OceanFirst Q3 Net Interest Income Jumps 43% as Flushing Integration Advances

OceanFirst Financial Corp. reported a sharp increase in third-quarter net interest income as the first full quarter of Flushing operations expanded its balance sheet, while the bank completed the acquired company’s core-system conversion and said integration was substantially finished.

The Red Bank, New Jersey-based lender, which trades on Nasdaq under the ticker OCFC, generated $172.1 million of net interest income in the quarter ended Sept. 30, 2026. That was up $51.4 million, or 43%, from the second quarter and $81.5 million, or 90%, from a year earlier, marking the ninth consecutive quarterly increase. The result included $5.5 million of non-recurring interest income from payoffs of acquired non-performing assets.

GAAP net income available to common shareholders was $16.5 million, compared with a loss of $3.0 million in the previous quarter and income of $17.3 million a year earlier. Merger-related expenses totaled $37.1 million in the third quarter, down from $42.8 million in the second quarter.

Excluding merger costs and other specified items, non-GAAP core earnings were $46.9 million, or $0.48 per diluted share, up from $30.5 million, or $0.43 per share, in the linked quarter. Core return on average assets rose to 0.80% from 0.71%, while core return on average tangible common equity increased to 10.35% from 8.92%.

Margin and balance-sheet growth

OceanFirst’s net interest margin increased 13 basis points sequentially to 3.18%. About 10 basis points came from one-time interest recoveries on non-performing assets, while purchase accounting contributed 11 basis points. Acquisition-related and other portfolio changes reduced the margin by eight basis points.

Total loans increased by $216 million during the quarter, equivalent to 5% annualized growth, to $16.49 billion. Commercial loan originations rose 15% to $735 million, and the company reported a $541 million forward pipeline at quarter-end. The average loan yield increased to 5.82% from 5.55% in the second quarter.

Deposits grew by $319 million, or 7% annualized, to $18.08 billion, including a $178 million increase in non-maturity deposits. The average cost of total deposits, including non-interest-bearing balances, was 2.28%, while the quarter-end spot cost was 2.17%. OceanFirst ended the period with a 91.2% loan-to-deposit ratio.

Core non-interest expense rose $27.2 million, or 31%, from the previous quarter to $114.3 million, primarily because the results included a full quarter of Flushing operations. The company said initial cost savings partly offset the added expenses. Despite the higher spending, the non-GAAP core efficiency ratio improved to 61.75% from 66.20%.

Integration and outlook

OceanFirst completed the Flushing core-system conversion in September, placing the combined company on a single operating platform. Management expects the remaining acquisition-related cost savings to begin flowing through operating expenses in October and anticipates a return to excess capital accretion in the fourth quarter.

For both the fourth quarter of 2026 and first quarter of 2027, management expects loan growth of about 1% to 2% per quarter, with deposits growing in line with loans and the loan-to-deposit ratio remaining at or below 95%. The company expects credit conditions to remain benign and reserves to be sufficient.

Management projects a stable net interest margin to modest low-single-digit expansion, subject to balance-sheet growth and interest-rate trends. Its assumptions include one rate increase in December 2026 and another in March 2027. Other income is expected to be about $13 million, subject to loan-swap activity.

Operating expenses are projected at approximately $110 million in the fourth quarter before moving toward a quarterly run rate of about $105 million in the first quarter of 2027. OceanFirst said additional operating-leverage initiatives are in process.

Credit and capital

Non-performing loans increased to $60.9 million from $54.1 million in the second quarter, although non-performing assets declined to 0.32% of total assets from 0.38%. Non-performing loans represented 0.37% of total loans, up from 0.33%. Criticized loans remained broadly stable at 3.13% of total loans, compared with 3.12% in the prior quarter; the earlier increase reflected the Flushing acquisition.

The allowance for credit losses was $212.3 million, or 1.29% of total loans, unchanged as a percentage of loans from the second quarter. Provision expense was $4.3 million, and annualized net charge-offs were 0.04% of average loans.

OceanFirst estimated its common equity Tier 1 ratio at 10.6%, compared with 10.7% in the second quarter. Management attributed the modest decline to loan growth and non-recurring Flushing merger expenses. The company expects to maintain a CET1 ratio above 10.5% while managing capital to support growth and limiting excess accumulation above 11%.

Commercial real estate remains a substantial part of the balance sheet. Investor-owned CRE and construction loans totaled $9.33 billion, including an $8.60 billion investor-owned portfolio with a weighted-average loan-to-value ratio of 51.2% and debt-service coverage of 1.72 times. About $1.47 billion of investor-owned CRE loans are scheduled to mature in 2026 and 2027.

The company identified interest-rate changes, economic weakness, real estate values, deposit flows, funding costs, credit quality, cybersecurity threats and the execution of Flushing-related savings and integration as factors that could affect future results.