Map highlighting New Jersey (AP)
By Michael L. Diamond, The Asbury Park (N.J.) Press
Some banks in and around the Jersey Shore have set aside money in the fourth quarter to give themselves a cushion in case borrowers whose property was damaged by superstorm Sandy decide to stop paying their loans.
The decision by OceanFirst Financial Corp. and the parent company of Two River Community Bank lowered their profits for the quarter. But OceanFirst's chief executive said the move would help put Sandy's financial damage behind the bank.
"We're still mildly afraid of what we don't know," John Garbarino, OceanFirst's chairman and chief executive officer, said during a conference call with investors last week.
Sandy damaged thousands of homes statewide with floods and winds, forcing banks, particularly those based in the region, to assess how many of their borrowers may have trouble paying their mortgages.
The risk for banks is that borrowers will decide to walk away from their properties and default on their loans.
OceanFirst said last week that its net income was $4 million, or 23 cents a share, for the quarter, down 26 percent from $5.5 million, or 30 cents a share, the same quarter a year ago. It set aside $1.8 million for the potential of bad loans due to Sandy.
The company reported net income of $20 million, or $1.12 a share, in 2012, compared with net income of $20.7 million, or $1.14 a share, in 2011.
OceanFirst, based in Toms River, N.J., is the biggest bank headquartered in Ocean County with $2.3 billion in assets. It has 24 branches in Ocean, Monmouth and Middlesex counties -- a footprint that bore the brunt of Sandy.
Meantime, Tinton Falls-based Community Partners Bancorp on Monday reported net income of $1.1 million, or 14 cents a share, up 3.2 percent from the same quarter a year ago.
The parent company of Two River Community Bank said it set aside $204,000 to cover the potential for bad loans due to Sandy.
The company reported net income of $4.4 million, or 54 cents a share, in 2012, compared with $3.5 million, or 44 cents a share, in 2011.
Community Partners has $733.9 million in assets and 16 branches in Monmouth and Union counties.
OceanFirst executives told analysts during the conference call that the bank worked with borrowers in the aftermath of Sandy, offering some 60 to 90 days of relief. None of the borrowers, however, has said they don't plan to honor their debt.
Still unclear is whether businesses and homeowners will receive enough money from their insurance claims to cover rebuilding costs. Some OceanFirst customers -- two yacht clubs and a nightclub, for example -- are making their debt payments by reaching into their own pockets, Garbarino said.
Meantime, some loans to either buy a home or refinance a mortgage were scuttled by Sandy, he said.
"It's remarkable the recovery that's been undertaken," Garbarino told analysts. But "it would be foolish to expect it's going to be business as usual as we enter 2013."