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| 8-K - FORM 8-K - OCEANFIRST FINANCIAL CORP | d928526d8k.htm |
 Investor Presentation
May 2015
OceanFirst Financial Corp.
OceanFirst Financial Corp.
Exhibit 99.1 |
 OceanFirst Financial Corp.
Forward Looking Statements:
This
presentation
contains
certain
forward-looking
statements
within
the
meaning
of
the
Private
Securities
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
and
accounting
principles
and
guidelines.
These
risks
and
uncertainties
are
further
discussed
in
the
Company’s
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2014
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. 2 |
 OceanFirst Bank Milestones
Founded,
Point Pleasant,
NJ
Branch Expansion
Into
Middlesex County
IPO To
Mutual
Depositors
Created OceanFirst
Foundation
Established
Commercial
Lending
Branch Expansion
Into
Monmouth County
Repurchased
62%
Of
Original IPO Shares
Established
Trust
and
Asset Management
Rebuilt Capital
To 9.5% Through
Secondary
Stock Offering
Resumed Share
Repurchases –
Current Authorization:
508,255
Shares
OceanFirst
Foundation Passes
$25 Million In
Cumulative Grants
Open LPO In Mercer
County To Serve
The Broader Central
Jersey Market
3 |
 Serving Central New Jersey Market
•
Community Bank serving the
Central Jersey market -
$2.4 billion
in assets and 23 branch offices
(24
th
branch opening in mid 2015)
•
Targeting growth opportunities in
Monmouth, Mercer and Middlesex
Counties
•
Market Cap $290.7 million
30 million people, or approximately
10% of the total U.S. population,
reside within a 2-hour drive*
*Includes New York –
Newark NY-NJ-PA-CT CSA and
Philadelphia –
Reading –
Camden CSA.
Pending Colonial
acquisition
supports existing
Red Bank
Financial Center
4 |
 Experienced Leadership
Name
Position
# of Years
at OCFC
Previous
Experience
Christopher D. Maher
President, Chief Executive Officer
2
Patriot National Bancorp;
Dime Community
Bancshares
Michael J. Fitzpatrick
Executive Vice President, Chief Financial Officer
22
KPMG
Joseph R. Iantosca
Executive Vice President, Chief Administrative Officer
11
BISYS Banking Solutions;
Neutrend LLC;
Brooklyn Federal Savings
Joseph J. Lebel III
Executive Vice President, Chief Lending Officer
9
Wachovia Bank N.A.
•
Substantial insider ownership of 27.3% –
aligned with shareholders’
interests
OceanFirst Bank ESOP 10.0%
Directors & Senior Executive Officers 10.6% (Chairman 5.9%)
Director and Proxy Officer Stock Ownership Guidelines
OceanFirst Foundation 6.7%
As of March 10, 2015 proxy date.
5 |
 Depth of Management
Name
Position
# of Years
at OCFC
Previous
Experience
Craig C. Spengeman
Executive Vice President, Director of Wealth Management
1
PGB Trust and
Investments (Division of
Peapack-Gladstone
Bank)
Margaret Lanning
First Senior Vice President, Chief Credit Officer
-
Wells Fargo Bank, N.A.;
Wachovia Bank
Steven J. Tsimbinos
First Senior Vice President, General Counsel
5
Thacher Proffit & Wood;
Lowenstein Sandler PC
Gary S. Hett
Senior Vice President, Director of Human Resources
2
Patriot National Bancorp;
Dime Community
Bancshares
Gayle S. Hoffman
Senior Vice President, Internal Audit Director
1
Rumson-Fair Haven
Bank & Trust;
First State Bank; KPMG
David R. Howard
Senior Vice President, Chief Risk Officer
2
Guggenheim Partners;
Financial Guaranty
Insurance Company
6 |
 Our Strategy
•
Positioned as the leading Community Bank in attractive Central Jersey
market –
developing the franchise, growing revenue and creating additional
value for shareholders
•
Strategically focused on revenue growth in commercial lending, wealth
management, and bankcard services
•
Guarding credit quality in ALL
business cycles
•
Growing diversified streams of non-interest income to decrease reliance on
Net Interest Margin (NIM)
•
Creating attractive profile to encourage roll-up opportunities presented by
local community banks lacking the scale or desire to remain
independent 7 |
 Significant Primary Market Deposit Share
Competing Favorably Against Banking Behemoths
# of
Dep. In Mkt.
Mkt. Shr.
Rank
Institution
Branches
($000)
(%)
Ocean County, NJ
1
TD Bank, National Association (Canada)
22
2,541,705
17.45
2
Hudson City Bancorp Inc. (NJ)
(1)
14
2,212,695
15.19
3
Wells Fargo Bank NA (CA)
26
2,203,005
15.13
4
OceanFirst Financial Corp. (NJ)
19
1,480,885
10.17
5
Banco Santander S.A. (Spain)
21
1,368,640
9.40
6
Bank of America Corp. (NC)
17
1,267,176
8.70
Total For Institutions In Market
188
14,563,013
(1)
Pending acquisition by M&T Bank (NY)
Source: FDIC Summary of Deposits, June 30, 2014
8 |
 Strategic Deposit Composition Transition
*Time deposits duration of 19 months
9 |
 Deposit Transition Supported by Strategic Focus on
Business Checking
10 |
 Technology and Delivery Systems
Mobile Banking
Added mobile deposit capture
in 2013. More than 14,000
depositors use mobile, text or
smart phone apps monthly.
Online Banking & Bill Pay
In 2014, 42% of depositors used
online banking and an average of
34,000 bills were paid with online
bill pay service each month.
Check Card
Over 6 million transactions
processed in 2014, a 10.7%
increase from 2013. Rewards
program promotes usage.
ATM & Interactive Teller (ITM)
Invested $900,000 to upgrade ATM fleet
to intelligent terminals in 2014; self-
service
deposits
more
than
doubled.
First
ITM deployed in April 2014.
Commercial Cash Management
Added Remote Deposit Capture
(RDC) in 2007. In 2014, 88 clients
processed over 600,000 checks
using RDC.
11 |
 Strategic Loan Composition Transition
(1)
Commercial loan (CRE and C&I) duration of 3.2 years.
12 |
 Credit Underwriting Remains Conservative
Commercial Loan Production 2014 and 2015
(Dollars in thousands)
2014 Total
Commercial
Loan
Originations
First Quarter
2015 Total
Commercial
Loan
Originations
Total
Portfolio at
March 31, 2015
Amount
$243,858
$69,436
$775,246
Weighted average rate
4.14%
4.13%
4.44%
Weighted average debt service coverage
2.0X
1.82X
1.99X
Weighted average loan-to-value (CRE only)
56%
65%
55%
Weighted average risk rating
(1)
4.3
4.2
4.5
Deposit contribution
$35,727
$14,259
$186,270
Cash management (% utilizing)
37%
(1)
Risk rating is on a scale from 1 (best) to 9 (worst). A rating of 4.5
represents an equivalent S&P rating of BBB. 13 |
 Highlights –
First Quarter 2015
•
Announced a merger agreement with Colonial American Bank in an all stock
transaction valued at $11.3 million at the time of announcement.
Colonial operates two full service banking centers in Middletown and
Shrewsbury, New Jersey, with total assets of $143.7 million •
Grew
commercial
loan
portfolio
$41.3
million,
22.5%
annualized;
7
th
consecutive
quarter
of
double
digit percentage growth
A new commercial lending team located in Mercer County, New Jersey, began
operations and provided strong support for the commercial loan growth
The Bank’s conservative credit culture was further enhanced with the addition
of a highly experienced Chief Credit Officer
•
Deposit growth totaled $80.8 million which included $73.7 million of core deposits
(all deposits except time deposits)
•
Earnings per share of $0.32, 9.6% ROE & 0.89% ROA
Net interest margin relatively stable at 3.24%
Expense discipline led to reductions in operating expenses of 4.6%, as compared to
the prior linked quarter and 2.6%, as compared to the same prior year
quarter. •
Tangible common equity of 9.2% of assets
•
Common stock repurchase plan in place to strategically manage capital levels
14 |
 Highlights –
Risk Management
Over the past year through March 31, 2015:
•
Interest Rate Risk Management
Extended
$154
million
of
FHLB
advances
into
3
–
5
year
terms
$90 million of retail checking migrated to non-interest bearing
Core deposits
(1)
are 88.1% of total deposits, a significant hedge against a rising rate
environment
•
Asset Quality Improvements
Non-performing loans decreased by 57%, or $25.9 million, to $19.4 million
at March 31, 2015
Credit metrics improved as non-performing loans as a percent of total loans
receivable
decreased
to
1.09%
from
2.83%,
and
Allowance
for
Loan
Losses
as
a
percent of total non-performing loans increased to 84.61% from 46.19%
(1)
Core deposits are all deposits except time deposits.
15 |
 Credit Metrics Reflect Conservative Culture
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2009
2010
2011
2012
2013
2014
3/31/2015
Residential
Consumer
Commercial Real Estate
Commercial
Note: Atlantic County Loan Exposure totals $11.6 million, or 0.7%, of total
loan portfolio as of March 31, 2015. Data as of December 31, unless otherwise
indicated. Net charge-off ratio for 2014 excludes charge-off related
to bulk sale of non-performing residential and consumer mortgage
loans. Including this charge-off, the ratio is 0.45%. Ratio for 2015 is annualized.
0.10%
0.00%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
Net Charge-Offs
16 |
 Prudently Provisioning for Credit Costs
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
Net Charge-Offs
Net Charge-Offs Attributable to Bulk Sale of NPL's
Provision for Loan Losses
(1)
Spike in charge-offs was due to a change in charge-off policy to recognize
the charge-off when the loan is deemed uncollectible rather than when
the foreclosure process is complete. The additional charge-off relating to the
change in policy through 2011 was $5.7 million, all of which
had been previously specifically reserved.
12/31/09
12/31/10
12/31/11
(1)
12/31/12
12/31/13
12/31/14
3/31/15
17 |
 Net Interest Margin
Stabilizing Close to Historical Levels
Historical Average Net Interest Margin (3.28%)
18 |
 Diversified Streams of Non-Interest Income
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
1996
3/31/2015 (Annualized)
Fees and Service Charges
Gain on Sale of Loans
BOLI
Other
BankCard Services
Investment Services
Wealth Management
$2.5M
$15.6M
Targeted
Growth
Areas
Non-Interest Income excludes gain/loss from other real estate operations, gain
on sale of securities and gain on sale of loan servicing.
19 |
 Generating Consistent Attractive Returns
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2009
2010
2011
2012
2013
2014
3/31/15
(Annualized)
Return on Equity
Return on Assets
(1)
Excludes
after-tax
impact
of
$3.1
million
in
non-recurring
charges
related
to
strategic
advance
restructuring
and
branch
consolidation.
(1)
0.0%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
20 |
 Prudently Managing Excess Capital in Near Term
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
2011
2012
2013
2014
3/31/15
Stock Repurchases
Cash Dividends
Notes: Stock Repurchases –
$15.06 Average Cost per Share.
Quarterly dividend rate increased by $0.01, or 8.3%, in October 2014.
(Three Months)
21 |
 Challenge Today is to Grow Revenue
Build Shareholder Value
•
Target
growth
in
broader
central
New
Jersey
market
–
increasing
share
In early 2015, added new commercial lending team located in Mercer County
Commercial loans increase at double digit percentage growth rate
for seven consecutive quarters
Superstorm Sandy recovery providing market opportunity (see Appendix 4)
•
Continuing Strategic Execution
Sold most non-performing residential/consumer mortgage loans in third quarter
of 2014; $500,000 in annual cost savings
FHLB Advances restructured in fourth quarter 2013; duration extended to 38
months Rationalizing Branch Network and Residential Lending, reinvesting
cost saves to support growth •
Control operating expenses while investing in revenue producing growth
opportunities Operating expenses decreased 4.6% for the quarter ended March
31, 2015, as compared to the prior linked quarter, and 2.6%, as compared to
the same prior year period •
Assessing opportunistic roll-up of local community banks
Strategic, in-market, acquisition of Colonial American Bank expands branch
footprint in demographically attractive markets; accretive to EPS in 2016
with negligible book value dilution •
Financial performance develops value proposition for shareholders and preserves the
right to remain independent
22 |
 Why OCFC…?
•
Fundamental
franchise
value
–
superior
deposit
profile
and
consistent,
conservatively underwritten, commercial loan growth
•
Seasoned and effective management team
Substantial insider ownership –
aligned with shareholders’
interests
•
Conservative credit culture and profile
•
Solid financial performance –
developing shareholder value
•
Strong balance sheet and capital base
23 |
 Attractive Valuation Metrics
Valuation
Price / Tang. Book Value
132%
150%
Price / LQA EPS
13.5x
14.9x
Price / Estimated EPS
13.4x
14.2x
Core Deposit Premium
4.1%
7.2%
Cash Dividend Yield
3.0%
2.9%
OCFC
Peers
(1)
1)
Peers include: DCOM, FFIC, FLIC, LBAI, ORIT, PGC, SNBC, SUBK, UVSP and
WSFS Note: Financial data as of the most recent period available; market data
as of May 14, 2015. Source: Sandler O’Neill
24 |
 Appendix
Appendix
25 |
 Market Demographics
Ocean
Monmouth
Middlesex
Mercer
National
Number of Offices
19
4
1
% of OceanFirst Deposits
86.2
10.9
2.9
Market Rank
4
17
35
Market Share (%)
10.2
0.9
0.2
Population
583,000
628,000
831,000
369,000
Projected 2014-2019
Population Growth (%)
1.4
—
3.0
1.2
3.5
Median Household Income ($)
58,000
81,000
75,000
74,000
52,000
Projected 2014-2019 Median
Household Income Growth (%)
2.6
3.1
3.5
5.6
4.6
Deposit and demographic data as of June 30, 2014.
Source: SNL Financial
APPENDIX 1
26 |
 Commercial Portfolio Metrics
APPENDIX 2
Commercial
Real
Estate
(CRE)
Total portfolio
(1)
$667.8 million
% of Total Loan Portfolio
37.7%
Average size of CRE loans
$864,000
Largest CRE loan
$15.9 million
Current Pipeline
$29.0 million
Weighted Average Yield
3.98%
Weighted Average Repricing Term
4.4 years
Commercial Loans
Total portfolio
(1)
$107.5 million
% of Total Loan Portfolio
6.1%
Average size of commercial loans
$374,000
Largest commercial loan
$4.0 million
Current Pipeline
$14.8 million
Weighted Average Yield
4.03%
Weighted Average Repricing Term
2.0 years
(1)
Combined commercial relationships (excluding small business) total 445.
As of March 31, 2015.
27 |
 Commercial Portfolio Segmentation
APPENDIX 2
(Cont’d)
Total Commercial Loan Exposure
by Industry Classification
Real Estate
Investment, 40.7%
Arts/Entertainment/
Recreation, 7.0%
Other Services, 2.8%
Retail Trade, 4.5%
Public Administration,
5.6%
Miscellaneous, 5.2%
Manufacturing, 3.5%
Educational Services,
4.8%
Accommodations/
Food Services, 6.5%
Healthcare, 7.5%
Wholesale Trade, 4.5%
Construction, 7.4%
Real Estate Investment by
Property Classification
Office, 33.4%
Commercial
Development, 9.6%
Shopping Center, 8.0%
Retail Store, 8.4%
Multi-Family, 6.0%
Miscellaneous, 8.1%
Single Purpose,
4.0%
Industrial/
Warehouse, 16.2%
Residential
Development, 6.3%
Diversified portfolio provides
protection against industry-
specific credit events.
As of March 31, 2015.
28 |
 Residential Portfolio Metrics
APPENDIX 3
Residential Real Estate
Total Portfolio
$784.4 million
% of Total Loan Portfolio
45.2%
Average size of mortgage loans
$195,000
% of loans for second homes
10.4%
Portfolio weighted average loan-to-value ratio (using original or most
recent appraisal) -
Loans originated during 2015
56%
64%
Portfolio average FICO score
-
Loans originated during 2015
752
760
% of loans outside the New York/New Jersey market
3.3%
% of loans outside Ocean/Monmouth Counties
26.8%
% of loans exceeding agency conforming amounts
45.7%
As of March 31, 2015, unless otherwise noted.
29 |