TOMS RIVER, N.J., April 27, 2017 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:OCFC) , (the "Company"), the holding company for OceanFirst Bank (the "Bank"), today announced that diluted earnings per share were $0.36 for the quarter ended March 31, 2017, as compared to $0.25 for the corresponding prior year quarter. 

The results of operations for the quarter ended March 31, 2017 include merger related expenses and the acceleration of stock award expense from a director retirement, which decreased net income, net of tax benefit, by $1.1 million.  Excluding these items, core earnings for the quarter ended March 31, 2017 were $13.1 million, or $0.40 per diluted share.  (Please refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of merger related expenses, certain other incurred expenses and quantification of core earnings).

Highlights for the quarter are described below:
  • The Company's net interest margin increased to 3.56%, as compared to 3.40% in the prior linked quarter and 3.34% in the comparable prior year period.
  • Total loans grew $26.6 million, including $31.1 million in commercial loan growth.
  • The Company announced the authorization of the Board to repurchase 5% of the Company's outstanding common stock up to an additional 1.6 million shares (the "2017 Repurchase Program").  This amount is in addition to the remaining 154,804 shares available for repurchase under the existing 2014 Repurchase Program.

Chairman and Chief Executive Officer, Christopher D. Maher, commented on the Company's results, "We are pleased with our earnings progress in the first quarter of 2017, which represents the first full quarter since the acquisition of Ocean Shore was completed on November 30, 2016.  In May, Ocean City Home Bank customers will be fully integrated into the OceanFirst platforms and the consolidation of overlapping branches will occur, providing those customers with access to the entire OceanFirst network and delivering additional operating efficiency." Mr. Maher added, "An important component of the Company's capital management strategy is the ability to repurchase shares.  With a limited number of shares still available in the 2014 Repurchase Program, the Board of Directors has authorized up to an additional 1.6 million shares under the 2017 Repurchase Program, providing the option to continue buybacks if and when opportunities present themselves."

The Company also announced that the Company's Board of Directors declared its eighty-first consecutive quarterly cash dividend on common stock.  The dividend for the quarter ended March 31, 2017 of $0.15 per share will be paid on May 19, 2017 to stockholders of record on May 8, 2017.

The Company continues to focus on organic growth while actively managing expense levels. Expense reductions associated with the successful systems integration of Cape Bancorp ("Cape") in the fourth quarter of 2016 have been fully realized as of the first quarter of 2017.  For Ocean Shore, initial cost savings have been realized during the first quarter of 2017, with incremental savings expected after the second quarter of 2017 due to the planned systems integration.

The Company also expects to realize significant cost savings from the consolidation of branches.  The Company's Board of Directors has approved the closure of 10 such branches in the legacy Cape and Ocean Shore market area in May 2017, with an expected annualized cost savings of $3.6 million.  The Company's Board of Directors also approved the closure of five branches in its central New Jersey market area by mid-2017, with an expected annualized cost savings of $2.5 million.   These initiatives are expected to allow the Company to continue to invest in commercial banking and electronic delivery channels while meeting the efficiency targets established in connection with the recent acquisitions.

Results of Operations

On May 2, 2016, the Company completed its acquisition of Cape and its results of operations are included in the consolidated results for the quarters ended March 31, 2017 and December 31, 2016, but are not included in the results of operations for the quarter ended March 31, 2016.

On November 30, 2016, the Company completed its acquisition of Ocean Shore and its results of operations are included in the consolidated results for the quarter ended March 31, 2017; its results of operations for December 1, 2016 through December 31, 2016 are included in the results of operations for the quarter ended December 31, 2016; and its results of operations are not included in the results of operations for the quarter ended March 31, 2016.

Net income for the quarter ended March 31, 2017, was $12.0 million, or $0.36 per diluted share, as compared to $4.2 million, or $0.25 per diluted share, for the corresponding prior year period.  Net income for the quarter ended March 31, 2017 includes merger related expenses and an accelerated stock award expense from a director retirement, of $1.1 million, net of tax benefit, as compared to $1.2 million in merger-related expenses, net of tax benefit, for the same prior year period. Net income increased over the prior year period primarily due to the acquisitions of Cape and Ocean Shore ("Acquisition Transactions").  In addition, in the first quarter of 2017, the Company adopted Accounting Standards Update ("ASU") 2016-09 "Compensation - Stock Compensation" which resulted in a $1.4 million decrease in income tax expense.

Net interest income for the quarter ended March 31, 2017 increased to $41.5 million, as compared to $20.6 million for the same prior year period, reflecting an increase in interest-earning assets and a higher net interest margin.  Average interest-earning assets increased $2.254 billion for the quarter ended March 31, 2017, as compared to the same prior year period. The increase mainly resulted from the Acquisition Transactions, which added $2.005 billion to average interest-earning assets.  The remaining increase is related to interest-earning deposits, securities and loans, which increased by $147.5 million, $27.1 million, and $63.4 million, respectively. The net interest margin increased to 3.56% for the quarter ended March 31, 2017, from 3.34% for the same prior year period. The yield on average interest-earning assets increased to 3.95% for the quarter ended March 31, 2017, from 3.75% for the same prior year period.  The yield on average interest-earning assets for the quarter ended March 31, 2017 benefited from an increase in the accretion of purchase accounting adjustments of $1.8 million and the generally higher interest rate environment.  For the quarter ended March 31, 2017, the cost of average interest-bearing liabilities decreased to 0.48%, from 0.50%, in the corresponding prior year period.  The total cost of deposits (including non-interest bearing deposits) was 0.27% for the quarter ended March 31, 2017, as compared to 0.26% for the corresponding prior year period.

Net interest income for the quarter ended March 31, 2017 increased $5.7 million, as compared to the prior linked quarter, as average interest-earning assets increased $541.2 million.  The increase in average interest-earning assets over the prior linked quarter was primarily due to the inclusion of Ocean Shore balances for the full quarter. The net interest margin increased to 3.56% for the quarter ended March 31, 2017, from 3.40% for the prior linked quarter.  The yield on average interest-earning assets increased to 3.95% for the quarter ended March 31, 2017, from 3.79% for the prior linked quarter.  The yield on average interest-earning assets for the quarter ended March 31, 2017 benefited from an increase in the accretion of purchase accounting adjustments of $790,000, the generally higher interest-rate environment and the change in asset mix from lower-yielding interest-earning deposits into higher-yielding securities and loans.  The cost of average interest-bearing liabilities was unchanged at 0.48% for both the quarter ended March 31, 2017 and the prior linked quarter.

For the quarter ended March 31, 2017, the provision for loan losses was $700,000, as compared to $563,000 for the corresponding prior year period and $510,000 in the prior linked quarter.  Net loan recoveries were $268,000 for the quarter ended March 31, 2017, as compared to net loan charge-offs of $1.1 million in the corresponding prior year period and $944,000 in the prior linked quarter. Non-performing loans totaled $21.7 million at March 31, 2017, as compared to $13.6 million at December 31, 2016, and $16.2 million at March 31, 2016. This increase was primarily due to the addition of a single commercial real estate relationship with a balance of $4.2 million and, to a lesser extent, an increase of $3.9 million in non-performing residential mortgage loans.

For the quarter ended March 31, 2017, other income increased to $6.0 million, as compared to $3.4 million in the same prior year period. The increase from the prior period was primarily due to the impact of the Acquisition Transactions, which added $2.1 million to other income for the quarter ended March 31, 2017, as compared to the same prior year period.  Excluding the Acquisition Transactions, the increase was primarily related to higher deposit related fees.  For the quarters ended March 31, 2017 and 2016, other income included losses of $250,000 and $272,000, respectively, attributable to the operations of a hotel, golf and banquet facility acquired as Other Real Estate Owned ("OREO") in the fourth quarter of 2015.  The Bank is currently engaged in a sales process with qualified buyers for this property.

For the quarter ended March 31, 2017, other income decreased $262,000, as compared to the prior linked quarter. A full quarter of Ocean Shore increased other income by $449,000, however, the gain on sale of loans available for sale decreased $248,000, as compared to the prior linked quarter, as the Bank retained most of its 30-year fixed-rate residential mortgage loan originations to replace repayments within the existing residential loan portfolio.  Additionally, the net loss from OREO operations, excluding the net loss of $105,000 related to Ocean Shore, increased $554,000, of which $200,000 of the increase related to the operations of the hotel, golf and banquet facility.

Operating expenses increased to $31.0 million, for the quarter ended March 31, 2017, as compared to $16.7 million in the same prior year period.  Operating expenses for each of the quarters ended March 31, 2017 and 2016 include $1.4 million in merger related expenses.  The increase in operating expenses over the prior year was primarily due to the operations of Cape and Ocean Shore, which added $11.2 million for the quarter. Excluding the Acquisition Transactions expenses, there were increases of $1.1 million relating to compensation and employee benefits, partly due to higher stock plan expense of $400,000, including $242,000 of accelerated expense relating to a director retirement, $1.7 million relating to general and administrative expenses, partly due to higher data and check processing charges, and $345,000 relating to marketing expenses.

For the quarter ended March 31, 2017, operating expenses, excluding merger related expenses, increased $3.7 million, as compared to the prior linked quarter. The increase was primarily related to the additional expense from the operations of Ocean Shore of $3.4 million and partly due to $242,000 of accelerated stock plan expense due to a director retirement.

The provision for income taxes was $3.8 million for the quarter ended March 31, 2017, as compared to $2.5 million for the same prior year period.  The effective tax rate was 24.0% for the quarter ended March 31, 2017, as compared to 36.8% for the same prior year period and 33.0% in the prior linked quarter.  The lower effective tax rate for the quarter ended March 31, 2017 resulted from the adoption of ASU 2016-09 "Compensation - Stock Compensation" which resulted in a $1.4 million decrease in income tax expense.  Excluding the impact of ASU 2016-09, the effective tax rate would have been 32.7% for the first quarter of 2017.Under the ASU, the tax benefits of exercised stock options and vested stock awards are recognized as a benefit to income tax expense in the reporting period in which they occur.  The tax benefit relating to the Company's stock plans was $62,000 for the year ended December 31, 2016, which was recorded directly into stockholders' equity.  The elevated tax benefit for the quarter ended March 31, 2017 was related to the exercise of options assumed in the acquisitions of Cape and Ocean Shore and the increase in the Company's stock price.

Financial Condition

Total assets increased by $29.3 million to $5.196 billion at March 31, 2017, from $5.167 billion at December 31, 2016.  Cash and due from banks and interest-bearing deposits decreased by $126.1 million, to $175.3 million at March 31, 2017, from $301.4 million at December 31, 2016, as these funds were deployed into higher-yielding securities which increased $132.1 million.  Loans receivable, net, increased by $22.2 million, to $3.826 billion at March 31, 2017 from $3.803 billion at December 31, 2016.

Deposits increased by $10.9 million, to $4.199 billion at March 31, 2017, from $4.188 billion at December 31, 2016, reflecting an increase in non-interest bearing checking and savings accounts totaling $24.2 million and $9.3 million, respectively. These increases were partially offset by decreases in money market and time deposit accounts of $10.8 million and $14.7 million, respectively. The loan-to-deposit ratio at March 31, 2017 was 91.1%, as compared to 90.8% at December 31, 2016.

Stockholders' equity increased to $582.7 million at March 31, 2017, as compared to $572.0 million at December 31, 2016. At March 31, 2017, there were 154,804 shares available for repurchase under the Company's stock repurchase program adopted in July of 2014.  In the first quarter, the Company did not repurchase any shares under this repurchase program.  Tangible stockholders' equity per common share increased to $13.07 at March 31, 2017, as compared to $12.95 at December 31, 2016.

Asset Quality

The Company's non-performing loans increased to $21.7 million at March 31, 2017, as compared to $13.6 million at December 31, 2016.  The increase was primarily due to a single commercial real estate relationship with a balance of $4.2 million and, to a lesser extent, an increase of $3.9 million in non-performing residential mortgage loans.  Non-performing loans do not include $7.1 million of purchased credit-impaired ("PCI") loans acquired in the Acquisition Transactions.  The Company's OREO totaled $8.8 million at March 31, 2017, as compared to $9.8 million at December 31, 2016.  This amount includes $7.0 million relating to the hotel, golf and banquet facility located in New Jersey which the Company acquired in the fourth quarter of 2015.  At March 31, 2017, the Company's allowance for loan losses was 0.42% of total loans, an increase from 0.40% at December 31, 2016.  These ratios exclude existing fair value credit marks of $24.0 million at March 31, 2017 on the Ocean Shore, Cape and Colonial American Bank loans.  These loans were acquired at fair value with no related allowance for loan losses.  The allowance for loan losses as a percent of total non-performing loans was 74.50% at March 31, 2017 as compared to 111.92% at December 31, 2016.

Explanation of Non-GAAP Financial MeasuresReported amounts are presented in accordance with generally accepted accounting principles in the United States ("GAAP").  The Company's management believes that the supplemental non-GAAP information, which consists of reported net income excluding merger related expenses, accelerated stock award expense relating to a director retirement, loss on sale of investment securities available for sale and FHLB prepayment fee, 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.  Please refer to Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, April 28, 2017 at 11 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 10104003 from one hour after the end of the call until July 28, 2017.  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, founded in 1902, is a $5.2 billion community bank with branches located throughout central and southern New Jersey.  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, 2016 and subsequent securities filings and should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 
OceanFirst Financial Corp .
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
 
    March 31, 2017   December 31, 2016   March 31, 2016
    (Unaudited)       (Unaudited)
Assets            
Cash and due from banks   $ 175,252     $ 301,373     $ 34,261  
Securities available-for-sale, at estimated fair value   47,104     12,224     30,085  
Securities held-to-maturity, net (estimated fair value of $695,564 at March 31, 2017, $598,119 at December 31, 2016, and $378,613 at March 31, 2016)   695,918     598,691     375,616  
Federal Home Loan Bank of New York stock, at cost   19,253     19,313     16,645  
Loans receivable, net   3,825,600     3,803,443     1,996,993  
Loans held-for-sale   283     1,551     3,386  
Interest and dividends receivable   12,258     11,989     6,036  
Other real estate owned   8,774     9,803     9,029  
Premises and equipment, net   70,806     71,385     28,322  
Servicing asset   203     228     544  
Bank Owned Life Insurance   132,789     132,172     57,868  
Deferred tax asset   33,652     38,787     16,786  
Other assets   16,233     10,105     10,485  
Core deposit intangible   10,400     10,924     310  
Goodwill   147,815     145,064     2,081  
Total assets   $ 5,196,340     $ 5,167,052     $ 2,588,447  
Liabilities and Stockholders' Equity            
Deposits   $ 4,198,663     $ 4,187,750     $ 1,971,360  
Securities sold under agreements to repurchase with retail customers   77,207     69,935     83,913  
Federal Home Loan Bank advances   250,021     250,498     251,917  
Other borrowings   56,591     56,559     22,500  
Advances by borrowers for taxes and insurance   14,876     14,030     7,271  
Other liabilities   16,302     16,242     10,410  
Total liabilities   4,613,660     4,595,014     2,347,371  
Stockholders' equity:            
Preferred stock, $.01 par value, $1,000 liquidation preference, 5,000,000 shares authorized, no shares issued            
Common stock, $.01 par value, 55,000,000 shares authorized, 33,566,772 shares issued and 32,465,413, 32,136,892, and 17,358,005 shares outstanding at March 31, 2017, December 31, 2016, and March 31, 2016, respectively   336     336     336  
Additional paid-in capital   352,316     364,433     271,003  
Retained earnings   256,045     238,192     231,016  
Accumulated other comprehensive loss   (5,382 )   (5,614 )   (5,923 )
Less: Unallocated common stock held by Employee Stock Ownership Plan   (2,690 )   (2,761 )   (2,974 )
Treasury stock, 1,101,359, 1,429,880, and 16,208,767 shares at March 31, 2017, December 31, 2016, and March 31, 2016, respectively   (17,945 )   (22,548 )   (252,382 )
Common stock acquired by Deferred Compensation Plan   (316 )   (313 )   (305 )
Deferred Compensation Plan Liability   316     313     305  
Total stockholders' equity   582,680     572,038     241,076  
Total liabilities and stockholders' equity   $ 5,196,340     $ 5,167,052     $ 2,588,447  

OceanFirst Financial Corp .
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
 
    For the Three Months Ended,
    March 31, 2017   December 31, 2016   March 31, 2016
    |--------------------- (unaudited) ---------------------|
Interest income:            
Loans   $ 41,742     $ 36,799     $ 21,035  
Mortgage-backed securities   2,660     1,874     1,415  
Investment securities and other   1,612     1,231     623  
Total interest income   46,014     39,904     23,073  
Interest expense:            
Deposits   2,781     2,392     1,271  
Borrowed funds   1,750     1,758     1,243  
Total interest expense   4,531     4,150     2,514  
Net interest income   41,483     35,754     20,559  
Provision for loan losses   700     510     563  
Net interest income after provision for loan losses   40,783     35,244     19,996  
Other income:            
Bankcard services revenue   1,579     1,424     851  
Wealth management revenue   516     545     550  
Fees and service charges   3,743     3,273     1,817  
Loan servicing income   64     73     56  
Net gain on sales of loans available-for-sale   42     290     179  
Net loss from other real estate operations   (733 )   (74 )   (406 )
Income from Bank Owned Life Insurance   772     710     319  
Other   12     16     10  
Total other income   5,995     6,257     3,376  
Operating expenses:            
Compensation and employee benefits   16,138     13,649     8,466  
Occupancy   2,767     2,380     1,626  
Equipment   1,698     1,499     969  
Marketing   740     609     251  
Federal deposit insurance   661     830     529  
Data processing   2,396     2,291     1,265  
Check card processing   953     662     420  
Professional fees   960     969     498  
Other operating expense   2,677     2,640     1,277  
Amortization of core deposit intangible   524     304     13  
Merger-related expenses   1,447     6,632     1,402  
Total operating expenses   30,961     32,465     16,716  
Income before provision for income taxes   15,817     9,036     6,656  
Provision for income taxes   3,799     2,984     2,451  
Net income   $ 12,018     $ 6,052     $ 4,205  
Basic earnings per share   $ 0.38     $ 0.22     $ 0.25  
Diluted earnings per share   $ 0.36     $ 0.22     $ 0.25  
Average basic shares outstanding   31,901     27,461     16,906  
Average diluted shares outstanding   33,090     28,128     17,118  

OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)
 
LOANS RECEIVABLE     At
      March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016
Commercial:                      
Commercial and industrial     $ 205,720     $ 152,810     $ 185,633     $ 222,355     $ 141,364  
Commercial real estate - owner- occupied     533,052     534,365     493,157     523,662     308,666  
Commercial real estate - investor     1,113,964     1,134,507     1,014,699     1,011,354     536,754  
Total commercial     1,852,736     1,821,682     1,693,489     1,757,371     986,784  
Consumer:                      
Residential mortgage     1,639,611     1,651,695     1,061,752     1,090,781     792,753  
Residential construction     76,985     65,408     46,813     48,266     54,259  
Home equity loans and lines     285,149     289,110     251,421     258,398     190,621  
Other consumer     1,560     1,566     1,273     1,586     570  
Total consumer     2,003,305     2,007,779     1,361,259     1,399,031     1,038,203  
Total loans     3,856,041     3,829,461     3,054,748     3,156,402     2,024,987  
Loans in process     (17,976 )   (14,249 )   (13,842 )   (13,119 )   (15,033 )
Deferred origination costs, net     3,686     3,414     3,407     3,441     3,253  
Allowance for loan losses     (16,151 )   (15,183 )   (15,617 )   (16,678 )   (16,214 )
Loans receivable, net     $ 3,825,600     $ 3,803,443     $ 3,028,696     $ 3,130,046     $ 1,996,993  
Mortgage loans serviced for others     $ 132,973     $ 137,881     $ 143,657     $ 145,903     $ 152,653  
  At March 31, 2017 Average Yield                    
Loan pipeline (1):                      
Commercial 4.38 %   $ 73,793     $ 99,060     $ 64,976     $ 48,897     $ 57,571  
Residential mortgage and construction 3.99     57,600     38,486     39,252     30,520     28,528  
Home equity loans and lines 4.56     7,879     6,522     5,099     5,594     8,082  
Total 4.23     $ 139,272     $ 144,068     $ 109,327     $ 85,011     $ 94,181  

  For the Three Months Ended,
  March 31,   December 31,   September 30,   June 30,   March 31,
  2017   2016   2016   2016   2016
  Average Yield                    
Loan originations:                      
Commercial 4.52 %   $ 106,896   (5 ) $ 105,062   (4 ) $ 63,310     $ 59,543     $ 58,005  
Residential mortgage and construction 3.96     64,452     62,087     41,170     40,295     34,361  
Home equity loans and lines 4.50     12,500     11,790     11,007     10,067     10,915  
Total 4.32     $ 183,848     $ 178,939     $ 115,487     $ 109,905     $ 103,281  
Loans sold     $ 1,907     $ 12,098   (3 ) $ 17,787   (2 ) $ 10,303     $ 8,901  

(1)  Loan pipeline includes pending loan applications and loans approved but not funded(2)  Excludes the sale of  under-performing loans of $12.8 million(3)  Excludes the sale of  under-performing loans of $21.0 million(4)  Includes purchased loans totaling $24.6 million(5)  Includes purchased loans totaling $5.0 million
DEPOSITS At
  March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016
Type of Account                  
Non-interest-bearing $ 806,728     $ 782,504     $ 512,957     $ 554,709     $ 351,743  
Interest-bearing checking 1,629,589     1,626,713     1,451,083     1,310,290     860,468  
Money market deposit 448,093     458,911     400,054     366,942     163,884  
Savings 681,853     672,519     489,173     489,132     327,845  
Time deposits 632,400     647,103     471,414     485,189     267,420  
  $ 4,198,663     $ 4,187,750     $ 3,324,681     $ 3,206,262     $ 1,971,360  

OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)
 
  March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016
ASSET QUALITY                  
Non-performing loans:                  
Commercial and industrial $ 231     $ 441     $ 1,152     $ 964     $ 909  
Commercial real estate - owner-occupied 2,383     2,414     5,213     4,363     4,354  
Commercial real estate - investor 5,118     521     1,675     1,675     940  
Residential mortgage 11,993     8,126     7,017     7,102     8,788  
Home equity loans and lines 1,954     2,064     1,450     1,226     1,202  
Total non-performing loans 21,679     13,566     16,507     15,330     16,193  
Other real estate owned 8,774     9,803     9,107     9,791     9,029  
Total non-performing assets $ 30,453     $ 23,369     $ 25,614     $ 25,121     $ 25,222  
Purchased credit-impaired ("PCI") loans $ 7,118     $ 7,575     $ 5,836     $ 9,673     $ 376  
Delinquent loans 30 to 89 days $ 18,516     $ 22,598     $ 8,553     $ 15,643     $ 6,996  
Troubled debt restructurings:                  
Non-performing (included in total non-performing loans above) $ 3,547     $ 3,471     $ 3,520     $ 2,990     $ 4,775  
Performing 26,974     27,042     26,396     28,173     26,689  
Total troubled debt restructurings $ 30,521     $ 30,513     $ 29,916     $ 31,163     $ 31,464  
Allowance for loan losses $ 16,151     $ 15,183     $ 15,617     $ 16,678     $ 16,214  
Allowance for loan losses as a percent of total loans receivable (1) 0.42 %   0.40 %   0.51 %   0.53 %   0.80 %
Allowance for loan losses as a percent of total non-performing loans 74.50     111.92     94.61     108.79     100.13  
Non-performing loans as a percent of total loans receivable 0.56     0.35     0.54     0.48     0.80  
Non-performing assets as a percent of total assets 0.59     0.45     0.62     0.62     0.97  

(1)  The loans acquired from Ocean Shore, Cape, and Colonial American were recorded at fair value.  The net credit mark on these loans, not reflected in the allowance for loan losses, was $24,002, $25,973, $17,051, $27,281, and $2,013, at March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively.
NET CHARGE-OFFS  
  For the three months ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2017   2016   2016   2016   2016
Net Charge-offs:                  
Loan charge-offs $ (205 )   $ (979 )   $ (2,116 )   $ (223 )   $ (1,172 )
Recoveries on loans 473     35     167     25     101  
Net loan recoveries (charge-offs) $ 268     $ (944 )   $ (1,949 )   $ (198 )   $ (1,071 )
Net loan charge-offs to average total loans (annualized)   NM*     0.11 %   0.25 %   0.03 %   0.21 %
Net charge-off detail - recovery (loss):                  
Commercial $ 311     $ (510 )   $ (1,707 )   $ (84 )   $ (1,073 )
Residential mortgage and construction (49 )   (233 )   (161 )   (69 )   (24 )
Home equity loans and lines 24     (194 )   (83 )   (45 )   28  
Other consumer (18 )   (7 )   2         (2 )
Net loan recoveries (charge-offs) $ 268     $ (944 )   $ (1,949 )   $ (198 )   $ (1,071 )

Note:  Included in net loan charge-offs for the three months ended December 31, 2016 and September 30, 2016  are $535 and $1,627 relating to under-performing loans sold or held-for-sale, respectively.

* Not meaningful

OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
 
  For the Three Months Ended
  March 31, 2017   December 31, 2016   March 31, 2016
(dollars in thousands)             Average               Average               Average
Average       Yield/ Average       Yield/ Average       Yield/
Balance Interest   Cost Balance Interest   Cost Balance Interest   Cost
Assets:                                  
Interest-earning assets:                                  
Interest-earning deposits and short- $ 214,165     $ 409     0.77 %   $ 359,804     $ 484     0.54 %   $ 48,501     $ 28     0.23 %
term investments
Securities (1) and FHLB stock 703,712     3,863     2.23     545,302     2,621     1.91     445,696     2,010     1.81  
Loans receivable, net (2)                                  
Commercial 1,830,641     21,140     4.68     1,717,502     21,016     4.87     972,050     10,998     4.53  
Residential 1,704,035     17,339     4.13     1,314,667     12,857     3.89     830,840     8,039     3.87  
Home Equity 287,335     3,245     4.58     262,372     2,907     4.41     191,355     1,990     4.16  
Other 1,248     18     5.85     1,149     19     6.58     501     8     6.39  
Allowance for loan loss net of (12,123 )           (12,987 )           (13,645 )        
deferred loan fees
Loans Receivable, net 3,811,136     41,742     4.44     3,282,703     36,799     4.46     1,981,101     21,035     4.27  
Total interest-earning assets 4,729,013     46,014     3.95     4,187,809     39,904     3.79     2,475,298     23,073     3.75  
Non-interest-earning assets 482,058             368,965             129,719          
Total assets $ 5,211,071             $ 4,556,774             $ 2,605,017          
Liabilities and Stockholders' Equity:                                  
Interest-bearing liabilities:                                  
Interest-bearing checking $ 1,668,545     876     0.21 %   $ 1,538,706     723     0.19 %   $ 899,883     305     0.14 %
Money market 445,186     311     0.28     424,613     312     0.29     156,326     70     0.18  
Savings 674,721     130     0.08     549,032     74     0.05     316,148     26     0.03  
Time deposits 640,269     1,464     0.93     527,817     1,283     0.97     263,722     870     1.33  
Total 3,428,721     2,781     0.33     3,040,168     2,392     0.31     1,636,079     1,271     0.31  
Securities sold under agreements 76,351     27     0.14     72,063     24     0.13     83,506     28     0.13  
to repurchase
FHLB Advances 250,339     1,070     1.73     250,829     1,120     1.78     266,234     1,084     1.63  
Other borrowings 56,392     653     4.70     56,397     614     4.33     22,500     131     2.33  
Total interest-bearing 3,811,803     4,531     0.48     3,419,457     4,150     0.48     2,008,319     2,514     0.50  
liabilities
Non-interest-bearing deposits 791,036             622,882             343,371          
Non-interest-bearing Liabilities 29,399             42,773             13,328          
Total liabilities 4,632,238             4,085,112             2,365,018          
Stockholders' equity 578,833             471,662             239,999          
Total liabilities and equity $ 5,211,071             $ 4,556,774             $ 2,605,017          
Net interest income     $ 41,483             $ 35,754             $ 20,559      
Net interest rate spread (3)         3.47 %           3.31 %           3.25 %
Net interest margin (4)         3.56 %           3.40 %           3.34 %
Total cost of deposits (including non-         0.27 %           0.26 %           0.26 %
interest-bearing deposits)
 

(1)  Amounts are recorded at average amortized cost.(2)  Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated loss allowances 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,
    2017   2016   2016   2016   2016
                     
Selected Financial Condition Data:                    
Total assets   $ 5,196,340     $ 5,167,052     $ 4,151,017     $ 4,047,493     $ 2,588,447  
Securities available-for-sale, at estimated fair value   47,104     12,224     2,497     12,509     30,085  
Securities held-to-maturity, net   695,918     598,691     470,642     513,721     375,616  
Federal Home Loan Bank of New York stock   19,253     19,313     18,289     21,128     16,645  
Loans receivable, net   3,825,600     3,803,443     3,028,696     3,130,046     1,996,993  
Loans held-for-sale   283     1,551     21,679     5,310     3,386  
Deposits   4,198,663     4,187,750     3,324,681     3,206,262     1,971,360  
Federal Home Loan Bank advances   250,021     250,498     251,146     312,603     251,917  
Securities sold under agreements to repurchase and other borrowings   133,798     126,494     125,477     90,173     106,413  
Stockholders' equity   582,680     572,038     417,244     409,258     241,076  
   
    For the Three Months Ended,
    March 31,   December 31,   September 30,   June 30,   March 31,
    2017   2016   2016   2016   2016
Selected Operating Data:                    
Interest income   $ 46,014     $ 39,904     $ 37,307     $ 33,141     $ 23,073  
Interest expense   4,531     4,150     3,372     3,127     2,514  
Net interest income   41,483     35,754     33,935     30,014     20,559  
Provision for loan losses   700     510     888     662     563  
Net interest income after provision for loan losses   40,783     35,244     33,047     29,352     19,996  
Other income   5,995     6,257     5,896     4,883     3,376  
Operating expenses   29,514     25,833     23,715     21,457     15,314  
Merger related expenses   1,447     6,632     1,311     7,189     1,402  
Income before provision for income taxes   15,817     9,036     13,917     5,589     6,656  
Provision for income taxes   3,799     2,984     4,789     1,928     2,451  
Net income   $ 12,018     $ 6,052     $ 9,128     $ 3,661     $ 4,205  
Diluted earnings per share   $ 0.36     $ 0.22     $ 0.35     $ 0.16     $ 0.25  
Net accretion/amortization of purchase accounting adjustments included in net interest income   $ 2,175     $ 1,385     $ 1,637     $ 1,267     $ 164  
 

(continued)
    At or For the Three Months Ended
    March 31,   December 31,   September 30,   June 30,   March 31,
    2017   2016   2016   2016   2016
Selected Financial Ratios and Other Data(1):                    
                     
Performance Ratios (Annualized):                    
Return on average assets (2)   0.94 %   0.53 %   0.88 %   0.40 %   0.65 %
Return on average stockholders' equity (2)   8.42     5.10     8.77     3.79     7.05  
Return on average tangible stockholders' equity (2) (3)   11.50     6.48     10.58     4.32     7.59  
Stockholders' equity to total assets   11.21     11.07     10.05     10.11     9.31  
Tangible stockholders' equity to tangible assets (3)   8.43     8.30     8.50     8.51     9.23  
Net interest rate spread   3.47     3.31     3.49     3.47     3.25  
Net interest margin   3.56     3.40     3.56     3.57     3.34  
Operating expenses to average assets (2)   2.41     2.83     2.43     3.16     2.58  
Efficiency ratio (2) (4)   65.21     77.28     62.83     82.09     69.84  
Loans to deposits   91.11     90.82     91.10     97.62     101.30  

(continued)
    At or For the Three Months Ended
    March 31,   December 31,   September 30,   June 30,   March 31,
    2017   2016   2016   2016   2016
Wealth Management:                    
Assets under administration   $ 215,593     $ 218,336     $ 221,612     $ 221,277     $ 203,723  
Per Share Data:                    
Cash dividends per common share   $ 0.15     $ 0.15     $ 0.13     $ 0.13     $ 0.13  
Stockholders' equity per common share at end of  period   17.95     17.80     16.14     15.89     13.89  
Tangible stockholders' equity per common share at end of period (3)   13.07     12.95     13.42     13.14     13.75  
Number of full-service customer facilities:   61     61     50     50     28  
Quarterly Average Balances                    
Total securities   $ 703,712     $ 545,302     $ 533,809     $ 571,463     $ 445,696  
Loans, receivable, net   3,811,136     3,282,703     3,085,691     2,772,518     1,981,101  
Total interest-earning assets   4,729,013     4,187,809     3,787,545     3,384,548     2,475,298  
Total assets   5,211,071     4,556,774     4,103,835     3,647,102     2,605,017  
Interest-bearing transaction deposits   2,788,452     2,512,351     2,300,589     1,899,266     1,372,357  
Time deposits   640,269     527,817     477,496     417,301     263,722  
Total borrowed funds   383,082     379,289     358,960     386,578     372,240  
Total interest-bearing liabilities   3,811,803     3,419,457     3,137,045     2,703,145     2,008,319  
Non-interest bearing deposits   791,036     622,882     521,088     529,230     343,371  
Stockholder's equity   578,833     471,662     414,166     388,694     239,999  
Total deposits   4,219,757     3,663,050     3,299,173     2,845,797     1,979,450  
Quarterly Yields                    
Total securities   2.23 %   1.91 %   1.91 %   1.82 %   1.81 %
Loans, receivable, net   4.44     4.46     4.46     4.43     4.27  
Total interest-earning assets   3.95     3.79     3.92     3.94     3.75  
Interest-bearing transaction deposits   0.18     0.18     0.16     0.15     0.12  
Time deposits   0.93     0.97     0.96     1.01     1.33  
Borrowed funds   1.85     1.84     1.43     1.41     1.34  
Total interest-bearing liabilities   0.48     0.48     0.43     0.47     0.50  
Net interest spread   3.47     3.31     3.49     3.47     3.25  
Net interest margin   3.56     3.40     3.56     3.57     3.34  
Total deposits   0.27     0.26     0.25     0.25     0.26  

(1)  With the exception of end of quarter ratios, all ratios are based on average daily balances.(2)  Performance ratios for each period include merger-related expenses.  Refer to Other Items - Non-GAAP Reconciliation for impact of merger related expenses.(3)  Tangible stockholders' equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible.(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
    March 31,   December 31,   September 30,   June 30,   March 31,
    2017   2016   2016   2016   2016
Core earnings:                    
Net income   $ 12,018     $ 6,052     $ 9,128     $ 3,661     $ 4,205  
Add:  Merger related expenses   1,447     6,632     1,311     7,189     1,402  
Accelerated stock award expense   242                  
Loss on sale of investment securities available for sale               12      
Federal Home Loan Bank prepayment fee               136      
Less:  Income tax benefit on items   (575 )   (2,108 )   (172 )   (2,311 )   (171 )
Core earnings   $ 13,132     $ 10,576     $ 10,267     $ 8,687     $ 5,436  
Core diluted earnings per share   $ 0.40     $ 0.38     $ 0.40     $ 0.38     $ 0.32  
                     
Core ratios (Annualized):                    
Return on average assets   1.02 %   0.92 %   1.00 %   0.96 %   0.84 %
Return on average tangible stockholder's equity   12.56     11.33     11.90     10.26     9.19  
Efficiency ratio   61.65     61.49     59.54     61.06     63.98  
   
   
COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS  
   
    March 31,   December 31,   September 30,   June 30,   March 31,
    2017   2016   2016   2016   2016
Total stockholders' equity   $ 582,680     $ 572,038     $ 417,244     $ 409,258     $ 241,076  
Less:                    
Goodwill   147,815     145,064     66,537     67,102     2,081  
Core deposit intangible   10,400     10,924     3,722     3,903     310  
Tangible stockholders' equity   $ 424,465     $ 416,050     $ 346,985     $ 338,253     $ 238,685  
                     
Total assets   $ 5,196,340     $ 5,167,052     $ 4,151,017     $ 4,047,493     $ 2,588,447  
Less:                    
Goodwill   147,815     145,064     66,537     67,102     2,081  
Core deposit intangible   10,400     10,924     3,722     3,903     310  
Tangible assets   $ 5,038,125     $ 5,011,064     $ 4,080,758     $ 3,976,488     $ 2,586,056  
Tangible stockholders' equity to tangible assets   8.43 %   8.30 %   8.50 %   8.51 %   9.23 %
   

 
Company Contact:Michael J. FitzpatrickChief Financial OfficerOceanFirst Financial Corp.Tel:  (732) 240-4500, ext. 7506Fax: (732) 349-5070Email: Mfitzpatrick@oceanfirst.com

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