59.86			66.83				62.08			67.28			63.82
Loans to deposits		82.27			86.19				93.43			100.51			98.20

		At or For the Year Ended December 31,
		2020			2019
Performance Ratios:
Return on average assets (2)		0.56	%		1.10	%
Return on average tangible assets (2) (3)		0.59			1.16
Return on average stockholders' equity (2)		4.35			7.84
Return on average tangible stockholders' equity (2) (3)		6.81			11.96
Net interest rate spread		2.96			3.40
Net interest margin		3.16			3.62
Operating expenses to average assets (2)		2.20			2.35
Efficiency ratio (2) (4)		63.70			63.44

		At or For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Wealth Management:
Assets under administration		$	245,175			$	232,292			$	224,042			$	173,856			$	195,415
Nest Egg		93,237				80,472				57,383				43,528				34,865
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		24.57				24.21				24.47				23.38				22.88
Tangible common equity per common share at end of period (3)		14.98				14.58				14.79				14.62				15.13
Common shares outstanding at end of period		60,392,043				60,378,120				60,343,077				60,311,717				50,405,048
Preferred shares outstanding at end of period		57,370				57,370				57,370				—				—
Number of full-service customer facilities:		62				62				62				75				56
Quarterly Average Balances
Total securities		$	1,209,543			$	1,112,174			$	1,130,779			$	1,186,535			$	1,008,461
Loans receivable, net		7,992,365				8,350,797				8,295,622				7,850,662				6,162,808
Total interest-earning assets		10,425,380				10,268,834				9,780,417				9,100,923				7,214,764
Total assets		11,747,492				11,621,969				11,114,586				10,332,809				8,192,177
Interest-bearing transaction deposits		5,858,533				5,425,392				5,065,069				4,825,193				4,053,226
Time deposits		1,437,770				1,606,632				1,623,890				1,459,348				931,228
Total borrowed funds		590,295				735,035				828,928				832,285				577,042
Total interest-bearing liabilities		7,886,598				7,767,059				7,517,887				7,116,826				5,561,496
Non-interest bearing deposits		2,209,532				2,209,241				2,018,044				1,687,582				1,393,002
Stockholders’ equity		1,475,088				1,482,682				1,453,658				1,414,924				1,145,665
Total deposits		9,505,835				9,241,265				8,707,003				7,972,123				6,377,456
Quarterly Yields
Total securities		2.38		%		2.43		%		2.64		%		2.68		%		2.59		%
Loans receivable, net		4.23				4.09				4.28				4.61				4.53
Total interest-earning assets		3.53				3.60				3.94				4.34				4.24
Interest-bearing transaction deposits		0.38				0.40				0.47				0.64				0.59
Time deposits		1.39				1.45				1.58				1.71				1.78
Borrowed funds		2.72				2.60				2.38				2.24				2.41
Total interest-bearing liabilities		0.74				0.83				0.92				1.05				0.98
Net interest spread		2.79				2.77				3.02				3.29				3.26
Net interest margin		2.97				2.97				3.24				3.52				3.48
Total deposits		0.45				0.49				0.57				0.70				0.64

⁽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.
OTHER ITEMS
(dollars in thousands, except per share amounts)

NON-GAAP RECONCILIATION

		For the Three Months Ended
		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
Core Earnings:
Net income (loss) available to common stockholders (GAAP)		$	32,060			$	(6,019	)		$	18,638			$	16,533			$	23,450
Add (less) non-recurring and non-core items:
Merger related expenses		1,194				3,156				3,070				8,527				3,742
Branch consolidation expenses		3,336				830				863				2,594				268
Net (gain) loss on equity investments		(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				—
Non-recurring professional fees		—				—				—				—				1,274
Income tax benefit related to change in New Jersey tax code		—				—				—				—				(2,205		)
Income tax (benefit) expense on items		2,832				(1,809		)		(1,190		)		(3,121		)		(793		)
Core earnings (loss) (Non-GAAP)		$	23,167			$	(266	)		$	22,305			$	26,980			$	25,736
Core diluted earnings (loss) per share		$	0.39			$	—			$	0.37			$	0.45			$	0.51
Core Ratios (annualized):
Return on average assets		0.78		%		(0.01		)%		0.81		%		1.05		%		1.25		%
Return on average tangible assets		0.82				(0.01		)		0.85				1.11				1.31
Return on average tangible stockholders’ equity		9.71				(0.11		)		9.69				12.25				13.53
Efficiency ratio		59.69				59.63				56.69				55.36				56.73
Certain prior quarter amounts in the tables above have been restated for consistency with the current period presentation.

		For the Years Ended December 31,
		2020				2019
Core Earnings:
Net income available to common stockholders (GAAP)		$	61,212			$	88,574
Add (less) non-recurring and non-core items:
Merger related expenses		15,947				10,503
Branch consolidation expense		7,623				9,050
Net gain on equity investments		(20,911		)		—
FHLB advance prepayment fees		14,257				—
Gain on sale of PPP loans		(5,101		)		—
Two River and Country Bank opening credit loss expense under the CECL model		2,447				—
Non-recurring professional fees		—				2,024
Compensation expense due to the retirement of an executive officer		—				1,256
Income tax benefit related to change in New Jersey tax code		—				(2,205		)
Income tax benefit on items		(3,288		)		(4,362		)
Core earnings (Non-GAAP)		$	72,186			$	104,840
Core diluted earnings per share		$	1.20			$	2.07
Core Ratios:
Return on average assets		0.64		%		1.30		%
Return on average tangible assets		0.68				1.37
Return on average tangible stockholders’ equity		7.77				14.16
Efficiency ratio		57.81				55.78

COMPUTATION OF TOTAL TANGIBLE STOCKHOLDERS’ EQUITY TO TANGIBLE ASSETS

		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Total stockholders’ equity		$	1,484,130			$	1,461,714			$	1,476,434			$	1,409,834			$	1,153,119
Less:
Goodwill		500,319				500,849				501,472				500,093				374,632
Core deposit intangible		23,668				25,194				26,732				28,276				15,607
Tangible stockholders’ equity		$	960,143			$	935,671			$	948,230			$	881,465			$	762,880
Total assets		$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074			$	8,246,145
Less:
Goodwill		500,319				500,849				501,472				500,093				374,632
Core deposit intangible		23,668				25,194				26,732				28,276				15,607
Tangible assets		$	10,924,326			$	11,125,254			$	10,817,161			$	9,960,705			$	7,855,906
Tangible stockholders’ equity to tangible assets		8.79		%		8.41		%		8.77		%		8.85		%		9.71		%

COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

		December 31,				September 30,				June 30,				March 31,				December 31,
		2020				2020				2020				2020				2019
Total stockholders’ equity		$	1,484,130			$	1,461,714			$	1,476,434			$	1,409,834			$	1,153,119
Less:
Goodwill		500,319				500,849				501,472				500,093				374,632
Core deposit intangible		23,668				25,194				26,732				28,276				15,607
Preferred stock		55,527				55,544				55,711				—				—
Tangible common equity		$	904,616			$	880,127			$	892,519			$	881,465			$	762,880
Total assets		$	11,448,313			$	11,651,297			$	11,345,365			$	10,489,074			$	8,246,145
Less:
Goodwill		500,319				500,849				501,472				500,093				374,632
Core deposit intangible		23,668				25,194				26,732				28,276				15,607
Tangible assets		$	10,924,326			$	11,125,254			$	10,817,161			$	9,960,705			$	7,855,906
Tangible common equity to tangible assets		8.28		%		7.91		%		8.25		%		8.85		%		9.71		%

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:

		At January 1, 2020
(in thousands)		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				(2,043		)		3,158
Other assets		18,662				(2,706		)		15,956
Core deposit intangible		—				12,130				12,130
Total assets acquired		1,103,504				8,117				1,111,621
Liabilities assumed:
Deposits		(939,132		)		(2,618		)		(941,750		)
Other liabilities		(58,935		)		(91		)		(59,026		)
Total liabilities assumed		(998,067		)		(2,709		)		(1,000,776		)
Net assets acquired		$	105,437			$	5,408			$	110,845
Goodwill recorded in the merger										$	86,205

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 of January 1, 2021, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.

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:

		At January 1, 2020
(in thousands)		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		)		137				(3,117		)
Other assets		10,327				(1,132		)		9,195
Core deposit intangible		—				2,117				2,117
Total assets acquired		788,396				5,284				793,680
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			$	4,034			$	73,787
Goodwill recorded in the merger										$	39,049

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 of January 1, 2021, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.

Company Contact:

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

FAQ

What were OceanFirst Financial's Q4 earnings results for 2020?

OceanFirst Financial reported Q4 2020 net income of $32.1 million, or $0.54 per diluted share, compared to $23.5 million, or $0.47 per diluted share, in Q4 2019.

How did the pandemic affect OceanFirst Financial's financial performance in 2020?

The COVID-19 pandemic led to higher credit losses, net interest margin compression, and increased operating expenses, impacting overall earnings.

What is the cash dividend declared by OceanFirst Financial for Q1 2021?

OceanFirst Financial declared a cash dividend of $0.17 per share, payable on February 19, 2021.

What was the total loan growth reported by OceanFirst Financial for 2020?

Total loan growth for the year 2020 was $1.54 billion, driven by bank acquisitions and record loan originations.