updated 10/21/2010 10:45:39 PM ET 2010-10-22T02:45:39

TOMS RIVER, N.J., Oct. 21, 2010 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (Nasdaq:OCFC), the holding company for OceanFirst Bank (the "Bank"), today announced that net income available to common stockholders increased to $5.2 million for the quarter ended September 30, 2010 as compared to $5.0 million for the quarter ended June 30, 2010, and $4.0 million for the corresponding prior year period. Diluted earnings per share for the quarter ended September 30, 2010 was $0.29, an increase of $0.02 from the prior linked quarter. Additional highlights for the quarter ended September 30, 2010 include:

  • Diluted earnings per share have grown in each of the last three quarters. Return on average stockholders equity was 10.7% for the quarter ended September 30, 2010.
  • Total revenue (i.e. net interest income and total other income) increased to $23.8 million for the quarter ended September 30, 2010 as compared to $23.3 million for the quarter ended June 30, 2010 and $21.2 million for the quarter ended September 30, 2009.
  • Deposits grew $83.5 million during the quarter to $1,623.5 million, including an increase of $102.4 million in core deposits (i.e. all deposits excluding time deposits).
  • Tangible common equity capital increased to 8.96% of assets.

The Company also announced that the Board of Directors declared its fifty-fifth consecutive quarterly cash dividend on common stock of $0.12 per share - covering the three month period ended September 30, 2010, to be paid on November 12, 2010 to shareholders of record on November 1, 2010. 

Chairman and CEO John R. Garbarino reflected on the quarter. "We are pleased with our record of growing our bottom line and increasing earnings per share, and the consequential value we are building for our shareholders. Core deposit growth also continues, with average core deposits now comprising 81.6% of total deposits. Complementing this growth, the Company again fortified its capital position with an increase in tangible common equity to 8.96% of assets." 

Results of Operations

Net income available to common stockholders for the three months ended September 30, 2010 was $5.2 million or $0.29 per diluted share, as compared to net income available to common stockholders of $4.0 million, or $0.34 per diluted share, for the corresponding prior year period. For the nine months ended September 30, 2010, net income available to common stockholders was $14.6 million or $0.80 per diluted share, as compared to net income available to common stockholders of $10.5 million or $0.90 per diluted share for the corresponding prior year period. For both the three and nine months ended September 30, 2010 diluted earnings per share reflects the higher number of average diluted shares outstanding from the issuance of additional common share in November 2009. 

Net interest income for the three and nine months ended September 30, 2010 increased to $19.6 million and $58.2 million, respectively, as compared to $16.7 million and $48.5 million, respectively, in the same prior year periods, reflecting greater interest-earning assets and, for the nine months ended September 30, 2010, a higher net interest margin. The net interest margin increased to 3.75% for the nine months ended September 30, 2010 from 3.59% in the same prior year period partly due to the low interest rate environment. For the three months ended September 30, 2010 the net interest margin was unchanged at 3.73%, as compared to the same prior year period. The yield on interest-earning assets decreased to 4.90% and 4.94%, respectively, for the three and nine months ended September 30, 2010, as compared to 5.32% and 5.35%, respectively, in the same prior year periods. The cost of interest-bearing liabilities decreased to 1.32% and 1.33%, respectively, for the three and nine months ended September 30, 2010, as compared to 1.79% and 1.98%, respectively, in the same prior year periods. Average interest-earning assets increased by $306.3 million and $264.2 million, respectively, for the three and nine months ended September 30, 2010, as compared to the same prior year periods. The increase in average interest-earning assets was primarily due to the increase in average mortgage-backed securities which increased $259.3 million and $252.5 million, respectively, for the three and nine months ended September 30, 2010.

The provision for loan losses increased to $1.6 million and $6.0 million, respectively, for the three and nine months ended September 30, 2010, as compared to $1.5 million and $3.5 million, respectively, for the corresponding prior year periods. The increased provisions are primarily due to higher levels of non-performing loans and partially due to higher loan balances. Additionally, for the nine months ended September 30, 2010, net charge-offs increased by $645,000 over the corresponding prior year period.

Other income decreased to $4.2 million and $10.8 million, respectively, for the three and nine months ended September 30, 2010, as compared to $4.5 million and $11.9 million, respectively, in the same prior year periods. Loan servicing income (loss) increased to income of $231,000 for the nine months ended September 30, 2010 from a loss of $102,000 in the same prior year period due to an impairment to the loan servicing asset of $263,000 recognized in the first quarter of 2009. Fees and service charges increased to $2.8 million and $8.1 million, respectively, for the three and nine months ended September 30, 2010, as compared to $2.7 million and $7.8 million for the corresponding prior year periods. The increase was due to higher fees from merchant services, commercial checking accounts and trust services partly offset by a reduction in private mortgage insurance fee income. This reduction in PMI fee income resulted from a charge of $203,000 for the three and nine months ended September 30, 2010, related to several rescission claims. The net gain on sales of loans increased to $1.2 million for the three months ended September 30, 2010, as compared to $1.1 million for the corresponding prior year period. Although loan sales volume decreased from the prior year period, the gain on sale margin was very strong resulting in the overall increase in gain on sale of loans for the three months ended September 30, 2010. For the nine months ended September 30, 2010, the net gain on the sale of loans sold decreased to $2.2 million, as compared to $3.1 million for the corresponding prior year period due to a decline in the volume of loans sold. The net loss from other real estate operations was $408,000 for the nine months ended September 30, 2010, as compared to a gain of $71,000 in the same prior year period due to current period write-downs in the value of properties previously acquired. Other income decreased $361,000 and $362,000 for the three and nine months ended September 30, 2010, respectively, as compared to the same prior year periods due to the prior year recovery of $367,000 on borrower escrow funds at Columbia Home Loans, LLC ("Columbia"), the Company's mortgage banking subsidiary which was shuttered in the fourth quarter of 2007.

Operating expenses increased to $13.8 million and $39.7 million, respectively, for the three and nine months ended September 30, 2010, as compared to $12.4 million and $37.4 million, respectively, for the corresponding prior year periods.  Compensation and employee benefits costs increased due to higher incentive compensation, salary and stock plan expense. For the nine months ended September 30, 2010, the increase was also due to the reduction in mortgage loan closings from prior year levels. Fewer loan closings in the current year decreased deferred loan expense which is reflected as an increase to compensation expense. Occupancy expense decreased by $570,000 for the nine months ended September 30, 2010, as compared to the corresponding prior year period due to a $556,000 charge in the second quarter of 2009 relating to the termination of all remaining lease obligations of Columbia. Federal deposit insurance expense for the nine months ended September 30, 2010 decreased by $529,000 from the corresponding prior year period primarily due to a special assessment of $869,000 in the second quarter of 2009. General and administrative expense for the three and nine months ended September 30, 2009 included $413,000 and $582,000, respectively, of costs related to the Company's announced, but subsequently terminated, merger with Central Jersey Bancorp. For the three and nine months ended September 30, 2010, the reduction in merger related expenses was offset by higher loan origination and servicing related expenses.

Dividends on preferred stock and discount accretion totaled $537,000 and $1.5 million, respectively, for the three and nine months ended September 30, 2009, as compared to no amounts in the current year periods. The preferred stock was redeemed on December 30, 2009.

Financial Condition

Total assets increased to $2,225.4 million at September 30, 2010, an increase from $2,030.0 at December 31, 2009. Loans receivable, net increased by $36.7 million to $1,666.0 million at September 30, 2010, from $1,629.3 million December 31, 2009, primarily due to increased commercial and commercial real estate lending. Investment securities available for sale increased to $68.9 million at September 30, 2010, as compared to $37.3 million at December 31, 2009, due to third quarter purchases of government agency and municipal securities as the Company invested part of the funds received from strong deposit flows. Mortgage-backed securities available for sale increased to $343.4 million at September 30, 2010, as compared to $213.6 million at December 31, 2009, due to purchases of $162.8 million in mortgage-backed securities issued by U.S. government sponsored enterprises.

The increase in assets was funded by increased deposits, which grew to $1,623.5 million at September 30, 2010 from $1,364.2 million at December 31, 2009. The growth was concentrated in core deposits, which increased $284.3 million. Time deposits decreased $25.0 million as the Bank continued to moderate its pricing for this product. Also, as a result of the increase in deposits, Federal Home Loan Bank advances decreased to $280.0 million at September 30, 2010 from $333.0 million at December 31, 2009. Stockholders' equity increased to $199.4 million at September 30, 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 $33.8 million at September 30, 2010, an increase from $28.3 million at December 31, 2009, with the largest increase of $2.6 million attributable to one-to-four family mortgage loans. The overall increase is reflective of the weak economic environment. Non-performing loans at September 30, 2010 include $653,000 of loans repurchased due to early payment default that were written down to market value on the date of repurchase and $2.5 million of loans previously held for sale that were also written down to market value. Net loan charge-offs decreased to $153,000 for the three months ended September 30, 2010, as compared to $578,000 for the corresponding prior year period. For the nine months ended September 30, 2010, net loan charge-offs increased to $2.1 million, as compared to $1.5 million for the corresponding prior year period. For the three and nine months ended September 30, 2010 net charge-offs included $75,000 and $1.2 million, respectively, of loans originated by Columbia.

The reserve for repurchased loans, which is included in other liabilities in the Company's consolidated statements of financial condition, was $809,000 at September 30, 2010, as compared to $819,000 at December 31, 2009. There was no provision for repurchased loans and one charge-off of $10,000 during the nine months ended September 30, 2010. At September 30, 2010, there are two outstanding loan repurchase requests on loans with a total principal balance of $325,000 which the Company is evaluating. One of these requests, with a principal balance of $203,000, was resolved with no loss subsequent to September 30, 2010. 

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, October 22, 2010 at 11:00 a.m. Eastern time. The direct dial number for the call is (877) 317-6789. 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 444952, from one hour after the end of the call until November 8, 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 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 within the meaning of the Private Securities Reform Act of 1995, 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," "will," "should," "may," "view," "opportunity," "potential," 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 are further discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 and 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.

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