OceanFirst Financial Corp. Announces 26.0% Increase in Quarterly Net Income Available to Common Stockholders and Continuation of Cash Dividend

TOMS RIVER, N.J., April 22, 2010 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (Nasdaq:OCFC), the holding company for OceanFirst Bank, today announced that net income available to common stockholders increased 26.0%, to $4.4 million for the quarter ended March 31, 2010 from $3.5 million for the corresponding prior year quarter. Diluted earnings per share amounted to $.24 for the quarter ended March 31, 2010 as compared to $.30 for the corresponding prior year period. The Company also announced that its Board of Directors declared a regular quarterly cash dividend on common stock of $.12 per share - covering the three month period ended March 31, 2010 - to be paid on May 14, 2010, to common shareholders of record on May 3, 2010. 

CEO John R. Garbarino reflected on the increase in net income. "We are pleased with the strong growth in net income, largely the result of our November 2009 common stock secondary offering and subsequent redemption of preferred stock. Our Company maintains its strengthened capital position with Tangible Common Equity Capital of 8.5%. We are also pleased to sustain our quarterly common stock cash dividend, representing a current attractive yield for our shareholders."

Results of Operations

Net interest income for the quarter ended March 31, 2010 increased to $19.0 million as compared to $15.7 million in the same prior year period, reflecting a higher net interest margin and higher levels of interest-earning assets.   The net interest margin increased to 3.76% for the three months ended March 31, 2010 from 3.47% in the same prior year period. The yield on interest-earning assets decreased to 4.96%, as compared to 5.41% in the same prior year period.    The cost of interest-bearing liabilities decreased to 1.35% for the three months ended March 31, 2010, as compared to 2.16% in the same prior year period. Average interest-earning assets increased by $216.8 million for the three months ended March 31, 2010 as compared to the same prior year period. The increase was in average mortgage-backed securities which increased $231.0 million.

The provision for loan losses increased to $2.2 million for the quarter ended March 31, 2010 as compared to $800,000 for the corresponding prior year period. The increased provision is due to higher levels of non-performing loans and net charge-offs.

Other income decreased to $3.0 million for the three months ended March 31, 2010 as compared to $3.2 million in the same prior year period. Loan servicing income (loss) increased to income of $46,000 for the quarter ended March 31, 2010 from a loss of $230,000 in the same prior year period. The loss for the quarter ended March 31, 2009 was due to an impairment to the loan servicing asset of $263,000.  The net gain on sales of loans decreased to $503,000 for the three months ended March 31, 2010 as compared to $673,000 for the three months ended March 31, 2009 due to a decline in the volume of loans sold. The net loss from other real estate operations was $335,000 for the quarter ended March 31, 2010 as compared to a loss of $1,000 in the same prior year period due to write-downs in the value of properties previously acquired.

Operating expenses amounted to $12.7 million for the three months ended March 31, 2010, as compared to $11.8 million for the corresponding prior year period. The increase was primarily related to increases in compensation and employee benefits costs relating to incentive compensation and stock plan expense. The increase was also due to the reduction in mortgage loan closings from prior year levels. Higher loan closings in the prior year increased deferred loan expense which is reflected as a reduction to compensation expense.

Dividends on preferred stock and discount accretion totaled $458,000 for the quarter ended March 31, 2009 as compared to no amounts in the current year period. The preferred stock was redeemed on December 30, 2009.

Financial Condition

Mortgage-backed securities available for sale increased to $367.2 million at March 31, 2010 as compared to $213.6 million at December 31, 2009. The increase is due to purchases of $162.8 million in mortgage-backed securities, all of which were issued by U.S. government sponsored enterprises. Loans receivable, net increased by $10.9 million at March 31, 2010 as compared to December 31, 2009 partly due to increased commercial and commercial real estate lending. At March 31, 2010, the Company was holding subprime loans with a gross principal balance of $2.2 million and a carrying value, net of write-offs and lower of cost or market adjustment of $1.8 million. Deposits increased to $1,381.1 million at March 31, 2010 from $1,364.2 million at December 31, 2009. The growth was concentrated in core deposits, defined as all deposits excluding time deposits, which increased $25.2 million. Time deposits decreased $8.3 million as the Bank continued to moderate its pricing for this product. Federal Home Loan Bank advances increased to $521.1 million at March 31, 2010 from $333.0 million at December 31, 2009 and were primarily used to fund the increase in mortgage-backed securities. Stockholders' equity increased to $187.2 million at March 31, 2010 as compared to $183.5 million at December 31, 2009 due to net income and a reduction in accumulated other comprehensive loss partly offset by the cash dividend on common stock.

Asset Quality

The Company's non-performing loans totaled $32.3 million at March 31, 2010, an increase from $28.3 million at December 31, 2009. The increase was concentrated in one-to-four family and consumer loans and is reflective of the weak economic environment. Non-performing loans at March 31, 2010 include $644,000 of loans repurchased due to early payment default that were written down to market value on the date of repurchase and $2.1 million of loans previously held for sale that were also written down to market value. For the three months ended March 31, 2010, the Company realized net loan charge-offs of $1.3 million. Of this amount, $844,000 are charge-offs relating to loans originated by Columbia Home Loans, LLC, ("Columbia"), the Company's mortgage banking subsidiary which has since been shuttered. 

The reserve for repurchased loans, which is included in other liabilities in the Company's consolidated statements of financial condition, was $819,000 at March 31, 2010, unchanged from December 31, 2009. There was no provision for repurchased loans and no charge-offs during the quarter ended March 31, 2010. At March 31, 2010, there is one outstanding loan repurchase request on a loan with a principal balance of $236,000 which the Company is evaluating. There are also six claims from one loan investor totaling $2.2 million that the Company believes are covered by a settlement agreement and release between Columbia and the loan investor executed in August 2007. The Company intends to vigorously contest these claims and believes there are valid defenses, including the settlement and release agreement.

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, April 23, 2010 at 11:00 a.m. Eastern time. The direct dial number for the call is (800) 860-2442. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877)344-7529, Replay Conference Number 439365, from one hour after the end of the call until May 5, 2010. The conference call, as well as the replay, are also available (listen-only) by internet webcast at www.oceanfirst.com in the Investor Relations section.

OceanFirst Financial Corp.'s subsidiary, OceanFirst Bank, founded in 1902, is a federally-chartered stock savings bank with $2.2 billion in assets and twenty-three branches located in Ocean, Monmouth and Middlesex counties, New Jersey. The Bank is the largest and oldest community-based financial institution headquartered in Ocean County, New Jersey.

OceanFirst Financial Corp.'s press releases are available by visiting us at www.oceanfirst.com.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company.   These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and the subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake – and specifically disclaims any obligation – to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

(1)   Amounts are recorded at average amortized cost.

(2)   Amount is net of deferred loan fees, undisbursed loan funds, discounts and premiums and estimated loss allowances and includes loans held for sale and non-performing loans.

(3)   Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(4)   Net interest margin represents net interest income divided by average interest-earning assets.