TOMS RIVER, N.J.--(BUSINESS WIRE)--
OceanFirst Financial Corp. (NASDAQ:OCFC), the holding company for
OceanFirst Bank, today announced that diluted earnings per share for
the quarter ended December 31, 2006 amounted to a loss of $.13. For
the year ended December 31, 2006 diluted earnings per share was $1.07.
These results have been revised from the earnings results the Company
reported in its January 18, 2007 press release in which the Company
reported diluted earnings per share for the quarter and year ended
December 31, 2006 of $.40 and $1.59.
The Company recently received information regarding the exposure
of Columbia Home Loans, LLC, ("Columbia"), the Company's mortgage
banking subsidiary, to repurchase subprime loans originated and sold
by Columbia. For the year ended December 31, 2006, Columbia originated
$728.3 million of loans, which represented 62.9% of total Company-wide
loan originations. Of this amount, $299.8 million or 41.2% of the
total originated, are considered subprime mortgage loans which are
made to individuals whose borrowing needs are generally not fulfilled
by traditional loan products because they do not satisfy the credit
documentation or other underwriting standards prescribed by
conventional mortgage lenders and loan buyers. In April 2006, Columbia
began to offer a subprime loan product that provided the borrower with
100% financing relative to the value of the underlying property.
Columbia originated $148.2 million of these loans in 2006. These
mortgage loans are generally underwritten to investor specifications,
subjected to investor due diligence and subsequently sold to
investors. The loan sale agreements typically require Columbia to
repurchase the loan in the event of 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.
Recently, senior executives of the Company learned of the higher
than expected incidence of demands for repurchase due to early payment
defaults. Upon further investigation, the Company learned that
Columbia officers failed to report to Company management, the demands
for repurchase due to early payment default in accordance with the
Company's established procedures. In addition, certain loan sale
agreements were renegotiated to expand the default period with
investors or early payment default demands were accepted without the
requisite delegated authority. Since the discovery of this
information, the Company has discontinued the origination of subprime
loans.
Based on the information currently available to the Company, a
reserve for repurchased loans has been established for $9.6 million
which is included in other liabilities in the Company's consolidated
statement of financial condition with a corresponding provision which
reduced the net (loss) gain on sale of loans to a loss of $7.1 million
and a gain of $1.4 million for the quarter and year ended December 31,
2006, respectively. In addition, the Company did not meet financial
targets required for certain executive officers to be paid a bonus
under the Company's incentive compensation program. Accordingly, no
bonuses were paid to the named executive officers of the Company,
which has been reflected in this revision. The previously issued
earnings release included bonuses in the amount of $275,000 to the
named executive officers.
Management is required to assess the Company's internal control
over financial reporting as of December 31, 2006. Based on this
assessment, management will disclose in Form 10-K that the Company's
internal control over financial reporting was not effective as of
December 31, 2006 due to the existence of the following material
weakness identified by management: The Company's policies and
procedures were not effective to provide for the proper evaluation and
assessment of the adequacy of the reserve for repurchased loans at its
mortgage banking subsidiary. Specifically, the Company lacked an
effective process to ensure that the exercise of loan repurchase
requests by purchasers of its loans were timely identified and
incorporated properly in the analysis of its reserve for repurchased
loans. To address the material weakness, in the first quarter of 2007
the Company enhanced its policies and procedures related to the
quarterly evaluation of the adequacy of the reserve for repurchased
loans, modified its mortgage loan product menu to eliminate the
origination of subprime loans and has taken disciplinary action
against certain officers of Columbia responsible for not following
established policies and procedures. The Company continues to
investigate this matter to determine further actions, if any, that may
be required.
Conference Call
The Company will host a conference call on Monday, March 26, 2007
at 9:00 a.m. Eastern time. The direct dial number for the call is
(877) 407-8035. 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 #236182, from one hour after the
end of the call until midnight on Monday, April 2, 2007.
OceanFirst Financial Corp.'s subsidiary, OceanFirst Bank, founded
in 1902, is a federally-chartered stock savings bank with $2.1 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 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 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)
December 31, December 31,
2006 2005
------------ ------------
ASSETS
---------
Cash and due from banks $ 32,204 $ 31,108
Investment securities available for sale 82,384 83,861
Federal Home Loan Bank of New York stock,
at cost 25,346 21,792
Mortgage-backed securities available for
sale 68,369 85,025
Loans receivable, net 1,701,425 1,654,544
Mortgage loans held for sale 82,943 32,044
Interest and dividends receivable 8,083 7,089
Real estate owned, net 288 278
Premises and equipment, net 18,196 16,118
Servicing asset 9,787 9,730
Bank Owned Life Insurance 37,145 36,002
Intangible Assets 1,114 1,272
Other assets 9,718 6,494
------------ ------------
Total assets $ 2,077,002 $ 1,985,357
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
Deposits $ 1,372,328 $ 1,356,568
Securities sold under agreements to
repurchase with retail customers 50,982 54,289
Securities sold under agreements to
repurchase with the Federal Home Loan Bank 34,000 59,000
Federal Home Loan Bank advances 430,500 354,900
Other borrowings 17,500 5,000
Advances by borrowers for taxes and
insurance 7,743 7,699
Other liabilities 31,629 9,117
------------ ------------
Total liabilities 1,944,682 1,846,573
------------ ------------
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 12,262,307 and 12,698,505,
shares outstanding at December 31, 2006
and 2005, respectively 272 272
Additional paid-in capital 201,936 197,621
Retained earnings 164,121 164,613
Accumulated other comprehensive loss (470) (1,223)
Less: Unallocated common stock held by
Employee Stock Ownership Plan (6,369) (7,472)
Treasury stock, 14,915,065 and
14,478,867, shares at December 31,
2006 and 2005, respectively (227,170) (215,027)
Common stock acquired by Deferred
Compensation Plan 1,457 1,383
Deferred Compensation Plan Liability (1,457) (1,383)
------------ ------------
Total stockholders' equity 132,320 138,784
------------ ------------
Total liabilities and
stockholders' equity $ 2,077,002 $ 1,985,357
============ ============
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
For the three months For the years
ended December 31, ended December 31,
--------------------- ---------------------
2006 2005 2006 2005
--------------------- ---------------------
(Unaudited)
Interest income:
Loans $ 27,334 $ 25,112 $ 106,384 $ 93,864
Mortgage-backed
securities 786 854 3,304 3,813
Investment securities
and other 1,772 1,323 6,874 5,122
---------- ---------- ---------- ----------
Total interest
income 29,892 27,289 116,562 102,799
---------- ---------- ---------- ----------
Interest expense:
Deposits 9,362 6,733 33,401 22,807
Borrowed funds 6,698 5,146 25,042 19,066
---------- ---------- ---------- ----------
Total interest
expense 16,060 11,879 58,443 41,873
---------- ---------- ---------- ----------
Net interest income 13,832 15,410 58,119 60,926
Provision for loan losses 50 - 150 350
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 13,782 15,410 57,969 60,576
---------- ---------- ---------- ----------
Other (loss) income:
Loan servicing income 106 131 515 280
Fees and service
charges 2,633 2,459 10,488 9,434
Net (loss) gain on
sales of loans and
securities
available for sale (7,115) 3,104 1,358 13,183
Net loss from other
real estate operations (1) - (61) -
Income from Bank Owned
Life Insurance 303 267 1,143 1,122
Other 111 23 165 71
---------- ---------- ---------- ----------
Total other (loss)
income (3,963) 5,984 13,608 24,090
---------- ---------- ---------- ----------
Operating expenses:
Compensation and
employee benefits 6,564 7,965 29,317 31,184
Occupancy 1,287 1,254 4,850 4,539
Equipment 558 597 2,533 2,531
Marketing 287 702 1,517 2,914
Federal deposit
insurance 133 128 533 507
Data processing 847 830 3,416 3,243
General and
administrative 2,480 2,640 10,215 9,916
---------- ---------- ---------- ----------
Total operating
expenses 12,156 14,116 52,381 54,834
---------- ---------- ---------- ----------
(Loss)income before
provision for income
taxes (2,337) 7,278 19,196 29,832
(Benefit) provision for
income taxes (898) 2,432 6,563 10,335
---------- ---------- ---------- ----------
Net (loss) income $ (1,439) $ 4,846 $ 12,633 $ 19,497
========== ========== ========== ==========
Basic (loss) earnings per
share $ (0.13) $ 0.41 $ 1.09 $ 1.65
========== ========== ========== ==========
Diluted (loss) earnings
per share $ (0.13) $ 0.40 $ 1.07 $ 1.60
========== ========== ========== ==========
Average basic shares
outstanding 11,488 11,737 11,547 11,786
========== ========== ========== ==========
Average diluted shares
outstanding 11,685 12,148 11,765 12,219
========== ========== ========== ==========
Cash (loss) earnings (1) $ (705) $ 5,598 $ 15,521 $ 22,479
========== ========== ========== ==========
Diluted cash (loss)
earnings per share $ (0.06) $ 0.46 $ 1.32 $ 1.84
========== ========== ========== ==========
(1) Cash earnings are determined by adding (net of taxes) to reported
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 At
December 31, December 31,
2006 2005
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Stockholders' equity
to total assets 6.37% 6.99%
Common shares
outstanding (in
thousands) 12,262 12,699
Stockholders' equity
per common share $10.79 $10.93
Tangible
stockholders'
equity per common
share 10.70 10.83
ASSET QUALITY
--------------------
Allowance for loan
losses $10,238 $10,460
Nonperforming loans 4,525 1,595
Nonperforming assets 4,813 1,873
Allowance for loan
losses as a percent
of total loans
receivable 0.57% 0.62%
Allowance for loan
losses as a percent
of nonperforming
loans 226.25 655.80
Nonperforming loans
as a percent of
total loans
receivable 0.25 0.09
Nonperforming assets
as a percent of
total assets 0.23 0.09
For the three months ended For the years ended
December 31, December 31,
--------------------------- ---------------------
2006 2005 2006 2005
------------- ------------- ---------- ----------
PERFORMANCE RATIOS
(ANNUALIZED)
--------------------
Return on average
assets (0.28)% 0.97% 0.62% 1.00%
Return on average
stockholders'
equity (4.25) 14.30 9.40 14.43
Interest rate spread 2.51 3.00 2.69 3.07
Interest rate margin 2.81 3.24 2.98 3.30
Operating expenses
to average assets 2.36 2.82 2.56 2.81
Efficiency ratio 123.17 65.98 73.03 64.50
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 For the years ended
December 31, December 31,
-------------------------- ---------------------
2006 2005 2006 2005
------------ ------------- ---------- ----------
Net (loss) income $ (1,439) $ 4,846 $ 12,633 $ 19,497
Add: Employee stock
plans amortization
Expense 799 847 3,290 3,374
Amortization of
intangible
assets 81 26 158 103
Less: Tax benefit (1) (146) (121) (560) (495)
------------ ------------- ---------- ----------
Cash (loss)
earnings $ (705) $ 5,598 $ 15,521 $ 22,479
============ ============= ========== ==========
Basic cash (loss)
earnings per share $ (0.06) $ 0.48 $ 1.34 $ 1.91
============ ============= ========== ==========
Diluted cash (loss)
earnings per share $ (0.06) $ 0.46 $ 1.32 $ 1.84
============ ============= ========== ==========
(1) 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 December 31, 2006 At December 31, 2005
-------------------- --------------------
Real estate:
One- to-four family $1,231,716 $1,187,226
Commercial real estate,
multi-family and land 306,288 281,585
Construction 13,475 22,739
Consumer 190,029 146,911
Commercial 49,693 61,637
-------------------- --------------------
Total loans 1,791,201 1,700,098
Loans in process (2,318) (7,646)
Deferred origination
costs, net 5,723 4,596
Allowance for loan
losses (10,238) (10,460)
-------------------- --------------------
Total loans, net 1,784,368 1,686,588
Less: mortgage loans held
for sale 82,943 32,044
-------------------- --------------------
Loans receivable, net $1,701,425 $1,654,544
==================== ====================
Mortgage loans serviced for
others $992,658 $910,272
Loan pipeline 294,646 293,934
For the three months ended For the years ended
December 31, December 31,
-------------------------- -----------------------
2006 2005 2006 2005
------------- ------------ ----------- -----------
Loan originations $ 295,714 $ 288,148 $1,221,819 $1,303,754
Loans sold 184,104 173,251 689,561 711,952
Net charge-offs
(recovery) 222 (50) 372 578
DEPOSITS
---------------------------
At December 31, 2006 At December 31, 2005
-------------------- --------------------
Type of Account
---------------------------
Non-interest bearing $ 114,950 $ 120,188
Interest-bearing checking 408,666 381,787
Money market deposit 105,571 125,169
Savings 200,544 242,689
Time deposits 542,597 486,735
-------------------- --------------------
$ 1,372,328 $ 1,356,568
==================== ====================
OceanFirst Financial Corp.
ANALYSIS OF NET INTEREST INCOME
FOR THE QUARTER ENDED DECEMBER 31,
-----------------------------------------------------
2006 2005
-------------------------- --------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-------------------------- --------------------------
(Dollars in thousands)
Assets
Interest-earnings
assets:
Interest-earning
deposits and
short-term
investments $ 9,388 $ 122 5.20% $ 8,122 $ 80 3.94%
Investment
securities (1) 82,572 1,241 6.01 84,962 984 4.63
FHLB stock 25,424 409 6.43 20,650 259 5.02
Mortgage-backed
securities (1) 71,213 786 4.41 90,896 854 3.76
Loans
receivable, net
(2) 1,777,775 27,334 6.15 1,696,560 25,112 5.92
-------------------------- --------------------------
Total
interest-
earning
assets 1,966,372 29,892 6.08 1,901,190 27,289 5.74
--------------- ---------------
Non-interest-
earning assets 97,480 100,693
----------- -----------
Total assets $2,063,852 $2,001,883
=========== ===========
Liabilities and
Stockholders'
Equity
Interest-bearing
liabilities:
Transaction
deposits $ 712,966 3,396 1.91 $ 774,248 2,610 1.35
Time deposits 541,486 5,966 4.41 487,421 4,123 3.38
-------------------------- --------------------------
Total 1,254,452 9,362 2.99 1,261,669 6,733 2.13
Borrowed funds 546,100 6,698 4.91 472,667 5,146 4.35
-------------------------- --------------------------
Total
interest-
bearing
liabilities 1,800,552 16,060 3.57 1,734,336 11,879 2.74
--------------- ---------------
Non-interest-
bearing deposits 115,199 119,374
Non-interest-
bearing
liabilities 12,798 12,661
----------- -----------
Total
liabilities 1,928,549 1,866,371
Stockholders'
equity 135,303 135,512
----------- -----------
Total
liabilities
and
stockholders'
equity $2,063,852 $2,001,883
=========== ===========
Net interest
income $13,832 $15,410
======== ========
Net interest rate
spread (3) 2.51% 3.00%
======= =======
Net interest
margin (4) 2.81% 3.24%
======= =======
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
2006 2005
-------------------------- --------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-------------------------- --------------------------
(Dollars in thousands)
Assets
Interest-
earnings
assets:
Interest-earning
deposits and
short-term
investments $ 8,885 $ 437 4.92% $ 10,796 $ 344 3.19%
Investment
securities (1) 83,999 5,122 6.10 85,942 3,871 4.50
FHLB stock 24,575 1,315 5.35 20,105 907 4.51
Mortgage-backed
securities (1) 77,416 3,304 4.27 106,148 3,813 3.59
Loans
receivable, net
(2) 1,758,230 106,384 6.05 1,624,761 93,864 5.78
-------------------------- --------------------------
Total
interest-
earning
assets 1,953,105 116,562 5.97 1,847,752 102,799 5.56
--------------- ---------------
Non-interest-
earning assets 96,752 101,357
----------- -----------
Total assets $2,049,857 $1,949,109
=========== ===========
Liabilities and
Stockholders'
Equity
Interest-bearing
liabilities:
Transaction
deposits $ 717,811 11,940 1.66 $ 747,401 8,136 1.09
Time deposits 534,056 21,461 4.02 481,585 14,671 3.05
-------------------------- --------------------------
Total 1,251,867 33,401 2.67 1,228,986 22,807 1.86
Borrowed funds 531,265 25,042 4.71 454,806 19,066 4.19
-------------------------- --------------------------
Total
interest-
bearing
liabilities 1,783,132 58,443 3.28 1,683,792 41,873 2.49
--------------- ---------------
Non-interest-
bearing deposits 120,482 115,681
Non-interest-
bearing
liabilities 11,875 14,499
----------- -----------
Total
liabilities 1,915,489 1,813,972
Stockholders'
equity 134,368 135,137
----------- -----------
Total
liabilities
and
stockholders'
equity $2,049,857 $1,949,109
=========== ===========
Net interest
income $58,119 $60,926
======== ========
Net interest rate
spread (3) 2.69% 3.07%
======= =======
Net interest
margin (4) 2.98% 3.30%
======= =======
(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.
Source: OceanFirst Financial Corp.
Contact: OceanFirst Financial Corp.
Michael J. Fitzpatrick, (732) 240-4500, ext. 7506
Fax: (732) 349-5070
email:
[email protected]