OceanFirst Financial (US:OCFC)2025-08-04 13:03PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) Presents unaudited consolidated financial statements for OceanFirst Financial Corp. as of June 30, 2025, detailing financial condition, income, and equity changes Consolidated Statements of Financial Condition Total assets decreased to $13.33 billion, loans increased, deposits grew, and stockholders' equity declined due to preferred stock redemption and share repurchases Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $13,327,847 | $13,421,247 | | Loans receivable, net | $10,119,781 | $10,055,429 | | Debt securities (AFS & HTM) | $1,704,530 | $1,873,375 | | Goodwill | $523,308 | $523,308 | | Total Liabilities | $11,684,167 | $11,718,490 | | Deposits | $10,232,442 | $10,066,342 | | FHLB advances | $938,687 | $1,072,611 | | Total Stockholders' Equity | $1,643,680 | $1,702,757 | Consolidated Statements of Income Q2 2025 net income available to common stockholders decreased to $16.2 million ($0.28 diluted EPS) due to higher expenses and preferred stock redemption loss Quarterly Income Statement Highlights (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $87,636 | $82,263 | | Provision for Credit Losses | $3,039 | $3,114 | | Total Other Income | $11,733 | $10,985 | | Total Operating Expenses | $71,474 | $58,620 | | Net Income | $19,085 | $24,432 | | Net Income Available to Common Stockholders | $16,200 | $23,369 | | Diluted Earnings Per Share | $0.28 | $0.40 | Six-Month Income Statement Highlights (in thousands, except EPS) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Interest Income | $174,288 | $168,487 | | Provision for Credit Losses | $8,379 | $3,705 | | Total Other Income | $22,986 | $23,271 | | Total Operating Expenses | $135,768 | $117,292 | | Net Income | $40,548 | $53,042 | | Net Income Available to Common Stockholders | $36,705 | $51,032 | | Diluted Earnings Per Share | $0.63 | $0.87 | Notes to Unaudited Consolidated Financial Statements Detailed disclosures cover basis of presentation, EPS, securities, loan portfolio, deposits, borrowings, fair value, derivatives, and leases, with the company operating as a single segment - The company operates as a single operating and reportable segment, providing regional community banking services122123 - At June 30, 2025, total debt securities were $1.63 billion at fair value, with unrealized losses of $90.7 million, primarily attributed to changes in interest rates rather than credit quality129134 - As of June 30, 2025, loans modified to borrowers experiencing financial difficulty totaled $40.1 million, up from $30.9 million at year-end 2024153 - The company utilizes interest rate swaps and caps for both customer accommodation and to hedge its own interest rate risk, with a notional amount of total derivatives of $1.55 billion as of June 30, 2025196197202 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial performance, noting decreased net income due to higher expenses, modest loan growth, expanded net interest margin, and stable asset quality Selected Financial Data (Q2 2025 vs. Q2 2024, dollars in thousands, except per share) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total assets | $13,327,847 | $13,321,755 | | Net interest income | $87,636 | $82,263 | | Net income | $19,085 | $24,432 | | Diluted earnings per share | $0.28 | $0.40 | | Net interest margin | 2.91% | 2.71% | | Non-performing assets as a percent of total assets | 0.31% | 0.25% | - Key Q2 2025 developments included the $57.4 million preferred stock redemption, resulting in a $1.8 million net loss, the launch of a Premier Banking initiative attracting $115.0 million in new deposits, and repurchases of over 1 million shares1417 Comparison of Financial Condition Total assets decreased to $13.33 billion, loans grew, deposits increased, and stockholders' equity declined due to preferred stock redemption and share repurchases - Total assets decreased by $93.4 million, primarily due to principal reductions, maturities, and calls of debt securities24 - The company shifted its funding mix, increasing deposits by $166.1 million (driven by brokered CDs) while decreasing FHLB advances by $133.9 million25 - Stockholders' equity decreased primarily due to the $55.5 million redemption of preferred stock and $24.3 million in share repurchases during the first six months of 20252728 Comparison of Operating Results Net income decreased for Q2 and H1 2025, despite increased net interest income and expanded net interest margin, due to a significant rise in non-interest expenses - Net interest margin for Q2 2025 increased to 2.91% from 2.71% in Q2 2024, as the decrease in cost of funds outpaced the decrease in the yield on average interest-earning assets35 - Q2 2025 provision for credit losses was $3.0 million, primarily driven by net loan charge-offs of $2.2 million and a reserve build due to a mix-shift into commercial and industrial loans36 - Operating expenses for Q2 2025 increased by $12.9 million year-over-year to $71.5 million, mainly due to a $7.1 million increase in compensation and benefits and a $2.2 million increase in professional fees4041 Liquidity and Capital Resources The company maintains strong liquidity and capital, with $3.5 billion in funding capacity and a CET1 ratio of 10.99%, exceeding 'well-capitalized' requirements - Total on-balance sheet liquidity and funding capacity was $3.5 billion at quarter-end46 - Estimated adjusted uninsured deposits were $1.73 billion, or 16.7% of total deposits47 Regulatory Capital Ratios (Company) | Ratio | June 30, 2025 | Requirement for Capital Adequacy | | :--- | :--- | :--- | | Common equity Tier 1 | 10.99% | 7.00% | | Tier 1 capital | 11.74% | 8.50% | | Total capital | 13.56% | 10.50% | - In July 2025, the Board authorized a new stock repurchase program for up to an additional 3.0 million shares2854 Lending Activities and Asset Quality Total loans reached $10.19 billion, with investor-owned CRE at 49.8%; asset quality remained stable, non-performing loans at 0.33%, and allowance coverage at 236.54% - Investor-owned commercial real estate loans totaled $5.07 billion, or 49.8% of total loans6365 Asset Quality Metrics | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-performing loans as a % of total loans | 0.33% | 0.35% | | Non-performing assets as a % of total assets | 0.31% | 0.28% | | Allowance for loan credit losses as a % of total loans | 0.78% | 0.73% | | Allowance / Non-performing loans | 236.54% | 207.19% | - Special Mention and Substandard loans decreased by $6.6 million to $153.3 million from year-end 202474 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk (IRR) through ALCO, measuring EVE and NII sensitivity; it was modestly liability sensitive to rising rates as of June 30, 2025 Interest Rate Sensitivity Analysis (June 30, 2025) | Change in Interest Rates (bps) | Economic Value of Equity (% Change) | Net Interest Income (% Change) | | :--- | :--- | :--- | | +300 | (3.7)% | (2.2)% | | +200 | (1.8)% | (0.9)% | | +100 | (0.6)% | (0.1)% | | (100) | (0.3)% | (0.2)% | | (200) | (2.5)% | (0.7)% | | (300) | (7.0)% | (1.4)% | - The change in interest rate sensitivity from year-end 2024 was influenced by an increase in fixed-rate loans, a decrease in floating-rate investments, and a deposit mix shift, partially offset by an increase in short-term borrowings94 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 202597 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls98 PART II. Other Information Item 1. Legal Proceedings The company is not involved in any material pending legal proceedings beyond routine ordinary course of business matters - The Company and the Bank are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which are deemed immaterial215 Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the Annual Report on Form 10-K for December 31, 2024 - No material changes to the Company's risk factors have occurred since December 31, 2024216 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased over 1 million shares in Q2 2025 and authorized a new program for an additional 3.0 million shares in July 2025 - On July 16, 2025, the Board authorized a new 2025 Stock Repurchase Program to repurchase up to an additional 3.0 million shares217 Share Repurchases in Q2 2025 | Period | Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 535,263 | $17.33 | | June 2025 | 467,316 | $16.96 | Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the second quarter of 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025221