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OceanFirst Financial Corp. Announces First Quarter Financial Results

/EIN News/ -- 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     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 %

 


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