EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

Company:

Michael J. Fitzpatrick

Chief Financial Officer

OceanFirst Financial Corp.

Tel: (732)240-4500, ext. 7506

Fax: (732)349-5070

email:Mfitzpatrick@oceanfirst.com

FOR IMMEDIATE RELEASE

OceanFirst Financial Corp.

ANNOUNCES QUARTERLY RESULTS

AND CONTINUATION OF QUARTERLY DIVIDEND

TOMS RIVER, NEW JERSEY, April 24, 2007…OceanFirst Financial Corp. (NASDAQ:OCFC), the holding company for OceanFirst Bank, today announced a diluted loss per share of $.47 for the quarter ended March 31, 2007. 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 March 31, 2007—to be paid on May 11, 2007, to shareholders of record on April 27, 2007.

Commenting on the quarter, CEO John R. Garbarino expressed optimism that the Company had adequately provided for projected losses resulting from the difficulties at Columbia Home Loans, LLC, the Company’s mortgage banking subsidiary. “The much discussed meltdown of the subprime lending market has taken a dreadful toll on our Company’s consolidated operations over the last two quarterly periods. Despite this, however, in the continued hostile economic environment, the core bank has demonstrated resiliency, and has achieved a degree of success in executing on the OceanFirst community bank business plan for the first three months of 2007.”

Results of Operations

Net interest income for the three months ended March 31, 2007 decreased to $14.4 million, as compared to $15.4 million in the same prior year period, reflecting a lower net interest margin partly offset by higher levels of interest-earning assets. The net interest margin decreased to 2.95% for the three months ended March 31, 2007 from 3.25% in the same prior year period. The yield on interest-earning assets increased to 6.21%, as compared to 5.87% for the same prior year period. The asset yield for the current quarter benefited from $681,000 of income relating to an equity investment. The comparable benefit in the prior year period was $463,000. The cost of interest-bearing liabilities increased to 3.56% for the three months ended March 31, 2007, as compared to 2.87% in the same prior year period. Average interest-earning assets increased by $62.2 million for the three months ended March 31, 2007 as compared to the same prior year period. The growth was concentrated in average loans receivable which grew $84.8 million, or 5.0%. The loan growth was funded by average borrowed funds which grew $65.7 million.

Other income decreased to a loss of $6.4 million for the three months ended March 31, 2007 from income of $4.4 million in the same prior year period. The net loss on the sale of loans was $9.6 million for the three months ended March 31, 2007 as compared to a net gain of $1.7 million for the three months ended March 31, 2006. The net loss includes a $7.1 million charge taken by Columbia to reduce loans held for sale to their current fair market value. Included in the $61.0 million of mortgage loans held for sale is $33.5 million of subprime loans. These loans were originated for sale to investors, however, due to significant weakness in the market for these loans, the loans were not sold as planned and remained in inventory. Also included in the net loss on the sale of loans is a $4.0 million charge to supplement the reserve for repurchased

loans taken in the previous quarter to reflect projected losses from future loan repurchase requests which may result from activities prior to the shutdown of all subprime lending operations at Columbia during the first quarter. This reserve was established 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. During the first quarter of 2007, Columbia originated $38.2 million in subprime loans of which $8.7 million were loans with 100% financing. In March 2007, the Company discontinued the origination of all subprime loans. For the quarter ended March 31, 2007, Columbia repurchased $13.9 million in loans and applied $3.8 million of its previously existing reserve for repurchased loans primarily to record the repurchased loans at fair market value. The reserve for repurchased loans at March 31, 2007 was $9.8 million which is included in other liabilities in the Company’s consolidated statement of financial condition.

Fees and service charges increased $451,000, or 19.2%, for the three months ended March 31, 2007, as compared to the same prior year period primarily related to fees from reverse mortgage loans, trust services and checking account fees.

Operating expenses amounted to $15.1 million for the three months ended March 31, 2007, as compared to $13.2 million for the corresponding prior year period. Included in general

and administrative expense is $1.0 million representing a write-off of the previously established goodwill on the acquisition of Columbia. The Company concluded at March 31, 2007 that as a result of the recent financial performance of Columbia, the goodwill was impaired. The increase in operating expenses was also due to the cost of three new branches and higher professional fees.

Financial Condition

Mortgage loans held for sale decreased by $22.0 million at March 31, 2007 as compared to December 31, 2006 due to reduced loan origination volume at Columbia. Deposits decreased to $1,352.9 million at March 31, 2007 from $1,372.3 million at December 31, 2006 as the Bank moderated its pricing relating to certificates of deposit. Core deposits, defined as all deposits excluding time deposits, however, increased $14.8 million.

Stockholders’ equity decreased by $7.0 million to $125.3 million at March 31, 2007, as compared to $132.3 million at December 31, 2006. For the quarter, 49,701 common shares were repurchased at a total cost of $1.1 million. Under the 5% repurchase program authorized by the Board of Directors in July 2006, 489,062 shares remain to be purchased as of March 31, 2007. Stockholders’ equity was further reduced by the net loss and the cash dividend.

Asset Quality

The Company’s non-performing assets totaled $18.2 million at March 31, 2007, an increase from $4.5 million at December 31, 2006. The March 31, 2007 amount includes $10.3 million of loans repurchased by Columbia in the first quarter due to an early payment default. These loans were written down to market value on the date of repurchase which included an

assessment of the loans credit impairment. As a result, these loans do not require an adjustment to the allowance for loan losses. For the quarter ended March 31, 2007 the Company realized a net loan charge-off of $1,000.

Conference Call

As previously announced, the Company will host an earnings conference call on Wednesday, April 25, 2007 at 11:00 a.m. Eastern time. The direct dial number for the call is (877) 407-8031. 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#239197, from one hour after the end of the call until midnight on Wednesday, May 2, 2007.

OceanFirst Financial Corp.’s subsidiary, OceanFirst Bank, founded in 1902, is a federally-chartered stock savings bank with $2.0 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)

 

     March 31,     December 31,     March 31,  
     2007     2006     2006  
     (Unaudited)           (Unaudited)  

ASSETS

       

Cash and due from banks

    $ 34,955     $ 32,204     $ 24,010  

Investment securities available for sale

      72,005       82,384       83,978  

Federal Home Loan Bank of New York stock, at cost

      25,319       25,346       22,279  

Mortgage-backed securities available for sale

      64,936       68,369       80,333  

Loans receivable, net

      1,705,425       1,701,425       1,688,525  

Mortgage loans held for sale

      60,972       82,943       31,031  

Interest and dividends receivable

      8,329       8,083       7,374  

Real estate owned, net

      709       288       245  

Premises and equipment, net

      17,899       18,196       16,345  

Servicing asset

      9,873       9,787       9,578  

Bank Owned Life Insurance

      37,450       37,145       36,271  

Intangible Assets

      74       1,114       1,246  

Other assets

      10,339       9,718       7,282  
                        

Total assets

    $ 2,048,285     $ 2,077,002     $ 2,008,497  
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Deposits

    $ 1,352,931     $ 1,372,328     $ 1,372,928  

Securities sold under agreements to repurchase with retail customers

      61,784       50,982       50,972  

Securities sold under agreements to repurchase with the Federal Home Loan Bank

      19,000       34,000       44,000  

Federal Home Loan Bank advances

      443,200       430,500       380,000  

Other Borrowings

      17,500       17,500       5,800  

Advances by borrowers for taxes and insurance

      9,007       7,743       8,868  

Other liabilities

      19,570       31,629       10,093  
                        

Total liabilities

      1,922,992       1,944,682       1,872,661  
                        

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 12,318,370, 12,262,307, and 12,494,153 shares outstanding at March 31, 2007, December 31, 2006 and March 31, 2006, respectively

      272       272       272  

Additional paid-in capital

      202,438       201,936       198,439  

Retained earnings

      155,574       164,121       166,139  

Accumulated other comprehensive loss

      (503 )     (470 )     (1,476 )

Less: Unallocated common stock held by Employee Stock Ownership Plan

      (6,117 )     (6,369 )     (7,196 )

Treasury stock, 14,859,002, 14,915,065 and 14,683,219 shares at March 31, 2007, December 31, 2006 and March 31, 2006, respectively

      (226,371 )     (227,170 )     (220,342 )

Common stock acquired by Deferred Compensation Plan

      1,414       1,457       1,495  

Deferred Compensation Plan Liability

      (1,414 )     (1,457 )     (1,495 )
                        

Total stockholders’ equity

      125,293       132,320       135,836  
                        

Total liabilities and stockholders’ equity

    $ 2,048,285     $ 2,077,002     $ 2,008,497  
                        

OceanFirst Financial Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

    

For the three months

ended March 31,

     2007     2006
     (Unaudited)

Interest income:

     

Loans

    $ 27,344     $ 25,019

Mortgage-backed securities

      724       874

Investment securities and other

      2,304       1,893
              

Total interest income

      30,372       27,786
              

Interest expense:

     

Deposits

      9,329       7,080

Borrowed funds

      6,635       5,289
              

Total interest expense

      15,964       12,369
              

Net interest income

      14,408       15,417

Provision for loan losses

      340       50
              

Net interest income after provision for loan losses

      14,068       15,367
              

Other (loss) income:

     

Loan servicing income

      122       126

Fees and service charges

      2,798       2,347

Net (loss) gain on sales of loans and securities available for sale

      (9,583 )     1,680

Net (loss) income from other real estate operations

      (19 )     —  

Income from Bank Owned Life Insurance

      305       268

Other

      5       6
              

Total other (loss) income

      (6,372 )     4,427
              

Operating expenses:

     

Compensation and employee benefits

      7,859       7,378

Occupancy

      1,206       1,184

Equipment

      553       626

Marketing

      316       307

Federal deposit insurance

      136       134

Data processing

      907       906

General and administrative

      4,113       2,641
              

Total operating expenses

      15,090       13,176
              

(Loss) income before (benefit) provision for income taxes

      (7,394 )     6,618

(Benefit) provision for income taxes

      (1,972 )     2,304
              

Net (loss) income

    $ (5,422 )   $ 4,314
              

Basic (loss) earnings per share

    $ (0.47 )   $ 0.37
              

Diluted (loss) earnings per share

    $ (0.47 )   $ 0.36
              

Average basic shares outstanding

      11,486       11,721
              

Average diluted shares outstanding

      N.A.       12,107
              

Cash (loss) earnings (1)

    $ (4,140 )   $ 5,026
              

Diluted cash (loss) earnings per share

    $ (0.36 )   $ 0.42
              
(1) Cash (loss) earnings are determined by adding (net of taxes) to reported (loss) earnings the non-cash expenses stemming from the amortization and appreciation of allocated shares in the company’s stock-related benefit plans and the amortization of intangible assets.

OceanFirst Financial Corp.

SELECTED CONSOLIDATED FINANCIAL DATA

(in thousands, except per share amounts)

 

     At March 31, 2007     At December 31, 2006     At March 31, 2006  

STOCKHOLDERS’ EQUITY

       

Stockholders’ equity to total assets

      6.12 %     6.37 %     6.76 %

Common shares outstanding (in thousands)

      12,318       12,262       12,494  

Stockholders’ equity per common share

    $ 10.17     $ 10.79     $ 10.87  

Tangible stockholders’ equity per common share

      10.17       10.70       10.77  

ASSET QUALITY

       

Allowance for loan losses

    $ 10,577     $ 10,238     $ 10,515  

Nonperforming loans

      18,197 (1)     4,525       1,612  

Nonperforming assets

      18,906 (1)     4,813       1,857  

Allowance for loan losses as a percent of total loans receivable

      0.60 %     0.57 %     0.61 %

Allowance for loan losses as a percent of nonperforming loans

      58.12       226.25       652.30  

Nonperforming loans as a percent of total loans receivable

      1.03       0.25       0.09  

Nonperforming assets as a percent of total assets

      0.92       0.23       0.09  

(1)

Includes $10.3 million of repurchased loans which have been written down to their fair market value.

 

    

For the three months

ended March 31

  
     2007     2006  

PERFORMANCE RATIOS (ANNUALIZED)

     

Return on average assets

    (1.05 )%   0.87 %

Return on average stockholders’ equity

    (16.60 )   12.63  

Interest rate spread

    2.65     3.00  

Interest rate margin

    2.95     3.25  

Operating expenses to average assets

    2.94     2.65  

Efficiency ratio

    187.78     66.40  

CASH EARNINGS

Although reported earnings and return on stockholders’ equity are traditional measures of performance, the Company believes that the change in stockholders’ equity or “cash earnings,” and related return measures are also a significant measure of a company’s performance. Cash earnings exclude the effects of various non-cash expenses, such as the employee stock plans amortization expense and related tax benefit, as well as the amortization of intangible assets. The following table reconciles the Company’s net income with cash earnings. The table is a pro forma calculation which is not in accordance with GAAP.

 

     For the three months
ended March 31		  
     2007     2006  

Net (loss) income

    $ (5,422 )   $ 4,314  

Add: Employee stock plans amortization Expense

      728       801  

Amortization of intangible assets

      1,039       26  

Less: Tax benefit (2)

      (485 )     (115 )
                

Cash (loss) earnings

    $ (4,140 )   $ 5,026  
                

Basic cash (loss) earnings per share

    $ (0.36 )   $ 0.43  
                

Diluted cash (loss) earnings per share

    $ (0.36 )   $ 0.42  
                

(2)

The Company does not receive any tax benefit for that portion of employee stock plan amortization expense relating

to the ESOP fair market value adjustment.

OceanFirst Financial Corp.

SELECTED LOAN AND DEPOSIT DATA

(in thousands)

LOANS RECEIVABLE

 

     At March 31, 2007     At December 31, 2006  

Real estate:

     

One- to four-family

    $ 1,207,982     $ 1,231,716  

Commercial real estate, multi- family and land

      319,444       306,288  

Construction

      9,098       13,475  

Consumer

      193,886       190,029  

Commercial

      43,258       49,693  
                

Total loans

      1,773,668       1,791,201  

Loans in process

      (2,168 )     (2,318 )

Deferred origination costs, net

      5,474       5,723  

Allowance for loan losses

      (10,577 )     (10,238 )
                

Total loans, net

      1,766,397       1,784,368  

Less: mortgage loans held for sale

      60,972       82,943  
                

Loans receivable, net

    $ 1,705,425     $ 1,701,425  
                

Mortgage loans serviced for others

    $ 1,025,351     $ 992,658  

Loan pipeline

      181,455       294,646  

 

     For the three months ended
March 31,		  
     2007    2006  

Loan originations

    $ 267,146    $ 237,992  

Loans sold

      161,252      95,735  

Net charge-offs (recovery)

      1      (4 )

DEPOSITS

 

     At March 31, 2007    At December 31, 2006

Type of Account

      

Non-interest bearing

    $ 118,491    $ 114,950

Interest-bearing checking

      421,551      408,666

Money market deposit

      104,493      105,571

Savings

      199,979      200,544

Time deposits

      508,417      542,597
             
   $ 1,352,931    $ 1,372,328
             

OceanFirst Financial Corp.

ANALYSIS OF NET INTEREST INCOME

 

     FOR THE QUARTER ENDED MARCH 31,  
     2007     2006  
    

AVERAGE

BALANCE

    INTEREST   

AVERAGE
YIELD/

COST

     AVERAGE
BALANCE		    INTEREST   

AVERAGE
YIELD/

COST

  
     (Dollars in thousands)  

Assets

                 

Interest-earnings assets:

                 

Interest-earning deposits and short-term investments

    $ 8,286    $ 108    5.21 %   $ 8,174    $ 90    4.40 %

Investment securities (1)

      75,571      1,748    9.25       84,637      1,537    7.26  

FHLB stock

      25,790      448    6.95       22,478      266    4.73  

Mortgage-backed securities (1)

      67,335      724    4.30       84,234      874    4.15  

Loans receivable, net (2)

      1,779,880      27,344    6.15       1,695,108      25,019    5.90  
                                        

Total interest-earning assets

      1,956,862      30,372    6.21       1,894,631      27,786    5.87  
                                

Non-interest-earning assets

      99,227           94,326      
                        

Total assets

    $ 2,056,089         $ 1,988,957      
                        

Liabilities and Stockholders’ Equity

                 

Interest-bearing liabilities:

                 

Transaction deposits

    $ 721,882      3,657    2.03     $ 740,520      2,712    1.46  

Time deposits

      520,412      5,672    4.36       498,543      4,368    3.50  
                                        

Total

      1,242,294      9,329    3.00       1,239,063      7,080    2.29  

Borrowed funds

      549,721      6,635    4.83       483,994      5,289    4.37  
                                        

Total interest-bearing liabilities

      1,792,015      15,964    3.56       1,723,057      12,369    2.87  
                                

Non-interest-bearing deposits

      113,007           117,958      

Non-interest-bearing liabilities

      20,382           11,332      
                        

Total liabilities

      1,925,404           1,852,347      

Stockholders’ equity

      130,685           136,610      
                        

Total liabilities and stockholders’ equity

    $ 2,056,089         $ 1,988,957      
                        

Net interest income

       $ 14,408         $ 15,417   
                        

Net interest rate spread (3)

          2.65 %         3.00 %
                        

Net interest margin (4)

          2.95 %         3.25 %
                        
(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.