<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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.
(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
---------------------------------------- ----------
(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 August 9, 2000, there were 11,559,438 shares of the Registrant's Common
Stock, par value $.01 per share, outstanding.
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<PAGE>
OceanFirst Financial Corp.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
------ --------------------- ----
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
as of June 30, 2000 and December 31, 1999.................. 1
Consolidated Statements of Income for the three and six
months ended June 30, 2000 and 1999........................ 2
Consolidated Statements of Cash Flows for the six
months ended June 30, 2000 and 1999........................ 3
Notes to Consolidated Financial Statements................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 6
Item 3. Quantitative and Qualitative Disclosure about Market Risk.. 9
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
<PAGE>
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and due from banks $ 9,267 $ 10,007
Investment securities available for sale 118,351 120,780
Federal Home Loan Bank of New York
stock, at cost 17,695 16,800
Mortgage-backed securities available for sale 315,310 346,182
Loans receivable, net 1,099,965 1,042,975
Mortgage loans held for sale 8,531 -
Interest and dividends receivable 9,512 8,468
Real estate owned, net 86 292
Premises and equipment, net 14,187 13,889
Other assets 33,947 31,514
----------- -----------
Total assets $ 1,626,851 $ 1,590,907
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 1,087,025 $ 1,056,950
Federal Home Loan Bank advances 98,000 115,000
Securities sold under agreements to repurchase 274,597 239,867
Advances by borrowers for taxes and insurance 6,738 5,990
Other liabilities 5,282 5,570
----------- -----------
Total liabilities 1,471,642 1,423,377
----------- -----------
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,
18,118,248 shares issued and 11,628,372 and 12,620,923 shares
outstanding at June 30, 2000 and December 31, 1999,
respectively 181 181
Additional paid-in capital 179,114 178,850
Retained earnings-substantially restricted 118,014 113,169
Accumulated other comprehensive loss (12,628) (9,568)
Less: Unallocated common stock held by
Employee Stock Ownership Plan (14,941) (15,727)
Unearned Incentive Awards (3,062) (4,030)
Treasury stock, (6,489,876 and 5,497,325 shares
at June 30, 2000 and December 31, 1999, respectively) (111,469) (95,345)
----------- -----------
Total stockholders' equity 155,209 167,530
----------- -----------
Total liabilities and stockholders' equity $ 1,626,851 $ 1,590,907
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months For the six months,
ended June 30, ended June 30,
-------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 20,713 $ 18,439 $ 40,642 $ 36,345
Mortgage-backed securities 5,502 5,967 11,227 11,754
Investment securities and other 2,398 2,167 4,826 4,493
-------- -------- -------- --------
Total interest income 28,613 26,573 56,695 52,592
-------- -------- -------- --------
Interest expense:
Deposits 10,870 10,203 21,322 20,407
Borrowed funds 5,199 4,335 10,193 8,435
-------- -------- -------- --------
Total interest expense 16,069 14,538 31,515 28,842
-------- -------- -------- --------
Net interest income 12,544 12,035 25,180 23,750
Provision for loan losses 250 225 490 450
-------- -------- -------- --------
Net interest income after provision
for loan losses 12,294 11,810 24,690 23,300
-------- -------- -------- --------
Other income:
Fees and service charges 1,125 886 2,113 1,666
Net gain (loss) on sales of loans and
securities available for sale 12 (57) 72 467
Income from other real estate operations, net 82 31 71 77
Other 303 193 596 388
-------- -------- -------- --------
Total other income 1,522 1,053 2,852 2,598
-------- -------- -------- --------
Operating expenses:
Compensation and employee benefits 4,229 3,723 8,559 7,378
Occupancy 556 482 1,138 993
Equipment 367 361 727 665
Marketing 375 415 691 823
Federal deposit insurance 119 215 239 434
Data processing 373 322 765 653
General and administrative 1,192 1,132 2,287 2,296
-------- -------- -------- --------
Total operating expenses 7,211 6,650 14,406 13,242
-------- -------- -------- --------
Income before provision for income taxes 6,605 6,213 13,136 12,656
Provision for income taxes 2,267 2,224 4,486 4,530
-------- -------- -------- --------
Net income $ 4,338 $ 3,989 $ 8,650 $ 8,126
======== ======== ======== ========
Basic earnings per share $ .42 $ .32 $ .82 $ .65
======== ======== ======== ========
Diluted earnings per share $ .41 $ .32 $ .80 $ .65
======== ======== ======== ========
Average basic shares outstanding 10,361 12,279 10,613 12,416
======== ======== ======== ========
Average diluted shares outstanding 10,593 12,481 10,821 12,589
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
--------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,650 $ 8,126
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of premises
and equipment 766 735
Amortization of Incentive Awards 968 968
Amortization of ESOP 786 652
ESOP adjustment 225 377
Amortization of servicing asset 143 210
Amortization of deposit premium 52 52
Net premium amortization in excess of discount
accretion on securities 192 731
Net accretion of deferred fees and discounts
in excess of premium amortization on loans (171) (217)
Provision for loan losses 490 450
Net gain on sales of real estate owned (94) (142)
Net gain on sales of loans and securities available for sale (72) (467)
Proceeds from sales of mortgage loans held for sale 8,963 27,287
Mortgage loans originated for sale (17,422) (12,708)
(Increase) decrease in interest and dividends receivable (1,044) 912
Increase in other assets (831) (508)
Decrease in other liabilities (249) (1,676)
-------- --------
Total adjustments (7,298) 16,656
-------- --------
Net cash provided by operating activities 1,352 24,782
-------- --------
Cash flows from investing activities:
Net increase in loans receivable (57,679) (57,956)
Purchase of investment securities available for sale - (14,160)
Purchase of mortgage-backed securities available for sale - (80,000)
Proceeds from maturities of investment securities
available for sale 200 30,163
Principal payments on mortgage-backed securities
available for sale 28,053 79,351
Purchases of Federal Home Loan Bank of New York Stock (895) --
Proceeds from sales of real estate owned 670 714
Purchases of premises and equipment (1,064) (232)
-------- --------
Net cash used in investing activities (30,715) (42,120)
-------- --------
</TABLE>
Continued
3
<PAGE>
OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(dollars in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
--------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Increase in deposits $ 30,075 $ 9,160
(Decrease) increase in Federal Home Loan Bank advances (17,000) 3,000
Increase in securities sold under agreements
to repurchase 34,730 15,962
Increase in advances by borrowers for taxes and
insurance 748 925
Exercise of Stock Options 292 --
Dividends paid (3,693) (3,488)
Purchase of treasury stock (16,529) (9,235)
-------- --------
Net cash provided by financing activities 28,623 10,324
-------- --------
Net decrease in cash and due from banks (740) (7,014)
Cash and due from banks at beginning of period 10,007 10,295
-------- --------
Cash and due from banks at end of period $ 9,267 $ 3,281
======== ========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest $ 31,418 $ 28,462
Income taxes 4,420 5,123
Noncash investing activities:
Transfer of loans receivable to real estate owned 370 626
Mortgage loans securitized into mortgage-backed
Securities 2,007 27,438
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
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,
OceanFirst Realty Inc. and Ocean Investment Services, Inc.
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 and six months ended
June 30, 2000 are not necessarily indicative of the results of operations that
may be expected for all of 2000.
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, 1999.
Note 2. Earnings per Share
---------------------------
The following reconciles shares outstanding for basic and diluted earnings per
share for the three and six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- ------------------
2000 1999 2000 1999
------ ------ ------ -------
<S> <C> <C> <C> <C>
Weighted average shares issued net of Treasury shares 11,841 14,022 12,134 14,196
Less: Unallocated ESOP shares (1,195) (1,325) (1,211) (1,341)
Unallocated incentive award shares (285) (418) (310) (439)
------ ------ ------ -------
Average basic shares outstanding 10,361 12,279 10,613 12,416
Add: Effect of dilutive securities:
Stock options 144 109 115 80
Incentive awards 88 93 93 93
------ ------ ------ -------
Average diluted shares outstanding 10,593 12,481 10,821 12,589
====== ====== ====== =======
</TABLE>
Note 3. Comprehensive Income
-----------------------------
For the three month periods ended June 30, 2000 and 1999 total comprehensive
income, representing net income plus or minus items previously recorded directly
in equity, such as the change in unrealized gains or losses on securities
available for sale amounted to $3,355,000 and $147,000, respectively. For the
six months ended June 30, 2000 and 1999, total comprehensive income amounted to
$5,590,000 and $4,262,000, respectively.
5
<PAGE>
Note 4. Impact of Recent Accounting Pronouncements
--------------------------------------------------
In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25". The interpretation
clarifies certain issues with respect to the application of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" (APB
Opinion No. 25). The interpretation results in a number of changes in the
application of APB Opinion No. 25 including, the accounting for modifications to
equity awards as well as extending APB Opinion No. 25 accounting treatment to
options granted to outside directors for their services as directors. The
provisions of the interpretation were effective July 1, 2000 and apply
prospectively, except for certain modifications to equity awards made after
December 15, 1998. The initial adoption of the interpretation did not have a
significant impact on the company's financial statements.
Note 5. Loans Receivable, Net
-----------------------------
Loans receivable, net at June 30, 2000 and December 31, 1999 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Real estate:
One- to four-family $ 958,044 $ 917,481
Commercial real estate, multi-
family and land 69,644 57,142
Construction 8,876 7,791
Consumer 60,313 56,040
Commercial 23,334 15,569
----------- -----------
Total loans 1,120,211 1,054,023
Loans in process (3,042) (2,790)
Deferred fees (5) (78)
Unearned premium 33 43
Allowance for loan losses (8,701) (8,223)
----------- -----------
Total loans, net 1,108,496 1,042,975
Less: mortgage loans held for sale 8,531 -
----------- -----------
Loans receivable, net $ 1,099,965 $ 1,042,975
=========== ===========
</TABLE>
Note 6. Deposits
----------------
The major types of deposits at June 30, 2000 and December 31, 1999 were as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Type of Account
---------------
Non-interest bearing $ 42,653 $ 31,328
NOW 121,744 113,426
Money market deposit 76,443 80,597
Savings 171,819 171,064
Time deposits 674,366 660,535
---------- ----------
$1,087,025 $1,056,950
========== ==========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Total assets at June 30, 2000 were $1.627 billion, an increase of $35.9 million,
compared to $1.591 billion at December 31, 1999.
Loans receivable, net, increased by $57.0 million, or 5.5%, to a balance of
$1.100 billion at June 30, 2000, compared to a balance of $1.043 billion at
December 31, 1999. The increase was largely attributable to a $40.6 million
increase in one- to four-family loans, as well as commercial lending (including
commercial real estate) initiatives which accounted for another
6
<PAGE>
$20.3 million of this growth. Deposit balances increased $30.1 million to $1.087
billion at June 30, 2000 from $1.057 billion at December 31, 1999, partly due to
the results of new branches opened in late 1999 and early 2000.
Stockholder's equity at June 30, 2000 decreased to $155.2 million, compared to
$167.5 million at December 31, 1999 due to the execution of the Company's
seventh stock repurchase program. The Company repurchased 1,016,150 shares of
common stock during the first half of 2000 at a total cost of $16.5 million.
Under the 10% repurchase program authorized by the Board of Directors in January
2000, 245,942 shares remain to be purchased as of June 30, 2000.
Results of Operations
General
Net income increased to $4.3 million and $8.6 million for the three and six
months ended June 30, 2000, respectively, as compared to net income of $4.0
million and $8.1 million for the three and six months ended June 30, 1999,
respectively. Diluted earnings per share increased to $.41 and $.80 for the
three and six months ended June 30, 2000, respectively, as compared to $.32 and
$.65 for the same prior year periods. The higher percentage increase in earnings
per share is the result of the Company's repurchase program which reduced the
number of shares outstanding.
Interest Income
Interest income for the three and six months ended June 30, 2000 was $28.6
million and $56.7 million respectively, compared to $26.6 million and $52.6
million for the three and six months ended June 30, 1999, respectively. The
increases in interest income were due to increases in average interest-earning
assets of $24.4 million and $34.6 for the three and six months ended June 30,
2000, respectively, as compared to the same prior year periods. Additionally,
the yield on average interest-earning assets increased to 7.42% and 7.38% on
average for the three and six months ended June 30, 2000, respectively, compared
to 7.00% and 7.01% on average in the same prior year periods. The asset yield
benefited from a change in the mix of average-earning assets towards a higher
concentration of loans receivable partly funded by reductions in lower yielding
investment and mortgage-backed securities. For the three and six months ended
June 30, 2000 loans receivable represented 70.2% and 69.4%, respectively, of
average interest-earning assets as compared to 65.0% and 64.8%, respectively,
for the same prior year periods.
Interest Expense
Interest expense for the three and six months ended June 30, 2000 was $16.1
million and $31.5 million respectively, compared to $14.5 million and $28.8
million for the three and six months ended June 30, 1999, respectively. The
increases in interest expense were primarily the result of increases in the
average cost of interest-bearing liabilities which rose to 4.61% and 4.55%,
respectively, for the three and six months ended June 30, 2000, as compared to
4.34% and 4.36%, respectively, for the same prior year periods, as well as
increases in average interest-bearing liabilities which rose by $54.2 million
and $61.5 million for the three and six months ended June 30, 2000,
respectively, as compared to the same prior year periods. The increase in
funding costs was partly restrained, as compared to the larger increase in asset
yield, due to the Company's focus on lower costing core deposit growth. Core
deposits (including non-interest-bearing deposits) represented 38.0 % and 37.8%
of average deposits for the three and six months ended June 30, 2000,
respectively, as compared to 36.9% and 36.6%, respectively, for the same prior
year periods.
Provision for Loan Losses
For the three and six months ended June 30, 2000, the Company's provision for
loan losses was $250,000 and $490,000, respectively, as compared to $225,000 and
$450,000, respectively, for the same prior year periods. While the Company
realized substantial loan growth over the past year, especially in the area of
higher risk commercial loans, the provision for loan losses rose only modestly
due to a decline in non-performing assets which decreased to $3.1 million at
June 30, 2000 as compared to $4.9 million at June 30, 1999.
Other Income
Other income was $1.5 million and $2.9 million for the three and six months
ended June 30, 2000, respectively, compared to $1.1 million and $2.6 million,
respectively, for the same prior year periods. The Company sold $27.4 million
of 30-year fixed-rate loans for the six months ended June 30, 1999 at a gain of
$516,000, which completed a balance sheet restructuring begun in the fourth
quarter of 1998. For the six months ended June 30, 2000 the Company sold $9.0
million of 30-year fixed-rate loans at a gain of $72,000. The Company
periodically sells these loans to assist in the management of interest rate
risk. For the three and six months ended June 30, 1999 the Company also
recorded a loss of $49,000 on the sale of an
7
<PAGE>
investment security. Excluding the respective net gains on the sale of loans and
securities, other income increased by $400,000, or 36.0%, and $649,000 or 30.5%,
for the three and six months ended June 30, 2000, respectively, as compared to
the same prior year periods. Fees and service charges increased due to the
growth in commercial account services and retail core account balances. The
Company continues to focus on growing non-interest revenue with the recent
introduction of Trust and Asset Management services.
Operating Expenses
Operating expenses were $7.2 million and $14.4 million, respectively, for the
three and six months ended June 30, 2000, as compared to $6.7 million and $13.2
million, respectively, in the same prior year periods. The increases were
principally due to the costs associated with the opening of the Bank's twelfth
and thirteenth branch offices in September and October 1999 and the Bank's
fourteenth branch office in May 2000, and the introduction of the Company's
Trust and Asset Management business line. These increases were partly offset by
decreases of $96,000 and $195,000 for the three and six months ended June 30,
2000, respectively, as compared to the same prior year periods in federal
deposit insurance due to a decline in the assessment rate.
Provision for Income Taxes
Income tax expense was $2.3 million and $4.5 million for the three and six
months ended June 30, 2000, respectively, compared to $2.2 million and $4.5
million for the same prior year periods. The effective tax rate declined for
the three and six months ended June 30, 2000, as compared for the same prior
year periods partly due to an increase in the nontaxable income from Bank Owned
Life Insurance.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, Federal Home Loan Bank
("FHLB") and other borrowings and, to a lesser extent, investment maturities and
proceeds from the sale of loans. 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 June 30, 2000, the Company had $43.0 million of outstanding overnight
borrowings from the FHLB, an increase from no overnight borrowings at December
31, 1999. The Company utilizes the overnight line from time to time to fund
short-term liquidity needs. The Company also had other borrowings of $329.6
million at June 30, 2000, a decrease from $354.9 million at December 31, 1999.
These borrowings were used to fund a wholesale leverage strategy designed to
improve returns on invested capital.
The Company's cash needs for the six months ended June 30, 2000, were primarily
provided by principal payments on loans and mortgage-backed securities,
increased deposits and increased total borrowings. The cash was principally
utilized for loan originations and the purchase of treasury stock. For the six
months ended June 30, 1999, the cash needs of the Company were primarily
satisfied by maturities of investment securities available for sale, principal
payments on loans and mortgage-backed securities, proceeds from the sale of
mortgage loans held for sale and increased total borrowings. The cash provided
was principally used for the purchase of investment and mortgage-backed
securities, the origination of loans and the purchase of treasury stock.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon
economic conditions and savings flows and is currently 4% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less during
the preceding calendar month. Liquid assets for purposes of this ratio include
cash, accrued interest receivable, certain time deposits, U.S. Treasury and
Government agencies and other securities and obligations generally having
remaining maturities of less than five years. The levels of these assets are
dependent on the Bank's operating, financing, lending and investing activities
during any given period. As of June 30, 2000 and December 31, 1999, the Bank's
liquidity ratios were 7.4% and 8.9%, respectively, both in excess of the minimum
regulatory requirement.
At June 30, 2000, the Bank exceeded all of its regulatory capital requirements
with tangible capital of $129.8 million, or 7.9%, of total adjusted assets,
which is above the required level of $24.6 million or 1.5%; core capital of
$129.8 million or 7.9% of total adjusted assets, which is above the required
level of $49.1 million, or 3.0%; and risk-based capital of $138.4 million, or
15.7% of risk-weighted assets, which is above the required level of $70.4
million or 8.0%. The Bank is considered a "well capitalized" institution under
the Office of Thrift Supervision's prompt corrective action regulations.
8
<PAGE>
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). The Company
had no troubled-debt restructured loans within the meaning of SFAS 15 at June
30, 2000 or December 31, 1999. 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.
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------- -------
(dollars in thousands)
<S> <C> <C>
Non-accrual loans:
Real estate:
One-to four-family $ 2,847 $ 2,401
Commercial real estate,
multi-family and land - 362
Consumer 141 222
------- -------
Total 2,988 2,985
REO, net 86 292
------- -------
Total non-performing assets $ 3,074 $ 3,277
======= =======
Non-performing loans as a percent of total
loans receivable .27% .28%
Non-performing assets as a percent of total
assets .19 .21
Allowance for loan losses as a percent of
total loans receivable .78 .78
Allowance for loan losses as percent of
total non-performing loans 291.20 275.48
</TABLE>
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 Bank's loan and
investment portfolios, changes in accounting principles, policies or guidelines,
and other economic, competitive, governmental and technological factors
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 1999 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 June 30, 2000 was negative 16.3% as compared to
negative 11.8% at December 31, 1999. 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
June 30, 2000 and December 31, 1999. 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, 1999.
At June 30, 2000, the Company's NPV in a static rate environment is less than
the NPV at December 31, 1999, reflecting the Company's declining capital levels
resulting from common stock repurchase programs. Also, in a shocked interest
rate environment, the Company projects a greater percent change in NPV at June
30, 2000 than was the case at December 31, 1999. The heightened interest rate
sensitivity is primarily due to the declining capital base which accentuates, on
a
9
<PAGE>
percentage basis, similar dollar changes in NPV. Additionally, the generally
higher interest rate environment reduces anticipated prepayment speeds on
mortgage loans and mortgage-backed securities and reduces the likelihood that a
callable security is called before its stated maturity date.
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------------------------------- ----------------------------------------------------
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
-------------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(dollars in
thousands)
300 $ 94,459 (46.6)% 6.6% $38,406 (15.6)% $119,838 (40.0)% 8.4% $44,212 (9.3)%
200 127,403 (28.0) 8.6 41,095 (9.7) 151,710 (24.0) 10.3 46,123 (5.3)
100 155,857 (11.9) 10.2 43,596 (4.2) 179,446 (10.1) 11.8 47,765 (2.0)
Static 176,913 - 11.2 45,496 - 199,646 - 12.8 48,724 -
(100) 192,233 8.7 11.9 46,975 3.3 213,252 6.8 13.3 49,251 1.1
(200) 197,913 11.9 12.0 47,834 5.1 217,678 9.0 13.4 48,927 1.4
(300) 197,222 11.5 11.8 48,105 5.7 216,809 8.6 13.2 47,865 (1.8)
</TABLE>
10
<PAGE>
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
---------------------------------------------------
Not Applicable
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.*
27 Financial Data Schedule (filed herewith)
b) The Company filed a Form 8-K on June 28, 2000 announcing that
OceanFirst Bank, the wholly-owned subsidiary of OceanFirst
Financial Corp., had entered into a Stock Purchase Agreement
pursuant to which OceanFirst Bank would acquire Columbia Equities,
Ltd., a New York chartered mortgage brokerage company based in
Tarrytown, New York.
* 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.
11
<PAGE>
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: August 11, 2000 /s/ John R. Garbarino
------------------------------------------
John R. Garbarino
Chairman of the Board, President
and Chief Executive Officer
DATE: August 11, 2000 /s/ Michael Fitzpatrick
------------------------------------------
Michael Fitzpatrick
Executive Vice President and
Chief Financial Officer
12
