8-K
Oceanfirst Financial Corp (OCFC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 18, 2024
OCEANFIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 001-11713 | 22-3412577 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (Commission<br>File No.) | (IRS Employer<br>Identification No.) |
110 West Front Street, Red Bank, New Jersey 07701
(Address of principal executive offices, including zip code)
(732)240-4500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange in which registered |
|---|---|---|
| Common stock, $0.01 par value per share | OCFC | NASDAQ |
| Depositary Shares (each representing a 1/40th interest in a share of 7.0% Series A Non-Cumulative, perpetual preferred stock) | OCFCP | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 18, 2024, OceanFirst Financial Corp. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2024. That press release is attached to this Report as Exhibit 99.1.
ITEM 7.01 REGULATION FD DISCLOSURE
The Company is scheduled to make presentations to current and prospective investors after April 18, 2024. Attached as Exhibit 99.2 of this Form 8-K is a copy of the presentation which OceanFirst Financial Corp. will make available at these presentations and will post on its website at www.oceanfirst.com. This report is being furnished to the SEC and shall not be deemed “filed” for any purpose.
ITEM 8.01OTHER EVENTS
In the press release described in Item 2.02, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.4375 per share for every depositary share, representing 1/40th interest in the Series A Preferred Stock, payable on May 15, 2024 to stockholders of record on April 30, 2024.
In the press release described in Item 2.02, the Company announced that the Board of Directors declared a regular quarterly cash dividend on the Company’s outstanding common stock. The cash dividend will be in the amount of $0.20 per share and will be payable on May 17, 2024 to the stockholders of record at the close of business on May 6, 2024.
ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS
| (d) | EXHIBITS | |
|---|---|---|
| 99.1 | Press Release dated | April 18, 2024 |
| 99.2 | Text of written presentation which OceanFirst Financial Corp. intends to provide to current and prospective investors after April 18, 2024. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| OCEANFIRST FINANCIAL CORP. | ||
|---|---|---|
| Dated: | April 18, 2024 | /s/ Patrick S. Barrett |
| Patrick S. Barrett | ||
| Executive Vice President and Chief Financial Officer |
Document
| Press Release |
|---|
Exhibit 99.1
Company Contact:
Patrick S. Barrett
Chief Financial Officer
OceanFirst Financial Corp.
Tel: (732) 240-4500, ext. 27507
Email: pbarrett@oceanfirst.com
FOR IMMEDIATE RELEASE
OCEANFIRST FINANCIAL CORP.
ANNOUNCES FIRST QUARTER
FINANCIAL RESULTS
RED BANK, NEW JERSEY, April 18, 2024 - OceanFirst Financial Corp. (NASDAQ:OCFC) (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), announced net income available to common stockholders of $27.7 million, or $0.47 per diluted share, for the quarter ended March 31, 2024, an increase from $26.9 million, or $0.46 per diluted share, for the corresponding prior year period, and $26.7 million, or $0.46 per diluted share, for the prior linked quarter. Selected performance metrics are as follows (refer to “Selected Quarterly Financial Data” for additional information):
| For the Three Months Ended, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Performance Ratios (Annualized): | March 31, | December 31, | March 31, | ||||||
| 2024 | 2023 | 2023 | |||||||
| Return on average assets | 0.82 | % | 0.78 | % | 0.82 | % | |||
| Return on average stockholders’ equity | 6.65 | 6.41 | 6.77 | ||||||
| Return on average tangible stockholders’ equity (a) | 9.61 | 9.33 | 10.00 | ||||||
| Return on average tangible common equity (a) | 10.09 | 9.81 | 10.53 | ||||||
| Efficiency ratio | 59.56 | 60.38 | 60.78 | ||||||
| Net interest margin | 2.81 | 2.82 | 3.34 |
(a) Return on average tangible stockholders’ equity and return on average tangible common equity (“ROTCE”) are non-GAAP (“generally accepted accounting principles”) financial measures and exclude the impact of intangible assets and goodwill from both assets and stockholders’ equity. ROTCE also excludes preferred stock from stockholders’ equity. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.
Core earnings1 for the quarter ended March 31, 2024 was $25.6 million, or $0.44 per diluted share, a decrease from $32.7 million, or $0.55 per diluted share, for the corresponding prior year period, and a decrease from $26.3 million, or $0.45 per diluted share, for the prior linked quarter.
Core earnings PTPP1 for the quarter ended March 31, 2024 was $36.2 million, or $0.62 per diluted share, as compared to $46.1 million, or $0.78 per diluted share, for the corresponding prior year period, and $37.9 million, or $0.65 per diluted share, for the prior linked quarter. Selected performance metrics are as follows:
| For the Three Months Ended, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | March 31, | |||||||
| Core Ratios1 (Annualized): | 2024 | 2023 | 2023 | ||||||
| Return on average assets | 0.76 | % | 0.77 | % | 1.00 | % | |||
| Return on average tangible stockholders’ equity | 8.91 | 9.20 | 12.15 | ||||||
| Return on average tangible common equity | 9.36 | 9.67 | 12.80 | ||||||
| Efficiency ratio | 61.05 | 60.02 | 56.49 | ||||||
| Core diluted earnings per share | $ | 0.44 | $ | 0.45 | $ | 0.55 | |||
| Core PTPP diluted earnings per share | 0.62 | 0.65 | 0.78 |
Key developments for the recent quarter are described below:
•Net Interest Margin Stabilization: Net interest margin of 2.81% decreased slightly from the prior linked quarter of 2.82%.
•Capital Accretion: The Company continued to build capital, while also resuming share repurchases. The Company’s estimated common equity tier 1 capital ratio, book value and tangible book value per share were 11.0%, $28.32 and $18.63, respectively, and increased approximately 15 basis points, $0.36 and $0.28 from the prior linked quarter.2 The Company repurchased 957,827 shares totaling $15.1 million.
1 Core earnings and core earnings before income taxes and provision for credit losses (“PTPP or Pre-Tax-Pre-Provision”), and ratios derived therefrom, are non-GAAP financial measures. For the periods presented, core earnings exclude merger related expenses, net branch consolidation expense, net (gain) loss on equity investments, net loss on sale of investments, net gain on sale of trust business, Federal Deposit Insurance Corporation (“FDIC”) special assessment, and the income tax effect of these items, (collectively referred to as “non-core” operations). PTPP excludes the aforementioned pre-tax “non-core” items along with income tax expense (benefit) and provision for credit losses. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.
2 Tangible book value per common share and tangible common equity to tangible assets are non-GAAP financial measures and exclude the impact of intangible assets, goodwill, and preferred equity from both stockholders’ equity and total assets. Refer to “Explanation of Non-GAAP Financial Measures” and the “Non-GAAP Reconciliation” tables for additional information regarding non-GAAP financial measures.
•Expense Management: The Company continued to exercise disciplined expense control. Excluding the FDIC special assessment charge of $418,000 in the current quarter and $1.7 million in the prior linked quarter, non-interest expense decreased slightly to $58.3 million, from $58.5 million.
•Asset Quality: Asset quality metrics remain strong as criticized and classified assets, non-performing loans, and loans 30 to 89 days past due as a percentage of total loans receivable were 1.65%, 0.35%, and 0.17%, respectively. These metrics continue to reflect strong credit performance and remain low compared to pre-pandemic levels.
Chairman and Chief Executive Officer, Christopher D. Maher, commented on the Company’s results, “We are pleased to report on our first quarter results, which reflected a stable net interest margin, prudent balance sheet management, and expense discipline. Additionally, we continued to build capital while also resuming share repurchases during the quarter.” Mr. Maher added, “The Company is well positioned to bolster shareholder value through a variety of different economic and industry outlooks.”
The Company’s Board of Directors declared its 109th consecutive quarterly cash dividend on common stock. The quarterly cash dividend on common stock of $0.20 per share will be paid on May 17, 2024 to common stockholders of record on May 6, 2024. The Company’s Board of Directors also 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 15, 2024 to preferred stockholders of record on April 30, 2024.
Results of Operations
The current quarter results were impacted by the following matters. Net interest income and margin were modestly impacted by a continued mix-shift to and repricing of higher cost funding that offset the increase in yields on interest-earning assets. Deposit betas increased modestly to 40%, from 38% in the prior linked quarter3. Additionally, the results included several non-recurring matters, which included a $1.2 million gain on sale of a portion of the Company’s trust business, a $1.2 million write-off in income tax expense, $418,000 in FDIC special assessments, and $345,000 in bank owned life insurance death benefits.
Net Interest Income and Margin
March 31, 2024 vs. March 31, 2023
Net interest income decreased to $86.2 million, from $98.8 million, primarily reflecting the net impact of the higher interest rate environment.
Net interest margin decreased to 2.81%, from 3.34%. Excluding the impact of purchase accounting accretion and prepayment fees of 0.04% for both quarters, net interest margin decreased to 2.77%, from 3.30%. Net interest margin decreased primarily due to the increase in cost of funds outpacing the increase in yield on average interest-earning assets.
Average interest-earning assets increased by $340.3 million, primarily driven by growth of $163.9 million in total loans and $143.0 million in securities. The average yield for interest-earning assets increased to 5.26%, from 4.68%.
The cost of average interest-bearing liabilities increased to 3.03%, from 1.74%, primarily due to higher cost of deposits. The total cost of deposits (including non-interest bearing deposits) increased to 2.31%, from 0.88%. Average interest-bearing liabilities increased by $636.4 million, primarily due to
3 Deposit beta measures the change in the interest rates paid for interest-bearing deposit accounts versus the change in the federal funds target rate. Represents the deposit beta for total deposits (interest-bearing and non-interest bearing) for the current rate cycle (since December 31, 2021).
an increase in total deposits, partly offset by a decrease in Federal Home Loan Bank (“FHLB”) advances, which reflect a shift in funding sources.
March 31, 2024 vs. December 31, 2023
Net interest income decreased by $1.6 million, reflecting a slight decrease in net interest margin to 2.81%, from 2.82%, as the increase in cost of funds was offset by yields of average interest earning assets. Excluding the impact of purchase accounting accretion and prepayment fees of 0.04% and 0.05% for the respective quarters, net interest margin remained flat at 2.77% for both periods.
Average interest-earning assets increased by $1.2 million, and the yield on average interest-earning assets increased to 5.26%, from 5.16% primarily due to securities purchased at the end of the prior linked quarter.
The total cost of average interest-bearing liabilities increased to 3.03%, from 2.91%, primarily due to higher cost of deposits and increased other borrowings. Total cost of deposits (including non-interest bearing deposits) increased to 2.31%, from 2.22%. Average interest-bearing liabilities increased by $91.2 million, primarily due to a mix shift from deposits to other borrowings.
Provision for Credit Losses
Provision for credit losses for the quarter ended March 31, 2024 was $591,000, as compared to $3.0 million and $3.2 million for the corresponding prior year period and prior linked quarter, respectively. The current quarter provision was driven by the net effect of continued uncertainty impacting the banking industry and improvements in macro-economic forecasts.
Net loan charge-offs were $349,000 for the quarter ended March 31, 2024 primarily related to a single consumer borrower, as compared to net loan recoveries of $47,000 for the corresponding prior year period. Net loan charge-offs were $35,000 in the prior linked quarter. Refer to “Asset Quality” section for further discussion.
Non-interest Income
March 31, 2024 vs. March 31, 2023
Other income increased to $12.3 million, as compared to $2.1 million. The current quarter’s other income was favorably impacted by non-core operations of $3.1 million related to net gains on equity investments and a gain on sale of a portion of its trust business. The prior year period’s other income was adversely impacted by non-core operations of $7.5 million, primarily related to losses on sale of investments.
Excluding non-core operations, other income decreased by $370,000, primarily driven by a decrease in fees and service charges of $686,000 on lower retail deposit fees and title activity.
March 31, 2024 vs. December 31, 2023
Other income in the prior linked quarter was $11.9 million and included non-core operations of $2.2 million related to net gains on equity investments. Excluding non-core operations, other income decreased by $484,000, primarily due to a decrease in fees and service charges of $842,000, which was driven by the same factors as noted above.
Non-interest Expense
March 31, 2024 vs. March 31, 2023
Operating expenses decreased to $58.7 million, as compared to $61.3 million. Operating expenses were adversely impacted by non-core items of $418,000, from an FDIC special assessment in the current year, and $92,000 from merger related and net branch consolidation expenses in the prior year.
Excluding non-core operations, operating expenses decreased $3.0 million. The primary drivers were decreases in professional fees of $2.4 million and compensation and employee benefits expenses of $1.2 million, which reflect the net realization of the Company’s performance improvements initiatives and strategic investments made over the past year.
March 31, 2024 vs. December 31, 2023
Operating expenses in the prior linked quarter was $60.2 million and included non-core operations of $1.7 million, related to an FDIC special assessment. Excluding non-core operations, operating expenses decreased by $272,000.
Income Tax Expense
The provision for income taxes was $10.6 million for the quarter ended March 31, 2024, as compared to $8.7 million for the same prior year period, and $8.6 million for the prior linked quarter. The effective tax rate was 27.1% for the quarter ended March 31, 2024, as compared to 23.7% for the same prior year period, and 23.6% for the prior linked quarter. The current quarter's effective tax rate was negatively impacted by 3.0% due to a one-time write-off of a deferred tax asset of $1.2 million.
Financial Condition
March 31, 2024 vs. December 31, 2023
Total assets decreased by $119.3 million to $13.42 billion, from $13.54 billion, primarily due to decreases in loans and debt securities. Total loans decreased by $68.9 million to $10.13 billion, from $10.19 billion, due to loan payoffs and lower loan originations. Held-to-maturity debt securities decreased by $31.1 million to $1.13 billion, from $1.16 billion, primarily due to principal repayments. Other assets increased by $20.3 million to $200.0 million, from $179.7 million, primarily due to increase in market values associated with customer interest rate swap programs.
Total liabilities decreased by $123.2 million to $11.75 billion, from $11.88 billion primarily related to lower deposits and a funding mix shift. Deposits decreased by $198.1 million to $10.24 billion, from $10.43 billion. Time deposits decreased to $2.32 billion, from $2.45 billion, or 22.7% and 23.4% of total deposits, respectively, which was primarily related to planned runoff of brokered time deposits which decreased by $88.1 million. The loan-to-deposit ratio was 98.9%, as compared to 97.7%. FHLB advances decreased by $190.2 million to $658.4 million, from $848.6 million due to mix
shift in funding sources to other borrowings, which increased by $229.3 million to $425.7 million, from $196.5 million, as a result of lower cost funding availability.
Other liabilities increased by $36.4 million to $337.1 million, from $300.7 million, primarily due to an increase in the market values associated with customer interest rate swaps and related collateral received from counterparties.
Capital levels remain strong and in excess of “well-capitalized” regulatory levels at March 31, 2024 including the Company’s common equity tier one capital ratio which increased to 11.0%, up approximately 15 basis points from December 31, 2023.
Total stockholders’ equity increased to $1.67 billion, as compared to $1.66 billion, primarily reflecting net income, partially offset by capital returns comprising of share repurchases and dividends. For the quarter ended March 31, 2024, the Company repurchased 957,827 shares totaling $15.1 million representing a weighted average cost of $15.64. The Company had 1,976,611 shares available for repurchase under the repurchase program authorized. Additionally, accumulated other comprehensive loss decreased by $1.4 million primarily due to increases in fair market value of available-for-sale debt securities, net of tax.
The Company’s tangible common equity2 increased by $4.7 million to $1.10 billion. The Company’s stockholders’ equity to assets ratio was 12.41% at March 31, 2024, and tangible common equity to tangible assets ratio increased by 11 basis points during the quarter to 8.49%, primarily due to the drivers described above.
Book value per common share increased to $28.32, as compared to $27.96. Tangible book value per common share2 increased to $18.63, as compared to $18.35.
Asset Quality
March 31, 2024 vs. December 31, 2023
Overall asset quality metrics remained stable for the quarter. The Company’s non-performing loans increased to $35.0 million from $29.5 million and represented 0.35% and 0.29% of total loans, respectively. The allowance for loan credit losses as a percentage of total non-performing loans was 191.86%, as compared to 227.21%. The level of 30 to 89 days delinquent loans decreased to $17.5 million, from $19.2 million. The Company’s allowance for loan credit losses was 0.66% of total loans for each period. Refer to “Provision for Credit Losses” section for further discussion.
The Company’s asset quality, excluding purchased with credit deterioration (“PCD”) loans, was as follows. Non-performing loans increased to $31.5 million, from $26.4 million. The allowance for loan credit losses as a percentage of total non-performing loans was 213.34%, as compared to 254.64%. The level of 30 to 89 days delinquent loans, excluding non-performing loans, decreased to $15.4 million, from $17.7 million. The allowance for loan credit losses plus the unamortized credit and PCD marks amounted to $74.2 million, or 0.73% of total loans, as compared to $74.7 million, or 0.73% of total loans.
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 and in some instances excluding income taxes and provision for credit losses, and reporting equity and asset amounts excluding intangible assets, goodwill or preferred stock, all of 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.
Annual Meeting
The Annual Meeting of Stockholders will be held on Tuesday, May 21, 2024 at 8:00 a.m. Eastern Time, as previously announced. The meeting will be held virtually through a live webcast. Stockholders as of the record date of March 25, 2024 are invited to participate in the live event. Voting before the meeting is encouraged, even for stockholders planning to participate in the virtual webcast. Votes may be submitted by telephone or online according to the instructions on the proxy card or by mail. A link to the live webcast is available by visiting oceanfirst.com - Investor Relations. Access will begin at 7:45 a.m. Eastern Time to allow time for stockholders to log-in with the control number provided on the proxy card prior to the 8:00 a.m. Eastern Time scheduled start. Eligible stockholders may also vote during the live meeting online at www.virtualshareholdermeeting.com/OCFC2024 by entering the 16-digit control number included on the proxy card or notice. As a reminder, participants of the meeting are not required to vote.
Conference Call
As previously announced, the Company will host an earnings conference call on Friday, April 19, 2024 at 11:00 a.m. Eastern Time. The direct dial number for the call is (833) 470-1428, using the access code 606038. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (866) 813-9403, access code 203920, from one hour after the end of the call until May 17, 2024. 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 $13.4 billion regional bank providing financial services throughout New Jersey and in the major metropolitan markets of Philadelphia, New York, Baltimore, and Boston. OceanFirst Bank delivers commercial and residential financing, treasury management, trust and asset management, and deposit services and is one of the largest and oldest community-based financial institutions headquartered in New Jersey. To learn more about OceanFirst, go to 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, inflation, general economic conditions, potential recessionary conditions, levels of unemployment in the Company’s lending area, real estate market values in the Company’s lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, 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, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company’s deposit portfolio, including the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, competition, demand for financial services in the Company’s market area, changes in consumer spending, borrowing and saving habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the effect of the Company’s rating under the Community Reinvestment Act, the impact of pandemics on our operations and financial results and those of our customers 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, 2023, 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)
| March 31, | December 31, | March 31, | ||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Unaudited) | |||||
| Assets | ||||||
| Cash and due from banks | $ | 130,422 | $ | 153,718 | $ | 496,193 |
| Debt securities available-for-sale, at estimated fair value | 744,944 | 753,892 | 452,195 | |||
| Debt securities held-to-maturity, net of allowance for securities credit losses of $1,058 at March 31, 2024, $1,133 at December 31, 2023 and $1,043 at March 31, 2023 (estimated fair value of $1,029,965 at March 31, 2024, $1,068,438 at December 31, 2023 and $1,149,673 at March 31, 2023) | 1,128,666 | 1,159,735 | 1,245,424 | |||
| Equity investments | 103,201 | 100,163 | 101,007 | |||
| Restricted equity investments, at cost | 85,689 | 93,766 | 115,750 | |||
| Loans receivable, net of allowance for loan credit losses of $67,173 at March 31, 2024, $67,137 at December 31, 2023 and $60,195 at March 31, 2023 | 10,068,209 | 10,136,721 | 9,986,949 | |||
| Loans held-for-sale | 4,702 | 5,166 | 1,885 | |||
| Interest and dividends receivable | 52,502 | 51,874 | 47,342 | |||
| Premises and equipment, net | 119,211 | 121,372 | 126,019 | |||
| Bank owned life insurance | 266,615 | 266,498 | 262,654 | |||
| Assets held for sale | 28 | 28 | 2,719 | |||
| Goodwill | 506,146 | 506,146 | 506,146 | |||
| Core deposit intangible | 8,669 | 9,513 | 12,470 | |||
| Other assets | 199,974 | 179,661 | 198,422 | |||
| Total assets | $ | 13,418,978 | $ | 13,538,253 | $ | 13,555,175 |
| Liabilities and Stockholders’ Equity | ||||||
| Deposits | $ | 10,236,851 | $ | 10,434,949 | $ | 9,993,095 |
| Federal Home Loan Bank advances | 658,436 | 848,636 | 1,346,566 | |||
| Securities sold under agreements to repurchase with customers | 66,798 | 73,148 | 70,938 | |||
| Other borrowings | 425,722 | 196,456 | 195,663 | |||
| Advances by borrowers for taxes and insurance | 28,187 | 22,407 | 31,198 | |||
| Other liabilities | 337,147 | 300,712 | 307,344 | |||
| Total liabilities | 11,753,141 | 11,876,308 | 11,944,804 | |||
| Stockholders’ equity: | ||||||
| OceanFirst Financial Corp. stockholders’ equity | 1,665,112 | 1,661,163 | 1,609,553 | |||
| Non-controlling interest | 725 | 782 | 818 | |||
| Total stockholders’ equity | 1,665,837 | 1,661,945 | 1,610,371 | |||
| Total liabilities and stockholders’ equity | $ | 13,418,978 | $ | 13,538,253 | $ | 13,555,175 |
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
| For the Three Months Ended, | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | March 31, | ||||||
| 2024 | 2023 | 2023 | ||||||
| ---------------------- (Unaudited) ---------------------- | ||||||||
| Interest income: | ||||||||
| Loans | $ | 137,121 | $ | 137,110 | $ | 121,720 | ||
| Debt securities | 19,861 | 15,444 | 14,286 | |||||
| Equity investments and other | 4,620 | 7,880 | 3,028 | |||||
| Total interest income | 161,602 | 160,434 | 139,034 | |||||
| Interest expense: | ||||||||
| Deposits | 59,855 | 59,467 | 21,330 | |||||
| Borrowed funds | 15,523 | 13,143 | 18,902 | |||||
| Total interest expense | 75,378 | 72,610 | 40,232 | |||||
| Net interest income | 86,224 | 87,824 | 98,802 | |||||
| Provision for credit losses | 591 | 3,153 | 3,013 | |||||
| Net interest income after provision for credit losses | 85,633 | 84,671 | 95,789 | |||||
| Other income: | ||||||||
| Bankcard services revenue | 1,416 | 1,531 | 1,330 | |||||
| Trust and asset management revenue | 526 | 610 | 612 | |||||
| Fees and service charges | 4,473 | 5,315 | 5,159 | |||||
| Net gain on sales of loans | 357 | 309 | 20 | |||||
| Net gain (loss) on equity investments | 1,923 | 2,176 | (6,801) | |||||
| Income from bank owned life insurance | 1,862 | 1,427 | 1,281 | |||||
| Commercial loan swap income | 138 | 29 | 701 | |||||
| Other | 1,591 | 464 | (229) | |||||
| Total other income | 12,286 | 11,861 | 2,073 | |||||
| Operating expenses: | ||||||||
| Compensation and employee benefits | 32,759 | 32,126 | 33,920 | |||||
| Occupancy | 5,199 | 5,218 | 5,239 | |||||
| Equipment | 1,130 | 1,172 | 1,205 | |||||
| Marketing | 990 | 1,112 | 982 | |||||
| Federal deposit insurance and regulatory assessments | 3,135 | 4,386 | 1,749 | |||||
| Data processing | 5,956 | 6,430 | 6,154 | |||||
| Check card processing | 1,050 | 991 | 1,281 | |||||
| Professional fees | 2,732 | 2,858 | 5,098 | |||||
| Amortization of core deposit intangible | 844 | 976 | 1,027 | |||||
| Branch consolidation expense, net | — | — | 70 | |||||
| Merger related expenses | — | — | 22 | |||||
| Other operating expense | 4,877 | 4,920 | 4,562 | |||||
| Total operating expenses | 58,672 | 60,189 | 61,309 | |||||
| Income before provision for income taxes | 39,247 | 36,343 | 36,553 | |||||
| Provision for income taxes | 10,637 | 8,591 | 8,654 | |||||
| Net income | 28,610 | 27,752 | 27,899 | |||||
| Net (loss) income attributable to non-controlling interest | (57) | 70 | 16 | |||||
| Net income attributable to OceanFirst Financial Corp. | 28,667 | 27,682 | 27,883 | |||||
| Dividends on preferred shares | 1,004 | 1,004 | 1,004 | |||||
| Net income available to common stockholders | $ | 27,663 | $ | 26,678 | $ | 26,879 | ||
| Basic earnings per share | $ | 0.47 | $ | 0.46 | $ | 0.46 | ||
| Diluted earnings per share | $ | 0.47 | $ | 0.46 | $ | 0.46 | ||
| Average basic shares outstanding | 58,789 | 59,120 | 58,774 | |||||
| Average diluted shares outstanding | 58,791 | 59,123 | 58,918 |
OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)
| LOANS RECEIVABLE | At | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Commercial real estate - investor | $ | 5,322,755 | $ | 5,353,974 | $ | 5,334,279 | $ | 5,319,686 | $ | 5,296,661 | ||||||||||||||||
| Commercial real estate - owner-occupied | 914,582 | 943,891 | 957,216 | 981,618 | 986,366 | |||||||||||||||||||||
| Commercial and industrial | 677,176 | 666,532 | 652,119 | 620,284 | 622,201 | |||||||||||||||||||||
| Total commercial | 6,914,513 | 6,964,397 | 6,943,614 | 6,921,588 | 6,905,228 | |||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||
| Residential real estate | 2,965,276 | 2,979,534 | 2,928,259 | 2,906,556 | 2,881,811 | |||||||||||||||||||||
| Home equity loans and lines and other consumer ("other consumer") | 245,859 | 250,664 | 251,698 | 255,486 | 252,773 | |||||||||||||||||||||
| Total consumer | 3,211,135 | 3,230,198 | 3,179,957 | 3,162,042 | 3,134,584 | |||||||||||||||||||||
| Total loans | 10,125,648 | 10,194,595 | 10,123,571 | 10,083,630 | 10,039,812 | |||||||||||||||||||||
| Deferred origination costs (fees), net | 9,734 | 9,263 | 8,462 | 8,267 | 7,332 | |||||||||||||||||||||
| Allowance for loan credit losses | (67,173) | (67,137) | (63,877) | (61,791) | (60,195) | |||||||||||||||||||||
| Loans receivable, net | $ | 10,068,209 | $ | 10,136,721 | $ | 10,068,156 | $ | 10,030,106 | $ | 9,986,949 | ||||||||||||||||
| Mortgage loans serviced for others | $ | 89,555 | $ | 68,217 | $ | 52,796 | $ | 50,820 | $ | 50,421 | ||||||||||||||||
| At March 31, 2024 Average Yield | ||||||||||||||||||||||||||
| Loan pipeline (1): | ||||||||||||||||||||||||||
| Commercial | 8.18 | % | $ | 66,167 | $ | 124,707 | $ | 50,756 | $ | 39,164 | $ | 236,550 | ||||||||||||||
| Residential real estate | 6.91 | 57,340 | 49,499 | 66,682 | 58,022 | 61,258 | ||||||||||||||||||||
| Other consumer | 8.82 | 13,030 | 8,819 | 13,795 | 18,621 | 20,589 | ||||||||||||||||||||
| Total | 7.71 | % | $ | 136,537 | $ | 183,025 | $ | 131,233 | $ | 115,807 | $ | 318,397 | For the Three Months Ended | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||||||||||
| Average Yield | ||||||||||||||||||||||||||
| Loan originations: | ||||||||||||||||||||||||||
| Commercial | 7.99 | % | $ | 123,010 | $ | 94,294 | $ | 90,263 | $ | 197,732 | $ | 200,504 | ||||||||||||||
| Residential real estate | 6.78 | 78,270 | 113,227 | 92,299 | 100,542 | 65,580 | ||||||||||||||||||||
| Other consumer | 8.94 | 11,405 | 16,971 | 17,019 | 22,487 | 15,927 | ||||||||||||||||||||
| Total | 7.60 | % | $ | 212,685 | $ | 224,492 | $ | 199,581 | $ | 320,761 | $ | 282,011 | ||||||||||||||
| Loans sold | $ | 29,965 | $ | 20,138 | $ | 15,404 | $ | 18,664 | $ | 3,861 |
(1)Loan pipeline includes loans approved but not funded.
| DEPOSITS | At | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||
| Type of Account | ||||||||||
| Non-interest-bearing | $ | 1,639,828 | $ | 1,657,119 | $ | 1,827,381 | $ | 1,854,136 | $ | 1,984,197 |
| Interest-bearing checking | 3,865,699 | 3,911,766 | 3,708,874 | 3,537,834 | 3,697,223 | |||||
| Money market | 1,150,979 | 1,021,805 | 860,025 | 770,440 | 615,993 | |||||
| Savings | 1,260,309 | 1,398,837 | 1,484,000 | 1,229,897 | 1,308,715 | |||||
| Time deposits (1) | 2,320,036 | 2,445,422 | 2,653,649 | 2,766,030 | 2,386,967 | |||||
| Total deposits | $ | 10,236,851 | $ | 10,434,949 | $ | 10,533,929 | $ | 10,158,337 | $ | 9,993,095 |
(1)Includes brokered time deposits of $543.4 million, $631.5 million, $995.5 million, $1.42 billion, and $1.24 billion at March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively.
OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)
| ASSET QUALITY (1) | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||||||||
| Non-performing loans: | ||||||||||||||||||||
| Commercial real estate - investor | $ | 21,507 | $ | 20,820 | $ | 20,723 | $ | 13,000 | $ | 13,643 | ||||||||||
| Commercial real estate - owner-occupied | 3,355 | 351 | 240 | 565 | 251 | |||||||||||||||
| Commercial and industrial | 567 | 304 | 1,120 | 199 | 162 | |||||||||||||||
| Residential real estate | 7,181 | 5,542 | 5,624 | 6,174 | 5,650 | |||||||||||||||
| Other consumer | 2,401 | 2,531 | 2,391 | 2,820 | 2,731 | |||||||||||||||
| Total non-performing loans | $ | 35,011 | $ | 29,548 | $ | 30,098 | $ | 22,758 | $ | 22,437 | ||||||||||
| Delinquent loans 30 to 89 days | $ | 17,534 | $ | 19,202 | $ | 20,591 | $ | 3,136 | $ | 11,232 | ||||||||||
| Modifications to borrowers experiencing financial difficulty (2) | ||||||||||||||||||||
| Non-performing (included in total non-performing loans above) | $ | 9,075 | $ | 6,420 | $ | 6,679 | $ | 6,882 | $ | 6,556 | ||||||||||
| Performing | 15,619 | 15,361 | 7,645 | 7,516 | 7,619 | |||||||||||||||
| Total modifications to borrowers experiencing financial difficulty (2) | $ | 24,694 | $ | 21,781 | $ | 14,324 | $ | 14,398 | $ | 14,175 | ||||||||||
| Allowance for loan credit losses | $ | 67,173 | $ | 67,137 | $ | 63,877 | $ | 61,791 | $ | 60,195 | ||||||||||
| Allowance for loan credit losses as a percent of total loans receivable (3) | 0.66 | % | 0.66 | % | 0.63 | % | 0.61 | % | 0.60 | % | ||||||||||
| Allowance for loan credit losses as a percent of total non-performing loans (3) | 191.86 | 227.21 | 212.23 | 271.51 | 268.28 | |||||||||||||||
| Non-performing loans as a percent of total loans receivable | 0.35 | 0.29 | 0.30 | 0.23 | 0.22 | |||||||||||||||
| Non-performing assets as a percent of total assets | 0.26 | 0.22 | 0.22 | 0.17 | 0.17 | |||||||||||||||
| Supplemental PCD and non-performing loans | ||||||||||||||||||||
| PCD loans, net of allowance for loan credit losses | $ | 16,700 | $ | 16,122 | $ | 18,640 | $ | 18,872 | $ | 20,513 | ||||||||||
| Non-performing PCD loans | 3,525 | 3,183 | 3,177 | 3,171 | 3,929 | |||||||||||||||
| Delinquent PCD and non-performing loans 30 to 89 days | 2,088 | 1,516 | 13,007 | 1,976 | 2,248 | |||||||||||||||
| PCD modifications to borrowers experiencing financial difficulty (2) | 764 | 771 | 750 | 755 | 758 | |||||||||||||||
| Asset quality, excluding PCD loans (4) | ||||||||||||||||||||
| Non-performing loans | 31,486 | 26,365 | 26,921 | 19,587 | 18,508 | |||||||||||||||
| Delinquent loans 30 to 89 days (excludes non-performing loans) | 15,446 | 17,686 | 7,584 | 1,160 | 8,984 | |||||||||||||||
| Modifications to borrowers experiencing financial difficulty (2) | 23,930 | 21,010 | 13,574 | 13,643 | 13,417 | |||||||||||||||
| Allowance for loan credit losses as a percent of total non-performing loans (3) | 213.34 | % | 254.64 | % | 237.28 | % | 315.47 | % | 325.24 | % | ||||||||||
| Non-performing loans as a percent of total loans receivable | 0.31 | 0.26 | 0.27 | 0.19 | 0.18 | |||||||||||||||
| Non-performing assets as a percent of total assets | 0.23 | 0.19 | 0.20 | 0.14 | 0.14 |
(1)Since September 30, 2023, non-performing loans included the remaining exposure of $8.8 million on a commercial real estate relationship that was partially charged-off during the quarter ended September 30, 2023.
(2)Balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings.
(3)Loans acquired from prior bank acquisitions were recorded at fair value. The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, was $7.0 million, $7.5 million, $8.8 million, $9.8 million and $10.5 million at March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively.
(4)All balances and ratios exclude PCD loans.
(continued)
| NET LOAN (CHARGE-OFFS) RECOVERIES | For the Three Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||||||
| Net loan (charge-offs) recoveries: | ||||||||||||||
| Loan charge-offs | $ | (441) | $ | (98) | $ | (8,379) | $ | (206) | $ | (10) | ||||
| Recoveries on loans | 92 | 63 | 108 | 83 | 57 | |||||||||
| Net loan (charge-offs) recoveries | $ | (349) | $ | (35) | $ | (8,271) | $ | (123) | $ | 47 | ||||
| Net loan (charge-offs) recoveries to average total loans (annualized) | 0.01 | % | — | % | 0.33 | % | — | % | NM* | |||||
| Net loan (charge-offs) recoveries detail: | ||||||||||||||
| Commercial | $ | (35) | $ | 9 | $ | (8,332) | $ | (117) | $ | — | ||||
| Residential real estate | 66 | 9 | 17 | 9 | 8 | |||||||||
| Other consumer | (380) | (53) | 44 | (15) | 39 | |||||||||
| Net loan (charge-offs) recoveries | $ | (349) | $ | (35) | $ | (8,271) | $ | (123) | $ | 47 |
* Not meaningful as amounts are net loan recoveries.
OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
| For the Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||||
| (dollars in thousands) | Average<br>Balance | Interest | Average<br><br>Yield/<br><br>Cost (1) | Average<br>Balance | Interest | Average<br><br>Yield/<br><br>Cost (1) | Average<br>Balance | Interest | Average<br><br>Yield/<br><br>Cost (1) | |||||||||
| Assets: | ||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||
| Interest-earning deposits and short-term investments | $ | 163,192 | $ | 2,226 | 5.49 | % | $ | 396,843 | $ | 5,423 | 5.42 | % | $ | 129,740 | $ | 938 | 2.93 | % |
| Securities (2) | 2,098,421 | 22,255 | 4.27 | 1,863,136 | 17,901 | 3.81 | 1,955,399 | 16,376 | 3.40 | |||||||||
| Loans receivable, net (3) | ||||||||||||||||||
| Commercial | 6,925,048 | 104,421 | 6.06 | 6,937,191 | 105,260 | 6.02 | 6,840,006 | 92,780 | 5.50 | |||||||||
| Residential real estate | 2,974,468 | 28,596 | 3.85 | 2,957,671 | 27,934 | 3.78 | 2,872,049 | 25,161 | 3.50 | |||||||||
| Other consumer | 248,396 | 4,104 | 6.65 | 250,300 | 3,916 | 6.21 | 263,404 | 3,779 | 5.82 | |||||||||
| Allowance for loan credit losses, net of deferred loan costs and fees | (59,141) | — | — | (56,001) | — | — | (50,554) | — | — | |||||||||
| Loans receivable, net | 10,088,771 | 137,121 | 5.46 | 10,089,161 | 137,110 | 5.40 | 9,924,905 | 121,720 | 4.96 | |||||||||
| Total interest-earning assets | 12,350,384 | 161,602 | 5.26 | 12,349,140 | 160,434 | 5.16 | 12,010,044 | 139,034 | 4.68 | |||||||||
| Non-interest-earning assets | 1,206,336 | 1,243,967 | 1,234,549 | |||||||||||||||
| Total assets | $ | 13,556,720 | $ | 13,593,107 | $ | 13,244,593 | ||||||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||
| Interest-bearing checking | $ | 3,925,965 | 20,795 | 2.13 | % | $ | 3,908,517 | 19,728 | 2.00 | % | $ | 3,863,338 | 6,269 | 0.66 | % | |||
| Money market | 1,092,003 | 9,172 | 3.38 | 941,859 | 7,520 | 3.17 | 705,631 | 1,759 | 1.01 | |||||||||
| Savings | 1,355,718 | 4,462 | 1.32 | 1,446,935 | 5,193 | 1.42 | 1,369,118 | 334 | 0.10 | |||||||||
| Time deposits | 2,414,063 | 25,426 | 4.24 | 2,596,706 | 27,026 | 4.13 | 1,826,662 | 12,968 | 2.88 | |||||||||
| Total | 8,787,749 | 59,855 | 2.74 | 8,894,017 | 59,467 | 2.65 | 7,764,749 | 21,330 | 1.11 | |||||||||
| FHLB Advances | 644,818 | 7,771 | 4.85 | 615,172 | 7,470 | 4.82 | 1,222,791 | 14,614 | 4.85 | |||||||||
| Securities sold under agreements to repurchase | 68,500 | 411 | 2.41 | 80,181 | 387 | 1.91 | 71,898 | 90 | 0.51 | |||||||||
| Other borrowings (4) | 500,901 | 7,341 | 5.89 | 321,369 | 5,286 | 6.53 | 306,156 | 4,198 | 5.56 | |||||||||
| Total borrowings | 1,214,219 | 15,523 | 5.14 | 1,016,722 | 13,143 | 5.13 | 1,600,845 | 18,902 | 4.79 | |||||||||
| Total interest-bearing liabilities | 10,001,968 | 75,378 | 3.03 | 9,910,739 | 72,610 | 2.91 | 9,365,594 | 40,232 | 1.74 | |||||||||
| Non-interest-bearing deposits | 1,634,583 | 1,739,499 | 2,028,507 | |||||||||||||||
| Non-interest-bearing liabilities(4) | 247,129 | 292,170 | 240,815 | |||||||||||||||
| Total liabilities | 11,883,680 | 11,942,408 | 11,634,916 | |||||||||||||||
| Stockholders’ equity | 1,673,040 | 1,650,699 | 1,609,677 | |||||||||||||||
| Total liabilities and equity | $ | 13,556,720 | $ | 13,593,107 | $ | 13,244,593 | ||||||||||||
| Net interest income | $ | 86,224 | $ | 87,824 | $ | 98,802 | ||||||||||||
| Net interest rate spread (5) | 2.23 | % | 2.25 | % | 2.94 | % | ||||||||||||
| Net interest margin (6) | 2.81 | % | 2.82 | % | 3.34 | % | ||||||||||||
| Total cost of deposits (including non-interest-bearing deposits) | 2.31 | % | 2.22 | % | 0.88 | % |
(1) Average yields and costs are annualized.
(2) 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.
(3) Amount is net of deferred loan costs and fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, and includes loans held for sale and non-performing loans.
(4) For the three months ended March 31, 2023, includes reclassifications to conform with current period presentation.
(5) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(6) 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, | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||
| Selected Financial Condition Data: | ||||||||||
| Total assets | $ | 13,418,978 | $ | 13,538,253 | $ | 13,498,183 | $ | 13,538,903 | $ | 13,555,175 |
| Debt securities available-for-sale, at estimated fair value | 744,944 | 753,892 | 453,208 | 452,016 | 452,195 | |||||
| Debt securities held-to-maturity, net of allowance for securities credit losses | 1,128,666 | 1,159,735 | 1,189,339 | 1,222,507 | 1,245,424 | |||||
| Equity investments | 103,201 | 100,163 | 97,908 | 96,452 | 101,007 | |||||
| Restricted equity investments, at cost | 85,689 | 93,766 | 82,484 | 105,305 | 115,750 | |||||
| Loans receivable, net of allowance for loan credit losses | 10,068,209 | 10,136,721 | 10,068,156 | 10,030,106 | 9,986,949 | |||||
| Deposits | 10,236,851 | 10,434,949 | 10,533,929 | 10,158,337 | 9,993,095 | |||||
| Federal Home Loan Bank advances | 658,436 | 848,636 | 606,056 | 1,091,666 | 1,346,566 | |||||
| Securities sold under agreements to repurchase and other borrowings | 492,520 | 269,604 | 279,164 | 270,377 | 266,601 | |||||
| Total stockholders’ equity | 1,665,837 | 1,661,945 | 1,637,604 | 1,626,283 | 1,610,371 | |||||
| For the Three Months Ended, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||
| Selected Operating Data: | ||||||||||
| Interest income | $ | 161,602 | $ | 160,434 | $ | 158,410 | $ | 150,096 | $ | 139,034 |
| Interest expense | 75,378 | 72,610 | 67,414 | 57,987 | 40,232 | |||||
| Net interest income | 86,224 | 87,824 | 90,996 | 92,109 | 98,802 | |||||
| Provision for credit losses | 591 | 3,153 | 10,283 | 1,229 | 3,013 | |||||
| Net interest income after provision for credit losses | 85,633 | 84,671 | 80,713 | 90,880 | 95,789 | |||||
| Other income (excluding activity related to debt and equity investments and sale of trust business) | 9,201 | 9,685 | 9,310 | 9,487 | 9,571 | |||||
| Net gain (loss) on equity investments | 1,923 | 2,176 | 1,452 | (559) | (2,193) | |||||
| Net loss on sale of investments | — | — | — | — | (5,305) | |||||
| Net gain on sale of trust business | 1,162 | — | — | — | — | |||||
| Operating expenses (excluding FDIC special assessment, merger related and branch consolidation expense, net) | 58,254 | 58,526 | 64,484 | 62,930 | 61,217 | |||||
| FDIC special assessment | 418 | 1,663 | — | — | — | |||||
| Branch consolidation expense, net | — | — | — | — | 70 | |||||
| Merger related expenses | — | — | — | — | 22 | |||||
| Income before provision for income taxes | 39,247 | 36,343 | 26,991 | 36,878 | 36,553 | |||||
| Provision for income taxes | 10,637 | 8,591 | 6,459 | 8,996 | 8,654 | |||||
| Net income | 28,610 | 27,752 | 20,532 | 27,882 | 27,899 | |||||
| Net (loss) income attributable to non-controlling interest | (57) | 70 | (135) | 85 | 16 | |||||
| Net income attributable to OceanFirst Financial Corp. | $ | 28,667 | $ | 27,682 | $ | 20,667 | $ | 27,797 | $ | 27,883 |
| Net income available to common stockholders | $ | 27,663 | $ | 26,678 | $ | 19,663 | $ | 26,793 | $ | 26,879 |
| Diluted earnings per share | $ | 0.47 | $ | 0.46 | $ | 0.33 | $ | 0.45 | $ | 0.46 |
| Net accretion/amortization of purchase accounting adjustments included in net interest income | $ | 921 | $ | 1,604 | $ | 1,745 | $ | 1,152 | $ | 1,237 |
(continued)
| At or For the Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | ||||||
| Selected Financial Ratios and Other Data(1) (2): | ||||||||||
| Performance Ratios (Annualized): | ||||||||||
| Return on average assets (3) | 0.82 | % | 0.78 | % | 0.57 | % | 0.80 | % | 0.82 | % |
| Return on average tangible assets (3) (4) | 0.85 | 0.81 | 0.59 | 0.83 | 0.86 | |||||
| Return on average stockholders’ equity (3) | 6.65 | 6.41 | 4.75 | 6.61 | 6.77 | |||||
| Return on average tangible stockholders’ equity (3) (4) | 9.61 | 9.33 | 6.93 | 9.70 | 10.00 | |||||
| Return on average tangible common equity (3) (4) | 10.09 | 9.81 | 7.29 | 10.21 | 10.53 | |||||
| Stockholders’ equity to total assets | 12.41 | 12.28 | 12.13 | 12.01 | 11.88 | |||||
| Tangible stockholders’ equity to tangible assets (4) | 8.92 | 8.80 | 8.64 | 8.51 | 8.37 | |||||
| Tangible common equity to tangible assets (4) | 8.49 | 8.38 | 8.21 | 8.09 | 7.95 | |||||
| Net interest rate spread | 2.23 | 2.25 | 2.37 | 2.52 | 2.94 | |||||
| Net interest margin | 2.81 | 2.82 | 2.91 | 3.02 | 3.34 | |||||
| Operating expenses to average assets | 1.74 | 1.76 | 1.88 | 1.87 | 1.88 | |||||
| Efficiency ratio (5) | 59.56 | 60.38 | 63.37 | 62.28 | 60.78 | |||||
| Loan-to-deposit ratio | 98.90 | 97.70 | 96.10 | 99.30 | 100.50 |
(continued)
| At or For the Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | |||||||||||
| Trust and Asset Management: | |||||||||||||||
| Wealth assets under administration and management (“AUA/M”) | $ | 236,891 | $ | 335,769 | $ | 336,913 | $ | 339,890 | $ | 333,436 | |||||
| Nest Egg AUA/M | 407,478 | 401,420 | 385,317 | 397,927 | 400,227 | ||||||||||
| Total AUA/M | 644,369 | 737,189 | 722,230 | 737,817 | 733,663 | ||||||||||
| Per Share Data: | |||||||||||||||
| Cash dividends per common share | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | |||||
| Book value per common share at end of period | 28.32 | 27.96 | 27.56 | 27.37 | 27.07 | ||||||||||
| Tangible book value per common share at end of period (4) | 18.63 | 18.35 | 17.93 | 17.72 | 17.42 | ||||||||||
| Common shares outstanding at end of period | 58,812,498 | 59,447,684 | 59,421,498 | 59,420,859 | 59,486,086 | ||||||||||
| Preferred shares outstanding at end of period | 57,370 | 57,370 | 57,370 | 57,370 | 57,370 | ||||||||||
| Number of full-service customer facilities: | 39 | 39 | 38 | 38 | 38 | ||||||||||
| Quarterly Average Balances | |||||||||||||||
| Total securities | $ | 2,098,421 | $ | 1,863,136 | $ | 1,873,450 | $ | 1,931,032 | $ | 1,955,399 | |||||
| Loans receivable, net | 10,088,771 | 10,089,161 | 10,040,522 | 10,010,785 | 9,924,905 | ||||||||||
| Total interest-earning assets | 12,350,384 | 12,349,140 | 12,384,797 | 12,250,055 | 12,010,044 | ||||||||||
| Total goodwill and core deposit intangible | 515,356 | 516,289 | 517,282 | 518,265 | 519,282 | ||||||||||
| Total assets | 13,556,720 | 13,593,107 | 13,637,213 | 13,467,721 | 13,244,593 | ||||||||||
| Time deposits | 2,414,063 | 2,596,706 | 2,867,921 | 2,458,872 | 1,826,662 | ||||||||||
| Total deposits (including non-interest-bearing deposits) | 10,422,332 | 10,633,516 | 10,626,159 | 9,993,010 | 9,793,256 | ||||||||||
| Total borrowings | 1,214,219 | 1,016,722 | 1,095,173 | 1,603,126 | 1,600,845 | ||||||||||
| Total interest-bearing liabilities | 10,001,968 | 9,910,739 | 9,880,134 | 9,722,910 | 9,365,594 | ||||||||||
| Non-interest bearing deposits | 1,634,583 | 1,739,499 | 1,841,198 | 1,873,226 | 2,028,507 | ||||||||||
| Stockholders' equity | 1,673,040 | 1,650,699 | 1,642,899 | 1,626,693 | 1,609,677 | ||||||||||
| Tangible stockholders’ equity (4) | 1,157,684 | 1,134,410 | 1,125,617 | 1,108,428 | 1,090,395 | ||||||||||
| Quarterly Yields and Costs | |||||||||||||||
| Total securities | 4.27 | % | 3.81 | % | 3.82 | % | 3.47 | % | 3.40 | % | |||||
| Loans receivable, net | 5.46 | 5.40 | 5.30 | 5.17 | 4.96 | ||||||||||
| Total interest-earning assets | 5.26 | 5.16 | 5.08 | 4.91 | 4.68 | ||||||||||
| Time deposits | 4.24 | 4.13 | 4.06 | 3.57 | 2.88 | ||||||||||
| Total cost of deposits (including non-interest-bearing deposits) | 2.31 | 2.22 | 1.99 | 1.52 | 0.88 | ||||||||||
| Total borrowed funds | 5.14 | 5.13 | 5.12 | 5.02 | 4.79 | ||||||||||
| Total interest-bearing liabilities | 3.03 | 2.91 | 2.71 | 2.39 | 1.74 | ||||||||||
| Net interest spread | 2.23 | 2.25 | 2.37 | 2.52 | 2.94 | ||||||||||
| Net interest margin | 2.81 | 2.82 | 2.91 | 3.02 | 3.34 |
(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) Ratios for each period are based on net income available to common stockholders.
(4) Tangible stockholders’ equity and tangible assets exclude intangible assets related to goodwill and core deposit intangible. Tangible common equity (also referred to as “tangible book value”) excludes goodwill, core deposit intangible and preferred equity. Refer to “Non-GAAP Reconciliation.”
(5) 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
| December 31, | September 30, | June 30, | March 31, | |||||||||||
| 2023 | 2023 | 2023 | 2023 | |||||||||||
| Core Earnings: | ||||||||||||||
| Net income available to common stockholders (GAAP) | 27,663 | $ | 26,678 | $ | 19,663 | $ | 26,793 | $ | 26,879 | |||||
| (Less) add non-recurring and non-core items: | ||||||||||||||
| Net (gain) loss on equity investments(1) | (2,176) | (1,452) | 559 | 2,193 | ||||||||||
| Net loss on sale of investments(1) | — | — | — | 5,305 | ||||||||||
| Net gain on sale of trust business | — | — | — | — | ||||||||||
| FDIC special assessment | 1,663 | — | — | — | ||||||||||
| Merger related expenses | — | — | — | 22 | ||||||||||
| Branch consolidation expense, net | — | — | — | 70 | ||||||||||
| Income tax expense (benefit) on items | 129 | 351 | (162) | (1,797) | ||||||||||
| Core earnings (Non-GAAP) | 25,638 | $ | 26,294 | $ | 18,562 | $ | 27,190 | $ | 32,672 | |||||
| Income tax expense | 10,637 | $ | 8,591 | $ | 6,459 | $ | 8,996 | $ | 8,654 | |||||
| Provision for credit losses | 3,153 | 10,283 | 1,229 | 3,013 | ||||||||||
| Less: income tax expense (benefit) on non-core items | 129 | 351 | (162) | (1,797) | ||||||||||
| Core earnings PTPP (Non-GAAP) | 36,224 | $ | 37,909 | $ | 34,953 | $ | 37,577 | $ | 46,136 | |||||
| Core earnings diluted earnings per share | 0.44 | $ | 0.45 | $ | 0.32 | $ | 0.46 | $ | 0.55 | |||||
| Core earnings PTPP diluted earnings per share | 0.62 | $ | 0.65 | $ | 0.59 | $ | 0.64 | $ | 0.78 | |||||
| Core Ratios (Annualized): | ||||||||||||||
| Return on average assets | % | 0.77 | % | 0.54 | % | 0.81 | % | 1.00 | % | |||||
| Return on average tangible stockholders’ equity | 9.20 | 6.54 | 9.84 | 12.15 | ||||||||||
| Return on average tangible common equity | 9.67 | 6.88 | 10.36 | 12.80 | ||||||||||
| Efficiency ratio | 60.02 | 64.29 | 61.94 | 56.49 | ||||||||||
| (1) The sale of specific positions in two financial institutions impacted both equity investments and debt securities for the three months ended March 31, 2023. On the Consolidated Statements of Income, the losses on sale of equity investments and debt securities are reported within net gain (loss) on equity investments (4.6 million) and other (697,000), respectively, for the three months ended March 31, 2023. |
All values are in US Dollars.
(continued)
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | 2023 | 2023 | |||||||||||
| Tangible Equity: | |||||||||||||||
| Total stockholders' equity | $ | 1,665,837 | $ | 1,661,945 | $ | 1,637,604 | $ | 1,626,283 | $ | 1,610,371 | |||||
| Less: | |||||||||||||||
| Goodwill | 506,146 | 506,146 | 506,146 | 506,146 | 506,146 | ||||||||||
| Core deposit intangible | 8,669 | 9,513 | 10,489 | 11,476 | 12,470 | ||||||||||
| Tangible stockholders' equity | 1,151,022 | 1,146,286 | 1,120,969 | 1,108,661 | 1,091,755 | ||||||||||
| Less: | |||||||||||||||
| Preferred stock | 55,527 | 55,527 | 55,527 | 55,527 | 55,527 | ||||||||||
| Tangible common equity | $ | 1,095,495 | $ | 1,090,759 | $ | 1,065,442 | $ | 1,053,134 | $ | 1,036,228 | |||||
| Tangible Assets: | |||||||||||||||
| Total assets | $ | 13,418,978 | $ | 13,538,253 | $ | 13,498,183 | $ | 13,538,903 | $ | 13,555,175 | |||||
| Less: | |||||||||||||||
| Goodwill | 506,146 | 506,146 | 506,146 | 506,146 | 506,146 | ||||||||||
| Core deposit intangible | 8,669 | 9,513 | 10,489 | 11,476 | 12,470 | ||||||||||
| Tangible assets | $ | 12,904,163 | $ | 13,022,594 | $ | 12,981,548 | $ | 13,021,281 | $ | 13,036,559 | |||||
| Tangible stockholders' equity to tangible assets | 8.92 | % | 8.80 | % | 8.64 | % | 8.51 | % | 8.37 | % | |||||
| Tangible common equity to tangible assets | 8.49 | % | 8.38 | % | 8.21 | % | 8.09 | % | 7.95 | % |
22
ex992q12024earningsrelea
. . . 1 The 1Q 2024 Earnings Release Supplement should be read in conjunction with the Earnings Release furnished as Exhibit 99.1 to Form 8-K filed with the SEC on April 18, 2024. Exhibit 99.2 OceanFirst Financial Corp. 1Q 2024 Earnings Release Supplement1 April 2024
. . .Legal Disclaimer 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, inflation, general economic conditions, potential recessionary conditions, levels of unemployment in the Company’s lending area, real estate market values in the Company’s lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, 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, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company’s deposit portfolio, including the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, competition, demand for financial services in the Company’s market area, changes in consumer spending, borrowing and saving habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the effect of the Company’s rating under the Community Reinvestment Act, the impact of pandemics on our operations and financial results and those of our customers 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, 2023, 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. NON-GAAP FINANCIAL INFORMATION. This presentation contains certain non-GAAP (generally accepted accounting principles) measures. These non-GAAP measures, as calculated by the Company, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP measures are not measures of financial performance or liquidity under GAAP and should not be considered alternatives to the Company's other financial information determined under GAAP. See reconciliations of certain non-GAAP measures included in the Company’s Earnings Release furnished as Exhibit 99.1 to Form 8-K as filed with the SEC on April 18, 2024. MARKET AND INDUSTRY DATA. This presentation references certain market, industry and demographic data, forecasts and other statistical information. We have obtained this data, forecasts and information from various independent, third-party industry sources and publications. Nothing in the data, forecasts or information used or derived from third party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of industry publications and surveys and independent sources. We believe that these sources and estimates are reliable but have not independently verified them. Statements as to our market position are based on market data currently available to us. These estimates involve inherent risks and uncertainties and are based on assumptions that are subject to change. 2
. . .Q1-24 Financial Highlights 3 (1) For non-GAAP financial measures, please refer to the ‘Non-GAAP Reconciliations’ in the Appendices for a reconciliation to GAAP financial information. (2) CET1 ratio represents an estimate as of Q1-24. (3) PCD loans are not included in these metrics. Refer to Asset Quality section in the Earnings Release for additional information. Financial Highlights $0.44 Core Diluted EPS 1 $86 million Net Interest Income 0.76% Core ROAA 1 9.36% Core ROTCE 1 $0.62 Core PTPP Diluted EPS 1 11.0% CET1 Ratio 2 ▪ The Company continued to build capital while resuming share purchases, repurchasing 957,827 shares totaling $15.1 million in Q1-24. Capital remains strong and above “well capitalized” levels. ▪ In-line with Management expense guidance, core non-interest expense(1) decreased $0.3 million (or 0.50%) to $58.3 million from the linked quarter. ▪ Asset quality metrics remain strong. Criticized and classified loans as a percent of total loans were 1.65% and non-performing loans as a percent of total loans were 0.31%(3).
. . . I N V E S T O R P R E S E N T A T I O N 4 Quarterly Earnings Update
. . .Loan Portfolio Trends 5 Moderated Loan Growth in the Portfolio ($’millions) ▪ Loan growth has moderated and will likely persist through mid-year with the expectation of low to mid-single digit annualized growth during the second half of the year. ▪ Loan yields continue to improve. 5,297 5,320 5,334 5,354 5,323 986 982 957 944 915 622 620 652 666 677 2,882 2,907 2,928 2,980 2,965 4.96% 253 Q1-23 5.17% 255 Q2-23 5.30% 252 Q3-23 5.40% 251 Q4-23 Q1-24 10,040 10,084 10,124 10,195 5.46% 246 10,126 Average Loan Yield Home Equity & Consumer Residential C&I CRE Owner Occupied CRE Investor Owned
. . .Credit Quality Historically Top Quartile and Well Positioned ▪ Underlying collateral is diversified: The underlying collateral for the CRE Investor Owned (“Investor”) portfolio is highly diversified. ▪ Low concentration in the Multi-Family portfolio, which represents 7% of total assets. ▪ Maturity wall is modest and has a minimal impact: Our maturity wall, totaling $922 million (or 9% of total loans), is set to mature in 2024 and 2025 with weighted average rates of 5.84% and 6.42%, for each respective cohort. ▪ A repricing analysis(2) was performed on the vast majority of the CRE Investor and Construction portfolio. Results indicated the portfolio continues to service debt without unusual stress. ▪ The weighted average DSCR of loans after stressing the portfolio at an interest rate of 7% is 1.21x. ▪ Refer to the Appendices for additional disclosures on the Office portfolio. 6 CRE Investor Owned Portfolio by Geography Notes: All data presented represents CRE Investor balances, excluding purchase accounting marks and Construction as of March 31, 2024, unless otherwise noted. (1) Other includes co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other. (2) Repricing analysis as of Q1-23 included stressing portfolio with an increase to 7% interest rates while keeping underwritten rents constant. We are actively tracking CRE loan underlying cash flows and noted no material change from Q1-23. As such, we have deemed the results from the repricing analysis to be relevant for the current quarter. (3) Rent-regulated multi-family is defined as buildings with >50% rent-regulated units. 33% 27% 25% 9% NY PA/DE NJ 3% MA 3% MD/DC Other The concentration in NYC rent-regulated3 multi- family loans is de- minimis, representing 0.27% of total assets. NYC Office Central Business District (CBD) is also de-minimis, representing 0.12% of total assets. Maturity Wall Detail Balance Weighted Average % of Maturity Year ($'millions) Rate LTV DSCR Loans 2024 313 5.84 62.40 1.54 3.09% 2025 609 6.42 54.97 1.72 6.01% Total 922 6.22 57.50 1.66 9.11% CRE Investor Owned - Collateral Details $'millions CRE: Investor Owned % of Total WA LTV WA DSCR Office 1,105 23.6% 56.2 1.66 Retail 1,082 23.1% 57.0 1.91 Multi-Family 884 18.9% 58.0 1.63 Industrial / Warehouse 722 15.4% 51.6 2.01 Hospitality 154 3.3% 48.4 1.90 Other 1 739 15.8% 46.4 1.76 CRE: Investor Owned 4,686 100.0% 54.2 1.79 Construction 637 CRE IO and Construction Total 5,323
. . . Strong asset quality trends driven by prudent loan growth and credit decisioning. Quarterly Credit Trends (1 of 2) 7 Non-Performing Loans and Assets ($’000)1 Special Mention and Substandard Loans ($’000) Note: At March 31, 2024, of the Special Mention loans and Substandard loans represented above, 99.6% and 71.9% were current on payments, respectively. Note #2: Peer data is on a one quarter lag. (1) PCD loans are not included in these metrics. Refer to Asset Quality section in the Earnings Release for additional information. Criticized loans as a % of total loans remain low at 1.65% as of Q1-24 compared to 2.06% as of Q4-19 (pre-pandemic). 0.20% 0.18% 0.14% Q1-23 0.19% 0.14% Q2-23 0.27% 0.20% Q3-23 0.26% 0.19% Q4-23 0.31% 0.23% Q1-24 Non-performing loans to total loans Non-performing assets to total assets Non-performing loans 18,508 19,587 22,70318,138 17,582 86,765 88,152 86,596 106,551 98,240 44,940 40,386 69,283 1.10% 23,980 Q1-23 2.53% 1.18% 30,859 Q2-23 2.70% 1.30% Q3-23 2.96% 1.44% Q4-23 1.65% Q1-24 2.39% Peer Average Criticized Loans / Total Loans OCFC Criticized Loans / Total Loans Special Mention Substandard OCFC 10-Year (2014-2023) Average Criticized Loans / Total Loans = 2.40%
. . .Quarterly Credit Trends (2 of 2) 8 Loan Allowance for Credit Losses (ACL) Plus PCD & General Credit Marks / Total Loans NCOs / (Recoveries) and Provision for Credit Loss Expense ($’000) 0.10% 0.60% Q1-23 0.10% 0.61% Q2-23 0.09% 0.63% Q3-23 0.07% 0.66% Q4-23 Q1-24 0.70% 0.71% 0.72% 0.73% 0.73% 0.66% 0.07% PCD & General Credit Marks ACL 10,283 3,153 591 (47) 123 8,271 35 349 3,013 Q1-23 1,229 Q2-23 Q3-23 Q4-23 Q1-24 Provision Expense Net Charge-offs (Recoveries) Driven by a charge-off on a single commercial real estate credit relationship announced in Sep-23. NCOs to avg. loans for 2023 totaled 0.08%.
. . . COVID-19 Pandemic Track Record of Strong Credit Performance 9 ▪ From 2006 to 2023, inclusive of the Global Financial Crisis, Hurricane Sandy, and the COVID-19 Pandemic, OCFC’s CRE NCO to average CRE loans totaled 7 bps per year compared to 73 bps for all commercial banks between $10 - $50 billion in assets. ▪ From 2006 to 2023, peak CRE net charge-offs for OCFC totaled 47 bps in 2020, related to proactively de-risking our balance sheet. Peak CRE charge-offs for commercial banks between $10 - $50 billion in assets were 455 bps in 2010. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Q1-24 OCFC CRE NCO / Avg Assets OCFC NCO / Avg Assets Commercial Banks ($10-50 bn) CRE NCO / Avg Assets Commercial Banks ($10-50 bn) NCO / Avg Assets Global Financial Crisis Cumulative CRE charge-offs for OCFC between 2006 and Q1-24 were minimal, totaling $35 million. Hurricane Sandy Source: S&P Global. Note: Commercial bank reporting is on a one quarter lag.
. . .Deposit Trends 10 (1) Deposit beta is calculated as the increase in rate paid on total deposits per quarter divided by the incremental increase in the fed funds rate since January 1, 2022. ▪ Non-maturity deposits decreased by $73 million (or 1%) from the linked quarter. ▪ High yield savings declined by $101 million from the previous quarter as we decreased pricing on this portfolio. The portfolio remained stable after the pricing change. ▪ The decline in Q1-24 time deposits is primarily driven by a decrease in brokered CDs of $88 million from planned runoff. Shift in Deposit Mix to Drive Retention ($’millions) 20.00% 1.15% Q1-23 29.00% 1.67% Q2-23 35.00% 2.02% Q3-23 38.00% 2.21% Q4-23 40.00% 2.31% Q1-24 Deposit Beta (1) Cost of Deposits (Spot) 2,387 2,766 2,654 2,445 2,320 616 770 860 1,022 1,151 1,309 1,230 1,484 1,399 1,260 3,697 3,538 3,709 3,912 3,866 1,984 1,854 1,827 1,657 1,640 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 9,993 10,158 10,534 10,435 10,237 Non Int. Bearing Int. Bearing Checking Savings Money Market Time Deposits Deposit Beta and Cost Trend 20% 29% 35% 38% 40% Cost of Deposits Type of Account Qtr. Avg. Mar 31 Spot Int. Bearing Checking 2.13% 2.14% Money Market 3.38% 3.49% Savings 1.32% 1.02% Time Deposits 4.24% 4.34% Total (incl. non-int bearing) 2.31% 2.31%
. . .Net Interest Income and Net Interest Margin Trends 11 (1) Core NIM excludes purchase accounting and prepayment fee income. Refer to the Earnings Release for additional information. Core NIM1 vs NIM NIM Bridge Q4-23 NIM -0.01 Non-core impacts Q1-24 NIM 2.82% 2.81% 3.34% 3.30% Q1-23 3.02% 2.97% Q2-23 2.91% 2.85% Q3-23 2.82% 2.77% Q4-23 2.81% 2.77% Q1-24 NIM Core NIM Net Interest Income ($’000) 98,802 Q1-23 92,109 Q2-23 90,996 Q3-23 87,824 Q4-23 86,224 Q1-24 Net Interest Income Headwinds ▪ Competitive market environment as peers compete on rate for quality credit. ▪ Remaining disciplined on deposit pricing and managing funding costs.
. . . Core Efficiency Ratio1 Expense Discipline and Focused Investment 12 Core Non-Interest Expense1 ($’000) 7,852 8,629 8,411 7,999 7,761 5,098 5,083 5,258 2,858 2,732 6,154 6,165 6,086 6,430 5,956 1,749 2,465 2,557 2,723 2,717 6,444 6,366 6,638 6,390 6,329 33,920 34,222 35,534 32,126 32,759 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 61,217 62,930 64,484 58,526 58,254 Compensation & employee benefits Occupancy & Equipment FDIC & regulatory assessments Data processing Professional fees Other Opex 56.49% Q1-23 61.94% Q2-23 64.29% Q3-23 60.02% Q4-23 61.05% Q1-24 1.87% 1.87% 1.88% 1.71% 1.73% Core Efficiency Ratio Core Non-Interest Expense to Average Assets (Annualized) (1For non-GAAP financial measures, please refer to the ‘Non-GAAP Reconciliations’ in the Appendices for a reconciliation to GAAP financial information. (2)Other Opex includes marketing, check card processing, amortization of CDI, and other expenses. ▪ Q1-24 core operating expenses decreased from prior linked quarter to $58.3MM. ▪ Q1-24 core operating expenses excludes a $0.4MM pre- tax FDIC special assessment. (2)
. . .Generating Consistent Returns 13 Book Value and Tangible Book Value per Common Share ($)1, 2 Core ROAA1, ROTE1, and ROTCE1 • Tangible book value per common share increased by $1.21 (or 7%) compared to the same quarter last year. • Capital remains strong and above “well capitalized” levels. • Repurchased 957,827 shares in the quarter totaling $15.1MM • Share repurchase authorization totaling 2.0 million shares outstanding. Capital Management ($’millions) 17.42 17.72 17.93 18.35 18.63 27.07 27.37 27.56 27.96 28.32 10.0 10.2 10.4 10.9 11.0 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 CET1 Book Value per Share Tangible Book Value per Common Share 12.15% 12.80% 1.00% Q1-23 9.84% 10.36% 0.81% Q2-23 6.54% 6.88% 0.54% Q3-23 9.20% 9.67% 0.77% Q4-23 8.91% 9.36% 0.76% Q1-24 Core ROTE Core ROTCE Core ROAA 12 12 12 12 12 15 8.37% 0 Q1-23 8.51% 0 Q2-23 8.64% 0 Q3-23 8.80% 0 Q4-23 8.92% Q1-24 Tangible Stockholders’ Equity to Tangible Assets1 Share Repurchases Common Dividend (1) For non-GAAP financial measures, please refer to the ‘Non-GAAP Reconciliations’ in the Appendices for a reconciliation to GAAP financial information. (2) CET1 ratio represents an estimate as of Q1-24.
. . .Management 2024 Outlook 14 Loans Deposits Operating Expenses Net Interest Margin Capital • Continued focus on credit risk management, anchored by our diversified CRE portfolio that has performed well in market downturns. • Loan growth has moderated and will likely persist through mid-year with the expectation of low to mid-single digit annualized growth during the second half of the year. • Maintain loan-to-deposit ratio ~100% for the entire year. • Continued mix shift expected to further pressure funding costs. Flat in Q2-24; modest growth in H2-24 Growth consistent with loan growth $58MM - $60MM per quarter Modest compression / stability remainder of the year Robust CET1 ratio (>10%) Guidance Key Assumptions / Commentary • Some level of quarterly volatility could occur. • We expect to maintain our common equity tier 1 ratio above 10%. • Further share repurchases dependent on other capital deployment opportunities. • Stabilization is subject to interest rate, loan growth, and funding trends.
. . . I N V E S T O R P R E S E N T A T I O N 15 Appendix
. . .CBD Office Concentration Exposure Is Moderate 16 CBD Office Portfolio by Geography 13% 35% 34% 18% NY NJ MA PA CBD Proportion of Total Assets 99% 1% CBD Non-CBD Office Loan Classifications 96% 4% Criticized & Classified Non Criticized & Classified Central business district (CBD) loans have a weighted average LTV of 65.9% and weighted average DSCR of 1.57. CRE Investor Owned: Office (All Geographies) $'millions Book Balance % of Total WA LTV WA DSCR Office 532 48.1% 51.6 1.69 Medical 311 28.2% 57.1 1.72 Credit Tenant 262 23.7% 64.5 1.54 Total Office 1,105 100.0% 56.2 1.66 % of Total Loans 10.9% Central Business District (CBD) - Office $'millions Book Balance % of Total WA LTV WA DSCR Credit Tenant 44 35.6% 61.0 1.79 Office 41 33.8% 57.7 1.55 Life Sciences & Medical 38 30.7% 80.6 1.33 CBD - Office 123 11.1% 65.9 1.57 % of Total Loans 1.2%
. . . Hurricane Sandy Global Financial Crisis COVID-19 Pandemic Northeast Outperforms Through Credit Cycles… 17 ▪ Historically, net charge-offs for Northeastern headquartered banks have greatly outperformed major exchange traded U.S. banks headquartered in other regions ▪ Median net charge-offs / average assets for Northeastern banks averaged 15 bps during the Global Financial Crisis compared to 50 bps for other regions. In Q4-23, median NCOs / average assets totaled 4 bps for Northeastern banks versus 5 bps for other regions Source: SNL Financial. Multiple of Northeast GFC Peak NCOs 1.3x 1.7x 2.6x 6.0x3.4x 0.24% 0.32% 0.40% 0.63% 0.80% 1.43% Northeast Southwest Mid Atlantic Midwest Southeast West 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Northeast NCO / Avg Assets Mid-Atlantic NCO / Avg Assets Southeast NCO / Avg Assets Midwest NCO / Avg Assets Southwest NCO / Avg Assets West NCO / Avg Assets
. . . Hurricane Sandy Global Financial Crisis COVID-19 Pandemic …With a Similar Story in Commercial Real Estate Portfolios 18 ▪ Northeastern banks’ CRE portfolio net charge-offs have also historically outperformed major exchange traded banks in other regions ▪ Median CRE net charge-offs / average assets for Northeastern banks averaged 2 bps during the Global Financial Crisis compared to 6 bps for other regions Source: SNL Financial. GFC Peak CRE NCOs 1.4x 1.7x 3.3x 6.2x4.2x 0.03% 0.04% 0.04% 0.09% 0.11% 0.16% Northeast Southwest Mid Atlantic Southeast Midwest West Multiple of Northeast 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Northeast NCO / Avg Assets Mid-Atlantic NCO / Avg Assets Southeast NCO / Avg Assets Midwest NCO / Avg Assets Southwest NCO / Avg Assets West NCO / Avg Assets
. . .Non-GAAP Reconciliations (1 of 2) (1) The sale of specific positions in two financial institutions impacted both equity investments and debt securities for the three months ended March 31, 2023. On the Consolidated Statements of Income, the losses on sale of equity investments and debt securities are reported within net gain (loss) on equity investments ($4.6 million) and other ($697,000), respectively, for the three months ended March 31, 2023. Non-GAAP Reconciliation For the Three Months Ended $'000 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Core Earnings: Net income available to common stockholders (GAAP) 27,663 26,678 19,663 26,793 26,879 Add (less) non-recurring and non-core items: Merger related expenses - - 22 Branch consolidation expense, net - - 70 Net (gain) loss on equity investments (1) (1,923) (2,176) (1,452) 559 2,193 Net loss on sale of investments (1) - - - - 5,305 Net gain on sale of trust business (1,162) - - - - FDIC special assessment 418 1,663 - - - Income tax expense (benefit) on items 642 129 351 (162) (1,797) Core earnings (Non-GAAP) 25,638 26,294 18,562 27,190 32,672 Income tax expense 10,637 8,591 6,459 8,996 8,654 Provision for credit losses 591 3,153 10,283 1,229 3,013 Less: income tax expense (benefit) on non-core items 642 129 351 (162) (1,797) Core earnings PTPP (Non-GAAP) 36,224 37,909 34,953 37,577 46,136 Core earnings diluted earnings per share 0.44 0.45 0.32 0.46 0.55 Core earnings PTPP diluted earnings per share 0.62 0.65 0.59 0.64 0.78 Core Ratios (Annualized): Return on average assets 0.76 0.77 0.54 0.81 1.00 Return on average tangible stockholders' equity 8.91 9.20 6.54 9.84 12.15 Return on average tangible common equity 9.36 9.67 6.88 10.36 12.80 Eff iciency ratio 61.05 60.02 64.29 61.94 56.49
. . .Non-GAAP Reconciliations (2 of 2) Non-GAAP Reconciliation $'000 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Tangible Equity Total stockholders' equity 1,665,837 1,661,945 1,637,604 1,626,283 1,610,371 Less: Goodw ill 506,146 506,146 506,146 506,146 506,146 Core deposit intangible 8,669 9,513 10,489 11,476 12,470 Tangible stockholders' equity 1,151,022 1,146,286 1,120,969 1,108,661 1,091,755 Less: Preferred Stock 55,527 55,527 55,527 55,527 55,527 Tangible common equity 1,095,495 1,090,759 1,065,442 1,053,134 1,036,228 Tangible Assets Total Assets 13,418,978 13,538,253 13,498,183 13,538,903 13,555,175 Less: Goodw ill 506,146 506,146 506,146 506,146 506,146 Core deposit intangible 8,669 9,513 10,489 11,476 12,470 Tangible assets 12,904,163 13,022,594 12,981,548 13,021,281 13,036,559