OceanFirst to Become Fourth Largest NJ-Based Banking Institution with Acquisition

On Jul 13, 2016

OceanFirst Financial Corp., headquartered in Toms River, and Ocean Shore Holding Co., headquartered in Ocean City, have entered into an agreement where Ocean Shore will merge with and into OceanFirst for approximately $145.6 million.

With roots dating back to 1887, Ocean City Home Bank is one of Southern New Jersey’s oldest and largest community banks with approximately $1.1 billion in total assets, $818 million in total deposits and $796 million in gross loans. Ocean Shore operates 11 full-service banking centers in Atlantic and Cape May Counties. Following OceanFirst’s recently completed acquisition of Cape Bancorp, Inc., the proposed transaction will further enrich OceanFirst’s distribution, scale and core deposit funding base, as it presents an exceptionally rare opportunity to combine two well-established, like-minded New Jersey franchises.

OceanFirst will strengthen its position as the largest bank headquartered in Central and Southern New Jersey and rank as the fourth largest New Jersey based banking institution by deposit market share.  Based on financial information as of March 31, 2016, and pro forma for the Cape transaction, the combined institution would have approximately $5.3 billion in total assets, $4.0 billion in total deposits, $4.0 billion in gross loans and 61 full-service banking locations.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, upon completion of the merger, shareholders of Ocean Shore common stock will be entitled to receive $4.35 in cash and 0.9667 shares of OceanFirst common stock for each share of Ocean Shore common stock. The transaction is expected to close late fourth quarter of 2016 or early first quarter of 2017, subject to each company receiving the required approval of its shareholders, receipt of all required regulatory approvals and fulfillment of other customary closing conditions.

The purchase price equates to 132 percent of Ocean Shore’s March 31, 2016 tangible book value, 4.9 percent premium to core deposits, 20.1x Ocean Shore’s trailing twelve month earnings, and 9.3x Ocean Shore’s estimated 2017 (forward) earnings (assuming fully phased-in cost savings). Tangible book value per common share is expected to be diluted by approximately 3.1 percent at closing with a projected earnback period of approximately 3.7 years using the cross-over¹ method.

The transaction includes strong earnings per share accretion of approximately 5.4 percent in 2018 (the first full year of combined operations and synergies) in addition to the projected double-digit earnings accretion from the Cape Bancorp, Inc. transaction. The combined company will be structured to support enhanced financial return targets of greater than 1.05 percent return on average assets and greater than 13.0 percent return on average tangible common equity along with remaining “well-capitalized” under regulatory guidelines.

OceanFirst expects to incur pre-tax merger and integration costs of approximately $19 million and to achieve cost savings of approximately 53 percent of Ocean Shore’s non-interest expenses or $12.4 million if 2017 cost savings were to be fully phased in.

“We are excited to welcome Ocean City Home Bank customers and employees to the OceanFirst family. Our two institutions have developed our respective community banks with a consistent vision, effectively sharing similar histories.  With our mutual understanding of our community bank business models and local market focus, OceanFirst and Ocean Shore can leverage this synergy to create one of the most highly valued banking institutions in the Mid-Atlantic region,” said Christopher D. Maher, President and Chief Executive Officer of OceanFirst.

Mr. Maher further commented, “This transaction represents a unique opportunity for OceanFirst to capitalize on its recent entry into Southern New Jersey through the acquisition of an extremely valuable deposit franchise coupled with significant efficiencies and low execution risk. Ocean Shore’s residential focus creates strategic optionality for prudent commercial real estate growth with strong cash flows.  We look forward to continuing to provide extraordinary customer care to all OceanFirst and Ocean Shore customers, as well as providing enhanced value to our stockholders.”

Steven E. Brady, President and Chief Executive Officer of Ocean Shore, echoed Mr. Maher’s comments stating, “The combination with OceanFirst provides several strategic benefits for all Ocean Shore stakeholders, including improved operating scale, access to additional product lines and increased shareholder liquidity.”  Mr. Brady added that “while this merger solidifies the pro forma bank’s Jersey Shore dominance, it also provides Ocean Shore the opportunity to capitalize on OceanFirst’s considerable expansion efforts toward the demographically attractive Philadelphia metro market – a natural market extension for Ocean Shore’s franchise as well.”

To provide for additional representation for OceanFirst’s Southern New Jersey market area, upon completion of the transaction, three current Ocean Shore Board members are expected to join the OceanFirst Board, including Mr. Brady.  Mr. Brady will also be named Vice Chairman for the Southern New Jersey Division, to serve in an advisory capacity for OceanFirst, where he will provide insight from his extensive banking and professional experience.

Piper Jaffray & Co. is serving as financial advisor to OceanFirst and rendered a fairness opinion to OceanFirst’s Board of Directors in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to OceanFirst. Sandler O’Neill + Partners, L.P. is serving as financial advisor to Ocean Shore and rendered a fairness opinion to Ocean Shore’s Board of Directors in connection with the transaction. Kilpatrick Townsend & Stockton LLP is serving as legal counsel to Ocean Shore.

 

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