OceanFirst Financial Corp. Announces Third Quarter Financial Results

OceanFirst Financial Corp.
·34 min read

RED BANK, N.J., Oct. 29, 2020 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:OCFC), (the Company), the holding company for OceanFirst Bank N.A. (the Bank), today announced a net loss available to common stockholders of $6.0 million, or $(0.10) per diluted share, for the three months ended September 30, 2020 as compared to net income available to common stockholders of $25.0 million, or $0.49 per diluted share, for the corresponding prior year period. For the nine months ended September 30, 2020, the Company reported net income available to common stockholders of $29.2 million, or $0.49 per diluted share, as compared to $65.1 million, or $1.28 per diluted share, for the corresponding prior year period. The quarter and year to date results were impacted by the COVID-19 pandemic, through both higher credit losses and increased operating expenses.

Core losses for the three months ended September 30, 2020 amounted to $266,000, or $0.00 per diluted share, while core earnings for the nine months ended September 30, 2020 were $48.3 million, or $0.80 per diluted share.

Core losses and earnings are non-GAAP measures that exclude merger related expenses, branch consolidation expenses, 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), net unrealized loss on equity investments, non-recurring professional fees, compensation expense due to the retirement of an executive officer, and income tax benefit related to change in the New Jersey tax code (collectively referred to as non-core operations). These non-core operations increased net loss by $5.8 million, net of tax, and decreased net income by $19.2 million, net of tax, for the three and nine months ended September 30, 2020, respectively. Refer to the 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:

  • COVID-19: The Companys third quarter results were adversely impacted by the COVID-19 pandemic, including an elevated credit loss provision of $35.7 million and an additional $1.7 million in operating expenses. Net charge-offs, excluding $14.2 million related to higher risk commercial loans transferred to held-for-sale, amounted to a modest $748,000.

  • Credit Quality: The Company made a strategic decision to accelerate the resolution of credit losses through the sale of higher risk loans. As part of this strategy, the Company transferred $45.5 million of forbearance loans to held-for-sale at September 30, 2020. Excluding the loans held-for-sale, loans under full forbearance were $209.6 million, or 2.6% of total loans, at October 23, 2020, a significant reduction from a peak for all forbearance requests of almost 20% of total loans.

  • Deposits: Deposits increased by $315.5 million, of which $79.0 million were non-interest bearing deposits. The total cost of deposits decreased to 0.49% for the quarter ended September 30, 2020.

  • Capital: The Company continues to maintain strong capital levels with tangible stockholders equity of $935.7 million for a tangible stockholders equity to tangible assets ratio of 8.41%.

  • Sale of Paycheck Protection Program (PPP) loans: The Company made a strategic decision to sell $298 million in PPP loans to improve operational efficiency and continue the Companys efforts to focus on the core business. The sale is expected to close in the fourth quarter of 2020.

Chairman and Chief Executive Officer, Christopher D. Maher, commented on the Companys results, The ongoing global pandemic has created significant challenges for individuals and businesses. In an effort to maintain a sharp focus on helping our borrowers rebuild the economy, we chose to accelerate efforts to address our highest risk loans by liquidating $67.5 million of those assets, thereby reducing the time and effort required to manage non-performing loans. As of the end of the quarter, we have also substantially strengthened our allowance for credit losses as a percentage of non-performing loans held-for-investment. While our quarterly results were disappointing, our disciplined actions and continued sound risk management have set the stage for improved results in future quarters. Mr. Maher added, Our focus remains firmly on the strong potential for business, and includes a variety of growth initiatives as well as proactive capital management.

The Companys Board of Directors declared its ninety-fifth consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on November 20, 2020 to common stockholders of record on November 9, 2020. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depository share, representing 1/40th interest in the Series A Preferred Stock. This dividend will be paid on November 16, 2020 to preferred stockholders of record on October 30, 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 three and nine months ended September 30, 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 September 30, 2020 are included in the consolidated results for the three and nine months ended September 30, 2020, but are not included in the results of operations for the corresponding prior year periods.

Net loss for the three months ended September 30, 2020 and net income for the three months ended September 30, 2019 were adversely impacted by non-core operations of $5.8 million, net of tax, and $2.6 million, net of tax, respectively. Net income for the nine months ended September 30, 2020 and 2019 was adversely impacted by non-core operations of $19.2 million, net of tax, and $14.0 million, net of tax, respectively. Core losses for the three months ended September 30, 2020 were $266,000 and core earnings for the nine months ended September 30, 2020 were $48.3 million, representing a decrease from core earnings of $27.5 million and $79.1 million for the same prior year periods, respectively. The decrease as compared to the prior periods was largely driven by the adverse impact of the COVID-19 pandemic.

Net Interest Income and Margin
Net interest income for the three and nine months ended September 30, 2020 increased to $76.8 million and $235.1 million, as compared to $63.4 million and $192.6 million for the same prior year periods, respectively, reflecting an increase in interest-earning assets, partly offset by a reduction in net interest margin. Average interest-earning assets increased by $3.18 billion and $2.68 billion for the three and nine months ended September 30, 2020, respectively, as compared to the same prior year periods. The averages for the three and nine months ended September 30, 2020 were favorably impacted by $1.81 billion and $1.80 billion, respectively, of interest-earning assets acquired from Two River and Country Bank and $461.6 million and $277.8 million, respectively, of interest-earning assets from PPP loans. Average loans receivable, net of allowance for credit losses, increased by $2.34 billion and $2.26 billion for the three and nine months ended September 30, 2020, respectively, as compared to the same prior year periods. The increases attributable to the acquisitions of Two River and Country Bank for the three and nine months ended September 30, 2020 were $1.60 billion and $1.58 billion, respectively. The net interest margin for the three and nine months ended September 30, 2020 decreased to 2.97% and 3.23%, respectively, from 3.55% and 3.66%, respectively, for the same prior year periods. The compression in net interest margin is primarily due to the lower interest rate environment, the origination of low-yielding PPP loans, and the excess balance sheet liquidity which the Company strategically accumulated entering the economic downturn. For the three and nine months ended September 30, 2020, the cost of average interest-bearing liabilities decreased to 0.83% and 0.93%, respectively, from 0.98% and 0.95%, respectively, in the corresponding prior year periods. The total cost of deposits (including non-interest bearing deposits) was 0.49% and 0.58% for the three and nine months ended September 30, 2020, respectively, as compared to 0.62% and 0.60%, respectively, in the same prior year periods.

Net interest income for the three months ended September 30, 2020 decreased by $1.9 million as compared to the prior linked quarter, as the net interest margin decreased to 2.97% as compared to 3.24% for the prior linked quarter. The yield on average interest-earning assets decreased to 3.60% from 3.94% in the prior linked quarter, primarily due to increasing balance sheet liquidity and the lower interest rate environment. The total cost of deposits (including non-interest bearing deposits) was 0.49% for the three months ended September 30, 2020, as compared to 0.57% for the three months ended June 30, 2020.

Provision for Credit Losses
For the three and nine months ended September 30, 2020, the credit loss expense was $35.7 million and $55.3 million, respectively, as compared to $305,000 and $1.3 million, respectively, for the corresponding prior year periods, and $9.6 million in the prior linked quarter. Net loan charge-offs were $15.0 million and $15.9 million for the three and nine months ended September 30, 2020, respectively, as compared to net loan recoveries of $196,000 and net loan charge-offs of $1.2 million for the three and nine months ended September 30, 2019, respectively, and net loan recoveries of $232,000 in the prior linked quarter. The three months ended September 30, 2020 included $14.2 million of charge-offs related to higher risk commercial loans transferred to held-for-sale. Non-performing loans held-for-investment totaled $29.9 million at September 30, 2020, as compared to $21.0 million at June 30, 2020 and $17.5 million at September 30, 2019. The increase in non-performing loans held-for-investment over the prior linked quarter is primarily due to the addition of one commercial real estate owner-occupied loan relationship totaling $6.3 million.

Credit loss expense for the three and nine months ended September 30, 2020 was significantly influenced by the decision to sell higher risk commercial loans as well as economic conditions related to the COVID-19 pandemic and estimates of how those conditions may impact the Companys borrowers. COVID-19 related loans under full forbearance (excluding forbearance loans held-for-sale) decreased to $209.6 million, or 2.6% of total loans at October 23, 2020 as compared to a peak for all forbearance requests of almost 20% of total loans in mid-2020 as borrowers have returned to monthly payments. The Company continues to proactively address the pandemics impact on credit. Due to the U.S. government guarantee on PPP loans, there is no credit allowance on these loans. Refer to exhibits filed with the earnings release on Form 8-K for detailed information on loans under forbearance agreements.

Non-interest Income
For the three and nine months ended September 30, 2020, other income decreased to $8.2 million and increased to $33.3 million, respectively, as compared to $11.5 million and $30.9 million, respectively, for the corresponding prior year periods. Other income for both the three and nine months ended September 30, 2020 included $3.6 million of net unrealized loss on equity investments.

Excluding the Two River and Country Bank acquisitions, which added $882,000, and the impact of the net unrealized loss on equity investments, the decrease in other income for the three months ended September 30, 2020, compared to the corresponding prior year period, was due to a decrease in fees and service charges of $1.4 million, partly offset by an increase in net gain on sale of loans of $800,000.

For the nine months ended September 30, 2020, excluding the Two River and Country Bank acquisitions which added $2.3 million, and the impact of the net unrealized loss on equity investments, the increase in other income was due to increases in commercial loan swap income of $4.7 million and net gain on sales of loans of $1.5 million, partly offset by a decrease in fees and service charges of $3.2 million. The waiver of certain fees during the COVID-19 pandemic may continue to suppress deposit fee income for the remainder of the public health crisis.

For the three months ended September 30, 2020, other income, excluding net unrealized loss on equity investments, increased $325,000 as compared to the prior linked quarter.

Non-interest Expense
Operating expenses increased to $56.8 million and $175.5 million for the three and nine months ended September 30, 2020, respectively, as compared to $43.4 million and $141.5 million, respectively, in the same prior year periods. Operating expenses for the three and nine months ended September 30, 2020 included $4.0 million and $19.0 million, respectively, of net expenses related to non-core operations. Operating expenses for the three and nine months ended September 30, 2019 included $3.2 million and $17.5 million, respectively, of net expenses related to non-core operations. Excluding the impact of non-core operations, the change in operating expenses over the prior year was due to the Two River and Country Bank acquisitions, which added $6.9 million and $23.0 million, respectively, for the three and nine months ended September 30, 2020. The remaining increase in operating expenses for the three months ended September 30, 2020 was primarily due to operating expenses attributable to the COVID-19 pandemic of $1.7 million, increases in compensation and benefits expense of $3.0 million and federal deposit insurance expense of $770,000. The increase in operating expenses for the nine months ended September 30, 2020 was primarily due to operating expenses attributable to the COVID-19 pandemic of $3.8 million, increases in compensation and benefits expense of $6.3 million, professional fees of $2.3 million, and Federal Home Loan Bank (FHLB) prepayment penalty fee of $924,000, partly offset by decreases in occupancy expense of $1.5 million, and equipment expense of $1.4 million.

For the three months ended September 30, 2020, operating expenses, excluding net expenses related to non-core operations, increased $802,000, as compared to the prior linked quarter. The increases were due to operating expenses attributable to the COVID-19 pandemic of $609,000 and professional fees of $832,000, offset by a decrease in FHLB prepayment penalty fee of $924,000.

Income Tax (Benefit) Expense
The benefit for income taxes was $2.6 million for the three months ended September 30, 2020, and the provision for income taxes was $7.3 million for the nine months ended September 30, 2020 as compared to provision for income taxes of $6.3 million and $15.6 million, respectively, for the same prior year periods. The effective tax rate was 34.6% and 19.5% for the three and nine months ended September 30, 2020, respectively, as compared to 20.2% and 19.3%, respectively, for the same prior year periods. The higher effective tax rate for the three months ended September 30, 2020 is primarily attributable to the net loss recognized during the quarter. The three and nine months ended September 30, 2020 included the adverse impacts of a New Jersey tax code change and a higher allocation of taxable income to New York due to the acquisition of Country Bank.

Fin ancial Condition
Total assets increased $3.41 billion, to $11.65 billion at September 30, 2020, from $8.25 billion at December 31, 2019, primarily as a result of the acquisitions of Two River and Country Bank, which added $2.03 billion to total assets. Cash and due from banks increased $860.3 million, to $980.9 million at September 30, 2020, from $120.5 million at December 31, 2019, due to increased deposits, the Companys decision to build liquidity during the economic downturn and the cash received from the issuance of subordinated notes and non-cumulative perpetual preferred stock as described below. Loans receivable, net of allowance for credit losses, increased by $1.74 billion, to $7.94 billion at September 30, 2020, from $6.21 billion at December 31, 2019, due to acquired loans from Two River and Country Bank of $1.56 billion coupled with organic loan growth. Loans held-for-sale increased to $388.8 million at September 30, 2020, of which $298 million were PPP loans. Non-performing loans held-for-sale totaled $67.5 million at September 30, 2020. As part of the acquisitions of Two River and Country Bank, the Companys goodwill balance increased to $500.8 million at September 30, 2020, from $374.6 million at December 31, 2019 and core deposit intangibles increased to $25.2 million, from $15.6 million. Other assets increased by $55.1 million to $224.6 million at September 30, 2020, from $169.5 million at December 31, 2019, primarily due to the increase in swap positions.

Deposits increased $2.95 billion, to $9.28 billion at September 30, 2020, from $6.33 billion at December 31, 2019, due to acquired deposits from Two River and Country Bank of $1.59 billion and organic deposit growth of $1.4 billion. The loan-to-deposit ratio at September 30, 2020 was 86.2%, as compared to 98.2% at December 31, 2019. The deposit growth funded a decrease in FHLB advances of $175.8 million to $343.5 million at September 30, 2020, from $519.3 million at December 31, 2019. The increase in other borrowings of $150.1 million to $246.9 million at September 30, 2020, from $96.8 million at December 31, 2019, primarily resulted from the May 2020 issuance of $125.0 million in subordinated notes at an initial rate of 5.25% and a stated maturity of May 15, 2030. Other liabilities increased $90.4 million to $153.0 million at September 30, 2020, from $62.6 million at December 31, 2019, primarily due to the increase in swap positions.

Stockholders equity increased to $1.46 billion at September 30, 2020, as compared to $1.15 billion at December 31, 2019. The acquisitions of Two River and Country Bank added $261.4 million to stockholders equity. During the three months ended June 30, 2020, the Company raised $55.7 million from the issuance of 7.0% fixed-to-floating rate non-cumulative perpetual preferred stock, with a par value of $0.01 and a liquidation price of $1,000 per share. Under the Companys stock repurchase program, there were 2,019,145 shares available for repurchase at September 30, 2020. The Company suspended its repurchase activity on February 28, 2020. For the nine months ended September 30, 2020, the Company repurchased 648,851 shares under the repurchase program at a weighted average cost of $22.83.

Asset Quality
The Companys non-performing loans held-for-investment increased to $29.9 million at September 30, 2020, as compared to $17.8 million at December 31, 2019. Non-performing loans do not include $56.4 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 Companys other real estate owned totaled $106,000 at September 30, 2020, as compared to $264,000 at December 31, 2019.

The Companys allowance for credit losses was 0.70% of total loans at September 30, 2020 as compared to 0.27% at December 31, 2019. The allowance for credit losses does not reflect the net unamortized credit mark of $31.6 million. The allowance for credit losses plus the unamortized credit mark amounted to $88.0 million, or 1.10% of loans held-for-investment. The allowance for credit losses as a percentage of non-performing loans held-for-investment was 188.5% at September 30, 2020, as compared to 94.4% at December 31, 2019.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with generally accepted accounting principles in the United States (GAAP). The Companys 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 companys 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 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, October 30, 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 10148569 from one hour after the end of the call until January 28, 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 $11.7 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 Companys 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 Banks lending area, real estate market values in the Banks 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 Companys market area, accounting principles and guidelines and the Banks ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Companys 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.



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

 

 

September 30, 2020

 

June 30, 2020

 

December 31, 2019

 

September 30, 2019

 

 

(Unaudited)

 

(Unaudited)

 

 

 

(Unaudited)

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

980,870

 

 

$

721,049

 

 

$

120,544

 

 

$

140,901

 

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

 

169,634

 

 

153,239

 

 

150,960

 

 

127,308

 

Debt securities held-to-maturity, net of allowance for credit losses of $2,393 at September 30, 2020 and $2,446 at June 30, 2020 (estimated fair value of $902,418 at September 30, 2020, $895,897 at June 30, 2020, $777,290 at December 31, 2019 and $826,964 at September 30, 2019)

 

871,688

 

 

867,959

 

 

768,873

 

 

819,253

 

Equity investments, at estimated fair value

 

63,846

 

 

13,830

 

 

10,136

 

 

10,145

 

Restricted equity investments, at cost

 

67,505

 

 

68,091

 

 

62,356

 

 

62,095

 

Loans receivable, net of allowance for credit losses of $56,350 at September 30, 2020, $38,509 at June 30, 2020, $16,852 at December 31, 2019 and $16,636 at September 30, 2019

 

7,943,390

 

 

8,335,480

 

 

6,207,680

 

 

6,081,938

 

Loans held-for-sale

 

388,763

 

 

21,799

 

 

 

 

110

 

Interest and dividends receivable

 

40,671

 

 

37,811

 

 

21,674

 

 

21,739

 

Other real estate owned

 

106

 

 

248

 

 

264

 

 

294

 

Premises and equipment, net

 

103,249

 

 

100,576

 

 

102,691

 

 

103,721

 

Bank owned life insurance

 

264,167

 

 

262,637

 

 

237,411

 

 

236,190

 

Assets held for sale

 

6,717

 

 

7,828

 

 

3,785

 

 

5,156

 

Goodwill

 

500,849

 

 

501,472

 

 

374,632

 

 

374,537

 

Core deposit intangible

 

25,194

 

 

26,732

 

 

15,607

 

 

16,605

 

Other assets

 

224,648

 

 

226,614

 

 

169,532

 

 

135,181

 

Total assets

 

$

11,651,297

 

 

$

11,345,365

 

 

$

8,246,145

 

 

$

8,135,173

 

Liabilities and Stockholders Equity

 

 

 

 

 

 

 

 

Deposits

 

$

9,283,288

 

 

$

8,967,754

 

 

$

6,328,777

 

 

$

6,220,855

 

Federal Home Loan Bank advances

 

343,452

 

 

343,392

 

 

519,260

 

 

512,149

 

Securities sold under agreements to repurchase with retail customers

 

142,823

 

 

152,821

 

 

71,739

 

 

65,067

 

Other borrowings

 

246,941

 

 

246,840

 

 

96,801

 

 

96,667

 

Advances by borrowers for taxes and insurance

 

20,104

 

 

19,582

 

 

13,884

 

 

16,230

 

Other liabilities

 

152,975

 

 

138,542

 

 

62,565

 

 

79,677

 

Total liabilities

 

10,189,583

 

 

9,868,931

 

 

7,093,026

 

 

6,990,645

 

Total stockholders equity

 

1,461,714

 

 

1,476,434

 

 

1,153,119

 

 

1,144,528

 

Total liabilities and stockholders equity

 

$

11,651,297

 

 

$

11,345,365

 

 

$

8,246,145

 

 

$

8,135,173

 



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

 

 

For the Three Months Ended,

 

For the Nine Months Ended,

 

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

 

 

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

 

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

Interest income:

 

 

 

 

 

 

 

 

 

 

Loans

 

$

85,933

 

 

$

88,347

 

 

$

69,715

 

 

$

264,224

 

 

$

209,633

 

Mortgage-backed securities

 

3,212

 

 

3,593

 

 

3,761

 

 

10,649

 

 

11,748

 

Debt securities, equity investments and other

 

3,817

 

 

3,937

 

 

3,411

 

 

12,173

 

 

10,338

 

Total interest income

 

92,962

 

 

95,877

 

 

76,887

 

 

287,046

 

 

231,719

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

Deposits

 

11,370

 

 

12,305

 

 

9,817

 

 

37,611

 

 

28,218

 

Borrowed funds

 

4,804

 

 

4,905

 

 

3,678

 

 

14,335

 

 

10,884

 

Total interest expense

 

16,174

 

 

17,210

 

 

13,495

 

 

51,946

 

 

39,102

 

Net interest income

 

76,788

 

 

78,667

 

 

63,392

 

 

235,100

 

 

192,617

 

Credit loss expense

 

35,714

 

 

9,649

 

 

305

 

 

55,332

 

 

1,281

 

Net interest income after credit loss expense

 

41,074

 

 

69,018

 

 

63,087

 

 

179,768

 

 

191,336

 

Other income:

 

 

 

 

 

 

 

 

 

 

Bankcard services revenue

 

3,097

 

 

2,741

 

 

2,658

 

 

8,319

 

 

7,622

 

Trust and asset management revenue

 

490

 

 

555

 

 

557

 

 

1,560

 

 

1,624

 

Fees and service charges

 

3,732

 

 

3,253

 

 

4,679

 

 

11,858

 

 

13,790

 

Net gain on sales of loans

 

1,001

 

 

756

 

 

 

 

1,930

 

 

15

 

Net (loss) gain on equity investments

 

(3,576

)

 

148

 

 

89

 

 

(3,273

)

 

330

 

Net gain (loss) from other real estate operations

 

214

 

 

(52

)

 

(108

)

 

12

 

 

(235

)

Income from bank owned life insurance

 

1,530

 

 

1,521

 

 

1,431

 

 

4,626

 

 

4,045

 

Commercial loan swap income

 

1,425

 

 

2,489

 

 

2,138

 

 

7,964

 

 

3,223

 

Other

 

266

 

 

19

 

 

99

 

 

310

 

 

520

 

Total other income

 

8,179

 

 

11,430

 

 

11,543

 

 

33,306

 

 

30,934

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

29,012

 

 

27,935

 

 

21,276

 

 

86,832

 

 

67,394

 

Occupancy

 

5,270

 

 

5,268

 

 

4,159

 

 

15,814

 

 

13,088

 

Equipment

 

1,906

 

 

1,982

 

 

2,062

 

 

5,831

 

 

5,944

 

Marketing

 

963

 

 

753

 

 

562

 

 

2,485

 

 

2,629

 

Federal deposit insurance and regulatory assessments

 

1,212

 

 

1,133

 

 

297

 

 

3,012

 

 

1,931

 

Data processing

 

4,517

 

 

4,149

 

 

3,398

 

 

12,843

 

 

10,736

 

Check card processing

 

1,385

 

 

1,290

 

 

1,639

 

 

3,951

 

 

4,399

 

Professional fees

 

3,354

 

 

2,683

 

 

2,580

 

 

8,339

 

 

5,697

 

Other operating expense

 

3,644

 

 

5,262

 

 

3,902

 

 

12,708

 

 

11,153

 

Amortization of core deposit intangible

 

1,538

 

 

1,544

 

 

1,009

 

 

4,660

 

 

3,029

 

Branch consolidation expense

 

830

 

 

863

 

 

1,696

 

 

4,287

 

 

8,782

 

Merger related expenses

 

3,156

 

 

3,070

 

 

777

 

 

14,753

 

 

6,761

 

Total operating expenses

 

56,787

 

 

55,932

 

 

43,357

 

 

175,515

 

 

141,543

 

(Loss) income before (benefit) provision for income taxes

 

(7,534

)

 

24,516

 

 

31,273

 

 

37,559

 

 

80,727

 

(Benefit) provision for income taxes

 

(2,608

)

 

5,878

 

 

6,302

 

 

7,314

 

 

15,603

 

Net (loss) income

 

(4,926

)

 

18,638

 

 

24,971

 

 

30,245

 

 

65,124

 

Dividends on preferred shares

 

1,093

 

 

 

 

 

 

1,093

 

 

 

Net (loss) income available to common stockholders

 

$

(6,019

)

 

$

18,638

 

 

$

24,971

 

 

$

29,152

 

 

$

65,124

 

Basic (loss) earnings per share

 

$

(0.10

)

 

$

0.31

 

 

$

0.50

 

 

$

0.49

 

 

$

1.30

 

Diluted (loss) earnings per share

 

$

(0.10

)

 

$

0.31

 

 

$

0.49

 

 

$

0.49

 

 

$

1.28

 

Average basic shares outstanding

 

59,935

 

 

59,877

 

 

50,491

 

 

59,901

 

 

50,242

 

Average diluted shares outstanding

 

59,935

 

 

59,999

 

 

50,966

 

 

60,076

 

 

50,830

 



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

LOANS RECEIVABLE

 

 

At

 

 

 

September 30,
2020

 

June 30,
2020

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

$

599,188

 

 

$

910,762

 

 

$

502,760

 

 

$

396,434

 

 

$

406,580

 

Commercial real estate - owner - occupied

 

1,176,529

 

 

1,199,742

 

 

1,220,983

 

 

792,653

 

 

787,752

 

Commercial real estate - investor

 

3,453,276

 

 

3,449,160

 

 

3,331,662

 

 

2,296,410

 

 

2,232,159

 

Total commercial

 

 

5,228,993

 

 

5,559,664

 

 

5,055,405

 

 

3,485,497

 

 

3,426,491

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

2,407,178

 

 

2,426,277

 

 

2,458,641

 

 

2,321,157

 

 

2,234,361

 

Home equity loans and lines

 

 

301,712

 

 

320,627

 

 

335,624

 

 

318,576

 

 

330,446

 

Other consumer

 

 

63,095

 

 

71,721

 

 

82,920

 

 

89,422

 

 

98,835

 

Total consumer

 

 

2,771,985

 

 

2,818,625

 

 

2,877,185

 

 

2,729,155

 

 

2,663,642

 

Total loans

 

 

8,000,978

 

 

8,378,289

 

 

7,932,590

 

 

6,214,652

 

 

6,090,133

 

Deferred origination (fees) costs, net

 

(1,238

)

 

(4,300

)

 

10,586

 

 

9,880

 

 

8,441

 

Allowance for credit losses

 

 

(56,350

)

 

(38,509

)

 

(29,635

)

 

(16,852

)

 

(16,636

)

Loans receivable, net

 

 

$

7,943,390

 

 

$

8,335,480

 

 

$

7,913,541

 

 

$

6,207,680

 

 

$

6,081,938

 

Mortgage loans serviced for others

 

$

88,210

 

 

$

101,840

 

 

$

51,399

 

 

$

50,042

 

 

$

54,457

 

 

At September 30, 2020  Average Yield

 

 

 

 

 

 

 

 

 

 

Loan pipeline (1) :

 

 

 

 

 

 

 

 

 

 

 

Commercial

3.97

%

 

$

154,700

 

 

$

169,093

 

 

$

293,820

 

 

$

219,269

 

 

$

126,578

 

Residential real estate

3.27

 

 

212,107

 

 

181,800

 

 

223,032

 

 

105,396

 

 

189,403

 

Home equity loans and lines

4.29

 

 

10,301

 

 

8,282

 

 

8,429

 

 

3,049

 

 

3,757

 

Total

3.59

%

 

$

377,108

 

 

$

359,175

 

 

$

525,281

 

 

$

327,714

 

 

$

319,738

 


 

For the Three Months Ended

 

 

September 30, 2020

 

June 30,
2020

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

 

 

Average Yield

 

 

 

 

 

 

 

 

 

 

 

Loan originations:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

3.64

%

 

$

187,747

 

 

$

216,979

 

(2

)

$

266,882

 

 

$

264,938

 

 

$

315,405

 

 

Residential real estate

3.29

 

 

219,325

 

 

242,137

 

 

148,675

 

 

226,492

 

 

156,308

 

 

Home equity loans and lines

4.33

 

 

10,966

 

 

12,128

 

 

10,666

 

 

12,961

 

 

10,498

 

 

Total

3.47

%

 

$

418,038

 

 

$

471,244

 

 

$

426,223

 

 

$

504,391

 

 

$

482,211

 

 

Loans sold

 

 

$

56,722

 

 

$

104,600

 

(3

)

$

7,500

 

(3

)

$

110

 

 

$

 

(3

)

(1) Loan pipeline includes loans approved but not funded.
(2) Excludes loans originated through the Paycheck Protection Program of $504 million.
(3) Excludes the sale of under-performing commercial loans of $4.9 million for the three months ended June 30, 2020, 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 for the three months ended September 30, 2019.

DEPOSITS

At

 

September 30,
2020

 

June 30,
2020

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

Type of Account

 

 

 

 

 

 

 

 

 

Non-interest-bearing

$

2,240,799

 

 

$

2,161,766

 

 

$

1,783,216

 

 

$

1,377,396

 

 

$

1,406,194

 

Interest-bearing checking

3,317,296

 

 

3,022,887

 

 

2,647,487

 

 

2,539,428

 

 

2,400,331

 

Money market deposit

691,872

 

 

680,199

 

 

620,145

 

 

578,147

 

 

593,457

 

Savings

1,471,554

 

 

1,456,931

 

 

1,420,628

 

 

898,174

 

 

901,168

 

Time deposits

1,561,767

 

 

1,645,971

 

 

1,420,591

 

 

935,632

 

 

919,705

 

 

$

9,283,288

 

 

$

8,967,754

 

 

$

7,892,067

 

 

$

6,328,777

 

 

$

6,220,855

 



OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)

ASSET QUALITY

September 30,
2020

 

June 30,
2020

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

Non-performing loans held-for-investment:

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

586

 

 

$

1,586

 

 

$

207

 

 

$

207

 

 

$

207

 

Commercial real estate - owner-occupied

11,365

 

 

4,582

 

 

4,219

 

 

4,811

 

 

4,537

 

Commercial real estate - investor

2,978

 

 

5,274

 

 

3,384

 

 

2,917

 

 

4,073

 

Residential real estate

11,518

 

 

6,568

 

 

5,920

 

 

7,181

 

 

5,953

 

Home equity loans and lines

3,448

 

 

3,034

 

 

2,533

 

 

2,733

 

 

2,683

 

Total non-performing loans held-for-investment

29,895

 

 

21,044

 

 

16,263

 

 

17,849

 

 

17,453

 

Non-performing loans held-for-sale

67,489

 

 

 

 

 

 

 

 

 

Other real estate owned

106

 

 

248

 

 

484

 

 

264

 

 

294

 

Total non-performing assets

$

97,490

 

 

$

21,292

 

 

$

16,747

 

 

$

18,113

 

 

$

17,747

 

PCD loans (1)

$

56,422

 

 

$

61,694

 

 

$

59,783

 

 

$

13,265

 

 

$

13,281

 

Delinquent loans 30 to 89 days

$

13,753

 

 

$

13,640

 

 

$

48,905

 

 

$

14,798

 

 

$

19,905

 

Troubled debt restructurings:

 

 

 

 

 

 

 

 

 

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

$

9,866

 

 

$

6,189

 

 

$

6,249

 

 

$

6,566

 

 

$

6,152

 

Performing

12,777

 

 

16,365

 

 

16,102

 

 

18,042

 

 

18,977

 

    Total troubled debt restructurings

$

22,643

 

 

$

22,554

 

 

$

22,351

 

 

$

24,608

 

 

$

25,129

 

Allowance for credit losses

$

56,350

 

 

$

38,509

 

 

$

29,635

 

 

$

16,852

 

 

$

16,636

 

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

0.70

%

 

0.46

%

 

0.37

%

 

0.27

%

 

0.27

%

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

188.49

 

 

182.99

 

 

182.22

 

 

94.41

 

 

95.32

 

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

0.37

 

 

0.25

 

 

0.21

 

 

0.29

 

 

0.29

 

Non-performing assets as a percent of total assets

0.84

 

 

0.19

 

 

0.16

 

 

0.22

 

 

0.22

 

(1) PCD loans are not included in non-performing loans held-for-investment or delinquent loans totals.
(2) The loans acquired from Two River, Country Bank, Capital Bank, Sun, Ocean Shore, Cape, and Colonial American were recorded at fair value. The net credit mark on these loans, not reflected in the allowance for credit losses, was $31,617, $35,439, $38,272, $30,260 and $32,768 at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

NET CHARGE-OFFS

For the Three Months Ended

 

September 30, 2020

 

June 30,
2020

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

Net (charge-offs) recoveries:

 

 

 

 

 

 

 

 

 

Loan charge-offs

$

(15,411

)

 

$

(169

)

 

$

(1,384

)

 

$

(445

)

 

$

(353

)

Recoveries on loans

416

 

 

401

 

 

230

 

 

306

 

 

549

 

Net loan (charge-offs) recoveries

$

(14,995

)

(1)

$

232

 

 

$

(1,154

)

(2)

$

(139

)

 

$

196

 

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

0.71

%

 

NM*

 

0.06

%

 

0.01

%

 

NM*

Net loan (charge-offs) recoveries detail:

 

 

 

 

 

 

 

 

 

Commercial

$

(14,801

)

 

$

30

 

 

$

59

 

 

$

163

 

 

$

256

 

Residential real estate

314

 

 

212

 

 

(1,112

)

 

(61

)

 

12

 

Home equity loans and lines

(490

)

 

(3

)

 

(36

)

 

(240

)

 

(10

)

Other consumer

(18

)

 

(7

)

 

(65

)

 

(1

)

 

(62

)

Net loan (charge-offs) recoveries

$

(14,995

)

(1)

$

232

 

 

$

(1,154

)

(2)

$

(139

)

 

$

196

 

(1) 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.
(2) 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

 

September 30, 2020

 

June 30, 2020

 

September 30, 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

$

805,863

 

 

$

236

 

 

0.12

%

 

$

354,016

 

 

$

115

 

 

0.13

%

 

$

40,932

 

 

$

264

 

 

2.56

%

Securities (1)

1,112,174

 

 

6,793

 

 

2.43

 

 

1,130,779

 

 

7,415

 

 

2.64

 

 

1,039,560

 

 

6,908

 

 

2.64

 

Loans receivable, net (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

5,554,897

 

 

58,639

 

 

4.20

 

 

5,409,238

 

 

59,460

 

 

4.42

 

 

3,350,868

 

 

42,104

 

 

4.99

 

Residential real estate

2,462,513

 

 

23,091

 

 

3.75

 

 

2,507,076

 

 

23,870

 

 

3.81

 

 

2,225,837

 

 

21,527

 

 

3.87

 

Home equity loans and lines

311,802

 

 

3,330

 

 

4.25

 

 

328,144

 

 

3,853

 

 

4.72

 

 

335,691

 

 

4,678

 

 

5.53

 

Other consumer

67,497

 

 

873

 

 

5.15

 

 

76,382

 

 

1,164

 

 

6.13

 

 

104,310

 

 

1,406

 

 

5.35

 

Allowance for credit losses, net of deferred loan fees

(45,912

)

 

 

 

 

 

(25,218

)

 

 

 

 

 

(8,381

)

 

 

 

 

Loans receivable, net

8,350,797

 

 

85,933

 

 

4.09

 

 

8,295,622

 

 

88,347

 

 

4.28

 

 

6,008,325

 

 

69,715

 

 

4.60

 

Total interest-earning assets

10,268,834

 

 

92,962

 

 

3.60

 

 

9,780,417

 

 

95,877

 

 

3.94

 

 

7,088,817

 

 

76,887

 

 

4.30

 

Non-interest-earning assets

1,353,135

 

 

 

 

 

 

1,334,169

 

 

 

 

 

 

984,421

 

 

 

 

 

Total assets

$

11,621,969

 

 

 

 

 

 

$

11,114,586

 

 

 

 

 

 

$

8,073,238

 

 

 

 

 

Liabilities and Stockholders Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

3,289,319

 

 

4,627

 

 

0.56

%

 

$

2,966,631

 

 

4,800

 

 

0.65

%

 

$

2,467,879

 

 

$

4,311

 

 

0.69

%

Money market

675,841

 

 

571

 

 

0.34

 

 

652,485

 

 

705

 

 

0.43

 

 

597,896

 

 

1,208

 

 

0.80

 

Savings

1,460,232

 

 

296

 

 

0.08

 

 

1,445,953

 

 

414

 

 

0.12

 

 

905,605

 

 

300

 

 

0.13

 

Time deposits

1,606,632

 

 

5,876

 

 

1.45

 

 

1,623,890

 

 

6,386

 

 

1.58

 

 

920,032

 

 

3,998

 

 

1.72

 

Total

7,032,024

 

 

11,370

 

 

0.64

 

 

6,688,959

 

 

12,305

 

 

0.74

 

 

4,891,412

 

 

9,817

 

 

0.80

 

FHLB advances

343,412

 

 

1,470

 

 

1.70

 

 

476,598

 

 

1,946

 

 

1.64

 

 

394,124

 

 

2,208

 

 

2.22

 

Securities sold under agreements to repurchase

144,720

 

 

174

 

 

0.48

 

 

131,382

 

 

138

 

 

0.42

 

 

62,296

73 0.46 Other borrowings246,903 3,160 5.09 220,948 2,821 5.14 96,578 1,397 5.74 Total interest-bearing
liabilities7,767,059 16,174 0.83 7,517,887 17,210 0.92 5,444,410 13,495 0.98 Non-interest-bearing deposits2,209,241 2,018,044 1,396,259 Non-interest-bearing liabilities162,987 124,997 88,868 Total liabilities10,139,287 9,660,928 6,929,537 Stockholders’ equity1,482,682 1,453,658 1,143,701 Total liabilities and equity$11,621,969 $11,114,586 $8,073,238 Net interest income $76,788 $78,667 $63,392 Net interest rate spread (3) 2.77% 3.02% 3.32%Net interest margin (4) 2.97% 3.24% 3.55%Total cost of deposits (including non-interest-bearing deposits) 0.49% 0.57% 0.62%


For the Nine Months Ended

September 30, 2020

September 30, 2019

(dollars in thousands)

Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

Assets:

Interest-earning assets:

Interest-earning deposits and short-term investments

$

409,321

$

693

0.23

%

$

62,543

$

1,103

2.36

%

Securities (1)

1,143,049

22,129

2.59

1,062,366

20,983

2.64

Loans receivable, net (2)

Commercial

5,309,275

177,973

4.48

3,291,189

126,091

5.12

Residential real estate

2,480,932

71,590

3.85

2,169,611

65,260

4.01

Home equity loans and lines

326,263

11,253

4.61

345,294

14,041

5.44

Other consumer

77,085

3,408

5.91

112,162

4,241

5.06

Allowance for credit losses, net of deferred loan fees

(27,186

)

(9,200

)

Loans receivable, net

8,166,369

264,224

4.32

5,909,056

209,633

4.74

Total interest-earning assets

9,718,739

287,046

3.95

7,033,965

231,719

4.40

Non-interest-earning assets

1,306,568

960,709

Total assets

$

11,025,307

$

7,994,674

Liabilities and Stockholders’ Equity:

Interest-bearing liabilities:

Interest-bearing checking

$

3,023,093

14,559

0.64

%

$

2,501,660

12,343

0.66

%

Money market

647,566

2,316

0.48

610,153

3,676

0.81

Savings

1,436,594

2,266

0.21

908,457

887

0.13

Time deposits

1,563,449

18,470

1.58

928,903

11,312

1.63

Total

6,670,702

37,611

0.75

4,949,173

28,218

0.76

FHLB Advances

483,267

6,239

1.72

379,786

6,367

2.24

Securities sold under agreements to repurchase

119,495

408

0.46

63,267

192

0.41

Other borrowings

195,754

7,688

5.25

98,562

4,325

5.87

Total interest-bearing liabilities

7,469,218

51,946

0.93

5,490,788

39,102

0.95

Non-interest-bearing deposits

1,971,622

1,303,447

Non-interest-bearing liabilities

133,928

75,988

Total liabilities

9,574,768

6,870,223

Stockholders’ equity

1,450,539

1,124,451

Total liabilities and equity

$

11,025,307

$

7,994,674

Net interest income

$

235,100

$

192,617

Net interest rate spread (3)

3.02

%

3.45

%

Net interest margin (4)

3.23

%

3.66

%

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

0.58

%

0.60

%

(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 credit losses.
(2) Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated allowance for 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)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Selected Financial Condition Data:

Total assets

$

11,651,297

$

11,345,365

$

10,489,074

$

8,246,145

$

8,135,173

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

169,634

153,239

153,738

150,960

127,308

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

871,688

867,959

914,255

768,873

819,253

Equity investments, at estimated fair value

63,846

13,830

14,409

10,136

10,145

Restricted equity investments, at cost

67,505

68,091

81,005

62,356

62,095

Loans receivable, net of allowance for credit losses

7,943,390

8,335,480

7,913,541

6,207,680

6,081,938

Deposits

9,283,288

8,967,754

7,892,067

6,328,777

6,220,855

Federal Home Loan Bank advances

343,452

343,392

825,824

519,260

512,149

Securities sold under agreements to repurchase and other borrowings

389,764

399,661

210,388

168,540

161,734

Stockholders’ equity

1,461,714

1,476,434

1,409,834

1,153,119

1,144,528


For the Three Months Ended,

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Selected Operating Data:

Interest income

$

92,962

$

95,877

$

98,207

$

77,075

$

76,887

Interest expense

16,174

17,210

18,562

13,721

13,495

Net interest income

76,788

78,667

79,645

63,354

63,392

Credit loss expense

35,714

9,649

9,969

355

305

Net interest income after credit loss expense

41,074

69,018

69,676

62,999

63,087

Other income

8,179

11,430

13,697

11,231

11,543

Operating expenses (excluding branch consolidation and merger related expenses)

52,801

51,999

51,675

43,589

40,884

Branch consolidation expense

830

863

2,594

268

1,696

Merger related expenses

3,156

3,070

8,527

3,742

777

(Loss) income before (benefit) provision for income taxes

(7,534

)

24,516

20,577

26,631

31,273

(Benefit) provision for income taxes

(2,608

)

5,878

4,044

3,181

6,302

Net (loss) income

$

(4,926

)

$

18,638

$

16,533

$

23,450

$

24,971

Net (loss) income available to common stockholders

$

(6,019

)

$

18,638

$

16,533

$

23,450

$

24,971

Diluted (loss) earnings per share

$

(0.10

)

$

0.31

$

0.27

$

0.47

$

0.49

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

$

4,364

$

5,536

$

5,533

$

3,501

$

2,769


At or For the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Selected Financial Ratios and Other Data(1):

Performance Ratios (Annualized):

Return on average assets (2)

(0.17

)%

0.67

%

0.64

%

1.14

%

1.23

%

Return on average tangible assets (2) (3)

(0.18

)

0.71

0.68

1.19

1.29

Return on average stockholders’ equity (2)

(1.32

)

5.16

4.70

8.12

8.66

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

(2.05

)

8.10

7.50

12.33

13.18

Stockholders’ equity to total assets

12.55

13.01

13.44

13.98

14.07

Tangible stockholders’ equity to tangible assets (3)

8.41

8.77

8.85

9.71

9.73

Tangible common stockholders’ equity to tangible assets (3)

7.91

8.25

8.85

9.71

9.73

Net interest rate spread

2.77

3.02

3.29

3.26

3.32

Net interest margin

2.97

3.24

3.52

3.48

3.55

Operating expenses to average assets (2)

1.94

2.02

2.44

2.31

2.13

Efficiency ratio (2) (4)

66.83

62.08

67.28

63.82

57.86

Loans to deposits

86.19

93.43

100.51

98.20

97.90


For the Nine Months Ended September 30,

2020

2019

Performance Ratios (Annualized):

Return on average assets (2)

0.37

%

1.09

%

Return on average tangible assets (2) (3)

0.38

1.14

Return on average stockholders’ equity (2)

2.79

7.74

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

4.38

11.83

Net interest rate spread

3.02

3.45

Net interest margin

3.23

3.66

Operating expenses to average assets (2)

2.13

2.37

Efficiency ratio (2) (4)

65.39

63.32

(continued)

At or For the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Trust and Asset Management:

Wealth assets under administration

$

232,292

$

224,042

$

173,856

$

195,415

$

194,137

Nest Egg

80,472

57,383

43,528

34,865

23,946

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

24.21

24.47

23.38

22.88

22.57

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

14.58

14.79

14.62

15.13

14.86

Common shares outstanding at end of period

60,378,120

60,343,077

60,311,717

50,405,048

50,700,586

Preferred shares outstanding at end of period

57,370

57,370

Number of full-service customer facilities:

62

62

75

56

56

Quarterly Average Balances

Total securities

$

1,112,174

$

1,130,779

$

1,186,535

$

1,008,461

$

1,039,560

Loans receivable, net

8,350,797

8,295,622

7,850,662

6,162,808

6,008,325

Total interest-earning assets

10,268,834

9,780,417

9,100,923

7,214,764

7,088,817

Total assets

11,621,969

11,114,586

10,332,809

8,192,177

8,073,238

Interest-bearing transaction deposits

5,425,392

5,065,069

4,825,193

4,053,226

3,971,380

Time deposits

1,606,632

1,623,890

1,459,348

931,228

920,032

Total borrowed funds

735,035

828,928

832,285

577,042

552,998

Total interest-bearing liabilities

7,767,059

7,517,887

7,116,826

5,561,496

5,444,410

Non-interest bearing deposits

2,209,241

2,018,044

1,687,582

1,393,002

1,396,259

Stockholders’ equity

1,482,682

1,453,658

1,414,924

1,145,665

1,143,701

Total deposits

9,241,265

8,707,003

7,972,123

6,377,456

6,287,671

Quarterly Yields

Total securities

2.43

%

2.64

%

2.68

%

2.59

%

2.64

%

Loans receivable, net

4.09

4.28

4.61

4.53

4.60

Total interest-earning assets

3.60

3.94

4.34

4.24

4.30

Interest-bearing transaction deposits

0.40

0.47

0.64

0.59

0.58

Time deposits

1.45

1.58

1.71

1.78

1.72

Borrowed funds

2.60

2.38

2.24

2.41

2.64

Total interest-bearing liabilities

0.83

0.92

1.05

0.98

0.98

Net interest spread

2.77

3.02

3.29

3.26

3.32

Net interest margin

2.97

3.24

3.52

3.48

3.55

Total deposits

0.49

0.57

0.70

0.64

0.62

(1) With the exception of end of quarter ratios, all ratios are based on average daily balances.
(2) Performance ratios for each period include non-core operations. Refer to “Non-GAAP Reconciliation” table under “Supplemental Information” for additional information.
(3) Tangible common stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible. Tangible common stockholders’ equity also excludes 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

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Core Earnings:

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

$

(6,019

)

$

18,638

$

16,533

$

23,450

$

24,971

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

Merger related expenses

3,156

3,070

8,527

3,742

777

Branch consolidation expenses

830

863

2,594

268

1,696

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

2,447

Net unrealized loss on equity investments

3,576

Non-recurring professional fees

1,274

750

Income tax benefit related to change in New Jersey tax code

(2,205

)

Income tax expense on items

(1,809

)

(966

)

(3,121

)

(793

)

(663

)

Core (loss) earnings (Non-GAAP)

$

(266

)

$

21,605

$

26,980

$

25,736

$

27,531

Core diluted (loss) earnings per share

$

$

0.36

$

0.45

$

0.51

$

0.54

Core Ratios (Annualized):

Return on average assets

(0.01

)%

0.78

%

1.05

%

1.25

%

1.35

%

Return on average tangible assets

(0.01

)

0.82

1.11

1.31

1.42

Return on average tangible stockholders’ equity

(0.11

)

9.39

12.25

13.53

14.53

Efficiency ratio

59.63

57.71

55.36

56.73

53.56


For the Nine Months Ended September 30,

2020

2019

Core Earnings:

Net income available to common stockholders (GAAP)

$

29,152

$

65,124

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

Merger related expenses

14,753

6,761

Branch consolidation expenses

4,287

8,782

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

2,447

Net unrealized loss on equity investments

3,576

Non-recurring professional fees

750

Compensation expense due to the retirement of an executive officer

1,256

Income tax expense on items

$

(5,896

)

$

(3,569

)

Core earnings (Non-GAAP)

$

48,319

$

79,104

Core diluted earnings per share

$

0.80

$

1.56

Core Ratios (Annualized):

Return on average assets

0.59

%

1.32

%

Return on average tangible assets

0.61

1.39

Return on average tangible stockholders’ equity

7.00

14.37

Efficiency ratio

57.53

55.47


COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Total stockholders’ equity

$

1,461,714

$

1,476,434

$

1,409,834

$

1,153,119

$

1,144,528

Less:

Goodwill

500,849

501,472

500,093

374,632

374,537

Core deposit intangible

25,194

26,732

28,276

15,607

16,605

Tangible stockholders’ equity

$

935,671

$

948,230

$

881,465

$

762,880

$

753,386

Total assets

$

11,651,297

$

11,345,365

$

10,489,074

$

8,246,145

$

8,135,173

Less:

Goodwill

500,849

501,472

500,093

374,632

374,537

Core deposit intangible

25,194

26,732

28,276

15,607

16,605

Tangible assets

$

11,125,254

$

10,817,161

$

9,960,705

$

7,855,906

$

7,744,031

Tangible stockholders’ equity to tangible assets

8.41

%

8.77

%

8.85

%

9.71

%

9.73

%

COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TOTAL TANGIBLE ASSETS

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Total stockholders’ equity

$

1,461,714

$

1,476,434

$

1,409,834

$

1,153,119

$

1,144,528

Less:

Goodwill

500,849

501,472

500,093

374,632

374,537

Core deposit intangible

25,194

26,732

28,276

15,607

16,605

Preferred stock

55,544

55,711

Tangible common stockholders’ equity

$

880,127

$

892,519

$

881,465

$

762,880

$

753,386

Total assets

$

11,651,297

$

11,345,365

$

10,489,074

$

8,246,145

$

8,135,173

Less:

Goodwill

500,849

501,472

500,093

374,632

374,537

Core deposit intangible

25,194

26,732

28,276

15,607

16,605

Tangible assets

$

11,125,254

$

10,817,161

$

9,960,705

$

7,855,906

$

7,744,031

Tangible common stockholders’ equity to tangible assets

7.91

%

8.25

%

8.85

%

9.71

%

9.73

%



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 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

(813

)

940,072

Accrued interest receivable

2,382

2,382

Bank owned life insurance

22,440

22,440

Deferred tax asset

5,201

(1,623

)

3,578

Other assets

18,662

(2,706

)

15,956

Core deposit intangible

12,130

12,130

Total assets acquired

1,103,504

8,537

1,112,041

Liabilities assumed:

Deposits

(939,132

)

(2,618

)