OceanFirst takes an aggressive stance in selling problematic loans
OceanFirst Financial in Toms River, NJ, suffered a third quarter loss after taking a more aggressive stance on credit issues.
The $ 11.7 billion asset company lost $ 6 million, or 10 cents a share, after transferring nearly $ 68 million in loans, including $ 45.4 million from forbearance, to statute held for sale and recorded an allowance for loan losses of $ 35.7 million.
OceanFirst has called the measures a strategic decision aimed at accelerating the resolution of credit losses linked to the coronavirus pandemic.
OceanFirst earlier this year joined with a majority of banks in postponing loan repayments to customers affected by the aftermath of the pandemic. He was, however, among the first to lay the groundwork for offloading stressed assets.
“The ongoing global pandemic has created significant challenges for individuals and businesses. In an effort to maintain a strong focus on helping our borrowers rebuild the economy, we have chosen to accelerate efforts to address our riskiest loans, ”Chief Executive Officer Christopher Maher said in the statement. of the company’s results Thursday.
“Although our quarterly results were disappointing, our disciplined actions and our continued sound risk management paved the way for better results in the coming quarters,” he added.
Forbearance loans, excluding those transferred to hold for sale, totaled $ 209.6 million, or 2.6% of the entire portfolio, as of October 23. Forbearance loans peaked at nearly a fifth of all loans in the second quarter.
The company said it expects its forbearance portfolios “to be negligible” on December 31.
About $ 30 million in loans in New York City were liquidated in mid-October, with a recovery of 85%. The company plans to liquidate $ 51 million in loans in New Jersey and Pennsylvania by the end of November, with an expected recovery of 82%.
OceanFirst recorded net write-offs of $ 15 million in the third quarter, representing a reversal of $ 232,000 in net recoveries from a quarter earlier.
The company also said it plans to sell nearly $ 300 million in paycheck protection program loans by the end of this year.
OceanFirst’s decision to offload problematic assets is “certainly more aggressive” than what other banks are doing, Piper Sandler analyst Frank Schiraldi wrote in a client note.
“Despite the loss this quarter … we believe management’s shares should be welcomed as they provide a clearer short-term outlook for the stock,” wrote Will Curtiss, analyst at Hovde Group, in a note to clients.