OceanFirst Financial
Annual Report 2018

Plain-text annual report

C V 1 1 0 2 2 7 8 1 o c 1022781oc CV1 OCEANFIRST FINANCIAL CORP. 2018 ANNUAL REPORT CV1 1022781oc 1022781oc.indd 1 c o 1 8 7 2 2 0 1 1 V C 4/15/19 8:26 PM C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc 1022781oc CV2 C V 2 1 0 2 2 7 8 1 o c AT-A-GLANCE New York Hunterdon Somerset Middlesex Bucks Mercer Monmouth P hila d elp hia P hila d elp hia Ocean Burlington Gloucester Camden Salem Atlantic Cumberland Cape May OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank N.A., founded in 1902, is a regional bank operating throughout New Jersey, metropolitan Philadelphia and metropolitan New York City. OceanFirst Bank delivers commercial and residential financing solutions, trust and asset management and deposit services and is one of the largest and oldest community- based financial institutions headquartered in New Jersey. c o 1 8 7 2 2 0 1 2 V C 4/15/19 8:26 PM CV2 1022781oc 1022781oc.indd 2 C M Y 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc 1 1 0 2 2 7 8 1 o c 1022781oc 1 $7.52 $5.42 $5.17 $2.36 $2.59 2014 2015 2016 2017 2018 TOTAL ASSETS (in Billions) 55 % 45 % LOAN PORTFOLIO ■ Commercial ■ Consumer 2018 $7.52 TOTAL ASSETS (in Billions) $5.42 2017 2018 (1) $94.15 CORE NET INCOME (in Millions) $56.02 2017 2018 (1) $1.98 CORE EPS $1.70 2017 63 BRANCHES* SERVING 11 NJ COUNTIES* 967 EMPLOYEES* (1) Refer to footnote on page 2 * as of 2/1/2019, includes Capital Bank of New Jersey acquisition OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 1 c o 1 8 7 2 2 0 1 1 4/15/19 8:26 PM 1 1022781oc 1022781oc.indd 1 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc 1022781oc 2 2 1 0 2 2 7 8 1 o c FINANCIAL SUMMARY (dollars in thousands, except per share amounts) At or for the year ended December 31, 2018 2017 2016 2015 SELECTED FINANCIAL CONDITION DATA Total assets Loans receivable, net Deposits Stockholders’ equity SELECTED OPERATING DATA Net interest income Other income Operating expenses (1) Net income (1) $7,516,154 $5,416,006 $5,166,917 $2,593,068 5,579,222 3,965,773 3,803,443 1,970,703 5,814,569 4,342,798 4,187,750 1,916,678 1,039,358 601,941 571,903 238,446 240,502 169,218 120,262 76,829 34,827 27,072 20,412 16,426 186,337 126,520 102,852 60,775 71,932 42,470 23,046 20,322 Diluted earnings per share (1) 1.51 1.28 0.98 1.21 SELECTED FINANCIAL RATIOS AND OTHER DATA (1) Tangible stockholders’ equity per common share at end of period Cash dividends per common share 14.26 0.62 13.58 0.60 12.94 0.54 13.67 0.52 Tangible stockholders’ equity to tangible assets 9.55% 8.42% 8.30% 9.12% Return on average assets (1) Return on average tangible stockholders’ equity (1) Net interest rate spread Net interest margin Operating expenses to average assets (1) Efficiency ratio (1) Non-performing loans as a percent of total loans receivable 0.98 11.16 3.53 3.68 2.53 67.68 0.31 0.80 9.82 3.41 3.50 2.39 64.46 0.52 0.62 7.13 3.38 3.47 2.76 73.11 0.35 0.82 8.96 3.18 3.28 2.47 65.17 0.91 (1) Amounts and performance ratios for 2018 include merger related expenses, branch consolidation expenses, and a tax benefit related to the Tax Cuts and Jobs Act (“Tax Reform”) totaling $28.2 million with an after tax cost of $22.2, or $0.47 per diluted share. Amounts and performance ratios for 2017 include merger related expenses, branch consolidation expenses, and additional income tax expense related to Tax Reform of $18.1 million with an after tax cost of $13.5 million, or $0.42 per diluted share. Amounts and performance ratios for 2016 include merger related expenses and a Federal Home Loan Bank advance prepayment fee totaling $16.7 million with an after tax cost of $11.9 million, or $0.51 per diluted share. Amounts and performance ratios for 2015 include merger related expenses of $1.9 million with an after tax cost of $1.3 million, or $0.08 per diluted share. 2 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 2 1022781oc 1022781oc.indd 2 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 2 4/15/19 8:26 PM 3 1 0 2 2 7 8 1 o c 1022781oc 3 Christopher D. Maher (right) Chairman of the Board President and Chief Executive Officer Joseph J. Lebel III (left) Executive Vice President and Chief Operating Officer DEAR FELLOW SHAREHOLDERS, By any measure, 2018 was a year of significant performance and progress for OceanFirst. Our Company delivered record core net income and strong financial metrics, while continuing to focus on providing exceptional customer service. We invested in the talent, technology and solutions to meet the needs of our customers in a dynamic financial services marketplace. We demonstrated our proficiency in executing value-added acquisitions that have expanded our market presence, growth prospects and earnings potential. DELIVERING RECORD EARNINGS Reported net income for 2018 was $71.9 million, or $1.51 per diluted share, a significant increase from $42.5 million, or $1.28 per diluted share, for 2017. Core earnings for 2018, excluding merger related expenses, branch consolidation expenses and the impact of Tax Reform, rose 68% from a year ago to a record $94.1 million, or $1.98 per diluted share. Our performance reflected the Company’s increased earnings power, due in part to the Sun Bancorp acquisition, as our income benefitted from growth in earning assets, while we achieved cost savings from merger synergies and branch consolidation. OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 3 3 1022781oc 1022781oc.indd 3 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.16.2019 17:07PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 3 4/16/19 5:02 PM 1022781oc 4 4 1 0 2 2 7 8 1 o c QUARTERLY EARNINGS PER SHARE & EFFICIENCY RATIO(1) ■ Core Efficiency Ratio ■ Core Diluted Earning Per Share 63.58% $0.30 $0.54 (1) For 2015, 2016, 2017 and 2018, excludes merger related expenses. For 2016, also excludes Federal Home Loan Bank prepay- ment fee and loss on sale of investment securities. For 2017 and 2018, also excludes 53.54% the effect of branch consolidation expense and the additional income tax expense Q4 ’14 Q2 ’15 Q4 ’15 Q2 ’16 Q4 ’16 Q2 ’17 Q4 ’17 Q2 ’18 Q4 ’18 (benefit) related to Tax Reform. 53.5% EFFICIENCY RATIO Q4 2018 Our key performance metrics showed positive momentum. Core return on average assets for 2018 was 1.28% and core return on average tangible stockholders’ equity was 14.61%, significantly better than 2017. These measures strengthened further in the 2018 fourth quarter, with core return on average assets of 1.38% and core return on average tangible stockholders equity of 15.19%. Net interest margin rose to 3.68%, from 3.50% a year ago. Reflecting our sharp focus on expense control, the core efficiency ratio was 53.54% for the 2018 fourth quarter, and should improve further as we reap the cost synergies of recent mergers and office consolidations. At year-end 2018, OceanFirst had over $7.5 billion in total assets, $5.8 billion in total deposits, and $5.6 billion in loans receivable. We ended the year with a strong capital position to support future growth, as well as strong asset quality. Our performance stands in contrast to the challenging environment the Company faced throughout 2018. During the year the Federal Reserve Bank increased short-term interest rates four times. As a result, the yield curve flattened, testing the strategies of many of our peers. Careful positioning of the balance sheet over the past five years has allowed the Bank to prosper as many peers faced sharply elevated deposit costs, compressed net interest margins, and decreases in profitability. Our performance throughout 2018 was recently recognized by S&P Global, which named OceanFirst to its U.S. top 50 regional bank performance list. 4 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 4 1022781oc 1022781oc.indd 4 C Y K ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 4 4/15/19 8:26 PM 5 1 0 2 2 7 8 1 o c 1022781oc 5 INVESTING IN THE FUTURE All businesses today operate in a digital era in which technology is drastically reshaping the demands of customers, and the capacity of organizations to make decisions driven by data and analytics. We have responded by investing in digital capabilities, products and services. Our technology-driven solutions now include a partnership with a capital investment in Nest Egg. Nest Egg is a digital investment platform, a “hybrid robo- advisor,” that empowers customers to invest in a way that is simple, personal, and convenient. We also launched AmiGo, our “digital banking on the go” product, which enables customers to bank whenever, wherever and however they want. In addition to Nest Egg and AmiGo, our portfolio of direct banking services includes online account opening, mobile banking, P2P transfers, and access to digital wallet services like Apple Pay and Android Pay. To ensure that customers get the most out of our digital solutions, over 500 customer-facing employees have been certified under our seven-week, proprietary Digital Banker certification program. We have invested in a number of other areas, as well. For example, Commercial Banking received a significant investment in the areas of Treasury Services and Interest Rate Swap solu- tions. We also are in the process of adding deeply experienced commercial bankers to expand into both the Philadelphia and New York City metropolitan areas. Our commitment to outstanding service has been recognized by our customers as well as independent surveys. Customer satisfaction, as measured by the Net Promoter Score of 63 as of March 31, 2019 indicates our customers’ willingness to recommend our products or services to others based on their most recent transactions. We are also honored that OceanFirst Bank was ranked as one of the country’s Best In-State Banks and Credit Unions—and #1 in New Jersey—in a first-of-its- kind nationwide customer survey conducted by Forbes. These external measurements evidence our committment to building a quality business. FOCUS: DIGITAL BANKING “OceanFirst will continue to invest in online and mobile solutions that make banking as conve- nient, personalized and efficient as possible.” David Howard President, Digital Strategy & Innovation At a time when customers demand best-in- class technology from their financial services providers, digital innovation is critical. We have placed a sharp focus on this effort, to ensure that all our digital tools, products, and customer interfaces are on par with the best solutions in the market. That means delivering a fully responsive online banking experience, with access to the most popular digital wallets—and even video tellers. Our mobile app not only allows customers to manage their OceanFirst accounts, but can also link to a wide range of investing, lending and credit card accounts. One of our newest products, AmiGo by OceanFirst, offers the “Best Account Ever” and is breaking new ground in digital marketing to attract customers that are not drawn to our branch network. We also offer Nest Egg, the first “hybrid robo-advisor” offered to banking customers to help reach their financial goals through an easy-to-use, low-cost investment solution, either digitally or with the assistance of their trusted OceanFirst banker. OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 5 c o 1 8 7 2 2 0 1 5 4/16/19 5:02 PM 5 1022781oc 1022781oc.indd 5 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.16.2019 17:07PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc 6 1 0 2 2 7 8 1 o c 1022781oc 6 FOCUS: BOARD ENGAGEMENT “It’s important to have leaders with the skills and experience to guide OceanFirst forward as we become a larger and more complex organization.” Christopher D. Maher Chairman, President and Chief Executive Officer Breadth of experience and diversity of thought are essential to good governance. At OceanFirst, we have focused on ensuring that our Board of Directors reflects the range of skills and perspectives needed for the effective oversight of the Company and the successful execution of our business. To that end, we made several key additions to the Board in 2018 and early 2019, including Kimberly Guadagno, the former Lieutenant Governor of New Jersey; Nicos Katsoulis, a senior banking executive with extensive experience in commercial lending; and Grace Vallacchi, OceanFirst’s EVP and Chief Risk Officer, who brings deep expertise in risk management and regulatory oversight. We also want to take this opportunity to thank Diane Rhine and Mark Solow, who are retiring from the Board, for their wise counsel and commitment to the success of OceanFirst. Public Company Governance Business/Market Knowledge Financial Services Industry Finance, Audit & Tax Large Complex Organization C-Suite Experience Mergers & Acquistions Human Capital Risk Management Non-Financial Regulated Experience Capital Markets Government Relations Technology & Cybersecurity GROWING THROUGH STRATEGIC ACQUISITIONS OceanFirst continued its strategic growth trajectory, completing the acquisition of Sun Bancorp on January 31, 2018. At the time of closing, Sun had assets of $2.1 billion. With its focus on community banking, commitment to exceptional customer service, strong core deposit franchise, and talented team members, Sun is an excellent complement to OceanFirst. Together, we have greater critical mass in the attractive New York and Philadelphia metro areas, enhancing our growth opportunities. Combining two organizations with overlapping franchises also provides meaningful potential for increasing efficiency. We completed the conversion of OceanFirst Bank to a national commercial bank charter in connection with the Sun merger, becoming the second largest commercial bank headquartered in New Jersey. In the fourth quarter of 2018, OceanFirst agreed to acquire Capital Bank of New Jersey, with about $499 million in assets. Capital Bank deepens our penetration of the greater Philadelphia metro market, adds to our capacity to serve small and medium-sized businesses, provides strong core funding, and affords the opportunity to leverage our broader product offering across Capital Bank’s client base. We were pleased to close the acquisition of Capital Bank on January 31, 2019, just 98 days following the announcement of the merger agreement. Since launching our M&A strategy in 2015, OceanFirst’s assets have increased from $2.4 billion at the end of 2014 to more than $8.0 billion (including Capital Bank). In a consolidating industry, where greater scale is required to meet changing customer needs and invest in innovation, we have built a solid reputation as an adept and preferred acquirer. Full integration of Sun’s customer accounts, systems and services was completed in June 2018, and over 90% of Sun customers have been retained as of December 31, 2018. Similarly, the legal closing for Capital Bank was completed in a timely and professional manner. Full integration of Capital Bank customer accounts, systems and services is planned for June 2019. 6 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 6 1022781oc 1022781oc.indd 6 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 6 4/15/19 8:26 PM 7 1 0 2 2 7 8 1 o c 1022781oc 7 “We completed the conversion of OceanFirst Bank to a national commercial bank charter in connection with the Sun merger, becoming the second largest commercial bank headquartered in New Jersey.” We also have positioned OceanFirst for future growth by making our operations more efficient. In 2018, we relocated our Administrative Offices to a modern facility in Red Bank, New Jersey, which we refer to as “HQ2.” This enabled us to centralize and streamline functions that had been spread out across 19 locations. HQ2 is also key to our ability to attract and retain talent, as it provides a state-of-the-art work environment, amenities such as a fitness center, and access to a commuter rail station that connects us with the entire metropolitan area. We recently announced plans for the possible future expansion of our Headquarters and Operations Center in Toms River, New Jersey, or HQ1, securing local approval to add a 79,000 square- foot addition to our existing operations campus. CAPITAL MANAGEMENT AND GOVERNANCE With profitability rising strongly, the internal generation of capital has accelerated, allowing for a wide range of capital management strategies. Our first priority has been to build our capital base, as reflected in the 5% growth in tangible book value per share in 2018 and the 113 basis point increase in tangible stockholders’ equity to tangible assets. Strong earnings also enabled the Board of Directors to increase the cash dividend in the 2018 third quarter by 13% to $0.17 per share. Our commitment to shareholder value was further reflected in the repurchase of 459,251 shares during 2018; at year-end there were 1.3 million shares remaining under the repurchase program. Our first priority will be to deploy capital in accretive organic growth opportunities, followed by value creating acquisitions, share repurchases, and dividends. The Board of Directors has continued its commitment to building a strong corporate governance foundation. This has included a focus on Board renewal, including updating committee structures and modernizing policies, as well as a declassification of the Board. In addition, we have added directors with the skills and experience to guide the Company forward as we become a larger and more complex organization. OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 7 c o 1 8 7 2 2 0 1 7 4/15/19 8:26 PM 7 1022781oc 1022781oc.indd 7 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc 8 1 0 2 2 7 8 1 o c 1022781oc 8 “To live up to our values, we must support the communities where we live and work, while also providing outstanding service to our customers, a rewarding work experience for our team members, and excellent results for our shareholders.” In June 2018, Kim Guadagno, the former Lieutenant Governor of New Jersey, was named to the Board. Ms. Guadagno, who has held a number of elected offices and has been an attorney for three decades, is highly regarded for her efforts to attract, retain and support the growth of businesses throughout New Jersey. Nicos Katsoulis was appointed to the Board, effective January 1, 2019. Mr. Katsoulis retired as an EVP of OceanFirst Bank in November 2018, having served as Chief Lending Officer of Sun at the time of its acquisition. He has extensive experience in commercial lending, including deep expertise in the New York metropolitan area, and also served on the Board of State Bank of Long Island. In recognition of the vital importance of risk management to our enterprise, Grace Vallacchi, OceanFirst’s EVP and Chief Risk Officer, was named to the Board in January 2019. Ms. Vallacchi is an experienced risk management professional with more than 25 years of experience in commercial banking and regulatory oversight, and served in a senior capacity at the Office of the Comptroller of the Currency prior to joining OceanFirst. DEVELOPING A TALENTED TEAM We have continued to invest in attracting, retaining and developing the talented individuals who are vital to our ability to serve customers and grow prudently and profitably in a rapidly changing business landscape. For example, our learning and development initiatives include a Leadership Development program that gives employees at various levels throughout the organization an opportunity to enhance their skills. Early in 2019, we strengthened our management structure by appointing several members of our senior leadership team to new positions. To help manage our growing organization, EVP Joseph Lebel was named Chief Operating Officer. Given the increasing importance of technology to our business, EVP Joseph Iantosca was appointed Chief Information Officer. Michele Estep was promoted to EVP and Chief Administrative Officer, expanding on her prior responsibility for Human Resources. In addition, our information security and regulatory compliance areas now report to Grace Vallacchi, EVP and Chief Risk Officer. 8 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 8 1022781oc 1022781oc.indd 8 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 8 4/15/19 8:26 PM 9 1 0 2 2 7 8 1 o c 1022781oc 9 We recognize that diversity and inclusion are essential, not only to our Company, but also to society as a whole. For that reason, we joined the more than 500 corporate executives in signing the “I Act On” pledge created by the organization CEO Action for Diversity & Inclusion™ to signify our commitment to advance diversity and inclusion within the workplace. Our commitment was the first made by any bank headquatered in the State of New Jersey. LIVING OUR VALUES OceanFirst is a company whose roots date back 117 years— and whose values have been shaped by our role as a community financial institution. We understand that our long- term success as a growing business is inseparable from our role as a good neighbor and responsible corporate citizen. To live up to our values, we must support the communities where we live and work, while also providing outstanding service to our customers, a rewarding work experience for our team members, and excellent results for our shareholders. In 2018, we helped first time homebuyers with low to moderate incomes with more than $3.5 million in mortgage financing solutions. In addition, as of December 31, 2018, more than $5.8 million of the Bank’s loan portfolio was financing organizations supporting community redevelopment. OceanFirst Foundation awarded more than $2.4 million in grants to local organizations in such areas as health and wellness, housing, youth development and education, the arts, and the overall quality of life in our communities. OceanFirst employees volunteered their time and energy through initiatives such as our WaveMakers program, where they lend their skills to assist nonprofit organizations. THE BUSINESS ENVIRONMENT As we compile this update for our shareholders, the current business environment deserves special note. The last decade has been defined by one of the longest periods of economic expansion in our country’s history. While lengthy as measured in years, the absolute level of growth has been FOCUS: CORE VALUES “Any organization is only as good as its people— and the values by which they live and work.” Michele Estep Executive Vice President & Chief Administrative Officer As a company that has completed five bank acquisitions since 2015 and merged the employees of those five banks with the legacy OceanFirst team, we recognize the importance of fostering a shared culture and consistent values. We have spent considerable time talking with team members about our mission and values, which guide us as we serve our customers, deliver results for shareholders, engage with our communities, and create a supportive workplace. Based on input from our team members, we adopted a set of strong core values: Leadership, Teamwork, Performance, Commitment, Integrity, and Customer Focus. We also enhanced our mission statement: To build relationships and financial solutions that empower clients to achieve their goals. To reinforce the importance of living our values, an online program enables our team members to give real-time recognition to colleagues who exhibit these qualities. OceanFirst also offers a range of initiatives to cultivate the talent and interests of our employees, from leadership development opportunities to our WaveMakers community involvement program. In early 2019, we also were the first New Jersey-based bank to endorse the I Act On diversity and inclusion pledge. OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 9 c o 1 8 7 2 2 0 1 9 4/15/19 8:26 PM 9 1022781oc 1022781oc.indd 9 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc 1 0 1 0 2 2 7 8 1 o c 1022781oc 10 FOCUS: TREASURY MANAGEMENT “With a dedicated service team and advanced technology, we’re committed to helping Treasury Management customers bank securely from their workplace— or anyplace.” Jeana Piscatelli Senior Vice President, Treasury Management Major commercial customers and government entities rely on OceanFirst’s Treasury Manage- ment services to conduct banking in a safe, secure and efficient manner. This has been a specialized strength of the Bank for over 20 years and customer account balances exceed $2 billion. As with all of OceanFirst’s products and services, our Treasury Management solutions are distinguished by a focus on innovation. Customers can manage the receipt and disbursement of funds electronically, with real-time visibility into cash flows. This reduces reliance on paper checks, helping to protect against fraud and enhancing efficiency. Services like Positive Pay give customers the ability to control the way payments are verified. And a dedicated Treasury Client Services team gives customers access to knowledgeable personnel. In 2019, we are making additional investments in technology—to give Treasury Management cus- tomers access to their accounts via mobile devices and tablets, as well as their desktops—with the same user experience and secure environment. quite modest for the majority of the expansion, suggesting that the economy is far from overheated. The vast majority of measurements indicate a healthy economy with ultra-low unemployment, consumer debt to income levels far lower than preceding the last downturn, stable FICO scores, and very low levels of delinquency among bank loans. These indicators, coupled with benign inflation and continued strong levels of consumer and business confidence, all point toward continued economic growth in the quarters ahead. However, the continued expansion is at risk of encountering a series of events that could change the direction of the economy over the coming years. These risks include contagion from a slowing China and weakened outlook for the European economy, which could be amplified by a Brexit-triggered series of events. Beyond the routine business cycle in these economies are the risks associated with unresolved issues related to tariff levels and overall trade policy. In addition to global economic risks, the full range of geo-political considerations, including cybersecurity, is too extensive to mention. Closer to home, the northeast U.S. economy is still adapting to the tax reform act of 2017, which limits the tax deductibility of state and local taxes. This makes our core markets of New Jersey, Pennsylvania, and New York more expensive for individuals and businesses. Local economic and tax policies have muted economic progress and restricted the growth of real estate values for the past few years. Regardless of these policies, our markets continue to be home to approximately 10% of the U.S. population—a population that is one of the most educated in the country and at the epicenter of the logistics economy. Acknowledging risks allows us to plan for a variety of outcomes. We do not expect to experience a recession in the short term. However, it is prudent to prepare our business and our balance sheet for a less accommodating economy. That means adhering to our risk management program, making 10 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 10 1022781oc 1022781oc.indd 10 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.16.2019 15:23PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 0 1 4/16/19 3:09 PM 1 1 1 0 2 2 7 8 1 o c 1022781oc 11 “...our markets continue to be home to approximately 10% of the U.S. population–a population that is one of the most educated in the country and at the epicenter of the logistics economy.” prudent loans to strong consumers and quality businesses, and proactively managing the quality of our balance sheet. These efforts may result in more conservative organic growth than in earlier points of the economic expansion, but we continue to see the opportunity to prudently create shareholder value in the quarters ahead. LOOKING AHEAD At OceanFirst, we have diligently pursued a strategy to build a banking institution with the competitive scale, breadth of solutions and innovative spirit to serve the needs of customers in a changing financial services marketplace. In doing so, we have also enhanced the Company’s ability to deliver performance and value for our shareholders and to support our communities. A key focus for our future will be on delivering consistent loan growth, and to that end, we are building meaningful commercial lending businesses in the Philadelphia and New York metropolitan areas. We will continue to invest in the talent and technology to provide best- in-class services and solutions, while striving for exceptional efficiency, operating excellence and financial performance. We thank our customers and shareholders for their confidence in us, our Board of Directors for their sound guidance, and all of our team members who are devoted to making OceanFirst a success. Going forward, we remain committed to realizing OceanFirst’s growth potential, delivering extraordinary customer service, and building shareholder value. Christopher D. Maher Chairman of the Board Joseph J. Lebel III Executive Vice President and President and Chief Executive Officer Chief Operating Officer OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report | 11 11 1022781oc 1022781oc.indd 11 C M Y K 299 8.500 in x 11.000 in OceanFirst Bank 04.16.2019 16:43PM 1022781oc brobson (sa1) 1022781oc ReB amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 1 1 4/16/19 4:39 PM 1 2 1 0 2 2 7 8 1 o c 1022781oc 12 OCEANFIRST FINANCIAL CORP. OCEANFIRST BANK BOARD OF DIRECTORS STEVEN E. BRADY Retired Ocean Shore Holding Co. ANGELO CATANIA Retired Homestar Services, LLC ANTHONY R. COSCIA, ESQ. Partner Windels Marx Lane & Mittendorf, LLP MICHAEL D. DEVLIN Retired Cape Bancorp., Inc. JACK M. FARRIS Retired Verizon Communications, Inc. KIMBERLY M. GUADAGNO, ESQ. Partner Connell Foley, LLP NICOS KATSOULIS Retired Sun National Bank JOHN K. LLOYD Retired Hackensack Meridian Health CHRISTOPHER D. MAHER Chairman of the Board President and Chief Executive Officer DIANE F. RHINE Childer Sotheby’s International Realty MARK G. SOLOW Retired GarMark Advisors, LLC GRACE C. TORRES Trustee Prudential Retail Mutual Funds GRACE M. VALLACCHI Executive Vice President Chief Risk Officer JOHN E. WALSH Senior Vice President T and M Associates, Inc. SAMUEL R. YOUNG President and CEO Tilton Fitness Management DIRECTORS EMERITUS JOHN W. CHADWICK JOHN R. GARBARINO ROBERT E. KNEMOLLER DONALD E. MCLAUGHLIN JAMES T. SNYDER OCEANFIRST FINANCIAL CORP. CORPORATE OFFICERS CHRISTOPHER D. MAHER Chairman of the Board President and Chief Executive Officer MICHAEL J. FITZPATRICK Executive Vice President Chief Financial Officer STEVEN J. TSIMBINOS Executive Vice President General Counsel Corporate Secretary GRACE M. VALLACCHI Executive Vice President Chief Risk Officer JILL APITO HEWITT Senior Vice President Investor Relations Officer ROBERT A. LASKOWSKI Senior Vice President Treasurer LINDA L. BLAKAITIS Vice President Assistant Corporate Secretary OCEANFIRST BANK EXECUTIVE OFFICERS CHRISTOPHER D. MAHER Chairman of the Board President and Chief Executive Officer MICHELE B. ESTEP Executive Vice President Chief Administrative Officer MICHAEL J. FITZPATRICK Executive Vice President Chief Financial Officer JOSEPH R. IANTOSCA Executive Vice President Chief Information Officer JOSEPH J. LEBEL III Executive Vice President Chief Operating Officer STEVEN J. TSIMBINOS Executive Vice President General Counsel GRACE M. VALLACCHI Executive Vice President Chief Risk Officer REGIONAL PRESIDENTS VINCENT M. D’ALESSANDRO President, Southern Region GEORGE DESTAFNEY President, Central Region DANIEL J. HARRIS President, New York Region DAVID R. HOWARD President, Digital Strategy & Innovation 12 | OceanFirst Financial Corp. (NASDAQ: OCFC) 2018 Annual Report 12 1022781oc 1022781oc.indd 12 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 2 1 4/15/19 8:26 PM 1 3 1 0 2 2 7 8 1 o c 1022781oc 13 SENIOR VICE PRESIDENTS CARLO ALIBRANDI Commercial Lending THOMAS ANDO Commercial Lending NINA ANUARIO Business Development MICHELLE BERRY Residential Lending JANET BOSSI Residential Lending MICHAEL BOYD BSA SHANNAN BOYD Loan Servicing MICHAEL COLEMAN Commercial Lending SHARON DANIELSON Deposit Operations SAMUEL DAVIS Commercial Credit Administration CRAIG DEGENOVA Commerical Lending MICHAEL DELLABARCA Commerical Credit Administration JOHN FINLEY Commercial Lending BRADLEY FOUSS Commercial Lending EDWARD GELETKA Retail Sales ANTHONY GIORDANO Senior Operations Officer MARK HARHIGH Commercial Credit Administration MICHELE HART Associate General Counsel JILL APITO HEWITT Investor Relations & Corporate Communications ANGELA HO Principal Accounting Officer SEAN KAUFFMAN Commercial Lending KENNETH KELLER Commercial Lending JAMES KRUZINSKI Commercial Lending JOSEPH LADUCA Controller PATRICIA LAIRD Project Management CARA LARNED Marketing ROBERT LASKOWSKI Treasurer RAYMOND LEAHY Commercial Lending STACY MATTIA Commercial Lending NANCY MAZZA Financial Services Sales SCOTT MCLAUGHLIN Special Assets Group MICHAEL MESSINA Commercial Lending NEENA MILLER Chief Credit Officer MICHAEL MOORHEAD Commercial Credit Administration EDWARD MORAN Commercial Lending VERONICA MOREY Retail Banking PATRICIA NELSON Human Resources RACHEL O’KEEFE Wealth Operations & Administration STEVEN PELLEGRINELLI Commercial Lending CHARLES PINTO Financial Services Sales JEANA PISCATELLI Treasury Management MICHELE POWELCZYK Commercial Credit Administration BRIAN SCHAEFFER Chief Information Security Officer PAUL SEIDENWAR Syndications/ABL NOEL SPEAR Real Estate Operations FRANK SUTTON Commercial Lending MARK TASY Retail Banking WILLIAM TONER Chief Technology Officer SUZANNE WEGRYN Commercial Credit Administration WENDY WRIGHT Commercial Credit Administration 13 1022781oc 1022781oc.indd 13 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 3 1 4/15/19 8:26 PM 1022781oc 14 1 4 1 0 2 2 7 8 1 o c www.oceanfirst.com NASDAQ: OCFC 888.623.2633 HEADQUARTERS (HQ2) ADMINISTRATIVE OFFICES 110 West Front Street INVESTOR RELATIONS Copies of the Company’s earnings releases and financial publications, STOCK TRANSFER AND REGISTRAR Shareholders wishing to change the Red Bank, NJ 07701 including the annual report on Form 10-K name, address or ownership of stock, HEADQUARTERS (HQ1) OPERATIONS CENTER 975 Hooper Avenue Toms River, NJ 08754-2009 ANNUAL MEETING OF SHAREHOLDERS The Annual Meeting of Shareholders will be held on May 29, 2019 at 6:00 p.m. at the OceanFirst Bank Administrative Offices at 110 West Front Street, Red Bank, New Jersey 07701 (without exhibits) filed with the Securities to report lost certificates or to consoli- and Exchange Commission are available date accounts are asked to contact the without charge by contacting: Company’s stock registrar and transfer Jill Apito Hewitt, Senior Vice President, agent directly: Extension 7516 or American Stock Transfer and Trust Co. investorrelations@oceanfirst.com Shareholder Relations Department INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 51 John F. Kennedy Parkway Short Hills, NJ 07078 59 Maiden Lane New York, NY 10038 (877) 724-6454 14 1022781oc 1022781oc.indd 14 C Y K 299 ReB 8.500 in x 11.000 in OceanFirst Bank 04.15.2019 20:29PM 1022781oc brobson (sa1) 1022781oc amoore file://sanjfs5.sa1.com/Sandy/1022781oc c o 1 8 7 2 2 0 1 4 1 4/15/19 8:26 PM 

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