OCEANFIRST FINL(OCFCP) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Provides unaudited consolidated financial statements and management's discussion and analysis for the first quarter of 2025 Item 1. Consolidated Financial Statements (unaudited) Presents unaudited consolidated financial statements, including financial condition, income, cash flows, and detailed notes Consolidated Statements of Financial Condition Details assets, liabilities, and equity, with $13.31 billion in assets and $11.60 billion in liabilities Consolidated Statements of Financial Condition (Selected Items) | (in millions) | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $13,309.3 | $13,421.2 | | Loans receivable, net | $10,058.1 | $10,055.4 | | Debt securities (AFS & HTM) | $1,751.6 | $1,873.4 | | Goodwill | $523.3 | $523.3 | | Total Liabilities | $11,600.2 | $11,718.5 | | Deposits | $10,177.0 | $10,066.3 | | FHLB advances | $891.0 | $1,072.6 | | Total Stockholders' Equity | $1,709.1 | $1,702.8 | Consolidated Statements of Income Q1 2025 net income was $21.5 million, down from $28.7 million in Q1 2024, with diluted EPS at $0.35 Consolidated Statements of Income (Three Months Ended March 31) | (in millions, except per share) | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Net interest income | $86.7 | $86.2 | | Provision for credit losses | $5.3 | $0.6 | | Total other income | $11.3 | $12.3 | | Total operating expenses | $64.3 | $58.7 | | Net income attributable to OCFC | $21.5 | $28.7 | | Diluted earnings per share | $0.35 | $0.47 | Consolidated Statements of Cash Flows Q1 2025 saw $1.8 million net cash used in operations, resulting in a $40.1 million net cash increase Cash Flow Summary (Three Months Ended March 31) | (in millions) | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1.8) | $46.1 | | Net cash provided by investing activities | $123.6 | $120.6 | | Net cash used in financing activities | $(81.7) | $(190.0) | | Net increase (decrease) in cash | $40.1 | $(23.3) | Notes to Unaudited Consolidated Financial Statements Provides detailed disclosures on accounting policies, loan portfolios, credit quality, fair value, and derivatives - At March 31, 2025, the company reclassified loans secured by owner-occupied commercial real estate to a new 'Commercial and industrial - real estate' category to better reflect their risk profile[107] - The allowance for credit losses on loans increased to $78.8 million at March 31, 2025, from $73.6 million at year-end 2024, with a provision of $5.8 million for the quarter[133] - The company holds interest rate swap and cap contracts with a total notional amount of $1.61 billion as of March 31, 2025, primarily to accommodate customer needs and manage interest rate risk[185] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses Q1 2025 financial condition and results, highlighting margin expansion, loan growth, and credit quality Financial Summary Q1 2025 net income decreased to $21.5 million, but net interest margin expanded to 2.90% with stable credit Selected Financial Data (Q1 2025 vs. Q4 2024 & Q1 2024) | (dollars in millions, except per share) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--- | :--- | :--- | :--- | | Total assets | $13,309.3 | $13,421.2 | $13,419.0 | | Deposits | $10,177.0 | $10,066.3 | $10,236.9 | | Net interest income | $86.7 | $83.3 | $86.2 | | Net income | $21.5 | $22.2 | $28.6 | | Diluted earnings per share | $0.35 | $0.36 | $0.47 | | Net interest margin | 2.90% | 2.69% | 2.81% | - Key developments in Q1 2025 included margin expansion driven by lower deposit costs, a 6.1% increase in commercial and industrial loans compared to the linked quarter, and a $5.3 million provision for credit losses[19] - The Board of Directors declared a quarterly cash dividend of $0.20 per common share and announced the intention to redeem all outstanding Series A Preferred Stock on May 15, 2025[18] Analysis of Net Interest Income Q1 2025 net interest income rose to $86.7 million, with net interest margin expanding to 2.90% due to lower deposit costs Net Interest Margin Analysis (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Average Yield on Interest-Earning Assets | 5.13% | 5.26% | | Average Cost of Interest-Bearing Liabilities | 2.78% | 3.03% | | Net Interest Rate Spread | 2.35% | 2.23% | | Net Interest Margin | 2.90% | 2.81% | | Total Cost of Deposits | 2.06% | 2.31% | Comparison of Financial Condition at March 31, 2025 and December 31, 2024 Total assets decreased to $13.31 billion, with deposits increasing and FHLB advances decreasing - Total assets decreased by $112.0 million, primarily due to principal reductions, maturities, and calls on debt securities[25] - Deposits increased by $110.7 million, while FHLB advances decreased by $181.6 million, indicating a shift in funding mix. The loan-to-deposit ratio improved to 99.5% from 100.5%[26] - The company repurchased 398,395 shares for $6.9 million during the quarter. Book value per share increased to $29.27 from $29.08[28] Comparison of Operating Results for the Three Months Ended March 31, 2025 and March 31, 2024 Q1 2025 net income decreased to $20.5 million, driven by higher credit loss provision and operating expenses - Net income available to common stockholders decreased to $20.5 million ($0.35/share) from $27.7 million ($0.47/share) in the prior year period[29] - Provision for credit losses increased to $5.3 million, compared to $0.6 million in Q1 2024, primarily driven by macroeconomic uncertainty[33] - Operating expenses increased by $5.6 million, primarily due to a $4.0 million rise in compensation and benefits from prior year acquisitions and annual merit increases[35] Liquidity and Capital Resources Maintains strong liquidity with $3.4 billion in funding capacity and capital ratios above 'well-capitalized' levels - Total on-balance sheet liquidity and funding capacity was $3.4 billion as of March 31, 2025[39] - Estimated adjusted uninsured deposits were $1.75 billion, or 17% of total deposits. Liquidity and funding capacity covered these uninsured deposits by 191%[40] Regulatory Capital Ratios (Company) - March 31, 2025 | Ratio | Actual | Required for Capital Adequacy* | | :--- | :--- | :--- | | Common equity Tier 1 (to risk-weighted assets) | 11.24% | 7.00% | | Tier 1 capital (to risk-weighted assets) | 12.56% | 8.50% | | Total capital (to risk-weighted assets) | 14.64% | 10.50% | | Tier 1 capital (to average assets) | 9.73% | 4.00% | *Includes Capital Conservation Buffer of 2.50% Lending Activities Total loans reached $10.13 billion, maintaining stable asset quality with non-performing loans at 0.37% - The loan portfolio is composed of 51.4% investor-owned CRE, 16.3% commercial and industrial, 30.2% residential real estate, and 2.2% consumer loans[56] Asset Quality Metrics | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-performing loans as a % of total loans | 0.37% | 0.35% | | Non-performing assets as a % of total assets | 0.29% | 0.28% | | Allowance for loan credit losses as a % of total loans | 0.78% | 0.73% | | Allowance for loan credit losses as a % of non-performing loans | 213.14% | 207.19% | - Special mention and substandard assets decreased by $8.7 million to $151.2 million from the previous quarter[68] Critical Accounting Policies and Estimates Allowance for credit losses and goodwill are critical estimates, with no goodwill impairment triggering events identified - The determination of the allowance for credit losses is a critical accounting policy requiring subjective judgments and estimates[70] - Goodwill was also a critical accounting estimate. No triggering events for impairment were identified during the period. The annual goodwill impairment assessment is typically performed in the third quarter[71][73] Item 3. Quantitative and Qualitative Disclosures About Market Risk Manages interest rate risk, showing modest asset sensitivity with projected NII increases in rising rate scenarios Interest Rate Sensitivity Analysis (March 31, 2025) | Change in Interest Rates (Basis Points) | Economic Value of Equity (% Change) | Net Interest Income (% Change) | | :--- | :--- | :--- | | +300 | (2.3)% | (0.6)% | | +200 | (0.7)% | 0.2% | | +100 | (0.1)% | 0.4% | | (100) | (1.4)% | (1.0)% | | (200) | (4.8)% | (2.3)% | | (300) | (10.0)% | (3.5)% | - The company's net interest income sensitivity indicates it was modestly asset sensitive at March 31, 2025. The change in sensitivity from the prior quarter was impacted by an increase in floating-rate loans and a favorable deposit mix shift, partially offset by an increase in overnight borrowings[86] Item 4. Controls and Procedures Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[89] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[90] PART II. Other Information Provides information on legal proceedings, risk factors, equity sales, other disclosures, and exhibits Item 1. Legal Proceedings No material pending legal proceedings beyond routine matters in the ordinary course of business - The Company and its bank subsidiary are not involved in any material pending legal proceedings outside of the ordinary course of business[198] Item 1A. Risk Factors No material changes to the company's risk factors since the 2024 Form 10-K filing - No material changes to the Company's risk factors have occurred since the filing of the 2024 Form 10-K[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Repurchased 322,337 shares in Q1 2025, with 1,228,863 shares remaining for repurchase Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | — | $— | | February 2025 | 13,704 | $17.89 | | March 2025 | 308,633 | $16.97 | - As of March 31, 2025, 1,228,863 shares were available for repurchase under the authorized stock repurchase program[200] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[204] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including executive agreements, CEO/CFO certifications, and XBRL data