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OceanFirst Financial Corp. Announces First Quarter Financial Results

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RED BANK, New Jersey, April 29, 2021 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced that net income available to common stockholders was $31.7 million, or $0.53 per diluted share, for the quarter ended March 31, 2021 as compared to $16.5 million, or $0.27 per diluted share, for the corresponding prior year period. The current quarter results benefited from the modest release of credit loss expense and improved levels of core operating expenses, which resulted in return on average assets of 1.12%, return on average tangible stockholders’ equity of 13.22%, and efficiency ratio of 54.73%, as compared to 0.64%, 7.50%, and 67.28%, respectively, in the prior year period.

Core earnings for the quarter ended March 31, 2021 amounted to $26.5 million, or $0.44 per diluted share. Core return on average assets, core return on average tangible stockholders’ equity, and core efficiency ratio were 0.94%, 11.04%, and 58.37%, respectively, for the quarter ended March 31, 2021. Core earnings is a non-GAAP (“generally accepted accounting principles”) measure. For the periods presented they exclude merger related expenses, branch consolidation expenses, net (gain) loss on equity investments, Federal Home Loan Bank (“FHLB”) advance prepayment fees, gain on sale of Paycheck Protection Program (“PPP”) loans, the opening credit loss expense under the Current Expected Credit Loss (“CECL”) model related to the acquisitions of Two River Bancorp (“Two River”) and Country Bank Holding Company, Inc. (“Country Bank”) (collectively referred to as “non-core” operations). Non-core operations had a favorable impact of $5.2 million, net of tax, for the quarter ended March 31, 2021. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” table for additional information regarding our non-GAAP measures and impact per period by operation.

Key developments for the recent quarter are described below:

  • Loan and Deposit Growth: Total loan growth for the quarter was $116.4 million, reflecting record loan originations of $747.8 million. Deposits increased $75.2 million, as compared to the prior linked quarter.

  • Operations: The Company continues to expand its commercial banking activities with the hiring of nine commercial bankers. The additional lenders are expected to help fuel organic loan growth throughout the remainder of the year. Additionally, the Company consolidated four branches in April 2021 bringing the total number of branches consolidated to 57 over the past five years. These consolidations will increase the average branch size to $164 million and will help further offset operating expenses in the second quarter.

  • Net Interest Margin: Net interest margin for the quarter was 2.93%, as compared to 2.97% in the prior linked quarter. Excluding purchase accounting accretion and prepayment fees, net interest margin expanded four basis points, to 2.75% in the current quarter, from 2.71% in the prior linked quarter, driven by a decrease in the cost of deposits to 0.37% from 0.45%, respectively.

"Strong first quarter results continued our earnings momentum through decreased expenses, core margin expansion, record loan originations, and strong deposit growth. The Bank’s credit risk indicators demonstrated strong asset quality while broader economic indicators are strengthening; the combination of which supported a modest negative credit provision,” said Chairman and Chief Executive Officer, Christopher D. Maher about the Company’s results. Mr. Maher added, “We remain focused on organic loan production, and the continued additions of experienced commercial bankers to drive our growth initiatives.” Mr. Maher also remarked on the COVID-19 pandemic, "We are so appreciative of our employees who for over a year have continued to persevere through the unprecedented times of the pandemic and provide uninterrupted essential banking services to our customers. While we are encouraged by progress with vaccine distribution and transmission trends in many communities, we know this is not behind us and we must remain vigilant in our efforts as our customers and neighbors continue to count on us.”

The Company’s Board of Directors declared its ninety-seventh consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on May 21, 2021 to common stockholders of record on May 10, 2021. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depositary share, representing 1/40th interest in the Series A Preferred Stock. This dividend will be paid on May 17, 2021 to preferred stockholders of record on April 30, 2021.

Results of Operations
Net income was favorably impacted by $5.2 million, net of tax, and adversely impacted by $10.4 million, net of tax, of non-core operations for the quarters ended March 31, 2021 and 2020, respectively. Core earnings for the quarter ended March 31, 2021 were $26.5 million, or $0.44 per diluted share, a decrease from core earnings of $27.0 million, or $0.45 per diluted share for the corresponding prior year period. Core earnings for quarter ended March 31, 2021 increased from $23.2 million, or $0.39 per diluted share for the prior linked quarter.

Net Interest Income and Margin
Net interest income for the quarter ended March 31, 2021 decreased to $73.6 million, as compared to $79.6 million for the same prior year period, reflecting a reduction in net interest margin, partly offset by an increase in interest-earning assets. Average interest-earning assets increased by $1.08 billion for the quarter ended March 31, 2021, as compared to the same prior year period, primarily concentrated in interest-earning deposits. Average loans receivable, net of allowance for loan credit losses, decreased by $120.9 million for the quarter ended March 31, 2021, as compared to the same prior year period. Net interest margin for the quarter ended March 31, 2021 decreased to 2.93% from 3.52% for the same prior year period. The net interest margin compression was primarily due to the excess balance sheet liquidity, driven by a strategic decision to accumulate liquidity entering the economic downturn, the lower interest rate environment, and to a lesser extent, the origination of low-yielding PPP loans. For the quarter ended March 31, 2021, the cost of average interest-bearing liabilities decreased to 0.60%, from 1.05% for the corresponding prior year period. The total cost of deposits (including non-interest bearing deposits) was 0.37% for the quarter ended March 31, 2021, compared to 0.70% for the same prior year period.

Net interest income for the quarter ended March 31, 2021 decreased by $4.2 million, as compared to the prior linked quarter, while the net interest margin decreased to 2.93%, compared to 2.97%. Excluding the impact of purchase accounting accretion and prepayment fees, the net interest margin increased to 2.75% from 2.71%. The yield on average interest-earning assets decreased to 3.38% from 3.53% in the prior linked quarter, primarily due to lower purchase accounting accretion and a reduction in average loans receivable, net. The total cost of interest-bearing liabilities was 0.60% for the quarter ended March 31, 2021, as compared to 0.74% for the quarter ended December 31, 2020, due to lower deposit costs and the repayment of all FHLB advances in the prior quarter.

Benefit/Provision for Credit Losses
For the quarter ended March 31, 2021, the benefit for credit loss expense was $620,000, as compared to a provision for credit loss expense of $10.0 million for the corresponding prior year period, and $4.1 million in the prior linked quarter. The benefit for credit loss expense for the quarter was significantly influenced by an improved economic outlook with expectations for strong GDP growth and improved employment levels.

Net loan recoveries were $280,000 for the quarter ended March 31, 2021, as compared to net loan charge-offs of $1.2 million for the corresponding prior year period, and $2.9 million for the prior linked quarter. Non-performing loans totaled $34.1 million at March 31, 2021, as compared to $36.4 million at December 31, 2020 and $16.3 million at March 31, 2020.

Non-interest Income
For the quarter ended March 31, 2021, other income increased to $20.8 million, as compared to $13.7 million for the corresponding prior year period. Other income for the quarter ended March 31, 2021 included $8.3 million of net gain on equity investments related to non-core operations. The net gain on equity investments was primarily a result of several programs implemented by the Company in 2020 to invest excess liquidity in high quality equity securities with attractive dividend yields which were sold in January 2021. Excluding this item, the decrease in other income for the quarter ended March 31, 2021, as compared to the corresponding prior year period, was primarily due to decreases in commercial loan swap income of $2.9 million and fees and service charges of $1.1 million, partially offset by an increase in gain on sale of loans of $1.7 million, and referral fees of $662,000 related to the origination of PPP loans.

Excluding the non-core operations, other income for the quarter ended March 31, 2021, increased $1.5 million, as compared to the prior linked quarter, primarily due to increases in commercial loan swap income of $1.0 million, gain on sale of loans of $669,000, and the referral fees on PPP loans of $662,000.

Non-interest Expense
Operating expenses decreased to $51.7 million for the quarter ended March 31, 2021, as compared to $62.8 million in the same prior year period. Operating expenses for the quarter ended March 31, 2021 included $1.4 million of expenses related to non-core operations, as compared to $11.1 million in the same prior year period. Excluding the impact of non-core operations, the $1.4 million decrease in operating expenses for the quarter ended March 31, 2021 was primarily due to decreases in compensation and benefits expense of $1.5 million and occupancy and equipment of $580,000, partially offset by an increase in federal deposit insurance expense of $1.2 million.

Excluding expenses related to non-core operations, operating expenses for the quarter ended March 31, 2021, decreased $2.8 million, as compared to the prior linked quarter. The change was due to decreases in professional fees of $1.1 million and data processing expense of $593,000.

Income Tax Expense
The provision for income taxes was $10.7 million for the quarter ended March 31, 2021, as compared to $4.0 million for the same prior year period, and $10.4 million for the prior linked quarter. The effective tax rate was 24.6% for the quarter ended March 31, 2021, as compared to 19.7% for the same prior year period, and 24.0% for the prior linked quarter. The higher effective tax rate for the current year period, as compared to the prior year period, is primarily due to the impact of a New Jersey tax code change and a higher allocation of taxable income to New York.

Financial Condition
Total assets increased $129.2 million, to $11.58 billion at March 31, 2021, from $11.45 billion at December 31, 2020. Cash and due from banks decreased $98.5 million, to $1.17 billion at March 31, 2021, from $1.27 billion at December 31, 2020. Total debt securities increased by $230.3 million at March 31, 2021, as compared to December 31, 2020, which was partly offset by a decrease in equity investments of $56.9 million due to sales. Loans receivable, net of allowance for loan credit losses, increased by $115.7 million, to $7.82 billion at March 31, 2021, from $7.70 billion at December 31, 2020.

Deposits increased $75.2 million, to $9.50 billion at March 31, 2021, from $9.43 billion at December 31, 2020. The loan-to-deposit ratio at March 31, 2021 was 82.8%, as compared to 82.3% at December 31, 2020.

Stockholders’ equity increased to $1.50 billion at March 31, 2021, as compared to $1.48 billion at December 31, 2020. For the quarter ended March 31, 2021, the Company repurchased 500,000 shares under its stock repurchase program at a weighted average cost of $19.94, and there were 1.5 million shares available for repurchase at March 31, 2021 under the existing repurchase program. Tangible common equity per common share increased to $15.26 at March 31, 2021, as compared to $14.98 at December 31, 2020.

Asset Quality
The Company’s non-performing loans decreased to $34.1 million at March 31, 2021, as compared to $36.4 million at December 31, 2020. Non-performing loans do not include $44.4 million of purchased with credit deterioration (“PCD”) loans from prior bank acquisitions.

The Company’s allowance for loan credit losses was 0.76% of total loans at March 31, 2021 as compared to 0.78% at December 31, 2020. The allowance for loan credit losses does not reflect the net unamortized credit and PCD marks of $25.7 million. The allowance for loan credit losses plus the unamortized credit and PCD marks amounted to $85.7 million, or 1.09% of loans. The allowance for loan credit losses as a percentage of non-performing loans was 175.7% at March 31, 2021, as compared to 166.8% at December 31, 2020.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with GAAP. The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income excluding non-core operations, 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. Refer to the 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 30, 2021 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 10153816 from one hour after the end of the call until July 29, 2021. 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.

OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank N.A., founded in 1902, is a $11.6 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: the impact of the COVID-19 pandemic on our operations and financial results and those of our customers, 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, 2020, 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.


Company Contact:

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


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

March 31, 2021

December 31, 2020

March 31, 2020

(Unaudited)

(Unaudited)

Assets

Cash and due from banks

$

1,173,665

$

1,272,134

$

256,470

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

268,511

183,302

153,738

Debt securities held-to-maturity, net of allowance for securities credit losses of $1,717 at March 31, 2021, $1,715 at December 31, 2020 and $2,529 at March 31, 2020 (estimated fair value of $1,099,745 at March 31, 2021, $968,466 at December 31, 2020 and $928,582 at March 31, 2020)

1,082,326

937,253

914,255

Equity investments, at estimated fair value

50,159

107,079

14,409

Restricted equity investments, at cost

52,199

51,705

81,005

Loans receivable, net of allowance for loan credit losses of $59,976 at March 31, 2021, $60,735 at December 31, 2020 and $29,635 at March 31, 2020

7,820,590

7,704,857

7,913,541

Loans held-for-sale

43,175

45,524

17,782

Interest and dividends receivable

32,819

35,269

27,930

Other real estate owned

106

106

484

Premises and equipment, net

110,093

107,094

104,560

Bank owned life insurance

264,548

265,253

261,270

Assets held for sale

5,340

5,782

3,785

Goodwill

500,319

500,319

500,093

Core deposit intangible

22,273

23,668

28,276

Other assets

151,349

208,968

211,476

Total assets

$

11,577,472

$

11,448,313

$

10,489,074

Liabilities and Stockholders’ Equity

Deposits

$

9,502,812

$

9,427,616

$

7,892,067

Federal Home Loan Bank advances

825,824

Securities sold under agreements to repurchase with retail customers

134,465

128,454

90,175

Other borrowings

228,176

235,471

120,213

Advances by borrowers for taxes and insurance

20,980

17,296

24,931

Other liabilities

192,320

155,346

126,030

Total liabilities

10,078,753

9,964,183

9,079,240

Total stockholders’ equity

1,498,719

1,484,130

1,409,834

Total liabilities and stockholders’ equity

$

11,577,472

$

11,448,313

$

10,489,074


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

For the Three Months Ended,

March 31, 2021

December 31, 2020

March 31, 2020

|-------------------- (Unaudited) --------------------|

Interest income:

Loans

$

77,908

$

84,997

$

89,944

Debt securities

5,355

5,539

6,772

Equity investments and other

1,611

2,026

1,491

Total interest income

84,874

92,562

98,207

Interest expense:

Deposits

8,496

10,679

13,936

Borrowed funds

2,774

4,032

4,626

Total interest expense

11,270

14,711

18,562

Net interest income

73,604

77,851

79,645

Credit loss (benefit) expense

(620

)

4,072

9,969

Net interest income after credit loss (benefit) expense

74,224

73,779

69,676

Other income:

Bankcard services revenue

3,052

3,098

2,481

Trust and asset management revenue

599

492

515

Fees and service charges

3,737

3,950

4,873

Net gain on sales of loans

1,916

6,348

173

Net gain on equity investments

8,287

24,487

155

Net (loss) gain from other real estate operations

(8

)

23

(150

)

Income from bank owned life insurance

1,415

1,798

1,575

Commercial loan swap income

1,111

116

4,050

Other

726

308

25

Total other income

20,835

40,620

13,697

Operating expenses:

Compensation and employee benefits

28,366

27,323

29,885

Occupancy

5,061

4,968

5,276

Equipment

1,578

1,938

1,943

Marketing

434

632

769

Federal deposit insurance and regulatory assessments

1,864

1,859

667

Data processing

4,031

4,624

4,177

Check card processing

1,372

1,507

1,276

Professional fees

2,837

3,908

2,302

Other operating expense

3,353

4,768

3,802

FHLB advance prepayment fees

13,333

Amortization of core deposit intangible

1,395

1,526

1,578

Branch consolidation expense

1,011

3,336

2,594

Merger related expenses

381

1,194

8,527

Total operating expenses

51,683

70,916

62,796

Income before provision for income taxes

43,376

43,483

20,577

Provision for income taxes

10,679

10,419

4,044

Net income

32,697

33,064

16,533

Dividends on preferred shares

1,004

1,004

Net income available to common stockholders

$

31,693

$

32,060

$

16,533

Basic earnings per share

$

0.53

$

0.53

$

0.28

Diluted earnings per share

$

0.53

$

0.54

$

0.27

Average basic shares outstanding

59,840

59,961

59,876

Average diluted shares outstanding

60,101

60,057

60,479


OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)

LOANS RECEIVABLE

At

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Commercial:

Commercial and industrial

$

498,245

$

470,656

$

599,188

$

910,762

$

502,760

Commercial real estate - owner-occupied

1,066,351

1,145,065

1,176,529

1,199,742

1,220,983

Commercial real estate - investor

3,804,351

3,491,464

3,453,276

3,449,160

3,331,662

Total commercial

5,368,947

5,107,185

5,228,993

5,559,664

5,055,405

Consumer:

Residential real estate

2,189,348

2,309,459

2,407,178

2,426,277

2,458,641

Home equity loans and lines

267,591

285,016

301,712

320,627

335,624

Other consumer

46,651

54,446

63,095

71,721

82,920

Total consumer

2,503,590

2,648,921

2,771,985

2,818,625

2,877,185

Total loans

7,872,537

7,756,106

8,000,978

8,378,289

7,932,590

Deferred origination costs (fees), net

8,029

9,486

(1,238

)

(4,300

)

10,586

Allowance for loan credit losses

(59,976

)

(60,735

)

(56,350

)

(38,509

)

(29,635

)

Loans receivable, net

$

7,820,590

$

7,704,857

$

7,943,390

$

8,335,480

$

7,913,541

Mortgage loans serviced for others

$

74,037

$

95,789

$

88,210

$

101,840

$

51,399

At March 31, 2021 Average Yield

Loan pipeline (1):

Commercial

3.76

%

$

154,946

$

210,024

$

154,700

$

169,093

$

293,820

Residential real estate

3.15

178,352

151,152

212,107

181,800

223,032

Home equity loans and lines

3.96

11,031

6,630

10,301

8,282

8,429

Total

3.45

%

$

344,329

$

367,806

$

377,108

$

359,175

$

525,281


For the Three Months Ended

March 31, 2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Average Yield

Loan originations:

Commercial

3.21

%

$

547,591

(2

)

$

173,715

$

187,747

$

216,979

(2

)

$

266,882

Residential real estate

3.10

189,942

222,780

219,325

242,137

148,675

Home equity loans and lines

4.14

10,278

13,435

10,966

12,128

10,666

Total

3.20

%

$

747,811

$

409,930

$

418,038

$

471,244

$

426,223

Loans sold

$

67,500

$

56,126

(3

)

$

56,722

$

104,600

(3

)

$

7,500

(3

)


(1)

Loan pipeline includes loans approved but not funded.

(2)

Excludes loans originated through the PPP of $60 million and $504 million for the three months ended March 31, 2021 and June 30, 2020, respectively.

(3)

Excludes the sale of PPP loans of $298.1 million, higher risk commercial loans of $64.8 million, net of charge-offs and under-performing residential and home equity loans and lines of $10.5 million, net of charge-offs, for the three months ended December 31, 2020, the sale of under-performing commercial loans of $4.9 million for the three months ended June 30, 2020, and 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.


DEPOSITS

At

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Type of Account

Non-interest-bearing

$

2,417,935

$

2,133,195

$

2,240,799

$

2,161,766

$

1,783,216

Interest-bearing checking

3,623,132

3,646,866

3,317,296

3,022,887

2,647,487

Money market deposit

782,459

783,521

691,872

680,199

620,145

Savings

1,568,528

1,491,251

1,471,554

1,456,931

1,420,628

Time deposits

1,110,758

1,372,783

1,561,767

1,645,971

1,420,591

$

9,502,812

$

9,427,616

$

9,283,288

$

8,967,754

$

7,892,067


OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITY

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Non-performing loans held-for-investment:

Commercial and industrial

$

1,616

$

1,551

$

586

$

1,586

$

207

Commercial real estate - owner-occupied

11,676

13,054

11,365

4,582

4,219

Commercial real estate - investor

12,366

10,660

2,978

5,274

3,384

Residential real estate

6,398

8,642

11,518

6,568

5,920

Home equity loans and lines

2,072

2,503

3,448

3,034

2,533

Total non-performing loans held-for-investment

34,128

36,410

29,895

21,044

16,263

Non-performing loans held-for-sale

67,489

Other real estate owned

106

106

106

248

484

Total non-performing assets

$

34,234

$

36,516

$

97,490

$

21,292

$

16,747

PCD loans (1)

$

44,421

$

48,488

$

56,422

$

61,694

$

59,783

Delinquent loans 30 to 89 days

$

16,477

$

34,683

$

13,753

$

13,640

$

48,905

Troubled debt restructurings:

Non-performing (included in total non-performing loans above)

$

4,785

$

5,158

$

9,866

$

6,189

$

6,249

Performing

11,466

12,009

12,777

16,365

16,102

Total troubled debt restructurings

$

16,251

$

17,167

$

22,643

$

22,554

$

22,351

Allowance for loan credit losses

$

59,976

$

60,735

$

56,350

$

38,509

$

29,635

Allowance for loan credit losses as a percent of total loans receivable (2)

0.76

%

0.78

%

0.70

%

0.46

%

0.37

%

Allowance for loan credit losses as a percent of total non-performing loans held-for-investment

175.74

166.81

188.49

182.99

182.22

Non-performing loans held-for-investment as a percent of total loans receivable

0.43

0.47

0.37

0.25

0.21

Non-performing assets as a percent of total assets

0.30

0.32

0.84

0.19

0.16


(1)

PCD loans are not included in non-performing loans held-for-investment or delinquent loans totals.

(2)

The loans acquired from prior bank acquisitions were recorded at fair value. The net credit mark on these loans, not reflected in the allowance for loan credit losses, was $25,695, $27,951, $31,617, $35,439 and $38,272 at March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020 respectively.


NET RECOVERIES (CHARGE-OFFS)

For the Three Months Ended

March 31, 2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Net recoveries (charge-offs):

Loan charge-offs

$

(356

)

$

(3,220

)

$

(15,411

)

$

(169

)

$

(1,384

)

Recoveries on loans

636

278

416

401

230

Net loan recoveries (charge-offs)

$

280

$

(2,942

)

(1)

$

(14,995

)

(2)

$

232

$

(1,154

)

(3)

Net loan recoveries (charge-offs) to average total loans (annualized)

NM*

0.15

%

0.71

%

NM*

0.06

%

Net loan recoveries (charge-offs) detail:

Commercial

$

126

$

(775

)

$

(14,801

)

$

30

$

59

Residential real estate

(203

)

(1,731

)

314

212

(1,112

)

Home equity loans and lines

352

(451

)

(490

)

(3

)

(36

)

Other consumer

5

15

(18

)

(7

)

(65

)

Net loan recoveries (charge-offs)

$

280

$

(2,942

)

(1)

$

(14,995

)

(2)

$

232

$

(1,154

)

(3)


(1)

Included in net loan charge-offs for the three months ended December 31, 2020 is $2.3 million relating to under-performing residential and consumer loans sold.

(2)

Included in net loan charge-offs for the three months ended September 30, 2020 is $14.2 million relating to loans transferred to held-for-sale.

(3)

Included in net loan charge-offs for the three months ended March 31, 2020 is $949 relating to under-performing loans sold.

* Not meaningful


OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME

For the Three Months Ended

March 31, 2021

December 31, 2020

March 31, 2020

(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

$

1,138,911

$

277

0.10

%

$

1,223,472

$

341

0.11

%

$

63,726

$

342

2.16

%

Securities (1)

1,311,683

6,689

2.07

1,209,543

7,224

2.38

1,186,535

7,921

2.68

Loans receivable, net (2)

Commercial

5,127,940

53,670

4.24

5,271,633

58,776

4.44

4,960,991

59,875

4.85

Residential real estate

2,327,838

20,069

3.45

2,420,494

21,530

3.56

2,473,410

24,628

3.98

Home equity loans and lines

275,943

3,523

5.18

293,746

3,930

5.32

339,003

4,070

4.83

Other consumer

50,964

646

5.14

58,174

761

5.20

87,478

1,371

6.30

Allowance for loan credit losses, net of deferred loan fees

(52,887

)

(51,682

)

(10,220

)

Loans receivable, net

7,729,798

77,908

4.09

7,992,365

84,997

4.23

7,850,662

89,944

4.61

Total interest-earning assets

10,180,392

84,874

3.38

10,425,380

92,562

3.53

9,100,923

98,207

4.34

Non-interest-earning assets

1,259,109

1,322,112

1,231,886

Total assets

$

11,439,501

$

11,747,492

$

10,332,809

Liabilities and Stockholders’ Equity:

Interest-bearing liabilities:

Interest-bearing checking

$

3,711,976

4,311

0.47

%

$

3,601,814

4,836

0.53

%

$

2,807,793

$

5,132

0.74

%

Money market

757,634

367

0.20

766,866

586

0.30

614,062

1,040

0.68

Savings

1,522,603

179

0.05

1,489,853

240

0.06

1,403,338

1,555

0.45

Time deposits

1,221,123

3,639

1.21

1,437,770

5,017

1.39

1,459,348

6,209

1.71

Total

7,213,336

8,496

0.48

7,296,303

10,679

0.58

6,284,541

13,936

0.89

FHLB Advances

204,880

779

1.51

631,329

2,824

1.80

Securities sold under agreements to repurchase

129,444

95

0.30

143,385

154

0.43

82,105

95

0.47

Other borrowings

228,368

2,679

4.76

242,030

3,099

5.09

118,851

1,707

5.78

Total borrowings

357,812

2,774

3.14

590,295

4,032

2.72

832,285

4,626

2.24

Total interest-bearing
liabilities

7,571,148

11,270

0.60

7,886,598

14,711

0.74

7,116,826

18,562

1.05

Non-interest-bearing deposits

2,212,273

2,209,532

1,687,582

Non-interest-bearing liabilities

160,500

176,274

113,477

Total liabilities

9,943,921

10,272,404

8,917,885

Stockholders’ equity

1,495,580

1,475,088

1,414,924

Total liabilities and equity

$

11,439,501

$

11,747,492

$

10,332,809

Net interest income

$

73,604

$

77,851

$

79,645

Net interest rate spread (3)

2.78

%

2.79

%

3.29

%

Net interest margin (4)

2.93

%

2.97

%

3.52

%

Total cost of deposits (including non-interest-bearing deposits)

0.37

%

0.45

%

0.70

%

(1) Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost, net of allowance for securities credit losses.
(2) Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, 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.


OceanFirst Financial Corp.
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share amounts)

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Selected Financial Condition Data:

Total assets

$

11,577,472

$

11,448,313

$

11,651,297

$

11,345,365

$

10,489,074

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

268,511

183,302

169,634

153,239

153,738

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

1,082,326

937,253

871,688

867,959

914,255

Equity investments, at estimated fair value

50,159

107,079

63,846

13,830

14,409

Restricted equity investments, at cost

52,199

51,705

67,505

68,091

81,005

Loans receivable, net of allowance for loan credit losses

7,820,590

7,704,857

7,943,390

8,335,480

7,913,541

Deposits

9,502,812

9,427,616

9,283,288

8,967,754

7,892,067

Federal Home Loan Bank advances

343,452

343,392

825,824

Securities sold under agreements to repurchase and other borrowings

362,641

363,925

389,764

399,661

210,388

Stockholders’ equity

1,498,719

1,484,130

1,461,714

1,476,434

1,409,834


For the Three Months Ended,

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Selected Operating Data:

Interest income

$

84,874

$

92,562

$

92,962

$

95,877

$

98,207

Interest expense

11,270

14,711

16,174

17,210

18,562

Net interest income

73,604

77,851

76,788

78,667

79,645

Credit loss (benefit) expense

(620

)

4,072

35,714

9,649

9,969

Net interest income after credit loss (benefit) expense

74,224

73,779

41,074

69,018

69,676

Other income (excluding net gain (loss) on equity investments and gain on sale of PPP loans)

12,548

11,032

11,755

11,430

13,697

Net gain (loss) on equity investments

8,287

24,487

(3,576

)

Gain on sale of PPP loans

5,101

Operating expenses (excluding FHLB advance prepayment fees, branch consolidation and merger related expenses)

50,291

53,053

52,801

51,075

51,675

FHLB advance prepayment fees

13,333

924

Branch consolidation expense

1,011

3,336

830

863

2,594

Merger related expenses

381

1,194

3,156

3,070

8,527

Income (loss) before provision (benefit) for income taxes

43,376

43,483

(7,534

)

24,516

20,577

Provision (benefit) for income taxes

10,679

10,419

(2,608

)

5,878

4,044

Net income (loss)

$

32,697

$

33,064

$

(4,926

)

$

18,638

$

16,533

Net income (loss) available to common stockholders

$

31,693

$

32,060

$

(6,019

)

$

18,638

$

16,533

Diluted earnings (loss) per share

$

0.53

$

0.54

$

(0.10

)

$

0.31

$

0.27

Net accretion/amortization of purchase accounting adjustments included in net interest income

$

3,650

$

6,186

$

4,364

$

5,536

$

5,533


At or For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Selected Financial Ratios and Other Data(1):

Performance Ratios (Annualized):

Return on average assets (2)

1.12

%

1.09

%

(0.21

)%

0.67

%

0.64

%

Return on average tangible assets (2) (3)

1.18

1.14

(0.22

)

0.71

0.68

Return on average stockholders’ equity (2)

8.59

8.65

(1.61

)

5.16

4.70

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

13.22

13.43

(2.51

)

8.10

7.50

Stockholders’ equity to total assets

12.95

12.96

12.55

13.01

13.44

Tangible stockholders’ equity to tangible assets (3)

8.83

8.79

8.41

8.77

8.85

Tangible common equity to tangible assets (3)

8.33

8.28

7.91

8.25

8.85

Net interest rate spread

2.78

2.79

2.77

3.02

3.29

Net interest margin

2.93

2.97

2.97

3.24

3.52

Operating expenses to average assets (2)

1.83

2.40

1.94

2.02

2.44

Efficiency ratio (2) (4)

54.73

59.86

66.83

62.08

67.28

Loans to deposits

82.84

82.27

86.19

93.43

100.51


At or For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Trust and Asset Management:

Wealth assets under administration

$

274,172

$

245,175

$

232,292

$

224,042

$

173,856

Nest Egg

101,701

93,237

80,472

57,383

43,528

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

24.84

24.57

24.21

24.47

23.38

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

15.26

14.98

14.58

14.79

14.62

Common shares outstanding at end of period

60,329,504

60,392,043

60,378,120

60,343,077

60,311,717

Preferred shares outstanding at end of period

57,370

57,370

57,370

57,370

Number of full-service customer facilities:

62

62

62

62

75

Quarterly Average Balances

Total securities

$

1,311,683

$

1,209,543

$

1,112,174

$

1,130,779

$

1,186,535

Loans receivable, net

7,729,798

7,992,365

8,350,797

8,295,622

7,850,662

Total interest-earning assets

10,180,392

10,425,380

10,268,834

9,780,417

9,100,923

Total assets

11,439,501

11,747,439

11,621,969

11,114,586

10,332,809

Interest-bearing transaction deposits

5,992,213

5,858,533

5,425,392

5,065,069

4,825,193

Time deposits

1,221,123

1,437,770

1,606,632

1,623,890

1,459,348

Total borrowed funds

357,812

590,295

735,035

828,928

832,285

Total interest-bearing liabilities

7,571,148

7,886,598

7,767,059

7,517,887

7,116,826

Non-interest bearing deposits

2,212,273

2,209,532

2,209,241

2,018,044

1,687,582

Stockholders’ equity

1,495,580

1,475,088

1,482,682

1,453,658

1,414,924

Total deposits

9,425,609

9,505,835

9,241,265

8,707,003

7,972,123

Quarterly Yields

Total securities

2.07

%

2.38

%

2.43

%

2.64

%

2.68

%

Loans receivable, net

4.09

4.23

4.09

4.28

4.61

Total interest-earning assets

3.38

3.53

3.60

3.94

4.34

Interest-bearing transaction deposits

0.33

0.38

0.40

0.47

0.64

Time deposits

1.21

1.39

1.45

1.58

1.71

Total borrowed funds

3.14

2.72

2.60

2.38

2.24

Total interest-bearing liabilities

0.60

0.74

0.83

0.92

1.05

Net interest spread

2.78

2.79

2.77

3.02

3.29

Net interest margin

2.93

2.97

2.97

3.24

3.52

Total deposits

0.37

0.45

0.49

0.57

0.70

(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Performance ratios for each period are presented on a GAAP basis and include non-core operations. Refer to “Non-GAAP Reconciliation.”
(3) Tangible stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible. Tangible common equity excludes goodwill, core deposit intangible and preferred equity.
(4) Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income.


OceanFirst Financial Corp.
SUPPLEMENTAL INFORMATION
(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,

2021

2020

2020

2020

2020

Core Earnings:

Net income (loss) available to common stockholders (GAAP)

$

31,693

$

32,060

$

(6,019

)

$

18,638

$

16,533

Add (less) non-recurring and non-core items:

Merger related expenses

381

1,194

3,156

3,070

8,527

Branch consolidation expenses

1,011

3,336

830

863

2,594

Net (gain) loss on equity investments

(8,287

)

(24,487

)

3,576

FHLB advance prepayment fees

13,333

924

Gain on sale of PPP loans

(5,101

)

Two River and Country Bank opening credit loss expense under the CECL model

2,447

Income tax expense (benefit) on items

1,666

2,832

(1,809

)

(1,190

)

(3,121

)

Core earnings (loss) (Non-GAAP)

$

26,464

$

23,167

$

(266

)

$

22,305

$

26,980

Core diluted earnings (loss) per share

$

0.44

$

0.39

$

$

0.37

$

0.45

Core Ratios (Annualized):

Return on average assets

0.94

%

0.78

%

(0.01

)%

0.81

%

1.05

%

Return on average tangible assets

0.98

0.82

(0.01

)

0.85

1.11

Return on average tangible stockholders’ equity

11.04

9.71

(0.11

)

9.69

12.25

Efficiency ratio

58.37

59.69

59.63

56.69

55.36


COMPUTATION OF TOTAL TANGIBLE STOCKHOLDERS’ EQUITY TO TANGIBLE ASSETS

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Total stockholders’ equity

$

1,498,719

$

1,484,130

$

1,461,714

$

1,476,434

$

1,409,834

Less:

Goodwill

500,319

500,319

500,849

501,472

500,093

Core deposit intangible

22,273

23,668

25,194

26,732

28,276

Tangible stockholders’ equity

$

976,127

$

960,143

$

935,671

$

948,230

$

881,465

Total assets

$

11,577,472

$

11,448,313

$

11,651,297

$

11,345,365

$

10,489,074

Less:

Goodwill

500,319

500,319

500,849

501,472

500,093

Core deposit intangible

22,273

23,668

25,194

26,732

28,276

Tangible assets

$

11,054,880

$

10,924,326

$

11,125,254

$

10,817,161

$

9,960,705

Tangible stockholders’ equity to tangible assets

8.83

%

8.79

%

8.41

%

8.77

%

8.85

%


COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

Total stockholders’ equity

$

1,498,719

$

1,484,130

$

1,461,714

$

1,476,434

$

1,409,834

Less:

Goodwill

500,319

500,319

500,849

501,472

500,093

Core deposit intangible

22,273

23,668

25,194

26,732

28,276

Preferred stock

55,527

55,527

55,544

55,711

Tangible common equity

$

920,600

$

904,616

$

880,127

$

892,519

$

881,465

Total assets

$

11,577,472

$

11,448,313

$

11,651,297

$

11,345,365

$

10,489,074

Less:

Goodwill

500,319

500,319

500,849

501,472

500,093

Core deposit intangible

22,273

23,668

25,194

26,732

28,276

Tangible assets

$

11,054,880

$

10,924,326

$

11,125,254

$

10,817,161

$

9,960,705

Tangible common equity to tangible assets

8.33

%

8.28

%

7.91

%

8.25

%

8.85

%