0001004702-20-000103.txt : 20200424 0001004702-20-000103.hdr.sgml : 20200424 20200423204349 ACCESSION NUMBER: 0001004702-20-000103 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 20200424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200424 DATE AS OF CHANGE: 20200423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCEANFIRST FINANCIAL CORP CENTRAL INDEX KEY: 0001004702 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 223412577 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11713 FILM NUMBER: 20812284 BUSINESS ADDRESS: STREET 1: 975 HOOPER AVE CITY: TOMS RIVER STATE: NJ ZIP: 08753-8396 BUSINESS PHONE: 7322404500 MAIL ADDRESS: STREET 1: 975 HOOPER AVENUE CITY: TOMS RIVER STATE: NJ ZIP: 08723 FORMER COMPANY: FORMER CONFORMED NAME: OCEAN FINANCIAL CORP DATE OF NAME CHANGE: 19951208 8-K 1 ocfc8-kearningsrelease.htm 8-K Document
false0001004702 0001004702 2020-04-24 2020-04-24


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 24, 2020 (April 23, 2020)
 
 
OCEANFIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-11713
 
22-3412577
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File No.)
 
(IRS Employer
Identification No.)
110 West Front Street, Red Bank, New Jersey 07701
(Address of principal executive offices, including zip code)
(732)240-4500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange in which registered
Common stock, $0.01 par value per share
 
OCFC
 
NASDAQ
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 






ITEM 2.02
RESULTS OF OPERATION AND FINANCIAL CONDITION
On April 23, 2020, OceanFirst Financial Corp. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2020. That press release is attached to this Report as Exhibit 99.1.

ITEM 7.01    REGULATION FD DISCLOSURE
The Company is scheduled to make presentations to current and prospective investors after April 23, 2020. Attached as Exhibit 99.2 of this Form 8-K is a copy of the presentation which OceanFirst Financial Corp. will make available at these presentations and will post on its website at www.oceanfirst.com. This report is being furnished to the SEC and shall not be deemed “filed” for any purpose.

ITEM 8.01
OTHER EVENTS
In the press release described in Item 2.02, the Company announced that the Board of Directors declared a regular quarterly cash dividend on the Company’s outstanding common stock. The cash dividend will be in the amount of $0.17 per share and will be payable on May 15, 2020 to the stockholders of record at the close of business on May 4, 2020.
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS
 
(d)
EXHIBITS
 
 
 
99.1
Press Release dated
April 23, 2020
99.2
Text of written presentation which OceanFirst Financial Corp. intends to provide to current and prospective investors after April 23, 2020.









SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
OCEANFIRST FINANCIAL CORP.
 
 
 
Dated:
April 24, 2020
/s/ Michael J. Fitzpatrick
 
 
Michael J. Fitzpatrick
 
 
Executive Vice President and Chief Financial Officer







Exhibit Index
 
Exhibit
  
Description
 
  
Press release dated
April 23, 2020
 
Text of written presentation which OceanFirst Financial Corp. intends to provide to current and prospective investors after April 23, 2020.



EX-99.1 2 ex991-earningsreleasem.htm EXHIBIT 99.1 Exhibit

oceanfirstpressreleas12.jpg
 
Press Release

    
Exhibit 99.1
Company Contact:
  
Michael J. Fitzpatrick
Chief Financial Officer
OceanFirst Financial Corp.
Tel: (732) 240-4500, ext. 7506
Email: Mfitzpatrick@oceanfirst.com


FOR IMMEDIATE RELEASE


OCEANFIRST FINANCIAL CORP.
ANNOUNCES FIRST QUARTER EARNINGS AND
FINANCIAL RESULTS

RED BANK, NEW JERSEY, April 23, 2020…OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced that net income was $16.5 million, or $0.27 per diluted share, for the quarter ended March 31, 2020, as compared to $21.2 million, or $0.42 per diluted share, for the corresponding prior year period.
The results of operations for the quarter ended March 31, 2020 include merger related expenses, branch consolidation expenses, and the Two River Bancorp (“Two River”) and Country Bank Holding Company, Inc. (“Country Bank”) opening credit loss expense under the Current Expected Credit Loss (“CECL”) model, which decreased net income, net of tax benefit, by $10.4 million. Excluding these items, core earnings for the quarter ended March 31, 2020 was $27.0 million, or $0.45 per diluted share. (Please refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of merger related, branch consolidation, and the Two River and Country Bank opening credit loss expenses). The first quarter results were also impacted by the COVID-19 outbreak, through both higher credit loss expense and increased operating expense.

1


Highlights for the quarter are described below:
Strong organic loan originations of $426.2 million provided total loan growth of $158.4 million (excluding acquired loans) with a record pipeline of $525.3 million at March 31, 2020.
On January 1, 2020, the Company completed its acquisitions of Two River and Country Bank. Two River added $1.2 billion to assets, $940.8 million to loans, $85.2 million to goodwill, and $941.8 million to deposits. Country Bank added $832.8 million to assets, $618.7 million to loans, $39.9 million to goodwill, and $652.7 million to deposits.
The Company anticipates full integration of operations and the elimination of eight duplicate branches in Two River’s market area in May 2020, resulting in cost savings in future periods. The Bank expects to consolidate an additional five branches, also in May, independent of the acquisitions; bringing the total number of branches consolidated to 53 over the past four years.
The Company adopted Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments,” which increased credit loss expense by $9.6 million from the prior linked quarter.
The Company’s first quarter results were adversely impacted by the COVID-19 outbreak, including an estimated increase in credit loss expense of $7.2 million and an increase in operating expense of $1.0 million. Refer to exhibits filed with the earnings release on Form 8-K for prospective information related to the impact of COVID-19.
Since the beginning of March, our efforts have largely focused on mitigating the impact of COVID-19 on our employees, customers, and community. We have emphasized employee safety through our work from home initiatives, temporary branch closures, and dispersion of key functions,” said Chairman and Chief Executive Officer, Christopher D. Maher. Mr. Maher added, “We are supporting borrowers impacted by COVID-19 with payment relief programs, as well as waiving certain fees for our

2


loan and deposit customers. Subsequent to quarter end, we have actively participated in the SBA’s Paycheck Protection Program, assisting local businesses to retain an estimated 36,000 employees.”
The Company announced that the Company’s Board of Directors declared its ninety-third consecutive quarterly cash dividend on common stock. The dividend, related to the three months ended March 31, 2020, of $0.17 per share will be paid on May 15, 2020 to stockholders of record on May 4, 2020.
Results of Operations
On January 31, 2019, the Company completed its acquisition of Capital Bank of New Jersey (“Capital Bank”) and its results of operations are included in the consolidated results for the quarter ended March 31, 2020, but are excluded from the results of operations for the period from January 1, 2019 to January 31, 2019.
On January 1, 2020, the Company completed its acquisitions of Two River and Country Bank and their respective results of operations from January 1, 2020 through March 31, 2020 are included in the consolidated results for the quarter ended March 31, 2020, but are not included in the results of operations for the corresponding prior year period.
Net income for the quarter ended March 31, 2020, was $16.5 million, or $0.27 per diluted share, as compared to $21.2 million, or $0.42 per diluted share, for the corresponding prior year period. Net income for the quarter ended March 31, 2020 included merger related expenses, branch consolidation expenses, and the Two River and Country Bank opening credit loss expense under the CECL model, which decreased net income, net of tax benefit, by $10.4 million. Net income for the quarter ended March 31, 2019 included merger related and branch consolidation expenses, which decreased net income, net of tax benefit, by $4.4 million. Excluding these items, net income for the quarter ended March 31, 2020 increased over the same prior year period, primarily due to the acquisitions of Two River and Country Bank.
Net interest income for the quarter ended March 31, 2020 increased to $79.6 million, as compared to $64.4 million for the same prior year period, reflecting an increase in interest-earning assets. Average

3


interest-earning assets increased by $2.186 billion for the quarter ended March 31, 2020, as compared to the same prior year period. The average for the quarter ended March 31, 2020 was favorably impacted by $1.762 billion of interest-earning assets acquired from Two River and Country Bank. Average loans receivable, net, increased by $2.083 billion for the quarter ended March 31, 2020, as compared to the same prior year period. The increase attributable to the acquisitions of Two River and Country Bank were $1.546 billion. The net interest margin for the quarter ended March 31, 2020 decreased to 3.52% from 3.78%, for the same prior year period. For the quarter ended March 31, 2020, the cost of average interest-bearing liabilities increased to 1.05%, from 0.89% in the corresponding prior year period. The total cost of deposits (including non-interest bearing deposits) was 0.70% for the quarter ended March 31, 2020, as compared to 0.57%, in the same prior year period. Deposit costs increased primarily due to the addition of higher priced deposits as a result of the Two River and Country Bank acquisitions.
Net interest income for the quarter ended March 31, 2020, increased by $16.3 million, as compared to the prior linked quarter, as average interest-earning assets increased by $1.886 billion. The net interest margin increased to 3.52% for the quarter ended March 31, 2020, as compared to 3.48% for the prior linked quarter. The increase was primarily due to a net increase in purchase accounting accretion of eight basis points as a result of the acquisition of Two River and Country Bank. Excluding the impact of purchase accounting and prepayment fees, the core net interest margin expanded by one basis point. The total cost of deposits (including non-interest bearing deposits) was 0.70% for the quarter ended March 31, 2020, as compared to 0.64% for the quarter ended December 31, 2019.
For the quarter ended March 31, 2020, the credit loss expense was $10.0 million, as compared to $620,000 for the corresponding prior year period, and $355,000 in the prior linked quarter. Net loan charge-offs were $1.2 million for the quarter ended March 31, 2020, as compared to $492,000 in the corresponding prior year period, and $139,000 in the prior linked quarter. Quarterly net charge-offs included $949,000 taken on the sale of higher risk residential loans. Non-performing loans totaled $16.3 million at March 31, 2020, as compared to $17.8 million at December 31, 2019 and $20.9 million at March 31, 2019. Credit

4


expense was significantly influenced by actual and expected economic conditions due to the COVID-19 outbreak. Refer to exhibits filed with the earnings release on Form 8-K for detailed information on credit loss expense.
For the quarter ended March 31, 2020, other income increased to $13.7 million, as compared to $9.5 million, for the corresponding prior year period. The increase was partly due to the impact of the Two River and Country Bank acquisitions, which added $558,000 and $162,000, respectively, to other income for the quarter ended March 31, 2020. Excluding the Two River and Country Bank acquisitions, the increase in other income for the quarter ended March 31, 2020 was primarily due to an increase in commercial loan swap fee income of $3.6 million, as compared to the corresponding prior year period.
For the quarter ended March 31, 2020, other income increased by $2.5 million, as compared to the prior linked quarter. The increase was partially due to the impact of the Two River and Country Bank acquisitions and an increase in commercial loan swap fee income of $2.0 million.
Operating expenses increased to $62.8 million for the quarter ended March 31, 2020, as compared to $47.3 million in the same prior year period. Operating expenses for the quarter ended March 31, 2020 included $11.1 million of merger related and branch consolidation expenses, as compared to $5.4 million of merger related and branch consolidation expenses, in the same prior year period. Excluding the impact of merger related and branch consolidation expenses, the change in operating expenses over the prior year were due to the Two River and Country Bank acquisitions, which added $5.3 million and $3.2 million, respectively, for the quarter ended March 31, 2020. The remaining increase in operating expenses was primarily due to expenses relating to the COVID-19 outbreak of $1.0 million.
For the quarter ended March 31, 2020, operating expenses increased by $9.4 million, as compared to the prior linked quarter, excluding merger related and branch consolidation expenses for both periods and non-recurring professional fees of $1.3 million for the quarter ended December 31, 2019. The increase in operating expenses was due to the Two River and Country Bank acquisitions and the expenses relating to the COVID-19 outbreak.

5


   The provision for income taxes was $4.0 million for the quarter ended March 31, 2020, as compared to $4.8 million, for the same prior year period. The effective tax rate was 19.7% for the quarter ended March 31, 2020, as compared to 18.6% for the same prior year period. The higher effective tax rate in the current year period is primarily due to the impact of a New Jersey tax code change.
Financial Condition
Total assets increased by $2.243 billion, to $10.489 billion at March 31, 2020, from $8.246 billion at December 31, 2019, primarily as a result of the acquisitions of Two River and Country Bank, which added $2.031 billion to total assets. Loans receivable, net of allowance for credit losses, increased by $1.706 billion, to $7.914 billion at March 31, 2020, from $6.208 billion at December 31, 2019, due to acquired loans from Two River and Country Bank of $1.559 billion. As part of the acquisitions of Two River and Country Bank, the Company’s goodwill balance increased to $500.1 million at March 31, 2020, from $374.6 million at December 31, 2019 and the core deposit intangible increased to $28.3 million, from $15.6 million.
Deposits increased by $1.563 billion, to $7.892 billion at March 31, 2020, from $6.329 billion at December 31, 2019, primarily due to acquired deposits from Two River and Country Bank of $1.594 billion. The loan-to-deposit ratio at March 31, 2020 was 100.3%, as compared to 98.1% at December 31, 2019.
Stockholders’ equity increased to $1.410 billion at March 31, 2020, as compared to $1.153 billion at December 31, 2019. The acquisitions of Two River and Country Bank added $261.4 million to stockholders’ equity. At March 31, 2020, there were 2,019,145 shares available for repurchase under the Company’s stock repurchase program. For the quarter ended March 31, 2020, the Company repurchased 648,851 shares under the repurchase program at a weighted average cost of $22.83. The Company suspended its repurchase activity on February 28, 2020. Tangible stockholders’ equity per common share decreased to $14.62 at March 31, 2020, as compared to $15.13 at December 31, 2019.

6


Asset Quality
The Company’s non-performing loans decreased to $16.3 million at March 31, 2020, as compared to $17.8 million at December 31, 2019. Non-performing loans do not include $59.8 million of purchased with credit deterioration (“PCD”) loans acquired in the Two River, Country Bank, Capital Bank, Sun Bancorp, Inc. (“Sun”), Ocean Shore Holding Co. (“Ocean Shore”), Cape Bancorp, Inc. (“Cape”), and Colonial American Bank (“Colonial American”) acquisitions (“Acquisition Transactions”). The Company’s other real estate owned totaled $484,000 at March 31, 2020, as compared to $264,000 at December 31, 2019.
At March 31, 2020, the Company’s allowance for loan losses was 0.37% of total loans, an increase from 0.27% at December 31, 2019. The allowance for credit losses as a percent of total non-performing loans was 182.2% at March 31, 2020, as compared to 94.4% at December 31, 2019.

7


Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income excluding merger related expenses, branch consolidation expenses, Two River and Country Bank opening credit loss expense under the CECL model, non-recurring professional fees, compensation expense due to the retirement of an executive officer, and reduction in income tax expense from the revaluation of state deferred tax assets as a result of a change in the New Jersey tax code, which can vary from period to period, provides a better comparison of period to period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Please refer to Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.
Conference Call
As previously announced, the Company will host an earnings conference call on Friday, April 24, 2020 at 11:00 a.m. Eastern Time. The direct dial number for the call is (888) 338-7143. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877) 344-7529, Replay Conference Number 10141831 from one hour after the end of the call until July 24, 2020. The conference call, as well as the replay, are also available (listen-only) by internet webcast at www.oceanfirst.com in the Investor Relations section.
* * *

8


OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank N.A., founded in 1902, is a $10.5 billion 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.
OceanFirst Financial Corp.’s press releases are available by visiting us at www.oceanfirst.com.

Forward-Looking Statements
    
In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation 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, future natural disasters and increases to flood insurance premiums, 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, accounting principles and guidelines and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under Item 1A - Risk Factors and elsewhere, 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.


9


OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)

 
 
March 31,
2020
 
December 31,
2019
 
March 31,
2019
 
 
(Unaudited)
 
 
 
(Unaudited)
Assets
 
 
 
 
 
 
Cash and due from banks
 
$
256,470

 
$
120,544

 
$
134,235

Federal funds sold
 

 

 
18,733

Debt securities available-for-sale, at estimated fair value
 
153,738

 
150,960

 
122,558

Debt securities held-to-maturity, net of allowance for credit losses of $2,529 at March 31, 2020 (estimated fair value of $928,582 at March 31, 2020, $777,290 at December 31, 2019, and $896,812 at March 31, 2019)
 
914,255

 
768,873

 
900,614

Equity investments, at estimated fair value
 
14,409

 
10,136

 
9,816

Restricted equity investments, at cost
 
81,005

 
62,356

 
55,663

Loans receivable, net of allowance for credit losses of $29,635 at March 31, 2020, $16,852 at December 31, 2019 and $16,705 at March 31, 2019
 
7,913,541

 
6,207,680

 
5,968,830

Loans held-for-sale
 
17,782

 

 

Interest and dividends receivable
 
27,930

 
21,674

 
22,294

Other real estate owned
 
484

 
264

 
1,594

Premises and equipment, net
 
104,560

 
102,691

 
113,226

Bank Owned Life Insurance
 
261,270

 
237,411

 
234,183

Assets held for sale
 
3,785

 
3,785

 
4,522

Other assets
 
211,476

 
169,532

 
112,955

Core deposit intangible
 
28,276

 
15,607

 
18,629

Goodwill
 
500,093

 
374,632

 
375,096

Total assets
 
$
10,489,074

 
$
8,246,145

 
$
8,092,948

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
Deposits
 
$
7,892,067

 
$
6,328,777

 
$
6,290,485

Federal Home Loan Bank advances
 
825,824

 
519,260

 
418,016

Securities sold under agreements to repurchase with retail customers
 
90,175

 
71,739

 
66,174

Other borrowings
 
120,213

 
96,801

 
99,579

Advances by borrowers for taxes and insurance
 
24,931

 
13,884

 
15,138

Other liabilities
 
126,030

 
62,565

 
76,393

Total liabilities
 
9,079,240

 
7,093,026

 
6,965,785

Total stockholders’ equity
 
1,409,834

 
1,153,119

 
1,127,163

Total liabilities and stockholders’ equity
 
$
10,489,074

 
$
8,246,145

 
$
8,092,948


10


OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
 
 
For the Three Months Ended,
 
 
March 31,
2020
 
December 31,
2019
 
March 31,
2019
 
 
|-------------------- (Unaudited) --------------------|
Interest income:
 
 
 
 
 
 
Loans
 
$
89,944

 
$
70,298

 
$
69,001

Mortgage-backed securities
 
3,844

 
3,552

 
4,041

Debt securities, equity investments and other
 
4,419

 
3,225

 
3,380

Total interest income
 
98,207

 
77,075

 
76,422

Interest expense:
 
 
 
 
 
 
Deposits
 
13,936

 
10,214

 
8,639

Borrowed funds
 
4,626

 
3,507

 
3,395

Total interest expense
 
18,562

 
13,721

 
12,034

Net interest income
 
79,645

 
63,354

 
64,388

Credit loss expense
 
9,969

 
355

 
620

Net interest income after credit loss expense
 
69,676

 
62,999

 
63,768

Other income:
 
 
 
 
 
 
Bankcard services revenue
 
2,481

 
2,641

 
2,285

Trust and asset management revenue
 
515

 
478

 
498

Fees and service charges
 
4,873

 
4,710

 
4,516

Net gain on sales of loans
 
173

 
1

 
8

Net unrealized gain (loss) on equity investments
 
155

 
(63
)
 
108

Net loss from other real estate operations
 
(150
)
 
(95
)
 
(6
)
Income from Bank Owned Life Insurance
 
1,575

 
1,375

 
1,321

Commercial loan swap income
 
4,050

 
2,062

 
472

Other
 
25

 
122

 
310

Total other income
 
13,697

 
11,231

 
9,512

Operating expenses:
 
 
 
 
 
 
Compensation and employee benefits
 
29,885

 
22,518

 
22,414

Occupancy
 
5,276

 
4,071

 
4,530

Equipment
 
1,943

 
1,775

 
1,946

Marketing
 
769

 
840

 
930

Federal deposit insurance and regulatory assessments
 
667

 
296

 
832

Data processing
 
4,177

 
4,078

 
3,654

Check card processing
 
1,276

 
1,557

 
1,438

Professional fees
 
2,302

 
3,641

 
1,709

Other operating expense
 
3,802

 
3,815

 
3,369

Amortization of core deposit intangible
 
1,578

 
998

 
1,005

Branch consolidation expense
 
2,594

 
268

 
391

Merger related expenses
 
8,527

 
3,742

 
5,053

Total operating expenses
 
62,796

 
47,599

 
47,271

Income before provision for income taxes
 
20,577

 
26,631

 
26,009

Provision for income taxes
 
4,044

 
3,181

 
4,836

Net income
 
$
16,533

 
$
23,450

 
$
21,173

Basic earnings per share
 
$
0.28

 
$
0.47

 
$
0.43

Diluted earnings per share
 
$
0.27

 
$
0.47

 
$
0.42

Average basic shares outstanding
 
59,876

 
49,890

 
49,526

Average diluted shares outstanding
 
60,479

 
50,450

 
50,150


11


OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)
LOANS RECEIVABLE
 
 
At
 
 
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
 
$
502,760

 
$
396,434

 
$
406,580

 
$
392,336

 
$
383,686

Commercial real estate - owner - occupied
 
1,220,983

 
792,653

 
787,752

 
771,640

 
802,229

Commercial real estate - investor
 
3,331,662

 
2,296,410

 
2,232,159

 
2,143,093

 
2,161,451

Total commercial
 
 
5,055,405

 
3,485,497

 
3,426,491

 
3,307,069

 
3,347,366

Consumer:
 
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
 
2,458,641

 
2,321,157

 
2,234,361

 
2,193,829

 
2,162,668

Home equity loans and lines
 
 
335,624

 
318,576

 
330,446

 
341,972

 
351,303

Other consumer
 
 
82,920

 
89,422

 
98,835

 
109,015

 
116,838

Total consumer
 
 
2,877,185

 
2,729,155

 
2,663,642

 
2,644,816

 
2,630,809

Total loans
 
 
7,932,590

 
6,214,652

 
6,090,133

 
5,951,885

 
5,978,175

Deferred origination costs, net
 
10,586

 
9,880

 
8,441

 
8,180

 
7,360

Allowance for credit losses
 
 
(29,635
)
 
(16,852
)
 
(16,636
)
 
(16,135
)
 
(16,705
)
Loans receivable, net
 
 
$
7,913,541

 
$
6,207,680

 
$
6,081,938

 
$
5,943,930

 
$
5,968,830

Mortgage loans serviced for others
 
$
51,399

 
$
50,042

 
$
54,457

 
$
90,882

 
$
92,274

 
At March 31, 2020 Average Yield
 
 
 
 
 
 
 
 
 
 
Loan pipeline (1):
 
 
 
 
 
 
 
 
 
 
 
Commercial
3.95
%
 
$
293,820

 
$
219,269

 
$
126,578

 
$
212,712

 
$
122,325

Residential real estate
3.42

 
223,032

 
105,396

 
189,403

 
82,555

 
63,598

Home equity loans and lines
4.40

 
8,429

 
3,049

 
3,757

 
2,550

 
4,688

Total
3.73
%
 
$
525,281

 
$
327,714

 
$
319,738

 
$
297,817

 
$
190,611

 
For the Three Months Ended
 
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
 
Average Yield
 
 
 
 
 
 
 
 
 
 
 
Loan originations:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
3.49
%
 
$
266,882

 
$
264,938

 
$
315,405

 
$
123,882

 
$
172,233

 
Residential real estate
3.51

 
148,675

 
226,492

 
156,308

 
120,771

 
75,530

 
Home equity loans and lines
5.13

 
10,666

 
12,961

 
10,498

 
14,256

 
13,072

 
Total
3.54
%
 
$
426,223

 
$
504,391

 
$
482,211

 
$
258,909

 
$
260,835

(2) 
Loans sold
 
 
$
7,500

(3) 
$
110

 
$

(3) 
$
403

(3) 
$
495

 
(1)
Loan pipeline includes loans approved but not funded.
(2)
Excludes purchased loans of $100.0 million for residential real estate.
(3)
Excludes the sale of under-performing residential loans of $4.0 million and commercial loans of $5.1 million for the three months ended March 31, 2020, and small business administration loans of $3.5 million and under-performing residential loans of $2.9 million for the three months ended September 30, 2019, and June 30, 2019, respectively.
DEPOSITS
At
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
Type of Account
 
 
 
 
 
 
 
 
 
Non-interest-bearing
$
1,783,216

 
$
1,377,396

 
$
1,406,194

 
$
1,370,167

 
$
1,352,520

Interest-bearing checking
2,647,487

 
2,539,428

 
2,400,331

 
2,342,913

 
2,400,192

Money market deposit
620,145

 
578,147

 
593,457

 
642,985

 
666,067

Savings
1,420,628

 
898,174

 
901,168

 
909,501

 
922,113

Time deposits
1,420,591

 
935,632

 
919,705

 
921,921

 
949,593

 
$
7,892,067

 
$
6,328,777

 
$
6,220,855

 
$
6,187,487

 
$
6,290,485


12


OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)
ASSET QUALITY
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
Non-performing loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
207

 
$
207

 
$
207

 
$
207

 
$
240

Commercial real estate - owner-occupied
4,219

 
4,811

 
4,537

 
4,818

 
4,565

Commercial real estate - investor
3,384

 
2,917

 
4,073

 
4,050

 
4,115

Residential real estate
5,920

 
7,181

 
5,953

 
5,747

 
8,611

Home equity loans and lines
2,533

 
2,733

 
2,683

 
2,974

 
3,364

Total non-performing loans
16,263

 
17,849

 
17,453

 
17,796

 
20,895

Other real estate owned
484

 
264

 
294

 
865

 
1,594

Total non-performing assets
$
16,747

 
$
18,113

 
$
17,747

 
$
18,661

 
$
22,489

Purchased with credit deterioration (“PCD”) loans (1)
$
59,783

 
$
13,265

 
$
13,281

 
$
13,432

 
$
16,306

Delinquent loans 30 to 89 days
$
48,905

 
$
14,798

 
$
19,905

 
$
20,029

 
$
21,578

Troubled debt restructurings:
 
 
 
 
 
 
 
 
 
Non-performing (included in total non-performing loans above)
$
6,249

 
$
6,566

 
$
6,152

 
$
6,815

 
$
6,484

Performing
16,102

 
18,042

 
18,977

 
19,314

 
19,690

Total troubled debt restructurings
$
22,351

 
$
24,608

 
$
25,129

 
$
26,129

 
$
26,174

Allowance for credit losses
$
29,635

 
$
16,852

 
$
16,636

 
$
16,135

 
$
16,705

Allowance for credit losses as a percent of total loans receivable
0.37
%
 
0.27
%
 
0.27
%
 
0.27
%
 
0.28
%
Allowance for credit losses as a percent of total non-performing loans
182.22

 
94.41

 
95.32

 
90.67

 
79.95

Non-performing loans as a percent of total loans receivable
0.21

 
0.29

 
0.29

 
0.30

 
0.35

Non-performing assets as a percent of total assets
0.16

 
0.22

 
0.22

 
0.23

 
0.28



NET CHARGE-OFFS
For the Three Months Ended
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
Net charge-offs:
 
 
 
 
 
 
 
 
 
Loan charge-offs
$
(1,384
)
 
$
(445
)
 
$
(353
)
 
$
(1,138
)
 
$
(868
)
Recoveries on loans
230

 
306

 
549

 
212

 
376

Net loan recoveries (charge-offs)
$
(1,154
)
(2) 
$
(139
)
 
$
196

 
$
(926
)
(2) 
$
(492
)
Net loan charge-offs to average total loans
(annualized)
0.06
%
 
0.01
%
 
NM*

 
0.06
%
 
0.03
%
Net charge-off detail - (loss) recovery:
 
 
 
 
 
 
 
 
 
Commercial
$
59

 
$
163

 
$
256

 
$
(58
)
 
$
(58
)
Residential real estate
(1,112
)
 
(61
)
 
12

 
(728
)
 
(425
)
Home equity loans and lines
(36
)
 
(240
)
 
(10
)
 
(121
)
 
(4
)
Other consumer
(65
)
 
(1
)
 
(62
)
 
(19
)
 
(5
)
Net loan recoveries (charge-offs)
$
(1,154
)
(2) 
$
(139
)
 
$
196

 
$
(926
)
(2) 
$
(492
)
(1)
PCD loans are not included in non-performing loans or delinquent loans totals.
(2)
Included in net loan charge-offs for the three months ended March 31, 2020 and June 30, 2019 are $949 and $429, respectively, relating to under-performing loans sold.
* Not Meaningful


13


OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
 
For the Three Months Ended
 
March 31, 2020
 
December 31, 2019
 
March 31, 2019
(dollars in thousands)
Average
Balance
 
Interest
 
Average
Yield/
Cost
 
Average
Balance
 
Interest
 
Average
Yield/
Cost
 
Average
Balance
 
Interest
 
Average
Yield/
Cost
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning deposits and short-term investments
$
63,726

 
$
342

 
2.16
%
 
$
43,495

 
$
196

 
1.79
%
 
$
79,911

 
$
467

 
2.37
%
Securities (1)
1,186,535

 
7,921

 
2.68

 
1,008,461

 
6,581

 
2.59

 
1,067,150

 
6,954

 
2.64

Loans receivable, net (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
4,960,991

 
59,875

 
4.85

 
3,442,771

 
42,416

 
4.89

 
3,211,296

 
41,408

 
5.23

Residential
2,473,410

 
24,628

 
3.98

 
2,309,741

 
22,469

 
3.89

 
2,094,131

 
21,404

 
4.09

Home Equity
339,003

 
4,070

 
4.83

 
323,878

 
4,243

 
5.20

 
353,358

 
4,707

 
5.40

Other
87,478

 
1,371

 
6.30

 
94,350

 
1,170

 
4.92

 
119,185

 
1,482

 
5.04

Allowance for credit losses net of deferred loan fees
(10,220
)
 

 

 
(7,932
)
 

 

 
(10,083
)
 

 

Loans Receivable, net
7,850,662

 
89,944

 
4.61

 
6,162,808

 
70,298

 
4.53

 
5,767,887

 
69,001

 
4.85

Total interest-earning assets
9,100,923

 
98,207

 
4.34

 
7,214,764

 
77,075

 
4.24

 
6,914,948

 
76,422

 
4.48

Non-interest-earning assets
1,231,886

 
 
 
 
 
977,413

 
 
 
 
 
924,368

 
 
 
 
Total assets
$
10,332,809

 
 
 
 
 
$
8,192,177

 
 
 
 
 
$
7,839,316

 
 
 
 
Liabilities and Stockholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking
$
2,807,793

 
5,132

 
0.74
%
 
$
2,562,059

 
4,477

 
0.69
%
 
$
2,508,669

 
3,745

 
0.61
%
Money market
614,062

 
1,040

 
0.68

 
592,116

 
1,243

 
0.83

 
623,868

 
1,157

 
0.75

Savings
1,403,338

 
1,555

 
0.45

 
899,051

 
308

 
0.14

 
904,047

 
286

 
0.13

Time deposits
1,459,348

 
6,209

 
1.71

 
931,228

 
4,186

 
1.78

 
932,341

 
3,451

 
1.50

Total
6,284,541

 
13,936

 
0.89

 
4,984,454

 
10,214

 
0.81

 
4,968,925

 
8,639

 
0.71

FHLB Advances
631,329

 
2,824

 
1.80

 
412,073

 
2,075

 
2.00

 
339,686

 
1,839

 
2.20

Securities sold under agreements to repurchase
82,105

 
95

 
0.47

 
68,257

 
85

 
0.49

 
65,295

 
55

 
0.34

Other borrowings
118,851

 
1,707

 
5.78

 
96,712

 
1,347

 
5.53

 
99,517

 
1,501

 
6.12

Total interest-bearing
liabilities
7,116,826

 
18,562

 
1.05

 
5,561,496

 
13,721

 
0.98

 
5,473,423

 
12,034

 
0.89

Non-interest-bearing deposits
1,687,582

 
 
 
 
 
1,393,002

 
 
 
 
 
1,211,934

 
 
 
 
Non-interest-bearing liabilities
113,477

 
 
 
 
 
92,014

 
 
 
 
 
55,975

 
 
 
 
Total liabilities
8,917,885

 
 
 
 
 
7,046,512

 
 
 
 
 
6,741,332

 
 
 
 
Stockholders’ equity
1,414,924

 
 
 
 
 
1,145,665

 
 
 
 
 
1,097,984

 
 
 
 
Total liabilities and equity
$
10,332,809

 
 
 
 
 
$
8,192,177

 
 
 
 
 
$
7,839,316

 
 
 
 
Net interest income
 
 
$
79,645

 
 
 
 
 
$
63,354

 
 
 
 
 
$
64,388

 
 
Net interest rate spread (3)
 
 
 
 
3.29
%
 
 
 
 
 
3.26
%
 
 
 
 
 
3.59
%
Net interest margin (4)
 
 
 
 
3.52
%
 
 
 
 
 
3.48
%
 
 
 
 
 
3.78
%
Total cost of deposits (including non-interest-bearing deposits)
 
 
 
 
0.70
%
 
 
 
 
 
0.64
%
 
 
 
 
 
0.57
%
 
(1)
Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost.
(2)
Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated credit loss allowances and includes loans held for sale and non-performing loans.
(3)
Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4)
Net interest margin represents net interest income divided by average interest-earning assets.


14


OceanFirst Financial Corp.
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share amounts)
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
 
 
 
 
 
 
 
 
 
 
 
Selected Financial Condition Data:
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
10,489,074

 
$
8,246,145

 
$
8,135,173

 
$
8,029,057

 
$
8,092,948

Debt securities available-for-sale, at estimated fair value
 
153,738

 
150,960

 
127,308

 
123,610

 
122,558

Debt securities held-to-maturity, net of allowance for credit losses
 
914,255

 
768,873

 
819,253

 
863,838

 
900,614

Equity investments, at estimated fair value
 
14,409

 
10,136

 
10,145

 
10,002

 
9,816

Restricted equity investments, at cost
 
81,005

 
62,356

 
62,095

 
59,425

 
55,663

Loans receivable, net of allowance for credit losses
 
7,913,541

 
6,207,680

 
6,081,938

 
5,943,930

 
5,968,830

Deposits
 
7,892,067

 
6,328,777

 
6,220,855

 
6,187,487

 
6,290,485

Federal Home Loan Bank advances
 
825,824

 
519,260

 
512,149

 
453,646

 
418,016

Securities sold under agreements to repurchase and other borrowings
 
210,388

 
168,540

 
161,734

 
158,619

 
165,753

Stockholders’ equity
 
1,409,834

 
1,153,119

 
1,144,528

 
1,137,295

 
1,127,163


 
 
For the Three Months Ended,
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
Selected Operating Data:
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
98,207

 
$
77,075

 
$
76,887

 
$
78,410

 
$
76,422

Interest expense
 
18,562

 
13,721

 
13,495

 
13,573

 
12,034

Net interest income
 
79,645

 
63,354

 
63,392

 
64,837

 
64,388

Credit loss expense
 
9,969

 
355

 
305

 
356

 
620

Net interest income after credit loss expense
 
69,676

 
62,999

 
63,087

 
64,481

 
63,768

Other income
 
13,697

 
11,231

 
11,543

 
9,879

 
9,512

Operating expenses (excluding branch consolidation and merger related expenses)
 
51,675

 
43,589

 
40,884

 
43,289

 
41,827

Branch consolidation expense
 
2,594

 
268

 
1,696

 
6,695

 
391

Merger related expenses
 
8,527

 
3,742

 
777

 
931

 
5,053

Income before provision for income taxes
 
20,577

 
26,631

 
31,273

 
23,445

 
26,009

Provision for income taxes
 
4,044

 
3,181

 
6,302

 
4,465

 
4,836

Net income
 
$
16,533

 
$
23,450

 
$
24,971

 
$
18,980

 
$
21,173

Diluted earnings per share
 
$
0.27

 
$
0.47

 
$
0.49

 
$
0.37

 
$
0.42

Net accretion/amortization of purchase accounting adjustments included in net interest income
 
$
5,533

 
$
3,501

 
$
2,769

 
$
3,663

 
$
4,027


15


(continued)
 
 
At or For the Three Months Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
Selected Financial Ratios and Other Data(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Ratios (Annualized):
 
 
 
 
 
 
 
 
 
 
Return on average assets (2)
 
0.64
%
 
1.14
%
 
1.23
%
 
0.94
%
 
1.10
%
Return on average tangible assets (2) (3)
 
0.68

 
1.19

 
1.29

 
0.99

 
1.15

Return on average stockholders’ equity (2)
 
4.70

 
8.12

 
8.66

 
6.73

 
7.82

Return on average tangible stockholders’ equity (2) (3)
 
7.50

 
12.33

 
13.18

 
10.32

 
11.97

Stockholders’ equity to total assets
 
13.44

 
13.98

 
14.07

 
14.16

 
13.93

Tangible stockholders’ equity to tangible assets (3)
 
8.85

 
9.71

 
9.73

 
9.76

 
9.53

Net interest rate spread
 
3.29

 
3.26

 
3.32

 
3.45

 
3.59

Net interest margin
 
3.52

 
3.48

 
3.55

 
3.66

 
3.78

Operating expenses to average assets (2)
 
2.44

 
2.31

 
2.13

 
2.53

 
2.45

Efficiency ratio (2) (4)
 
67.28

 
63.82

 
57.86

 
68.14

 
63.97

Loans to deposits
 
100.27

 
98.09

 
97.77

 
96.06

 
94.89



 


16


(continued)
 
 
At or For the Three Months Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
Trust and Asset Management:
 
 
 
 
 
 
 
 
 
 
Wealth assets under administration
 
$
173,856

 
$
195,415

 
$
194,137

 
$
199,554

 
$
200,130

Nest Egg
 
43,528

 
34,865

 
23,946

 
9,755

 
4,052

Per Share Data:
 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
 
$
0.17

 
$
0.17

 
$
0.17

 
$
0.17

 
$
0.17

Stockholders’ equity per common share at end of period
 
23.38

 
22.88

 
22.57

 
22.24

 
22.00

Tangible stockholders’ equity per common share at end of period (3)
 
14.62

 
15.13

 
14.86

 
14.57

 
14.32

Common shares outstanding at end of period
 
60,311,717

 
50,405,048

 
50,700,586

 
51,131,804

 
51,233,944

Number of full-service customer facilities:
 
75

 
56

 
56

 
60

 
63

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
 
Total securities
 
$
1,186,535

 
$
1,008,461

 
$
1,039,560

 
$
1,080,690

 
$
1,067,150

Loans receivable, net
 
7,850,662

 
6,162,808

 
6,008,325

 
5,948,312

 
5,767,887

Total interest-earning assets
 
9,100,923

 
7,214,764

 
7,088,817

 
7,096,216

 
6,914,948

Total assets
 
10,332,809

 
8,192,177

 
8,073,238

 
8,068,899

 
7,839,316

Interest-bearing transaction deposits
 
4,825,193

 
4,053,226

 
3,971,380

 
4,051,539

 
4,036,584

Time deposits
 
1,459,348

 
931,228

 
920,032

 
934,470

 
932,341

Total borrowed funds
 
832,285

 
577,042

 
552,998

 
566,785

 
504,498

Total interest-bearing liabilities
 
7,116,826

 
5,561,496

 
5,444,410

 
5,552,794

 
5,473,423

Non-interest bearing deposits
 
1,687,582

 
1,393,002

 
1,396,259

 
1,302,147

 
1,211,934

Stockholders’ equity
 
1,414,924

 
1,145,665

 
1,143,701

 
1,131,165

 
1,097,984

Total deposits
 
7,972,123

 
6,377,456

 
6,287,671

 
6,288,156

 
6,180,859

Quarterly Yields
 
 
 
 
 
 
 
 
 
 
Total securities
 
2.68
%
 
2.59
%
 
2.64
%
 
2.64
%
 
2.64
%
Loans receivable, net
 
4.61

 
4.53

 
4.60

 
4.78

 
4.85

Total interest-earning assets
 
4.34

 
4.24

 
4.30

 
4.43

 
4.48

Interest-bearing transaction deposits
 
0.64

 
0.59

 
0.58

 
0.58

 
0.52

Time deposits
 
1.71

 
1.78

 
1.72

 
1.66

 
1.50

Borrowed funds
 
2.24

 
2.41

 
2.64

 
2.70

 
2.73

Total interest-bearing liabilities
 
1.05

 
0.98

 
0.98

 
0.98

 
0.89

Net interest spread
 
3.29

 
3.26

 
3.32

 
3.45

 
3.59

Net interest margin
 
3.52

 
3.48

 
3.55

 
3.66

 
3.78

Total deposits
 
0.70

 
0.64

 
0.62

 
0.62

 
0.57

(1)
With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2)
Performance ratios for each period include merger related expenses, branch consolidation expenses, opening credit loss expense, non-recurring professional fees, compensation expense due to the retirement of an executive officer, the reduction in income tax expense from the revaluation of state deferred tax assets as a result of a change in the New Jersey tax code. Refer to Other Items - Non-GAAP Reconciliation for impact of these items.
(3)
Tangible stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible.
(4)
Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.






17


OceanFirst Financial Corp.
OTHER ITEMS
(dollars in thousands, except per share amounts)

NON-GAAP RECONCILIATION
 
 
For the Three Months Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
Core earnings:
 
 
 
 
 
 
 
 
 
 
Net income
 
$
16,533

 
$
23,450

 
$
24,971

 
$
18,980

 
$
21,173

Non-recurring items:
 
 
 
 
 
 
 
 
 
 
Add: Merger related expenses
 
8,527

 
3,742

 
777

 
931

 
5,053

Branch consolidation expenses
 
2,594

 
268

 
1,696

 
6,695

 
391

Two River & Country Bank opening credit loss expense under the CECL model
 
2,447

 

 

 

 

Non-recurring professional fees
 

 
1,274

 
750

 

 

Compensation expense due to the retirement of an executive officer
 

 

 

 
1,256

 

Income tax benefit related to change in New Jersey tax code
 

 
(2,205
)
 

 

 

Less: Income tax expense on items
 
(3,121
)
 
(793
)
 
(663
)
 
(1,867
)
 
(1,039
)
Core earnings
 
$
26,980

 
$
25,736

 
$
27,531

 
$
25,995

 
$
25,578

Core diluted earnings per share
 
$
0.45

 
$
0.51

 
$
0.54

 
$
0.51

 
$
0.51

 
 
 
 
 
 
 
 
 
 
 
Core ratios (Annualized):
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.05
%
 
1.25
%
 
1.35
%
 
1.29
%
 
1.32
%
Return on average tangible assets
 
1.11

 
1.31

 
1.42

 
1.36

 
1.39

Return on average tangible stockholders’ equity
 
12.25

 
13.53

 
14.53

 
14.14

 
14.46

Efficiency ratio
 
55.36

 
56.73

 
53.56

 
56.26

 
56.60


 
 




18


(continued)

COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS

 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2020
 
2019
 
2019
 
2019
 
2019
Total stockholders’ equity
 
$
1,409,834

 
$
1,153,119

 
$
1,144,528

 
$
1,137,295

 
$
1,127,163

Less:
 
 
 
 
 
 
 
 
 
 
Goodwill
 
500,093

 
374,632

 
374,537

 
374,592

 
375,096

Core deposit intangible
 
28,276

 
15,607

 
16,605

 
17,614

 
18,629

Tangible stockholders’ equity
 
$
881,465

 
$
762,880

 
$
753,386

 
$
745,089

 
$
733,438

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
10,489,074

 
$
8,246,145

 
$
8,135,173

 
$
8,029,057

 
$
8,092,948

Less:
 
 
 
 
 
 
 
 
 
 
Goodwill
 
500,093

 
374,632

 
374,537

 
374,592

 
375,096

Core deposit intangible
 
28,276

 
15,607

 
16,605

 
17,614

 
18,629

Tangible assets
 
$
9,960,705

 
$
7,855,906

 
$
7,744,031

 
$
7,636,851

 
$
7,699,223

Tangible stockholders’ equity to tangible assets
 
8.85
%
 
9.71
%
 
9.73
%
 
9.76
%
 
9.53
%


 

19


(continued)
ACQUISITION DATE - FAIR VALUE BALANCE SHEET
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Capital Bank, net of the total consideration paid (in thousands):

 
At January 31, 2019
 
Capital Bank Book Value
 
Purchase Accounting Adjustments
 
Fair Value
Total Purchase Price:
 
 
 
 
$
76,834

Assets acquired:
 
 
 
 
 
Cash and cash equivalents
$
59,748

 
$

 
$
59,748

Securities
103,798

 
(23
)
 
103,775

Loans
312,320

 
(5,020
)
 
307,300

Accrued interest receivable
1,387

 
3

 
1,390

Bank Owned Life Insurance
10,460

 

 
10,460

Deferred tax asset
1,605

 
2,496

 
4,101

Other assets
9,384

 
(4,404
)
 
4,980

Core deposit intangible

 
2,662

 
2,662

Total assets acquired
498,702

 
(4,286
)
 
494,416

Liabilities assumed:
 
 
 
 
 
Deposits
(448,792
)
 
(226
)
 
(449,018
)
Other liabilities
(827
)
 
(4,383
)
 
(5,210
)
Total liabilities assumed
(449,619
)
 
(4,609
)
 
(454,228
)
Net assets acquired
$
49,083

 
$
(8,895
)
 
$
40,188

Goodwill recorded in the merger
 
 
 
 
$
36,646

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. On January 31, 2020, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.


20


(continued)
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Two River, net of the total consideration paid (in thousands):

 
At January 1, 2020
 
Two River Book Value
 
Purchase
Accounting
Adjustments
 
Estimated
Fair Value
Total Purchase Price:
 
 
 
 
$
197,050

Assets acquired:
 
 
 
 
 
Cash and cash equivalents
$
51,102

 
$

 
$
51,102

Securities
62,832

 
1,549

 
64,381

Loans
940,885

 
(49
)
 
940,836

Accrued interest receivable
2,382

 

 
2,382

Bank Owned Life Insurance
22,440

 

 
22,440

Deferred tax asset
5,201

 
(1,850
)
 
3,351

Other assets
18,662

 
(2,700
)
 
15,962

Core deposit intangible

 
12,130

 
12,130

Total assets acquired
1,103,504

 
9,080

 
1,112,584

Liabilities assumed:
 
 
 
 
 
Deposits
(939,132
)
 
(2,618
)
 
(941,750
)
Other liabilities
(58,935
)
 
(21
)
 
(58,956
)
Total liabilities assumed
(998,067
)
 
(2,639
)
 
(1,000,706
)
Net assets acquired
$
105,437

 
$
6,441

 
$
111,878

Goodwill recorded in the merger
 
 
 
 
$
85,172

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to recorded carrying values may be required.

21


(continued)
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Country Bank, net of the total consideration paid (in thousands):

 
At January 1, 2020
 
Country Bank Book Value
 
Purchase
Accounting
Adjustments
 
Estimated
Fair Value
Total Purchase Price:
 
 
 
 
$
112,836

Assets acquired:
 
 
 
 
 
Cash and cash equivalents
$
20,799

 
$

 
$
20,799

Securities
144,460

 
39

 
144,499

Loans
614,285

 
4,376

 
618,661

Accrued interest receivable
1,779

 

 
1,779

Bank Owned Life Insurance

 

 

Deferred tax asset
(3,254
)
 
(897
)
 
(4,151
)
Other assets
10,327

 
(1,134
)
 
9,193

Core deposit intangible

 
2,117

 
2,117

Total assets acquired
788,396

 
4,501

 
792,897

Liabilities assumed:
 
 
 
 
 
Deposits
(649,399
)
 
(3,254
)
 
(652,653
)
Other liabilities
(69,244
)
 
1,980

 
(67,264
)
Total liabilities assumed
(718,643
)
 
(1,274
)
 
(719,917
)
Net assets acquired
$
69,753

 
$
3,227

 
$
72,980

Goodwill recorded in the merger
 
 
 
 
$
39,856

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to recorded carrying values may be required.




22
EX-99.2 3 ocfcearningsreleasesuppl.htm EXHIBIT 99.2 ocfcearningsreleasesuppl
. . . Exhibit 99.2 OceanFirst Financial Corp. Supplement to Q1 2020 Earnings Press Release April 23, 2020 . . .


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Forward Looking Statements In addition to historical information, this presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation 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 the following: changes in interest rates, general economic conditions, public health crises (such as the governmental, social and economic effects of the novel coronavirus), levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, 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, accounting principles and guidelines, the Bank’s ability to successfully integrate acquired operations and the other risks described in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties 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. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. This presentation is not an offer to sell securities, nor is it a solicitation of an offer to buy securities in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of the securities of the Company or passed upon the accuracy or adequacy of the presentation. Any representation to the contrary is a criminal offense. Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of the . . . Company after the date hereof. APRIL | 2020 2 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE PPP Application Status . . . Loans approved to date have an estimated fee income of approximately $12 million that will be realized in future quarters. APRIL | 2020 3 Data as of April 22, 2020 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE ACL Components In addition to the Allowance for Credit Losses, there is $38 million in net unamortized purchase accounting credit marks. . . . APRIL | 2020 4 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Commercial Loan Forbearance Commercial Portfolio Forbearance Requests Total Outstanding Balance: $5bn Total Forbearance Requests: $775M Forbearance requests *WA LTV: 55% are well-secured and *WA DSCR: 1.9 represent just 16% of No delinquency last 24 months: 93% commercial portfolio Data as of April 17, 2020 APRIL | 2020 *WA LTV and WA DSCR as of most recent financial review 5 Forbearance requests require credit approvalData Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Commercial Loan Forbearance (Credit Attributes) Forbearance requests are moderating . . . APRIL | 2020 6 Data as of April 17, 2020 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Residential and Consumer Loan Forbearance Residential and Consumer Portfolio Forbearance Requests Total Outstanding Balance: $3bn Total Forbearance Requests: $311M WA LTV: 70% WA FICO Score: 742 WA LTV: 70% As of forbearance request date APRIL | 2020 7 Data as of April 17, 2020 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Residential and Consumer Loan Forbearance (Credit Attributes) Forbearance requests are moderating FICO Score Payment History Vintage . . . APRIL | 2020 8 Data as of April 17, 2020 Data Classification: General Business


 
SUPPLEMENT TO Q1 2020 EARNINGS .PRESS . . RELEASE Investor Relations Inquiries Jill A. Hewitt Senior Vice President, Director of Investor Relations & Corporate Communications jhewitt@oceanfirst.com (732) 240-4500, ext. 7513 . . . APRIL | 2020 9


 
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