OceanFirst Financial Corp. Announces Quarterly and Annual Earnings and Financial Results

January 28, 2021 4:15 PM EST

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RED BANK, N.J., Jan. 28, 2021 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (NASDAQ:“OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced net income available to common stockholders of $32.1 million, or $0.54 per diluted share, for the quarter ended December 31, 2020, as compared to $23.5 million, or $0.47 per diluted share, for the corresponding prior year quarter. For the year ended December 31, 2020, the Company reported net income available to common stockholders of $61.2 million, or $1.02 per diluted share, as compared to $88.6 million, or $1.75 per diluted share, for the corresponding prior year. The quarter and annual results were impacted by the COVID-19 pandemic, through higher credit losses, net interest margin compression and increased operating expenses.

Core earnings for the quarter and year ended December 31, 2020 amounted to $23.2 million and $72.2 million, respectively, or $0.39 and $1.20 per diluted share, respectively.

Core earnings are non-GAAP (“generally accepted accounting principles”) measures. 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”), 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). Non-core operations had a favorable impact of $8.9 million, net of tax, and an unfavorable impact of $11.0 million, net of tax, to GAAP earnings for the quarter and year ended December 31, 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.

Key developments for the recent quarter and year are described below:

  • Earnings: Achieved record quarterly GAAP earnings of $32.1 million, with diluted earnings per share increasing by 15%, to $0.54, as compared to the corresponding prior year quarter.
  • Balance sheet: The Company ended 2020 with a strengthened balance sheet driven by a series of successfully executed strategic decisions throughout the year. As a result of these initiatives, tangible book value per share increased to $14.98 from $14.58 in the prior linked quarter and tangible stockholders’ equity to tangible assets ratio improved to 8.79% from 8.41% in the prior linked quarter. Highlights include:

○ The creation of a yield-focused debt and equity portfolio, which resulted in $23.6 million of net gains in the fourth quarter;
○ The sale of $298.1 million in PPP loans, which resulted in gains of $5.1 million;
○ The extinguishment of $343.5 million in high-cost borrowings with an average rate of 1.63%, providing a tailwind heading into 2021;
○ Total loan growth for the year was $1.54 billion, reflecting bank acquisitions and record loan originations of $2.23 billion (including PPP loan originations), partly offset by loan sales of $612.3 million. Deposits increased $3.10 billion for the year, including $1.51 billion of organic growth.

  • Loan forbearance: COVID-19 related loans under full forbearance have been substantially resolved, which allows the Bank to focus on organic growth and gain earnings momentum in 2021.

“I’m pleased to announce record GAAP quarterly earnings of $32.1 million, completing a year which began with the closing of two whole bank acquisitions and quickly became a year filled with challenges to support our customers and communities during an unprecedented health crisis,” said Chairman and Chief Executive Officer, Christopher D. Maher. Mr. Maher added, “OceanFirst is well positioned for 2021 as our customers look forward to the opportunities that are on the horizon and our Country works to recover from the pandemic. At OceanFirst, we remain committed to growing our Company and will continue to focus on maintaining strong credit, fostering margin expansion, and controlling operating expenses while seeking growth opportunities.”

The Company expects to consolidate four branches in the second quarter, with an expected $1.1 million in annual savings. The latest branch consolidations bring the total number of branches consolidated to 57 over the past five years, helping to drive a targeted average branch size of $160 million.

The Company’s Board of Directors declared its ninety-sixth consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.17 per share will be paid on February 19, 2021 to stockholders of record on February 8, 2021. The Board previously declared a quarterly cash dividend on preferred stock of $0.4375 per depository share, representing 1/40th interest in the Company’s Series A Preferred Stock. This dividend will be paid on February 15, 2021 to preferred stockholders of record on January 29, 2021.

Results of Operations

On January 31, 2019, the Company completed its acquisition of Capital Bank of New Jersey (“Capital Bank”) and its results of operations are included in the consolidated results for the quarter and year ended December 31, 2020, but are excluded from the results of operations for the period from January 1, 2019 to January 31, 2019.

On January 1, 2020, the Company completed its acquisitions of Two River and Country Bank and their respective results of operations from January 1, 2020 through December 31, 2020 are included in the consolidated results for the quarter and year ended December 31, 2020, but are not included in the results of operations for the corresponding prior year periods.

Net income was favorably impacted by $8.9 million, net of tax, and adversely impacted by $2.3 million, net of tax, of non-core operations for the quarters ended December 31, 2020 and 2019, respectively. Net income was adversely impacted by $11.0 million, net of tax, and $16.3 million, net of tax, of non-core operations for the years ended December 31, 2020 and 2019, respectively. Core earnings for the quarter and year ended December 31, 2020 were $23.2 million and $72.2 million, respectively, representing a decrease from core earnings of $25.7 million and $104.8 million, respectively, for the same prior year periods. 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 quarter and year ended December 31, 2020 increased to $77.9 million and $313.0 million, respectively, as compared to $63.4 million and $256.0 million, respectively, for the same prior year periods, reflecting an increase in interest-earning assets, partly offset by a reduction in net interest margin. Average interest-earning assets increased by $3.21 billion and $2.82 billion for the quarter and year ended December 31, 2020, respectively, as compared to the same prior year periods. The averages for the quarter and year ended December 31, 2020, were favorably impacted by $1.65 billion and $1.75 billion, respectively, of interest-earning assets acquired from Two River and Country Bank and $77.5 million and $227.5 million, respectively, of interest-earning assets from PPP loans. Average loans receivable, net of allowance for credit losses, increased by $1.83 billion and $2.15 billion for the quarter and year ended December 31, 2020, respectively, as compared to the same prior year periods. The increases attributable to the acquisition of Two River and Country Bank for the quarter and year ended December 31, 2020 were $1.46 billion and $1.55 billion, respectively. The net interest margin for the quarter and year ended December 31, 2020 decreased to 2.97% and 3.16%, respectively, from 3.48% and 3.62%, 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 quarter and the year ended December 31, 2020, the cost of average interest-bearing liabilities decreased to 0.74% and 0.88%, respectively, from 0.98% and 0.96%, respectively, in the corresponding prior year periods. The total cost of deposits (including non-interest bearing deposits) was 0.45% and 0.55% for the quarter and year ended December 31, 2020, respectively, as compared to 0.64% and 0.61%, respectively, in the same prior year periods.

Net interest income for the quarter ended December 31, 2020, increased by $1.1 million, as compared to the prior linked quarter, while net interest margin remained steady at 2.97%, as compared to the prior linked quarter. The yield on average interest-earning assets decreased to 3.53% from 3.60% in the prior linked quarter, primarily due to increasing balance sheet liquidity. The total cost of deposits (including non-interest bearing deposits) was 0.45% for the quarter ended December 31, 2020, as compared to 0.49% in the prior linked quarter.

Provision for Credit Losses

For the quarter and year ended December 31, 2020, the provision for credit loss expense was $4.1 million and $59.4 million, respectively, as compared to $355,000 and $1.6 million, respectively, for the corresponding prior year periods, and $35.7 million in the prior linked quarter. Credit loss expense for the year ended December 31, 2020 was significantly influenced by economic conditions related to the COVID-19 pandemic, as well as estimates of how those conditions may impact the Company’s borrowers, and the decision to sell higher risk commercial loans in the third quarter of 2020. At December 31, 2020, COVID-19 related loans under full forbearance have been substantially resolved.

Net loan charge-offs were $2.9 million and $18.9 million for the quarter and year ended December 31, 2020, respectively, as compared to net loan charge-offs of $139,000 and $1.4 million, respectively, in the corresponding prior year periods, and net loan charge-offs of $15.0 million in the prior linked quarter. The three months ended December 31, 2020 included $2.3 million of charge-offs related to the sale of under-performing residential and consumer loans. The year ended December 31, 2020 included $14.6 million of charge-offs related to the sale of higher risk commercial loans and $3.3 million of charge-offs related to the sale of under-performing residential and consumer loans. Non-performing loans held-for-investment totaled $36.4 million at December 31, 2020, as compared to $29.9 million at September 30, 2020, and $17.8 million at December 31, 2019.

Non-interest Income

For the quarter and year ended December 31, 2020, other income increased to $40.6 million and $73.9 million, respectively, as compared to $11.2 million and $42.2 million, respectively, for the corresponding prior year periods. Other income for the quarter and year ended December 31, 2020 included $29.6 million and $26.0 million, respectively, of net gains related to non-core operations.

The primary contributor to other income for the quarter and year ended December 31, 2020 was gains earned on equity investments. The Company implemented several programs in 2020 to invest excess liquidity in high quality interest or dividend bearing securities. In August 2020, the Company began purchasing select financial services institutions’ common stocks paying attractive dividends. The positive performance of the portfolio drove the decision to liquidate all of the positions in December 2020 and January 2021, which resulted in an additional $8.1 million of net gains recorded in January 2021.

Excluding the impact of non-core operations, the change in other income for the quarter ended December 31, 2020 over the prior year was due to Two River and Country Bank acquisitions which added $439,000. The remaining decrease in other income for the quarter ended December 31, 2020, compared to the corresponding prior year period, was due to decreases in commercial loan swap income of $1.9 million and fees and service charges of $1.2 million, partly offset by an increase in net gain on sale of loans of $1.0 million, and net gain on real estate operations of $695,000.

Excluding the impact of non-core operations, the change in other income for the year ended December 31, 2020 over the prior year was due to Two River and Country Bank acquisitions which added $2.8 million. The remaining increase in other income was due to increases in commercial loan swap income of $2.8 million, net gain on sales of loans of $2.5 million, net gain on real estate operations of $981,000, and bankcard services of $577,000, partly offset by a decrease in fees and service charges of $4.4 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.

Excluding the impact of non-core operations, other income for the quarter ended December 31, 2020, decreased $723,000 as compared to the prior linked quarter. The decrease was primarily related to a decrease in commercial loan swap income of $1.3 million.

Non-interest Expense

Operating expenses increased to $70.9 million and $246.4 million for the quarter and year ended December 31, 2020, respectively, as compared to $47.6 million and $189.1 million, respectively, in the same prior year periods. Operating expenses for the quarter and year ended December 31, 2020 included $17.9 million and $37.8 million, respectively, of net expenses related to non-core operations. Operating expenses for the quarter and year ended December 31, 2019 included $5.3 million and $22.8 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 Two River and Country Bank acquisitions, which added $6.3 million and $29.3 million for the quarter and year ended December 31, 2020, respectively. The remaining increase in operating expenses for the quarter ended December 31, 2020 was due to increases in federal deposit insurance expense of $1.4 million, compensation and benefits expense of $1.4 million, professional fees of $1.3 million, and operating expenses attributable to the COVID-19 pandemic of $707,000. The increase in operating expenses for the year ended December 31, 2020 was due to increases in compensation and benefits expense of $7.6 million, operating expenses attributable to the COVID-19 pandemic of $4.5 million, professional fees of $3.6 million, and federal deposit insurance expense of $2.0 million, partly offset by decreases in equipment expense of $1.8 million, occupancy expense of $1.6 million, and check card processing of $680,000.

For the quarter ended December 31, 2020, operating expenses, excluding net expenses related to non-core operations, increased $252,000 as compared to the prior linked quarter. The increase was due to increases in other operating expense of $788,000, federal deposit insurance expense of $648,000, and professional fees of $583,000, partly offset by decreases in compensation and benefits expense of $1.1 million and operating expenses attributable to the COVID-19 pandemic of $1.0 million.

Income Tax Expense

The provision for income taxes was $10.4 million and $17.7 million for the quarter and year ended December 31, 2020, respectively, as compared to $3.2 million and $18.8 million, respectively, for the same prior year periods. The effective tax rate was 24.0% and 21.9% for the quarter and year ended December 31, 2020, respectively, as compared to 11.9% and 17.5%, respectively, for the same prior year periods. The higher effective tax rates for the quarter and year ended December 31, 2020 are due to 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. The lower tax rates in the prior year periods were also due to the reduction in income tax expense of $2.2 million from the revaluation of state deferred tax assets as a result of the change in New Jersey tax code. Excluding the impact of the New Jersey tax code change, the effective tax rate for the quarter and year ended December 31, 2019 was 20.2% and 19.6%.

Financial Condition

Total assets increased by $3.20 billion to $11.45 billion at December 31, 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 by $1.15 billion to $1.27 billion at December 31, 2020, from $120.5 million at December 31, 2019, due to increased deposits, the Company’s decision to build liquidity during the economic downturn, the cash received from the issuance of subordinated notes and non-cumulative perpetual preferred stock as described below, and the cash received from loan sales throughout the year. Loans receivable, net of allowance for credit losses, increased by $1.50 billion, to $7.70 billion at December 31, 2020, from $6.21 billion at December 31, 2019, primarily due to acquired loans from Two River and Country Bank of $1.56 billion. As part of the acquisitions of Two River and Country Bank, the Company’s goodwill balance increased to $500.3 million at December 31, 2020, from $374.6 million at December 31, 2019 and core deposit intangibles increased to $23.7 million, from $15.6 million. Other assets increased by $39.4 million to $209.0 million at December 31, 2020, from $169.5 million at December 31, 2019, primarily due to an increase in swap positions.

Deposits increased by $3.10 billion, to $9.43 billion at December 31, 2020, from $6.33 billion at December 31, 2019, primarily due to acquired deposits from Two River and Country Bank of $1.59 billion and organic deposit growth of $1.51 billion. The loan-to-deposit ratio at December 31, 2020 was 82.3%, as compared to 98.2% at December 31, 2019. The Company utilized the excess liquidity to prepay all FHLB advances in the fourth quarter of 2020, bringing the balance to $0 at December 31, 2020 from $519.3 million at December 31, 2019. The increase in other borrowings of $138.7 million to $235.5 million at December 31, 2020, from $96.8 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 by $92.7 million to $155.3 million at December 31, 2020, from $62.6 million at December 31, 2019, primarily due to an increase in swap positions.

Stockholders’ equity increased to $1.48 billion at December 31, 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 Company’s stock repurchase program, there were 2,019,145 shares available for repurchase at December 31, 2020. The Company had suspended its repurchase activity on February 28, 2020, and has determined to recommence repurchases under its existing stock repurchase plan beginning February 1, 2021. For the year ended December 31, 2020, the Company repurchased 648,851 shares under the repurchase program at a weighted average cost of $22.83.

Asset Quality

The Company’s non-performing loans held-for-investment totaled $36.4 million at December 31, 2020, as compared to $29.9 million at September 30, 2020, and $17.8 million at December 31, 2019. Non-performing loans held-for-investment do not include $48.5 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.

COVID-19 related loans under full forbearance have been substantially resolved and returned to payment terms. The Company’s special mention and substandard loans were $360.2 million as of December 31, 2020, as compared to $317.4 million as of September 30, 2020 and $107.7 million as of December 31, 2019. The increase as compared to the prior year reflects the addition of Two River and Country Bank portfolios, as well as borrowers that have been negatively impacted by the COVID-19 pandemic which primarily occurred during the third quarter as Coronavirus Aid, Relief and Economic Security (“CARES”) Act forbearance periods ended. A significant majority of these borrowers are current on their loan payments. The Company’s non-accrual loans as of December 31, 2020 were 0.47% of total loans, as compared to 0.37% as of September 30, 2020 and 0.29% as of December 31, 2019.

At December 31, 2020, the Company’s allowance for credit losses was 0.78% of total loans, an increase from 0.27% at December 31, 2019. The allowance for credit losses does not reflect the net unamortized credit mark of $28.0 million. The allowance for credit losses plus the unamortized credit mark amounted to $88.7 million, or 1.14% of loans held-for-investment. The allowance for credit losses as a percent of total non-performing loans held-for-investment was 166.81% at December 31, 2020, as compared to 94.41% at December 31, 2019.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance 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 Non-GAAP Reconciliation at the end of this document for details on the earnings impact of these items.

Annual Meeting

The Company also announced today that its Annual Meeting of Stockholders will be virtually held on Wednesday, May 19, 2021 at 9:00 a.m. Eastern Time. The record date for stockholders to vote at the Annual Meeting is April 2, 2021. Additional information regarding virtual access to the meeting will be distributed prior to the meeting.

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, January 29, 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 10150841 from one hour after the end of the call until April 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 an $11.45 billion regional bank operating throughout New Jersey, metropolitan Philadelphia and metropolitan New York City. OceanFirst Bank delivers commercial and residential financing solutions, wealth management and deposit services and is one of the largest and oldest community-based financial institutions headquartered in New Jersey.

OceanFirst Financial Corp.’s press releases are available by visiting us at www.oceanfirst.com.

Forward-Looking Statements

In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “should,” “may,” “view,” “opportunity,” “potential,” or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: changes in interest rates, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, accounting principles and guidelines and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under Item 1A - Risk Factors and elsewhere, and subsequent securities filings and should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


OceanFirst Financial Corp
.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)

  December 31, 2020 September 30, 2020 December 31, 2019
  (Unaudited) (Unaudited)  
Assets      
Cash and due from banks $1,272,134  $980,870  $120,544 
Debt securities available-for-sale, at estimated fair value 183,302  169,634  150,960 
Debt securities held-to-maturity, net of allowance for credit losses of $1,715 at December 31, 2020 and $2,393 at September 30, 2020 (estimated fair value of $968,466 at December 31, 2020, $902,418 at September 30, 2020, and $777,290 at December 31, 2019) 937,253  871,688  768,873 
Equity investments, at estimated fair value 107,079  63,846  10,136 
Restricted equity investments, at cost 51,705  67,505  62,356 
Loans receivable, net of allowance for credit losses of $60,735 at December 31, 2020, $56,350 at September 30, 2020, and $16,852 at December 31, 2019 7,704,857  7,943,390  6,207,680 
Loans held-for-sale 45,524  388,763   
Interest and dividends receivable 35,269  40,671  21,674 
Other real estate owned 106  106  264 
Premises and equipment, net 107,094  103,249  102,691 
Bank owned life insurance 265,253  264,167  237,411 
Assets held for sale 5,782  6,717  3,785 
Goodwill 500,319  500,849  374,632 
Core deposit intangible 23,668  25,194  15,607 
Other assets 208,968  224,648  169,532 
Total assets $11,448,313  $11,651,297  $8,246,145 
Liabilities and Stockholders’ Equity      
Deposits $9,427,616  $9,283,288  $6,328,777 
Federal Home Loan Bank advances   343,452  519,260 
Securities sold under agreements to repurchase with retail customers 128,454  142,823  71,739 
Other borrowings 235,471  246,941  96,801 
Advances by borrowers for taxes and insurance 17,296  20,104  13,884 
Other liabilities 155,346  152,975  62,565 
Total liabilities 9,964,183  10,189,583  7,093,026 
Total stockholders’ equity 1,484,130  1,461,714  1,153,119 
Total liabilities and stockholders’ equity $11,448,313  $11,651,297  $8,246,145 


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

  For the Three Months Ended, For the Year Ended
  December 31, September 30, December 31, December 31,
  2020 2020 2019 2020 2019
  |--------------------- (Unaudited) ---------------------| (Unaudited)  
Interest income:          
Loans $84,997  $85,933   $70,298   $349,221  $279,931  
Mortgage-backed securities 3,388  3,212   3,552   14,037  15,300  
Debt securities, equity investments and other 4,177  3,817   3,225   16,350  13,563  
Total interest income 92,562  92,962   77,075   379,608  308,794  
Interest expense:          
Deposits 10,679  11,370   10,214   48,290  38,432  
Borrowed funds 4,032  4,804   3,507   18,367  14,391  
Total interest expense 14,711  16,174   13,721   66,657  52,823  
Net interest income 77,851  76,788   63,354   312,951  255,971  
Credit loss expense 4,072  35,714   355   59,404  1,636  
Net interest income after credit loss expense 73,779  41,074   62,999   253,547  254,335  
Other income:          
Bankcard services revenue 3,098  3,097   2,641   11,417  10,263  
Trust and asset management revenue 492  490   478   2,052  2,102  
Fees and services charges 3,950  3,732   4,710   15,808  18,500  
Net gain on sales of loans 6,348  1,001   1   8,278  16  
Net gain (loss) on equity investments 24,487  (3,576)  (63)  21,214  267  
Net gain (loss) from other real estate operations 23  214   (95)  35  (330) 
Income from bank owned life insurance 1,798  1,530   1,375   6,424  5,420  
Commercial loan swap income 116  1,425   2,062   8,080  5,285  
Other 308  266   122   618  642  
Total other income 40,620  8,179   11,231   73,926  42,165  
Operating expenses:          
Compensation and employee benefits 27,323  29,012   22,518   114,155  89,912  
Occupancy 4,968  5,270   4,071   20,782  17,159  
Equipment 1,938  1,906   1,775   7,769  7,719  
Marketing 632  963   840   3,117  3,469  
Federal deposit insurance and regulatory assessments 1,859  1,212   296   4,871  2,227  
Data processing 4,624  4,517   4,078   17,467  14,814  
Check card processing 1,507  1,385   1,557   5,458  5,956  
Professional fees 3,908  3,354   3,641   12,247  9,338  
Other operating expense 4,768  3,644   3,815   16,552  14,968  
Amortization of core deposit intangible 1,526  1,538   998   6,186  4,027  
FHLB advance prepayment fees 13,333        14,257    
Branch consolidation expense 3,336  830   268   7,623  9,050  
Merger related expenses 1,194  3,156   3,742   15,947  10,503  
Total operating expenses 70,916  56,787   47,599   246,431  189,142  
Income (loss) before provision (benefit) for income taxes 43,483  (7,534)  26,631   81,042  107,358  
Provision (benefit) for income taxes 10,419  (2,608)  3,181   17,733  18,784  
Net income (loss) 33,064  (4,926)  23,450   63,309  88,574  
Dividends on preferred shares 1,004  1,093      2,097    
Net income (loss) available to common stockholders $32,060  $(6,019)  $23,450   $61,212  $88,574  
Basic earnings (loss) per share $0.53  $(0.10)  $0.47   $1.02  $1.77  
Diluted earnings (loss) per share $0.54  $(0.10)  $0.47   $1.02  $1.75  
Average basic shares outstanding 59,961  59,935   49,890   59,919  50,166  
Average diluted shares outstanding 60,057  59,935   50,450   60,072  50,746  


OceanFirst Financial Corp.

SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)

LOANS RECEIVABLE  At
   December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Commercial:           
Commercial and industrial  $470,656   $599,188   $910,762   $502,760   $396,434  
Commercial real estate - owner-occupied 1,145,065   1,176,529   1,199,742   1,220,983   792,653  
Commercial real estate - investor 3,491,464   3,453,276   3,449,160   3,331,662   2,296,410  
Total commercial  5,107,185   5,228,993   5,559,664   5,055,405   3,485,497  
Consumer:           
Residential real estate  2,309,459   2,407,178   2,426,277   2,458,641   2,321,157  
Home equity loans and lines  285,016   301,712   320,627   335,624   318,576  
Other consumer  54,446   63,095   71,721   82,920   89,422  
Total consumer  2,648,921   2,771,985   2,818,625   2,877,185   2,729,155  
Total loans  7,756,106   8,000,978   8,378,289   7,932,590   6,214,652  
Deferred origination costs (fees), net 9,486   (1,238)  (4,300)  10,586   9,880  
Allowance for credit losses  (60,735)  (56,350)  (38,509)  (29,635)  (16,852) 
Loans receivable, net  $7,704,857   $7,943,390   $8,335,480   $7,913,541   $6,207,680  
Mortgage loans serviced for others $95,789   $88,210   $101,840   $51,399   $50,042  
 At December 31, 2020 Average Yield          
Loan pipeline (1):           
Commercial3.78% $210,024   $154,700   $169,093   $293,820   $219,269  
Residential real estate3.16  151,152   212,107   181,800   223,032   105,396  
Home equity loans and lines4.14  6,630   10,301   8,282   8,429   3,049  
Total3.53% $367,806   $377,108   $359,175   $525,281   $327,714  


 For the Three Months Ended
 December 31, 2020 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 Average Yield          
Loan originations:           
Commercial3.74% $173,715  $187,747  $216,979 (2)$266,882  $264,938 
Residential real estate3.23  222,780  219,325  242,137  148,675  226,492 
Home equity loans and lines4.18  13,435  10,966  12,128  10,666  12,961 
Total3.48% $409,930  $418,038  $471,244  $426,223  $504,391 
Loans sold  $56,126 (3) $56,722  $104,600 (3)$7,500 (3)$110 

(1) Loan pipeline includes loans approved but not funded.
(2) Excludes loans originated through the PPP of $504 million.
(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 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
  December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Type of Account          
Non-interest-bearing $2,133,195  $2,240,799  $2,161,766  $1,783,216  $1,377,396 
Interest-bearing checking 3,646,866  3,317,296  3,022,887  2,647,487  2,539,428 
Money market deposit 783,521  691,872  680,199  620,145  578,147 
Savings 1,491,251  1,471,554  1,456,931  1,420,628  898,174 
Time deposits 1,372,783  1,561,767  1,645,971  1,420,591  935,632 
  $9,427,616  $9,283,288  $8,967,754  $7,892,067  $6,328,777 


OceanFirst Financial Corp.

ASSET QUALITY
(dollars in thousands)

ASSET QUALITYDecember 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Non-performing loans held-for-investment:         
Commercial and industrial$1,551  $586  $1,586  $207  $207 
Commercial real estate - owner-occupied13,054  11,365  4,582  4,219  4,811 
Commercial real estate - investor10,660  2,978  5,274  3,384  2,917 
Residential real estate8,642  11,518  6,568  5,920  7,181 
Home equity loans and lines2,503  3,448  3,034  2,533  2,733 
Total non-performing loans held-for-investment36,410  29,895  21,044  16,263  17,849 
Non-performing loans held-for-sale  67,489       
Other real estate owned106  106  248  484  264 
Total non-performing assets$36,516  $97,490  $21,292  $16,747  $18,113 
PCD loans (1)$48,488  $56,422  $61,694  $59,783  $13,265 
Delinquent loans 30 to 89 days$34,683  $13,753  $13,640  $48,905  $14,798 
Troubled debt restructurings:         
Non-performing (included in total non-performing loans above)$5,158  $9,866  $6,189  $6,249  $6,566 
Performing12,009  12,777  16,365  16,102  18,042 
Total troubled debt restructurings$17,167  $22,643  $22,554  $22,351  $24,608 
Allowance for credit losses$60,735  $56,350  $38,509  $29,635  $16,852 
Allowance for credit losses as a percent of total loans receivable (2)0.78% 0.70% 0.46% 0.37% 0.27%
Allowance for credit losses as a percent of total non-performing
loans held-for-investment
166.81  188.49  182.99  182.22  94.41 
Non-performing loans as a percent of total loans receivable0.47  0.37  0.25  0.21  0.29 
Non-performing assets as a percent of total assets0.32  0.84  0.19  0.16  0.22 

(1) PCD loans are not included in non-performing loans held-for-investment, troubled debt restructurings 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 $27,951, $31,617, $35,439, $38,272, and $30,260 at December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively.

NET CHARGE-OFFS For the Three Months Ended
  December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Net (charge-offs) recoveries:          
Loan charge-offs $(3,220) $(15,411)  $(169)  $(1,384) $(445)
Recoveries on loans 278  416   401   230  306 
Net loan (charge-offs) recoveries $(2,942)(1)$(14,995) (2)$232   $(1,154)(3)$(139)
Net loan charge-offs to average total loans (annualized) 0.15% 0.71%  NM*   0.06% 0.01%
Net loan (charge-offs) recoveries details:          
Commercial $(775) $(14,801)  $30   $59  $163 
Residential mortgage and construction (1,731) 314   212   (1,112) (61)
Home equity loans and lines (451) (490)  (3)  (36) (240)
Other consumer 15  (18)  (7)  (65) (1)
Net loan (charge-offs) recoveries $(2,942)(1)$(14,995) (2)$232   $(1,154)(3)$(139)

(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 residential loans sold.
* Not Meaningful


OceanFirst Financial Corp.

ANALYSIS OF NET INTEREST INCOME

 For the Three Months Ended
 December 31, 2020 September 30, 2020 December 31, 2019
(dollars in thousands)Average
Balance
 Interest Average
Yield/
Cost
 Average
Balance
 Interest Average
Yield/
Cost
 Average
Balance
 Interest Average
Yield/
Cost
Assets:                 
Interest-earning assets:                 
Interest-earning deposits and short-term investments$1,223,472   $341  0.11% $805,863   $236  0.12% $43,495   $196  1.79%
Securities (1)1,209,543   7,224  2.38  1,112,174   6,793  2.43  1,008,461   6,581  2.59 
Loans receivable, net (2)                 
Commercial5,271,633   58,776  4.44  5,554,897   58,639  4.20  3,442,771   42,416  4.89 
Residential real estate2,420,494   21,530  3.56  2,462,513   23,091  3.75  2,309,741   22,469  3.89 
Home equity loans and lines293,746   3,930  5.32  311,802   3,330  4.25  323,878   4,243  5.20 
Other consumer58,174   761  5.20  67,497   873  5.15  94,350   1,170  4.92 
Allowance for credit losses, net of deferred loan fees(51,682)      (45,912)      (7,932)     
Loans receivable, net7,992,365   84,997  4.23  8,350,797   85,933  4.09  6,162,808   70,298  4.53 
Total interest-earning assets10,425,380   92,562  3.53  10,268,834   92,962  3.60  7,214,764   77,075  4.24 
Non-interest-earning assets1,322,112       1,353,135       977,413      
Total assets$11,747,492       $11,621,969       $8,192,177      
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing checking$3,601,814   4,836  0.53% $3,289,319   4,627  0.56% $2,562,059   4,477  0.69%
Money market766,866   586  0.30  675,841   571  0.34  592,116   1,243  0.83 
Savings1,489,853   240  0.06  1,460,232   296  0.08  899,051   308  0.14 
Time deposits1,437,770   5,017  1.39  1,606,632   5,876  1.45  931,228   4,186  1.78 
Total7,296,303   10,679  0.58  7,032,024   11,370  0.64  4,984,454   10,214  0.81 
FHLB advances204,880   779  1.51  343,412   1,470  1.70  412,073   2,075  2.00 
Securities sold under agreements to repurchase143,385   154  0.43  144,720   174  0.48  68,257   85  0.49 
Other borrowings242,030   3,099  5.09  246,903   3,160  5.09  96,712   1,347  5.53 
Total interest-bearing liabilities7,886,598   14,711  0.74  7,767,059   16,174  0.83  5,561,496   13,721  0.98 
Non-interest-bearing deposits2,209,532       2,209,241       1,393,002      
Non-interest-bearing liabilities176,274       162,987       92,014      
Total liabilities10,272,404       10,139,287       7,046,512      
Stockholders’ equity1,475,088       1,482,682       1,145,665      
Total liabilities and equity$11,747,492       $11,621,969       $8,192,177      
Net interest income  $77,851      $76,788      $63,354   
Net interest rate spread (3)    2.79%     2.77%     3.26%
Net interest margin (4)    2.97%     2.97%     3.48%
Total cost of deposits (including non-interest-bearing deposits)    0.45%     0.49%     0.64%


  For the Year Ended
  December 31, 2020 December 31, 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 $613,971   $1,034  0.17% $57,742   $1,299  2.25%
Securities (1) 1,159,764   29,353  2.53  1,048,779   27,564  2.63 
Loans receivable, net (2)            
Commercial 5,299,813   236,749  4.47  3,329,396   168,507  5.06 
Residential real estate 2,465,740   93,120  3.78  2,204,931   87,729  3.98 
Home equity loans and lines 318,090   15,183  4.77  339,896   18,284  5.38 
Other consumer 72,331   4,169  5.76  107,672   5,411  5.03 
Allowance for credit losses, net of deferred loan fees (33,343)      (8,880)     
Loans receivable, net 8,122,631   349,221  4.30  5,973,015   279,931  4.69 
Total interest-earning assets 9,896,366   379,608  3.84  7,079,536   308,794  4.36 
Non-interest-earning assets 1,310,474       964,920      
Total assets $11,206,840       $8,044,456      
Liabilities and Stockholders’ Equity:            
Interest-bearing liabilities:            
Interest-bearing checking $3,168,889   19,395  0.61% $2,517,068   16,820  0.67%
Money market 677,554   2,902  0.43  605,607   4,919  0.81 
Savings 1,449,982   2,505  0.17  906,086   1,195  0.13 
Time deposits 1,531,857   23,488  1.53  929,488   15,498  1.67 
Total 6,828,282   48,290  0.71  4,958,249   38,432  0.78 
FHLB advances 413,290   7,018  1.70  387,925   8,441  2.18 
Securities sold under agreements to repurchase 125,500   562  0.45  64,525   276  0.43 
Other borrowings 207,386   10,787  5.20  98,095   5,674  5.78 
Total interest-bearing liabilities 7,574,458   66,657  0.88  5,508,794   52,823  0.96 
Non-interest-bearing deposits 2,031,100       1,325,836      
Non-interest-bearing liabilities 144,571       80,028      
Total liabilities 9,750,129       6,914,658      
Stockholders’ equity 1,456,711       1,129,798      
Total liabilities and equity $11,206,840       $8,044,456      
Net interest income   $312,951      $255,971   
Net interest rate spread (3)     2.96%     3.40%
Net interest margin (4)     3.16%     3.62%
Total cost of deposits (including non-interest-bearing deposits)     0.55%     0.61%

(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
(dollars in thousands, except per share amounts)

  December 31, 2020 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Selected Financial Condition Data:          
Total assets $11,448,313  $11,651,297  $11,345,365  $10,489,074  $8,246,145 
Debt securities available-for-sale, at estimated fair value 183,302  169,634  153,239  153,738  150,960 
Debt securities held-to-maturity, net of allowance for credit losses 937,253  871,688  867,959  914,255  768,873 
Equity investments, at estimated fair value 107,079  63,846  13,830  14,409  10,136 
Restricted equity investments, at cost 51,705  67,505  68,091  81,005  62,356 
Loans receivable, net of allowance for credit losses 7,704,857  7,943,390  8,335,480  7,913,541  6,207,680 
Deposits 9,427,616  9,283,288  8,967,754  7,892,067  6,328,777 
Federal Home Loan Bank advances   343,452  343,392  825,824  519,260 
Securities sold under agreements to repurchase and other borrowings 363,925  389,764  399,661  210,388  168,540 
Stockholders’ equity 1,484,130  1,461,714  1,476,434  1,409,834  1,153,119 


  For the Three Months Ended
  December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Selected Operating Data:          
Interest income $92,562  $92,962   $95,877  $98,207  $77,075 
Interest expense 14,711  16,174   17,210  18,562  13,721 
Net interest income 77,851  76,788   78,667  79,645  63,354 
Credit loss expense 4,072  35,714   9,649  9,969  355 
Net interest income after credit loss expense 73,779  41,074   69,018  69,676  62,999 
Other income (excluding net gain (loss) on equity investments and gain on sale of PPP loans) 11,032  11,755   11,430  13,697  11,231 
Net gain (loss) on equity investments 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) 53,053  52,801   51,075  51,675  43,589 
FHLB advance prepayment fees 13,333     924     
Branch consolidation expense 3,336  830   863  2,594  268 
Merger related expenses 1,194  3,156   3,070  8,527  3,742 
Income (loss) before provision (benefit) for income taxes 43,483  (7,534)  24,516  20,577  26,631 
Provision (benefit) for income taxes 10,419  (2,608)  5,878  4,044  3,181 
Net income (loss) $33,064  $(4,926)  $18,638  $16,533  $23,450 
Net income (loss) available to common stockholders $32,060  $(6,019)  $18,638  $16,533  $23,450 
Diluted earnings (loss) per share $0.54  $(0.10)  $0.31  $0.27  $0.47 
Net accretion/amortization of purchase accounting adjustments included in net interest income $6,186  $4,364   $5,536  $5,533  $3,501 


  At or For the Three Months Ended
  December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Selected Financial Ratios and Other Data(1):          
           
Performance Ratios (Annualized):          
Return on average assets (2) 1.12% (0.17)%  0.67% 0.64% 1.14%
Return on average tangible assets (2) (3) 1.17  (0.18)  0.71  0.68  1.19 
Return on average stockholders' equity (2) 8.92  (1.32)  5.16  4.70  8.12 
Return on average tangible stockholders' equity (2) (3) 13.85  (2.05)  8.10  7.50  12.33 
Stockholders' equity to total assets 12.96  12.55   13.01  13.44  13.98 
Tangible stockholders' equity to tangible assets (3) 8.79  8.41   8.77  8.85  9.71 
Tangible common equity to tangible assets (3) 8.28  7.91   8.25  8.85  9.71 
Net interest rate spread 2.79  2.77   3.02  3.29  3.26 
Net interest margin 2.97  2.97   3.24  3.52  3.48 
Operating expenses to average assets (2) 2.40  1.94   2.02  2.44  2.31 
Efficiency ratio (2) (4) 59.86  66.83   62.08  67.28  63.82 
Loans to deposits 82.27  86.19   93.43  100.51  98.20 


  At or For the Year Ended December 31,
  2020 2019
Performance Ratios:    
Return on average assets (2) 0.56% 1.10%
Return on average tangible assets (2) (3) 0.59  1.16 
Return on average stockholders' equity (2) 4.35  7.84 
Return on average tangible stockholders' equity (2) (3) 6.81  11.96 
Net interest rate spread 2.96  3.40 
Net interest margin 3.16  3.62 
Operating expenses to average assets (2) 2.20  2.35 
Efficiency ratio (2) (4) 63.70  63.44 


  At or For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2020 2020 2020 2020 2019
Wealth Management:          
Assets under administration $245,175  $232,292  $224,042  $173,856  $195,415 
Nest Egg 93,237  80,472  57,383  43,528  34,865 
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 24.57  24.21  24.47  23.38  22.88 
Tangible common equity per common share at end of period (3) 14.98  14.58  14.79  14.62  15.13 
Common shares outstanding at end of period 60,392,043  60,378,120  60,343,077  60,311,717  50,405,048 
Preferred shares outstanding at end of period 57,370  57,370  57,370     
Number of full-service customer facilities: 62  62  62  75  56 
Quarterly Average Balances          
Total securities $1,209,543  $1,112,174  $1,130,779  $1,186,535  $1,008,461 
Loans receivable, net 7,992,365  8,350,797  8,295,622  7,850,662  6,162,808 
Total interest-earning assets 10,425,380  10,268,834  9,780,417  9,100,923  7,214,764 
Total assets 11,747,492  11,621,969  11,114,586  10,332,809  8,192,177 
Interest-bearing transaction deposits 5,858,533  5,425,392  5,065,069  4,825,193  4,053,226 
Time deposits 1,437,770  1,606,632  1,623,890  1,459,348  931,228 
Total borrowed funds 590,295  735,035  828,928  832,285  577,042 
Total interest-bearing liabilities 7,886,598  7,767,059  7,517,887  7,116,826  5,561,496 
Non-interest bearing deposits 2,209,532  2,209,241  2,018,044  1,687,582  1,393,002 
Stockholders’ equity 1,475,088  1,482,682  1,453,658  1,414,924  1,145,665 
Total deposits 9,505,835  9,241,265  8,707,003  7,972,123  6,377,456 
Quarterly Yields          
Total securities 2.38% 2.43% 2.64% 2.68% 2.59%
Loans receivable, net 4.23  4.09  4.28  4.61  4.53 
Total interest-earning assets 3.53  3.60  3.94  4.34  4.24 
Interest-bearing transaction deposits 0.38  0.40  0.47  0.64  0.59 
Time deposits 1.39  1.45  1.58  1.71  1.78 
Borrowed funds 2.72  2.60  2.38  2.24  2.41 
Total interest-bearing liabilities 0.74  0.83  0.92  1.05  0.98 
Net interest spread 2.79  2.77  3.02  3.29  3.26 
Net interest margin 2.97  2.97  3.24  3.52  3.48 
Total deposits 0.45  0.49  0.57  0.70  0.64 

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

NON-GAAP RECONCILIATION

  For the Three Months Ended
  December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Core Earnings:          
Net income (loss) available to common stockholders (GAAP) $32,060  $(6,019) $18,638  $16,533  $23,450 
Add (less) non-recurring and non-core items:          
Merger related expenses 1,194  3,156  3,070  8,527  3,742 
Branch consolidation expenses 3,336  830  863  2,594  268 
Net (gain) loss on equity investments (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   
Non-recurring professional fees         1,274 
Income tax benefit related to change in New Jersey tax code         (2,205)
Income tax (benefit) expense on items 2,832  (1,809) (1,190) (3,121) (793)
Core earnings (loss) (Non-GAAP) $23,167  $(266) $22,305  $26,980  $25,736 
Core diluted earnings (loss) per share $0.39  $  $0.37  $0.45  $0.51 
           
Core Ratios (annualized):          
Return on average assets 0.78% (0.01)% 0.81% 1.05% 1.25%
Return on average tangible assets 0.82  (0.01) 0.85  1.11  1.31 
Return on average tangible stockholders’ equity 9.71  (0.11) 9.69  12.25  13.53 
Efficiency ratio 59.69  59.63  56.69  55.36  56.73 
Certain prior quarter amounts in the tables above have been restated for consistency with the current period presentation.


  For the Years Ended December 31,
  2020 2019
Core Earnings:    
Net income available to common stockholders (GAAP) $61,212  $88,574 
Add (less) non-recurring and non-core items:    
Merger related expenses 15,947  10,503 
Branch consolidation expense 7,623  9,050 
Net gain on equity investments (20,911)  
FHLB advance prepayment fees 14,257   
Gain on sale of PPP loans (5,101)  
Two River and Country Bank opening credit loss expense under the CECL model 2,447   
Non-recurring professional fees   2,024 
Compensation expense due to the retirement of an executive officer   1,256 
Income tax benefit related to change in New Jersey tax code   (2,205)
Income tax benefit on items (3,288) (4,362)
Core earnings (Non-GAAP) $72,186  $104,840 
Core diluted earnings per share $1.20  $2.07 
     
Core Ratios:    
Return on average assets 0.64% 1.30%
Return on average tangible assets 0.68  1.37 
Return on average tangible stockholders’ equity 7.77  14.16 
Efficiency ratio 57.81  55.78 


COMPUTATION OF TOTAL TANGIBLE STOCKHOLDERS’ EQUITY TO TANGIBLE ASSETS

  December 31, September 30, June 30, March 31, December 31,
  2020 2020 2020 2020 2019
Total stockholders’ equity $1,484,130  $1,461,714  $1,476,434  $1,409,834  $1,153,119 
Less:          
Goodwill 500,319  500,849  501,472  500,093  374,632 
Core deposit intangible 23,668  25,194  26,732  28,276  15,607 
Tangible stockholders’ equity $960,143  $935,671  $948,230  $881,465  $762,880 
           
Total assets $11,448,313  $11,651,297  $11,345,365  $10,489,074  $8,246,145 
Less:          
Goodwill 500,319  500,849  501,472  500,093  374,632 
Core deposit intangible 23,668  25,194  26,732  28,276  15,607 
Tangible assets $10,924,326  $11,125,254  $10,817,161  $9,960,705  $7,855,906 
Tangible stockholders’ equity to tangible assets 8.79% 8.41% 8.77% 8.85% 9.71%


COMPUTATION OF TOTAL TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

  December 31, September 30, June 30, March 31, December 31,
  2020 2020 2020 2020 2019
Total stockholders’ equity $1,484,130  $1,461,714  $1,476,434  $1,409,834  $1,153,119 
Less:          
Goodwill 500,319  500,849  501,472  500,093  374,632 
Core deposit intangible 23,668  25,194  26,732  28,276  15,607 
Preferred stock 55,527  55,544  55,711     
Tangible common equity $904,616  $880,127  $892,519  $881,465  $762,880 
           
Total assets $11,448,313  $11,651,297  $11,345,365  $10,489,074  $8,246,145 
Less:          
Goodwill 500,319  500,849  501,472  500,093  374,632 
Core deposit intangible 23,668  25,194  26,732  28,276  15,607 
Tangible assets $10,924,326  $11,125,254  $10,817,161  $9,960,705  $7,855,906 
Tangible common equity to tangible assets 8.28% 7.91% 8.25% 8.85% 9.71%


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:

  At January 1, 2020
(in thousands) 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  (2,043) 3,158 
Other assets 18,662  (2,706) 15,956 
Core deposit intangible   12,130  12,130 
Total assets acquired 1,103,504  8,117  1,111,621 
Liabilities assumed:      
Deposits (939,132) (2,618) (941,750)
Other liabilities (58,935) (91) (59,026)
Total liabilities assumed (998,067) (2,709) (1,000,776)
Net assets acquired $105,437  $5,408  $110,845 
Goodwill recorded in the merger     $86,205 

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As of January 1, 2021, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.


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

  At January 1, 2020
(in thousands) Country Bank Book Value Purchase Accounting Adjustments Estimated Fair Value
Total purchase price:     $112,836 
Assets acquired:      
Cash and cash equivalents $20,799  $  $20,799 
Securities 144,460  39  144,499 
Loans 614,285  4,123  618,408 
Accrued interest receivable 1,779    1,779 
Deferred tax asset (3,254) 137  (3,117)
Other assets 10,327  (1,132) 9,195 
Core deposit intangible   2,117  2,117 
Total assets acquired 788,396  5,284  793,680 
Liabilities assumed:      
Deposits (649,399) (3,254) (652,653)
Other liabilities (69,244) 2,004  (67,240)
Total liabilities assumed (718,643) (1,250) (719,893)
Net assets acquired $69,753  $4,034  $73,787 
Goodwill recorded in the merger     $39,049 

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As of January 1, 2021, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.

Company Contact:

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




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