TOMS RIVER, N.J., Oct. 25, 2007 (PRIME NEWSWIRE) -- OceanFirst Financial Corp. (Nasdaq:OCFC), the holding company for OceanFirst Bank, today announced that diluted earnings per share for the quarter ended September 30, 2007 rose to $.27 from the $.02 earned the previous quarter. The earnings for the corresponding prior year period were $.42. For the nine months ended September 30, 2007 the loss per share was $.18 as compared to diluted earnings per share of $1.18 for the corresponding prior year period. The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $.20 per share - covering the three month period ended September 30, 2007 - to be paid on November 16, 2007, to shareholders of record on November 2, 2007.
During the second quarter, the Bank decided to discontinue operations at the Westchester County, New York office of Columbia Home Loans, LLC ("Columbia"), the Bank's mortgage banking subsidiary. During the third quarter, the Bank determined to completely shutter all of Columbia's loan origination activity by discontinuing the two remaining small loan production offices. The Bank is retaining Columbia's loan servicing portfolio. This planned shutdown was the result of the significant operating losses incurred by Columbia in the first two quarters of the year related to their origination of subprime mortgage loans. For the three and nine months ended September 30, 2007, Columbia recorded a net loss of $1.1 million and $13.6 million, respectively. Absent the closure, the Company expected Columbia to continue to incur operating losses for the foreseeable future. The elimination of Columbia's Westchester Headquarters operation was completed just prior to September 30, 2007. The planned shutdown of the two smaller loan production offices are expected to be completed by December 31, 2007. A portion of the revenue and expenses related to the retained loan servicing portfolio are expected to continue.
Discussing the results, CEO John R. Garbarino commented on the improved profitability as compared to the previous two quarters and expressed confidence that the previous subprime lending losses at Columbia had been recognized, contained and provided for. "The Company's strengthening profitability over the past three months demonstrates the resilience of our core banking operations after dealing with and accounting for the Columbia subprime losses." Mr. Garbarino continued, "I am also pleased to note the turnaround and expansion of our net interest margin during the quarter and to acknowledge our forty-third consecutive quarterly cash dividend, reflective of our confidence in the future performance of the Company."
Results of Operations
Net interest income for the three and nine months ended September 30, 2007 decreased to $12.8 million and $39.9 million, respectively, as compared to $14.5 million and $44.3 million, respectively, in the same prior year periods, reflecting a lower net interest margin and lower levels of average interest-earning assets. The net interest margin decreased to 2.76% and 2.78%, respectively, for the three and nine months ended September 30, 2007 from 2.89% and 3.03%, respectively, in the same prior year periods. The yield on interest-earning assets increased to 6.07% for both the three and nine months ended September 30, 2007, as compared to 6.06% and 5.93%, respectively, for the same prior year periods. The cost of interest-bearing liabilities increased, however, to 3.61% and 3.59%, respectively, for the three and nine months ended September 30, 2007, as compared to 3.47% and 3.18%, respectively, in the same prior year periods. Average interest-earning assets decreased by $139.9 million and $35.5 million, respectively, for the three and nine months ended September 30, 2007, as compared to the same prior year periods, partly reflective of the discontinuance of Columbia's mortgage banking operations.
Other income decreased to income of $4.6 million for the three months ended September 30, 2007 and a loss of $1.6 million for the nine months ended September 30, 2007, as compared to income of $6.6 million and $17.6 million, respectively, in the same prior year periods. For the three and nine months ended September 30, 2007, the Company recorded a gain of $1.2 million and a loss of $11.7 million, respectively, on the sale of loans and lower of cost or market adjustment, as compared to gains of $3.5 million and $8.5 million, respectively, in the same prior year periods. The loss for the nine months ended September 30, 2007 relates to the subprime mortgage loans originated by Columbia which were unable to be sold as planned and remained in inventory through the first quarter. Columbia was able to subsequently sell most of these loans in a bulk sale transaction during the second quarter. Included in the bulk sale were subprime loans with a stated principal balance of $42.6 million for which Columbia recognized a loss on sale, net of reserves, of $1.3 million. Additionally, included in the loss on sale of loans for the nine months ended September 30, 2007 are mark-to-market charges of $9.4 million incurred by Columbia to reduce loans held for sale to their current fair market value. There were no mark-to-market charges incurred for the three months ended September 30, 2007.
Columbia has also established a reserve for repurchased loans to account for Columbia's obligation to repurchase loans which experienced an "early payment default," defined as the failure by the borrower to make a payment within a designated period early in the loan term. In July 2006, Columbia renegotiated and tightened investor loan sale agreements to generally define early payment default as the failure of the borrower to make the first payment following sale of the loan. In addition to early payment defaults, Columbia must also repurchase a loan in the event of a breach of a representation or warranty or a misrepresentation during the loan origination process. The early payment defaults primarily relate to subprime mortgage loans, especially those with 100% financing relative to the value of the underlying property. In March 2007, the Company discontinued the origination of all subprime loans. The reserve for repurchased loans, which is included in other liabilities in the Company's consolidated statement of financial condition, was $2.8 million at September 30, 2007 and outstanding loan repurchase requests totaled $618,000 at the same date. The reserve for repurchased loans is established to provide for expected losses related to outstanding loan repurchase requests and additional repurchase requests which may be received on loans previously sold to investors. For the quarter ended September 30, 2007, the Company recognized a reversal of the provision for repurchased loans of $200,000. For the nine months ended September 30, 2007 the provision for repurchased loans was $3.8 million which is included as part of the gain (loss) on sale of loans.
At September 30, 2007, the Company was holding subprime loans with a gross principal balance of $7.2 million and a carrying value, net of reserves and lower of cost or market adjustment, of $4.4 million.
Fees and service charges increased $265,000, or 9.9%, and $870,000, or 11.1%, for the three and nine months ended September 30, 2007, respectively, as compared to the same prior year period primarily related to increased fees from trust services and deposit accounts.
Operating expenses amounted to $12.6 million and $41.4 million, respectively, for the three and nine months ended September 30, 2007, as compared to $13.5 million and $40.2 million, respectively, for the corresponding prior year periods. The decrease in operating expenses for the three months ended September 30, 2007 as compared to the corresponding prior year period was due to the discontinuation of operations at Columbia and lower ESOP expense. These reductions were partly offset by the cost of new branches, higher professional fees and total severance costs at Columbia of $101,000. Additionally, occupancy expense for the three and nine months ended September 30, 2007 includes a $375,000 charge for lease termination costs at Columbia. For the nine months ended September 30, 2007 general and administrative expense includes $1.0 million relating to the write-off of the previously established goodwill on the August 2000 acquisition of Columbia.
Financial Condition
Mortgage loans held for sale decreased by $79.7 million at September 30, 2007 as compared to December 31, 2006 due to reduced loan origination volume at Columbia. Deposits decreased to $1,310.9 million at September 30, 2007 from $1,372.3 million at December 31, 2006 as the Bank moderated its pricing relating to certificates of deposit. Total Federal Home Loan Bank borrowings decreased by $80.0 million to $384.5 million at September 30, 2007, as compared to $464.5 million at December 31, 2006 due to the lower loan balances. Additionally, during the quarter ended June 30, 2007, the Company issued $10.0 million of Trust Preferred Securities to provide additional liquidity at the holding company.
Stockholders' equity decreased by $8.7 million to $123.6 million at September 30, 2007, as compared to $132.3 million at December 31, 2006. For the nine months ended September 30, 2007, 49,701 common shares were repurchased at a total cost of $1.1 million. All of these shares were repurchased in the first quarter of 2007. Under the 5% repurchase program authorized by the Board of Directors in July 2006, 489,062 shares remain to be purchased as of September 30, 2007. Stockholders' equity was further reduced by the net loss and cash dividend payments.
Asset Quality
The Company's non-performing assets totaled $9.6 million at September 30, 2007, an increase from $4.8 million at December 31, 2006. The increase was primarily due to the subprime loans now held by the Company. The September 30, 2007 amount includes $887,000 of loans repurchased by Columbia due to early payment default which were written down to market value on the date of repurchase and $3.3 million of loans previously held-for-sale which were written down to market value at March 31, 2007. For the nine months ended September 30, 2007 the Company realized a net loan charge-off of $76,000.
Conference Call
As previously announced, the Company will host an earnings conference call on Thursday, October 25, 2007 at 11:00 a.m. Eastern time. The direct dial number for the call is (877) 407-8035. For those unable to participate in the conference call, a replay will be available. To access the replay, dial (877)660-6853, Account #286, Conference ID#257827, from one hour after the end of the call until midnight on November 1, 2007.
OceanFirst Financial Corp.'s subsidiary, OceanFirst Bank, founded in 1902, is a federally-chartered stock savings bank with $1.9 billion in assets and twenty 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 at no charge by visiting us on the worldwide web at http://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.
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
September 30, December 31, September 30,
2007 2006 2006
----------- ----------- -----------
(Unaudited) (Unaudited)
ASSETS
------
Cash and due from banks $ 29,456 $ 32,204 $ 36,967
Investment securities
available for sale 58,133 82,384 82,050
Federal Home Loan Bank
of New York stock, at cost 22,040 25,346 24,634
Mortgage-backed securities
available for sale 58,285 68,369 71,692
Loans receivable, net 1,678,937 1,701,425 1,714,760
Mortgage loans held for sale 3,244 82,943 62,206
Interest and
dividends receivable 8,357 8,083 8,366
Real estate owned, net 433 288 288
Premises and equipment, net 17,372 18,196 17,722
Servicing asset 9,340 9,787 9,565
Bank Owned Life Insurance 38,087 37,145 36,842
Intangible Assets 23 1,114 1,195
Other assets 13,123 9,718 6,877
----------- ----------- -----------
Total assets $1,936,830 $2,077,002 $2,073,164
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Deposits $1,310,941 $1,372,328 $1,371,738
Securities sold under
agreements to repurchase
with retail customers 69,742 50,982 55,050
Securities sold under
agreements to repurchase
with the Federal Home Loan Bank 13,000 34,000 34,000
Federal Home Loan Bank advances 371,500 430,500 428,200
Other borrowings 27,500 17,500 17,500
Advances by borrowers
for taxes and insurance 8,247 7,743 8,788
Other liabilities 12,329 31,629 20,878
----------- ----------- -----------
Total liabilities 1,813,259 1,944,682 1,936,154
----------- ----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized,
no shares issued -- -- --
Common stock, $.01 par value,
55,000,000 shares authorized,
27,177,372 shares issued and
12,341,915, 12,262,307, and
12,349,245 shares outstanding
at September 30, 2007,
December 31, 2006 and
September 30, 2006,
respectively 272 272 272
Additional paid-in capital 203,237 201,936 201,319
Retained earnings 154,317 164,121 168,069
Accumulated other
comprehensive loss (2,704) (470) (869)
Less: Unallocated common stock
held by Employee Stock
Ownership Plan (5,612) (6,369) (6,645)
Treasury stock,
14,835,457,
14,915,065 and
14,828,127
shares at
September 30, 2007,
December 31, 2006 and
September 30, 2006,
respectively (225,939) (227,170) (225,136)
Common stock acquired
by Deferred
Compensation Plan 1,406 1,457 1,517
Deferred Compensation
Plan Liability (1,406) (1,457) (1,517)
----------- ----------- -----------
Total stockholders'
equity 123,571 132,320 137,010
----------- ---------- -----------
Total liabilities
and stockholders'
equity $1,936,830 $2,077,002 $2,073,164
=========== =========== ===========
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
For the For the
three months nine months
ended ended
September 30, September 30,
----------------- -----------------
2007 2006 2007 2006
---------------- -----------------
(Unaudited) (Unaudited)
Interest income:
Loans $25,945 $27,825 $79,528 $79,051
Mortgage-backed securities 688 812 2,127 2,518
Investment securities and other 1,590 1,679 5,494 5,102
-------- -------- -------- --------
Total interest income 28,223 30,316 87,149 86,671
-------- -------- -------- --------
Interest expense:
Deposits 9,326 8,939 27,778 24,040
Borrowed funds 6,066 6,918 19,431 18,343
-------- -------- -------- --------
Total interest expense 15,392 15,857 47,209 42,383
-------- -------- -------- --------
Net interest income 12,831 14,459 39,940 44,288
Provision for loan losses 75 50 525 100
-------- -------- -------- --------
Net interest income after
provision for loan losses 12,756 14,409 39,415 44,188
-------- -------- -------- --------
Other income (loss):
Loan servicing income 126 136 356 408
Fees and service charges 2,942 2,677 8,724 7,854
Net gain (loss) and lower
of cost or market
adjustment on sales of
loans and securities
available for sale 1,156 3,515 (11,676) 8,474
Net income (loss) from
other real estate operations 8 (60) 27 (60)
Income from Bank Owned Life
Insurance 324 291 942 840
Other 6 44 41 55
-------- -------- -------- --------
Total other income (loss) 4,562 6,603 (1,586) 17,571
-------- -------- -------- --------
Operating expenses:
Compensation and
employee benefits 6,755 7,497 22,227 22,752
Occupancy 1,569 1,244 4,028 3,564
Equipment 543 767 1,631 1,975
Marketing 359 531 1,046 1,230
Federal deposit insurance 168 133 444 400
Data processing 859 859 2,625 2,569
General and administrative 2,357 2,483 9,444 7,735
-------- -------- -------- --------
Total operating expenses 12,610 13,514 41,445 40,225
-------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes 4,708 7,498 (3,616) 21,534
Provision (benefit) for
income taxes 1,582 2,592 (1,597) 7,461
-------- -------- -------- --------
Net income (loss) $ 3,126 $ 4,906 $(2,019) $14,073
======== ======== ======== ========
Basic earnings (loss)
per share $ 0.27 $ 0.43 $ (0.18) $ 1.22
======== ======== ======== ========
Diluted earnings (loss)
per share $ 0.27 $ 0.42 $ (0.18) $ 1.18
======== ======== ======== ========
Average basic shares
outstanding 11,561 11,465 11,522 11,567
======== ======== ======== ========
Average diluted shares
outstanding 11,643 11,689 11,522 11,880
======== ======== ======== ========
OceanFirst Financial Corp.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)
At At At
Sept. 30, Dec. 31, Sept. 30,
2007 2006 2006
-------- -------- --------
STOCKHOLDERS' EQUITY
--------------------
Stockholders' equity to total assets 6.38% 6.37% 6.61%
Common shares outstanding (in thousands) 12,342 12,262 12,349
Stockholders' equity per common share $ 10.01 $ 10.79 $ 11.09
Tangible stockholders' equity
per common share 10.01 10.70 11.00
ASSET QUALITY
-------------
Allowance for loan losses $10,687 $10,238 $10,411
Nonperforming loans 9,162 4,525 3,699
Nonperforming assets 9,595 4,813 3,987
Allowance for loan losses
as a percent of total loans receivable 0.63% 0.57% 0.58%
Allowance for loan losses
as a percent of nonperforming loans 116.64 226.25 281.45
Nonperforming loans
as a percent of total loans receivable 0.54 0.25 0.21
Nonperforming assets as a percent
of total assets 0.50 0.23 0.19
For the For the
three months ended nine months ended
September 30, September 30,
------------------ -----------------
2007 2006 2007 2006
------- ------- ------- -------
PERFORMANCE RATIOS (ANNUALIZED)
-------------------------------
Return on average assets 0.64% 0.94% (0.13)% 0.92%
Return on average
stockholders' equity 10.19 14.79 (2.14) 14.00
Interest rate spread 2.46 2.59 2.48 2.75
Interest rate margin 2.76 2.89 2.78 3.03
Operating expenses to
average assets 2.57 2.58 2.74 2.62
Efficiency ratio 72.50 64.16 108.06 65.03
OceanFirst Financial Corp.
SELECTED LOAN AND DEPOSIT DATA
(in thousands)
LOANS RECEIVABLE
----------------
At Sept. 30, At Dec. 31,
2007 2006
----------- ------------
Real estate:
One- to four-family $1,104,566 $ 1,231,716
Commercial real estate, multi-
family and land 317,080 306,288
Construction 14,172 13,475
Consumer 209,232 190,029
Commercial 46,532 49,693
----------- ------------
Total loans 1,691,582 1,791,201
Loans in process (3,883) (2,318)
Deferred origination costs, net 5,169 5,723
Allowance for loan losses (10,687) (10,238)
Total loans, net 1,682,181 1,784,368
Less: mortgage loans held for sale 3,244 82,943
----------- ------------
Loans receivable, net $1,678,937 $ 1,701,425
=========== ============
Mortgage loans serviced for others $1,036,346 $ 992,658
Loan pipeline 93,793 294,646
For the For the
three months ended nine months ended
September 30, September 30,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
Loan originations $123,677 $331,465 $570,236 $926,105
Loans sold 63,991 245,658 359,802 505,457
Net charge-offs 7 326 76 150
DEPOSITS
--------
At Sept. 30, At Dec. 31,
Type of Account 2007 2006
--------------- ----------- ------------
Non-interest bearing $ 113,488 $ 114,950
Interest-bearing checking 442,195 408,666
Money market deposit 86,442 105,571
Savings 193,872 200,544
Time deposits 474,944 542,597
----------- -----------
$1,310,941 $1,372,328
=========== ===========
OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30,
---------------------------------------------------
2007 2006
-------------------------- ------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
---------------------------------------------------
(Dollars in thousands)
Assets
Interest-earnings
assets:
Interest-earning
deposits and
short-term
investments $ 17,191 $ 217 5.05% $ 8,960 $ 117 5.22%
Investment
securities (1) 62,836 895 5.70 83,917 1,212 5.78
FHLB stock 22,432 478 8.52 25,940 350 5.40
Mortgage-backed
securities (1) 60,539 688 4.55 74,679 812 4.35
Loans
receivable,
net (2) 1,696,679 25,945 6.12 1,806,060 27,825 6.16
---------- ------- ------ ---------- ------- ------
Total
interest
-earning
assets 1,859,677 28,223 6.07 1,999,556 30,316 6.06
------- ------ ------- ------
Non-interest
-earning assets 102,284 99,144
---------- ----------
Total assets $1,961,961 $2,098,700
========== ==========
Liabilities and
Stockholders'
Equity
Interest
-bearing
liabilities:
Transaction
deposits $ 727,233 3,837 2.11 $ 703,986 3,039 1.73
Time deposits 488,688 5,489 4.49 557,093 5,900 4.24
---------- ------- ------ ---------- ------- ------
Total 1,215,921 9,326 3.07 1,261,079 8,939 2.84
Borrowed funds 489,662 6,066 4.96 567,003 6,918 4.88
---------- ------- ------ ---------- ------- ------
Total
interest
-bearing
liabilities 1,705,583 15,392 3.61 1,828,082 15,857 3.47
------- ------ ------- ------
Non-interest
-bearing
deposits 116,895 124,998
Non-interest
-bearing
liabilities 16,834 12,896
---------- ----------
Total
liabilities 1,839,312 1,965,976
Stockholders'
equity 122,649 132,724
---------- ----------
Total
liabilities
and
stockholders'
equity $1,961,961 $2,098,700
========== ==========
Net interest
income $12,831 $14,459
======= =======
Net interest
rate
spread (3) 2.46% 2.59%
====== ======
Net interest
margin (4) 2.76% 2.89%
====== ======
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------
2007 2006
-------------------------- ------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
---------------------------------------------------
(Dollars in thousands)
Assets
Interest-earnings
assets:
Interest
-earning
deposits and
short-term
investments $ 11,212 $ 430 5.11% $ 8,706 $ 315 4.82%
Investment
securities (1) 69,980 3,661 6.98 84,480 3,880 6.12
FHLB stock 24,575 1,403 7.61 24,289 907 4.98
Mortgage-backed
securities (1) 63,912 2,127 4.44 79,506 2,518 4.22
Loans receivable,
net (2) 1,743,488 79,528 6.08 1,751,643 79,051 6.02
---------- ------- ------ ---------- ------- ------
Total
interest
-earning
assets 1,913,167 87,149 6.07 1,948,624 86,671 5.93
------- ------ ------- ------
Non-interest
-earning assets 101,345 96,516
---------- ----------
Total assets $2,014,512 $2,045,140
========== ==========
Liabilities and
Stockholders'
Equity
Interest
-bearing
liabilities:
Transaction
deposits $ 723,194 11,116 2.05 $ 717,194 8,544 1.59
Time deposits 501,697 16,662 4.43 531,557 15,496 3.89
---------- ------- ------ ---------- ------- ------
Total 1,224,891 27,778 3.02 1,248,751 24,040 2.57
Borrowed funds 529,584 19,431 4.89 526,266 18,343 4.65
---------- ------- ------ ---------- ------- ------
Total
interest
-bearing
liabilities 1,754,475 47,209 3.59 1,775,017 42,383 3.18
------- ------ ------- ------
Non-interest
-bearing
deposits 115,299 124,508
Non-interest
-bearing
liabilities 19,153 11,563
---------- ----------
Total
liabilities 1,888,927 1,911,088
Stockholders'
equity 125,585 134,052
---------- ----------
Total
liabilities
and
stockholders'
equity $2,014,512 $2,045,140
========== ==========
Net interest
income $39,940 $44,288
======= =======
Net interest
rate
spread (3) 2.48% 2.75%
====== ======
Net interest
margin (4) 2.78% 3.03%
====== ======
(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.