OceanFirst Financial (OCFC) in Toms River, N.J., expects to increase its fourth-quarter loan-loss provision because of Hurricane Sandy and new regulatory guidance for borrowers who have filed for bankruptcy.
The $2.3 billion-asset company will add $1 million to $3 million to its provision for loans losses because of the storm and bankruptcy guidance, OceanFirst said last week in a regulatory filing. In October the company reported a loan-loss provision of $1.4 million for the third quarter and $4.8 million for the first nine months of the year. It posted earnings of $5 million for the quarter and $16 million for the first nine months of the year.
OceanFirst Bank's primary market of northeastern New Jersey was hit hard by Hurricane Sandy in late October. The bank is providing payment deferrals to residential borrowers affected by the storm for two months without penalty, the company said. An additional two-month extension will also be considered, OceanFirst said.
Through Dec. 18, 114 borrowers with residential loans had requested a payment deferment. The outstanding principal balance for this pool of borrowers was $25.2 million, with an average loan size of $221,000 and a weighted average loan-to-value ratio of 59%. Seventy percent of these loans are located in a flood zone. The bank requires flood insurance on all properties in a flood zone.
Only three commercial real estate borrowers with a combined outstanding loan balance of $3.6 million have reported substantial property damage. Each of these loans maintains a loan-to-value ratio less than 25%.
At Sept. 30, $213.6 million of the bank's one-to-four family residential loans were in a flood zone, representing roughly a quarter of this loan portfolio. Additionally, $38.8 million, or about 19%, of the bank's home equity loan and line balances and $91.5 million, or roughly 19%, of its commercial real estate portfolio were in a flood zone.
The company said it also expects to record chargeoffs relating to residential loans where the borrower has gone through Chapter 7 bankruptcy. This is based on guidance issued by the Office of the Comptroller of the Currency that requires banks to move these loans, even ones that are performing, to nonaccrual status because the borrower poses a higher risk of default.
OceanFirst said that its management is continuing to evaluate the impact of the storm and the bankruptcy chargeoffs relative to the adequacy of its allowance for loan losses.
OceanFirst's president and chief operating officer, Vito R. Nardelli, stepped down at the end of August while the company's chairman and chief executive, John R. Garbarino, assumed his responsibilities until a replacement is found.