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OceanFirst Financial Corp. Announces Quarterly Financial Results and Advancement of CEO Succession Plan(GlobeNewswire Via Acquire Media NewsEdge) 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 2013PERFORMANCE 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.CONTACT: Company Contact: Michael J. Fitzpatrick Chief Financial Officer OceanFirst Financial Corp. Tel: (732) 240-4500, ext. 7506 Fax: (732) 349-5070 Email: [email protected] Source: OceanFirst Financial Corp. 2014 GlobeNewswire, Inc. |