UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number 0-27428
OceanFirst Financial Corp.
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(Exact name of registrant as specified in its charter)
Delaware 22-3412577
-------------------------------- -----------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
975 Hooper Avenue, Toms River, NJ 08753
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732)240-4500
------------------
--------------------------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO______.
-----
As of May 10, 2002, there were 14,471,222 shares of the Registrant's Common
Stock, par value $.01 per share, outstanding.
OceanFirst Financial Corp.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
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PAGE
----
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
as of March 31, 2002 and December 31, 2001 ............................. 1
Consolidated Statements of Income for the three
months ended March 31, 2002 and 2001 ................................... 2
Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 and 2001 ............................. 3
Notes to Consolidated Financial Statements ............................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................... 7
Item 3. Quantitative and Qualitative Disclosure about Market Risk .............. 10
Part II. OTHER INFORMATION
------- -----------------
Item 1. Legal Proceedings ...................................................... 11
Item 2. Changes in Securities .................................................. 11
Item 3. Default Upon Senior Securities ......................................... 11
Item 4. Submission of Matters to a Vote of Security Holders .................... 11
Item 5. Other Information ...................................................... 11
Item 6. Exhibits and Reports on Form 8-K ....................................... 11
Signatures ........................................................................ 12
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
March 31, December 31,
2002 2001
------------ ------------
(Unaudited)
ASSETS
------
Cash and due from banks $ 19,167 $ 16,876
Investment securities available for sale 78,330 80,017
Federal Home Loan Bank of New York
stock, at cost 23,885 23,560
Mortgage-backed securities available for sale 199,531 233,302
Loans receivable, net 1,253,340 1,300,889
Mortgage loans held for sale 73,473 37,828
Interest and dividends receivable 8,066 7,632
Real estate owned, net 181 133
Premises and equipment, net 17,616 16,730
Servicing asset 8,477 7,628
Other assets 40,433 39,071
------------ -----------
Total assets $ 1,722,499 $ 1,763,666
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits $ 1,114,030 $ 1,109,043
Federal Home Loan Bank advances 258,200 272,000
Securities sold under agreements to repurchase 191,127 212,332
Advances by borrowers for taxes and insurance 6,504 6,371
Other liabilities 9,343 17,191
------------ -----------
Total liabilities 1,579,204 1,616,937
------------ -----------
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 14,503,472 and 14,791,334
shares outstanding at March 31, 2002 and December 31,
2001, respectively 272 272
Additional paid-in capital 182,733 181,780
Retained earnings 134,524 131,655
Accumulated other comprehensive loss (3,011) (824)
Less: Unallocated common stock held by
Employee Stock Ownership Plan (12,309) (12,663)
Unearned Incentive Awards -- (161)
Treasury stock, 12,673,900 and 12,386,038 shares
at March 31, 2002 and December 31, 2001,
respectively (158,914) (153,330)
------------ -----------
Total stockholders' equity 143,295 146,729
------------ -----------
Total liabilities and stockholders' equity $ 1,722,499 $1,763,666
============ ===========
See accompanying notes to unaudited consolidated financial statements.
Note: Shares and related amounts have been adjusted for the three-for-two stock
split effected in the form of a 50% stock dividend payable on May 17, 2002 to
common stockholders of record as of May 3, 2002.
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
For the three months
ended March 31
--------------
2002 2001
---- ----
(Unaudited)
Interest income:
Loans $ 23,856 $ 22,732
Mortgage-backed securities 3,098 4,374
Investment securities and other 1,460 2,203
-------- --------
Total interest income 28,414 29,309
-------- --------
Interest expense:
Deposits 7,385 11,717
Borrowed funds 5,361 4,861
-------- --------
Total interest expense 12,746 16,578
-------- --------
Net interest income 15,668 12,731
Provision for loan losses 500 255
-------- --------
Net interest income after provision
for loan losses 15,168 12,476
-------- --------
Other income:
Fees and service charges 1,478 1,356
Net gain on sales of loans and securities
available for sale 394 1,079
Net income from other real estate operations 19 14
Other 534 351
-------- --------
Total other income 2,425 2,800
-------- --------
Operating expenses:
Compensation and employee benefits 5,262 5,368
Occupancy 792 694
Equipment 543 495
Marketing 424 337
Federal deposit insurance 126 123
Data processing 588 491
General and administrative 2,143 1,602
-------- --------
Total operating expenses 9,878 9,110
-------- -----
Income before provision for income taxes 7,715 6,166
Provision for income taxes 2,666 2,145
-------- --------
Net income $ 5,049 $ 4,021
======== ========
Basic earnings per share $ .38 $ .28
======== ========
Diluted earnings per share $ .36 $ .26
======== ========
Average basic shares outstanding 13,181 14,532
======== ========
Average diluted shares outstanding 13,894 15,205
======== ========
See accompanying notes to unaudited consolidated financial statements.
Note: Earnings per share and shares outstanding have been adjusted for the
three-for-two stock split effected in the form of a 50% stock dividend payable
on May 17, 2002 to common stockholders of record as of May 3, 2002.
2
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the three months
ended March 31,
---------------------
2002 2001
-------- -------
(Unaudited)
Cash flows from operating activities:
Net income $ 5,049 $ 4,021
-------- --------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization of premises
and equipment 475 464
Amortization of Incentive Awards 161 484
Amortization of ESOP 354 374
ESOP adjustment 395 283
Amortization of servicing asset 462 254
Amortization of intangible assets 26 89
Net premium amortization in excess of discount
accretion on securities 321 113
Net accretion of deferred fees and discounts
in excess of premium amortization on loans 1 (17)
Provision for loan losses 500 255
Net gain on sales of real estate owned (23) (21)
Net gain on sales of loans and securities available for sale (394) (1,079)
Proceeds from sales of mortgage loans held for sale 127,543 68,474
Mortgage loans originated for sale (162,794) (59,615)
Increase in value of Bank Owned Life Insurance (524) (300)
(Increase) decrease in interest and dividends receivable (434) 523
Increase in other assets (891) (983)
(Decrease) increase in other liabilities (7,290) 1,732
-------- --------
Total adjustments (42,112) 11,030
-------- -------
Net cash (used in) provided by operating activities (37,063) 15,051
-------- --------
Cash flows from investing activities:
Net decrease (increase) in loans receivable 46,951 (23,468)
Purchase of mortgage-backed securities available for sale - (24,649)
Purchase of investment securities available for sale (600) -
Proceeds from maturities of investment securities
available for sale - 5,000
Principal payments on mortgage-backed securities
available for sale 32,266 14,100
Purchase of Federal Home Loan Bank of New York Stock (325) -
Proceeds from sales of real estate owned 72 234
Purchases of premises and equipment (1,361) (1,256)
-------- --------
Net cash provided by (used in) investing activities 77,003 (30,039)
-------- --------
Continued
3
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(dollars in thousands)
For the three months
ended March 31,
-----------------------
2002 2001
------- ------
(Unaudited)
Cash flows from financing activities:
Increase in deposits $ 4,987 $ 15,785
(Decrease) increase in short-term borrowings (45,005) 6,002
Proceeds from Federal Home Loan Bank advances 25,000 -
Repayments of Federal Home Loan Bank advances (15,000) -
Proceeds from securities sold under agreements
to repurchase - 10,000
Repayments of securities sold under agreement to
repurchase - -
Increase in advances by borrowers for taxes and
insurance 133 290
Exercise of stock options 246 548
Dividends paid (2,129) (1,895)
Purchase of treasury stock (5,881) (8,850)
----------- -----------
Net cash (used in) provided by financing activities (37,649) 21,880
----------- -----------
Net increase in cash and due from banks 2,291 6,892
Cash and due from banks at beginning of period 16,876 7,235
----------- -----------
Cash and due from banks at end of period $ 19,167 $ 14,127
=========== ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest $ 12,960 $ 16,483
Income taxes 2,353 12
Noncash investing activities:
Transfer of loans receivable to real estate owned 97 340
Mortgage loans securitized into mortgage-backed
securities 47,624 4,167
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
4
OceanFirst Financial Corp.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
Note 1. Basis of Presentation
-----------------------------
The accompanying unaudited consolidated financial statements include the
accounts of OceanFirst Financial Corp. (the "Company") and its wholly-owned
subsidiary, OceanFirst Bank (the "Bank") and its wholly-owned subsidiaries,
Columbia Equities, Ltd., OceanFirst REIT Holdings, Inc., OceanFirst Realty Corp.
and Ocean Investment Services, LLC.
The interim consolidated financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, considered necessary for a
fair presentation of the financial condition and results of operations for the
periods presented. The results of operations for the three months ended March
31, 2002 are not necessarily indicative of the results of operations that may be
expected for all of 2002.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's Annual Report to Stockholders on Form 10-K for the year ended
December 31, 2001.
Note 2. Earnings per Share
--------------------------
Amounts per common share have been adjusted for the three-for-two stock split
effected in the form of a 50% stock dividend declared by the Company's Board of
Directors on April 17, 2002 and payable on May 17, 2002 to common stockholders
of record as of May 3, 2002.
The following reconciles shares outstanding for basic and diluted earnings per
share for the three months ended March 31, 2002 and 2001 (in thousands):
Three months ended
March 31,
------------------
2002 2001
------ ------
Weighted average shares issued net of Treasury shares 14,740 16,446
Less: Unallocated ESOP shares (1,481) (1,654)
Unallocated incentive award shares (78) (260)
------ ------
Average basic shares outstanding 13,181 14,532
Add: Effect of dilutive securities:
Stock options 648 555
Incentive awards 65 118
------ ------
Average diluted shares outstanding 13,894 15,205
====== ======
Note 3. Comprehensive Income
----------------------------
For the three month periods ended March 31, 2002 and 2001 total comprehensive
income, representing net income plus or minus items recorded directly in equity,
such as the change in unrealized gains or losses on securities available for
sale amounted to $2,862,000 and $6,126,000, respectively.
Note 4. Impact of Recent Accounting Pronouncements
--------------------------------------------------
On July 20, 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of SFAS 142. SFAS 142 also requires
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed periodically
5
for impairment. SFAS 142 requires that goodwill and any intangible asset
determined to have an indefinite useful life acquired after June 30, 2001 not be
amortized, but continue to be evaluated for impairment in accordance with the
appropriate pre-SFAS 142 accounting literature. The Company adopted SFAS 142
effective January 1, 2002. As of December 31, 2001, the Company had $1.0 million
in unamortized goodwill with annual amortization of $253,000 which ceased upon
the adoption of SFAS 142. The cessation of goodwill amortization for the three
months ended March 31, 2002 did not have a significant impact on the Company's
consolidated financial statements as compared to the same prior year period. The
Company is currently evaluating the transitional goodwill impairment criteria of
SFAS 142 and is not able to estimate the impact, if any, that SFAS 142 may have
on recorded goodwill. The impairment, if any, will be recognized as a cumulative
effect of a change in accounting principle and will be recorded in the first
interim reporting period of 2002. The adoption of SFAS 142 did not significantly
impact the Company's accounting for currently recorded intangible assets,
primarily core deposit intangibles.
On October 3, 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal or Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," it retains many of the fundamental
provisions of that Statement. The Statement is effective for fiscal years
beginning after December 15, 2001. The initial adoption of SFAS No. 144 did not
have a significant impact on the Company's financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 requires an enterprise to record the fair
value of an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible long-lived
assets. The Company is required to adopt the provisions of SFAS No. 143 for
fiscal years beginning after June 15, 2002. The Company does not anticipate that
SFAS No. 143 will significantly impact the Company's consolidated financial
statements.
Note 5. Loans Receivable, Net
-----------------------------
Loans receivable, net at March 31, 2002 and December 31, 2001 consisted of the
following (in thousands):
March 31, 2002 December 31, 2001
-------------- -----------------
Real estate:
One- to four-family $ 1,090,897 $ 1,110,282
Commercial real estate, multi-
family and land 116,786 112,318
Construction 8,366 9,082
Consumer 68,340 67,039
Commercial 51,411 51,756
----------- -----------
Total loans 1,335,800 1,350,477
Loans in process (2,004) (2,458)
Deferred origination costs, net 1,495 1,048
Unearned (discount) premium (2) 1
Allowance for loan losses (8,476) (10,351)
----------- -----------
Total loans, net 1,326,813 1,338,717
Less: mortgage loans held for sale 73,473 37,828
----------- -----------
Loans receivable, net $ 1,253,340 $ 1,300,889
=========== ===========
6
Note 6. Deposits
----------------
The major types of deposits at March 31, 2002 and December 31, 2001 were as
follows (in thousands):
March 31, 2002 December 31, 2001
-------------- -----------------
Type of Account
---------------
Non-interest bearing $ 76,140 $ 73,799
NOW 223,663 212,328
Money market deposit 86,219 78,903
Savings 207,674 196,879
Time deposits 520,334 547,134
---------- ----------
$1,114,030 $1,109,043
========== ==========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Total assets at March 31, 2002 were $1.722 billion, a decrease of $41.2 million,
compared to $1.764 billion at December 31, 2001.
Loans receivable, net and mortgage loans held for sale together decreased by
$11.9 million to a balance of $1.327 billion at March 31, 2002, compared to a
balance of $1.339 billion at December 31, 2001 as the Bank actively sold 30-year
fixed-rate mortgage loans during the quarter.
Proceeds from the loan sales and the cash flow from mortgage-backed securities
were used to reduce total borrowings (Federal Home Loan Bank advances and
securities sold under agreements to repurchase) which declined by $35.0 million,
to $449.3 million at March 31, 2002 from $484.3 million at December 31, 2001.
The sale of 30-year fixed-rate mortgage loans and the reduction in the total
borrowings reduces the Company's interest rate risk exposure and better
positions the Bank for the higher rate environment expected in the second half
of 2002.
Deposit balances increased $5.0 million to $1.114 billion at March 31, 2002 from
$1.109 billion at December 31, 2001. Although overall deposit growth was modest,
core deposit categories, a key emphasis for the Company, increased by $31.8
million as time deposits declined.
Stockholder's equity at March 31, 2002 decreased to $143.3 million, compared to
$146.7 million at December 31, 2001 due to the first quarter execution of the
Company's ninth stock repurchase program. The Company repurchased 312,600 shares
of common stock during the three months ended March 31, 2002 at a total cost of
$5.9 million. Under the 10% repurchase program authorized by the Board of
Directors July 19, 2001, 471,564 shares remain to be purchased as of March 31,
2002.
Results of Operations
General
Net income increased to $5.0 million for the three months ended March 31, 2002,
as compared to net income of $4.0 million for the three months ended March 31,
2001, while diluted earnings per share increased to $.36 for the three months
ended March 31, 2002, as compared to $.26 for the same prior year period.
Earnings per share is favorably affected by the Company's repurchase program,
which reduced the number of shares outstanding.
Interest Income
Interest income for the three months ended March 31, 2002 was $28.4 million
compared to $29.3 million for the three months ended March 31, 2001. The
decrease in interest income was due to a decline in the yield on
interest-earning assets to 6.82% for the three months ended March 31, 2002, as
compared to 7.54%, for the same prior year period. Despite the decline, which
was reflective of the general interest rate environment, the asset yield still
benefited from the Bank's strong loan growth, which was partly funded by
reductions in the lower-yielding investment and mortgage-backed securities
available for sale portfolios. For the three months ended March 31, 2002 loans
receivable represented 80.7% of average interest-earning assets as compared to
75.4%, for the same prior year period. The decline in the yield on
interest-earning
7
assets was partly offset by an increase in average interest-earning assets of
$112.3 million for the three months ended March 31, 2002, as compared to the
same prior year period.
Interest Expense
Interest expense for the three months ended March 31, 2002 was $12.7 million
compared to $16.6 million for the three months ended March 31, 2001. The
decrease in interest expense was primarily the result of a decrease in the cost
of interest-bearing liabilities to 3.36% for the three months ended March 31,
2002, as compared to 4.70% in the same prior year period. Funding costs were
partly restrained due the Company's focus on lower-costing core deposit growth.
Core deposits (including non-interest-bearing deposits) represented 52.6% of
average deposits for the three months ended March 31, 2002, as compared to
41.8%, for the same prior year period. The decline in funding costs was partly
offset by an increase in average interest-bearing liabilities which rose by
$110.1 million for the three months ended March 31, 2002, as compared to the
same prior year period.
Provision for Loan Losses
For the three months ended March 31, 2002, the Company's provision for loan
losses was $500,000, as compared to $255,000 for the same prior year period. The
increase was due to the deterioration and charge-off during the quarter of the
Bank's one non-performing commercial loan.
Other Income
Other income was $2.4 million for the three months ended March 31, 2002,
compared to $2.8 million for the same prior year period. For the three months
ended March 31, 2002 the Company recorded a gain of $394,000 on the sale of
loans, as compared to a gain of $1.1 million in the same prior year period.
Excluding the respective net gains on the sale of loans, other income increased
by $310,000, or 18.0%, for the three months ended March 31, 2002, as compared to
the same prior year period. Fees and service charges increased due to the growth
in commercial account services, retail core account balances and trust fees.
These gains were partly offset by a $112,000 reduction in loan servicing fee
income due to higher prepayment speeds.
Operating Expenses
Operating expenses were $9.9 million for the three months ended March 31, 2002,
as compared to $9.1 million in the same prior year period. The increase was
principally due to the costs associated with the opening and operation of the
Bank's sixteenth branch office in September 2001, as well as higher loan related
expenses. Compensation expense benefited from the elimination, in February 2002,
of the amortization expense relating to the stock awards granted under the 1997
Incentive Plan, a cost savings of $322,000 for the three months ended March 31,
2002 as compared to the same prior year period. This savings was partly offset
by a $92,000 increase in ESOP expense due to the higher average market price for
OCFC shares during the first quarter of 2002 as compared to the same prior year
quarter.
Provision for Income Taxes
Income tax expense was $2.7 million for the three months ended March 31, 2002
compared to $2.1 for the same prior year period. The effective tax rate was
essentially unchanged at 34.6% for the three months ended March 31, 2002 as
compared to 34.7% for the same prior year period.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, proceeds from the sale of
loans, Federal Home Loan Bank ("FHLB") and other borrowings and, to a lesser
extent, investment maturities. While scheduled amortization of loans is a
predictable source of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Company has other sources of liquidity if a need for additional funds arises,
including an overnight line of credit and advances from the FHLB.
At March 31, 2002, the Company had $31.2 million of outstanding overnight
borrowings from the FHLB, a decrease from $80.0 million at December 31, 2001.
The Company utilizes the overnight line from time to time to fund short-term
liquidity needs. The Company also had other borrowings of $418.1 million at
March 31, 2002, an increase from $404.3 million at December 31, 2001. These
borrowings were used to fund a wholesale leverage strategy designed to improve
returns on invested capital.
8
The Company's cash needs for the three months ended March 31, 2002, were
primarily provided by principal payments on loans and mortgage-backed
securities, maturities of investment securities and proceeds from the sale of
mortgage loans held for sale. The cash was principally utilized for loan
originations, a reduction in total borrowings and the purchase of treasury
stock. For the three months ended March 31, 2001, the cash needs of the Company
were primarily satisfied by principal payments on loans and mortgage-backed
securities, proceeds from the sale of mortgage loans held for sale and increased
deposits and total borrowings. The cash provided was principally used for the
origination of loans and the purchase of treasury stock.
At March 31, 2002, the Bank exceeded all of its regulatory capital requirements
with tangible capital of $124.3 million, or 7.2%, of total adjusted assets,
which is above the required level of $25.8 million or 1.5%; core capital of
$124.3 million or 7.2% of total adjusted assets, which is above the required
level of $51.6 million, or 3.0%; and risk-based capital of $132.4 million, or
12.7% of risk-weighted assets, which is above the required level of $83.3
million or 8.0%. The Bank is considered a "well capitalized" institution under
the Office of Thrift Supervision's prompt corrective action regulations.
Non-Performing Assets
The following table sets forth information regarding the Company's nonperforming
assets consisting of non-accrual loans and Real Estate Owned (REO). It is the
policy of the Company to cease accruing interest on loans 90 days or more past
due or in the process of foreclosure.
March 31, December 31,
2002 2001
----------------- -----------------
(dollars in thousands)
Non-accrual loans:
Real estate:
One-to four-family $ 3,613 $ 3,661
Commercial real estate,
multi-family and land - -
Consumer 165 151
Commercial - 2,368
-------- -------
Total 3,778 6,180
REO, net 181 133
-------- -------
Total non-performing assets $ 3,959 $ 6,313
======== =======
Non-performing loans as a percent of total
loans receivable .28% .46%
Non-performing assets as a percent of total
assets .23 .36
Allowance for loan losses as a percent of
total loans receivable .63 .77
Allowance for loan losses as percent of
total non-performing loans 224.35 167.49
The decrease in non-performing loans is primarily due to the first quarter
charge-off of the Bank's one non-performing commercial loan with an outstanding
balance of $2.4 million. The loan is a participation interest in a $125 million
shared national credit on a company headquartered in New Jersey, and is secured
by corporate assets and various commercial real estate properties. The Bank does
not participate in any other shared national credits. The creditor filed for
bankruptcy protection in March 2002 and an orderly asset liquidation appears
less likely. Any future recovery of principal would increase the Bank's
allowance for loan losses.
Private Securities Litigation Reform Act Safe Harbor Statement
In addition to historical information, this quarterly report may include certain
forward looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal and state tax authorities, changes in interest rates, deposit flows, the
cost of funds, demand for loan products, demand for financial services,
competition, changes in the quality or composition of the
9
Bank's loan and investment portfolios, changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors, and the effects of war or terrorism activities affecting
the Company's operations, markets, products, services and prices. Further
description of the risks and uncertainties to the business are included in Item
1, Business, of the Company's 2001 Form 10-K.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company's interest rate sensitivity is monitored by management through the
use of an interest rate risk (IRR) model. Based on internal IRR modeling the
Company's one year gap at March 31, 2002 was a flat 0.0% as compared to negative
6.7% at December 31, 2001. Additionally, the table below sets forth the
Company's exposure to interest rate risk as measured by the change in net
portfolio value ("NPV") and net interest income under varying rate shocks as of
March 31, 2002 and December 31, 2001. All methods used to measure interest rate
sensitivity involve the use of assumptions, which may tend to oversimplify the
manner in which actual yields and costs respond to changes in market interest
rates. The Company's interest rate sensitivity should be reviewed in conjunction
with the financial statements and notes thereto contained in the Company's
Annual Report for the year ended December 31, 2001.
At March 31, 2002 passbook, NOW and Money Market accounts ("core deposits") were
assumed to decay, or runoff , at 1.75% per month as compared to an assumed decay
rate of 2.78% per month at December 31, 2001. The slower decay rate was partly
responsible for reducing the Company's negative gap, increasing NPV in a static
rate environment and reducing interest rate sensitivity in a shocked interest
rate environment. The increase in core deposits and the decline in time deposits
from December 31, 2001 to March 31, 2002 also contributed to this trend.
Additionally, the results were similarly affected by the Bank's sale of 30-year
fixed-rate mortgage loans during the quarter. The proceeds from these sales were
used to reduce overnight borrowings which declined by $48.8 million from
December 31, 2001 to March 31, 2002.
March 31, 2002 December 31, 2001
------------------------------------------------------- -------------------------------------------------------
Net Portfolio Value Net Interest Income Net Portfolio Value Net Interest Income
------------------------------------------------------------------------- -------------------------------------------------------
Change in
Interest Rates
in Basis Points NPV NPV
(Rate Shock) Amount % Change Ratio Amount % Change Amount % Change Ratio Amount % Change
------------------------------------------------------------------------- -------------------------------------------------------
(dollars in
thousands)
200 $142,173 (18.0)% 8.7% $57,059 (3.1)% $118,006 (22.1)% 7.0% $58,369 (5.3)%
100 161,853 (6.7) 9.6 58,668 (0.4) 141,155 (6.8) 8.2 60,366 (2.1)
Static 173,438 - 10.0 58,900 - 151,507 - 8.6 61,649 -
(100) 171,468 (1.1) 9.7 58,374 (0.9) 154,728 2.1 8.6 62,177 .9
(200) 161,753 (6.7) 9.1 56,058 (4.8) 153,274 1.2 8.4 60,781 (1.4)
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is not engaged in any legal proceedings of a
material nature at the present time. From time to time, the
Company is a party to routine legal proceedings within the
normal course of business. Such routine legal proceedings in
the aggregate are believed by management to be immaterial to
the Company's financial condition or results of operations.
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of stockholders was held on April 18, 2002.
The following directors were elected for terms of three years:
Thomas F. Curtin, John R. Garbarino and Frederick E.
Schlosser. The following proposals were voted on by the
stockholders:
Withheld/ Broker
Proposal For Against Abstain Non-Votes
-------- --- ------- ------- ---------
1) Election of Directors:
Thomas F. Curtin 7,472,000 - 25,542 -
John R. Garbarino 7,470,835 - 26,707 -
Frederick E. Schlosser 7,466,204 - 31,338 -
Withheld/ Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
2) Ratification of KPMG LLP 7,479,953 10,835 6,754 -
as independent auditors for the
Company for the year ending
December 31, 2002.
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
3.1 Certificate of Incorporation of OceanFirst
Financial Corp.*
3.2 Bylaws of OceanFirst Financial Corp.**
4.0 Stock Certificate of OceanFirst Financial Corp.*
b) There were no reports on Form 8-K filed during the three
months ended March 31, 2002.
* Incorporated herein by reference into this document from the Exhibits to
Form S-1, Registration Statement, filed on December 7, 1995, as amended,
Registration No. 33-80123.
** Incorporated herein by reference into this document from the Exhibit to
Form 10-Q, Quarterly Report, filed on August 11, 2000.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OceanFirst Financial Corp.
------------------------------------
Registrant
DATE: May 13, 2002 /s/ John R. Garbarino
-----------------------------------
John R. Garbarino
Chairman of the Board, President
and Chief Executive Officer
DATE: May 13, 2002 /s/ Michael Fitzpatrick
-----------------------------------
Michael Fitzpatrick
Executive Vice President and
Chief Financial Officer
12