OceanFirst Financial in Toms River, N.J., said Friday that it has agreed to acquire in-state rival Sun Bancorp in Mount Laurel for $487 million in cash and stock.
It would be the fourth bank acquisition for the $5.2 billion-asset OceanFirst since July 31, 2015, when it acquired the $144 million-asset Colonial American Bank in Middletown, N.J. Since then, OceanFirst has purchased the $1.3 billion-asset Cape Bancorp in Cape May, N.J., and the $1.1 billion-asset Ocean Shore Holding in Ocean City, N.J.
For the $2.3 billion-asset Sun, the sale would serve as a coda to the dramatic turnaround engineered by CEO Thomas M. O’Brien.
O’Brien joined Sun as a consultant in April 2014 as the company, which had lost $10.1 million in 2013, was preparing to announce another quarterly loss, of $1.9 million. After taking over as CEO in July, O’Brien embarked on a painful restructuring program, selling off branches, shuttering Sun’s mortgage subsidiary and disposing of $95 million in problem loans. Sun returned to profitability in the first quarter of 2015 and has made money in every quarter since.
The $487 million purchase price works out to 1.69 times Sun’s tangible book value as of March 31 and 14.5 times its estimated 2018 earnings adjusted to reflect expected cost savings.
The combined company would have assets of $7.5 billion and loans of $5.5 billion. It would also have wider access to the New York and Philadelphia metropolitan markets, OceanFirst CEO Christopher D. Maher said on a conference call with reporters and analysts.
“The expansion of our commercial business is squarely focused on the corridor from Philadelphia to New York. With Sun our presence improves greatly,” said Maher, who is also OceanFirst’s chairman and president.
The addition of Sun’s people will be just as important, Maher added.
“Many characterize community banking as being in the midst of a talent war,” he said. “It’s very hard to find top-quality people. It’s very hard to find top-quality bankers in particular …We’re placing a significant reliance on the quality of the clients, relationships and the folks over at Sun who are handling those. One of the biggest values we can get out of this is extending those relationships.”
O’Brien is expected to leave the company after the deal closes in early 2018, but OceanFirst intends to keep as much of his team as possible. OceanFirst has retained about 75% of the employees at the three banks it has acquired over the past two years, Maher said.
OceanFirst expects to cut about 53% of Sun’s noninterest expenses through branch and back-office consolidation. But a sizable amount of those cost savings will come from realizing reductions that were already underway at Sun, Maher said.
Indeed, mounting operating expenses played a major role in Sun’s decision to sell, according to O’Brien.
“Scale continues to drive a lot of transactions,” he said. “The cost of doing business and the economic and regulatory headwinds just favor more scale deals.”