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| 8-K - 8-K - EARNING RELEASE - OCEANFIRST FINANCIAL CORP | ocfc8-kearningsreleasejanu.htm |
Exhibit 99.1
 | Press Release | |
Company Contact:
Michael J. Fitzpatrick
Chief Financial Officer
OceanFirst Financial Corp.
Tel: (732) 240-4500, ext. 7506
Email: Mfitzpatrick@oceanfirst.com
FOR IMMEDIATE RELEASE
OCEANFIRST FINANCIAL CORP.
ANNOUNCES RECORD QUARTERLY AND ANNUAL
FINANCIAL RESULTS
RED BANK, NEW JERSEY, JANUARY 24, 2019…OceanFirst Financial Corp. (NASDAQ:”OCFC”), (the “Company”), the holding company for OceanFirst Bank N.A. (the “Bank”), today announced that net income was $26.7 million, or $0.55 per diluted share, for the quarter ended December 31, 2018, as compared to $10.0 million, or $0.30 per diluted share, for the corresponding prior year quarter. For the year ended December 31, 2018, net income was $71.9 million, or $1.51 per diluted share, as compared to $42.5 million, or $1.28 per diluted share, for the corresponding prior year period.
The results of operations for the quarter and year ended December 31, 2018 include merger related expenses, branch consolidation expenses and a reduction of income tax expense from the revaluation of the Company’s deferred tax asset as a result of the Tax Cuts and Jobs Act (“Tax Reform”). These items increased net income, net of tax, by $696,000 for the quarter and decreased net income, net of tax, by $22.2 million, for the year. Excluding these items, core earnings for the quarter and year ended December 31, 2018 were $26.0 million, or $0.54 per diluted share, and $94.1 million, or $1.98 per diluted share, respectively. (Please refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of merger related and branch consolidation expenses and the impact of Tax Reform).
Highlights for the quarter are described below:
• | Achieved record quarterly core earnings, with core diluted earnings per share increasing 20% over the corresponding prior year quarter. |
• | Return on average assets for the quarter ended December 31, 2018 was 1.41% and return on average tangible stockholders equity was 15.60%, while core return on average assets was 1.38% and core return on average tangible stockholders equity was 15.19%, representing increases of 27% and 14%, respectively, compared to the corresponding prior year period. |
• | The Company’s net interest margin increased to 3.68%, as compared to 3.64% in the prior linked quarter, and 3.42% in the comparable prior year period. |
• | Asset quality improved from the linked quarter as non-performing loans decreased $1.8 million, to $17.4 million, or 0.31% of total loans, and other real estate owned decreased $4.9 million, to $1.4 million. |
“The Company delivered strong results for the quarter with continued growth in core earnings per share,” said Chairman and Chief Executive Officer, Christopher D. Maher. Mr. Maher added, “We are pleased to report core earnings of $26.0 million and core diluted earnings per share of $0.54. Our asset quality remains strong with declining non-performing loans and modest net charge-offs. The merger with Capital Bank of New Jersey has received regulatory approval and the approval of Capital’s shareholders and is scheduled to close on January 31, 2019. We look forward to welcoming Capital Bank customers, employees, and stockholders into the growing OceanFirst family.”
On October 25, 2018, the Company announced the execution of a definitive agreement and plan
of merger (the “merger agreement”) with Capital Bank of New Jersey (“Capital Bank”). On January 23, 2019, Capital Bank received their requisite stockholder approval for the merger. Regulatory approval of the merger was received from the Office of the Comptroller of the Currency on December 19, 2018. Subject to the fulfillment of other customary closing conditions, the Company expects to close the transaction on
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January 31, 2019, and anticipates the full integration of Capital Bank’s branches and core operating systems in the second quarter of 2019.
The Company expects to consolidate three branches in the second quarter, primarily as a result of the merger. The branch consolidation will improve operating efficiency while also funding continued investment in commercial banking and electronic delivery channels. The Company expects to identify at least four additional branches for consolidation early in the third quarter of 2019.
The Company also announced that the Company’s Board of Directors declared its eighty-eighth consecutive quarterly cash dividend on common stock. The dividend, for the quarter ended December 31, 2018, of $0.17 per share will be paid on February 15, 2019 to stockholders of record on February 4, 2019.
Board of Directors Appointment
The Company announced that on January 23, 2019 it appointed Grace Vallacchi, the Executive Vice President and Chief Risk Officer of the Company and the Bank, to the Boards of Directors of the Company and the Bank, effective immediately. Ms. Vallacchi will retain her Executive Vice President and Chief Risk Officer positions with the Company and the Bank, and will now report directly to Chairman, President and Chief Executive Officer Christopher D. Maher. Prior to joining OceanFirst, Ms. Vallacchi was an Associate Deputy Comptroller in the Northeastern District of the Office of the Comptroller of the Currency, where she had oversight over seven Assistant Deputy Controllers with over 180 examiners supervising 120 community banks and thrifts. Chairman and Chief Executive Officer Christopher D. Maher said, “Grace has made a tremendous impact on OceanFirst’s risk management and she will bring valuable insight to the Board. We look forward to her contributions as a Board member.”
Results of Operations
On January 31, 2018, the Company completed its acquisition of Sun Bancorp Inc. (“Sun”) and its results of operations from February 1, 2018 through December 31, 2018 are included in the consolidated results for the quarter and year ended December 31, 2018, but are not included in the results of operations for the corresponding prior year periods.
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Net income for the quarter ended December 31, 2018, was $26.7 million, or $0.55 per diluted share, as compared to $10.0 million, or $0.30 per diluted share, for the corresponding prior year period. Net income for the year ended December 31, 2018, was $71.9 million, or $1.51 per diluted share, as compared to $42.5 million, or $1.28 per diluted share, for the corresponding prior year period. Net income for the quarter and year ended December 31, 2018 included merger related expenses, branch consolidation expenses, and a reduction of income tax expense from the revaluation of deferred tax assets as a result of Tax Reform, which increased net income, net of tax, by $696,000 for the quarter and decreased net income, net of tax, by $22.2 million, for the year. Net income for the quarter and year ended December 31, 2017 included merger related expenses, branch consolidation expenses, and additional income tax expense related to Tax Reform, which decreased net income, net of tax, by $4.9 million and $13.5 million, respectively. Excluding these items, net income for the quarter and year ended December 31, 2018 increased over the prior year periods primarily due to the acquisitions of Sun and the expense savings from the successful integration during 2017 of Ocean Shore Holding Co. (“Ocean Shore”) which was acquired on November 30, 2016.
Net interest income for the quarter and year ended December 31, 2018 increased to $61.8 million and $240.5 million, respectively, as compared to $42.5 million and $169.2 million, respectively, for the same prior year periods, reflecting an increase in interest-earning assets and a higher net interest margin. Average interest-earning assets increased by $1.735 billion and $1.704 billion for the quarter and year ended December 31, 2018, respectively, as compared to the same prior year periods. The averages for the quarter and year ended December 31, 2018, were favorably impacted by $1.569 billion and $1.511 billion, respectively, of interest-earning assets acquired from Sun. Average loans receivable, net, increased by $1.626 billion and $1.505 billion for the quarter and year ended December 31, 2018, respectively, as compared to the same prior year periods. The increases attributable to the acquisition of Sun were $1.335 billion and $1.290 billion, respectively. The net interest margin for both the quarter and year ended December 31, 2018 increased to 3.68%, from 3.42% and 3.50%, respectively, for the same prior year
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periods. The net interest margin benefited from the accretion of purchase accounting adjustments on the Sun acquisition of $2.5 million and $10.7 million for the quarter and year ended December 31, 2018, respectively; and to a lesser extent from the impact of Federal Reserve interest rate increases. For the quarter and the year ended December 31, 2018, the cost of average interest-bearing liabilities increased to 0.80% and 0.70%, respectively, from 0.54% and 0.50%, respectively, in the corresponding prior year periods. The total cost of deposits (including non-interest bearing deposits) was 0.48% and 0.39% for the quarter and year ended December 31, 2018, respectively, as compared to 0.32% and 0.29%, respectively, for the corresponding prior year periods.
Net interest income for the quarter ended December 31, 2018, increased $337,000, as compared to the prior linked quarter, as the net interest margin increased to 3.68% for the quarter ended December 31, 2018, as compared to 3.64% for the prior linked quarter. The total cost of deposits (including non-interest bearing deposits) was 0.48% for the quarter ended December 31, 2018, as compared to 0.39% for the quarter ended September 30, 2018.
For the quarter and year ended December 31, 2018, the provision for loan losses was $506,000 and $3.5 million, respectively, as compared to $1.4 million and $4.4 million, respectively, for the corresponding prior year periods, and $907,000 in the prior linked quarter. Net loan charge-offs were $750,000 and $2.6 million for the quarter and year ended December 31, 2018, respectively, as compared to net loan charge-offs of $2.3 million and $3.9 million, respectively, in the corresponding prior year periods, and net loan charge-offs of $777,000 in the prior linked quarter. Non-performing loans totaled $17.4 million at December 31, 2018, as compared to $19.2 million at September 30, 2018, and $20.9 million at December 31, 2017.
For the quarter and year ended December 31, 2018, other income increased to $8.7 million and $34.8 million, respectively, as compared to $6.7 million and $27.1 million, respectively, for the corresponding prior year periods. The increases were primarily due to the impact of the Sun acquisition, which added $1.9 million and $8.0 million to other income for the quarter and year ended December 31,
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2018, respectively, as compared to the same prior year periods. Excluding the Sun acquisition, the slight increase in other income for the quarter ended December 31, 2018, was primarily due to increases in bankcard fees and other income, partially offset by a decrease in rental income and an increase in loss from other real estate operations. For the year ended December 31, 2018, excluding the Sun acquisition, the slight decrease in other income was primarily due to an increase in the loss from real estate operations of $2.9 million, of which $1.7 million related to the year-to-date write-down and sale of a hotel, golf and banquet facility, offset by increases in bankcard fees of $852,000 and service charges of $700,000, mostly related to deposit fees, an increase in the gain on sales of loans of $568,000, mostly related to the sale of one non-performing commercial loan relationship during the first quarter of 2018 and an increase in other income of $653,000.
For the quarter ended December 31, 2018, other income increased $463,000, as compared to the prior linked quarter. The increase was primarily due to a decrease in the loss from other real estate operations of $745,000, an increase in fees and service charges of $175,000, an increase in the net unrealized gain on equity securities of $153,000, and an increase in bankcard revenue of $86,000, partially offset by the decrease in net fees on loan level interest rate swap transactions of $689,000.
Operating expenses increased to $39.1 million and $186.3 million for the quarter and year ended December 31, 2018, respectively, as compared to $27.7 million and $126.5 million, respectively, in the same prior year periods. Operating expenses for the quarter and year ended December 31, 2018 included $1.3 million and $30.1 million, respectively, of merger related and branch consolidation expenses, as compared to $1.3 million and $14.5 million, respectively, in the same prior year periods. Excluding the impact of merger and branch consolidation expenses, the increase in operating expenses over the prior year was primarily due to the Sun acquisition, which added $7.7 million and $35.2 million for the quarter and year ended December 31, 2018, respectively. Excluding the Sun acquisition, the remaining increase in operating expenses for the quarter ended December 31, 2018 over the prior year period was primarily due to increases in compensation and employee benefits expense of $844,000, service bureau expense of
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$658,000, marketing expense of $505,000 and occupancy expense of $453,000. Excluding the Sun acquisition, the remaining increase in operating expenses for the year ended December 31, 2018 over the prior year period was primarily due to increases in compensation and employee benefits expense of $4.0 million as a result of higher incentive and stock plan expenses, occupancy expenses of $1.6 million, service bureau expense of $1.5 million, equipment expense of $657,000, and marketing expenses of $589,000.
For the quarter ended December 31, 2018, operating expenses, excluding merger and branch consolidation expenses, increased $291,000, as compared to the prior linked quarter. The increase was primarily due to check card processing expense of $506,000 and increases in branch administration expense and equipment expense, offset by decreases in compensation and employee benefits expense of $748,000.
The provision for income taxes was $4.3 million and $13.6 million for the quarter and year ended December 31, 2018, respectively, as compared to $10.2 million and $22.9 million, respectively, for the same prior year periods. The effective tax rate was 13.8% and 15.9% for the quarter and year ended December 31, 2018, respectively, as compared to 50.6% and 35.0%, respectively, for the same prior year periods. The lower effective tax rate for the quarter and year ended December 31, 2018 was due to Tax Reform which lowered the Company’s statutory tax rate in 2018. Additionally, Tax Reform required the Company to revalue its deferred tax asset, resulting in a tax benefit of $1.9 million, for the quarter and year ended December 31, 2018, and a tax expense of $3.6 million for the quarter ended December 31, 2017. Excluding the impact of Tax Reform, the effective tax rate for the quarter and year ended December 31, 2018 was 19.8% and 18.0%, respectively, as compared to 32.5% and 29.4%, respectively for the same prior year periods.
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Financial Condition
Total assets increased by $2.100 billion to $7.516 billion at December 31, 2018, from $5.416 billion at December 31, 2017, primarily as a result of the acquisition of Sun, which added $2.044 billion to total assets. Restricted equity investments increased by $37.1 million, to $56.8 million at December 31, 2018, from $19.7 million at December 31, 2017, primarily due to the addition of Federal Reserve Bank stock as a result of converting to a national bank charter. Loans receivable, net, increased by $1.613 billion, to $5.579 billion at December 31, 2018, from $3.966 billion at December 31, 2017, primarily due to acquired loans of $1.517 billion as well as purchased loans totaling $197.0 million. As part of the acquisition of Sun, the Company’s goodwill balance increased to $338.4 million at December 31, 2018, from $150.5 million at December 31, 2017, and the core deposit intangible increased to $17.0 million at December 31, 2018, from $8.9 million at December 31, 2017.
Deposits increased by $1.472 billion, to $5.815 billion at December 31, 2018, from $4.343 billion at December 31, 2017, due to acquired deposits of $1.616 billion. The loan-to-deposit ratio at December 31, 2018 was 96.0%, as compared to 91.3% at December 31, 2017. Federal Home Loan Bank advances increased by $160.7 million, to $449.4 million at December 31, 2018, from $288.7 million at December 31, 2017 due to the acquisition of Sun and to fund loan growth.
Stockholders’ equity increased to $1.039 billion at December 31, 2018, as compared to $601.9 million at December 31, 2017. The acquisition of Sun added $402.6 million to stockholders’ equity. At December 31, 2018, there were 1.3 million shares available for repurchase under the Company’s stock repurchase programs. During the year ended December 31, 2018, the Company repurchased 459,251 shares under these repurchase programs. During 2018, the Company contributed an additional $8.4 million to the existing Employee Stock Ownership Plan. The purchased shares will be allocated to employees over the next nine years. Tangible stockholders’ equity per common share increased to $14.26 at December 31, 2018, as compared to $13.58 at December 31, 2017.
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Asset Quality
The Company’s non-performing loans decreased to $17.4 million at December 31, 2018, as compared to $20.9 million at December 31, 2017. The decrease was primarily due to the sale of one commercial loan relationship during the first quarter of 2018. Non-performing loans do not include $8.9 million of purchased credit-impaired (“PCI”) loans acquired in the Sun, Ocean Shore, Cape Bancorp, Inc. (“Cape”), and Colonial American Bank (“Colonial American”) acquisitions (“Acquisition Transactions”). The Company’s other real estate owned totaled $1.4 million at December 31, 2018, as compared to $8.2 million at December 31, 2017. The decrease was primarily due to the sale of a hotel, golf, and banquet facility.
At December 31, 2018, the Company’s allowance for loan losses was 0.30% of total loans, a decrease from 0.40% at December 31, 2017. These ratios exclude existing fair value credit marks of $31.6 million at December 31, 2018 on loans acquired from the Acquisition Transactions, and $17.5 million at December 31, 2017 on loans acquired from Ocean Shore, Cape and Colonial American. These loans were acquired at fair value with no related allowance for loan losses. The allowance for loan losses as a percent of total non-performing loans was 95.2% at December 31, 2018, as compared to 75.4% at December 31, 2017.
Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income excluding merger related expenses, branch consolidation expenses and the impact to income tax expense related to the revaluation of deferred tax assets as required under Tax Reform, 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
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results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Please refer to Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.
Annual Meeting
The Company also announced today that its Annual Meeting of Stockholders will be held on Wednesday, May 29, 2019 at 6:00 p.m. Eastern time, at the OceanFirst Bank Administrative Offices located at 110 West Front Street, Red Bank, New Jersey. The record date for stockholders to vote at the Annual Meeting is April 10, 2019.
Conference Call
As previously announced, the Company will host an earnings conference call on Friday, January 25, 2019 at 11:00 a.m. Eastern Time. The direct dial number for the call is (888) 338-7143. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877) 344-7529, Replay Conference Number 10127192 from one hour after the end of the call until April 25, 2019. 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 $7.5 billion regional bank operating throughout New Jersey, metropolitan Philadelphia and metropolitan New York City. OceanFirst Bank delivers commercial and residential financing solutions, wealth management and deposit services and is one of the largest and oldest community-based financial institutions headquartered in New Jersey.
OceanFirst Financial Corp.’s press releases are available by visiting us at www.oceanfirst.com.
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Forward-Looking Statements
In addition to historical information, this news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “should,” “may,” “view,” “opportunity,” “potential,” or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: changes in interest rates, general economic conditions, levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, accounting principles and guidelines and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties are further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, 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.
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OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||
(Unaudited) | (Unaudited) | |||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 120,792 | $ | 148,362 | $ | 109,613 | ||||||
Debt securities available-for-sale, at estimated fair value | 100,717 | 100,015 | 81,581 | |||||||||
Debt securities held-to-maturity, net (estimated fair value of $832,815 at December 31, 2018, $864,173 at September 30, 2018, and $761,660 at December 31, 2017) | 846,810 | 883,540 | 764,062 | |||||||||
Equity investments, at estimated fair value | 9,655 | 9,519 | 8,700 | |||||||||
Restricted equity investments, at cost | 56,784 | 57,143 | 19,724 | |||||||||
Loans receivable, net | 5,579,222 | 5,543,959 | 3,965,773 | |||||||||
Loans held-for-sale | — | 732 | 241 | |||||||||
Interest and dividends receivable | 19,689 | 20,822 | 14,254 | |||||||||
Other real estate owned | 1,381 | 6,231 | 8,186 | |||||||||
Premises and equipment, net | 111,209 | 112,320 | 101,776 | |||||||||
Bank Owned Life Insurance | 222,482 | 221,190 | 134,847 | |||||||||
Deferred tax asset | 63,377 | 59,052 | 1,922 | |||||||||
Assets held for sale | 4,522 | 7,552 | 4,046 | |||||||||
Other assets | 24,101 | 36,094 | 41,895 | |||||||||
Core deposit intangible | 16,971 | 17,954 | 8,885 | |||||||||
Goodwill | 338,442 | 338,104 | 150,501 | |||||||||
Total assets | $ | 7,516,154 | $ | 7,562,589 | $ | 5,416,006 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Deposits | $ | 5,814,569 | $ | 5,854,250 | $ | 4,342,798 | ||||||
Federal Home Loan Bank advances | 449,383 | 456,806 | 288,691 | |||||||||
Securities sold under agreements to repurchase with retail customers | 61,760 | 61,044 | 79,668 | |||||||||
Other borrowings | 99,530 | 99,473 | 56,519 | |||||||||
Advances by borrowers for taxes and insurance | 14,066 | 16,654 | 11,156 | |||||||||
Other liabilities | 37,488 | 44,518 | 35,233 | |||||||||
Total liabilities | 6,476,796 | 6,532,745 | 4,814,065 | |||||||||
Total stockholders’ equity | 1,039,358 | 1,029,844 | 601,941 | |||||||||
Total liabilities and stockholders’ equity | $ | 7,516,154 | $ | 7,562,589 | $ | 5,416,006 | ||||||
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OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
For the Three Months Ended, | For the Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
|--------------------- (Unaudited) ---------------------| | (Unaudited) | |||||||||||||||||||
Interest income: | ||||||||||||||||||||
Loans | $ | 65,320 | $ | 64,497 | $ | 42,909 | $ | 249,549 | $ | 170,588 | ||||||||||
Mortgage-backed securities | 3,947 | 4,105 | 2,919 | 16,034 | 11,108 | |||||||||||||||
Investment securities and other | 3,091 | 2,780 | 2,078 | 11,071 | 7,133 | |||||||||||||||
Total interest income | 72,358 | 71,382 | 47,906 | 276,654 | 188,829 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 7,068 | 5,799 | 3,515 | 22,578 | 12,336 | |||||||||||||||
Borrowed funds | 3,449 | 4,079 | 1,886 | 13,574 | 7,275 | |||||||||||||||
Total interest expense | 10,517 | 9,878 | 5,401 | 36,152 | 19,611 | |||||||||||||||
Net interest income | 61,841 | 61,504 | 42,505 | 240,502 | 169,218 | |||||||||||||||
Provision for loan losses | 506 | 907 | 1,415 | 3,490 | 4,445 | |||||||||||||||
Net interest income after provision for loan losses | 61,335 | 60,597 | 41,090 | 237,012 | 164,773 | |||||||||||||||
Other income: | ||||||||||||||||||||
Bankcard services revenue | 2,511 | 2,425 | 1,764 | 9,228 | 6,965 | |||||||||||||||
Wealth management revenue | 524 | 573 | 528 | 2,245 | 2,150 | |||||||||||||||
Fees and services charges | 4,910 | 4,735 | 3,891 | 19,461 | 15,058 | |||||||||||||||
Net gain on sales of loans | 14 | 31 | 26 | 668 | 100 | |||||||||||||||
Net unrealized gain (loss) on equity investments | 83 | (70 | ) | — | (199 | ) | — | |||||||||||||
Net loss from other real estate operations | (837 | ) | (1,582 | ) | (678 | ) | (3,812 | ) | (874 | ) | ||||||||||
Income from Bank Owned Life Insurance | 1,292 | 1,337 | 863 | 5,105 | 3,299 | |||||||||||||||
Other | 251 | 836 | 351 | 2,131 | 374 | |||||||||||||||
Total other income | 8,748 | 8,285 | 6,745 | 34,827 | 27,072 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Compensation and employee benefits | 18,946 | 19,694 | 13,961 | 83,135 | 60,100 | |||||||||||||||
Occupancy | 4,333 | 4,443 | 2,693 | 17,915 | 10,657 | |||||||||||||||
Equipment | 2,315 | 2,067 | 1,763 | 8,319 | 6,769 | |||||||||||||||
Marketing | 940 | 1,021 | 433 | 3,415 | 2,678 | |||||||||||||||
Federal deposit insurance | 856 | 927 | 485 | 3,713 | 2,564 | |||||||||||||||
Data processing | 3,318 | 3,125 | 2,040 | 13,286 | 8,849 | |||||||||||||||
Check card processing | 1,305 | 799 | 922 | 4,209 | 3,561 | |||||||||||||||
Professional fees | 1,217 | 1,066 | 1,094 | 4,963 | 3,995 | |||||||||||||||
Other operating expense | 3,581 | 3,366 | 2,548 | 13,509 | 10,810 | |||||||||||||||
Amortization of core deposit intangible | 983 | 995 | 495 | 3,811 | 2,039 | |||||||||||||||
Branch consolidation expense | 240 | 1,368 | (734 | ) | 3,151 | 6,205 | ||||||||||||||
Merger related expenses | 1,048 | 662 | 1,993 | 26,911 | 8,293 | |||||||||||||||
Total operating expenses | 39,082 | 39,533 | 27,693 | 186,337 | 126,520 | |||||||||||||||
Income before provision for income taxes | 31,001 | 29,349 | 20,142 | 85,502 | 65,325 | |||||||||||||||
Provision for income taxes | 4,269 | 5,278 | 10,186 | 13,570 | 22,855 | |||||||||||||||
Net income | $ | 26,732 | $ | 24,071 | $ | 9,956 | $ | 71,932 | $ | 42,470 | ||||||||||
Basic earnings per share | $ | 0.56 | $ | 0.50 | $ | 0.31 | $ | 1.54 | $ | 1.32 | ||||||||||
Diluted earnings per share | $ | 0.55 | $ | 0.50 | $ | 0.30 | $ | 1.51 | $ | 1.28 | ||||||||||
Average basic shares outstanding | 47,709 | 47,685 | 32,225 | 46,773 | 32,113 | |||||||||||||||
Average diluted shares outstanding | 48,411 | 48,572 | 33,168 | 47,657 | 33,125 | |||||||||||||||
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OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(dollars in thousands)
LOANS RECEIVABLE | At | |||||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||||||
Commercial: | ||||||||||||||||||||||
Commercial and industrial | $ | 304,996 | $ | 343,121 | $ | 338,436 | $ | 370,711 | $ | 187,645 | ||||||||||||
Commercial real estate - owner-occupied | 740,893 | 735,289 | 717,061 | 763,261 | 569,624 | |||||||||||||||||
Commercial real estate - investor | 2,023,131 | 2,019,859 | 2,076,930 | 2,034,708 | 1,187,482 | |||||||||||||||||
Total commercial | 3,069,020 | 3,098,269 | 3,132,427 | 3,168,680 | 1,944,751 | |||||||||||||||||
Consumer: | ||||||||||||||||||||||
Residential real estate | 2,044,523 | 2,020,155 | 2,013,389 | 1,882,981 | 1,748,925 | |||||||||||||||||
Home equity loans and lines | 353,609 | 359,094 | 365,448 | 371,340 | 281,143 | |||||||||||||||||
Other consumer | 121,561 | 74,555 | 50,952 | 1,844 | 1,295 | |||||||||||||||||
Total consumer | 2,519,693 | 2,453,804 | 2,429,789 | 2,256,165 | 2,031,363 | |||||||||||||||||
Total loans | 5,588,713 | 5,552,073 | 5,562,216 | 5,424,845 | 3,976,114 | |||||||||||||||||
Deferred origination costs, net | 7,086 | 8,707 | 7,510 | 5,752 | 5,380 | |||||||||||||||||
Allowance for loan losses | (16,577 | ) | (16,821 | ) | (16,691 | ) | (16,817 | ) | (15,721 | ) | ||||||||||||
Loans receivable, net | $ | 5,579,222 | $ | 5,543,959 | $ | 5,553,035 | $ | 5,413,780 | $ | 3,965,773 | ||||||||||||
Mortgage loans serviced for others | $ | 95,100 | $ | 106,369 | $ | 105,116 | $ | 109,273 | $ | 121,662 | ||||||||||||
At December 31, 2018 Average Yield | ||||||||||||||||||||||
Loan pipeline (1): | ||||||||||||||||||||||
Commercial | 5.22 | % | $ | 129,839 | $ | 137,519 | $ | 166,178 | $ | 71,982 | $ | 53,859 | ||||||||||
Residential real estate | 4.45 | 49,800 | 64,841 | 64,259 | 73,513 | 43,482 | ||||||||||||||||
Home equity loans and lines | 5.14 | 6,571 | 11,030 | 9,240 | 11,338 | 7,412 | ||||||||||||||||
Total | 5.01 | % | $ | 186,210 | $ | 213,390 | $ | 239,677 | $ | 156,833 | $ | 104,753 | ||||||||||
For the Three Months Ended | |||||||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||
Average Yield | |||||||||||||||||||||||
Loan originations: | |||||||||||||||||||||||
Commercial | 5.39 | % | $ | 151,851 | $ | 136,764 | $ | 67,297 | $ | 59,150 | $ | 141,346 | |||||||||||
Residential real estate | 4.36 | 92,776 | 124,419 | 109,357 | 68,835 | 73,729 | |||||||||||||||||
Home equity loans and lines | 5.19 | 15,583 | 17,892 | 20,123 | 14,891 | 18,704 | |||||||||||||||||
Total | 5.01 | % | $ | 260,210 | (2) | $ | 279,075 | (3) | $ | 196,777 | (5) | $ | 142,876 | $ | 233,779 | ||||||||
Loans sold | $ | 728 | (4) | $ | 1,349 | (4) | $ | 422 | $ | 241 | (6) | $ | 1,422 | (4) | |||||||||
(1) | Loan pipeline includes pending loan applications and loans approved but not funded. |
(2) | Excludes purchased loans of $49.5 million for other consumer and $753,000 for residential real estate. |
(3) | Excludes purchased loans of $25.0 million for other consumer. |
(4) | Excludes the sale of under-performing commercial loans of $1.7 million and under-performing residential loans of $5.1 million and $5.8 million for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively. |
(5) | Excludes purchased loans of $23.6 million for commercial, $49.0 million for residential real estate, and $49.1 million for other consumer. |
(6) | Excludes the sale of SBA loans acquired from Sun and under-performing loans totaling $8.5 million. |
DEPOSITS | At | |||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||||
Type of Account | ||||||||||||||||||||
Non-interest-bearing | $ | 1,151,362 | $ | 1,196,875 | $ | 1,195,980 | $ | 1,117,100 | $ | 756,513 | ||||||||||
Interest-bearing checking | 2,350,106 | 2,332,215 | 2,265,971 | 2,330,682 | 1,954,358 | |||||||||||||||
Money market deposit | 569,680 | 584,250 | 574,269 | 613,183 | 363,656 | |||||||||||||||
Savings | 877,177 | 887,799 | 903,777 | 917,288 | 661,167 | |||||||||||||||
Time deposits | 866,244 | 853,111 | 879,409 | 929,083 | 607,104 | |||||||||||||||
$ | 5,814,569 | $ | 5,854,250 | $ | 5,819,406 | $ | 5,907,336 | $ | 4,342,798 | |||||||||||
14
OceanFirst Financial Corp.
ASSET QUALITY
(dollars in thousands)
ASSET QUALITY | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||
Non-performing loans: | |||||||||||||||||||
Commercial and industrial | $ | 1,587 | $ | 1,727 | $ | 1,947 | $ | 1,717 | $ | 503 | |||||||||
Commercial real estate - owner-occupied | 501 | 511 | 522 | 862 | 5,962 | ||||||||||||||
Commercial real estate - investor | 5,024 | 8,082 | 6,364 | 7,994 | 8,281 | ||||||||||||||
Residential real estate | 7,389 | 6,390 | 6,858 | 5,686 | 4,190 | ||||||||||||||
Home equity loans and lines | 2,914 | 2,529 | 2,415 | 1,992 | 1,929 | ||||||||||||||
Total non-performing loans | 17,415 | 19,239 | 18,106 | 18,251 | 20,865 | ||||||||||||||
Other real estate owned | 1,381 | 6,231 | 7,854 | 8,265 | 8,186 | ||||||||||||||
Total non-performing assets | $ | 18,796 | $ | 25,470 | $ | 25,960 | $ | 26,516 | $ | 29,051 | |||||||||
Purchased credit-impaired (“PCI”) loans | $ | 8,901 | $ | 9,700 | $ | 12,995 | $ | 14,352 | $ | 1,712 | |||||||||
Delinquent loans 30 to 89 days | $ | 25,686 | $ | 26,691 | $ | 36,010 | $ | 35,431 | $ | 20,796 | |||||||||
Troubled debt restructurings: | |||||||||||||||||||
Non-performing (included in total non-performing loans above) | $ | 3,595 | $ | 3,568 | $ | 4,190 | $ | 4,306 | $ | 8,821 | |||||||||
Performing | 22,877 | 24,230 | 24,272 | 33,806 | 33,313 | ||||||||||||||
Total troubled debt restructurings | $ | 26,472 | $ | 27,798 | $ | 28,462 | $ | 38,112 | $ | 42,134 | |||||||||
Allowance for loan losses | $ | 16,577 | $ | 16,821 | $ | 16,691 | $ | 16,817 | $ | 15,721 | |||||||||
Allowance for loan losses as a percent of total loans receivable (1) | 0.30 | % | 0.30 | % | 0.30 | % | 0.31 | % | 0.40 | % | |||||||||
Allowance for loan losses as a percent of total non-performing loans | 95.19 | 87.43 | 92.18 | 92.14 | 75.35 | ||||||||||||||
Non-performing loans as a percent of total loans receivable | 0.31 | 0.35 | 0.33 | 0.34 | 0.52 | ||||||||||||||
Non-performing assets as a percent of total assets | 0.25 | 0.34 | 0.34 | 0.35 | 0.54 | ||||||||||||||
(1) | The loans acquired from Sun, Ocean Shore, Cape, and Colonial American were recorded at fair value. The net credit mark on these loans, not reflected in the allowance for loan losses, was $31,647, $34,357, $37,679, $40,717, and $17,531 at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively. |
NET CHARGE-OFFS | For the Three Months Ended | ||||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||||
Net Charge-offs: | |||||||||||||||||||||
Loan charge-offs | $ | (1,133 | ) | $ | (891 | ) | $ | (1,284 | ) | $ | (533 | ) | $ | (2,523 | ) | ||||||
Recoveries on loans | 383 | 114 | 452 | 258 | 245 | ||||||||||||||||
Net loan charge-offs | $ | (750 | ) | (1) | $ | (777 | ) | (1) | $ | (832 | ) | $ | (275 | ) | $ | (2,278 | ) | (1) | |||
Net loan charge-offs to average total loans (annualized) | 0.05 | % | 0.06 | % | 0.06 | % | 0.02 | % | 0.23 | % | |||||||||||
Net charge-off detail - (loss) recovery: | |||||||||||||||||||||
Commercial | $ | (871 | ) | $ | (246 | ) | $ | (846 | ) | $ | (10 | ) | $ | (1,036 | ) | ||||||
Residential mortgage and construction | 210 | (478 | ) | (20 | ) | (159 | ) | (1,262 | ) | ||||||||||||
Home equity loans and lines | (62 | ) | (35 | ) | 31 | (99 | ) | 28 | |||||||||||||
Other consumer | (27 | ) | (18 | ) | 3 | (7 | ) | (8 | ) | ||||||||||||
Net loan (charge-offs) recoveries | $ | (750 | ) | (1) | $ | (777 | ) | (1) | $ | (832 | ) | $ | (275 | ) | $ | (2,278 | ) | (1) | |||
(1) | Included in net loan charge-offs for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017 are $243, $430, and $1,124, respectively, relating to under-performing loans sold. |
15
OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
For the Three Months Ended | ||||||||||||||||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
(dollars in thousands) | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | |||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||
Interest-earning deposits and short-term investments | $ | 103,449 | $ | 236 | 0.91 | % | $ | 88,706 | $ | 172 | 0.77 | % | $ | 155,987 | $ | 391 | 0.99 | % | ||||||||||||||
Securities (1) | 1,037,039 | 6,802 | 2.60 | 1,080,784 | 6,713 | 2.46 | 874,910 | 4,606 | 2.09 | |||||||||||||||||||||||
Loans receivable, net (2) | ||||||||||||||||||||||||||||||||
Commercial | 3,061,999 | 39,045 | 5.06 | 3,101,665 | 38,726 | 4.95 | 1,887,319 | 22,087 | 4.64 | |||||||||||||||||||||||
Residential | 2,036,024 | 20,688 | 4.06 | 2,027,880 | 20,438 | 4.03 | 1,743,334 | 17,552 | 4.03 | |||||||||||||||||||||||
Home Equity | 356,088 | 4,656 | 5.19 | 361,127 | 4,628 | 5.08 | 278,294 | 3,243 | 4.62 | |||||||||||||||||||||||
Other | 78,832 | 931 | 4.69 | 52,764 | 705 | 5.30 | 1,086 | 27 | 9.86 | |||||||||||||||||||||||
Allowance for loan loss net of deferred loan fees | (9,198 | ) | — | — | (9,350 | ) | — | — | (11,993 | ) | — | — | ||||||||||||||||||||
Loans Receivable, net | 5,523,745 | 65,320 | 4.69 | 5,534,086 | 64,497 | 4.62 | 3,898,040 | 42,909 | 4.37 | |||||||||||||||||||||||
Total interest-earning assets | 6,664,233 | 72,358 | 4.31 | 6,703,576 | 71,382 | 4.22 | 4,928,937 | 47,906 | 3.86 | |||||||||||||||||||||||
Non-interest-earning assets | 839,878 | 865,054 | 475,927 | |||||||||||||||||||||||||||||
Total assets | $ | 7,504,111 | $ | 7,568,630 | $ | 5,404,864 | ||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||
Interest-bearing checking | $ | 2,407,400 | 3,120 | 0.51 | % | $ | 2,300,270 | 2,313 | 0.40 | % | $ | 1,944,223 | 1,447 | 0.30 | % | |||||||||||||||||
Money market | 585,117 | 894 | 0.61 | 578,446 | 680 | 0.47 | 385,720 | 322 | 0.33 | |||||||||||||||||||||||
Savings | 878,617 | 263 | 0.12 | 896,682 | 265 | 0.12 | 662,318 | 59 | 0.04 | |||||||||||||||||||||||
Time deposits | 848,361 | 2,791 | 1.31 | 864,264 | 2,541 | 1.17 | 619,087 | 1,687 | 1.08 | |||||||||||||||||||||||
Total | 4,719,495 | 7,068 | 0.59 | 4,639,662 | 5,799 | 0.50 | 3,611,348 | 3,515 | 0.39 | |||||||||||||||||||||||
FHLB Advances | 354,296 | 1,930 | 2.16 | 475,536 | 2,542 | 2.12 | 261,018 | 1,146 | 1.74 | |||||||||||||||||||||||
Securities sold under agreements to repurchase | 60,901 | 43 | 0.28 | 61,336 | 41 | 0.27 | 74,661 | 39 | 0.21 | |||||||||||||||||||||||
Other borrowings | 99,431 | 1,476 | 5.89 | 99,438 | 1,496 | 5.97 | 56,475 | 701 | 4.92 | |||||||||||||||||||||||
Total interest-bearing liabilities | 5,234,123 | 10,517 | 0.80 | 5,275,972 | 9,878 | 0.74 | 4,003,502 | 5,401 | 0.54 | |||||||||||||||||||||||
Non-interest-bearing deposits | 1,177,321 | 1,210,650 | 760,552 | |||||||||||||||||||||||||||||
Non-interest-bearing liabilities | 56,705 | 61,272 | 38,880 | |||||||||||||||||||||||||||||
Total liabilities | 6,468,149 | 6,547,894 | 4,802,934 | |||||||||||||||||||||||||||||
Stockholders’ equity | 1,035,962 | 1,020,736 | 601,930 | |||||||||||||||||||||||||||||
Total liabilities and equity | $ | 7,504,111 | $ | 7,568,630 | $ | 5,404,864 | ||||||||||||||||||||||||||
Net interest income | $ | 61,841 | $ | 61,504 | $ | 42,505 | ||||||||||||||||||||||||||
Net interest rate spread (3) | 3.51 | % | 3.48 | % | 3.32 | % | ||||||||||||||||||||||||||
Net interest margin (4) | 3.68 | % | 3.64 | % | 3.42 | % | ||||||||||||||||||||||||||
Total cost of deposits (including non-interest-bearing deposits) | 0.48 | % | 0.39 | % | 0.32 | % | ||||||||||||||||||||||||||
16
(continued)
For the Year Ended | ||||||||||||||||||||||
December 31, 2018 | December 31, 2017 | |||||||||||||||||||||
(dollars in thousands) | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | ||||||||||||||||
Assets: | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Interest-earning deposits and short-term investments | $ | 102,001 | $ | 896 | 0.88 | % | $ | 179,960 | $ | 1,449 | 0.81 | % | ||||||||||
Securities (1) | 1,073,454 | 26,209 | 2.44 | 796,392 | 16,792 | 2.11 | ||||||||||||||||
Loans receivable, net (2) | ||||||||||||||||||||||
Commercial | 3,012,521 | 149,965 | 4.98 | 1,858,842 | 87,706 | 4.72 | ||||||||||||||||
Residential | 1,965,395 | 79,805 | 4.06 | 1,726,020 | 69,784 | 4.04 | ||||||||||||||||
Home Equity | 357,137 | 17,991 | 5.04 | 282,128 | 13,003 | 4.61 | ||||||||||||||||
Other | 35,424 | 1,788 | 5.05 | 1,156 | 95 | 8.22 | ||||||||||||||||
Allowance for loan loss net of deferred loan fees | (9,972 | ) | — | — | (12,251 | ) | — | — | ||||||||||||||
Loans Receivable, net | 5,360,505 | 249,549 | 4.66 | 3,855,895 | 170,588 | 4.42 | ||||||||||||||||
Total interest-earning assets | 6,535,960 | 276,654 | 4.23 | 4,832,247 | 188,829 | 3.91 | ||||||||||||||||
Non-interest-earning assets | 828,518 | 459,926 | ||||||||||||||||||||
Total assets | $ | 7,364,478 | $ | 5,292,173 | ||||||||||||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||
Interest-bearing checking | $ | 2,336,917 | 9,219 | 0.39 | % | $ | 1,796,370 | 4,533 | 0.25 | % | ||||||||||||
Money market | 571,997 | 2,818 | 0.49 | 410,373 | 1,213 | 0.30 | ||||||||||||||||
Savings | 877,179 | 990 | 0.11 | 672,315 | 345 | 0.05 | ||||||||||||||||
Time deposits | 858,978 | 9,551 | 1.11 | 625,847 | 6,245 | 1.00 | ||||||||||||||||
Total | 4,645,071 | 22,578 | 0.49 | 3,504,905 | 12,336 | 0.35 | ||||||||||||||||
FHLB Advances | 382,464 | 7,885 | 2.06 | 258,870 | 4,486 | 1.73 | ||||||||||||||||
Securities sold under agreements to repurchase | 66,340 | 168 | 0.25 | 74,712 | 121 | 0.16 | ||||||||||||||||
Other borrowings | 94,644 | 5,521 | 5.83 | 56,457 | 2,668 | 4.73 | ||||||||||||||||
Total interest-bearing liabilities | 5,188,519 | 36,152 | 0.70 | 3,894,944 | 19,611 | 0.50 | ||||||||||||||||
Non-interest-bearing deposits | 1,135,602 | 776,344 | ||||||||||||||||||||
Non-interest-bearing liabilities | 56,098 | 31,004 | ||||||||||||||||||||
Total liabilities | 6,380,219 | 4,702,292 | ||||||||||||||||||||
Stockholders’ equity | 984,259 | 589,881 | ||||||||||||||||||||
Total liabilities and equity | $ | 7,364,478 | $ | 5,292,173 | ||||||||||||||||||
Net interest income | $ | 240,502 | $ | 169,218 | ||||||||||||||||||
Net interest rate spread (3) | 3.53 | % | 3.41 | % | ||||||||||||||||||
Net interest margin (4) | 3.68 | % | 3.50 | % | ||||||||||||||||||
Total cost of deposits (including non-interest-bearing deposits) | 0.39 | % | 0.29 | % | ||||||||||||||||||
(1) | Amounts represent debt and equity securities, including FHLB and Federal Reserve Bank stock, and are recorded at average amortized cost. |
(2) | Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated loss allowances and includes loans held for sale and non-performing loans. |
(3) | Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. |
(4) | Net interest margin represents net interest income divided by average interest-earning assets. |
17
OceanFirst Financial Corp.
SELECTED QUARTERLY FINANCIAL DATA
(dollars in thousands, except per share amounts)
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||||
Selected Financial Condition Data: | ||||||||||||||||||||
Total assets | $ | 7,516,154 | $ | 7,562,589 | $ | 7,736,903 | $ | 7,494,899 | $ | 5,416,006 | ||||||||||
Debt securities available-for-sale, at estimated fair value | 100,717 | 100,015 | 100,369 | 86,114 | 81,581 | |||||||||||||||
Debt securities held-to-maturity, net | 846,810 | 883,540 | 922,756 | 982,857 | 764,062 | |||||||||||||||
Equity investments, at estimated fair value | 9,655 | 9,519 | 9,539 | 9,565 | 8,700 | |||||||||||||||
Restricted equity investments, at cost | 56,784 | 57,143 | 66,981 | 50,418 | 19,724 | |||||||||||||||
Loans receivable, net | 5,579,222 | 5,543,959 | 5,553,035 | 5,413,780 | 3,965,773 | |||||||||||||||
Loans held-for-sale | — | 732 | 919 | 167 | 241 | |||||||||||||||
Deposits | 5,814,569 | 5,854,250 | 5,819,406 | 5,907,336 | 4,342,798 | |||||||||||||||
Federal Home Loan Bank advances | 449,383 | 456,806 | 674,227 | 341,646 | 288,691 | |||||||||||||||
Securities sold under agreements to repurchase and other borrowings | 161,290 | 160,517 | 161,604 | 181,822 | 136,187 | |||||||||||||||
Stockholders’ equity | 1,039,358 | 1,029,844 | 1,012,568 | 1,007,460 | 601,941 | |||||||||||||||
For the Three Months Ended | ||||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||||
Selected Operating Data: | ||||||||||||||||||||
Interest income | $ | 72,358 | $ | 71,382 | $ | 70,078 | $ | 62,837 | $ | 47,906 | ||||||||||
Interest expense | 10,517 | 9,878 | 8,631 | 7,126 | 5,401 | |||||||||||||||
Net interest income | 61,841 | 61,504 | 61,447 | 55,711 | 42,505 | |||||||||||||||
Provision for loan losses | 506 | 907 | 706 | 1,371 | 1,415 | |||||||||||||||
Net interest income after provision for loan losses | 61,335 | 60,597 | 60,741 | 54,340 | 41,090 | |||||||||||||||
Other income | 8,748 | 8,285 | 8,883 | 8,910 | 6,745 | |||||||||||||||
Operating expenses | 37,794 | 37,503 | 42,470 | 38,508 | 26,434 | |||||||||||||||
Branch consolidation expenses | 240 | 1,368 | 1,719 | (176 | ) | (734 | ) | |||||||||||||
Merger related expenses | 1,048 | 662 | 6,715 | 18,486 | 1,993 | |||||||||||||||
Income before provision for income taxes | 31,001 | 29,349 | 18,720 | 6,432 | 20,142 | |||||||||||||||
Provision for income taxes | 4,269 | 5,278 | 3,018 | 1,005 | 10,186 | |||||||||||||||
Net income | $ | 26,732 | $ | 24,071 | $ | 15,702 | $ | 5,427 | $ | 9,956 | ||||||||||
Diluted earnings per share | $ | 0.55 | $ | 0.50 | $ | 0.32 | $ | 0.12 | $ | 0.30 | ||||||||||
Net accretion/amortization of purchase accounting adjustments included in net interest income | $ | 3,918 | $ | 4,036 | $ | 4,883 | $ | 3,930 | $ | 1,956 | ||||||||||
18
(continued)
At or For the Three Months Ended | |||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||
Selected Financial Ratios and Other Data(1): | |||||||||||||||
Performance Ratios (Annualized): | |||||||||||||||
Return on average assets (2) | 1.41 | % | 1.26 | % | 0.84 | % | 0.32 | % | 0.73 | % | |||||
Return on average stockholders' equity (2) | 10.24 | 9.36 | 6.23 | 2.54 | 6.56 | ||||||||||
Return on average tangible stockholders' equity (2) (3) | 15.60 | 14.39 | 9.64 | 3.80 | 8.89 | ||||||||||
Stockholders' equity to total assets | 13.83 | 13.62 | 13.09 | 13.44 | 11.11 | ||||||||||
Tangible stockholders' equity to tangible assets (3) | 9.55 | 9.35 | 8.87 | 9.11 | 8.42 | ||||||||||
Net interest rate spread | 3.51 | 3.48 | 3.57 | 3.58 | 3.32 | ||||||||||
Net interest margin | 3.68 | 3.64 | 3.70 | 3.70 | 3.42 | ||||||||||
Operating expenses to average assets (2) | 2.07 | 2.07 | 2.71 | 3.37 | 2.03 | ||||||||||
Efficiency ratio (2) (4) | 55.37 | 56.65 | 72.38 | 87.92 | 56.23 | ||||||||||
Loans to deposits | 95.95 | 94.70 | 95.42 | 91.65 | 91.32 | ||||||||||
At or For the Year Ended December 31, | ||||||
2018 | 2017 | |||||
Performance Ratios: | ||||||
Return on average assets (2) | 0.98 | % | 0.80 | % | ||
Return on average stockholders' equity (2) | 7.31 | 7.20 | ||||
Return on average tangible stockholders' equity (2) (3) | 11.16 | 9.82 | ||||
Net interest rate spread | 3.53 | 3.41 | ||||
Net interest margin | 3.68 | 3.50 | ||||
Operating expenses to average assets (2) | 2.53 | 2.39 | ||||
Efficiency ratio (2) (4) | 67.68 | 64.46 | ||||
19
(continued)
At or For the Three Months Ended | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2018 | 2017 | ||||||||||||||||
Wealth Management: | ||||||||||||||||||||
Assets under administration | $ | 184,476 | $ | 209,796 | $ | 210,690 | $ | 221,493 | $ | 233,185 | ||||||||||
Per Share Data: | ||||||||||||||||||||
Cash dividends per common share | $ | 0.17 | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.15 | ||||||||||
Stockholders’ equity per common share at end of period | 21.68 | 21.29 | 20.97 | 20.94 | 18.47 | |||||||||||||||
Tangible stockholders’ equity per common share at end of period (3) | 14.26 | 13.93 | 13.56 | 13.51 | 13.58 | |||||||||||||||
Common shares outstanding at end of period | 47,951,168 | 48,382,370 | 48,283,500 | 48,105,623 | 32,596,893 | |||||||||||||||
Number of full-service customer facilities: | 59 | 59 | 59 | 76 | 46 | |||||||||||||||
Quarterly Average Balances | ||||||||||||||||||||
Total securities | $ | 1,037,039 | $ | 1,080,784 | $ | 1,119,354 | $ | 1,056,774 | $ | 874,910 | ||||||||||
Loans, receivable, net | 5,523,745 | 5,534,086 | 5,425,970 | 4,950,007 | 3,898,040 | |||||||||||||||
Total interest-earning assets | 6,664,233 | 6,703,576 | 6,661,048 | 6,107,017 | 4,928,937 | |||||||||||||||
Total assets | 7,504,111 | 7,568,630 | 7,532,968 | 6,842,693 | 5,404,864 | |||||||||||||||
Interest-bearing transaction deposits | 3,871,134 | 3,775,398 | 3,878,117 | 3,614,295 | 2,992,261 | |||||||||||||||
Time deposits | 848,361 | 864,264 | 902,091 | 820,834 | 619,087 | |||||||||||||||
Total borrowed funds | 514,628 | 636,310 | 540,356 | 481,163 | 392,154 | |||||||||||||||
Total interest-bearing liabilities | 5,234,123 | 5,275,972 | 5,320,564 | 4,916,292 | 4,003,502 | |||||||||||||||
Non-interest bearing deposits | 1,177,321 | 1,210,650 | 1,149,764 | 1,004,673 | 760,552 | |||||||||||||||
Stockholder’s equity | 1,035,962 | 1,020,736 | 1,011,378 | 866,697 | 601,930 | |||||||||||||||
Total deposits | 5,896,816 | 5,850,312 | 5,929,972 | 5,439,802 | 4,371,900 | |||||||||||||||
Quarterly Yields | ||||||||||||||||||||
Total securities | 2.60 | % | 2.46 | % | 2.39 | % | 2.31 | % | 2.09 | % | ||||||||||
Loans, receivable, net | 4.69 | 4.62 | 4.67 | 4.64 | 4.37 | |||||||||||||||
Total interest-earning assets | 4.31 | 4.22 | 4.22 | 4.17 | 3.86 | |||||||||||||||
Interest-bearing transaction deposits | 0.44 | 0.34 | 0.31 | 0.28 | 0.25 | |||||||||||||||
Time deposits | 1.31 | 1.17 | 1.00 | 0.97 | 1.08 | |||||||||||||||
Borrowed funds | 2.66 | 2.54 | 2.51 | 2.24 | 1.91 | |||||||||||||||
Total interest-bearing liabilities | 0.80 | 0.74 | 0.65 | 0.59 | 0.54 | |||||||||||||||
Net interest spread | 3.51 | 3.48 | 3.57 | 3.58 | 3.32 | |||||||||||||||
Net interest margin | 3.68 | 3.64 | 3.70 | 3.70 | 3.42 | |||||||||||||||
Total deposits | 0.48 | 0.39 | 0.35 | 0.33 | 0.32 | |||||||||||||||
(1) | With the exception of end of quarter ratios, all ratios are based on average daily balances. |
(2) | Performance ratios for each period include merger related and branch consolidation expenses. Refer to Other Items - Non-GAAP Reconciliation for impact of merger related and branch consolidation expenses. |
(3) | Tangible stockholders’ equity and tangible assets exclude intangible assets relating to goodwill and core deposit intangible. |
(4) | Efficiency ratio represents the ratio of operating expenses to the aggregate of other income and net interest income. |
20
OceanFirst Financial Corp.
OTHER ITEMS
(dollars in thousands, except per share amounts)
NON-GAAP RECONCILIATION
For the Three Months Ended | ||||||||||||||||||||
December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | ||||||||||||||||
Core earnings: | ||||||||||||||||||||
Net income | $ | 26,732 | $ | 24,071 | $ | 15,702 | $ | 5,427 | $ | 9,956 | ||||||||||
Add: Merger related expenses | 1,048 | 662 | 6,715 | 18,486 | 1,993 | |||||||||||||||
Branch consolidation expenses | 240 | 1,368 | 1,719 | (176 | ) | (734 | ) | |||||||||||||
Income tax (benefit) expense related to Tax Reform | (1,854 | ) | — | — | — | 3,643 | ||||||||||||||
Less: Income tax (benefit) expense on items | (130 | ) | (426 | ) | (1,771 | ) | (3,664 | ) | 2 | |||||||||||
Core earnings | $ | 26,036 | $ | 25,675 | $ | 22,365 | $ | 20,073 | $ | 14,860 | ||||||||||
Core diluted earnings per share | $ | 0.54 | $ | 0.53 | $ | 0.46 | $ | 0.45 | $ | 0.45 | ||||||||||
Core ratios (annualized): | ||||||||||||||||||||
Return on average assets | 1.38 | % | 1.35 | % | 1.19 | % | 1.19 | % | 1.09 | % | ||||||||||
Return on average tangible stockholders’ equity | 15.19 | 15.35 | 13.73 | 14.07 | 13.27 | |||||||||||||||
Efficiency ratio | 53.54 | 53.74 | 60.39 | 59.59 | 53.67 | |||||||||||||||
For the Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
Core earnings: | ||||||||
Net income | $ | 71,932 | $ | 42,470 | ||||
Add: Merger related expenses | 26,911 | 8,293 | ||||||
Branch consolidation expenses | 3,151 | 6,205 | ||||||
Income tax (benefit) expense related to Tax Reform | (1,854 | ) | 3,643 | |||||
Less: Income tax (benefit) expense on items | (5,991 | ) | (4,596 | ) | ||||
Core earnings | $ | 94,149 | $ | 56,015 | ||||
Core diluted earnings per share | $ | 1.98 | $ | 1.70 | ||||
Core ratios: | ||||||||
Return on average assets | 1.28 | % | 1.06 | % | ||||
Return on average tangible stockholders’ equity | 14.61 | 12.95 | ||||||
Efficiency ratio | 56.76 | 57.07 | ||||||
COMPUTATION OF TOTAL TANGIBLE EQUITY TO TOTAL TANGIBLE ASSETS
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2018 | 2017 | ||||||||||||||||
Total stockholders’ equity | $ | 1,039,358 | $ | 1,029,844 | $ | 1,012,568 | $ | 1,007,460 | $ | 601,941 | ||||||||||
Less: | ||||||||||||||||||||
Goodwill | 338,442 | 338,104 | 338,972 | 337,519 | 150,501 | |||||||||||||||
Core deposit intangible | 16,971 | 17,954 | 18,949 | 19,950 | 8,885 | |||||||||||||||
Tangible stockholders’ equity | $ | 683,945 | $ | 673,786 | $ | 654,647 | $ | 649,991 | $ | 442,555 | ||||||||||
Total assets | $ | 7,516,154 | $ | 7,562,589 | $ | 7,736,903 | $ | 7,494,899 | $ | 5,416,006 | ||||||||||
Less: | ||||||||||||||||||||
Goodwill | 338,442 | 338,104 | 338,972 | 337,519 | 150,501 | |||||||||||||||
Core deposit intangible | 16,971 | 17,954 | 18,949 | 19,950 | 8,885 | |||||||||||||||
Tangible assets | $ | 7,160,741 | $ | 7,206,531 | $ | 7,378,982 | $ | 7,137,430 | $ | 5,256,620 | ||||||||||
Tangible stockholders’ equity to tangible assets | 9.55 | % | 9.35 | % | 8.87 | % | 9.11 | % | 8.42 | % | ||||||||||
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(continued)
ACQUISITION DATE - FAIR VALUE BALANCE SHEET
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition for Sun, net of the total consideration paid (in thousands):
At January 31, 2018 | ||||||||||||
Sun Book Value | Purchase Accounting Adjustments | Estimated Fair Value | ||||||||||
Total Purchase Price: | $ | 474,930 | ||||||||||
Assets acquired: | ||||||||||||
Cash and cash equivalents | $ | 68,632 | $ | — | $ | 68,632 | ||||||
Securities | 254,522 | — | 254,522 | |||||||||
Loans | 1,541,868 | (24,523 | ) | 1,517,345 | ||||||||
Accrued interest receivable | 5,621 | — | 5,621 | |||||||||
Bank Owned Life Insurance | 85,238 | — | 85,238 | |||||||||
Deferred tax asset | 55,710 | 1,864 | 57,574 | |||||||||
Other assets | 49,561 | (6,359 | ) | 43,202 | ||||||||
Core deposit intangible | — | 11,897 | 11,897 | |||||||||
Total assets acquired | 2,061,152 | (17,121 | ) | 2,044,031 | ||||||||
Liabilities assumed: | ||||||||||||
Deposits | (1,614,910 | ) | (1,163 | ) | (1,616,073 | ) | ||||||
Borrowings | (142,567 | ) | 14,840 | (127,727 | ) | |||||||
Other liabilities | (14,372 | ) | 1,130 | (13,242 | ) | |||||||
Total liabilities assumed | (1,771,849 | ) | 14,807 | (1,757,042 | ) | |||||||
Net assets acquired | $ | 289,303 | $ | (2,314 | ) | $ | 286,989 | |||||
Goodwill recorded in the merger | $ | 187,941 | ||||||||||
The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to the recorded carrying values may be required.
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