TOMS RIVER, N.J., July 28, 2016 (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 $0.16 for the three months ended June 30, 2016, as compared to $0.31 for the corresponding prior year quarter. For the six months ended June 30, 2016, diluted earnings per share were $0.39, as compared to $0.63 for the corresponding prior year period.

On May 2, 2016, the Company completed its acquisition of Cape Bancorp, Inc. ("Cape"), which added $1.5 billion in assets, $1.2 billion in loans, and $1.2 billion in deposits. The Company anticipates that core system integration and rebranding will occur in October 2016, providing for the realization of additional cost savings entering the first quarter of 2017. The results of operations for the three and six months ended June 30, 2016 includes merger related expenses of $7.2 million and $8.6 million, respectively. In connection with the acquisition, the Bank deleveraged the combined balance sheet through the sale of lower-yielding securities and the prepayment of existing term borrowings in order to improve the net interest margin, reduce interest rate sensitivity, and increase capital ratios. The implementation of this strategy resulted in an expense of $136,000 relating to the prepayment of Federal Home Loan Bank ("FHLB") borrowings and a loss of $12,000 on the sale of investment securities available-for-sale. Excluding the after-tax impact of merger related expenses and deleveraging costs, core earnings for the three and six months ended June 30, 2016 were $8.7 million or $0.38 per diluted share, and $14.1 million, or $0.70 per diluted share, respectively. (Please refer to Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.)  

Other highlights are described below.

• Primarily due to the benefit of the Cape acquisition, net interest margin increased to 3.55%, as compared to 3.32% in the trailing quarter and 3.23% in the prior year quarter.
• The Company’s strong deposit funding is reflected in the loan to deposit ratio at June 30, 2016 of 97.6% and the average cost of deposits for the quarter ended June 30, 2016 of 0.25%.
  
• On July 13, 2016, the Company announced it had entered into a definitive agreement and plan of merger pursuant to which Ocean Shore Holding Company ("Ocean Shore"), the holding company and parent of Ocean City Home Bank, will merge with and into OceanFirst in a transaction valued at approximately $145.6 million. Ocean City Home Bank is one of Southern New Jersey’s oldest and largest community banks with approximately $1.1 billion in total assets, $818 million in total deposits and $796 million in gross loans.

Chief Executive Officer and President Christopher D. Maher commented, "The Company achieved substantial improvement in core earnings, as we delivered the initial expected benefits of the Cape acquisition. We anticipate additional expense savings later in the year due to core system integration and rebranding which should be fully realized as we enter the first quarter of 2017." Mr. Maher added; "Our continued investment in deposit gathering capabilities, reflected in the Cape and Ocean Shore acquisitions, support our strategy of funding loan growth with high quality, core deposits."

The Company also announced that the Board of Directors declared its seventy-eighth consecutive quarterly cash dividend on common stock. The dividend for the quarter ended June 30, 2016 of $0.13 per share will be paid on August 19, 2016 to stockholders of record on August 8, 2016.

Results of Operations

On July 31, 2015, the Company completed its acquisition of Colonial American Bank ("Colonial"), which added $142.4 million to assets, $121.2 million to loans, and $123.3 million to deposits. Colonial’s results of operations are included in the consolidated results for the three and six months ended June 30, 2016, but are excluded from the results of operations for the corresponding prior year periods.

On May 2, 2016, the Company completed its acquisition of Cape and its results of operations from May 2, 2016 through June 30, 2016 are included in the consolidated results for the three and six months ended June 30, 2016, but are excluded from the results of operations for the corresponding prior year periods.

Net income for the three months ended June 30, 2016 was $3.7 million, or $0.16 per diluted share, as compared to net income of $5.1 million, or $0.31 per diluted share, for the corresponding prior year period. Net income for the six months ended June 30, 2016 was $7.9 million, or $0.39 per diluted share, as compared to net income of $10.4 million, or $0.63 per diluted share, for the corresponding prior year period. Net income for the three and six months ended June 30, 2016 includes merger related expenses, of $7.2 million and $8.6 million, respectively. Additionally, net income for the three and six months ended June 30, 2016, includes a Federal Home Loan Bank prepayment fee of $136,000, and a loss on the sale of investment securities available-for-sale of $12,000. Excluding these items, diluted earnings per share increased over the prior year periods due to higher net interest income and other income partly offset by higher operating expenses and provision for loan losses. Net income for the three and six months ended June 30, 2016 included losses of $138,000 and $417,000, respectively, attributable to the operations of a hotel, golf and banquet facility acquired in the fourth quarter of 2015 as other real estate owned. 

Excluding merger related expenses, the FHLB prepayment fee and loss on sale of investment securities, diluted earnings per share increased $0.06 from the prior linked quarter primarily due to the favorable impact of the Cape acquisition.

Net interest income for the three and six months ended June 30, 2016 increased to $30.0 million and $50.6 million, respectively, as compared to $18.4 million and $36.6 million for the same prior year periods, reflecting an increase in interest-earning assets and a higher net interest margin. Average interest-earning assets increased $1,102.2 million and $668.5 million, respectively, for the three and six months ended June 30, 2016, as compared to the same prior year periods. The three and six months ended June 30, 2016 were favorably impacted by the interest-earning assets acquired from Cape and Colonial, which averaged $980.2 million and $545.6 million, respectively. Average loans receivable, net, increased $1,009.5 million and $644.1 million, respectively, for the three and six months ended June 30, 2016, as compared to the same prior year periods. The increases attributable to Cape and Colonial were $866.4 million and $483.9 million, respectively. The net interest margin increased to 3.55% and 3.45%, respectively, for the three and six months ended June 30, 2016, as compared to 3.23% for both prior year periods. The yield on average interest-earning assets increased to 3.92% and 3.84%, respectively, for the three and six months ended June 30, 2016, as compared to 3.61% and 3.60% for the same prior year periods. The yields on average interest-earning assets for the three and six months ended June 30, 2016 benefited from the accretion of purchase accounting adjustments on Cape and Colonial of $1.3 million and $1.4 million, respectively; the higher-yielding interest-earning assets acquired from Cape; and the change in the average balance sheet mix in favor of higher-yielding loans receivable at the expense of lower-yielding securities. The cost of average interest-bearing liabilities at 0.46% for the three months ended June 30, 2016, was unchanged as compared to the prior year period. For the six months ended June 30, 2016, the cost of average interest-bearing liabilities increased to 0.48%, from 0.46% in the prior year period. The total cost of deposits (including non-interest bearing deposits) was 0.25%, for both the three and six months ended June 30, 2016, as compared to 0.22% for both prior year periods.

Net interest income for the three months ended June 30, 2016 increased $9.5 million, as compared to the prior linked quarter, as interest-earning assets increased $909.3 million, of which $876.6 million relates to Cape, and as the net interest margin increased to 3.55%, from 3.32%. The yield on average interest-earning assets increased to 3.92% for the three months ended June 30, 2016, from 3.73% for the prior linked quarter, while the cost of average interest-bearing liabilities was 0.46% for the three months ended June 30, 2016, as compared to 0.50% for the prior linked quarter.  

For the three and six months ended June 30, 2016, the provision for loan losses was $662,000 and $1.2 million, respectively, as compared to $300,000 and $675,000, respectively, for the corresponding prior year periods. Net charge-offs were $198,000 and $1.3 million, respectively, for the three and six months ended June 30, 2016, as compared to net charge-offs of $185,000 and $458,000, respectively, in the corresponding prior year periods. The increase in net charge-offs for the six months ended June 30, 2016 was primarily due to first quarter charge-offs of $886,000 on two non-performing commercial loans. Non-performing loans decreased to $15.3 million at June 30, 2016, as compared to $16.2 million at March 31, 2016 and $20.9 million at June 30, 2015. 

For the three and six months ended June 30, 2016, other income increased to $4.9 million and $8.3 million, respectively, as compared to $4.2 million and $8.2 million, respectively, in the same prior year periods. The increases from the prior periods were primarily due to the impact of the Cape acquisition which added $951,000 to total other income for the three and six months ended June 30, 2016, as compared to the same prior year periods. Excluding Cape, other income decreased $238,000 and $848,000, respectively, as compared to the same prior year periods. The decreases, excluding Cape, were partly due to higher net losses from other real estate operations of $196,000 and $623,000, respectively, as compared to the prior year periods. The losses were predominately due to the seasonal operations of the hotel, golf and banquet facility acquired as other real estate owned in the fourth quarter of 2015. The Bank is currently engaged in a sales process with qualified buyers. The results for the three and six months ended June 30, 2015 included gains on sale of loan servicing of $30,000 and $111,000, respectively.

For the quarter ended June 30, 2016, other income, excluding the impact from Cape, increased $557,000, as compared to the prior linked quarter. The increases were related to a lower net loss on other real estate operations of $138,000 and a $187,000 increase in fees and service charges.

Operating expenses increased to $28.6 million and $45.4 million, respectively, for the three and six months ended June 30, 2016, as compared to $14.4 million and $28.1 million, respectively, in the same prior year periods. Operating expenses for the three and six months ended June 30, 2016 include $7.2 million and $8.6 million, respectively, in merger related expenses relating to the acquisition of Cape, as compared to merger related expenses of $184,000 and $234,000, respectively, in the prior year periods relating to the acquisition of Colonial. Excluding merger related expenses, the increases in operating expenses over the prior year were primarily due to the operations of Cape and Colonial, which added $5.3 million and $5.8 million for the quarter and year-to-date, respectively; the investment in commercial lending which added expenses of $339,000 and $780,000 for the quarter and year-to-date, respectively; the impact of new branches which added expenses of $391,000 and $722,000 for the quarter and year-to-date, respectively; and the FHLB prepayment fee of $136,000. 

For the three months ended June 30, 2016, operating expenses increased $6.1 million, as compared to the prior linked quarter, excluding merger related expenses. The increase was primarily due to the additional expense from the operations of Cape of $4.9 million; the FHLB prepayment fee of $136,000; higher compensation and employee benefits expense of $387,000; and higher marketing expense of $212,000.

The provision for income taxes was $1.9 million and $4.4 million, respectively, for the three and six months ended June 30, 2016, as compared to $2.8 million and $5.5 million, respectively, for the same prior year periods. The effective tax rate was 34.5% and 35.8%, respectively, for the three and six months ended June 30, 2016 as compared to 35.1% and 34.7%, respectively, for the same prior year periods and 36.8% in the prior linked quarter. The variances in the effective tax rate were primarily due to the timing of non-deductible merger related expenses.

Financial Condition

Total assets increased by $1,454.4 million to $4,047.5 million at June 30, 2016, from $2,593.1 million at December 31, 2015 as a result of the acquisition of Cape. Loans receivable, net, increased by $1,159.3 million, to $3,130.0 million at June 30, 2016, from $1,970.7 million at December 31, 2015. Excluding the Cape acquisition, loans receivable, net, increased $2.4 million. As part of the acquisition of Cape, Colonial and the purchase of an existing retail branch in the Toms River market in the first quarter of 2016, the Company has outstanding goodwill and core deposit intangible at June 30, 2016 of $67.1 million and $3.9 million, respectively.

Deposits increased by $1,289.6 million, to $3,206.3 million at June 30, 2016, from $1,916.7 million at December 31, 2015, including deposits of $1,248.4 million acquired from Cape and $17.0 million acquired through the purchase of an existing retail branch located in the Toms River market. The loan-to-deposit ratio at June 30, 2016 was 97.6%, as compared to 102.8% at December 31, 2015. The deposit growth partly funded a decrease in FHLB advances of $11.8 million, to $312.6 million at June 30, 2016, from $324.4 million at December 31, 2015. 

Stockholders' equity increased to $409.3 million at June 30, 2016, as compared to $238.4 million at December 31, 2015. The acquisition of Cape added $165.9 million to stockholder’s equity. At June 30, 2016, there were 244,804 shares available for repurchase under the stock repurchase program adopted in July of 2014. Tangible stockholders’ equity per common share decreased to $13.14 at June 30, 2016, as compared to $13.67 at December 31, 2015 due to the addition of intangible assets in the Cape acquisition.

Asset Quality

The Company's non-performing loans decreased to $15.3 million at June 30, 2016, compared to $18.3 million at December 31, 2015 and $20.9 million at June 30, 2015. Non-performing loans do not include $9.7 million of purchased credit-impaired ("PCI") loans acquired from Cape and Colonial. The Company’s other real estate owned totaled $9.8 million at June 30, 2016, as compared to $8.8 million at December 31, 2015. The 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 June 30, 2016, the Company’s allowance for loan losses was 0.53% of total loans, a decrease from 0.84% at December 31, 2015. These ratios exclude existing fair value credit marks of $27.3 million at June 30, 2016 on the Cape and Colonial loans and $2.2 million at December 31, 2015 on the Colonial 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 108.79% at June 30, 2016 as compared to 91.51% at December 31, 2015.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income, excluding merger related expenses, loss on sale of investment securities available for sale and Federal Home Loan Bank 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.

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, July 29, 2016 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 10088668 from one hour after the end of the call until October 29, 2016. 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 community bank with $4.0 billion in assets, $3.1 billion in loans, $3.2 billion in deposits and 50 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 and accounting principles and guidelines. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 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)

							June 30,					March 31,				December 31,				June 30,
								2016					2016				2015				2015
ASSETS							(unaudited)					(unaudited)								(unaudited)
Cash, due from banks and interest-bearing deposits							$	66,222				$	34,261			$	43,946			$	40,359
Securities available-for-sale, at estimated fair value								12,509					30,085				29,902				30,030
Securities held-to-maturity, net (estimated fair value of $520,971 at June 30, 2016, $378,613 at March 31, 2016, $397,763 at December 31, 2015, and $420,409 at June 30, 2015)								513,721					375,616				394,813				414,625
Federal Home Loan Bank of New York stock, at cost								21,128					16,645				19,978				18,740
Loans receivable, net								3,130,046					1,996,993				1,970,703				1,772,879
Mortgage loans held for sale								5,310					3,386				2,697				1,454
Interest and dividends receivable								10,143					6,036				5,860				5,550
Other real estate owned								9,791					9,029				8,827				3,357
Premises and equipment, net								49,392					28,322				28,419				24,931
Servicing asset								664					544				589				487
Bank Owned Life Insurance								105,929					57,868				57,549				56,858
Deferred tax asset								37,052					16,786				16,807				15,234
Other assets								14,581					10,485				10,900				10,596
Core deposit intangible								3,903					310				256				0
Goodwill								67,102					2,081				1,822				0
Total Assets							$	4,047,493				$	2,588,447			$	2,593,068			$	2,395,100
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits							$	3,206,262				$	1,971,360			$	1,916,678			$	1,761,675
Securities sold under agreements to repurchase with retail customers								67,673					83,913				75,872				71,687
Federal Home Loan Bank advances								312,603					251,917				324,385				295,616
Other borrowings								22,500					22,500				22,500				27,500
Advances by borrowers for taxes and insurance								9,828					7,271				7,121				7,845
Other liabilities								19,369					10,410				8,066				9,242
Total liabilities								3,638,235					2,347,371				2,354,622				2,173,565
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 25,748,898, 17,358,005, 17,286,557 and 16,722,632, shares outstanding at June 30, 2016, March 31, 2016, December 31, 2015, and June 30, 2015, respectively								336					336				336				336
Additional paid-in capital								308,460					271,003				269,757				267,248
Retained earnings								230,895					231,016				229,140				223,644
Accumulated other comprehensive loss								(5,798		)			(5,923	)			(6,241	)			(6,587	)
Less: Unallocated common stock held by Employee Stock Ownership Plan								(2,903		)			(2,974	)			(3,045	)			(3,187	)
Treasury stock, 7,817,874, 16,208,767, 16,280,215, and 16,844,140 shares at June 30, 2016, March 31, 2016, December 31, 2015,and June 30, 2015, respectively								(121,732		)			(252,382	)			(251,501	)			(259,919	)
Common stock acquired by Deferred Compensation Plan								(308		)			(305	)			(314	)			(309	)
Deferred Compensation Plan Liability								308					305				314				309
Total stockholders' equity								409,258					241,076				238,446				221,535
Total liabilities and stockholders' equity							$	4,047,493				$	2,588,447			$	2,593,068			$	2,395,100

OceanFirst Financial Corp.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

				For the Three Months Ended,												For the Six Months Ended
				June 30,				March 31,				June 30,				June 30,				June 30,
				2016				2016				2015				2016				2015
				-------------(unaudited)------------------												------------(unaudited)------------
Interest income:
Loans				$	30,521			$	21,035			$	18,548			$	51,556			$	36,577
Mortgage-backed securities					1,708				1,415				1,519				3,123				3,142
Investment securities and other					912				623				509				1,535				1,026
Total interest income					33,141				23,073				20,576				56,214				40,745
Interest expense:
Deposits					1,771				1,271				967				3,042				1,922
Borrowed funds					1,356				1,243				1,176				2,599				2,257
Total interest expense					3,127				2,514				2,143				5,641				4,179
Net interest income					30,014				20,559				18,433				50,573				36,566
Provision for loan losses					662				563				300				1,225				675
Net interest income after provision for loan losses					29,352				19,996				18,133				49,348				35,891
Other income:
Bankcard services revenue					1,211				851				899				2,062				1,682
Wealth management revenue					621				550				629				1,171				1,157
Fees and service charges					2,502				1,817				2,059				4,319				3,949
Loan servicing income					95				56				59				151				111
Net loss on sale of investment securities available for sale					(12		)		—				—				(12		)		—
Net gain on sale of loan servicing					—				—				30				—				111
Net gain on sales of loans available for sale					170				179				185				349				377
Net loss from other real estate operations					(313		)		(406		)		(72		)		(719		)		(51		)
Income from Bank Owned Life Insurance					542				319				364				861				810
Other					67				10				18				77				11
Total other income					4,883				3,376				4,171				8,259				8,157
Operating expenses:
Compensation and employee benefits					11,432				8,466				7,700				19,898				15,239
Occupancy					2,011				1,626				1,242				3,637				2,696
Equipment					1,184				969				813				2,153				1,611
Marketing					543				251				415				794				689
Federal deposit insurance					723				529				506				1,252				1,004
Data processing					1,881				1,265				1,101				3,146				2,189
Check card processing					505				420				423				925				898
Professional fees					700				498				539				1,198				934
Other operating expense					2,217				1,277				1,469				3,493				2,636
Federal Home Loan Bank prepayment fee					136				—				—				136				—
Amortization of core deposit intangible					125				13				—				138				—
Merger related expense					7,189				1,402				184				8,591				234
Total operating expenses					28,646				16,716				14,392				45,361				28,130
Income before provision for income taxes					5,589				6,656				7,912				12,246				15,918
Provision for income taxes					1,928				2,451				2,779				4,380				5,523
Net income				$	3,661			$	4,205			$	5,133			$	7,866			$	10,395
Basic earnings per share				$	0.16			$	0.25			$	0.31			$	0.40			$	0.63
Diluted earnings per share				$	0.16			$	0.25			$	0.31			$	0.39			$	0.63
Average basic shares outstanding					22,478				16,906				16,401				19,694				16,433
Average diluted shares outstanding					22,880				17,118				16,593				19,996				16,613

OceanFirst Financial Corp.

SELECTED LOAN AND DEPOSIT DATA

(in thousands)

LOANS RECEIVABLE
									June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
Commercial:
Commercial and industrial									$	222,355		$	141,364		$	144,788		$	129,379		$	111,229
Commercial real estate – owner-occupied										523,662			308,666			307,509			317,438			281,178
Commercial real estate – investor										1,011,354			536,754			510,936			486,625			417,108
Total commercial										1,757,371			986,784			963,233			933,442			809,515
Consumer:
Residential mortgage										1,096,091			796,139			793,946			789,517			749,416
Residential construction										48,266			54,259			50,757			51,580			52,428
Home equity loans and lines										258,398			190,621			192,368			193,587			191,708
Other consumer										1,586			570			792			719			643
Total consumer										1,404,341			1,041,589			1,037,863			1,035,403			994,195
Total loans										3,161,712			2,028,373			2,001,096			1,968,845			1,803,710
Loans in process										(13,119	)		(15,033	)		(14,206	)		(14,145	)		(16,073	)
Deferred origination costs, net										3,441			3,253			3,232			3,216			3,230
Allowance for loan losses										(16,678	)		(16,214	)		(16,722	)		(16,638	)		(16,534	)
Total loans, net										3,135,356			2,000,379			1,973,400			1,941,278			1,774,333
Less:  mortgage loans held for sale										5,310			3,386			2,697			2,306			1,454
Loans receivable, net									$	3,130,046		$	1,996,993		$	1,970,703		$	1,938,972		$	1,772,879
Mortgage loans serviced for others									$	145,903		$	152,653		$	158,244		$	164,488		$	173,090
Loan pipeline:					Average Yield
Commercial						4.14		%	$	48,897		$	57,571		$	53,785		$	71,944		$	58,613
Residential mortgage and construction						3.79				30,520			28,528			31,860			39,894			26,854
Home equity loans and lines						4.38				5,594			8,082			5,481			8,859			8,059
Total						4.03			$	85,011		$	94,181		$	91,126		$	120,697		$	93,526

							For the Three Months Ended,
							June 30,			March 31,			December 31,			September 30,			June 30,
								2016			2016			2015			2015			2015
Loan originations:
Commercial					4.25	%	$	59,543		$	58,005		$	72,534		$	70,378		$	52,037
Residential mortgage and construction					3.66			40,295			34,361			43,616			35,994			47,261
Home equity loans and lines					4.32			10,067			10,915			10,431			13,841			13,259
Total					4.04		$	109,905		$	103,281		$	126,581		$	120,213		$	112,557
Loans sold							$	10,303		$	8,901		$	9,784		$	11,063		$	16,788

DEPOSITS
	June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
Type of Account
Non-interest-bearing	$	554,709		$	351,743		$	337,143		$	362,079		$	328,175
Interest-bearing checking		1,310,290			860,468			859,927			883,940			794,310
Money market deposit		366,942			163,885			153,196			151,657			123,017
Savings		489,132			327,845			310,989			310,009			306,079
Time deposits		485,189			267,420			255,423			260,086			210,094
	$	3,206,262		$	1,971,361		$	1,916,678		$	1,967,771		$	1,761,675

OceanFirst Financial Corp.
ASSET QUALITY
(in thousands)

						June 30, 2016			March 31, 2016									December 31, 2015			September 30, 2015			June 30, 2015
ASSET QUALITY
Non-performing loans:
Commercial and industrial						$	964		$	909								$	123		$	115		$	115
Commercial real estate – owner-occupied							4,363			4,354									7,684			15,666			13,139
Commercial real estate – investor							1,675			940									3,112			1,391			1,462
Residential mortgage							7,102			8,788									5,779			5,481			4,288
Home equity loans and lines							1,226			1,202									1,574			1,738			1,899
Other consumer							—			—									2			3			2
Total non-performing loans							15,330			16,193									18,274			24,394			20,905
Other real estate owned							9,791			9,029									8,827			3,262			3,357
Total non-performing assets						$	25,121		$	25,222								$	27,101		$	27,656		$	24,262
Purchased credit-impaired ("PCI") loans						$	9,673		$	376								$	461		$	1,019		$	—
Delinquent loans 30 to 89 days						$	15,643		$	6,996								$	9,087		$	8,025		$	7,258
Troubled debt restructurings:
Non-performing (included in total non-performing loans above)						$	2,990		$	4,775								$	4,918		$	3,819		$	3,832
Performing							28,173			26,689									26,344			26,935			27,618
Total troubled debt restructurings						$	31,163		$	31,464								$	31,262		$	30,754		$	31,450
Allowance for loan losses						$	16,678		$	16,214								$	16,722		$	16,638		$	16,534
Allowance for loan losses as a percent of total loans receivable							0.53	%		0.80							%		0.84	%		0.85	%		0.92		%
Allowance for loan losses and fair value credit marks as a percent of total loans receivable (1)							1.39	%		0.91							%		0.95	%		1.01	%		0.92		%
Allowance for loan losses as a percent of total non-performing loans							108.79			100.13									91.51			68.21			79.09
Non-performing loans as a percent of total loans receivable							0.48			0.80									0.91			1.24			1.16
Non-performing assets as a percent of total assets							0.62			0.97									1.05			1.08			1.01
(1) The loans acquired from Cape and Colonial were recorded at fair value.  The net credit mark on these loans, not reflected in the allowance for loans losses, was $27,281,000, $2,013,000, $2,202,000 and $3,046,000 at June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively.

NET CHARGE-OFFS

			For the quarters ended
			June 30,			March 31,			December 31,			September 30,			June 30,
				2016			2016			2015			2015			2015
Net Charge-offs:
Loan charge-offs			$	(223	)	$	(1,172	)	$	(236	)	$	(210	)	$	(331	)
Recoveries on loans				25			101			19			14			146
Net loan charge-offs			$	(198	)	$	(1,071	)	$	(217	)	$	(196	)	$	(185	)
Net loan charge-offs to average total loans (annualized)				0.03	%		0.21	%		0.04	%		0.04	%		0.04	%
Net charge-off detail - (loss) recovery:
Commercial			$	(84	)	$	(1,073	)	$	12		$	(47	)	$	(3	)
Residential mortgage and construction				(69	)		(24	)		(117	)		(51	)		11
Home equity loans and lines				(45	)		28			(109	)		(98	)		(192	)
Other consumer				—			(2	)		(3	)		—			(1	)
Net loans charged-off			$	(198	)	$	(1,071	)	$	(217	)	$	(196	)	$	(185	)

OceanFirst Financial Corp.

ANALYSIS OF NET INTEREST INCOME

						FOR THE THREE MONTHS ENDED,
						JUNE 30, 2016										MARCH 31, 2016									JUNE 30, 2015
						AVERAGE BALANCE				INTEREST			AVERAGE YIELD/ COST			AVERAGE BALANCE			INTEREST			AVERAGE YIELD/ COST			AVERAGE BALANCE			INTEREST			AVERAGE YIELD/ COST
						(dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits and short-term  investments						$	40,567			$	41			0.40	%	$	48,501		$	28			0.23	%	$	28,636		$	6			0.08	%
Securities (1) and FHLB stock							571,463				2,579			1.81			445,696			2,010			1.80			490,760			2,022			1.65
Loans receivable, net (2):
Commercial							1,471,159				17,783			4.84			972,050			10,998			4.53			790,055			8,759			4.43
Residential							1,076,557				10,225			3.80			830,840			8,039			3.87			791,603			7,799			3.94
Home equity							236,937				2,498			4.22			191,355			1,990			4.16			194,250			1,982			4.08
Other							1,011				15			5.93			501			8			6.39			436			8			7.00
Allowance for loan loss net of deferred loan fees							(13,146		)		—			—			(13,645	)		—			—			(13,349	)		—			—
Total loans							2,772,518				30,521			4.40			1,981,101			21,035			4.25			1,762,995			18,548			4.21
Total interest-earning assets							3,384,548				33,141			3.92			2,475,298			23,073			3.73			2,282,391			20,576			3.61
Non-interest-earning assets							262,554										129,719									112,445
Total assets						$	3,647,102									$	2,605,017								$	2,394,836
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing checking						$	1,166,298				503			0.17		$	899,883			305			0.14		$	845,871			187			0.09
Money market							298,530				180			0.24			156,326			70			0.18			122,668			26			0.08
Savings							434,438				41			0.04			316,148			26			0.03			305,173			25			0.03
Time deposits							417,301				1,047			1.00			263,722			870			1.32			212,166			729			1.37
Total							2,316,567				1,771			0.31			1,636,079			1,271			0.31			1,485,878			967			0.26
Securities sold under agreements to repurchase							76,907				26			0.14			83,506			28			0.13			67,873			22			0.13
FHLB advances							287,171				1,201			1.67			266,234			1,084			1.63			270,432			952			1.41
Other borrowings							22,500				129			2.29			22,500			131			2.33			27,500			202			2.94
Total interest-bearing liabilities							2,703,145				3,127			0.46			2,008,319			2,514			0.50			1,851,683			2,143			0.46
Non-interest-bearing deposits							529,230										343,371									307,528
Non-interest-bearing liabilities							26,033										13,328									14,705
Total liabilities							3,258,408										2,365,018									2,173,916
Stockholders' equity							388,694										239,999									220,920
Total liabilities and stockholders' equity						$	3,647,102									$	2,605,017								$	2,394,836
Net interest income										$	30,014								$	20,559								$	18,433
Net interest rate spread (3)														3.46	%								3.23	%								3.15	%
Net interest margin (4)														3.55	%								3.32	%								3.23	%
Total cost of deposits (including non-interest bearing deposits)														0.25	%								0.26	%								0.22	%

(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.

				FOR THE SIX MONTHS ENDED,
				JUNE 30, 2016												JUNE 30, 2015
				AVERAGE BALANCE			INTEREST			AVERAGE YIELD/ COST						AVERAGE BALANCE			INTEREST			AVERAGE YIELD/ COST
				(dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits and short-term  investments				$	44,533		$	70			0.31	%				$	28,443		$	11			0.08	%
Securities (1) and FHLB stock					508,590			4,588			1.80						500,326			4,157			1.66
Loans receivable, net (2):
Commercial					1,221,604			28,780			4.71						765,396			17,058			4.46
Residential					954,059			18,265			3.83						785,079			15,530			3.96
Home equity					214,146			4,488			4.19						195,384			3,973			4.07
Other					756			23			6.08						434			15			6.91
Allowance for loan loss net of deferred loan fees					(13,396	)		—			—						(13,269	)		—			—
Total loans					2,377,169			51,556			4.34						1,733,024			36,576			4.22
Total interest-earning assets					2,930,292			56,214			3.84						2,261,793			40,744			3.60
Non-interest-earning assets					195,768												112,176
Total assets				$	3,126,060											$	2,373,969
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing checking				$	1,033,091			808			0.16					$	859,312			382			0.09
Money market					227,428			250			0.22						111,860			46			0.08
Savings					375,293			67			0.04						303,717			49			0.03
Time deposits					340,511			1,917			1.13						208,324			1,444			1.39
Total					1,976,323			3,042			0.31						1,483,213			1,921			0.26
Securities sold under agreements to repurchase					80,207			54			0.13						67,260			43			0.13
FHLB advances					276,547			2,284			1.65						256,511			1,812			1.41
Other borrowings					22,500			261			2.32						27,500			402			2.92
Total interest-bearing liabilities					2,355,577			5,641			0.48						1,834,484			4,179			0.46
Non-interest-bearing deposits					436,300												302,490
Non-interest-bearing liabilities					19,836												14,701
Total liabilities					2,811,713												2,151,675
Stockholders' equity					314,347												222,294
Total liabilities and stockholders' equity				$	3,126,060											$	2,373,969
Net interest income							$	50,573											$	36,566
Net interest rate spread (3)											3.36	%											3.14	%
Net interest margin (4)											3.45	%											3.23	%
Total cost of deposits (including non-interest bearing deposits)											0.25	%											0.22	%

(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)

		June 30,			March 31,			December 31,			September 30,				June 30,
			2016			2016			2015			2015				2015
Selected Financial Condition Data:
Total assets		$	4,047,493		$	2,588,447		$	2,593,068		$	2,557,898			$	2,395,100
Securities available-for-sale, at estimated fair value			12,509			30,085			29,902			30,108				30,030
Securities held-to-maturity, net			513,721			375,616			394,813			392,932				414,625
Federal Home Loan Bank of New York stock			21,128			16,645			19,978			15,970				18,740
Loans receivable, net			3,130,046			1,996,993			1,970,703			1,938,972				1,772,879
Mortgage loans held-for-sale			5,310			3,386			2,697			2,306				1,454
Deposits			3,206,262			1,971,360			1,916,678			1,967,771				1,761,675
Federal Home Loan Bank advances			312,603			251,917			324,385			233,006				295,616
Securities sold under agreements to repurchase and other borrowings			90,173			106,413			98,372			105,493				99,187
Stockholders' equity			409,258			241,076			238,446			234,688				221,535

	For the quarters ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2016			2016			2015			2015			2015
Selected Operating Data:
Interest income	$	33,141		$	23,073		$	23,149		$	21,970		$	20,576
Interest expense		3,127			2,514			2,461			2,395			2,143
Net interest income		30,014			20,559			20,688			19,575			18,433
Provision for loan losses		662			563			300			300			300
Net interest income after provision for loan losses		29,352			19,996			20,388			19,275			18,133
Other income		4,883			3,376			4,118			4,152			4,171
Operating expenses		21,457			15,314			15,885			15,117			14,208
Merger related expenses		7,189			1,402			614			1,030			184
Income before provision for income taxes		5,589			6,656			8,007			7,280			7,912
Provision for income taxes		1,928			2,451			2,777			2,582			2,779
Net income	$	3,661		$	4,205		$	5,230		$	4,698		$	5,133
Diluted earnings per share	$	0.16		$	0.25		$	0.31		$	0.28		$	0.31

	At or For the Quarters Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2016			2016			2015			2015			2015
Selected Financial Ratios and Other Data(1):
Performance Ratios (Annualized):
Return on average assets (2)		0.40	%		0.65	%		0.81	%		0.75	%		0.86	%
Return on average stockholders' equity (2)		3.77			7.01			8.85			8.02			9.29
Return on average tangible stockholders' equity (2)(3)		4.30			7.07			8.93			8.07			9.29
Stockholders' equity to total assets		10.11			9.31			9.19			9.18			9.25
Tangible stockholders' equity to tangible assets (3)		8.51			9.23			9.12			9.10			9.25
Net interest rate spread		3.46			3.23			3.27			3.16			3.15
Net interest margin		3.55			3.32			3.37			3.26			3.23
Operating expenses to average assets (2)		3.14			2.57			2.55			2.56			2.40
Efficiency ratio (2) (4)		82.09			69.84			66.51			68.05			63.67
Wealth Management:
Assets under administration (000’s)	$	221,277		$	203,723		$	229,039		$	205,087		$	216,533

Per Share Data:
Cash dividends per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13
Stockholders' equity per common share at end of period		15.89			13.89			13.79			13.58			13.25
Tangible stockholders' equity per common share at end of period (3)		13.14			13.75			13.67			13.46			13.25
Number of full-service customer facilities:		50			28			27			27			24

	For the quarters ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2016			2016			2015			2015			2015
Quarterly Average Balances
Total securities	$	571,463		$	445,696		$	456,486		$	468,707		$	490,760
Loans, receivable, net		2,772,518			1,981,101			1,960,099			1,875,458			1,762,995
Total interest-earning assets		3,384,548			2,475,298			2,457,812			2,399,212			2,282,391
Total assets		3,647,102			2,605,017			2,587,109			2,521,481			2,394,836
Interest-bearing transaction deposits		1,899,266			1,372,357			1,371,415			1,319,106			1,273,717
Time deposits		417,301			263,722			256,378			244,325			212,160
Total borrowed funds		386,578			372,240			357,171			355,639			365,804
Total interest-bearing liabilities		2,703,145			2,008,319			1,984,964			1,919,070			1,851,681
Non-interest bearing deposits		529,230			343,371			349,473			354,411			307,528
Stockholder’s equity		388,694			239,999			236,498			234,173			220,920
Total deposits		2,845,797			1,979,450			1,977,266			1,917,842			1,793,405
Quarterly Yields
Total securities		1.81	%		1.80	%		1.74	%		1.69	%		1.65	%
Loans, receivable, net		4.40			4.25			4.31			4.26			4.21
Total interest-earning assets		3.92			3.73			3.77			3.66			3.61
Interest-bearing transaction deposits		0.15			0.12			0.11			0.12			0.07
Time deposits		1.00			1.32			1.30			1.28			1.37
Borrowed funds		1.40			1.34			1.39			1.39			1.29
Total interest-bearing liabilities		0.46			0.50			0.50			0.50			0.46
Net interest spread		3.46			3.23			3.27			3.16			3.15
Net interest margin		3.55			3.32			3.37			3.26			3.23
Total deposits		0.25			0.26			0.25			0.24			0.22

(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 stockholder’s 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
 (in thousands, except per share amounts)

NON-GAAP RECONCILIATION

		For the quarters ended
		June 30,			March 31,			December 31,			September 30,			June 30,
			2016			2016			2015			2015			2015
Core earnings:
Net income		$	3,661		$	4,205		$	5,230		$	4,698		$	5,133
Add:  Merger related expenses			7,189			1,402			614			1,030			184
	Loss on sale of investment securities available for sale		12			—			—			—			—
	Federal Home Loan Bank prepayment fee		136			—			—			—			—
Less:  Income tax benefit on items			(2,311	)		(171	)		(173	)		(316	)		(33	)
Core earnings		$	8,687		$	5,436		$	5,671		$	5,412		$	5,284
Core diluted earnings per share		$	0.38		$	0.32		$	0.33		$	0.32		$	0.32

COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS

		June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
Total stockholder’s equity		$	409,258		$	241,076		$	238,446		$	234,688		$	221,535
Less:
Goodwill			67,102			2,081			1,822			1,845			—
Core deposit intangible			3,903			310			256			269			—
Tangible stockholders’ equity		$	338,253		$	238,685		$	236,368		$	232,574		$	221,535
Total Assets		$	4,047,493		$	2,588,447		$	2,593,068		$	2,557,898		$	2,395,100
Less:
Goodwill			67,102			2,081			1,822			1,845			—
Core deposit intangible			3,903			310			256			269			—
Tangible assets		$	3,976,488		$	2,586,056		$	2,590,990		$	2,555,784		$	2,395,100
Tangible stockholders’ equity to tangible assets			8.51	%		9.23	%		9.12	%		9.10	%		9.25	%
Net accretion/amortization of purchase accounting adjustments included in net interest income		$	1,267		$	164		$	177		$	140		$	—

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 Cape, net of the total consideration paid (in thousands):

		At May 2, 2016
(in thousands)		Cape Book Value			Purchase Accounting Adjustments			Estimated Fair Value
Total Purchase Price:								$	196,403
Assets acquired:
Cash and cash equivalents		$	30,025		$	—		$	30,025
Securities and Federal Home Loan Bank Stock			218,577			361			218,938
Loans:			1,169,568			—			1,156,980
Specific credit fair value on credit impaired loans			—			(7,256	)		—
General credit fair value			—			(19,069	)		—
Interest rate fair value			—			1,982			—
Reverse allowance for loan losses			—			9,931			—
Reverse net deferred fees, premiums and discounts			—			1,824			—
Premises and equipment			27,972			(6,249	)		21,723
Other real estate owned			2,343			(408	)		1,935
Deferred tax asset			9,407			12,647			22,054
Other assets			61,793			—			61,793
Core deposit intangible			831			2,887			3,718
Total assets acquired			1,520,516			(3,350	)		1,517,166
Liabilities assumed:
Deposits			(1,247,688	)		(679	)(a)		(1,248,367	)
Borrowings			(123,587	)		(879	)		(124,466	)
Other liabilities			(7,611	)		(5,340	)(b)		(12,951	)
Total liabilities assumed			(1,378,886	)		(6,898	)		(1,385,784	)
Net assets acquired			141,630			(10,248	)		131,382
Goodwill recorded in the merger								$	65,021
The following provides an explanation of certain fair value adjustments presented in the above table:    (a)  Represents fair value adjustment on time deposits of $1,024, net of reversal of prior acquisition purchase accounting adjustments of $346.  (b)  Represents accrued liability related to the Pension Plan.

 

Company Contact:

Michael J. Fitzpatrick
Chief Financial Officer
OceanFirst Financial Corp.
Tel:  (732) 240-4500, ext. 7506
Fax: (732) 349-5070
Email: Mfitzpatrick@oceanfirst.com

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