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OceanFirst taking its time to cross $10B as estimated Durbin hit dwindles

OceanFirst Financial Corp. executives said they will take their time to cross the $10 billion asset threshold after announcing two acquisitions that will put them just under that mark.

The Toms River, N.J.-based bank expects to stay below $10 billion in 2020 and is looking at crossing that threshold as early as the first quarter of 2021, chairman, President and CEO Christopher Maher said during a conference call with analysts.

Maher spoke after OceanFirst's announcement that it will acquire New Jersey-based Two River Bancorp and New York-based Country Bank Holding Co. Inc. The two deals, expected to close in the first quarter of 2020, would put OceanFirst's assets at approximately $9.9 billion, up from the roughly $8 billion in assets it reported in the second quarter.

The company will manage its balance sheet to stay below $10 billion in the meantime, executives said. One option they cited on the call is running down some higher-cost certificates of deposit or brokered CDs.

The $10 billion threshold has been critical for banks, as it has come with a raft of new regulatory requirements and compliance costs. Many banks look to jump significantly above that threshold in order to ease the decreased debit card interchange income due to the Durbin amendment, part of the landmark Dodd-Frank Act.

But company executives said their estimated hit from the Durbin amendment has been dropping due to customers' shifting transaction mix. OceanFirst would see a roughly $5 million pretax hit from the Durbin amendment if it crossed over $10 billion today. But when the integration of the two banks is completed and the company is ready to jump above the threshold in 2021, the cost would be closer to $3.5 million after tax, executives said.

Management said the decreased cost of going above $10 billion makes it possible for the company to grow above that mark with perhaps $10.5 billion in assets, rather than needing $11 billion or more to help overcome increased regulatory costs.