OceanFirst Financial Corp Sells Fixed-to-Floating Preferred

Regional banker OceanFirst Financial (OCFC) has sold a new fixed-to-floating rate preferred. This one has been trading a few days on the OTC Grey market (ticker OCFSL) already and closed yesterday at $24.70.

The coupon will be set at 7% until 5/14/2025 after which it float at a rate of 6.845% plus 3 month SOFR (secured overnight financing rate).

The issue will be a small one with 2.2 million shares sold, with another 330,000 available for over allotment.

The issue is unrated by the big 3 ratings agencies, but rated BBB-(medium) by Kroll.

The pricing term sheet is here.

18 thoughts on “OceanFirst Financial Corp Sells Fixed-to-Floating Preferred”

  1. I reluctantly bought a small position this morning, and now just flipped for 1% profit. I don’t want this trash but I’ll take the found money.

  2. I like the terms which seem a little fat for a bank with such good record. I can’t get the balance sheet data so I don’t know the debt level but coverage is good. My major misgiving would be that this community bank is close to ground zero for covid 19. Mortgage defaults and card payments?

    1. This is what I call the great SP500 index nonsense that is happening right now. The SP500 is priced so that the total SP500 earnings will be equal to 2019, by either 2021 or 2022. But, at the same time, the largest money center banks are priced at 2011 and 2012 earnings because of all the losses the banks are going to take with mortgages, credit cards and other loans.


      2 points:

      1. It would be almost impossible to achieve the same SP500 earnings if the large banks went back to 2011/2012 earnings since they are part of the index.

      2. If the consumer has that much trouble, and consumer spending is 70% of GDP, this is a 2nd reason why this is near impossible.

      That is totally illogical. The only logical answer for this completely illogical scenario is computerized trading (which I have always hated). I cannot see a human analyst making these conclusions. Most I see on CNBC and Bloomberg don’t. They cannot explain it either.

      Despite my purchases in the last several days, I am still at 68% cash (because I adjusted the portfolio).

      I still like my WFC common stock purchase yesterday. Paying 7.7% (ex-dividend was this morning).. The common stock price cut in half (from $54 to about $25). So, if you don’t like the small banks, the common stock of money center banks are down 40-50% and paying nice dividends

      1. I sold my WFC out of disappointment that there was no pick up from the Fed removing restrictions on WFC. I have been happier with regional common and CIT preferred.

        I agree that S & P and NASDAQ seem way over bought. We are still losing 2,000 plus a day to covid.

        1. Overbought based on what? The same modelers who forecasted 2mm+ US deaths from Covid-19? History tells you that this is a classic V shaped recovery. Some V’s are gapped horizontally and some slim vertically. Who knows what tomorrow brings.

          Bottom line, either you can or can’t fight the Fed. Which is it?

          The largest names in the Nasdaq and S&P with the heaviest weightings are either doing better than expected or just flat out crushing their numbers – think MSFT and all the tech names. Plus, nearly every other market around the world is in the toilet. Germany, for example, has 1/2 the gains we now have. UK, forget about it. China’s numbers suck.

          Massive inflows are coming to the US because this is where the action is and where the money is to be made. Not a lot of it is coming to fixed pfd’s and baby bonds since they’ve run so much – so that leaves one with what option? That’s right…. DOW, S&P500, Nasdaq.

          We’ve gone from trading in FEAR to trading on the FOMO. We’re going higher from here with the obvious and expected bumpiness along the way. We’re still a long ways away from the DOW 29,551 we were at on 2/12/20.

          1. Nasdaq today is trading above Jan 1 2020. We have whole industries in crisis: auto, airlines, car rental, hospitality and fine dining and most crowd entertainment. I can’t quantify it but given the wreckage in those industries and a lot of small business, I don’t believe the Dow at 24000 let alone current levels of S&P and nasdaq.

          2. Hello my friend Affinity; Whats your best assessment of our mutually owned “AAPL”?? Iam battling back and forth if I want to double my position here at $304 as I have a very long time horizon. I also bought some for my daughter as well as myself waaaaay back in the $227 to $240 range. But NOW it has completely gotten away from me and I have a reluctance to “chase it” at this point. A 35% run in 8 weeks is quite CRAZY in my opinion. I have read reports on the company adnauseum and love the company but just not the run up and now somewhat very high price. Would love to hear your thoughts.

            1. Hello Chuck…
              I am holding AAPL here and although I also would like to add more, I just cannot pull the trigger on it right now. I’d much rather continue buying the XLK and get exposure to the fantastic complimentary companies like Microsoft, Visa, Cisco, Nvidia, Adobe, Paypal, Salesforce, etc. Many of these I already own outright in addition to this ETF.

              My target buy range on AAPL is in the $280 flat area. I’m certainly willing to wait until it reports again and maybe it drops back down as it has been known to do after earnings reports in the past. We’re just too far out from the 5G phones beginning to be sold en-masse for me to get onboard.

              With so many working from home, they’ve had a big bump in sales from Mac’s and iPad’s recently, but that will wear off. So will the massive increase in spending at the App store from all the kids home from school. So now we’re back to anticipation of the 5G iPhone upgrade cycle. If I have to chase it when that begins and Corona hysteria ends, I will. I firmly believe it goes to $400, no problem. The 5G upgrade cycle will be yuuuugge.

              Just doesn’t make sense to chase it for me, especially since I think it can be had back at $280 if you’re patient. If I miss it, no worries. Like I said, the XLK gives you your APPL exposure and so much more to the names that are powering this recovery on all cylinders.

              All of this is just my opinion… Good luck and health to you my friend!

              1. To Affinity; A big THANK YOU to YOU my FRIEND. Someday we’ll have to trade emails as we have lots in common. TAKE CARE. By the way I totally agree on the $280 entry area.

  3. Chuck, I have owned and followed the commons of HTBK, UMPQ, CVCY,
    Their 1st qtr. reports are a complete turn around from the last yr. In banking I wonder what will happen for the coming qtrs.
    Being west coast banks is different from where your at still makes me wonder about this segment of the market and maybe all financial services companies.

  4. I brought a 50% position this morning. Yes, their areas within NJ where they are primarily located are good areas.

    1. Just a note for anybody considering. In 5 years, this is protected from negative interest rates.

      “however, that if the Benchmark Rate is less than zero, the Benchmark Rate shall be deemed to be zero”.

      So the minimum rate after 5 years is 6.845%

  5. Tim—I bought 700 shares of this issue yesterday—-Apparently, they are in talks regarding which of 2 possible mergers to entertain…..Whichever is finally agreed to, OCEANFIRST will be the surviving entity— they are primarily based in Central & Southern NJ, a rapidly growing area even though other parts of NJ are loosing people.

  6. Be it right or be it wrong I have made the difficult decision not to buy what I call Junkie paper. After seeing what can happen during the month of March it taught me a very valuable and expensive lesson. At one point in the ball game I was down around $700K so won’t learn that lesson anytime soon again. I have reshuffled about 10 to 12 things and bought another 10 to 12 much larger, safer, financially stronger, etc etc stuff.. Going to stay in that direction. Hope everyone out there is ok. Luckily I’ve gotten about 60% of that loss back. Working hard to get it all back. But it will take “time”.

    1. Indeed, when I was a “kid” a grizzled 80 year old broker told me, “Buy the Best, forget the Rest.”
      It took me thirty-five years to hear it.

    2. Chuck being in the learning phase , I have to agree. I dont want to not sleep at night , in March my unrated issues lost 50% of their value. IMHO for me I won’t buy ‘Junk” issues again . But this is just me

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