Contacts:
Steven E. Brady, President and CEO
Donald F. Morgenweck, CFO
(609) 399-0012
PRESS RELEASE
OCEAN SHORE HOLDING CO. REPORTS 3RD QUARTER EARNINGS
Ocean City, New Jersey - October 30, 2008 - Ocean Shore Holding Co.
(NASDAQ: OSHC) today announced net income of $341,000, or $0.04 per basic and
diluted share, for the quarter ended September 30, 2008, as compared to
$811,000, or $0.10 per basic and diluted share, for the quarter ended September
30, 2007. The decline in net income was primarily due to a $1.3 million pre-tax,
non-cash charge for other than temporary impairment ("OTTI") of certain
investment securities.
Net income for the nine months ended September 30, 2008 was $2,160,000,
or $0.27 per share basic and diluted, as compared to $1,931,000, or $0.24 per
share basic and $0.23 per share diluted, for the same period in 2007, and also
reflect the impact of the OTTI charge.
Ocean Shore Holding Co. (the "Company") is the holding company for
Ocean City Home Bank (the "Bank"), a federal savings bank headquartered in Ocean
City, New Jersey. The Bank operates a total of nine full-service banking offices
in eastern New Jersey.
"I am pleased to report continuing strong operating results," said
Steven E. Brady, President and CEO. "Net interest income after the provision for
loan losses was up 27% in the third quarter and 24% year to date over last year.
We have now had six consecutive quarters of growth in net interest income after
the provision for loan losses. Asset quality remains excellent, with
nonperforming assets at only 0.06%. Our only disappointment this quarter is the
need to take an OTTI charge on certain investment securities. Our investment
portfolio is less than 10% of our total assets and only two securities in our
portfolio have had significant declines in value as a result of recent market
conditions. These securities are backed primarily by trust preferred securities
issued by other banks, not sub-prime mortgages or other so-called toxic
securities. Current mark-to-market accounting rules - which have received much
criticism in the current financial crisis - require us to write down the value
of these securities even if we have the ability to hold them to maturity and
expect to recover most, if not all, our investment."
"We have followed the efforts of the U.S. Treasury very closely and
support its efforts to help provide capital to the U.S. financial system through
the Capital Purchase Program. However, after carefully evaluating the program,
we have determined not to participate. Because our capital ratios are strong, we
have concluded that if the Company is going to raise additional capital, it is
in the best interests of our shareholders to accomplish that through a second
step conversion, which we are currently pursuing."
TOTAL ASSETS AND DEPOSITS GROW
Total assets grew $66.2 million, or 10.5%, to $695.7 million at
September 30, 2008 from December 31, 2007. Loans receivable, net, increased
$51.0 million, or 9.7%, to $579.0 million on steady loan activity, and
investment and mortgage-backed securities increased $6.9 million, or 11.8%, to
$65.9 million. The increase in loans receivable was primarily due to growth in
real estate loans of $54.2 million and consumer loans of $0.4 million, offset by
a decline in construction loans of $2.7 million and commercial loans of $1.0
million.
Deposits grew $45.5 million, or 10.9%, to $460.7 million at September
30, 2008 from December 31, 2007. Total borrowings increased $19.0 million, or
13.2%, to $162.7 million. The proceeds from the additional borrowings were used
to fund the growth in the loan portfolio, as loan growth outpaced deposit
growth.
ASSET QUALITY REMAINS EXCELLENT
The Company's asset quality continues to be excellent. Non-performing
assets totaled only $406,000 at September 30, 2008. The Company experienced no
charge-off activity in the nine months of 2008, compared to $5,000 in the same
period last year. The allowance for loan losses remained essentially unchanged
at 0.45% of total net loans at September 30, 2008 compared to 0.44% at December
31, 2007 and 0.46% of total net loans at September 30, 2007.
NET INTEREST INCOME INCREASES OVER PRIOR PERIODS
Net interest income increased $1.1 million, or 28.8%, to $4.9 million
for the third quarter of 2008 compared to $3.8 million in the third quarter of
2007. Net interest margin increased 39 basis points in the quarter ended
September 30, 2008 to 3.15% from 2.76% for the quarter ended September 30, 2007.
Interest income for the third quarter grew due to an increase in average
interest-earning assets of $70.1 million, which added $844,000 in additional
interest income. Offsetting the growth in interest-earning assets was a decrease
in the average yield of 14 basis points to 5.88%. Interest expense for the third
quarter decreased $246,000 due to a 49 basis point decrease in the average cost
of interest-bearing liabilities to 3.15%, which was partially offset by an
increase in average interest-bearing liabilities of $48.3 million. On a
linked-quarter basis, net interest margin increased 15 basis points to 3.15% in
the third quarter of 2008 from 3.00% for the second quarter of 2008.
Net interest income increased $2.7 million for the first nine months of
2008, or 24.6%, to $13.8 million compared to the same period in the prior year.
Net interest margin increased 26 basis points to 3.02% from 2.76% due to a 34
basis points decrease in the cost of interest-bearing liabilities, offset by an
8 basis points decrease in the yield on interest-earning assets.
OTTI CHARGE
During the third quarter, the Company recorded an other-than-temporary
impairment charge of $1.3 million to reduce the carrying amount of its
investment in a pooled trust preferred security to $700,000 at September 30,
2008. This security is held in the Company's available for sale portfolio. Prior
to recording this charge, the unrealized loss had been reflected as a reduction
to stockholders' equity through other comprehensive income. Therefore, recording
this charge has no effect on stockholders' equity. The decision to record this
non-cash other-than-temporary impairment charge was due to the significant
decline in the market value of this security, which resulted from a sharp
decline in trading activity, and information that there is the possibility of a
temporary suspension or reduction of distributions by the pool.
OTHER INCOME AND EXPENSES
Other income increased $53,000, or 7.8%, in the third quarter and
$110,000, or 5.7%, year to date over the same periods last year primarily as a
result of increases in service charges and fees. Other expenses increased
$357,000, or 11.3%, in the third quarter and $606,000, or 6.2%, year to date
over the same periods last year primarily as a result of increases in employee
compensation expenses and occupancy expenses.
This press release, as well as other written communications made from
time to time by the Company and its subsidiaries and oral communications made
from time to time by authorized officers of the Company, may contain statements
relating to the future results of the Company (including certain projections and
business trends) that are considered "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned," "estimated," "intend"
and "potential." For these statements, the Company claims the protection of the
safe harbor for forward-looking statements contained in the PSLRA.
The Company cautions you that a number of important factors could cause
actual results to differ materially from those currently anticipated in any
forward-looking statement. Such factors include, but are not limited to:
prevailing economic and geopolitical conditions; changes in interest rates, loan
demand, real estate values and competition; changes in accounting principles,
policies, and guidelines; changes in any applicable law, rule, regulation or
practice with respect to tax or legal issues; and other economic, competitive,
governmental, regulatory and technological factors affecting the Company's
operations, pricing, products and services and other factors that may be
described in the Company's annual report on Form 10-K and quarterly reports on
Form 10-Q as filed with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this release, and, except
as may be required by applicable law or regulation, the Company assumes no
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.
SELECTED FINANCIAL CONDITION DATA
SEPTEMBER 30, DECEMBER 31,
2008 2007 % CHANGE
--------------------- ------------------- -----------------
(DOLLARS IN THOUSANDS)
Total assets................................... $695,710 $629,523 10.5%
Cash and cash equivalents...................... 14,185 9,540 48.7
Investment securities.......................... 36,881 22,273 65.6
Mortgage-backed securities .................... 28,988 36,643 (20.9)
Loans receivable, net.......................... 579,045 528,058 9.7
Deposits....................................... 460,683 415,231 10.9
FHLB advances.................................. 145,000 120,230 20.6
Subordinated debt.............................. 15,464 15,464 0.0
Other borrowings............................... 2,250 8,000 (71.9)
Stockholder's equity.......................... 64,215 63,047 1.9
SELECTED OPERATING DATA
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------
2008 2007 % CHANGE 2008 2007 % CHANGE
-------------- -------------- ------------- --------------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE AND PER SHARE AMOUNTS)
Interest and dividend income........... $ 9,092 $ 8,248 10.2 $ 26,904 $ 23,914 12.5
Interest expense ...................... 4,222 4,468 (5.5) 13,083 12,826 2.0
----------- ---------- ----------- -----------
Net interest income............... 4,870 3,780 28.8 13,821 11,088 24.6
Provision for loan losses.............. 114 48 137.5 273 198 37.9
----------- ---------- ----------- -----------
Net interest income after
provision for loan losses........... 4,756 3,732 27.4 13,548 10,890 24.4
Other income........................... 733 680 7.8 2,025 1,915 5.7
Impairment on investment securities.... (1,296) - N/M (1,610) -- N/M
Other expense.......................... 3,530 3,173 11.3 10,320 9,714 6.2
----------- ---------- ----------- -----------
Income before taxes.................... 663 1,239 (46.5) 3,643 3,091 17.9
Provision for income taxes............. 322 428 (24.9) 1,483 1,160 27.8
----------- ---------- ----------- -----------
Net Income........................ $ 341 $ 811 (57.9) $ 2,160 $ 1,931 11.9
=========== ========== =========== ===========
Earnings per share basic $ 0.04 $ 0.10 $ 0.27 $ 0.24
Earnings per share diluted $ 0.04 $ 0.10 $ 0.27 $ 0.23
Average shares outstanding basic 8,007,999 8,088,991 7,999,467 8,127,967
Average shares outstanding diluted 8,091,415 8,206,667 8,095,745 8,257,387
N/M - not measurable
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2008 SEPTEMBER 30, 2007
--------------------------------- --------------------------------
AVERAGE AVERAGE
BALANCE YIELD/COST BALANCE YIELD/COST
-------------- --------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Loans $ 574,272 5.84% $ 475,493 6.03%
Investment securities 43,345 6.49% 62,717 6.07%
Other interest-earning assets 933 1.16% 10,242 4.94%
---------- ----------
Total interest-earning assets 618,550 5.88% 548,452 6.02%
Interest-bearing deposits $ 377,632 2.62% $ 388,372 3.24%
Total borrowings 159,014 4.39% 102,948 5.15%
---=------ ----------
Total interest-bearing liabilities 536,646 3.15% 491,320 3.64%
Interest rate spread 2.73% 2.38%
Net interest margin 3.15% 2.76%
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2008 SEPTEMBER 30, 2007
--------------------------------- --------------------------------
AVERAGE AVERAGE
BALANCE YIELD/COST BALANCE YIELD/COST
-------------- --------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Loans $ 557,461 5.85% $ 454,893 5.99%
Investment securities 49,173 6.42% 66,322 5.86%
Other interest-earning assets 4,061 2.20% 14,239 5.24%
---------- ----------
Total interest-earning assets 610,695 5.87% 535,454 5.95%
Interest-bearing deposits $ 382,460 2.74% $ 388,417 3.22%
Total borrowings 156,089 4.46% 88,851 5.16%
---------- ----------
Total interest-bearing liabilities 538,549 3.24% 477,268 3.58%
Interest rate spread 2.63% 2.37%
Net interest margin 3.02% 2.76%
ASSET QUALITY DATA
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2008 2007
------------------------------------
(DOLLARS IN THOUSANDS)
Allowance for Loan Losses:
Allowance at beginning of period..................... $ 2,307 $ 2,050
Provision for loan losses............................ 273 261
Recoveries........................................... 3 4
Charge-offs.......................................... 0 8
------------ -----------
Net charge-offs...................................... (3) 4
------------ ------------
Allowance at end of period........................... $ 2,583 $ 2,307
Allowance for loan losses as a percent of total
loans................................................ 0.45% 0.44%
Allowance for loan losses as a percent of
nonperforming loans.................................. 636.21% 779.88%
SEPTEMBER 30, DECEMBER 31,
2008 2007
----------------------------------------
(DOLLARS IN THOUSANDS)
Nonperforming Assets:
Nonaccrual loans:
Mortgage loans.................................... $ 337 $ 295
Commercial business loans......................... 0 0
Consumer loans.................................... 69 1
----- -----
Total........................................ 406 296
Real estate owned.................................... 0 0
Other nonperforming assets........................... 0 0
----- -----
Total nonperforming assets........................... $ 406 $ 296
Nonperforming loans as a percent of
total loans....................................... 0.07% 0.06%
Nonperforming assets as a percent of
total assets...................................... 0.06% 0.05%
SELECTED FINANCIAL RATIOS
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
2008 2007
-------------- --------------
SELECTED PERFORMANCE RATIOS:
Return on average assets (1)............. 0.44% 0.45%
Return on average equity (1)............. 4.49% 4.08%
Interest rate spread (1)................. 2.63% 2.37%
Net interest margin (1).................. 3.02% 2.76%
Efficiency ratio......................... 64.92% 74.71%
(1) Annualized.