OceanFirst Financial Corp. Announces Quarterly and Year-to-Date Net Income and Earnings Per Share Growth

TOMS RIVER, N.J., July 21, 2011 (GLOBE NEWSWIRE) -- OceanFirst Financial Corp. (Nasdaq:OCFC), the holding company for OceanFirst Bank (the "Bank"), today announced that both net income and diluted earnings per share increased over the prior year. Earnings per share rose 3.7%, to $0.28, for the quarter ended June 30, 2011 from $0.27, for the corresponding prior year quarter. For the six months ended June 30, 2011, net income was $10.2 million, an increase of $853,000 over the prior year period. Diluted earnings per share also increased 9.8%, to $0.56, as compared to $0.51 for the corresponding prior year period. Additional highlights for the quarter included:

• The net interest margin expanded on a linked quarter basis to 3.67% for the quarter ended June 30, 2011, as compared to 3.60% for the quarter ended March 31, 2011.
• Return on average stockholders' equity was 9.87% for the quarter ended June 30, 2011. The Company remains well-capitalized with the tangible common equity ratio increasing to 9.53% at June 30, 2011.
• The combination of solid earnings and increased other comprehensive income has boosted shareholder book value 5.9% year-to-date to $11.32 per share.

The Company also announced that the Board of Directors declared its fifty-eighth consecutive quarterly cash dividend on common stock. The dividend for the quarter ended June 30, 2011 was declared in the amount of $0.12 per share to be paid on August 12, 2011 to shareholders of record on August 1, 2011.  

Chairman and CEO John R. Garbarino observed, "We continue to build on our already healthy capital position with another solid earnings quarter while prudently provisioning for our loan loss exposure. Our fortified capital base and strong record of provisioning remain the staunch defense to the volatility evidenced in our non-performing loans."

Results of Operations

Net income for the three months ended June 30, 2011 increased to $5.1 million, or $0.28 per diluted share, as compared to net income of $5.0 million, or $0.27 per diluted share for the corresponding prior year period. For the six months ended June 30, 2011 net income increased to $10.2 million, or $0.56 per diluted share, as compared to net income of $9.4 million, or $0.51 per diluted share, for the corresponding prior year period.

Net interest income for the three and six months ended June 30, 2011 was $19.6 million and $39.0 million, respectively, as compared to $19.7 million and $38.7 million, respectively, in the same prior year periods, reflecting greater interest-earning assets offset by a lower year-over-year net interest margin. Average interest-earning assets increased $56.0 million, or 2.7%, and $92.0 million, or 4.5%, respectively, for the three and six months ended June 30, 2011, as compared to the same prior year periods. The increase in average interest-earning assets was primarily due to the increase in average investment securities which increased $85.2 million and $77.7 million, respectively, for the three and six months ended June 30, 2011, as compared to the same prior year periods. The net interest margin decreased to 3.67% and 3.64% for the three and six months ended June 30, 2011 from 3.78% and 3.77%, respectively, in the same prior year periods due to increased average deposits which were invested into interest-earning deposits and investment securities at a modest net interest spread. Additionally, high loan refinance volume caused yields on loans and mortgage-backed securities to reset downward. The yield on average interest-earning assets decreased to 4.53% for both the three and six months ended June 30, 2011, as compared to 4.96% in both the same prior year periods. The cost of average interest-bearing liabilities decreased to 0.97% and 1.00%, respectively, for the three and six months ended June 30, 2011, as compared to 1.31% and 1.33%, respectively, in the same prior year periods. The decrease in the cost of interest-bearing liabilities was partly offset by an increase of $31.3 million and $65.3 million, respectively, in average interest-bearing liabilities for the three and six months ended June 30, 2011, as compared to the same prior year periods. This increase resulted from higher average interest-bearing deposits of $187.0 million and $225.0 million, respectively, partly offset by a decrease in average borrowed funds of $155.7 million and $159.7 million. For the three months ended June 30, 2011, the net interest margin increased from the prior linked quarter of 3.60% primarily due to a decrease in the cost of interest-bearing liabilities. 

For the three and six months ended June 30, 2011, the provision for loan losses was $2.2 million and $3.9 million, respectively, as compared to $2.2 million and $4.4 million, respectively, for the corresponding prior year periods. 

Other income increased to $3.9 million and $7.4 million, respectively, for the three and six months ended June 30, 2011, as compared to $3.6 million and $6.6 million in the same prior year periods. Fees and service charges increased to $2.9 million and $5.7 million, respectively, for the three and six months ended June 30, 2011, as compared to $2.8 million and $5.4 million, respectively, for the corresponding prior year periods due to higher fees from investment services and merchant services. The net gain on sales of loans increased to $609,000 and $1.4 million, respectively, for the three and six months ended June 30, 2011, as compared to $502,000 and $1.0 million, respectively, for the corresponding prior year periods due to an increase in the volume of loans sold. The net loss from other real estate operations was $36,000 and $402,000, respectively, for the three and six months ended June 30, 2011, as compared to a loss of $28,000 and $364,000, respectively, in the same prior year periods due to write-downs in the value of properties previously acquired. 

Operating expenses increased by 0.9%, to $13.4 million, and 2.1%, to $26.5 million, respectively, for the three and six months ended June 30, 2011, as compared to $13.3 million and $26.0 million, respectively, for the corresponding prior year periods. The increase was primarily due to compensation and employee benefits costs, which increased by $63,000, or 0.9%, to $7.1 million and $575,000, or 4.2%, to $14.2 million, respectively, for the three and six months ended June 30, 2011, as compared to the corresponding prior year periods. Occupancy expense decreased by $293,000 for the six months ended June 30, 2011, as compared to the corresponding prior year period due to a $184,000 benefit from the negotiated settlement of the remaining office lease obligation at Columbia Home Loans, LLC ("Columbia"), the Company's mortgage banking subsidiary, which was shuttered in the fourth quarter of 2007. Equipment expense increased by $107,000, to $644,000 and $279,000, to $1.3 million, respectively, for the three and six months ended June 30, 2011, as compared to the corresponding prior year periods due to technology upgrades and infrastructure improvements. 

The provision for income taxes was $2.9 million and $5.7 million, respectively, for the three and six months ended June 30, 2011, as compared to $2.9 million and $5.5 million, respectively, for the same prior year periods. The effective tax rate decreased to 35.9% for both the three and six months ended June 30, 2011, as compared to 36.8% and 37.1%, respectively, in the same prior year periods. 

Financial Condition

Total assets decreased by $12.3 million, or 0.5%, to $2,239.0 million at June 30, 2011, from $2,251.3 million at December 31, 2010. Investment securities available for sale increased by 44.8%, to $133.1 million at June 30, 2011, as compared to $91.9 million at December 31, 2010, due to purchases of short-term government agency securities. Loans receivable, net decreased by $43.0 million, or 2.6%, to $1,617.8 million at June 30, 2011, from $1,660.8 million at December 31, 2010, primarily due to sales and prepayments of one-to-four family loans.       

Deposits decreased by $24.7 million, or 1.5%, to $1,639.2 million at June 30, 2011 from $1,664.0 million at December 31, 2010. The decline was concentrated in time deposits, which decreased $22.8 million, as the Bank continued to moderate its pricing for this product. Partly as a result of the decrease in deposits, Federal Home Loan Bank advances increased $9.0 million, to $274.0 million at June 30, 2011, from $265.0 million at December 31, 2010. Stockholders' equity increased 6.0%, to $213.4 million at June 30, 2011, as compared to $201.3 million at December 31, 2010, primarily 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 $46.7 million at June 30, 2011, a $9.2 million increase from $37.5 million at December 31, 2010, primarily due to the addition of one large loan relationship comprised of two commercial real estate loans and one commercial loan totaling $5.7 million. The loans are collateralized by commercial and residential real estate, all business assets and a personal guarantee. A May 2011 appraisal values the real estate collateral at $8.1 million. Additionally, non-performing one-to-four family real estate loans increased $4.4 million at June 30, 2011, as compared to December 31, 2010 due to continued economic stress. Net loan charge-offs increased to $2.1 million for the six months ended June 30, 2011, as compared to $2.0 million for the corresponding prior year period. For the six months ended June 30, 2011 net charge-offs included $122,000 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 June 30, 2011, unchanged from December 31, 2010. There was no provision for repurchased loans and no charge-offs during the six months ended June 30, 2011. At June 30, 2011, there was one outstanding loan repurchase request on a loan with a total principal balance of $180,000 which the Company is contesting. 

Conference Call

As previously announced, the Company will host an earnings conference call on Friday, July 22, 2011 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 451818, from one hour after the end of the call until August 1, 2011. 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 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 the subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, levels of unemployment in the Bank's lending area, 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, 2010 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.