OCFC 10-Q Quarter ended March 31, 2013

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

For the quarterly period ended March 31, 2013

For the transition period from to

Commission file number 001-11713

OceanFirst Financial Corp.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (732) 240-4500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES x NO ¨ .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES x NO ¨ .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES ¨ NO x .

As of May 3, 2013, there were 17,660,229 shares of the Registrant’s Common Stock, par value $.01 per share, outstanding.

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OceanFirst Financial Corp.

INDEX TO FORM 10-Q

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FINANCIAL SUMMARY

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Summary

OceanFirst Financial Corp. is the holding company for OceanFirst Bank (the “Bank”), a community bank serving Ocean and Monmouth Counties in New Jersey. The term the “Company” refers to OceanFirst Financial Corp., OceanFirst Bank and all of the Bank’s 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 interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income such as income from loan sales, loan servicing, loan originations, merchant credit card services, deposit accounts, trust and asset management services, the sale of investment products and other fees. The Company’s operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, data processing, federal deposit insurance and general and administrative expenses. The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory agencies.

Interest-earning assets, both loans and securities, are generally priced against longer-term indices, while interest-bearing liabilities, primarily deposits and borrowings, are generally priced against shorter-term indices. Beginning in the second half of 2011 and through the first quarter of 2013, the Company’s net interest margin has generally contracted as compared to prior linked periods. Due to the low interest rate environment, high loan refinance volume caused yields on loans and mortgage-backed securities to trend downward. At the same time, the Company’s asset mix has shifted as higher-yielding loans have decreased due to prepayments and the sale of newly originated 30-year fixed-rate one-to-four family loans while lower yielding securities have increased. Based upon current economic conditions, the Federal Reserve has indicated that it intends to keep interest rates at current levels through mid 2015. As a result, management expects the low interest rate environment to continue beyond 2013, causing further pressure on the net interest margin. In addition to the interest rate environment, the Company’s results are affected by national and local economic conditions. Recent economic indicators point to some improvement in the economy, which expanded moderately in 2011 and 2012, and in overall labor market conditions as the national unemployment rate in the first quarter of 2013 has improved over prior year levels. Despite these signs, the overall economy remains weak and the unemployment rate remains at elevated levels. Additionally, housing values remain significantly below their peak levels in 2006. These economic conditions have generally had an adverse impact on the Company’s results of operations.

Highlights of the Company’s financial results for the three months ended March 31, 2013 were as follows:

Total assets increased to $2.304 billion at March 31, 2013, from $2.269 billion at December 31, 2012. Mortgage-backed securities available for sale increased by $49.3 million, to $383.1 million at March 31, 2013, as compared to $333.9 million at December 31, 2012. Loans receivable, net decreased $21.8 million at March 31, 2013, as compared to December 31, 2012 primarily due to prepayments and the sale of newly originated 30-year fixed-rate one-to-four family loans.

Deposits increased by $20.6 million at March 31, 2013, as compared to December 31, 2012. An increase of $29.5 million in core deposits (i.e. all deposits excluding time deposits) was partly offset by a decline of $8.9 million in time deposits.

Net income for the three months ended March 31, 2013 decreased to $4.4 million, or $0.26 per diluted share, as compared to net income of $5.6 million, or $0.31 per diluted share for the corresponding prior year period due to reductions in net interest income and the net (loss) gain on the sales of loans available for sale, partly offset by reductions in the provision for loan losses and operating expenses.

Net interest income for the three months ended March 31, 2013 decreased to $17.2 million, as compared to $19.1 million in the same prior year period, reflecting a lower net interest margin partly offset by greater interest-earning assets. The net interest margin decreased to 3.16% for the three months ended March 31, 2013, as compared to 3.52% for the corresponding prior year period.

The provision for loan losses was $1.1 million for the three months ended March 31, 2013, as compared to $1.7 million in the same prior year period. The Company’s non-performing loans increased $4.1 million, to $47.4 million at March 31, 2013, from $43.4 million at December 31, 2012. The increase was expected as it was related to loans adversely affected by superstorm Sandy which were identified and provided for in the fourth quarter of 2012.

Other income decreased $902,000 for the three months ended March 31, 2013 as compared to the same prior year period. The net (loss) gain on the sales of loans available for sale for the three months ended March 31, 2013 was adversely impacted by an addition of $975,000 to the reserve for repurchased loans as compared to an addition of $150,000 in the same prior year period.

The Company remains well-capitalized with a tangible common equity ratio of 9.53%.

Return on average stockholders’ equity was 8.06% for the three months ended March 31, 2013, as compared to 10.38% for the corresponding prior year period.

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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.

The following table sets forth certain information relating to the Company for the three months ended March 31, 2013 and 2012. The yields and costs are derived by dividing income or expense by the average balance of 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 which are considered adjustments to yields.

Comparison of Financial Condition at March 31, 2013 and December 31, 2012

Total assets at March 31, 2013 were $2.304 billion, an increase of $34.5 million, compared to $2.269 billion at December 31, 2012.

Cash and due from banks increased by $8.8 million, to $71.4 million at March 31, 2013, as compared to $62.5 million at December 31, 2012. Mortgage-backed securities available for sale increased by $49.3 million, to $383.1 million at March 31, 2013, as compared to $333.9 million at December 31, 2012, as excess liquidity was invested.

Loans receivable, net decreased by $21.8 million, to a balance of $1.501 billion at March 31, 2013, as compared to a balance of $1.523 billion at December 31, 2012, primarily due to prepayments and the sale of newly originated 30-year fixed-rate one-to-four family loans.

Total deposits increased $20.6 million, to $1.740 billion at March 31, 2013, from $1.720 billion at December 31, 2012. The mix of deposits changed as non-interest-bearing deposits and savings deposits increased by $22.7 million and $29.8 million, respectively, while interest-bearing checking and time deposits decreased $29.6 million and $8.9 million, respectively. Securities sold under agreements to repurchase with retail customers increased by $10.5 million, to $71.3 million at March 31, 2013, from $60.8 million at December 31, 2012.

Stockholders’ equity at March 31, 2013 decreased to $219.6 million, as compared to $219.8 million at December 31, 2012, primarily due to the repurchase of 254,340 shares of common stock for $3.6 million (average cost $14.32) and the cash dividend on common stock, partly offset by net income and other comprehensive income.

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Comparison of Operating Results for the Three Months Ended March 31, 2013 and March 31, 2012

General

Net income for the three months ended March 31, 2013 decreased to $4.4 million, or $0.26 per diluted share, as compared to net income of $5.6 million, or $0.31 per diluted share for the corresponding prior year period due to reductions in net interest income and the net (loss) gain on the sales of loans available for sale, partly offset by reductions in the provision for loan losses and operating expenses.

Interest Income

Interest income for the three months ended March 31, 2013 was $20.1 million, as compared to $22.9 million for the three months ended March 31, 2012. The yield on interest-earning assets declined to 3.69% for the three months ended March 31, 2013, as compared to 4.21% for the same prior year period. For the three months ended March 31, 2012, the yield on loans receivable benefited from commercial loan prepayment fees of $254,000, most of which was related to a single large commercial loan, which increased the yield on interest-earning assets by 5 basis points. Prepayment fee income for the three months ended March 31, 2013 was $32,000. Average interest-earning assets increased by $2.8 million for the three months ended March 31, 2013, as compared to the same prior year period. The increase in average interest-earning assets was primarily due to the increase in average short-term investments which increased $36.1 million for the three months ended March 31, 2013 and to the increase in average investment and mortgage-backed securities available for sale, which collectively increased $9.3 million. These increases were partly offset by a decrease in average loans receivable, net, of $41.8 million for the quarter ended March 31, 2013, as compared to the same prior year period.

Interest Expense

Interest expense for the three months ended March 31, 2013 was $2.9 million as compared to $3.8 million for the three months ended March 31, 2012. The cost of interest-bearing liabilities decreased to 0.61% for the three months ended March 31, 2013 as compared to 0.79% in the same prior year period. Average interest-bearing liabilities decreased by $19.8 million for the three months ended March 31, 2013, as compared to the same prior year period. The decrease was due to declines in average borrowed funds of $31.7 million and average time deposits of $34.8 million for the three months ended March 31, 2013 as compared to the same prior year period, partly offset by an increase in average transaction deposits of $46.7 million.

Net Interest Income

Net interest income for the three months ended March 31, 2013 decreased to $17.2 million, as compared to $19.1 million in the same prior year period, reflecting a lower net interest margin partly offset by slightly higher interest-earning assets. The net interest margin decreased to 3.16% for the three months ended March 31, 2013, from 3.52% in the same prior year period due to a change in the mix of average interest-earning assets from higher-yielding loans receivable into lower-yielding short-term investments and investment and mortgage-backed securities available for sale. High loan refinance volume also caused yields on loans and mortgage-backed securities to trend downward.

Provision for Loan Losses

For the three months ended March 31, 2013, the provision for loan losses was $1.1 million as compared to $1.7 million for the corresponding prior year period. The decrease for the quarter ended March 31, 2013 was partly due to a reduction of $573,000 in net charge-offs for the three months ended March 31, 2013 as compared to the same prior year period and a reduction in loans receivable, net at March 31, 2013 as compared to December 31, 2012. Although non-performing loans increased $4.1 million at March 31, 2013, as compared to December 31, 2012, all of the increase, $4.5 million, relates to loans adversely affected by superstorm Sandy. These loans were identified at December 31, 2012 and potential losses were provided for at that time.

Other Income

Other income decreased to $3.4 million for the three months ended March 31, 2013, as compared to $4.3 million in the same prior year period. Higher fees and service charges and an improvement in the net gain (loss) from other real estate owned was offset by a decrease in the net (loss) gain on sales of loans available for sale. Effective January 1, 2013, income from the origination of reverse mortgage loans of $166,000 is classified as part of fees and service charges as compared to inclusion in the net (loss) gain on the sales of loans in the prior period as the Bank no longer closes these loans in its name. For the three months ended March 31, 2013, the net (loss) gain on the sales of loans decreased $1.1 million to a loss of $174,000, due to an increase in the provision for repurchased loans, a decrease in loan sale volume and the reclassification of reverse mortgage income. The net (loss) gain on the sales of loans for the three months ended March 31, 2013 was adversely impacted by an addition of $975,000 to the reserve for repurchased loans as compared to an addition of $150,000 in the same prior year period. (Refer to Note 6. Reserve for Repurchased Loans and Loss Sharing Obligations.) For the quarter ended March 31, 2013, fees and service charges, exclusive of the $166,000 in fees on reverse mortgage loans, decreased $16,000, due to a reduction in fees from investment services and deposit accounts partly offset by increases in bankcard services and trust revenue. Finally, the net gain (loss) from other real estate owned improved $52,000 for the quarter ended March 31, 2013, as compared to the same prior year period.

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Operating Expenses

Operating expenses decreased by $275,000, to $12.7 million, for the three months ended March 31, 2013, as compared to $12.9 million for the corresponding prior year period primarily due to a reduction in the incentive plan accrual.

Provision for Income Taxes

Income tax expense was $2.4 million for the three months ended March 31, 2013, as compared to $3.1 million for the same prior year period. The effective tax rate was 35.1% for the three months ended March 31, 2013 as compared to 35.7% in the same prior year period.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, proceeds from the sale of loans, FHLB and other borrowings and, to a lesser extent, investment maturities. While scheduled amortization of loans is a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including various lines of credit.

At March 31, 2013 and December 31, 2012, the Company had no overnight borrowings from the FHLB. The Company periodically utilizes overnight borrowings to fund short-term liquidity needs. The Company had total FHLB borrowings of $225.0 million at March 31, 2013 and December 31, 2012.

The Company’s cash needs for the three months ended March 31, 2013 were primarily satisfied by principal payments on loans and mortgage-backed securities, proceeds from the sale of mortgage loans held for sale, proceeds from maturities of investment securities available for sale, deposit growth and short-term borrowings. The cash was principally utilized for loan originations and the purchase of investment and mortgage-backed securities. The Company’s cash needs for the three months ended March 31, 2012 were primarily satisfied by principal payments on loans and mortgage-backed securities and proceeds from the sale of mortgage loans held for sale. The cash was principally utilized for loan originations, the purchase of investment and mortgage-backed securities, to fund deposit outflow and reduce FHLB borrowings.

In the normal course of business, the Company routinely enters into various off-balance-sheet commitments, primarily relating to the origination and sale of loans. At March 31, 2013, outstanding commitments to originate loans totaled $59.7 million; outstanding unused lines of credit totaled $243.5 million; and outstanding commitments to sell loans totaled $11.7 million. The Company expects to have sufficient funds available to meet current commitments arising in the normal course of business.

Time deposits scheduled to mature in one year or less totaled $129.4 million at March 31, 2013. Based upon historical experience management estimates that a significant portion of such deposits will remain with the Company.

The Company has a detailed contingency funding plan and comprehensive reporting of funding trends on a monthly and quarterly basis which is reviewed by management. Management also monitors cash on a daily basis to determine the liquidity needs of the Bank. Additionally, management performs multiple liquidity stress test scenarios on a quarterly basis. The Bank continues to maintain significant liquidity under all stress scenarios.

Under the Company’s stock repurchase program, shares of OceanFirst Financial Corp. common stock may be purchased in the open market and through other 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 three months ended March 31, 2013, the Company repurchased 254,340 shares of common stock at a total cost of $3.6 million compared with repurchases of 113,500 at a cost of $1.6 million for the three months ended March 31, 2012. At March 31, 2013, there were 580,444 shares remaining to be repurchased under the existing stock repurchase program.

Cash dividends on common stock declared and paid during the first three months of 2013 were $2.1 million, as compared to $2.2 million in the same prior year period. On April 17, 2013, the Board of Directors declared a quarterly cash dividend of twelve cents ($0.12) per common share. The dividend is payable on May 10, 2013, to stockholders of record at the close of business on April 29, 2013.

The primary sources of liquidity specifically available to OceanFirst Financial Corp., the holding company of OceanFirst Bank, are capital distributions from the banking subsidiary and the issuance of preferred and common stock and long-term debt. For the three months ended March 31, 2013, the Company received a dividend payment of $4.0 million from the Bank. At March 31, 2013, the Company had received notice from the Federal Reserve Bank of Philadelphia that it does not object to the payment

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of $8.0 million in dividends from the Bank to the Holding Company over the next two quarters, although the Federal Reserve Bank reserved the right to revoke the approval at any time if a safety and soundness concern arises throughout the period. The Company’s ability to continue to pay dividends will be largely dependent upon capital distributions from the Bank, which may be adversely affected by capital constraints imposed by the applicable regulations. The Company cannot predict whether the Bank will be permitted under applicable regulations to pay a dividend to the Company. If the Bank is unable to pay dividends to the Company, the Company may not have the liquidity necessary to 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. At March 31, 2013, OceanFirst Financial Corp. held $17.8 million in cash and $5.7 million in investment securities available for sale.

As of March 31, 2013, the Bank exceeded all regulatory capital requirements as follows (in thousands):

The Bank is considered a “well-capitalized” institution under the Prompt Corrective Action Regulations.

At March 31, 2013, the Company maintained tangible common equity of $219.6 million, for a tangible common equity to assets ratio of 9.53%.

Off-Balance-Sheet Arrangements and Contractual Obligations

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in the financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used for general corporate purposes or for customer needs. Corporate purpose transactions are used to help manage credit, interest rate, and liquidity risk or to optimize capital. Customer transactions are used to manage customers’ requests for funding. These financial instruments and commitments include unused lines of credit and commitments to extend credit. The Company also has outstanding commitments to sell loans amounting to $11.7 million.

The following table shows the contractual obligations of the Company by expected payment period as of March 31, 2013 (in thousands):

Commitments to originate loans and commitments to fund unused lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. 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.

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Non-Performing Assets

The following table sets forth information regarding the Company’s non-performing assets consisting of non-performing loans and Other Real Estate Owned (“OREO”). 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.

The Company’s non-performing loans increased $4.1 million at March 31, 2013, as compared to December 31, 2012 due to the impact of superstorm Sandy which caused substantial disruption in the Bank’s market area on October 29 and 30, 2012. The Bank increased its allowance for loan losses at December 31, 2012 by $1.8 million in expectation of increasing levels of non-performing loans for borrowers impacted by superstorm Sandy. The Bank previously identified 124 loans totaling $30.1 million which were adversely impacted by the storm. At March 31, 2013, the status of these loans was as follows:

Included in the non-performing loan total at March 31, 2013 was $19.3 million of troubled debt restructured loans, as compared to $18.2 million of troubled debt restructured loans at December 31, 2012. Non-performing loans are concentrated in one-to-four family loans which comprise 62.3% of the total. At March 31, 2013, the average weighted loan-to-value ratio of non-performing one-to-four family loans, after any related charge-offs, was 60% using appraisal values at time of origination and 78% using updated appraisal values. Appraisals are updated for all non-performing residential loans secured by real estate and subsequently updated annually if the loan remains delinquent for an extended period. At March 31, 2013, the average weighted loan-to-value ratio of the total one-to-four family loan portfolio was 56% using appraisal values at time of origination. The largest non-performing loan relationship consists of several credits to a single borrower with an aggregate balance of $6.3 million which was criticized due to poor, but improving, operating results. The loans are collateralized by commercial and residential real estate, all business assets and also carry a personal guarantee. An appraisal performed in May 2011 values the real estate collateral at $9.3 million. In November 2011, the Company entered into a troubled debt restructuring with the borrower which reduced the interest rate in exchange for additional collateral. The loan was renewed in December 2012 at comparable terms. The borrower is current as to payments under the restructured terms but remains classified as a non-accrual loan due to continued uncertainty about the borrower’s ability to service the debt. The Company’s non-performing loans remain at elevated levels partly due to the extended foreclosure process in the State of New Jersey. The protracted foreclosure process delays the Company’s ability to resolve non-performing loans through the sale of the underlying collateral.

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The Company classifies loans and other assets in accordance with regulatory guidelines as follows (in thousands):

The largest Special Mention loan at March 31, 2013 is a commercial real estate mortgage to a local builder for $1.8 million which was current as to payments. The loan is well collateralized by residential property and several vacant lots. The largest Substandard loan relationship is the marina credit for $6.3 million noted above. The largest Doubtful asset with a balance of $862,000 is a portion of a commercial real estate loan to a self-storage facility. The remaining balance of $1.3 million is rated Substandard. In September 2011, the Company entered into a troubled debt restructuring with the borrower which reduced the interest rate and extended the payment term. All scheduled payments under the restructured terms have been made since that date. In addition to loan classifications, the Company previously classified select investment securities as Substandard, representing the amount with a credit rating below investment grade from one of the internationally recognized credit rating services. These securities have consistently remained current as to principal and interest payments. During the first quarter of 2013, the Company performed, with the assistance of an independent expert, a detailed analysis relating to the collectability of these securities. The analysis concluded that the issuers of these securities have an adequate capacity to meet financial commitments as originally agreed for the projected life of the security, the risk of default is low and the full and timely repayment of principal and interest is expected.

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 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 inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated statements of financial condition at fair value or the lower of cost or fair value. Policies with respect to the methodologies used to determine the allowance for loan losses, the reserve for repurchased loans and the valuation of Mortgage Servicing Rights and judgments regarding securities impairment are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations. These judgments and policies involve a higher degree of complexity and require 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. These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors.

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 Private Securities Reform Act of 1995 which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “should,” “may,” “view,” “opportunity,” “potential,” or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 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. Further description of the risks and uncertainties to the business are included in Item 1, Business and Item 1A, Risk Factors of the Company’s 2012 Form 10-K and Item 1A of this
Form 10-Q.

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The Company’s interest rate sensitivity is monitored through the use of an interest rate risk (“IRR”) model. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2013, which were anticipated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods shown.

At March 31, 2013, the Company’s one-year gap was positive 0.63% as compared to positive 0.90% at December 31, 2012.

Additionally, the table below sets forth the Company’s exposure to interest rate risk as measured by the change in net portfolio value (“NPV”) and net interest income under varying rate shocks as of March 31, 2013 and December 31, 2012. All methods used to measure interest rate sensitivity involve the use of assumptions, which may tend to oversimplify the manner in which actual yields and costs respond to changes in market interest rates. The Company’s interest rate sensitivity should be reviewed in conjunction with the financial statements and notes thereto contained in the 2012 Form 10-K.

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 5d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (“SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, there were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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OceanFirst Financial Corp.

(dollars in thousands, except per share amounts)