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 March 31,September 30, 2003

 

¨

o

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)

Delaware22-3412577

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
incorporation or organization)

(I.R.S. Employer Identification No.)

975 Hooper Avenue, Toms River, NJ

08754-2009



(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)

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  ¨.

YES  x

NO  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  YES  x  NO  ¨.

YES  x

NO  o

As of May 8,November 7, 2003, there were 13,756,34813,403,383 shares of the Registrant’s Common Stock, par value $.01 per share, outstanding.



OceanFirst Financial Corp.

INDEX TO FORM 10-Q

PAGE



PART I.I.

FINANCIAL INFORMATION

Item1.

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition as of March 31,September 30, 2003 and December 31, 2002

1

Consolidated Statements of Income for the three and nine months ended March 31,September 30, 2003 and 2002

2

Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2003 and 20023
Consolidated Statements of Cash Flows for the threenine months ended March 31,September 30, 2003 and 2002

3

4

Notes to Unaudited Consolidated Financial Statements

5

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

7

8

Item 3.

Quantitative and Qualitative Disclosure aboutDisclosures About Market Risk

10

13

Item 4.

Controls and Procedures

11

13

Part II.

OTHER INFORMATION

Item 1.

Legal Proceedings

12

15

Item 2.

Changes in Securities and Use of Proceeds

12

15

Item 3.

DefaultDefaults Upon Senior Securities

12

15

Item 4.

Submission of Matters to a Vote of Security Holders

12

15

Item 5.

Other Information

12

15

Item 6.

Exhibits and Reports on Form 8-K

12

15

Signatures

14

Certifications

15

16


OceanFirst Financial Corp.

wOceanFirst Financial Corp.
Consolidated Statements of Financial Condition

(dollars in thousands, except per share amounts)

 

 

March 31,
2003

 

December 31,
2002

 

 

 


 


 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

35,104

 

$

17,192

 

Investment securities available for sale

 

 

77,823

 

 

91,978

 

Federal Home Loan Bank of New York stock, at cost

 

 

19,850

 

 

18,700

 

Mortgage-backed securities available for sale

 

 

142,587

 

 

138,657

 

Loans receivable, net

 

 

1,336,696

 

 

1,335,898

 

Mortgage loans held for sale

 

 

57,211

 

 

66,626

 

Interest and dividends receivable

 

 

6,572

 

 

6,378

 

Real estate owned, net

 

 

—  

 

 

141

 

Premises and equipment, net

 

 

17,320

 

 

17,708

 

Servicing asset

 

 

7,328

 

 

7,907

 

Bank Owned Life Insurance

 

 

32,818

 

 

32,398

 

Other assets

 

 

11,628

 

 

10,115

 

 

 



 



 

Total assets

 

$

1,744,937

 

$

1,743,698

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

$

1,151,882

 

$

1,184,836

 

Securities sold under agreements to repurchase with retail customers

 

 

52,870

 

 

44,584

 

Securities sold under agreements to repurchase with the Federal Home Loan Bank

 

 

115,000

 

 

140,000

 

Federal Home Loan Bank advances

 

 

269,500

 

 

214,000

 

Advances by borrowers for taxes and insurance

 

 

6,789

 

 

5,952

 

Other liabilities

 

 

13,524

 

 

19,021

 

 

 



 



 

Total liabilities

 

 

1,609,565

 

 

1,608,393

 

 

 



 



 

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 13,777,942 and 13,757,880 shares outstanding at March 31, 2003 and December 31, 2002, respectively

 

 

272

 

 

272

 

Additional paid-in capital

 

 

186,740

 

 

184,934

 

Retained earnings

 

 

144,067

 

 

142,224

 

Accumulated other comprehensive loss

 

 

(4,429

)

 

(3,201

)

Less:

Unallocated common stock held by Employee Stock Ownership Plan (ESOP)

 

 

(10,913

)

 

(11,248

)

 

Treasury stock, 13,399,430 and 13,419,492 shares at March 31, 2003 and December 31, 2002, respectively

 

 

(180,365

)

 

(177,676

)

 

 



 



 

 

Total stockholders’ equity

 

 

135,372

 

 

135,305

 

 

 



 



 

 

Total liabilities and stockholders’ equity

 

$

1,744,937

 

$

1,743,698

 

 

 



 



 

   

September 30,

2003


  

December 31,

2002


 
  ��(Unaudited)    

ASSETS

         

Cash and due from banks

  $42,117  $17,192 

Investment securities available for sale

   79,322   91,978 

Federal Home Loan Bank of New York stock, at cost

   19,950   18,700 

Mortgage-backed securities available for sale

   102,361   138,657 

Loans receivable, net

   1,351,866   1,335,898 

Mortgage loans held for sale

   83,671   66,626 

Interest and dividends receivable

   6,598   6,378 

Real estate owned, net

   264   141 

Premises and equipment, net

   16,867   17,708 

Servicing asset

   7,121   7,907 

Bank Owned Life Insurance

   33,573   32,398 

Other assets

   10,884   10,115 
   


 


Total assets

  $1,754,594  $1,743,698 
   


 


LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Liabilities:

         

Deposits

  $1,164,745  $1,184,836 

Securities sold under agreements to repurchase with retail customers

   52,242   44,584 

Securities sold under agreements to repurchase with the Federal Home Loan Bank

   100,000   140,000 

Federal Home Loan Bank advances

   283,500   214,000 

Advances by borrowers for taxes and insurance

   6,741   5,952 

Other liabilities

   14,542   19,021 
   


 


Total liabilities

   1,621,770   1,608,393 
   


 


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 13,418,183 and 13,757,880 shares outstanding at September 30, 2003 and December 31, 2002, respectively

   272   272 

Additional paid-in capital

   188,526   184,934 

Retained earnings

   149,014   142,224 

Accumulated other comprehensive loss

   (4,236)  (3,201)

Less: Unallocated common stock held by Employee Stock Ownership Plan (ESOP)

   (10,245)  (11,248)

Treasury stock, 13,759,189 and 13,419,492 shares at September 30, 2003 and December 31, 2002, respectively

   (190,507)  (177,676)

Total stockholders’ equity

   132,824   135,305 
   


 


Total liabilities and stockholders’ equity

  $1,754,594  $1,743,698 
   


 


See accompanying Notes to Unaudited Consolidated Financial Statements.

1


OceanFirst Financial Corp.

Consolidated Statements of Income

(in thousands, except per share amounts)

 

 

For the three months
ended March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

 

 

(Unaudited)

 

 

 

 

Interest income:

 

 

 

 

 

 

 

Loans

 

$

22,746

 

$

23,856

 

Mortgage-backed securities

 

 

1,436

 

 

3,098

 

Investment securities and other

 

 

1,246

 

 

1,460

 

 

 



 



 

Total interest income

 

 

25,428

 

 

28,414

 

 

 



 



 

Interest expense:

 

 

 

 

 

 

 

Deposits

 

 

5,233

 

 

7,385

 

Borrowed funds

 

 

4,808

 

 

5,361

 

 

 



 



 

Total interest expense

 

 

10,041

 

 

12,746

 

 

 



 



 

Net interest income

 

 

15,387

 

 

15,668

 

Provision for loan losses

 

 

375

 

 

500

 

 

 



 



 

Net interest income after provision for loan losses

 

 

15,012

 

 

15,168

 

 

 



 



 

Other income:

 

 

 

 

 

 

 

Loan servicing (loss) income

 

 

(1,190

)

 

41

 

Fees and service charges

 

 

1,824

 

 

1,437

 

Net gain on sales of loans and securities available for sale

 

 

2,505

 

 

394

 

Net income from other real estate operations

 

 

110

 

 

19

 

Income on Bank Owned Life Insurance

 

 

420

 

 

524

 

Other

 

 

11

 

 

10

 

 

 



 



 

Total other income

 

 

3,680

 

 

2,425

 

 

 



 



 

Operating expenses:

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

5,093

 

 

5,262

 

Occupancy

 

 

937

 

 

792

 

Equipment

 

 

591

 

 

543

 

Marketing

 

 

421

 

 

424

 

Federal deposit insurance

 

 

93

 

 

126

 

Data processing

 

 

715

 

 

588

 

General and administrative

 

 

2,766

 

 

2,143

 

 

 



 



 

Total operating expense

 

 

10,616

 

 

9,878

 

 

 



 



 

Income before provision for income taxes

 

 

8,076

 

 

7,715

 

Provision for income taxes

 

 

2,827

 

 

2,666

 

 

 



 



 

Net income

 

$

5,249

 

$

5,049

 

 

 



 



 

Basic earnings per share

 

$

0.42

 

$

0.38

 

 

 



 



 

Diluted earnings per share

 

$

0.40

 

$

0.36

 

 

 



 



 

Average basic shares outstanding

 

 

12,442

 

 

13,182

 

 

 



 



 

Average diluted shares outstanding

 

 

13,210

 

 

13,895

 

 

 



 



 

   

For the three months

ended September 30


  

For the nine months

ended September 30,


 
   2003

  2002

  2003

  2002

 
   (Unaudited)  (Unaudited) 

Interest income:

                 

Loans

  $21,159  $23,993  $66,058  $71,222 

Mortgage-backed securities

   819   2,353   3,641   8,058 

Investment securities and other

   721   925   2,742   3,273 
   


 


 


 


Total interest income

   22,699   27,271   72,441   82,553 
   


 


 


 


Interest expense:

                 

Deposits

   3,886   6,784   13,557   21,426 

Borrowed funds

   5,018   4,915   14,801   15,225 
   


 


 


 


Total interest expense

   8,904   11,699   28,358   36,651 
   


 


 


 


Net interest income

   13,795   15,572   44,083   45,902 

Provision for loan losses

   48   375   673   1,250 
   


 


 


 


Net interest income after provision for loan losses

   13,747   15,197   43,410   44,652 
   


 


 


 


Other income:

                 

Loan servicing loss

   (71)  (2,047)  (2,758)  (2,091)

Fees and service charges

   1,990   1,676   5,855   4,669 

Net gain on sales of loans and securities available for sale

   3,335   1,258   8,737   2,766 

Net (loss) income from other real estate operations

   (3)  (7)  106   67 

Other

   383   460   1,201   1,460 
   


 


 


 


Total other income

   5,634   1,340   13,141   6,871 
   


 


 


 


Operating expenses:

                 

Compensation and employee benefits

   5,699   5,107   15,819   15,365 

Occupancy

   852   848   2,663   2,438 

Equipment

   633   561   1,809   1,679 

Marketing

   369   583   1,338   1,439 

Federal deposit insurance

   126   113   360   364 

Data processing

   702   595   2,234   1,908 

General and administrative

   2,676   2,092   8,265   6,393 
   


 


 


 


Total operating expenses

   11,057   9,899   32,488   29,586 
   


 


 


 


Income before provision for income taxes

   8,324   6,638   24,063   21,937 

Provision for income taxes

   2,994   1,848   8,538   6,962 
   


 


 


 


Net income

  $5,330  $4,790  $15,525  $14,975 
   


 


 


 


Basic earnings per share

  $0.43  $0.38  $1.25  $1.16 
   


 


 


 


Diluted earnings per share

  $0.41  $0.35  $1.19  $1.08 
   


 


 


 


Average basic shares outstanding

   12,293   12,719   12,384   12,938 
   


 


 


 


Average diluted shares outstanding

   13,072   13,666   13,080   13,822 
   


 


 


 


See accompanying Notes to Unaudited Consolidated Financial Statements.

2


OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

 

 

For the three months
ended March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

 

 

(Unaudited)

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

5,249

 

$

5,049

 

 

 



 



 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of premises and equipment

 

 

553

 

 

475

 

Amortization of Incentive Awards

 

 

—  

 

 

161

 

Amortization of ESOP

 

 

334

 

 

354

 

ESOP adjustment

 

 

527

 

 

395

 

Amortization and impairment of servicing asset

 

 

1,772

 

 

462

 

Amortization of intangible assets

 

 

26

 

 

26

 

Net premium amortization in excess of discount accretion on securities

 

 

224

 

 

321

 

Net (accretion) amortization of deferred fees and discounts on loans

 

 

(268

)

 

1

 

Provision for loan losses

 

 

375

 

 

500

 

Net gain on sales of real estate owned

 

 

(114

)

 

(23

)

Net gain on sales of loans and securities

 

 

(2,505

)

 

(394

)

Proceeds from sales of mortgage loans held for sale

 

 

149,411

 

 

127,543

 

Mortgage loans originated for sale

 

 

(139,007

)

 

(162,794

)

Increase in value of Bank Owned Life Insurance

 

 

(420

)

 

(524

)

Increase in interest and dividends receivable

 

 

(194

)

 

(434

)

Increase in other assets

 

 

(701

)

 

(891

)

Decrease in other liabilities

 

 

(4,217

)

 

(7,290

)

 

 



 



 

Total adjustments

 

 

5,796

 

 

(42,112

)

 

 



 



 

Net cash provided by (used in) operating activities

 

 

11,045

 

 

(37,063

)

 

 



 



 

Cash flows from investing activities:

 

 

 

 

 

 

 

Net (decrease) increase in loans receivable

 

 

(905

)

 

46,951

 

Proceeds from sale of investment securities available for sale

 

 

1,273

 

 

—  

 

Purchase of investment securities available for sale

 

 

(1,332

)

 

(600

)

Purchase of mortgage-backed securities available for sale

 

 

(50,392

)

 

—  

 

Proceeds from maturities of investment securities available for sale

 

 

13,171

 

 

—  

 

Principal payments on mortgage-backed securities available for sale

 

 

45,538

 

 

32,266

 

Increase in Federal Home Loan Bank of New York stock

 

 

(1,150

)

 

(325

)

Proceeds from sales of real estate owned

 

 

255

 

 

72

 

Purchases of premises and equipment

 

 

(165

)

 

(1,361

)

 

 



 



 

Net cash provided by investing activities

 

 

6,293

 

 

77,003

 

 

 



 



 

Continued

3


OceanFirst Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)
(dollars in thousands)

 

 

For the three months
ended March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

 

 

(Unaudited)

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

(Decrease) increase in deposits

 

$

(32,954

)

$

4,987

 

Increase (decrease) in short-term borrowings

 

 

18,786

 

 

(45,005

)

Proceeds from Federal Home Loan Bank advances

 

 

20,000

 

 

25,000

 

Repayments of Federal Home Loan Bank advances

 

 

—  

 

 

(15,000

)

Increase in advances by borrowers for taxes and insurance

 

 

837

 

 

133

 

Exercise of stock options

 

 

2,903

 

 

246

 

Dividends paid

 

 

(2,247

)

 

(2,129

)

Purchase of treasury stock

 

 

(6,751

)

 

(5,881

)

 

 



 



 

Net cash provided by (used in) financing activities

 

 

574

 

 

(37,649

)

 

 



 



 

Net increase in cash and due from banks

 

 

17,912

 

 

2,291

 

Cash and due from banks at beginning of period

 

 

17,192

 

 

16,876

 

 

 



 



 

Cash and due from banks at end of period

 

$

35,104

 

$

19,167

 

 

 



 



 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

9,979

 

$

12,960

 

Income taxes

 

 

7,654

 

 

2,353

 

Noncash investing activities:

 

 

 

 

 

 

 

Transfer of loans receivable to real estate owned

 

 

—  

 

 

97

 

Mortgage loans securitized into mortgage-backed securities

 

 

28,520

 

 

47,624

 

 

 



 



 

See accompanying notes to unaudited consolidated financial statements.

4


OceanFirst Financial Corp.

Consolidated Statements of

Changes in Stockholders’ Equity (Unaudited)

(in thousands, except per share amounts)

   Common
Stock


  

Additional

Paid-In

Capital


  Retained
Earnings


  

Accumulated

Other
Comprehensive
Loss


  

Employee

Stock

Ownership

Plan


  Unearned
Incentive
Awards


  

Treasury

Stock


   Total

 

Balance at December 31, 2001

  $272  $181,780  $131,655  $(824) $(12,663) $(161) $(153,330)  $146,729 
                                


Comprehensive income:

                                  

Net income

   —     —     14,975   —     —     —     —      14,975 

Other comprehensive loss:

                                  

Unrealized loss on securities (net of tax benefit $630)

   —     —     —     (1,073)  —     —     —      (1,073)
                                


Total comprehensive income

                                13,902 
                                


Earned Incentive Awards

   —     —     —     —     —     161   —      161 

Tax benefit of stock plans

   —     558   —     —     —     —     —      558 

Purchase 940,050 shares of common stock

   —     —     —     —     —     —     (19,885)   (19,885)

Allocation of ESOP stock

   —     —     —     —     1,062   —     —      1,062 

ESOP adjustment

   —     1,514   —     —     —     —     —      1,514 

Cash dividend – $.51 per share

   —     —     (6,679)  —     —     —     —      (6,679)

Exercise of stock options

   —     —     (155)  —     —     —     924    769 
   

  

  


 


 


 


 


  


Balance at September 30, 2002

  $272  $183,852  $139,796  $(1,897) $(11,601) $—    $(172,291)  $138,131 
   

  

  


 


 


 


 


  


Balance at December 31, 2002

  $272  $184,934  $142,224  $(3,201) $(11,248) $   $(177,676)  $135,305 
                                


Comprehensive income:

                                  

Net income

   —     —     15,525   —     —     —     —      15,525 

Other comprehensive loss:

                                  

Unrealized loss on securities (net of tax benefit $847)

   —     —     —     (1,245)  —     —     —      (1,245)

Reclassification adjustment for gains included in net income (net of tax expense $113)

   —     —     —     210   —     —     —      210 
                                


Total comprehensive income

                                14,490 

Tax benefit of stock plans

   —     1,821   —     —     —     —     —      1,821 

Purchase 771,713 shares of common stock

   —     —     —     —     —     —     (18,062)   (18,062)

Allocation of ESOP stock

   —     —     —     —     1,003   —     —      1,003 

ESOP adjustment

   —     1,771   —     —     —     —     —      1,771 

Cash dividend – $.58 per share

   —     —     (7,199)  —     —     —     —      (7,199)

Exercise of stock options

   —       —     (1,536)  —     —     —     5,231    3,695 
   

  

  


 


 


 


 


  


Balance at September 30, 2003

  $272  $188,526  $149,014  $(4,236) $(10,245) $—    $(190,507)  $132,824 
   

  

  


 


 


 


 


  


See accompanying Notes to Unaudited Consolidated Financial Statements.

3


OceanFirst Financial Corp.

Consolidated Statements of Cash Flows

(dollars in thousands)

   For the nine months ended
September 30,


 
   2003

  2002

 
   (Unaudited) 

Cash flows from operating activities:

         

Net income

  $15,525  $14,975 
   


 


Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization of premises and equipment

   1,596   1,501 

Amortization of Incentive Awards

   —     161 

Amortization of ESOP

   1,003   1,062 

ESOP adjustment

   1,771   1,514 

Amortization and impairment of servicing asset

   4,529   3,715 

Amortization of intangible assets

   79   79 

Net premium amortization in excess of discount accretion on securities

   986   948 

Net accretion of deferred fees and discounts on loans

   (270)  (330)

Provision for loan losses

   673   1,250 

Net gain on sales of real estate owned

   (114)  (81)

Net gain on sales of loans and securities

   (8,737)  (2,766)

Proceeds from sales of mortgage loans held for sale

   477,990   364,647 

Mortgage loans originated for sale

   (490,364)  (356,324)

Increase in value of Bank Owned Life Insurance

   (1,175)  (1,424)

Increase in interest and dividends receivable

   (220)  (249)

Increase in other assets

   (143)  (3,820)

Decrease in other liabilities

   (2,658)  (1,932)
   


 


Total adjustments

   (15,054)  7,951 
   


 


Net cash provided by operating activities

   471   22,926 
   


 


Cash flows from investing activities:

         

Net increase in loans receivable

   (16,635)  (635)

Proceeds from sale of investment securities available for sale

   1,273   —   

Purchase of investment securities available for sale

   (2,330)  (600)

Purchase of mortgage-backed securities available for sale

   (70,581)  (30,165)

Proceeds from maturities of investment securities available for sale

   14,171   —   

Principal payments on mortgage-backed securities available for sale

   104,016   81,114 

(Increase) decrease in Federal Home Loan Bank of New York stock

   (1,250)  5,120 

Proceeds from sales of real estate owned

   255   472 

Purchases of premises and equipment

   (755)  (2,620)
   


 


Net cash provided by investing activities

   28,164   52,686 
   


 


Continued

4


OceanFirst Financial Corp.

Consolidated Statements of Cash Flows (Continued)

(dollars in thousands)

   

For the nine months

ended September 30,


 
   2003

  2002

 
   (Unaudited) 

Cash flows from financing activities:

         

(Decrease) increase in deposits

  $(20,091) $61,006 

Increase (decrease) in short-term borrowings

   30,158   (71,132)

Proceeds from Federal Home Loan Bank advances

   55,000   25,000 

Repayments of Federal Home Loan Bank advances

   (48,000)  (43,000)

Increase (decrease) in advances by borrowers for taxes and insurance

   789   (3,706)

Exercise of stock options

   3,695   769 

Dividends paid

   (7,199)  (6,679)

Purchase of treasury stock

   (18,062)  (19,885)
   


 


Net cash used in financing activities

   (3,710)  (57,627)
   


 


Net increase in cash and due from banks

   24,925   17,985 

Cash and due from banks at beginning of period

   17,192   16,876 
   


 


Cash and due from banks at end of period

  $42,117  $34,861 
   


 


Supplemental Disclosure of Cash Flow Information:

         

Cash paid during the period for:

         

Interest

  $28,527  $37,213 

Income taxes

   8,003   2,803 

Noncash investing activities:

         

Transfer of loans receivable to real estate owned

   264   617 

Mortgage loans securitized into mortgage-backed securities

   40,931   96,275 
   


 


See accompanying Notes to Unaudited Consolidated Financial Statements.

5


OceanFirst Financial Corp.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

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 OceanFirst Services, LLC.LLC and its wholly-owned subsidiary OFB Re-Insurance, Ltd.

 

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 nine months ended March 31,September 30, 2003 are not necessarily indicative of the results of operations that may be expected for all of 2003.

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, 2002.

Stock BasedStock-Based Compensation

The Company accounts for stock basedstock-based compensation using the intrinsic value method under Accounting Principles Board No. 25 and accordingly has recognized no compensation expense under this method. Statement of Financial Accounting Standards No. 123, Accounting“Accounting for Stock-based CompensationCompensation” as amended by Statement of Financial Accounting Standards No. 148, Accounting“Accounting for Stock-based Compensation-Transition and Disclosure,Disclosure”, permits the use of the intrinsic value method; however, the amended statement requires the Company to disclose the pro forma net income and earnings per share as if the stock-based compensation had been accounted for using the fair value method. Had the compensation costs for the Company’s stock option plan been determined based on the fair value method, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):

 

 

Three months ended
March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

Net income - as reported

 

$

5,249

 

$

5,049

 

 

 



 



 

Stock based employee compensation expense included in reported net income, all relating to earned incentive awards, net of related tax effects

 

 

—  

 

 

105

 

Total stock-based employee compensation expense determined under the fair value based method, including earned incentive awards and stock option grants, net of related tax effects

 

 

(93

)

 

(199

)

 

 



 



 

Net stock based employee compensation expense not included in reported net income, all relating to stock option grants, net of related tax effects

 

 

(93

)

 

(94

)

 

 



 



 

Net income - pro forma

 

$

5,156

 

$

4,955

 

 

 



 



 

Basic earnings per share:

 

 

 

 

 

 

 

As reported

 

$

.42

 

$

.38

 

 

 



 



 

Pro forma

 

$

.41

 

$

.38

 

 

 



 



 

Diluted earnings per share:

 

 

 

 

 

 

 

As reported

 

$

.40

 

$

.36

 

 

 



 



 

Pro forma

 

$

.39

 

$

.36

 

 

 



 



 

5

   Three months ended
September 30,


  Nine months ended
September 30,


 
   2003

  2002

  2003

  2002

 

Net income – as reported

  $5,330  $4,790  $15,525  $14,975 
   


 


 


 


Stock-based employee compensation expense included in reported net income, all relating to earned incentive awards, net of related tax effects

   —     —     —     105 

Total stock-based employee compensation expense determined under the fair value based method, including earned incentive awards and stock option grants, net of related tax effects

   (138)  (116)  (336)  (430)
   


 


 


 


Net stock-based employee compensation expense not included in reported net income, all relating to stock option grants, net of related tax effects

   (138)  (116)  (336)  (325)
   


 


 


 


Net income – pro forma

  $5,192  $4,674  $15,189  $14,650 
   


 


 


 


Basic earnings per share:

                 

As reported

  $.43  $.38  $1.25  $1.16 
   


 


 


 


Pro forma

  $.42  $.37  $1.23  $1.13 
   


 


 


 


Diluted earnings per share:

                 

As reported

  $.41  $.35  $1.19  $1.08 
   


 


 


 


Pro forma

  $.40  $.34  $1.16  $1.06 
   


 


 


 


6


Earnings per Share

The following reconciles shares outstanding for basic and diluted earnings per share for the three and nine months ended March 31,September 30, 2003 and 2002 (in thousands):

 

 

Three months ended
March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

Weighted average shares issued net of Treasury shares

 

 

13,801

 

 

14,740

 

Less:

Unallocated ESOP shares

 

 

(1,314

)

 

(1,481

)

 

Unallocated incentive award shares

 

 

(45

)

 

(78

)

 

 



 



 

Average basic shares outstanding

 

 

12,442

 

 

13,181

 

Add:

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Stock options

 

 

732

 

 

648

 

 

Incentive awards

 

 

36

 

 

65

 

 

 



 



 

Average diluted shares outstanding

 

 

13,210

 

 

13,894

 

 

 



 



 

   Three months ended
September 30,


  Nine months ended
September 30,


 
   2003

  2002

  2003

  2002

 

Weighted average shares issued net of Treasury shares

  13,566  14,169  13,699  14,451 

Less: Unallocated ESOP shares

  (1,235) (1,397) (1,275) (1,438)

Unallocated incentive award shares

  (38) (53) (40) (75)
   

 

 

 

Average basic shares outstanding

  12,293  12,719  12,384  12,938 

Add: Effect of dilutive securities:

             

Stock options

  749  905  664  824 

Incentive awards

  30  42  32  60 
   

 

 

 

Average diluted shares outstanding

  13,072  13,666  13,080  13,822 
   

 

 

 

Comprehensive Income

For the three month periods ended March 31,September 30, 2003 and 2002, 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 $4,021,000$5,236,000 and $2,862,000,$3,909,000, respectively. For the nine months ended September 30, 2003 and 2002, total comprehensive income amounted to $14,490,000 and $13,902,000, respectively.

Impact of Recent Accounting Pronouncements

Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” was issued in May 2003. Statement 150 requires instruments within its scope to be classified as a liability (or, in some cases, as an asset). Statement 150 is generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 (i.e., July 1, 2003 for calendar year entities). For financial instruments created before June 1, 2003 and still existing at the beginning of the interim period of adoption, transition generally should be applied by reporting the cumulative effect of a change in an accounting principle by initially measuring the financial instruments at fair value or other measurement attributes of the Statement. The adoption of Statement 150 did not have a significant effect on the Bank’s consolidated financial statements.

Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” was issued on April 30, 2003. The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This Statement is effective for contracts entered into or modified after June 30, 2003. The adoption of this Statement did not have a significant effect on the Bank’s consolidated financial statements.

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) was issued in January 2003. FIN 46 applies immediately to enterprises that hold a variable interest in variable interest entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003 to enterprises that hold a variable interest in variable interest entities created before February 1, 2003. FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period, and it applies to nonpublic enterprises no later than the end of the applicable annual period. FIN 46 may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. FIN 46 provides guidance on the identification of entities controlled through means other than voting rights. FIN 46 specifies how a business enterprise should evaluate its interest in a variable interest entity to determine whether to consolidate that entity. A variable interest entity must be consolidated by its primary beneficiary if the entity does not effectively disperse risks among the parties involved. On October 9, 2003, the effective date was deferred until the end of the first interim or annual period ending after December 15, 2003, for certain interests held by a public entity in certain variable interest entities or potential variable interest entities created before February 1, 2003. The adoption of FIN 46 is not expected to have a material impact on the consolidated financial statements of the Company.

7


Note 2. Loans Receivable, Net

Loans receivable, net at March 31,September 30, 2003 and December 31, 2002 consisted of the following (in thousands):

 

 

March 31, 2003

 

December 31, 2002

 

 

 


 


 

Real estate:

 

 

 

 

 

 

 

One- to four-family

 

$

1,086,785

 

$

1,104,976

 

Commercial real estate, multi-family and land

 

 

146,715

 

 

139,654

 

Construction

 

 

12,333

 

 

11,079

 

Consumer

 

 

81,664

 

 

80,218

 

Commercial

 

 

78,022

 

 

77,968

 

 

 



 



 

Total loans

 

 

1,405,519

 

 

1,413,895

 

Loans in process

 

 

(3,981

)

 

(3,531

)

Deferred origination costs, net

 

 

2,827

 

 

2,239

 

Unearned discount

 

 

(5

)

 

(5

)

Allowance for loan losses

 

 

(10,453

)

 

(10,074

)

 

 



 



 

Total loans, net

 

 

1,393,907

 

 

1,402,524

 

Less: mortgage loans held for sale

 

 

57,211

 

 

66,626

 

 

 



 



 

Loans receivable, net

 

$

1,336,696

 

$

1,335,898

 

 

 



 



 

   September 30,
2003


  December 31,
2002


 

Real estate:

         

One-to four-family

  $1,105,153  $1,101,904 

Commercial real estate, multi-family and land

   166,734   142,726 

Construction

   10,802   11,079 

Consumer

   78,758   80,218 

Commercial

   83,874   77,968 
   


 


Total loans

   1,445,321   1,413,895 

Loans in process

   (2,920)  (3,531)

Deferred origination costs, net

   3,923   2,239 

Unearned discount

   (5)  (5)

Allowance for loan losses

   (10,782)  (10,074)
   


 


Total loans, net

   1,435,537   1,402,524 

Less: mortgage loans held for sale

   83,671   66,626 
   


 


Loans receivable, net

  $1,351,866  $1,335,898 
   


 


Note 3. Deposits

The major types of deposits at March 31,September 30, 2003 and December 31, 2002 were as follows (in thousands):

Type of Account

 

March 31, 2003

 

December 31, 2002

 


 


 


 

Non-interest bearing

 

$

92,279

 

$

86,290

 

NOW

 

 

247,529

 

 

260,762

 

Money market deposit

 

 

127,280

 

 

123,960

 

Savings

 

 

245,029

 

 

234,995

 

Time deposits

 

 

439,765

 

 

478,829

 

 

 



 



 

 

 

$

1,151,882

 

$

1,184,836

 

 

 



 



 

6

   September 30,
2003


  December 31,
2002


Type of Account

        

Non-interest bearing

  $108,608  $86,290

NOW

   254,135   260,762

Money market deposit

   137,875   123,960

Savings

   265,713   234,995

Time deposits

   398,414   478,829
   

  

   $1,164,745  $1,184,836
   

  

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations


Critical Accounting Policies

Item 2. Management’s Discussion

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2002 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and Analysisother subjective assessments. Certain assets are carried in the consolidated statements of Financial Conditionfinancial condition at fair value or the lower of cost or fair value. Policies with respect to the methodologies used to determine the allowance for loan losses, the valuation of Mortgage Servicing Rights and Resultsjudgments regarding goodwill and securities impairment are the most critical accounting policies because they are important to the presentation of Operationsthe Company’s financial condition and results of operations, involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions and estimates could result in material differences in the results of operations or financial condition. These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors.

Analysis of Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income also depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them.

The following table sets forth certain information relating to the Company for the three and nine months ended March 31,

8


September 30, 2003 and 2002. The yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown except where noted otherwise. Average balances are derived from average daily balances. The yields and costs include fees which are considered adjustments to yields.

 

 

Three Months Ended March 31,

 

 

 


 

 

 

2003

 

2002

 

 

 


 


 

 

 

Average
Balance

 

Interest

 

Average Yield/
Cost

 

Average
Balance

 

Interest

 

Average Yield/
Cost

 

 

 


 


 


 


 


 


 

 

 

(Dollars in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earnings assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits and short term investments

 

$

13,876

 

$

40

 

 

1.15

%

$

2,618

 

$

6

 

 

. 92

%

Investment securities

 

 

89,010

 

 

951

 

 

4.27

 

 

80,563

 

 

1,197

 

 

5.94

 

FHLB stock

 

 

19,110

 

 

255

 

 

5.34

 

 

23,721

 

 

257

 

 

4.33

 

Mortgage-backed securities

 

 

123,880

 

 

1,436

 

 

4.64

 

 

216,822

 

 

3,098

 

 

5.72

 

Loans receivable, net (1)

 

 

1,402,070

 

 

22,746

 

 

6.49

 

 

1,345,568

 

 

23,856

 

 

7.09

 

 

 



 



 



 



 



 



 

Total interest-earning assets

 

 

1,647,946

 

 

25,428

 

 

6.17

 

 

1,669,292

 

 

28,414

 

 

6.81

 

 

 

 

 

 



 



 

 

 

 



 



 

Non-interest earning assets

 

 

84,861

 

 

 

 

 

 

 

 

82,462

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total assets

 

$

1,732,807

 

 

 

 

 

 

 

$

1,751,754

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

 

$

630,277

 

 

1,570

 

 

1.00

 

 

509,850

 

 

2,017

 

 

1.58

 

Time deposits

 

 

459,912

 

 

3,663

 

 

3.19

 

 

524,683

 

 

5,368

 

 

4.09

 

 

 



 



 



 



 



 



 

Total

 

 

1,090,189

 

 

5,233

 

 

1.92

 

 

1,034,533

 

 

7,385

 

 

2.86

 

Borrowed funds

 

 

400,729

 

 

4,808

 

 

4.80

 

 

485,047

 

 

5,361

 

 

4.42

 

 

 



 



 



 



 



 



 

Total interest-bearing liabilities

 

 

1,490,918

 

 

10,041

 

 

2.69

 

 

1,519,580

 

 

12,746

 

 

3.36

 

 

 

 

 

 



 



 

 

 

 



 



 

Non-interest-bearing deposits

 

 

88,147

 

 

 

 

 

 

 

 

72,635

 

 

 

 

 

 

 

Non-interest bearing liabilities

 

 

19,208

 

 

 

 

 

 

 

 

14,566

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total liabilities

 

 

1,598,273

 

 

 

 

 

 

 

 

1,606,781

 

 

 

 

 

 

 

Stockholders’equity

 

 

134,534

 

 

 

 

 

 

 

 

144,973

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,732,807

 

 

 

 

 

 

 

$

1,751,754

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

15,387

 

 

 

 

 

 

 

$

15,668

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

Net interest rate spread (2)

 

 

 

 

 

 

 

 

3.48

%

 

 

 

 

 

 

 

3.45

%

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Net interest margin (3)

 

 

 

 

 

 

 

 

3.73

%

 

 

 

 

 

 

 

3.75

%

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 


   FOR THE QUARTER ENDED SEPTEMBER 30,

 
   2003

  2002

 
   

AVERAGE

BALANCE


  INTEREST

  

AVERAGE
YIELD/

COST


  

AVERAGE

BALANCE


  INTEREST

  

AVERAGE
YIELD/

COST


 
   (Dollars in thousands) 

Assets

                       

Interest-earnings assets:

                       

Interest-earning deposits and short term investments

  $9,918  $24  .97% $30,714  $129  1.68%

Investment securities

   86,924   454  2.09   86,456   608  2.81 

FHLB stock

   19,544   243  4.97   18,704   188  4.02 

Mortgage-backed securities

   118,649   819  2.76   166,140   2,353  5.67 

Loans receivable, net (1)

   1,433,215   21,159  5.91   1,338,229   23,993  7.17 
   

  

  

 

  

  

Total interest-earning assets

   1,668,250   22,699  5.44   1,640,243   27,271  6.65 
       

  

     

  

Non-interest earning assets

   98,647          86,531        
   

         

        

Total assets

  $1,766,897         $1,726,774        
   

         

        

Liabilities and Stockholders’ Equity

                       

Interest-bearing liabilities:

                       

Transaction deposits

  $665,099   987  .59  $599,665   2,241  1.49 

Time deposits

   405,096   2,899  2.86   494,668   4,543  3.67 
   

  

  

 

  

  

Total

   1,070,195   3,886  1.45   1,094,333   6,784  2.48 

Borrowed funds

   433,780   5,018  4.63   392,189   4,915  4.99 
   

  

  

 

  

  

Total interest-bearing liabilities

   1,503,975   8,904  2.37   1,486,522   11,699  3.15 
       

  

     

  

Non-interest-bearing deposits

   111,012          83,611        

Non-interest-bearing liabilities

   17,711          15,891        
   

         

        

Total liabilities

   1,632,698          1,586,024        

Stockholders’ equity

   134,199          140,750        
   

         

        

Total liabilities and stockholders’ equity

  $1,766,897         $1,726,774        
   

         

        

Net interest income

      $13,795         $15,572    
       

         

    

Net interest rate spread (2)

          3.07%         3.50%
           

         

Net interest margin (3)

          3.31%         3.80%
           

         

   FOR THE NINE MONTHS ENDED SEPTEMBER 30,

 
   2003

  2002

 
   

AVERAGE

BALANCE


  INTEREST

  

AVERAGE
YIELD/

COST


  

AVERAGE

BALANCE


  INTEREST

  

AVERAGE
YIELD/

COST


 
   (Dollars in thousands) 

Assets

                       

Interest-earnings assets:

                       

Interest-earning deposits and short term investments

  $13,096  $108  1.10% $11,968  $149  1.66%

Investment securities

   89,705   1,884  2.80   86,241   2,414  3.73 

FHLB stock

   19,324   750  5.17   21,022   710  4.50 

Mortgage-backed securities

   124,045   3,641  3.91   188,007   8,058  5.71 

Loans receivable, net (1)

   1,414,011   66,058  6.23   1,335,701   71,222  7.11 
   

  

  

 

  

  

Total interest-earning assets

   1,660,181   72,441  5.82   1,642,939   82,553  6.70 
       

  

     

  

Non-interest earning assets

   88,129          84,694        
   

         

        

Total assets

  $1,748,310         $1,727,633        
   

         

        

Liabilities and Stockholders’ Equity

                       

Interest-bearing liabilities:

                       

Transaction deposits

  $645,383   3,825  .79  $554,739   6,493  1.56 

Time deposits

   430,194   9,732  3.02   511,818   14,933  3.89 
   

  

  

 

  

  

Total

   1,075,577   13,557  1.68   1,066,557   21,426  2.68 

Borrowed funds

   421,149   14,801  4.69   426,037   15,225  4.76 
   

  

  

 

  

  

Total interest-bearing liabilities

   1,496,726   28,358  2.53   1,492,594   36,651  3.27 
       

  

     

  

Non-interest-bearing deposits

   100,162          78,442        

Non-interest-bearing liabilities

   16,917          14,232        
   

         

        

Total liabilities

   1,613,805          1,585,268        

Stockholders’ equity

   134,505          142,365        
   

         

        

Total liabilities and stockholders’ equity

  $1,748,310         $1,727,633        
   

         

        

Net interest income

      $44,083         $45,902    
       

         

    

Net interest rate spread (2)

          3.29%         3.43%
           

         

Net interest margin (3)

          3.54%         3.73%
           

         

(1)

(1)

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.

(2)

(2)

Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(3)

(3)

Net interest margin represents net interest income divided by average interest-earning assets.

Comparison of Financial Condition at March 31,September 30, 2003 and December 31, 2002

Total assets at March 31,September 30, 2003 were $1.745$1.755 billion, an increase of $1.2$10.9 million, compared to $1.744 billion at December 31, 2002.

Loans receivable, net increased by $798,000$16.0 million to a balance of $1.337$1.352 billion at March 31,September 30, 2003, compared to a balance of $1.336 billion at December 31, 2002. Commercial and commercial real estate loans outstanding increased $7.1$29.9 million,

9


while one- to four-family mortgage loans declined, as the Bank actively sold 30-year fixed-rate mortgage loans during the period.

 

Deposit balances decreased $33.0$20.1 million to $1.152$1.165 billion at March 31,September 30, 2003 from $1.185 billion at December 31, 2002. During the quarter a large commercial deposit relationship transferred $11.6 million to the securities sold under agreement to repurchase account.  Core deposit categories,deposits (all deposits except certificates), a key emphasis for the Company, increased by $6.1$60.3 million, net of the $11.6 million mentioned above, as time deposits declined.

Total borrowings, consisting of securities sold under agreements to repurchase and Federal Home Loan Bank advances, increased $37.1 million to $435.7 million at September 30, 2003, compared to a balance of $398.6 million at December 31, 2002. Repurchase agreements with retail customers increased $7.7 million as a large commercial deposit relationship transferred their deposit balances to the securities sold under agreements to repurchase account. Overnight borrowings increased by $22.5 million and longer-term wholesale borrowings used to fund balance sheet leverage increased by $7.0 million.

 

Stockholders’ equity at March 31,September 30, 2003 increaseddecreased to $135.4$132.8 million, compared to $135.3 million at December 31, 2002. The Company repurchased 310,800771,713 shares of common stock during the threenine months ended March 31,September 30, 2003 at a total cost of $6.8$18.1 million. Under the 10% repurchase program authorized by the Board of Directors in August 2002, 639,035178,122 shares remain to be purchased as of March 31,September 30, 2003. A new repurchase program, the Company’s eleventh, was announced on October 22, 2003. Under this 10% repurchase program, an additional 1,341,818 shares are available for repurchase. The cost of the share repurchases was partly offset by the proceeds from stock option exercises and the related tax benefit.benefits.

7


Comparison of Operating Results for the Three and Nine Months Ended March 31,September 30, 2003 and March 31,September 30, 2002

General

Net income increased to $5.2$5.3 million and $15.5 million for the three and nine months ended March 31,September 30, 2003, respectively, as compared to net income of $5.0$4.8 million and $15.0 million, respectively, for the three and nine months ended March 31,September 30, 2002. Diluted earnings per share increased to $.40$.41 and $1.19, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to $.36,$.35 and $1.08, respectively, for the same prior year period.periods. Earnings per share was favorably affected by the Company’s repurchase program, which reduced the number of shares outstanding.

Interest Income

Interest income for the three and nine months ended March 31,September 30, 2003 was $25.4$22.7 million and $72.4 million, respectively, compared to $28.4$27.3 million and $82.6 million, respectively, for the three and nine months ended March 31,September 30, 2002. The decrease in interest income was due to a decline in the yield on interest-earning assets to 6.17%,5.44% and 5.82 %, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to 6.81%6.65% and 6.70%, respectively, for the same prior year period.periods. Despite the decline, which was reflective of the general interest rate environment, the asset yield continued to benefit from the Bank’s loan growth over the past year, which was partly funded by reductions in the lower-yielding investment and mortgage-backed securities available for sale portfolios. For the three and nine months ended March 31,September 30, 2003 loans receivable represented 85.1%85.9% and 85.2%, respectively, of average interest-earning assets as compared to 80.6%81.6 % and 81.3%, respectively, for the same prior year period.  The asset yield for the three months ended March 31, 2003 benefited from $407,000 of income relating to an equity investment.  The comparable benefit for the prior year period was $600,000.periods.

Interest Expense

Interest expense for the three and nine months ended March 31,September 30, 2003 was $10.0$8.9 million and $28.4 million, respectively, compared to $12.7$11.7 million and $36.7 million, respectively, for the three and nine months ended March 31,September 30, 2002. The decrease in interest expense was primarily the result of a decrease in the cost of interest-bearing liabilities to 2.69%2.37% and 2.53%, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to 3.36%3.15% and 3.27%, respectively, in the same prior year period.periods. Funding costs decreased due to the lower interest rate environment and also due to the Company’s focus on lower-costing core deposit growth. Core deposits (including non-interest-bearing deposits) represented 61.0%65.7% and 63.4%, respectively, of average deposits for the three and nine months ended March 31,September 30, 2003, as compared to 52.6%58.0% and 55.3%, respectively, for the same prior year period.periods.

 

Provision for Loan Losses

For the three and nine months ended March 31,September 30, 2003, the Company’s provision for loan losses was $375,000$48,000 and $673,000, respectively, as compared to $500,000$375,000 and $1.3 million, respectively, for the same prior year period.periods. The prior period provision for the nine months ended September 30, 2002 was increased to reflect the charge-off of a large nonperformingnon-performing commercial loan which was part of a shared national credit. The Company recognized a net recovery of $36,000 through the allowance for loan losses for the nine months ended September 30, 2003. Additionally, non-performing loans declined to $2.3 million at September 30, 2003 as compared to $2.8 million at September 30, 2002.

10


Other Income

Other income was $3.7$5.6 million and $13.1 million, respectively, for the three and nine months ended March 31,September 30, 2003, compared to $2.4$1.3 million and $6.9 million, respectively, for the same prior year period.periods. For the three and nine months ended March 31,September 30, 2003, respectively, the Company recorded a gain of $2.5$3.3 million and $8.7 million, respectively, on the sale of loans and securities available for sale, as compared to a gain of $394,000$1.3 million and $2.8 million, respectively, in the same prior year period.periods. For the threenine months ended March 31,September 30, 2003 the gain on sale of loans and securities available for sale includes a gain of $323,000 on the sale of equity securities.

 

Loan servicing income decreased by $1.2loss was $71,000 and $2.8 million, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to $2.0 million and $2.1 million, respectively, for the same prior year periodperiods. The losses were due to actual and anticipated prepayments of the loans underlying the servicing portfolio. Results for the threenine months ended March 31,September 30, 2003 include the recognition of an impairment charge on the loan servicing asset for $1.0$2.2 million. There was noFor the three and nine months ended September 30, 2002 the Company recognized impairments to the loan servicing impairment in the same prior period.asset of $1.9 million and $2.1 million, respectively.

Fees and service charges increased by $387,000,$314,000, or 26.9%18.7%, and $1.2 million, or 25.4%, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to the same prior year periodperiods due to the growth in commercial account services, retail core account balances and trust fees.fees and the establishment of a captive insurance subsidiary to recognize fee income from private mortgage insurance.

Operating Expenses

Operating expenses were $10.6$11.1 million and $32.5 million, respectively, for the three and nine months ended March 31,September 30, 2003, as compared to $9.9 million and $29.6 million, respectively, in the same prior year period.periods. The increase was principally due to higher loan-related expenses and for the year-to-date, the costs associated with the opening and operation of the Bank’s seventeenth branch office in May 2002, as well as higher loan-related expenses.  Additionally, ESOP expense increased by $113,000 due to the higher average market price for the Company’s shares during the first quarter of 2003, as compared to the same prior year period.2002.

8


Provision for Income Taxes

Income tax expense was $2.8$3.0 million and $8.5 million, respectively, for the three and nine months ended March 31,September 30, 2003, compared to $2.7$1.8 million and $7.0 million, respectively, for the same prior year period.periods. The effective tax rate increased slightly to 35.0%36.0% and 35.5%, respectively, for the three and nine months ended March 31,September 30, 2003 as compared to 34.6%27.8% and 31.7% for the same prior year period.periods. The Company’s higher average stock price in 2003 as compared to 2002 increased that portion of the Company’s ESOP expense which is not deductible for tax purposes. For the three and nine months ended September 30, 2002, the provision for income taxes included a $389,000 tax benefit relating to the passage of the New Jersey Business Tax Reform Act. The legislation increased the tax rate on savings institutions, such as the Bank, from 3% to 9%. As a result, deferred tax assets were increased to reflect their expected recognition at the higher tax rate of 9% and current period expense was decreased.

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,September 30, 2003, the Company had outstanding overnight borrowings from the FHLB of $10.5$22.5 million, an increase from no outstanding overnight borrowings at December 31, 2002. The Company utilizes the overnight line from time to time to fund short-term liquidity needs. Securities sold under agreements to repurchase with retail customers increased to $52.2 million at September 30, 2003 from $44.6 million at December 31, 2002 as a large commercial deposit relationship transferred their deposit balances to the securities sold under agreements to repurchase account. The Company also had other borrowings of $426.9$361.0 million at March 31,September 30, 2003, an increase from $398.6$354.0 million at December 31, 2002. These borrowings were used to fund a wholesale leverage strategy designed to improve returns on invested capital.

The Company’s cash needs for the threenine months ended March 31,September 30, 2003, were primarily providedsatisfied by principal payments on loans and mortgage-backed securities, increased total borrowings and proceeds from the sale of mortgage loans held for sale. The cash was principally utilized for loan originations, the purchase of mortgage-backed securities, the funding of deposit outflows and the purchase of treasury stock. For the threenine months ended March 31,September 30, 2002, the cash needs of the Company were primarily satisfied by principal payments on loans and mortgage-backed securities, maturities of investment securitiesincreased deposits and

11


proceeds from the sale of mortgage loans held for sale. The cash provided was principally used for the origination of loans, the purchase of mortgage-backed securities, a reduction in total borrowings and the purchase of treasury stock.

In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination and sale of loans. At March 31,September 30, 2003, outstanding commitments to originate loans totaled $143.0 million; outstanding unused lines of credit totaled $99.9 million; and outstanding commitments to sell loans totaled $80.3 million. The Company expects to have sufficient funds available to meet current commitments in the normal course of business.

At September 30, 2003, the Bank exceeded all of its regulatory capital requirements with tangible capital of $117.1$114.2 million, or 6.70%6.5%, of total adjusted assets, which is above the required level of $26.2$26.3 million or 1.5%; core capital of $117.1$114.2 million or 6.70%6.5% of total adjusted assets, which is above the required level of $52.4$52.7 million, or 3.0%; and risk-based capital of $127.4$124.9 million, or 11.79%11.3% of risk-weighted assets, which is above the required level of $86.4$88.6 million or 8.0%. The Bank is considered a “well-capitalized” institution under the Office of Thrift Supervision’s prompt corrective action regulations.

9


Non-Performing Assets

The following table sets forth information regarding the Company’s non-performing 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,
2003

 

December 31,
2002

 

 

 


 


 

 

 

(dollars in thousands)

 

Non-accrual loans:

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

One-to four-family

 

$

3,175

 

$

2,222

 

Commercial real estate, multi-family and land

 

 

73

 

 

74

 

Consumer

 

 

146

 

 

95

 

Commercial

 

 

291

 

 

297

 

 

 



 



 

Total

 

 

3,685

 

 

2,688

 

REO, net

 

 

—  

 

 

141

 

 

 



 



 

Total non-performing assets

 

$

3,685

 

$

2,829

 

 

 



 



 

Allowance for loan losses as a percent of total loans receivable

 

 

.74

%

 

.71

%

Allowance for loan losses as percent of total non-performing loans

 

 

283.66

 

 

374.78

 

Non-performing loans as a percent of total loans receivable

 

 

.26

 

 

.19

 

Non-performing assets as a percent of total assets

 

 

.21

 

 

.16

 

   September 30,
2003


  December 31,
2002


 
   (dollars in thousands) 

Non-accrual loans:

         

Real estate:

         

One-to four-family

  $1,876  $2,222 

Commercial real estate, multi-family and land

   72   74 

Consumer

   87   95 

Commercial

   289   297 
   


 


Total non-performing loans

   2,324   2,688 

REO, net

   264   141 
   


 


Total non-performing assets

  $2,588  $2,829 
   


 


Allowance for loan losses as a percent of total loans receivable

   .75%  .71%

Allowance for loan losses as percent of total non-performing loans

   463.94   374.78 

Non-performing loans as a percent of total loans receivable

   .16   .19 

Non-performing assets as a percent of total assets

   .15   .16 

Private Securities Litigation Reform Act Safe Harbor Statement

In addition to historical information, this quarterly report 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 Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on 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. Further description of the risks and uncertainties to the business are included in Item 1, BUSINESS of the Company’s 2002 Form 10-K.

12


Item 3. Quantitative and Qualitative Disclosure about Market RiskQuantitative and Qualitative Disclosures About Market Risk

The Company’s interest rate sensitivity is monitored by management through the use of an interest rate risk (IRR) model. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at March 31,September 30, 2003, which were anticipated by the Company, based upon certain assumptions, to reprice or mature in each of the future time periods shown. At March 31,September 30, 2003 the Company’s one yearone-year gap was positive 8.16%6.28% as compared to positive 10.05% at December 31, 2002.

10

At September 30, 2003


  

3 Months

or Less


  

More than

3 Months to
1 Year


  

More than

1 Year to

3 Years


  

More than

3 Years to

5 Years


  

More than

5 Years


  Total

 

(dollars in thousands)

                         

Interest-earning assets: (1)

                         

Interest-earning deposits and short- term investments

  $8,705  $—    $—    $—    $—    $8,705 

Investment securities

   76,543   —     —     —     10,395   86,938 

FHLB stock

   —     —     —     —     19,950   19,950 

Mortgage-backed securities

   9,447   23,713   30,011   35,678   3,060   101,909 

Loans receivable (2)

   264,861   280,095   467,810   277,176   152,459   1,442,401 
   


 


 


 


 


 


Total interest-earning assets

   359,556   303,808   497,821   312,854   185,864   1,659,903 
   


 


 


 


 


 


Interest-bearing liabilities:

                         

Money market deposit accounts

   7,113   19,211   38,529   73,022   —     137,875 

Savings accounts

   13,710   37,031   74,268   140,704   —     265,713 

NOW accounts

   13,110   35,411   71,018   134,596   —     254,135 

Time deposits

   70,729   202,013   75,514   30,972   19,186   398,414 

FHLB advances

   38,500   40,000   123,000   52,000   30,000   283,500 

Securities sold under agreements to repurchase

   52,242   30,000   20,000   30,000   20,000   152,242 
   


 


 


 


 


 


Total interest-bearing liabilities

   195,404   363,666   402,329   461,294   69,186   1,491,879 
   


 


 


 


 


 


Interest sensitivity gap (3)

  $164,152  $(59,858) $95,492  $(148,440) $116,678  $168,024 
   


 


 


 


 


 


Cumulative interest sensitivity gap

  $164,152  $104,294  $199,786  $51,346  $168,024  $168,024 
   


 


 


 


 


 


Cumulative interest sensitivity gap as a percent of total interest-earning assets

   9.89%  6.28%  12.04%  3.09%  10.12%  10.12%


At March 31, 2003
(dollars in thousands)

 

3 Months
or Less

 

More than
3 Months to
1 Year

 

More than
1 Year to
3 Years

 

More than
3 Years to
5 Years

 

More than
5 Years

 

Total

 


 


 


 


 


 


 


 

Interest-earning assets: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits and short- term investments

 

$

15,637

 

$

—  

 

$

—  

 

$

—  

 

$

—  

 

$

15,637

 

Investment securities

 

 

75,300

 

 

1,200

 

 

—  

 

 

—  

 

 

10,394

 

 

86,894

 

FHLB stock

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

19,850

 

 

19,850

 

Mortgage-backed securities

 

 

21,378

 

 

48,059

 

 

47,998

 

 

15,279

 

 

8,289

 

 

141,003

 

Loans receivable (2)

 

 

246,224

 

 

256,682

 

 

435,124

 

 

275,378

 

 

188,130

 

 

1,401,538

 

 

 



 



 



 



 



 



 

Total interest-earning assets

 

 

358,539

 

 

305,941

 

 

483,122

 

 

290,657

 

 

226,663

 

 

1,664,922

 

 

 



 



 



 



 



 



 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market deposit accounts

 

 

6,566

 

 

17,734

 

 

35,568

 

 

67,412

 

 

—  

 

 

127,280

 

Savings accounts

 

 

12,640

 

 

34,141

 

 

68,473

 

 

129,775

 

 

—  

 

 

245,029

 

NOW accounts

 

 

12,769

 

 

34,489

 

 

69,172

 

 

131,099

 

 

—  

 

 

247,529

 

Time deposits

 

 

107,314

 

 

167,598

 

 

117,627

 

 

31,665

 

 

15,561

 

 

439,765

 

FHLB advances

 

 

14,500

 

 

68,000

 

 

90,000

 

 

77,000

 

 

20,000

 

 

269,500

 

Securities sold under agreements to repurchase

 

 

52,870

 

 

—  

 

 

55,000

 

 

25,000

 

 

35,000

 

 

167,870

 

 

 



 



 



 



 



 



 

Total interest-bearing liabilities

 

 

206,659

 

 

321,962

 

 

435,840

 

 

461,951

 

 

70,561

 

 

1,496,973

 

 

 



 



 



 



 



 



 

Interest sensitivity gap (3)

 

$

151,880

 

$

(16,021

)

$

47,282

 

$

(171,294

)

$

156,102

 

$

167,949

 

 

 



 



 



 



 



 



 

Cumulative interest sensitivity gap

 

$

151,880

 

$

135,859

 

$

183,141

 

$

11,847

 

$

167,949

 

$

167,949

 

 

 



 



 



 



 



 



 

Cumulative interest sensitivity gap as a percent of total interest- earning assets

 

 

9.12

%

 

8.16

%

 

11.00

%

 

0.71

%

 

10.09

%

 

10.09

%

 

 



 



 



 



 



 



 


(1)

Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments, and contractual maturities.

(2)

For purposes of the gap analysis, loans receivable includes loans held for sale and non-performing loans gross of the allowance for loan losses, unamortized discounts and deferred loan fees.

(3)

Interest sensitivity gap represents the difference between interest-earning assets and interest-bearing liabilities.

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,September 30, 2003 and December 31, 2002. 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, 2002.

 

 

March 31, 2003

 

December 31, 2002

 

 

 


 


 

 

 

Net Portfolio Value

 

 

 

Net Interest Income

 

Net Portfolio Value

 

 

 

Net Interest Income

 

 

 


 

 

 


 


 

 

 


 

Change in Interest Rates in Basis Points (Rate Shock)

 

Amount

 

% Change

 

NPV
Ratio

 

Amount

 

% Change

 

Amount

 

% Change

 

NPV
Ratio

 

Amount

 

% Change

 


 


 


 


 


 


 


 


 


 


 


 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200

 

$

162,964

 

 

(6.7

)%

 

9.5

%

$

60,577

 

 

1.7

%

$

151,546

 

 

(7.1

)%

 

8.9

%

$

60,492

 

 

2.1

%

100

 

 

175,052

 

 

0.2

 

 

10.0

 

 

60,441

 

 

1.5

 

 

163,725

 

 

0.4

 

 

9.4

 

 

60,234

 

 

1.7

 

Static

 

 

174,758

 

 

—  

 

 

9.8

 

 

59,553

 

 

—  

 

 

163,127

 

 

—  

 

 

9.2

 

 

59,230

 

 

—  

 

(100)

 

 

161,759

 

 

(7.4

)

 

9.0

 

 

56,769

 

 

(4.7

)

 

150,429

 

 

(7.8

)

 

8.4

 

 

56,527

 

 

(4.6

)

   September 30, 2003

  December 31, 2002

 
   Net Portfolio Value

  Net Interest Income

  Net Portfolio Value

  Net Interest Income

 

Change in

Interest Rates

in Basis Points

(Rate Shock)


  Amount

  %
Change


  

NPV

Ratio


  Amount

  %
Change


  Amount

  %
Change


  

NPV

Ratio


  Amount

  %
Change


 

(dollars in thousands)

                                   

200

  $139,170  (12.0)% 8.2% $57,892  1.2% $151,546  (7.1)% 8.9% $60,492  2.1%

100

   157,785  (0.2) 9.1   58,054  1.5   163,725  0.4  9.4   60,234  1.7 

Static

   158,073  —    8.9   57,222  —     163,127  —    9.2   59,230  —   

(100)

   148,317  (6.2) 8.3   54,377  (5.0)  150,429  (7.8) 8.4   56,527  (4.6)

Item 4.Item 4. Controls and Procedures

The Company’s management, including the Company’s principal executive officer and Procedures

Evaluationprincipal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures.  The Company maintains controls and procedures designed to ensure were effective for the purpose of ensuring that the information

13


required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, of the Securities and Exchange Commission.  Based upon their evaluation of those controls(2) is accumulated and procedures performed within 90 days of the filing date of this report, the chief executive officer and the principal financial officer of the Company concluded thatcommunicated to the Company’s disclosure controls and procedures were adequate.

Changes in internal controls.  The Company made no significant changes inmanagement, including its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the chiefprincipal executive officer and principal financial officer.officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

11

14


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.

 

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 and Use of Proceeds

Not Applicable

 

Not Applicable

Item 3.

Defaults Upon Senior Securities

Not Applicable

 

Not Applicable

Item 4.

Submission of Matters to a Vote of Security Holders

Not Applicable

 

The annual meeting of stockholders was held on April 24, 2003.  The following directors were elected for terms of three years:  John W. Chadwick, Carl Feltz, Jr. and Diane F. Rhine.  The following proposals were voted on by the stockholders:


Proposal

 

For

 

Against

 

Withheld/
Abstain

 

Broker
Non-Votes

 


 


 


 


 


 

1)

Election of Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John W. Chadwick

 

 

10,543,644

 

 

—  

 

 

451,542

 

 

—  

 

 

Carl Feltz, Jr.

 

 

10,540,160

 

 

—  

 

 

455,022

 

 

—  

 

 

Diane F. Rhine

 

 

10,541,597

 

 

—  

 

 

453,585

 

 

—  

 

2)

Amendment of the OceanFirst Financial Corp. 2000 Stock Option Plan

 

 

6,814,253

 

 

2,570,788

 

 

39,587

 

 

1,570,554

 

3)

Ratification of the appointment of KPMG LLP as independent auditors of the Company for the fiscal year ending December 31, 2003.

 

 

10,991,371

 

 

71,891

 

 

11,920

 

 

—  

 


Item 5.

Other Information

Not Applicable

 

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.*

12


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.*

31.1    Rule 13a-14(a)/15d-14(a) Certification of CEO

31.2    Rule 13a-14(a)/15d-14(a) Certification of CFO

32.0    Section 1350 Certifications

b) Reports on Form 8-K

The Company filed a report on Form 8-K with the Securities and Exchange Commission on July 28, 2003 which included the press release, dated July 24, 2003, announcing the Company’s financial results for the quarter ended June 30, 2003.

*

99.1

CEO Certification pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002.

99.2

CFO Certification pursuant to 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of 2002.

b)

There were no reports on Form 8-K filed during the three months ended March 31, 2003.


*

Incorporated herein by reference into this document from the Exhibits to Form S-1, Registration Statement, effective May 13, 1996, as amended, Registration No. 33-80123.

 

**

**

Incorporated herein by reference into this document from the Exhibit to Form 10-K, Annual Report, filed on March 25, 2003.

1315


SIGNATURES

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.OceanFirst Financial Corp.

Registrant


Registrant

DATE: MayNovember 13, 2003

/s/    JOHN R. GARBARINO


John R. Garbarino


John R. Garbarino

Chairman of the Board, President and Chief Executive Officer

DATE: MayNovember 13, 2003

/s/    MICHAEL FITZPATRICKMichael Fitzpatrick        



Michael Fitzpatrick

Executive Vice President and Chief Financial Officer

14

16


CERTIFICATION

I, John R. Garbarino, certify, that:

1.

I have reviewed this quarterly report on Form 10-Q of OceanFirst Financial Corp.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a.

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c.

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.

all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date:   May 13, 2003

Exhibit

  

Exhibit Index Description


  Page

31.1

  Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer  18

31.2

  Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer  19

32.1

  Section 1350 Certifications  20

 

/s/JOHN R. GARBARINO


John R. Garbarino
Chief Executive Officer
(principal executive officer)

15


CERTIFICATION17

I, Michael J. Fitzpatrick, certify, that:

1.

I have reviewed this quarterly report on Form 10-Q of OceanFirst Financial Corp.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a.

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c.

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.

all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date:   May 13, 2003

/s/ MICHAEL FITZPATRICK


Michael Fitzpatrick
Chief Financial Officer
(principal financial officer)

16