TOMS RIVER, N.J., April 24, 2014 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (Nasdaq:OCFC), (the "Company"), the holding company for OceanFirst Bank (the "Bank"), today announced diluted earnings per share of $0.28 for the quarter ended March 31, 2014, as compared to $0.26 for the corresponding prior year quarter.
Highlights for the quarter included:
- Commercial loans outstanding increased $27.5 million, an annualized growth rate of 18.7%, the third consecutive quarter of double digit growth.
- The net interest margin remains strong at 3.36%.
- Tangible common equity also remains strong at 9.47%.
The Company announced that the Board of Directors declared its sixty-ninth consecutive quarterly cash dividend on common stock. The dividend for the quarter ended March 31, 2014 of $0.12 per share will be paid on May 16, 2014 to shareholders of record on May 5, 2014.
The next step in the Company Executive Management Succession Plan was also disclosed. Upon the expiration of CEO John R. Garbarino's current employment agreement on December 31, 2014, President and COO Christopher D. Maher will succeed him as CEO. Mr. Maher's amended employment agreement will continue through June 30, 2017. Mr. Garbarino will remain on the Board of Directors where he currently serves as Chairman. "I am pleased we are able to plan an orderly transition of my CEO responsibilities to such a highly qualified executive as Chris Maher," said Garbarino. Maher also commented, "During John's 43 year career with the Bank and 18 year tenure as CEO of the Company, OceanFirst has demonstrated an enviable record of developing value for shareholders. Together we are now working closely on a strategic plan delivering more robust growth."
Results of Operations
Net income for the three months ended March 31, 2014 was $4.7 million, or $0.28 per diluted share, as compared to net income of $4.4 million, or $0.26 per diluted share for the corresponding prior year period.
Net interest income for the quarter ended March 31, 2014 increased to $18.1 million as compared to $17.2 million for the same prior year period, reflecting an increase in the net interest margin partly offset by lower interest-earning assets. The net interest margin increased to 3.36% for the quarter ended March 31, 2014 from 3.16% for the same prior year period. The yield on average interest-earning assets decreased to 3.68% for the quarter ended March 31, 2014, as compared to 3.69% for the same prior year period. Despite the one basis point decline, the asset yield benefited from a shift in the mix of earning assets as average loans receivable, net increased $33.1 million while average interest-earning deposits and short-term investments decreased $56.6 million, as compared to the same prior year period. The cost of average interest-bearing liabilities decreased to 0.37% for the quarter ended March 31, 2014, as compared to 0.61% for the same prior year period. The decrease was partly due to the prepayment of $159.0 million of Federal Home Loan Bank ("FHLB") advances with a weighted average cost of 2.31% early in the fourth quarter of 2013. Average interest-earning assets decreased $26.3 million for the quarter ended March 31, 2014, as compared to the same prior year period, as excess liquidity was allowed to run-off.
For the quarter ended March 31, 2014, the provision for loan losses was $530,000, as compared to $1.1 million for the corresponding prior year period. The decrease for the quarter ended March 31, 2014 was primarily due to a reduction of $590,000 in net charge-offs, as compared to the same prior year period. Non-performing loans decreased $39,000 at March 31, 2014, as compared to December 31, 2013, and by $2.1 million, as compared to March 31, 2013.
For the quarter ended March 31, 2014, other income increased to $4.0 million, as compared to $3.4 million in the same prior year period. For the quarter ended March 31, 2014, wealth management revenue increased $113,000 as compared to the same prior year period, partly due to an increase in assets under administration to $216.5 million at March 31, 2014 from $176.8 million at March 31, 2013. Fees and service charges increased $144,000, as compared to the same prior year period due to higher retail and commercial checking account fees. For the quarter ended March 31, 2014, the net gain on the sale of loans amounted to $132,000, as compared to a loss of $174,000 in the same prior year period. The net loss on the sale of loans for the quarter ended March 31, 2013 was adversely impacted by a provision of $975,000 added to the reserve for repurchased loans and loss sharing obligations, as compared to no provision in the current quarter. The prior year provision was related to loans sold to the Federal Home Loan Bank as part of its Mortgage Partnership Finance program. Excluding the provision for repurchased loans, the gain on sale of loans was adversely impacted by a decrease in the gain-on-sale margin and a reduction in loans sold to $10.3 million for the quarter ended March 31, 2014, as compared to $36.8 million for the corresponding prior year quarter, as increasing longer-term interest rates reduced one-to-four family refinance activity.
Operating expenses amounted to $14.3 million for the quarter ended March 31, 2014, as compared to $12.7 million in the same prior year period. Compensation and employee benefits expense increased $1.1 million for the quarter ended March 31, 2014, as compared to the same prior year period due to personnel additions in revenue producing areas. Marketing expenses increased $282,000, as compared to the same prior year period, primarily due to a promotional campaign to attract retail checking accounts and incent bankcard usage. The promotion resulted in the acquisition of 1,200 new checking relationships in the first quarter. Occupancy expenses for the quarter ended March 31, 2014 include $180,000 in snow removal costs, a $130,000 increase over the same prior year period. Excluding non-recurring expenses relating to the prepayment of FHLB advances and the consolidation of two branches, operating expenses decreased $504,000 for the quarter ended March 31, 2014, as compared to the quarter ended December 31, 2013, primarily due to a reduction of $401,000 in professional fees.
The provision for income taxes was $2.6 million for the quarter ended March 31, 2014, as compared to $2.4 million for the same prior year period. The effective tax rate was 35.3% for the quarter ended March 31, 2014, as compared to 35.1% in the same prior year period.
Financial Condition
Total assets increased by $32.0 million to $2,281.7 million at March 31, 2014, from $2,249.7 million at December 31, 2013. Loans receivable, net, increased by $29.5 million, to $1,571.0 million at March 31, 2014 from $1,541.5 million at December 31, 2013, primarily due to growth in commercial loans of $27.5 million and in residential construction loans, net of loans in process, which increased $5.8 million.
Deposits decreased by $26.6 million, to $1,720.1 million at March 31, 2014, from $1,746.8 million at December 31, 2013, despite strong growth in retail and business checking accounts. To fund loan growth and deposit outflows, Federal Home Loan Bank advances increased $57.3 million, to $232.3 million at March 31, 2014, from $175.0 million at December 31, 2013. Stockholders' equity increased to $216.2 million at March 31, 2014, as compared to $214.4 million at December 31, 2013. Net income for the period was offset by the repurchase of 88,000 shares of common stock for $1.5 million (average cost per share of $17.29) and the cash dividend on common stock. At March 31, 2014, 213,766 shares were available for repurchase under the stock repurchase program adopted in the fourth quarter of 2012. Tangible stockholders' equity per common share was $12.45 at March 31, 2014, as compared to $12.33 at December 31, 2013.
Asset Quality
The Company's non-performing loans totaled $45.3 million at March 31, 2014, a $39,000 decrease from December 31, 2013. Net loan charge-offs decreased to $526,000 for the quarter ended March 31, 2014, as compared to $1.1 million for the corresponding prior year quarter.
Conference Call
As previously announced, the Company will host an earnings conference call on Friday, April 25, 2014 at 11:00 a.m. Eastern time. The direct dial number for the call is (888) 317-6016. 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 10043132 from one hour after the end of the call until July 25, 2014. 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 $2.3 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
In addition to historical information, 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 or expressions of confidence. 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 its subsidiaries include, but are not limited to: changes in interest rates, general economic conditions, levels of unemployment in the Bank's lending area, real estate market values in the Bank's lending area, future natural disasters and increases to flood insurance premiums, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, 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, 2013 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.
| OceanFirst Financial Corp. | ||
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||
| (dollars in thousands, except per share amounts) | ||
| March 31, | December 31, | |
| 2014 | 2013 | |
| (unaudited) | ||
| ASSETS | ||
| Cash and due from banks | $36,746 | $33,958 |
| Securities available-for-sale, at estimated fair value | 39,261 | 43,836 |
| Securities held-to-maturity, net (estimated fair value of $498,383 and $495,082 at March 31, 2014 and December 31, 2013, respectively) | 496,111 | 495,599 |
| Federal Home Loan Bank of New York stock, at cost | 17,011 | 14,518 |
| Loans receivable, net | 1,570,969 | 1,541,460 |
| Mortgage loans held for sale | 1,153 | 785 |
| Interest and dividends receivable | 5,361 | 5,380 |
| Other real estate owned | 4,457 | 4,345 |
| Premises and equipment, net | 23,963 | 23,684 |
| Servicing asset | 3,965 | 4,178 |
| Bank Owned Life Insurance | 54,909 | 54,571 |
| Deferred tax asset | 15,191 | 15,239 |
| Other assets | 12,614 | 12,158 |
| Total assets | $2,281,711 | $2,249,711 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Deposits | $1,720,131 | $1,746,763 |
| Securities sold under agreements to repurchase with retail customers | 66,226 | 68,304 |
| Federal Home Loan Bank advances | 232,300 | 175,000 |
| Other borrowings | 27,500 | 27,500 |
| Due to brokers | 1,522 | — |
| Advances by borrowers for taxes and insurance | 6,892 | 6,471 |
| Other liabilities | 10,950 | 11,323 |
| Total liabilities | 2,065,521 | 2,035,361 |
| Stockholders' equity: | ||
| Preferred stock, $.01 par value, $1,000 liquidation preference, 5,000,000 shares authorized, no shares issued | — | — |
| Common stock, $.01 par value, 55,000,000 shares authorized, 33,566,772 shares issued and 17,358,459 and 17,387,049 shares outstanding at March 31, 2014 and December 31, 2013, respectively | 336 | 336 |
| Additional paid-in capital | 264,289 | 263,319 |
| Retained earnings | 208,732 | 206,201 |
| Accumulated other comprehensive loss | (6,575) | (6,619) |
| Less: Unallocated common stock held by Employee Stock Ownership Plan | (3,544) | (3,616) |
| Treasury stock, 16,208,313 and 16,179,723 shares at March 31, 2014 and December 31, 2013, respectively | (247,048) | (245,271) |
| Common stock acquired by Deferred Compensation Plan | (324) | (665) |
| Deferred Compensation Plan Liability | 324 | 665 |
| Total stockholders' equity | 216,190 | 214,350 |
| Total liabilities and stockholders' equity | $2,281,711 | $2,249,711 |
| OceanFirst Financial Corp. | |||
| CONSOLIDATED STATEMENTS OF INCOME | |||
| (in thousands, except per share amounts) | |||
| For the Three Months Ended, | |||
| March 31, | December 31, | March 31, | |
| 2014 | 2013 | 2013 | |
| ------------(unaudited)------------ | |||
| Interest income: | |||
| Loans | $17,246 | $17,368 | $17,664 |
| Mortgage-backed securities | 1,763 | 1,863 | 1,648 |
| Investment securities and other | 736 | 729 | 740 |
| Total interest income | 19,745 | 19,960 | 20,052 |
| Interest expense: | |||
| Deposits | 1,096 | 1,102 | 1,325 |
| Borrowed funds | 584 | 607 | 1,538 |
| Total interest expense | 1,680 | 1,709 | 2,863 |
| Net interest income | 18,065 | 18,251 | 17,189 |
| Provision for loan losses | 530 | 200 | 1,100 |
| Net interest income after provision for loan losses | 17,535 | 18,051 | 16,089 |
| Other income: | |||
| Bankcard services revenue | 791 | 909 | 810 |
| Wealth management revenue | 540 | 591 | 427 |
| Fees and service charges | 2,000 | 1,954 | 1,856 |
| Loan servicing income | 228 | 220 | 156 |
| Net gain (loss) on sales of loans available for sale | 132 | 287 | (174) |
| Net gain on sales of investment securities available for sale | — | 4 | — |
| Net (loss) gain from other real estate operations | (32) | (49) | 2 |
| Income from Bank Owned Life Insurance | 338 | 338 | 316 |
| Other | 1 | 29 | 16 |
| Total other income | 3,998 | 4,283 | 3,409 |
| Operating expenses: | |||
| Compensation and employee benefits | 7,685 | 7,747 | 6,578 |
| Occupancy | 1,464 | 1,458 | 1,363 |
| Equipment | 756 | 721 | 638 |
| Marketing | 532 | 490 | 250 |
| Federal deposit insurance | 546 | 543 | 524 |
| Data processing | 1,070 | 994 | 973 |
| Check card processing | 446 | 480 | 411 |
| Professional fees | 375 | 776 | 611 |
| Other operating expense | 1,389 | 1,558 | 1,317 |
| Federal Home Loan Bank advance prepayment fee | — | 4,265 | — |
| Branch consolidation expense | — | 579 | — |
| Total operating expenses | 14,263 | 19,611 | 12,665 |
| Income before provision for income taxes | 7,270 | 2,723 | 6,833 |
| Provision for income taxes | 2,563 | 784 | 2,397 |
| Net income | $4,707 | $1,939 | $4,436 |
| Basic earnings per share | $0.28 | $0.12 | $0.26 |
| Diluted earnings per share | $0.28 | $0.11 | $0.26 |
| Average basic shares outstanding | 16,884 | 16,855 | 17,285 |
| Average diluted shares outstanding | 17,050 | 17,056 | 17,324 |
| OceanFirst Financial Corp. | ||
| SELECTED CONSOLIDATED FINANCIAL DATA | ||
| (in thousands, except per share amounts) | ||
| At March 31, | At December 31, | |
| 2014 | 2013 | |
| STOCKHOLDERS' EQUITY | ||
| Stockholders' equity to total assets | 9.47% | 9.53% |
| Common shares outstanding (in thousands) | 17,358 | 17,387 |
| Stockholders' equity per common share | $12.45 | $12.33 |
| Tangible stockholders' equity per common share | 12.45 | 12.33 |
| ASSET QUALITY | ||
| Non-performing loans: | ||
| Real estate – one-to-four family | $27,486 | $28,213 |
| Commercial real estate | 12,010 | 12,304 |
| Consumer | 3,731 | 4,328 |
| Commercial and industrial | 2,094 | 515 |
| Total non-performing loans | 45,321 | 45,360 |
| Other real estate owned | 4,457 | 4,345 |
| Total non-performing assets | $49,778 | $49,705 |
| Delinquent loans 30 to 89 days | $9,137 | $9,147 |
| Troubled debt restructurings: | ||
| Non-performing (included in total non-performing loans above) | $10,217 | $9,663 |
| Performing | 21,435 | 21,456 |
| Total troubled debt restructurings | $31,652 | $31,119 |
| Allowance for loan losses | $20,934 | $20,930 |
| Allowance for loan losses as a percent of total loans receivable | 1.31% | 1.33% |
| Allowance for loan losses as a percent of total non-performing loans | 46.19 | 46.14 |
| Non-performing loans as a percent of total loans receivable | 2.83 | 2.88 |
| Non-performing assets as a percent of total assets | 2.18 | 2.21 |
| WEALTH MANAGEMENT | ||
| Assets under administration | $216,508 | $216,144 |
| For the Three Months Ended | |||
| March 31, | December 31, | March 31, | |
| 2014 | 2013 | 2013 | |
| PERFORMANCE RATIOS (ANNUALIZED) | |||
| Return on average assets | 0.83% | 0.34%(1) | 0.77% |
| Return on average stockholders' equity | 8.72 | 3.64(1) | 8.06 |
| Interest rate spread | 3.31 | 3.33 | 3.08 |
| Interest rate margin | 3.36 | 3.38 | 3.16 |
| Operating expenses to average assets | 2.52 | 3.43(1) | 2.21 |
| Efficiency ratio | 64.65 | 87.03(1) | 61.49 |
| (1) Performance ratios for the fourth quarter of 2013 include non-recurring expenses relating to the prepayment of Federal Home Loan Bank advances of $4.3 million and the consolidation of two branches into newer in-market facilities at a cost of $579,000. The total after-tax cost was $3.1 million. | |||
| OceanFirst Financial Corp. | |||
| SELECTED LOAN AND DEPOSIT DATA | |||
| (in thousands) | |||
| LOANS RECEIVABLE | |||
| At March 31, 2014 | At December 31, 2013 | ||
| Real estate: | |||
| One-to-four family | $748,647 | $751,370 | |
| Commercial real estate, multi-family and land | 550,808 | 528,945 | |
| Residential construction | 37,852 | 30,821 | |
| Consumer | 199,926 | 200,683 | |
| Commercial and industrial | 66,196 | 60,545 | |
| Total loans | 1,603,429 | 1,572,364 | |
| Loans in process | (13,991) | (12,715) | |
| Deferred origination costs, net | 3,618 | 3,526 | |
| Allowance for loan losses | (20,934) | (20,930) | |
| Total loans, net | 1,572,122 | 1,542,245 | |
| Less: mortgage loans held for sale | 1,153 | 785 | |
| Loans receivable, net | $1,570,969 | $1,541,460 | |
| Mortgage loans serviced for others | $794,530 | $806,810 | |
| Loan pipeline: | Average Yield | ||
| Commercial | 4.24% | $46,813 | $58,992 |
| Construction/permanent | 4.02% | 9,753 | 9,955 |
| One-to-four family | 4.26% | 19,729 | 18,827 |
| Consumer | 4.04% | 7,118 | 5,496 |
| $83,413 | $93,270 | ||
| For the Three Months Ended | |||
| March 31, 2014 | December 31, 2013 | March 31, 2013 | |
| Loan originations: | |||
| Commercial | $52,482 | $53,700 | $18,438 |
| Construction/permanent | 10,416 | 16,209 | 3,590 |
| One-to-four family | 27,738 | 31,706 | 53,685 |
| Consumer | 13,379 | 12,059 | 11,130 |
| Total | $104,015 | $113,674 | $86,843 |
| Loans sold | $10,270 | $18,222 | $36,791 |
| Net charge-offs | 526 | 157 | 1,116 |
| DEPOSITS | ||
| At March 31, 2014 | At December 31, 2013 | |
| Type of Account | ||
| Non-interest-bearing | $218,124 | $207,608 |
| Interest-bearing checking | 865,023 | 913,753 |
| Money market deposit | 123,701 | 116,947 |
| Savings | 297,739 | 290,512 |
| Time deposits | 215,544 | 217,943 |
| $1,720,131 | $1,746,763 |
| OceanFirst Financial Corp. | |||||||||
| ANALYSIS OF NET INTEREST INCOME | |||||||||
| FOR THE THREE MONTHS ENDED | |||||||||
| March 31, 2014 | December 31, 2013 | March 31, 2013 | |||||||
| AVERAGE | AVERAGE | AVERAGE | |||||||
| AVERAGE | YIELD/ | AVERAGE | YIELD/ | AVERAGE | YIELD/ | ||||
| BALANCE | INTEREST | COST | BALANCE | INTEREST | COST | BALANCE | INTEREST | COST | |
| (dollars in thousands) | |||||||||
| Assets | |||||||||
| Interest-earning assets: | |||||||||
| Interest-earning deposits and short-term investments | $29,332 | $6 | 0.08% | $34,566 | $8 | 0.09% | $85,951 | $26 | 0.12% |
| Securities (1) and FHLB stock | 562,350 | 2,493 | 1.77 | 595,859 | 2,584 | 1.73 | 565,197 | 2,362 | 1.67 |
| Loans receivable, net (2) | 1,557,281 | 17,246 | 4.43 | 1,528,956 | 17,368 | 4.54 | 1,524,156 | 17,664 | 4.64 |
| Total interest-earning assets | 2,148,963 | 19,745 | 3.68 | 2,159,381 | 19,960 | 3.70 | 2,175,304 | 20,052 | 3.69 |
| Non-interest-earning assets | 115,855 | 127,852 | 118,148 | ||||||
| Total assets | $2,264,818 | $2,287,233 | $2,293,452 | ||||||
| Liabilities and Stockholders' Equity | |||||||||
| Interest-bearing liabilities: | |||||||||
| Transaction deposits | $1,322,358 | 363 | 0.11 | $1,345,106 | 371 | 0.11 | $1,330,639 | 563 | 0.17 |
| Time deposits | 215,710 | 733 | 1.36 | 213,337 | 731 | 1.37 | 221,200 | 762 | 1.38 |
| Total | 1,538,068 | 1,096 | 0.29 | 1,558,443 | 1,102 | 0.28 | 1,551,839 | 1,325 | 0.34 |
| Borrowed funds | 283,256 | 584 | 0.82 | 289,434 | 607 | 0.84 | 319,645 | 1,538 | 1.92 |
| Total interest-bearing liabilities | 1,821,324 | 1,680 | 0.37 | 1,847,877 | 1,709 | 0.37 | 1,871,484 | 2,863 | 0.61 |
| Non-interest-bearing deposits | 210,867 | 209,715 | 185,066 | ||||||
| Non-interest-bearing liabilities | 16,690 | 16,489 | 16,845 | ||||||
| Total liabilities | 2,048,881 | 2,074,081 | 2,073,395 | ||||||
| Stockholders' equity | 215,937 | 213,152 | 220,057 | ||||||
| Total liabilities and stockholders' equity | $2,264,818 | $2,287,233 | $2,293,452 | ||||||
| Net interest income | $18,065 | $18,251 | $17,189 | ||||||
| Net interest rate spread (3) | 3.31% | 3.33% | 3.08% | ||||||
| Net interest margin (4) | 3.36% | 3.38% | 3.16% | ||||||
| (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. | |||||||||