OceanFirst Financial Corporation

05/01/2026 | Press release | Distributed by Public on 05/01/2026 14:49

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
FINANCIAL SUMMARY(1)
At or for the Quarters Ended
(dollars in thousands, except per share amounts) March 31, 2026 December 31, 2025 March 31, 2025
SELECTED FINANCIAL CONDITION DATA:
Total assets $ 14,556,336 $ 14,564,317 $ 13,309,278
Loans receivable, net of allowance for loan credit losses 11,059,275 10,970,666 10,058,072
Deposits 11,155,916 10,964,405 10,177,023
Total stockholders' equity 1,669,368 1,662,550 1,709,117
SELECTED OPERATING DATA:
Net interest income 96,447 95,278 86,652
Provision for credit losses 2,738 3,700 5,340
Other income 6,748 9,411 11,253
Operating expenses 73,403 84,142 64,294
Net income 20,506 13,093 21,463
Net income attributable to OceanFirst Financial Corp. 20,506 13,093 21,509
Net income available to common stockholders 20,506 13,093 20,505
Diluted earnings per share 0.36 0.23 0.35
SELECTED FINANCIAL RATIOS:
Book value per common share at end of period 28.98 28.97 29.27
Cash dividend per share 0.20 0.20 0.20
Dividend payout ratio per common share 55.56 % 86.96 % 57.14 %
Stockholders' equity to total assets 11.47 11.42 12.84
Return on average assets (2) (3) (4)
0.57 0.36 0.62
Return on average stockholders' equity (2) (3) (4)
4.95 3.12 4.85
Net interest rate spread (5)
2.44 2.36 2.35
Net interest margin (2) (6)
2.93 2.87 2.90
Operating expenses to average assets (2) (4)
2.05 2.33 1.96
Efficiency ratio (4) (7)
71.13 80.37 65.67
Loan-to-deposit ratio (8)
99.70 100.60 99.50
ASSET QUALITY:
Non-performing loans (9)
$ 34,638 $ 27,791 $ 36,970
Non-performing assets (9)
45,031 38,057 38,887
Allowance for loan credit losses as a percent of total loans receivable (8) (10)
0.77 % 0.76 % 0.78 %
Allowance for loan credit losses as a percent of total non-performing loans (9) (10)
248.60 301.27 213.14
Non-performing loans as a percent of total loans receivable (8) (9)
0.31 0.25 0.37
Non-performing assets as a percent of total assets (9)
0.31 0.26 0.29
(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Ratios are annualized.
(3) Ratios are based on net income available to common stockholders.
(4) Performance ratios for the quarter ended March 31, 2026 included a net expense related to a net loss on equity investments, restructuring charges, and merger related expenses of $4.6 million, or $3.8 million, net of tax benefit. Performance ratios for the quarter ended December 31, 2025 included a net expense related to net gain on equity investments, restructuring charges, credit risk transfer execution expense and merger related expenses of $12.7 million, or $10.4 million, net of tax benefit. Performance ratios for the quarter ended March 31, 2025 included a net benefit related to a net gain on equity investments of $205,000, or $156,000, net of tax expense.
(5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(7) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.
(8) Total loans receivable excludes loans held-for-sale.
(9) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans and assets generally consist of all loans 90 days or more past due and other loans in the process of foreclosure. It is the Company's policy to cease accruing interest on all such loans and to reverse previously accrued interest.
(10) Loans acquired from 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 $3.8 million, $4.0 million, and $5.6 million at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
Summary
OceanFirst Financial Corp. is the holding company for the Bank, a regional bank serving business and retail customers throughout New Jersey and the major metropolitan areas from Massachusetts through Virginia. The term "Company" refers to OceanFirst Financial Corp., the Bank and all their subsidiaries on a consolidated basis. The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and investments, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income such as income from bankcard services, trust and asset management products and services, deposit account services, sales of loans and investments, bank owned life insurance and commercial loan swap income. The Company's operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, federal deposit insurance and regulatory assessments, data processing, check card processing, professional fees and other general and administrative expenses. The Company's results of operations are significantly affected by competition, general economic conditions, including levels of unemployment and real estate values, as well as changes in market interest rates, inflation, government policies, including the imposition of tariffs and retaliatory responses, and actions of regulatory agencies.
Key developments relating to the Company's financial results and corporate activities for the quarter ended March 31, 2026, as compared to the linked quarter, were as follows:
•Margin and Net Interest Expansion: Net interest margin increased six basis points to 2.93%, from 2.87%, and net interest income increased by $1.2 million, to $96.4 million.
•Sustained Growth: Total loans increased $91.9 million, a 3% annualized growth rate, and included commercial and industrial loan growth of $105.1 million, a 19% annualized growth rate.
•Controlled Expenses: Non-interest expense decreased by 13%, or $10.7 million, to $73.4 million.
Net income available to common stockholders for the quarter ended March 31, 2026 was $20.5 million, or $0.36 per diluted share, as compared to $20.5 million, or $0.35 per diluted share, for the corresponding prior year period. Dividends paid to preferred stockholders were $1.0 million for the quarter ended March 31, 2025. No such dividends were paid during the three months ended March 31, 2026 as the preferred stock was redeemed in the second quarter of 2025.
On April 15, 2026, the Company's Board declared a quarterly cash dividend on common stock of $0.20 per share. The dividend, related to the quarter ended March 31, 2026, will be paid on May 8, 2026 to common stockholders of record on April 27, 2026.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. For the three months ended March 31, 2026, interest income included net loan fees of $1.1 million, as compared to $1.4 million for the same prior year period.
The following tables set forth certain information relating to the Company for the three months ended March 31, 2026 and 2025. The yields and costs, which are annualized, are derived by dividing the income or expense by the average balance of the related assets or liabilities, respectively, for the periods shown except where noted otherwise. Average balances are derived from average daily balances. The yields and costs include certain fees and costs which are considered adjustments to yields.
For the Three Months Ended March 31,
2026 2025
(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 $ 83,036 $ 662 3.23 % $ 95,439 $ 983 4.18 %
Securities (2)
2,282,663 22,305 3.96 2,003,206 19,701 3.99
Loans receivable, net (3)
Commercial 7,687,461 109,097 5.76 6,781,005 98,260 5.88
Residential real estate 3,167,262 33,141 4.19 3,065,679 31,270 4.08
Other consumer
199,318 3,086 6.28 228,553 3,489 6.19
Allowance for loan credit losses, net of deferred loan costs and fees (61,878) - - (61,854) - -
Loans receivable, net 10,992,163 145,324 5.34 10,013,383 133,019 5.37
Total interest-earning assets 13,357,862 168,291 5.10 12,112,028 153,703 5.13
Non-interest-earning assets 1,192,836 1,199,865
Total assets $ 14,550,698 $ 13,311,893
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing checking $ 4,509,841 22,820 2.05 % $ 4,135,952 21,433 2.10 %
Money market 1,472,989 8,808 2.43 1,322,003 9,353 2.87
Savings 988,964 1,306 0.54 1,058,015 1,785 0.68
Time deposits 2,372,824 20,761 3.55 1,916,109 18,475 3.91
Total 9,344,618 53,695 2.33 8,432,079 51,046 2.46
FHLB advances
1,261,984 12,884 4.14 996,293 11,359 4.62
Securities sold under agreements to repurchase 59,806 384 2.60 64,314 428 2.70
Other borrowings 299,919 4,881 6.60 283,150 4,218 6.04
Total borrowings 1,621,709 18,149 4.54 1,343,757 16,005 4.83
Total interest-bearing liabilities 10,966,327 71,844 2.66 9,775,836 67,051 2.78
Non-interest-bearing deposits 1,731,789 1,597,972
Non-interest-bearing liabilities 174,100 222,951
Total liabilities 12,872,216 11,596,759
Stockholders' equity 1,678,482 1,715,134
Total liabilities and stockholders' equity $ 14,550,698 $ 13,311,893
Net interest income $ 96,447 $ 86,652
Net interest rate spread (4)
2.44 % 2.35 %
Net interest margin (5)
2.93 % 2.90 %
Total cost of deposits (including non-interest-bearing deposits) 1.97 % 2.06 %
(1)Average yields and costs are annualized.
(2)Amounts represent debt and equity securities, including FHLB and FRB 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.
Comparison of Financial Condition at March 31, 2026 and December 31, 2025
Total assets decreased by $8.0 million to $14.56 billion, primarily due to a decrease in total debt securities, offset by an increase in loans. Debt securities AFS decreased by $50.7 million to $1.18 billion, from $1.23 billion, primarily due to principal reductions, maturities and calls. Debt securities HTM decreased by $28.7 million to $852.9 million, from $881.6 million, primarily due to principal repayments. Total loans increased by $91.9 million to $11.12 billion, from $11.03 billion, primarily due to an increase in commercial loans of $162.9 million, partly offset by a decrease in total consumer loans of $71.0 million.
Total liabilities decreased by $14.8 million to $12.89 billion, from $12.90 billion primarily related to a decrease in FHLB advances, partly offset by an increase in deposits. FHLB advances decreased by $217.0 million to $1.18 billion, from $1.40 billion driven by a shift to more favorably priced deposits. Deposits increased by $191.5 million to $11.16 billion, from $10.96 billion, primarily due to an increase in interest bearing deposits of $182.2 million. Time deposits decreased by $81.6 million to $2.39 billion, from $2.47 billion, representing 21.4% and 22.5% of total deposits, respectively. Time deposits included a decrease in brokered time deposits of $121.9 million, partly offset by an increase in retail time deposits of $40.6 million. The loan-to-deposit ratio was 99.7%, as compared to 100.6%.
Other liabilities decreased by $7.0 million to $202.3 million, from $209.3 million, mostly due to payment of annual incentive accruals, partly offset by collateral received from counterparties.
Capital levels remain strong and in excess of "well-capitalized" regulatory levels at March 31, 2026, including the Company's common equity tier one capital ratio of 10.75%.
Total stockholders' equity increased to $1.67 billion, as compared to $1.66 billion, primarily due to net income, partially offset by capital returns comprised of dividends and share repurchases. Additionally, accumulated other comprehensive loss increased by $2.4 million primarily due to decreases in the fair market value of AFS debt securities, net of tax.
During the quarter ended March 31, 2026, the Company repurchased 177,450 shares totaling $3.4 million representing a weighted average cost of $19.18, which represented repurchases of exercised options and vesting of awards from employees outside of the authorized share repurchase program. As of March 31, 2026, the Company had 3,226,284 shares available for repurchase under the authorized repurchase programs.
The Company's stockholders' equity to assets ratio was 11.47%, as compared to 11.42% and book value per share increased to $28.98, as compared to $28.97, primarily due to the drivers noted above.
Comparison of Operating Results for the Three Months Ended March 31, 2026 and March 31, 2025
General
Net income available to common stockholders was $20.5 million, or $0.36 per diluted share, as compared to $20.5 million, or $0.35 per diluted share. Net income for the quarter ended March 31, 2026 included merger-related expenses of $4.2 million, a net loss of $354,000 on equity investments, and restructuring charges of $128,000. These items decreased net income by $3.8 million, net of tax.
Net income for the quarter ended March 31, 2025 included net gains on equity investments of $205,000, which increased net income by $156,000, net of tax.
Interest Income
Interest income for the three months ended March 31, 2026 increased to $168.3 million from $153.7 million. The average balance of interest-earning assets increased by $1.25 billion, primarily due to increases in commercial loans and securities. The average yield for interest-earning assets decreased to 5.10%, from 5.13%, primarily due to the repricing of assets tied to short-term rates.
Interest Expense
Interest expense for the three months ended March 31, 2026 increased to $71.8 million from $67.1 million. The average balance of interest-bearing liabilities increased by $1.19 billion, primarily due to increases in deposits and FHLB advances. The cost of average interest-bearing liabilities decreased to 2.66% from 2.78%, primarily due to repricing of deposits and, to a lesser extent, FHLB advances. The total cost of deposits decreased nine basis points to 1.97% from 2.06%.
Net Interest Income and Margin
Net interest income for the quarter ended March 31, 2026 increased to $96.4 million, from $86.7 million, reflecting the net impact of the interest rate environment and an increase in average balances. Net interest margin increased to 2.93%, from 2.90%, primarily due to a decrease in cost of funds.
Provision for Credit Losses
Provision for credit losses for the quarter ended March 31, 2026 was $2.7 million, as compared to $5.3 million. The current quarter provision was primarily driven by net loan growth and an increase in criticized and classified loans, partly offset by a decrease in off-balance sheet commitments.
Net loan charge-offs were $701,000 for the quarter ended March 31, 2026, as compared to $636,000 for the corresponding prior year period. The prior year period included charge-offs of $720,000 related to the sale of $5.1 million of non-performing residential and consumer loans.
Non-interest Income
Other income decreased to $6.7 million, as compared to $11.3 million. Other income was adversely impacted by net losses on equity investments of $354,000 in the current quarter. For the prior year period, other income was favorably impacted by net gains on equity investments of $205,000. The remaining decrease of $3.9 million was primarily driven by a decrease in fees and service charges of $1.9 million related to disposition of the title business at the beginning of the fourth quarter last year, and a decrease in a net gain on sale of loans of $886,000 due to the discontinuation of residential loan originations. In addition, the prior period included non-recurring other income of $842,000.
Non-interest Expense
Operating expenses increased to $73.4 million, as compared to $64.3 million. Operating expenses in the current quarter were adversely impacted by merger-related expenses of $4.2 million, for the anticipated merger with Flushing, and restructuring charges of $128,000, related to the discontinuation of residential loan originations. The remaining increase of $4.8 million was primarily driven by an increase in compensation and benefits of $2.7 million, mostly due to the net impact of discontinuation of residential initiatives and commercial banking hires adjusted for annual inflationary increases. The prior year also included a $1.3 million benefit from normal incentive-related adjustments released. Additional drivers were increases in professional fees of $797,000, partly due to higher consulting fees, other operating expenses of $627,000, mostly due to credit risk transfer premium expense, and data processing expense of $405,000.
Income Tax Expense
The provision for income taxes was $6.5 million, as compared to $6.8 million. The effective tax rate was 24.2%, as compared to 24.1%.
Liquidity and Capital Resources
Liquidity Management
The Company manages its liquidity and funding needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses liquidity and management monitors the adherence to policy limits to satisfy current and future cash flow needs. The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources and availability, stress testing, collateral management, and other qualitative and quantitative metrics.
Management monitors cash on a daily basis to determine the liquidity needs of the Bank and OceanFirst Financial Corp. (the "Parent Company"), a separate legal entity from the Bank. Additionally, management performs multiple liquidity stress test scenarios on a periodic basis. As of March 31, 2026, the Bank and the Parent Company continued to maintain adequate liquidity under all stress scenarios. The Company also has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management.
The Company continually evaluates its on-balance sheet liquidity, including cash and unpledged securities and funding capacity at the FHLB and FRB Discount Window, and periodically tests each of its lines of credit. As of March 31, 2026, total on-balance sheet liquidity and funding capacity was $3.9 billion.
The Bank has a highly operational and granular deposit base, with long-standing client relationships across multiple customer segments providing stable funding. The vast majority of government deposits are protected by FDIC insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank. At March 31, 2026, the Bank reported $6.82 billion of estimated uninsured deposits in its Call Report. This total included $2.95 billion of collateralized government deposits and $2.08 billion of intercompany deposits of fully consolidated subsidiaries, leaving estimated adjusted uninsured deposits of $1.79 billion, or 15.9% of total deposits. On-balance-sheet liquidity and funding capacity represented 220% of the estimated adjusted uninsured deposits.
The primary sources of liquidity specifically available to the Parent Company are dividends from the Bank, proceeds from the sale of investments, and the issuance of debt and common stock. For the three months ended March 31, 2026, the Parent Company received no dividend payments from the Bank. At March 31, 2026, the Parent Company held $77.8 million in cash and cash equivalents.
The Bank's primary sources of funds are deposits, principal and interest payments on loans and investments, FHLB advances, other borrowings and proceeds from the sale of loans and investments. While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment sales are greatly influenced by interest rates, economic conditions, and competition. The Bank has other sources of liquidity if a need for additional funds arises, including lines of credit at multiple financial institutions and access to the FRB Discount Window.
As of March 31, 2026, the Company pledged $7.94 billion of loans with the FHLB and FRB to enhance the Company's borrowing capacity, which included collateral pledged to the FHLB to obtain a letter of credit to collateralize certain municipal deposits. The Company also pledged $1.41 billion of securities to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law. The Company had $1.18 billion of FHLB advances, including $929.2 million of outstanding FHLB term advances and $251.0 million of overnight borrowings as of March 31, 2026, as compared to $929.2 million of FHLB term advances and $468.0 million of overnight borrowings at December 31, 2025.
The Company's cash needs for the quarter ended March 31, 2026 were primarily satisfied by an increase in deposits, and primarily utilized for the net repayment of FHLB advances and loan growth.
Off-Balance Sheet Commitments and Contractual Obligations
In the normal course of business, the Bank routinely enters into various off-balance sheet commitments, primarily relating to the origination and funding of loans. At March 31, 2026, outstanding commitments to originate loans totaled $417.8 million and outstanding undrawn lines of credit totaled $1.85 billion, of which $1.60 billion were commitments to commercial and commercial construction borrowers and $255.0 million were commitments to consumer and residential construction borrowers. Commitments to fund undrawn lines of credit and commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the existing contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company's exposure to credit risk is represented by the contractual amount of the instruments.
At March 31, 2026, the Company also had various contractual obligations, which included debt obligations of $1.50 billion, including finance lease obligations of $1.1 million, and an additional $17.9 million in operating lease obligations included in other liabilities. The Company expects to have sufficient funds available to meet current commitments in the normal course of business.
Time deposits scheduled to mature in one year or less totaled $2.35 billion at March 31, 2026. If these deposits do not remain with the Company, it may need to seek other sources of funds, including other deposit products, advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, the Company may be required to pay higher rates on such deposits or borrowings than it currently pays.
Liquidity Used in Stock Repurchases and Cash Dividends
Under the Company's stock repurchase program, shares of its common stock may be purchased in the open market and through privately-negotiated transactions, from time-to-time, depending on market conditions. The repurchased shares are held as treasury stock for general corporate purposes. For the quarter ended March 31, 2026, the Company repurchased 177,450 shares of its common stock, totaling $3.4 million, which represented repurchases of exercised options and vesting of awards from
employees outside of the authorized share repurchase program. At March 31, 2026, there were 3,226,284 shares available to be repurchased under the authorized stock repurchase program.
Cash dividends on common stock declared and paid during the three months ended March 31, 2026 were $11.5 million.
The Parent Company's ability to continue to repurchase shares of common stock and pay dividends depends on capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations. If applicable regulations or regulators prevent the Bank from paying a dividend to the Parent Company, the Parent Company may not have the liquidity necessary to repurchase shares of common stock or pay a dividend in the future or pay a dividend at the same rate as historically paid or be able to meet current debt obligations. Additionally, regulations of the Federal Reserve may prevent the Parent Company from either paying or increasing the cash dividend to common stockholders. These regulatory policies may affect the ability of the Parent Company to pay dividends, repurchase shares of common stock, or otherwise engage in capital distributions.
Capital Management
The Company manages its capital sources, uses, and expected future needs through its Treasury function and the Asset Liability Committee. The Company has an internal policy that addresses capital and management monitors the adherence to policy limits to satisfy current and future capital needs. The policy includes internal limits, monitoring of key indicators, sources and availability, intercompany transactions, forecasts and stress testing, and other qualitative and quantitative metrics.
Management performs multiple capital stress test scenarios on a quarterly basis, varying loan growth, earnings, access to the capital markets, credit losses, and mark-to-market losses in the investment portfolio, including both AFS and held-to-maturity. As of March 31, 2026, the Bank and Company continued to maintain adequate capital under all stress scenarios. The Bank and the Parent Company also have detailed contingency capital plans and obtain comprehensive reporting of capital trends on a regular basis, which are reviewed by management and the Board.
Regulatory Capital Requirements
As of March 31, 2026 and December 31, 2025, the Company and the Bank satisfied all regulatory capital requirements currently applicable as follows (dollars in thousands):
Actual For capital adequacy
purposes 		To be well-capitalized
under prompt
corrective action
As of March 31, 2026 Amount Ratio Amount Ratio Amount Ratio
Company:
Tier 1 capital (to average assets) $ 1,206,357 8.61 % $ 560,251 4.00 % N/A N/A
Common equity Tier 1 (to risk-weighted assets)
1,131,388 10.75 736,924 7.00
(1)
N/A N/A
Tier 1 capital (to risk-weighted assets) 1,206,357 11.46 894,836 8.50
(1)
N/A N/A
Total capital (to risk-weighted assets) 1,481,716 14.07 1,105,386 10.50
(1)
N/A N/A
Bank:
Tier 1 capital (to average assets) $ 1,224,374 8.80 % $ 556,544 4.00 % $ 695,680 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,224,374 11.73 730,614 7.00
(1)
678,428 6.50
Tier 1 capital (to risk-weighted assets) 1,224,374 11.73 887,174 8.50
(1)
834,988 8.00
Total capital (to risk-weighted assets) 1,314,732 12.60 1,095,921 10.50
(1)
1,043,735 10.00
As of December 31, 2025
Company:
Tier 1 capital (to average assets) $ 1,193,942 8.65 % $ 551,966 4.00 % N/A N/A
Common equity Tier 1 (to risk-weighted assets)
1,119,172 10.72 730,982 7.00
(1)
N/A N/A
Tier 1 capital (to risk-weighted assets) 1,193,942 11.43 887,621 8.50
(1)
N/A N/A
Total capital (to risk-weighted assets) 1,467,329 14.05 1,096,473 10.50
(1)
N/A N/A
Bank:
Tier 1 capital (to average assets) $ 1,194,054 8.71 % $ 548,260 4.00 % $ 685,326 5.00 %
Common equity Tier 1 (to risk-weighted assets)
1,194,054 11.54 724,359 7.00
(1)
672,619 6.50
Tier 1 capital (to risk-weighted assets) 1,194,054 11.54 879,578 8.50
(1)
827,839 8.00
Total capital (to risk-weighted assets) 1,282,441 12.39 1,086,538 10.50
(1)
1,034,798 10.00
(1)Includes the Capital Conservation Buffer of 2.50%.
At March 31, 2026 and December 31, 2025, the Company and the Bank satisfied the criteria to be "well-capitalized" under the Prompt Corrective Action regulations.
At March 31, 2026 and December 31, 2025, the Company maintained a stockholders' equity to total assets ratio of 11.47% and 11.42%, respectively.
Lending Activities
Loan Portfolio Composition. At March 31, 2026, the Company had total loans outstanding of $11.12 billion, of which $5.48 billion, or 49.3% of total loans, were investor owned commercial real estate, multi-family, and construction (including residential development loans), collectively, "commercial real estate - investor". The remainder of the portfolio consisted of commercial and industrial loans, of which $1.02 billion were commercial and industrial - real estate, or 9.1% of total loans; and $1.30 billion were commercial and industrial - non-real estate loans, or 11.7% of total loans; $3.13 billion of residential real estate loans, or 28.1% of total loans; and $198.0 million of other consumer loans, primarily home equity loans and lines of credit, or 1.8% of total loans.
Commercial Real Estate - Investor Owned. At March 31, 2026, the Bank's total investor owned commercial real estate loans outstanding were $5.48 billion, or 49.3% of total loans, as compared to $5.42 billion, or 49.1% of total loans at December 31, 2025. The Bank originates investor owned commercial real estate loans that are secured by properties, or properties under construction, that are generally used for business purposes such as office, industrial, multi-family, or retail facilities. A substantial majority of the Bank's investor owned commercial real estate loans are located in its primary market area.
The Bank performs extensive due diligence in underwriting commercial real estate loans due to the larger loan amounts and the riskier nature of such loans. The Bank assesses and mitigates the risk in several ways, including inspection of all such properties and the review of the overall financial condition of the borrower and guarantors, which include, for example, the review of the rent rolls and applicable leases/lease terms and conditions and the verification of income. A tenant analysis and market analysis are part of the underwriting.
Investor owned commercial real estate loans are among the largest of the Bank's loans and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy, and as a result, the Bank is particularly vigilant of this portfolio. The Bank believes this portfolio is highly diversified with loans secured by a variety of property types and the portfolio exhibits stable credit quality.
The following table presents the Company's commercial real estate - investor owned loans by industry as of March 31, 2026:
As of March 31, 2026
(dollars in thousands) Amount Percent of Total
Weighted Average LTV (1)
Weighted Average Debt Service Coverage Ratio (2)
Office $ 463,056 9 % 52 % 1.9x
Medical 300,403 6 55 1.7
Credit Tenant 276,875 6 61 1.5
Total Office (3)
1,040,334 21 55 1.7
Retail 1,128,005 23 61 1.9
Multi-family (4)
984,053 20 61 1.5
Industrial/warehouse 809,172 17 51 2.0
Hospitality 173,998 4 46 1.8
Other (5)
754,418 15 52 1.8
Total 4,889,980 100 % 56 1.8
Construction 588,852
Total CRE investor owned
$ 5,478,832
(1) Represents the weighted average of loan balances as of March 31, 2026 divided by their most recent appraisal value, which is generally obtained at the time of origination.
(2) Represents the weighted average of net operating income on the property before debt service divided by the loan's respective annual debt service based on the most recent credit review of the borrower.
(3) CBD exposure represented $118 million, or 11.3%, of the total office loan balance at March 31, 2026. Office CBD loans had a weighted average LTV of 49% and weighted average debt service coverage ratio of 1.7x at March 31, 2026. $104 million, or 89%, of the total office CBD exposure are to credit tenants, life sciences and medical borrowers at March 31, 2026. New York City office CBD loans represented $7 million, or 0.05% of the Company's total assets at March 31, 2026.
(4) New York City rent-regulated multi-family loans, where the property has more than 50% of its units rent-regulated, represented $28 million, or 0.19% of the Company's total assets at March 31, 2026.
(5) Other includes co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other.
The following table presents total commercial real estate - investor owned loans by geography (generally based on location of collateral) as of March 31, 2026:
As of March 31, 2026
(dollars in thousands) Amount Percent of Total
New York $ 1,474,336 30 %
Pennsylvania and Delaware 1,362,766 28
New Jersey 1,271,107 26
Massachusetts 184,214 4
Maryland and District of Columbia 133,752 3
Other 463,805 9
Total 4,889,980 100 %
Construction 588,852
Total CRE investor owned $ 5,478,832
Asset quality. The following table sets forth information regarding the Company's non-performing assets, consisting of non-performing loans and other real estate acquired through foreclosure. It is the policy of the Company to cease accruing interest on loans 90 days or more past due or in the process of foreclosure.
March 31, December 31,
2026 2025
(dollars in thousands)
Non-performing assets (1) (2):
Commercial real estate - investor
$ 18,970 $ 13,636
Commercial and industrial:
Commercial and industrial - real estate 5,541 4,813
Commercial and industrial - non-real estate 228 640
Total commercial and industrial 5,769 5,453
Residential real estate
7,011 6,200
Other consumer
2,888 2,502
Total non-performing loans 34,638 27,791
Other real estate owned 10,393 10,266
Total non-performing assets $ 45,031 $ 38,057
Allowance for loan credit losses $ 86,110 $ 83,726
Allowance for unfunded commitments 3,738 4,028
PCD loans, net of allowance for loan credit losses
14,604 14,968
Delinquent loans 30-89 days 55,876 47,808
Allowance for loan credit losses as a percent of total loans receivable (3)
0.77 % 0.76 %
Allowance for loan credit losses as a percent of total non-performing loans (3)
248.60 301.27
Non-performing loans as a percent of total loans receivable 0.31 0.25
Non-performing assets as a percent of total assets 0.31 0.26
(1)Excludes loans held-for-sale.
(2)Non-performing assets consist of non-performing loans and real estate acquired through foreclosure. Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure.
(3)Loans acquired from 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, were $3.8 million and $4.0 million at March 31, 2026 and December 31, 2025, respectively.
Overall asset quality metrics remained stable. The Company's non-performing loans represented 0.31% and 0.25% of total loans, respectively. The allowance for loan credit losses as a percentage of total non-performing loans was 248.60%, as compared to 301.27%. The level of 30 to 89 days delinquent loans increased to $55.9 million, from $47.8 million, primarily related to commercial loans. The Company's other real estate owned increased to $10.4 million from $10.3 million. The Company's allowance for loan credit losses to total loans was 0.77%, as compared to 0.76%.
The Company classifies loans (other than loans held-for-sale) and other real estate owned in accordance with regulatory guidelines. The table below represents Special Mention and Substandard loans (other than loans held-for-sale) and other real estate owned (in thousands):
March 31, December 31,
2026 2025
Special Mention $ 15,901 $ 18,161
Substandard 164,834 103,981
Total $ 180,735 $ 122,142
Special mention and substandard loans (other than loans held-for-sale) and other real estate owned increased by $58.6 million to $180.7 million at March 31, 2026 from $122.1 million at December 31, 2025. The increase was primarily due to one accruing commercial and industrial relationship totaling $50.4 million that moved to substandard during the three months ended March 31, 2026.
Critical Accounting Policies and Estimates
Note 1 to the Company's Audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"), as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried on the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value.
Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of the Company's financial condition and results of operations and high level of subjectivity. A critical accounting policy involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. The critical accounting policy and its application is reviewed periodically, and at least annually, with the Audit Committee of the Board.
Goodwill in accordance with ASC 350, Intangibles - Goodwill and Other, was also a critical accounting estimate in the preparation of the consolidated financial statements at March 31, 2026 and December 31, 2025.
Significant negative industry or economic trends, including declines in the market price of the Company's stock, reduced estimates of future cash flows or business disruptions could result in impairments to goodwill in the future, which may result in recording an impairment loss. Any resulting impairment loss may have a material adverse impact on the Company's financial condition and results of operations and is considered a non-cash event with no impact to the Company's regulatory capital ratios, liquidity position, and ongoing operations.
Management continued to carefully assess and evaluate all available information for potential triggering events after the August 31 annual testing date, and concluded no triggering events were identified subsequent to the annual test date. Management will continue evaluating the economic conditions at future reporting periods for triggering events.
Impact of New Accounting Pronouncements
Accounting Pronouncements Adopted in 2026
None.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)". The amendments in this ASU require expanded disclosure and disaggregation of certain costs and expenses including, but not limited to, purchases of inventory, employee compensation, depreciation, depletion, and amortization. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
In November 2024, FASB issued ASU 2024-04, "Debt - Debt with Conversion and Other Options (Subtopic 470-20)". The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2025, and for interim periods beginning after December 15, 2026. Early adoption is permitted. Currently, this ASU does not have any impact to the consolidated financial statements.
In May 2025, FASB issued ASU 2025-03, "Business Combinations (Topic 805) and Consolidation (Topic 810)". The amendments in this ASU require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquired is a variable interest entity, to determine which entity is the accounting acquirer. The amendment requires that an entity apply the new guidance prospectively to any acquisition transaction that occurs after the initial application date. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods within those annual reporting periods. Early adoption is permitted. The Company does not expect this standard to have a material impact on the Company's consolidated financial statements.
In September 2025, FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)". The amendments in this ASU remove all references to prescriptive and sequential software development stages and provides disclosure requirements for related capitalized costs. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. Currently, this ASU does not have any impact to the consolidated financial statements.
In September 2025, FASB issued ASU 2025-07, "Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606)". The amendments in this ASU, related to Topic 815, exclude from derivative accounting any non-exchange traded contracts that are based on operations or activities specific to contracted parties, while providing specific exceptions to this exclusion. The amendments in this ASU, related to Topic 606, clarify that an entity should apply Topic 606 guidance to contracts with share-based noncash consideration from a customer in a revenue contract. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods within those annual reporting periods. Early adoption is permitted. Topic 606 is not applicable to the Company. The Company is currently evaluating the impact of the standard for Topic 815 on the consolidated financial statements.
In November 2025, FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements". The amendments in this ASU include new guidance on assessing similar risks for cash flow hedges, hedging interest payments on "choose-your-rate" debt, accounting for cash flow hedges of nonfinancial forecasted transactions, using net written options as hedging instruments, and the accounting for foreign currency-denominated debt in "dual hedges". This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and for interim periods within those annual reporting periods. Early adoption is permitted. Currently this ASU does not have an impact on the consolidated financial statements.
Private Securities Litigation Reform Act Safe Harbor Statement
In addition to historical information, this quarterly report contains certain forward-looking statements within the meaning of the federal securities laws, which are based on certain assumptions and describe future plans, strategies and expectations of the Company. Forward-looking statements may be identified by the use of the words such as " estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "strategy," "future," "opportunity," "may," "could," "target," "should," "will," "would," "will be," "will continue," "will likely result," or similar expressions that predict or indicate future
events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. These statements are based on various assumptions, whether or not identified in this document, and on the current expectations of the Company's management and are not predictions of actual performance, and, as a result, are subject to risks and uncertainties. These forward-looking statements are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict, may differ from assumptions and many are beyond the control of the Company. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements may include statements with respect to the proposed transaction between the Company and Flushing and the proposed investment by Warburg in the Company's equity securities.
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, inflation, general economic conditions, including potential recessionary conditions, levels of unemployment in the Company's lending area, real estate market values in the Company's lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, the imposition of tariffs or other domestic or international governmental policies and retaliatory responses, the effects of a potential future federal government shutdown, 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, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company's deposit portfolio and the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, competition, demand for financial services in the Company's market area, our ability to enter into new markets and capitalize on growth opportunities, the adequacy of and changes in the economic assumptions and methodology for computing the allowance for credit losses, availability of capital, competition, our ability to maintain and increase market share and control expenses, changes in investor sentiment and consumer spending, borrowing and savings habits, changes in accounting principles, a failure in or breach of the Company's operational or security systems or infrastructure, including cyberattacks and fraud, the failure to maintain current technologies, failure to retain or attract employees, the impact of pandemics on our operations and financial results and those of our customers and the Bank's ability to successfully integrate acquired operations.
Additional forward-looking statements related to the proposed transaction with Flushing and the proposed investment by Warburg include, but are not limited to: (i) the risk that the proposed transaction may not be completed in a timely manner or at all; (ii) the failure to satisfy the conditions to the consummation of the proposed transaction, including obtaining the necessary regulatory approvals (and the risk that such regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement between the Company and Flushing; (iv) the inability to obtain alternative capital in the event it becomes necessary to complete the proposed transaction; (v) the effect of the announcement or pendency of the proposed transaction on Company's and Flushing's business relationships, operating results and business generally; (vi) risks that the proposed transaction disrupts current plans and operations of the Company and Flushing; (vii) potential difficulties in retaining Company and Flushing customers and employees as a result of the proposed transaction; (viii) potential litigation relating to the proposed transaction that could be instituted against the Company, Flushing or their respective directors and officers, including the effects of any outcomes related thereto; (ix) the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected expenses, factors or events; (x) the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and Flushing do business; and (xi) the dilution caused by the Company's issuance of additional shares of its capital stock in connection with the transaction. The foregoing list of factors is not exhaustive. All forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth above.
These risks and uncertainties are further discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, 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 Corporation published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 20:50 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]