RED BANK, N.J., Oct. 24, 2022 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”) (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), announced net income available to common stockholders of $37.6 million, or $0.64 per diluted share, for the three months ended September 30, 2022, as compared to $28.0 million, or $0.47 per diluted share, for the prior linked quarter, and $23.2 million, or $0.39 per diluted share, for the corresponding prior year period. For the nine months ended September 30, 2022, the Company reported net income available to common stockholders of $90.3 million, or $1.53 per diluted share, as compared to $84.4 million, or $1.41 per diluted share, for the corresponding prior year period. Selected performance metrics are as follows (refer to “Selected Quarterly Financial Data” for additional information):

 For the Three Months Ended, For the Nine Months Ended,
Performance Ratios (Annualized):

September 30, June 30, September 30, September 30, September 30,
2022  2022  2021  2022  2021 
Return on average assets1.19% 0.92% 0.78% 0.99% 0.98%
Return on average stockholders’ equity9.68  7.31  6.05  7.87  7.49 
Return on average tangible stockholders’ equity (a)14.62  11.08  9.20  11.91  11.46 
Efficiency ratio53.10  59.65  67.43  57.90  60.62 
Net interest margin3.36  3.29  2.93  3.28  2.91 

(a) Return on average tangible stockholders’ equity, a non-GAAP (“generally accepted accounting principles”) financial measure, excludes the impact of intangible assets and goodwill from both assets and stockholders’ equity. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.

Core earnings1 for the three and nine months ended September 30, 2022 amounted to $35.0 million and $98.4 million, respectively, or $0.60 and $1.67 per diluted share, an increase from core earnings of $26.7 million and $82.7 million, or $0.45 and $1.38 per diluted share, for the corresponding prior year periods. Non-core operations, net of tax, had a favorable impact of $2.6 million, and an adverse impact of $8.1 million, for the three and nine months ended September 30, 2022, respectively. Non-core operations, net of tax, had an adverse impact of $3.6 million, and a favorable impact of $1.7 million, for the three and nine months ended September 30, 2021, respectively.

Core earnings for the three months ended September 30, 2022 increased $376,000 from $34.6 million, or $0.59 per diluted share, for the prior linked quarter. Non-core operations, net of tax, had an adverse impact of $6.7 million for the prior linked quarter.

Core earnings PTPP for the three and nine months ended September 30, 2022 were $47.5 million and $134.2 million, respectively, or $0.81 and $2.28 per diluted share, respectively. Selected performance metrics are as follows:

 For the Three Months Ended, For the Nine Months Ended,
 September 30, June 30, September 30, September 30, September 30,
Core Ratios1 (Annualized): 2022   2022   2021   2022   2021 
Return on average assets 1.11%  1.13%  0.90%  1.08%  0.95%
Return on average tangible stockholders’ equity 13.62   13.73   10.62   12.98   11.23 
Efficiency ratio 54.80   54.43   62.22   55.51   60.23 
Core diluted earnings per share$0.60  $0.59  $0.45  $1.67  $1.38 
Core PTPP diluted earnings per share 0.81   0.80   0.54   2.28   1.67 

Key developments for the recent quarter are described below:

1 Core earnings and core earnings before income taxes and credit loss provision (“PTPP or Pre-Tax-Pre-Provision”), and ratios derived therefrom, are non-GAAP financial measures. For the periods presented, core earnings exclude merger related expenses, net branch consolidation (benefit) expense, net loss (gain) on equity investments, and the income tax effect of these items, (collectively referred to as “non-core” operations). PTPP excludes the aforementioned pre-tax “non-core” items along with income tax expense (benefit) and credit loss provision (benefit). Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.

Chairman and Chief Executive Officer, Christopher D. Maher, commented on the Company’s results, “Our Company delivered another quarter of strong financial performance driven by expansion of net interest income and margin, continued organic loan and deposit growth, and disciplined expense management.” Mr. Maher added, “In addition to financial performance, I’m proud of our team’s continuing efforts to support our community. On October 6th, approximately 750 employees participated in our inaugural CommunityFirst day, providing service to over 100 different non-profits in the five primary states that OceanFirst serves.”

The Company’s Board of Directors declared its 103rd consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.20 per share will be paid on November 18, 2022 to common stockholders of record on November 7, 2022. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depositary share, representing 1/40th interest in the Series A Preferred Stock. This dividend will be paid on November 15, 2022 to preferred stockholders of record on October 31, 2022.

Results of Operations
On April 1, 2022, the Company completed its acquisition of a majority interest in Trident Abstract Title Agency, LLC (“Trident”) and its results of operations are included in the consolidated results for the three and nine months ended September 30, 2022, but are excluded from the results of operations for the period from January 1, 2021 to March 31, 2022. Refer to “Supplemental Information on Trident” for the impact of Trident on the Company’s consolidated results.

Net Interest Income and Margin
Net interest income for the three and nine months ended September 30, 2022 increased to $96.0 million and $271.0 million, respectively, as compared to $77.1 million and $224.8 million for the corresponding prior year periods, reflecting an increase in average interest-earning assets and net interest margin.

Net interest margin for the three and nine months ended September 30, 2022 increased to 3.36% and 3.28%, respectively, from 2.93% and 2.91% for the same prior year periods. Excluding the impact of purchase accounting accretion and prepayment fees of 0.08% and 0.18% for the three months ended September 30, 2022 and 2021, respectively, net interest margin increased to 3.28% from 2.75%. Excluding the impact of purchase accounting accretion and prepayment fees of 0.13% and 0.17% for the nine months ended September 30, 2022 and 2021, respectively, net interest margin increased to 3.15% from 2.74%. Net interest margin for both the three and nine months ended September 30, 2022 were positively impacted by the redeployment of excess cash into loans and the impact of the rising rate environment on interest earning assets, partly offset by an increased cost of funds and the growth in interest-bearing liabilities balances.

Average interest-earning assets increased by $865.6 million and $739.5 million for the three and nine months ended September 30, 2022, respectively, as compared to the same prior year periods, primarily due to loan and securities growth funded by the redeployment of excess cash. Average loans receivable, net of allowance for loan credit losses, increased by $1.65 billion and $1.38 billion for the three and nine months ended September 30, 2022, respectively, as compared to the same prior year periods.

For the three months ended September 30, 2022, the cost of average interest-bearing liabilities increased to 0.69% from 0.44% for the corresponding prior year period, as a result of higher costs associated with Federal Home Loan Bank (“FHLB”) advances and time deposits issued in an elevated rate environment in 2022. The total cost of deposits (including non-interest bearing deposits) was 0.36% for the three months ended September 30, 2022, as compared to 0.22% for the same prior year period.

For the nine months ended September 30, 2022, the cost of average interest-bearing liabilities decreased to 0.49% from 0.52% for the corresponding prior year period, as a result of downward repricing of deposits that began in the prior year and continued through the current year, partly offset by the recent pace of the rising rate environment in the current quarter and increased funding costs on FHLB advances. The total cost of deposits (including non-interest bearing deposits) was 0.24% for the nine months ended September 30, 2022, as compared to 0.28% for the same prior year period.

Net interest income for the three months ended September 30, 2022 increased by $5.2 million, as compared to the prior linked quarter, reflecting an increase in net interest margin to 3.36%, as compared to 3.29% for the prior linked quarter. Excluding the impact of purchase accounting accretion and prepayment fees of 0.08% and 0.17% for the three months ended September 30, 2022 and June 30, 2022, respectively, net interest margin increased to 3.28%, from 3.12%. The expansion in net interest margin was primarily attributable to the impact of the rising rate environment on interest earning assets and to a lesser extent loan growth, partly offset by increased costs of funds. Average interest-earning assets increased by $242.9 million for the quarter ended September 30, 2022, as compared to the prior linked quarter, primarily due to loan growth. The yield on average interest-earning assets increased to 3.88% for the three months ended September 30, 2022, from 3.60% in the prior linked quarter. The total cost of average interest-bearing liabilities was 0.69% for the three months ended September 30, 2022, as compared to 0.42% in the prior linked quarter, primarily due to the impact of brokered deposits issued in the prior linked quarter and increased rates on FHLB advances.

Credit Loss Expense (Benefit)
Credit loss expense for the three and nine months ended September 30, 2022 was $1.0 million and $4.1 million, respectively, as compared to a credit loss benefit of $3.2 million and $10.3 million for the corresponding prior year periods, and a credit loss expense of $1.3 million in the prior linked quarter. The credit loss expense for the three and nine months ended September 30, 2022 was influenced by loan growth, slowing prepayment rates, and increasingly uncertain macro-economic forecasts due to rising interest rates, inflation, and global economic headwinds, partly offset by positive trends in the Company’s criticized and classified assets.

Net loan recoveries were $252,000 and $386,000 for the three months ended September 30, 2022 and 2021, respectively. Net loan recoveries were $335,000 and $442,000 for the nine months ended September 30, 2022 and 2021, respectively. Net loan charge-offs were $9,000 in the prior linked quarter. Refer to “Asset Quality” section for further discussion.

Non-interest Income
For the three months ended September 30, 2022, other income increased to $15.2 million, as compared to $9.9 million for the corresponding prior year period. For the nine months ended September 30, 2022, other income decreased to $31.5 million, as compared to $42.5 million for the corresponding prior year period.

Other income for the three and nine months ended September 30, 2022 was impacted by non-core operations of $3.4 million related to gains on equity investments and $7.5 million related to net losses on equity investments, respectively. The nine months ended September 30, 2022 included $11.3 million of net unrealized losses, mostly on preferred stock equity investments, primarily due to the impact of the rising interest rate environment. The preferred stock equity investments carry a weighted average yield of 5.1% and an amortized cost of $73.3 million at September 30, 2022. Other income for the three and nine months ended September 30, 2021 was impacted by non-core operations of $466,000 related to net losses on equity investments and $8.4 million related to net gains on equity investments, respectively.

Excluding non-core operations noted above, other income increased by $1.4 million for the three months ended September 30, 2022, as compared to the corresponding prior year period. This increase was primarily due to the acquisition of a majority interest in Trident, which added $3.3 million of title-related fees and service charges. This increase was partly offset by a decrease in income from bankcard services of $1.9 million, primarily as a result of the Durbin amendment, which became effective for the Company on July 1, 2022.

Excluding non-core operations noted above, other income increased by $4.9 million for the nine months ended September 30, 2022, as compared to the corresponding prior year period. The increase was primarily due to the impact of Trident, which added $7.8 million of title-related fees and services charges, and an increase in commercial loan swap income of $3.8 million. These increases were partly offset by decreases in net gain on sale of loans of $2.8 million, income from bankcard services of $2.3 million primarily as a result of the Durbin amendment, fees and service charges of $849,000, and Paycheck Protection Program (“PPP”) loan origination referral fees of $800,000.

Excluding non-core operations of $8.1 million related to net losses on equity investments in the prior linked quarter, other income for the three months ended September 30, 2022 decreased by $3.8 million, primarily due to decreases in income from bankcard services of $1.8 million primarily as a result of the Durbin amendment, fees and service charges of $1.3 million due to seasonality and market conditions impacting Trident’s performance, and commercial loan swap income of $823,000.

Non-interest Expense
Operating expenses increased to $59.0 million and $175.2 million for the three and nine months ended September 30, 2022, respectively, as compared to $58.7 million and $162.0 million for the same prior year periods. Operating expenses for the three and nine months ended September 30, 2022 were favorably impacted by $48,000 and adversely impacted by $3.1 million of non-core operations, respectively. Operating expenses were adversely impacted by non-core operations for the three and nine months ended September 30, 2021 of $4.2 million and $6.1 million, respectively.

Excluding non-core operations, operating expenses increased by $4.6 million for the three months ended September 30, 2022, as compared to the corresponding prior year period. This increase was partly due to the acquisition of a majority interest in Trident, which added $2.8 million of expenses for the three months ended September 30, 2022, and increases, excluding Trident, in compensation and benefits expense of $1.8 million primarily related to increased employee medical benefit claims, and data processing expense of $1.2 million, as a result of the migration to a new core banking system. These increases were partly offset by a decrease in professional fees of $615,000.

Excluding non-core operations, operating expenses increased by $16.2 million for the nine months ended September 30, 2022, as compared to the corresponding prior year period. This increase was partly due to the impact of Trident, which added $6.0 million of expenses and increases, excluding Trident, in compensation and benefits expense of $5.3 million partly relating to the commercial banking strategy and commercial banking hires in expansion markets of Boston and Baltimore, data processing expense of $4.6 million as a result of the migration to a new core banking system, and federal deposit insurance and regulatory assessments of $1.0 million as a result of a higher assessment base and multiplier. These increases were partly offset by a decrease in amortization of core deposit intangible by $551,000.

Excluding non-core operations, operating expenses for the three months ended September 30, 2022 increased $1.1 million as compared to the prior linked quarter, primarily due to increases in compensation and benefits of $971,000, primarily related to increased employee medical benefit claims, and occupancy expense of $530,000.

Income Tax Expense
The provision for income taxes was $12.3 million and $29.2 million for the three and nine months ended September 30, 2022, respectively, as compared to $7.4 million and $28.1 million for the same prior year periods, and $8.9 million for the prior linked quarter. The effective tax rate was 24.1% and 23.7% for the three and nine months ended September 30, 2022, respectively, as compared to 23.3% and 24.3% for the same prior year periods, respectively, and 23.3% for the prior linked quarter.

Financial Condition
Total assets increased by $943.8 million to $12.68 billion at September 30, 2022, from $11.74 billion at December 31, 2021. Total loans increased by $1.10 billion to $9.72 billion at September 30, 2022, from $8.62 billion at December 31, 2021, due to strong loan originations. Total debt securities decreased by $209.4 million at September 30, 2022, as compared to December 31, 2021, primarily due to principal repayments and maturities, and to a lesser extent, an increase in unrealized losses driven by the rising rate environment. Other assets increased by $81.1 million to $228.1 million at September 30, 2022 from $147.0 million at December 31, 2021, primarily due to an increase in market values associated with customer interest rate swap programs.

Total liabilities increased by $920.2 million to $11.14 billion at September 30, 2022, from $10.22 billion at December 31, 2021. Deposits increased by $226.7 million to $9.96 billion at September 30, 2022, from $9.73 billion at December 31, 2021. Total deposits, excluding time deposits, decreased by $402.7 million to $8.56 billion at September 30, 2022, from $8.96 billion at December 31, 2021, due to the net runoff of interest-bearing checking balances. Time deposits increased to $1.40 billion at September 30, 2022, from $775.0 million at December 31, 2021, primarily due to an increase in brokered time deposits. The loans-to-deposit ratio at September 30, 2022 was 97.6%, as compared to 88.6% at December 31, 2021.

FHLB advances increased to $514.2 million at September 30, 2022 from $0 at December 31, 2021 to fund liquidity needs. Other borrowings decreased by $34.2 million to $194.9 million at September 30, 2022, from $229.1 million at December 31, 2021, primarily due to the extinguishment of $35.0 million of subordinated debt in March 2022. Other liabilities increased by $230.9 million to $352.9 million at September 30, 2022, from $122.0 million at December 31, 2021, primarily due to an increase in the market values associated with customer interest rate swap programs and related collateral received from counterparties.

Stockholders’ equity increased to $1.54 billion at September 30, 2022, as compared to $1.52 billion at December 31, 2021. Accumulated other comprehensive loss increased by $35.7 million to $38.5 million at September 30, 2022 from $2.8 million at December 31, 2021, primarily due to unrealized losses on debt securities available-for-sale which were adversely impacted by the rising interest rate environment. For the nine months ended September 30, 2022, the Company repurchased 373,223 shares totaling $7.4 million under its stock repurchase program at a weighted average cost of $19.82. There were 2,934,438 shares available for repurchase at September 30, 2022 under the existing repurchase program. Stockholders’ equity per common share increased to $26.04 at September 30, 2022, as compared to $25.63 at December 31, 2021. Tangible common equity per common share2 increased to $16.30 at September 30, 2022, as compared to $15.93 at December 31, 2021.

2 Tangible common equity per common share, a non-GAAP financial measure, excludes the impact of intangible assets, goodwill, and preferred equity from stockholders’ equity. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.

Asset Quality
The Company’s non-performing loans decreased to $21.5 million at September 30, 2022, as compared to $25.5 million at December 31, 2021. The Company’s non-performing loans, excluding $3.0 million and $6.5 million of non-performing purchased with credit deterioration (“PCD”) loans from prior bank acquisitions at September 30, 2022 and December 31, 2021, respectively, decreased to $18.5 million at September 30, 2022, as compared to $18.9 million at December 31, 2021. The allowance for loan credit losses as a percentage of total non-performing loans was 248.96% at September 30, 2022, as compared to 191.61% at December 31, 2021. The allowance for loan credit losses as a percentage of total non-performing loans, excluding PCD loans, was 290.01% at September 30, 2022, as compared to 257.81% at December 31, 2021. The level of 30 to 89 days delinquent loans improved to $11.8 million at September 30, 2022, from $14.5 million at December 31, 2021. The level of 30 to 89 days delinquent loans, excluding non-performing and PCD loans, improved to $10.4 million at September 30, 2022, from $13.5 million at December 31, 2021.

The Company’s allowance for loan credit losses was 0.55% of total loans at September 30, 2022, as compared to 0.57% at December 31, 2021. The allowance for loan credit losses plus the unamortized credit and PCD marks amounted to $67.1 million, or 0.69% of total loans, at September 30, 2022, as compared to $67.8 million, or 0.79% of total loans at December 31, 2021.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with GAAP. The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income excluding non-core operations and in some instances excluding income taxes and credit loss provision, and reporting equity and asset amounts excluding intangible assets and goodwill, which can vary from period to period, provides a better comparison of period-to-period operating performance. In addition, a non-GAAP table has been presented excluding the results associated with the acquisition of a majority interest in Trident for better comparison period over period. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.

Conference Call
As previously announced, the Company will host an earnings conference call on Tuesday, October 25, 2022 at 11:00 a.m. Eastern Time. The direct dial number for the call is (844) 200-6205, using the access code 225620. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (866) 813-9403, access code 477430, from one hour after the end of the call until January 26, 2023. The conference call, as well as the replay, are also available (listen-only) by internet webcast at www.oceanfirst.com in the Investor Relations section.

OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank N.A., founded in 1902, is a $12.7 billion regional bank providing financial services throughout New Jersey and in the major metropolitan markets of Philadelphia, New York, Baltimore, and Boston. OceanFirst Bank delivers commercial and residential financing, treasury management, trust and asset management, and deposit services and is one of the largest and oldest community-based financial institutions headquartered in New Jersey. To learn more about OceanFirst, go to 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: management plans relating to the proposed transaction with Partners Bancorp (the “Transaction”); the ability to complete the Transaction; the ability to obtain any regulatory, stockholder or other approvals, authorizations or consents; the expected timing of the completion of the Transaction; any statements of the plans and objectives of management for future operations, products or services, including the execution of integration plans relating to the Transaction; the impact of the COVID-19 or any other pandemic on our operations and financial results and those of our customers, changes in interest rates, inflation, 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 current or anticipated impact of military conflict, terrorism or other geopolitical events, 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, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks; 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, 2021, under Item 1A - Risk Factors and elsewhere, and subsequent securities filings and should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)

  September 30, June 30, December 31, September 30,
   2022  2022  2021  2021
  (Unaudited) (Unaudited)   (Unaudited)
Assets        
Cash and due from banks $170,668 $189,019 $204,949 $981,126
Debt securities available-for-sale, at estimated fair value  470,300  507,276  568,255  314,620
Debt securities held-to-maturity, net of allowance for securities credit losses of $1,234 at September 30, 2022, $1,293 at June 30, 2022, $1,467 at December 31, 2021, and $1,503 at September 30, 2021 (estimated fair value of $905,426 at September 30, 2022, $987,532 at June 30, 2022, $1,152,744 at December 31, 2021 and $1,143,381 at September 30, 2021)  1,027,712  1,068,034  1,139,193  1,125,382
Equity investments  81,722  75,269  101,155  101,314
Restricted equity investments, at cost  77,556  76,047  53,195  53,017
Loans receivable, net of allowance for loan credit losses of $53,521 at September 30, 2022, $52,061 at June 30, 2022, $48,850 at December 31, 2021 and $50,153 at September 30, 2021  9,672,488  9,380,688  8,583,352  8,139,961
Loans held-for-sale  3,549  —  —  13,428
Interest and dividends receivable  38,388  34,184  32,606  32,512
Other real estate owned  —  —  106  106
Premises and equipment, net  127,868  128,118  125,828  123,669
Bank owned life insurance  261,118  260,230  259,207  260,072
Assets held for sale  3,216  4,263  6,229  4,613
Goodwill  506,146  506,146  500,319  500,319
Core deposit intangible  14,656  15,827  18,215  19,558
Other assets  228,066  193,552  147,007  159,991
Total assets $12,683,453 $12,438,653 $11,739,616 $11,829,688
Liabilities and Stockholders’ Equity        
Deposits $9,959,469 $9,831,484 $9,732,816 $9,774,097
Federal Home Loan Bank advances  514,200  488,750  —  —
Securities sold under agreements to repurchase with customers  96,289  105,495  118,769  143,292
Other borrowings  194,914  194,654  229,141  228,887
Advances by borrowers for taxes and insurance  25,457  23,640  20,305  22,214
Other liabilities  352,908  273,198  122,032  147,949
Total liabilities  11,143,237  10,917,221  10,223,063  10,316,439
OceanFirst Financial Corp. stockholders’ equity  1,539,253  1,520,488  1,516,553  1,513,249
Non-controlling interest  963  944  —  —
Total stockholders’ equity  1,540,216  1,521,432  1,516,553  1,513,249
Total liabilities and stockholders’ equity $12,683,453 $12,438,653 $11,739,616 $11,829,688


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

  For the Three Months Ended, For the Nine Months Ended,
  September 30, June 30, September 30, September 30, September 30,
   2022   2022   2021   2022   2021 
  |---------------------- (Unaudited) ----------------------| |---------- (Unaudited) -----------|
Interest income:          
Loans $100,141  $90,731  $78,889  $273,340  $233,845 
Debt securities  8,479   7,473   5,040   23,456   16,379 
Equity investments and other  1,879   1,212   1,491   4,102   3,411 
Total interest income  110,499   99,416   85,420   300,898   253,635 
Interest expense:          
Deposits  9,238   4,317   5,379   17,596   20,200 
Borrowed funds  5,296   4,302   2,909   12,313   8,683 
Total interest expense  14,534   8,619   8,288   29,909   28,883 
Net interest income  95,965   90,797   77,132   270,989   224,752 
Credit loss expense (benefit)  1,016   1,254   (3,179)  4,121   (10,259)
Net interest income after credit loss expense (benefit)  94,949   89,543   80,311   266,868   235,011 
Other income:          
Bankcard services revenue  1,509   3,310   3,409   7,782   10,052 
Trust and asset management revenue  568   658   584   1,835   1,774 
Fees and service charges  6,320   7,646   2,973   17,026   10,519 
Net gain (loss) on sales of loans  168   3   (15)  348   3,180 
Net gain (loss) on equity investments  3,362   (8,078)  (466)  (7,502)  8,397 
Net gain (loss) from other real estate operations  —   50   (3)  48   (12)
Income from bank owned life insurance  1,356   1,422   1,640   4,881   4,771 
Commercial loan swap income  1,471   2,294   1,588   6,546   2,772 
Other  396   236   173   579   1,068 
Total other income  15,150   7,541   9,883   31,543   42,521 
Operating expenses:          
Compensation and employee benefits  34,124   33,153   30,730   97,972   89,008 
Occupancy  5,288   4,758   5,005   15,790   15,380 
Equipment  1,150   1,336   1,124   3,856   4,008 
Marketing  655   971   496   2,242   1,555 
Federal deposit insurance and regulatory assessments  1,757   1,788   1,459   5,435   4,422 
Data processing  6,560   6,170   5,363   18,466   13,796 
Check card processing  1,231   1,515   1,337   3,728   4,012 
Professional fees  2,502   2,472   3,089   8,296   8,317 
Amortization of core deposit intangible  1,171   1,178   1,354   3,559   4,110 
Branch consolidation (benefit) expense, net  (346)  546   4,014   602   5,051 
Merger related expenses  298   196   225   2,459   1,052 
Other operating expense  4,607   4,578   4,477   12,748   11,315 
Total operating expenses  58,997   58,661   58,673   175,153   162,026 
Income before provision for income taxes  51,102   38,423   31,521   123,258   115,506 
Provision for income taxes  12,298   8,940   7,354   29,212   28,087 
Net income  38,804   29,483   24,167   94,046   87,419 
Net income attributable to non-controlling interest  193   522   —   715   — 
Net income attributable to OceanFirst Financial Corp.  38,611   28,961   24,167   93,331   87,419 
Dividends on preferred shares  1,004   1,004   1,004   3,012   3,012 
Net income available to common stockholders $37,607  $27,957  $23,163  $90,319  $84,407 
Basic earnings per share $0.64  $0.48  $0.40  $1.54  $1.42 
Diluted earnings per share $0.64  $0.47  $0.39  $1.53  $1.41 
Average basic shares outstanding  58,681   58,894   59,311   58,777   59,619 
Average diluted shares outstanding  58,801   58,995   59,515   58,918   59,862 


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

LOANS RECEIVABLE  At
   September 30, June 30, March 31, December 31, September 30,
    2022   2022   2022   2021   2021 
Commercial:           
Commercial real estate - investor  $5,007,637  $4,808,965  $4,607,880  $4,378,061  $3,922,983 
Commercial real estate - owner-occupied  983,784   1,020,873   1,057,246   1,055,065   1,123,973 
Commercial and industrial   652,620   584,464   502,739   449,224   457,674 
Total commercial   6,644,041   6,414,302   6,167,865   5,882,350   5,504,630 
Consumer:           
Residential real estate   2,813,209   2,758,269   2,687,927   2,479,701   2,401,240 
Home equity loans and lines and other consumer ("other consumer")  261,510   252,314   253,184   260,819   275,962 
Total consumer   3,074,719   3,010,583   2,941,111   2,740,520   2,677,202 
Total loans   9,718,760   9,424,885   9,108,976   8,622,870   8,181,832 
Deferred origination costs (fees), net  7,249   7,864   7,301   9,332   8,282 
Allowance for loan credit losses   (53,521)  (52,061)  (50,598)  (48,850)  (50,153)
Loans receivable, net  $9,672,488  $9,380,688  $9,065,679  $8,583,352  $8,139,961 
Mortgage loans serviced for others $53,869  $56,045  $58,089  $60,447  $64,840 
 At September 30, 2022 Average Yield          
Loan pipeline (1):           
Commercial5.21% $339,487  $273,843  $385,986  $539,426  $482,942 
Residential real estate5.20   80,591   104,920   116,554   123,211   160,070 
Other consumer5.24   19,395   6,278   12,814   8,381   8,420 
Total5.21% $439,473  $385,041  $515,354  $671,018  $651,432 


 For the Three Months Ended 
 September 30, June 30, March 31, December 31, September 30, 
 2022  2022  2022  2021  2021 
 Average Yield           
Loan originations:            
Commercial5.11% $356,726 $645,863 $816,517 $780,464 $585,667 
Residential real estate4.72   129,808  173,365  192,721(2) 195,942(2) 174,365(2)
Other consumer3.90   57,254  16,253  12,718  12,552  11,782 
Total4.89% $543,788 $835,481 $1,021,956 $988,958 $771,814 
Loans sold  $9,425(3)$— $703(4)$649 $1,756 

(1) Loan pipeline includes loans approved but not funded.
(2) Excludes residential real estate loan pool purchases of $161.7 million, $82.2 million and $219.7 million for the three months ended March 31, 2022, December 31, 2021 and September 30, 2021, respectively.
(3) Excludes the sale of a small business administration loan of $1.2 million for the three months ended September 30, 2022   
(4) Excludes the sale of higher risk commercial loans of $12.0 million for the three months ended March 31, 2022.


DEPOSITSAt
 September 30, June 30, March 31, December 31, September 30,
  2022  2022  2022  2021  2021
Type of Account         
Non-interest-bearing$2,325,547 $2,312,126 $2,444,833 $2,412,056 $2,467,952
Interest-bearing checking 3,909,864  3,696,067  4,287,745  4,201,736  4,013,565
Money market 749,229  716,782  811,588  736,090  816,691
Savings 1,570,472  1,606,534  1,624,751  1,607,933  1,620,447
Time deposits 1,404,357  1,499,975  887,316  775,001  855,442
Total deposits$9,959,469 $9,831,484 $10,056,233 $9,732,816 $9,774,097


OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITY

September 30, June 30, March 31, December 31, September 30,
 2022   2022   2022   2021   2021 
Non-performing loans:         
Commercial real estate - investor$9,866  $2,609  $3,575  $3,614  $8,506 
Commercial real estate - owner-occupied 1,976   8,233   9,632   11,904   12,524 
Commercial and industrial 321   364   2,830   277   418 
Residential real estate 5,958   5,846   7,047   6,114   5,505 
Other consumer 3,377   3,701   3,841   3,585   3,351 
Total non-performing loans 21,498   20,753   26,925   25,494   30,304 
Other real estate owned —   —   106   106   106 
Total non-performing assets$21,498  $20,753  $27,031  $25,600  $30,410 
Delinquent loans 30 to 89 days$11,846  $9,558  $18,691  $14,546  $7,840 
Troubled debt restructuring (“TDR”):         
Non-performing (included in total non-performing loans above)$10,047  $10,493  $11,914  $11,311  $9,962 
Performing 6,065   6,946   7,716   12,320   9,661 
Total TDRs$16,112  $17,439  $19,630  $23,631  $19,623 
Allowance for loan credit losses$53,521  $52,061  $50,598  $48,850  $50,153 
Allowance for loan credit losses as a percent of total loans receivable (1) 0.55%  0.55%  0.56%  0.57%  0.61%
Allowance for loan credit losses as a percent of total non-performing loans (1) 248.96   250.86   187.92   191.61   165.50 
Non-performing loans as a percent of total loans receivable 0.22   0.22   0.30   0.30   0.37 
Non-performing assets as a percent of total assets 0.17   0.17   0.22   0.22   0.26 
PCD loans         
PCD loans, net of allowance for loan credit losses$29,249  $35,227  $37,032  $41,817  $41,372 
Non-performing PCD loans 3,043   3,529   3,745   6,546   6,960 
Delinquent PCD and non-performing loans 30 to 89 days 1,434   1,381   2,749   1,000   1,193 
TDR PCD loans 715   997   1,033   337   345 
Asset quality, excluding PCD loans (2)         
Non-performing loans 18,455   17,224   23,180   18,948   23,344 
Non-performing assets 18,455   17,224   23,286   19,054   23,450 
Delinquent loans 30 to 89 days (excludes non-performing loans) 10,412   8,177   15,942   13,546   6,647 
TDRs 15,397   16,442   18,597   23,294   19,278 
Allowance for loan credit losses as a percent of total non-performing loans (1) 290.01%  302.26%  218.28%  257.81%  214.84%
Non-performing loans as a percent of total loans receivable 0.19   0.18   0.25   0.22   0.29 
Non-performing assets as a percent of total assets 0.15   0.14   0.19   0.16   0.20 

(1) Loans acquired from prior bank acquisitions were recorded at fair value. The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, was $13.6 million, $15.5 million, $16.9 million, $18.9 million and $21.3 million at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.
(2) All balances and ratios exclude PCD loans.


NET LOAN RECOVERIES (CHARGE-OFFS)For the Three Months Ended
 September 30, June 30, March 31, December 31, September 30,
  2022   2022   2022   2021   2021 
Net loan recoveries (charge-offs):         
Loan charge-offs$(5) $(287) $(143) $(92) $(163)
Recoveries on loans 257   278   235   111   549 
Net loan recoveries (charge-offs)$252  $(9) $92  $19  $386 
Net loan recoveries (charge-offs) to average total loans (annualized)NM*  —% NM* NM* NM*
Net loan recoveries (charge-offs) detail:         
Commercial$117  $154  $25  $(24) $(33)
Residential real estate 44   (47)  94   21   280 
Other consumer 91   (116)  (27)  22   139 
Net loan recoveries (charge-offs)$252  $(9) $92  $19  $386 

* Not meaningful as amounts are net loan recoveries.


OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME

 For the Three Months Ended
 September 30, June 30, September 30,
  2022   2022   2021 
(dollars in thousands)Average
Balance		 Interest Average
Yield/
Cost (1)		 Average
Balance		 Interest Average
Yield/
Cost (1)		 Average
Balance		 Interest Average
Yield/
Cost (1)
Assets:                 
Interest-earning assets:                 
Interest-earning deposits and short-term investments$65,648  $336 2.03% $67,440  $100 0.59% $1,053,797  $441 0.17%
Securities (2) 1,748,687   10,022 2.27   1,811,869   8,585 1.90   1,542,630   6,090 1.57 
Loans receivable, net (3)                 
Commercial 6,509,515   74,309 4.53   6,278,465   65,390 4.18   5,361,472   55,387 4.10 
Residential real estate 2,791,067   22,818 3.27   2,718,787   22,742 3.35   2,260,673   20,076 3.55 
Other consumer 256,638   3,014 4.66   251,014   2,599 4.15   289,011   3,426 4.70 
Allowance for loan credit losses, net of deferred loan costs and fees (44,773)  — —   (43,683)  — —   (46,436)  — — 
Loans receivable, net 9,512,447   100,141 4.18   9,204,583   90,731 3.95   7,864,720   78,889 3.98 
Total interest-earning assets 11,326,782   110,499 3.88   11,083,892   99,416 3.60   10,461,147   85,420 3.24 
Non-interest-earning assets 1,191,173       1,168,093       1,276,890     
Total assets$12,517,955      $12,251,985      $11,738,037     
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing checking$3,873,968   2,671 0.27% $4,020,474   1,612 0.16% $3,841,475   2,854 0.29%
Money market 793,230   721 0.36   739,647   279 0.15   767,854   245 0.13 
Savings 1,603,147   187 0.05   1,639,568   161 0.04   1,609,197   146 0.04 
Time deposits 1,467,297   5,659 1.53   937,387   2,265 0.97   904,384   2,134 0.94 
Total 7,737,642   9,238 0.47   7,337,076   4,317 0.24   7,122,910   5,379 0.30 
FHLB Advances 352,392   2,208 2.49   538,754   1,647 1.23   —   — — 
Securities sold under agreements to repurchase 96,147   35 0.14   103,929   41 0.16   142,494   51 0.14 
Other borrowings 194,755   3,053 6.22   194,481   2,614 5.39   228,695   2,858 4.96 
Total borrowings 643,294   5,296 3.27   837,164   4,302 2.06   371,189   2,909 3.11 
Total interest-bearing liabilities 8,380,936   14,534 0.69   8,174,240   8,619 0.42   7,494,099   8,288 0.44 
Non-interest-bearing deposits 2,328,700       2,328,124       2,576,123     
Non-interest-bearing liabilities 266,564       214,900       148,327     
Total liabilities 10,976,200       10,717,264       10,218,549     
Stockholders’ equity 1,541,755       1,534,721       1,519,488     
Total liabilities and equity$12,517,955      $12,251,985      $11,738,037     
Net interest income  $95,965     $90,797     $77,132  
Net interest rate spread (4)    3.19%     3.18%     2.80%
Net interest margin (5)    3.36%     3.29%     2.93%
Total cost of deposits (including non-interest-bearing deposits)    0.36%     0.18%     0.22%


 For the Nine Months Ended September 30,
  2022   2021 
(dollars in thousands)Average
Balance		 Interest Average
Yield/
Cost (1)		 Average
Balance		 Interest Average
Yield/
Cost (1)
Assets:           
Interest-earning assets:           
Interest-earning deposits and short-term investments$73,886  $472 0.85% $1,061,419  $958 0.12%
Securities (2) 1,801,978   27,086 2.01   1,452,778   18,832 1.73 
Loans receivable, net (3)           
Commercial 6,275,836   198,054 4.22   5,270,138   163,315 4.14 
Residential real estate 2,685,080   66,899 3.32   2,269,066   59,242 3.48 
Other consumer 254,891   8,387 4.40   306,681   11,288 4.92 
Allowance for loan credit losses, net of deferred loan costs and fees (42,987)  — —   (50,912)  — — 
Loans receivable, net 9,172,820   273,340 3.98   7,794,973   233,845 4.01 
Total interest-earning assets 11,048,684   300,898 3.64   10,309,170   253,635 3.29 
Non-interest-earning assets 1,191,358       1,264,347     
Total assets$12,240,042      $11,573,517     
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing checking$4,088,759   6,433 0.21% $3,753,457   10,549 0.38%
Money market 773,666   1,317 0.23   761,975   823 0.14 
Savings 1,617,354   473 0.04   1,571,345   490 0.04 
Time deposits 1,060,027   9,373 1.18   1,041,371   8,338 1.07 
Total 7,539,806   17,596 0.31   7,128,148   20,200 0.38 
FHLB Advances 308,043   3,890 1.69   —   — — 
Securities sold under agreements to repurchase 105,821   117 0.15   135,754   203 0.20 
Other borrowings 205,796   8,306 5.40   228,472   8,480 4.96 
Total borrowings 619,660   12,313 2.66   364,226   8,683 3.19 
Total interest-bearing liabilities 8,159,466   29,909 0.49   7,492,374   28,883 0.52 
Non-interest-bearing deposits 2,352,606       2,416,866     
Non-interest-bearing liabilities 193,147       157,821     
Total liabilities 10,705,219       10,067,061     
Stockholders’ equity 1,534,823       1,506,456     
Total liabilities and equity$12,240,042      $11,573,517     
Net interest income  $270,989     $224,752  
Net interest rate spread (4)    3.15%     2.77%
Net interest margin (5)    3.28%     2.91%
Total cost of deposits (including non-interest-bearing deposits)    0.24%     0.28%

(1) Average yields and costs are annualized.
(2) Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost, net of allowance for securities credit losses.
(3) Amount is net of deferred loan costs and fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, and includes loans held for sale and non-performing loans.
(4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.


OceanFirst Financial Corp.
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share amounts)

  September 30, June 30, March 31, December 31, September 30,
   2022  2022  2022  2021  2021
Selected Financial Condition Data:          
Total assets $12,683,453 $12,438,653 $12,164,945 $11,739,616 $11,829,688
Debt securities available-for-sale, at estimated fair value  470,300  507,276  546,470  568,255  314,620
Debt securities held-to-maturity, net of allowance for securities credit losses  1,027,712  1,068,034  1,099,514  1,139,193  1,125,382
Equity investments  81,722  75,269  93,888  101,155  101,314
Restricted equity investments, at cost  77,556  76,047  56,704  53,195  53,017
Loans receivable, net of allowance for loan credit losses  9,672,488  9,380,688  9,065,679  8,583,352  8,139,961
Deposits  9,959,469  9,831,484  10,056,233  9,732,816  9,774,097
Federal Home Loan Bank advances  514,200  488,750  75,002  —  —
Securities sold under agreements to repurchase and other borrowings  291,203  300,149  312,178  347,910  372,179
Total stockholders’ equity  1,540,216  1,521,432  1,519,334  1,516,553  1,513,249


  For the Three Months Ended,
  September 30, June 30, March 31, December 31, September 30,
   2022   2022   2022   2021   2021 
Selected Operating Data:          
Interest income $110,499  $99,416  $90,983  $88,457  $85,420 
Interest expense  14,534   8,619   6,756   7,871   8,288 
Net interest income  95,965   90,797   84,227   80,586   77,132 
Credit loss expense (benefit)  1,016   1,254   1,851   (1,573)  (3,179)
Net interest income after credit loss expense (benefit)