OCFC

Business Context and Reporting Period

Company: OceanFirst Financial Corp. (OceanFirst)
Filing Type: Form 8-K (Current Report)
Date of Report: July 14, 2016
Event Date: July 12, 2016
Context: OceanFirst, the parent company of OceanFirst Bank, entered into an Agreement and Plan of Merger with Ocean Shore Holding Co. (Ocean Shore), the parent company of Ocean City Home Bank. The transaction involves a series of integrated mergers resulting in OceanFirst as the surviving entity and OceanFirst Bank as the surviving bank.

Key Financial Metrics and Transaction Terms

This filing details a merger agreement rather than periodic financial results. Key financial terms of the transaction include:

• Merger Consideration: Ocean Shore shareholders will receive $4.35 in cash and 0.9667 shares of OceanFirst common stock for each share of Ocean Shore common stock.
• Stock Option Conversion: Outstanding Ocean Shore options will fully vest and convert to OceanFirst options using a multiplier of 1.2084 for share count and a divisor of 1.2084 for exercise price.
• Termination Fee: If the agreement is terminated under certain circumstances, the obligated party must pay a termination fee of $5.72 million.
• Financial Statements: The filing text does not provide current revenue, profit, cash flow, margins, debt, or liquidity metrics for either company.

Material Changes and Transaction Structure

The primary material change is the execution of the Merger Agreement. The transaction structure is as follows:

1. First-Step Merger: Masters Merger Sub Corp. (a wholly-owned subsidiary of OceanFirst) merges with and into Ocean Shore, with Ocean Shore surviving.
2. Second Merger: Immediately following the First-Step Merger, Ocean Shore merges with and into OceanFirst, with OceanFirst surviving.
3. Bank Merger: Ocean City Home Bank merges with and into OceanFirst Bank, with OceanFirst Bank surviving.

Both boards of directors have unanimously approved the agreement. OceanFirst directors and Ocean Shore directors have entered into voting agreements to support the merger.

Guidance, Outlook, and Risks

Expected Closing: The parties anticipate closing late in the fourth quarter of 2016 or early in the first quarter of 2017, subject to conditions.

Conditions to Closing:

• Approval by Ocean Shore and OceanFirst shareholders.
• Receipt of all required regulatory approvals.
• Effectiveness of the SEC registration statement (Form S-4).
• Authorization for listing on the NASDAQ Global Select Market.
• Compliance with covenants and accuracy of representations.

Management Commentary and Governance:

• Steven E. Brady (CEO of Ocean Shore) and two other Ocean Shore directors are expected to join the OceanFirst board.
• An Advisory Board will be created consisting of Steven E. Brady and four other Ocean Shore directors to advise on integration and stakeholder relationships for a two-year term.

Risks and Contingencies:

• Failure to obtain regulatory or shareholder approvals.
• Integration challenges and diversion of management time.
• Reputational risks and negative reactions from stakeholders.
• Failure to realize expected benefits of the transaction or the recently completed acquisition of Cape Bancorp, Inc.

Important Facts for Investor Verification

• Verify the final terms of the Merger Agreement in the joint proxy statement/prospectus (Form S-4) once filed.
• Confirm the status of regulatory approvals required for the bank merger.
• Review the pro forma financial impact of the merger, which is not detailed in this 8-K.
• Monitor the voting results of Ocean Shore and OceanFirst shareholders.
• Assess the integration plan for Ocean Shore and the previously acquired Cape Bancorp, Inc.