Oceanfirst Financial Corp. · NASDAQ:OCFC

Oceanfirst Financial — Investor Presentation (November 2017)

41 slides from Oceanfirst Financial's investor presentation, Nov 1, 2017

  1. Slide 1: Investor Presentation November 2017

    Investor Presentation November 2017 OceanFirst Financial Corp.

  2. Slide 2: Forward-Looking Statements

    OceanFirst Financial Corp. Forward-Looking Statements In addition to historical information, the Form 10-K 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, strategi

  3. Slide 3: OceanFirst Milestones – 115 Years of Growth

    OceanFirst Milestones – 115 Years of Growth 3 Founded, Point Pleasant, NJ Branch Expansion Into Middlesex County 1902 1985 IPO To Mutual Depositors 1996 Established Commercial Lending Created OceanFirst Foundation Branch Expansion Into Monmouth County 1999 Established Trust and Asset Management 2014

  4. Slide 4: Serving Central and Southern New Jersey Markets

    Serving Central and Southern New Jersey Markets • OceanFirst is the largest Bank headquartered in Central and Southern New Jersey • $5.4 billion in assets • Branches located in 7 counties • Market Cap $904 million • Average Daily Share Volume of 117,000 OceanFirst Headquarters OceanFirst Retail Bran

  5. Slide 5: OceanFirst Loan Portfolio Diversification by Geography

    5 Atlantic City loan portfolio exposure totals 1.0% of total loans OceanFirst Loan Portfolio Diversification by Geography Least Concentrated Most Concentrated Opportunity for organic commercial loan growth

  6. Slide 6: Experienced Leadership

    Experienced Leadership Name Position # of Years at OCFC # of Years In Banking Previous Experience Christopher D. Maher Chairman, President, Chief Executive Officer 4 29 Patriot National Bancorp; Dime Community Bancshares Michael J. Fitzpatrick Executive Vice President, Chief Financial Officer 25 36

  7. Slide 7: Deep Bench of Experienced Executives

    Deep Bench of Experienced Executives Name Position # of Years at OCFC # of Years In Banking Previous Experience Gary S. Hett First Senior Vice President, Director of Human Resources 4 44 Patriot National Bancorp; Dime Community Bancshares David R. Howard First Senior Vice President, Direct Banking 4

  8. Slide 8: Strategic Focus

    Strategic Focus 8 I. Organic Commercial Loan and Core Deposit Growth • Grew commercial loans (excluding acquired loans) from $533 million at December 31, 2012 to $965 million at September 30, 2017, 13% CAGR • Grew low cost core deposits (excluding acquired deposits) from $1,493 million (0.15% cost)

  9. Slide 9: Strategic Focus (Continued): Conservative Risk Management

    Strategic Focus (Continued) 9 III. Conservative Risk Management • Credit Risk  Reduced non-performing loans from $43.4 million (2.8% of loans) at December 31, 2012 to $15.1 million (0.39% of loans) at September 30, 2017  Strong credit culture – experienced and independent credit administration, re

  10. Slide 10: Strategic Focus (Continued): Direct Banking Initiative

    Strategic Focus (Continued) 10 IV. Direct Banking Initiative • Current suite of digital offerings is at top of market for community banks Website Apple Pay Finance Works Online Banking Platform U Choose Rewards Online Account Opening Mobile Application Pop Money Biometric ID Verification Bill Pay Te

  11. Slide 11: Strategic Focus (Continued): Transition of Branch Service Area Model

    Strategic Focus (Continued) 11 V. Transition of Branch Service Area Model • Currently 46 branches with an average branch size of $95MM • Consolidated 15 branches in 2017  Customer retention is above expectations • Target average branch size >$100MM • Will continue to place non-branch electronic ser

  12. Slide 12: Highlights – 2017 Third Quarter

    Highlights – 2017 12 Third Quarter • Core EPS of $0.45(1), an increase from $0.40(1) in Q3 2016  13.63% ROTE(1)(2) & 1.11% ROA(1)(2)  Net interest margin of 3.50% • Deposits increased $173.4 million reducing the loan to deposit ratio to 89.0%, while the cost of deposits increased only one basis po

  13. Slide 13: Overview of Sun Bancorp, Inc.

     Valued at approximately $487 million – 85% stock, 15% cash • Price/TBV – 169% [156% net of DTA] • Core deposit premium – 12.7%  Financially compelling: • 2019E EPS accretion of 3.6% in addition to double digit accretion from Cape and Ocean Shore acquisitions • Earnback of approximately 3.5 years

  14. Slide 14: Favorable Competitive Position

    Favorable Competitive Position Competing Favorably Against Banking Behemoths and Local Community Banks Source: FDIC Summary of Deposits, June 30, 2017 Note: Market area is defined as 11 counties in Central and Southern New Jersey Institution # of Branches Dep. In Mkt. ($000) TD Bank (Canada) 127 19,

  15. Slide 15: Strategic Deposit Composition Transition

    Strategic Deposit Composition Transition Non- Interest Checking Non- Interest Checking Interest Checking Interest Checking WAR 0.25% MMDA & Savings MMDA & Savings MMDA & Savings WAR 0.13% Time Deposits Time Deposits Time Deposits WAR 1.02% 0 400 800 1,200 1,600 2,000 2,400 2,800 3,200 3,600 4,000 4,

  16. Slide 16: Full Suite of Technology and Delivery Systems

    Online Banking & Bill Pay In the most recent quarter, 45% of deposit customers used online banking and an average of 65,000 bills were paid with online bill pay service each month. Check Card Rewards program promotes usage driving over $560 million of card transactions in the last year with related

  17. Slide 17: Strategic Loan Composition Transition

    Strategic Loan Composition Transition Investment CRE(A) Owner- Occupied CRE Owner- Occupied CRE C&I C&I Consumer (Home Equity) Consumer (Home Equity) Residential Real Estate Residential Real Estate Residential Real Estate 0 400 800 1,200 1,600 2,000 2,400 2,800 3,200 3,600 4,000 Dec 1996 Dec 2011 Se

  18. Slide 18: Credit Underwriting Remains Conservative: Commercial Loan Production

    Credit Underwriting Remains Conservative: Commercial Loan Production 2016 and 2017 (Dollars in thousands) Commercial Loan Originations Year Nine Months Ended Ended December 31, 2016 September 30, 2017 Commercial Loan Portfolio at September 30, 2017 Amount $261,301 $319,364 $1,873,355 Weighted averag

  19. Slide 19: OceanFirst Maintains Conservative CRE Portfolio Relative to Peers

    19 OceanFirst Maintains Conservative CRE Portfolio Relative to Peers 0 200 400 600 800 1,000 1,200 Peer 1 Peer 2 OceanFirst Bank Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer Group Average Peer 12 Peer 13 Peer 14 Peer 15 Peer 16 Peer 17 Peer 18 (%) CRE to Total Risk Based Cap

  20. Slide 20: Highlights – Risk Management

    Highlights – Risk Management 2017 • Interest Rate Risk Management  Core deposits(1) are 85.7% of total deposits, a significant hedge against a rising rate environment  Non-interest bearing deposits are 18.0% of total deposits  Approximately $210 million of excess liquidity in interest-bearing dep

  21. Slide 21: Effective Interest Rate Risk Management

    Effective Interest Rate Risk Management 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Mortgage Loans Consumer Loans Commercial Loans (CRE & C&I) Securities Total Assets (Weighted Average) Borrowings Deposits Adjustable/Floating Fixed Core Deposits, Administered Duration Rate Characteristics 0.0 1.0 2.0 3.0 4.

  22. Slide 22: Term Borrowings Extended as Interest Rate Hedge

    Term Borrowings Extended as Interest Rate Hedge 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 2017 2018 2019 2020 2021 2022 M ill io ns o f D ol la rs Maturity Periods TOTAL $259.2MM 1.76% AVG. COST At September 30, 2017 22

  23. Slide 23: Credit Metrics Reflect Conservative Culture

    0.00% 0.20% 0.40% 0.60% 0.80% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2011 2012 2013 2014 2015 2016 YTD Q3 2017 N et loan charge-offs as percent of average loans N on -p er fo rm in g lo an s as p er ce nt o f t ot al lo an s re ce iv ab le Residential Consumer Commercial Real Estate Commercial Ne

  24. Slide 24: Net Interest Margin Expanded

    Net Interest Margin Expanded Net Interest Margin to Outperform both Historical Level and Peer Group 2.00% 2.20% 2.40% 2.60% 2.80% 3.00% 3.20% 3.40% 3.60% 3.80% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 Q2 2017 Q3 2017 Historical Average (1996 – 2016) Net Interest Margin (3.29%) YTD 2

  25. Slide 25: Diversified Streams of Non-Interest Income

    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 9/30/17 (Annualized) P er ce nt o f A ve ra ge A ss et s Fees and Service Charges Gain on Sale of Loans BOLI BankCard Services Wealth Management/Investment Services Other $2.5M $27.4M Targeted Growt

  26. Slide 26: Generating Consistent Attractive Returns

    Generating Consistent Attractive Returns 7.0% 9.0% 11.0% 13.0% 2009 2010 2011 2012 2013 2014 2015 2016 YTD Q3 2017 (Annualized) 0.70% 0.80% 0.90% 1.00% 1.10% Return on Tangible Equity Return on Assets (1)For 2013, excludes after-tax impact of $3.1 million in charges related to strategic advance rest

  27. Slide 27: Accelerating EPS Growth

    Accelerating EPS Growth 27 $0.40 $0.80 $1.20 $1.60 $2.00 2011 2012 2013 2014 2015 2016 YTD Q3 2017 (Annualized) Core Diluted EPS Reported Diluted EPS (2) (1)For 2013, excludes after-tax impact of $3.1 million in charges related to strategic advance restructuring and branch consolidation. (2)For 2015

  28. Slide 28: Prudently Managing Excess Capital in Near Term

    Prudently Managing Excess Capital in Near Term $8.8 $8.6 $8.2 $8.2 $8.7 $12.6 $14.4 $2.1 $11.9 $8.1 $9.2 $6.5 $1.9 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2011 2012 2013 2014 2015 2016 2017 A nn ua l R et ur n of C ap ita l ( M ill io ns ) Cash Dividends Stock Repurchases Notes: Stock Repurchases – $15.52

  29. Slide 29: Why OCFC…?

    Why OCFC…? • Fundamental franchise value  Preeminent community bank in Central and Southern New Jersey  Superior deposit profile  Significant commercial loan growth since December 2012; current focus on recent portfolio integrations  Conservative credit culture • Solid financial performance  Co

  30. Slide 30: Attractive Valuation Metrics

    Attractive Valuation Metrics OCFC Peers(1) 30 Valuation Price / Tangible Book Value 216% 225% Price / 2017 Estimated EPS 17.0x 18.6x Price / 2018 Estimated EPS 15.7x 17.1x Core Deposit Premium(2) 12.5% 13.6% Cash Dividend Yield 2.1% 2.1% 1) Peers include: AROW, BMTC, DCOM, EGBN, FFIC, FISI, FLIC, LB

  31. Slide 31: Appendix

    Appendix (9 OcEANFirsT

  32. Slide 32: Analyst Coverage and Investor Relations Contacts

    OceanFirst Financial Corp. – Analyst Coverage APPENDIX 1 Investor Relations Contacts Christopher D. Maher Chairman, President and Chief Executive Officer 732-240-4500 Ext. 7504 cmaher@oceanfirst.com Michael J. Fitzpatrick Executive Vice President and Chief Financial Officer 732-240-4500 Ext. 7506 mf

  33. Slide 33: Market Demographics

    Market Demographics Central New Jersey(1) Southern New Jersey(2) Philadelphia Metro(3) Total Bank Offices in Market 830 487 841 Total Bank Deposits in Market $89.4 billion $39.2 billion $97.4 billion Number of OceanFirst Offices 29 23 % of OceanFirst Deposits 50 50 Market Rank 10 5 Market Share (%)

  34. Slide 34: Commercial Portfolio Metrics

    Commercial Portfolio Metrics APPENDIX 3 Commercial Real Estate (CRE) Owner-Occupied Investor Total $ 555.4 million 1,134.4 million $1,689.8 million % of Total Loan Portfolio 43.3% Average Size of CRE Loans $796,000 Largest CRE Loan $24.0 million Pipeline as of September 30, 2017 $37.8 million Weight

  35. Slide 35: Commercial Portfolio Segmentation

    Commercial Portfolio Segmentation APPENDIX 3 (Cont’d) Total Commercial Loan Exposure by Industry Classification Arts/Entertainment/ Recreation, 3.5% Real Estate Investment, 52.5% Other Services, 3.5% Retail Trade, 5.7% Public Administration, 2.1% Miscellaneous, 5.2% Manufacturing, 2.7% Educational S

  36. Slide 36: Residential Portfolio Metrics

    Residential Portfolio Metrics APPENDIX 4 Residential Real Estate Total Portfolio $1,678.1 million % of Total Loan Portfolio 43.0% Average size of mortgage loans $214,000 % of loans for second homes 19% Portfolio weighted average loan-to-value ratio (using original or most recent appraisal) - Loans o

  37. Slide 37: Colonial American Bank Acquisition

    Colonial American Bank Acquisition • 100% Stock deal, valued at $11.9 million • In-Market acquisition supports growth objective in towns of Middletown and Shrewsbury, NJ • Favorable financial terms (adjusted for DTA realization of $2.3 million)  Price/Tangible Book Value of 104% o Transaction neutr

  38. Slide 38: Cape Bancorp Acquisition

    Cape Bancorp Acquisition • Creates the preeminent New Jersey based community banking franchise operating throughout central and southern New Jersey • 85% stock and 15% cash, valued at $196 million • Favorable financial terms  Price/Tangible Book Value of 139%  Price/Core Deposit Premium of 4.4% 

  39. Slide 39: Ocean Shore Holding Co. Acquisition

    39 Ocean Shore Holding Co. Acquisition - OCFC Branches - OSHC Branches APPENDIX 7 • Reinforces OceanFirst as the preeminent New Jersey based community banking franchise operating throughout central and southern New Jersey • 80% stock and 20% cash, valued at $181 million • Favorable financial terms(1

  40. Slide 40: Atlantic City Exposure

    40 Atlantic City Exposure OceanFirst Bank September 30, 2017 # of Loans Amount (000’s) Percent of Total Loans Atlantic City 157 $ 39,902 1.02% Atlantic County 2,807 $502,376 12.87% APPENDIX 8

  41. Slide 41: Serving Our Communities

    Serving Our Communities • OceanFirst Foundation  As of September 30, 2017, over $33.0 million has been granted to organizations serving the Bank’s market  Provided $500,000 in grants dedicated to assisting our neighbors after Superstorm Sandy hit the Jersey Shore in 2012  First foundation establi

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