OceanFirst Financial Corp (OCFC) 2009 Q4 法說會逐字稿

Good morning and welcome to the OceanFirst Financial Corp. earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Jill Hewitt. Please go ahead, ma'am.

Thanks, Andrea. Good morning and thank you all for joining us. I'm Jill Hewitt, Senior Vice President and Investor Relations Officer; and we will begin this morning's call with our forward-looking statement disclosure.

This call as well as our recent news release may contain 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 word 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 US government, including policies of the US 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 such statements. The Company does not undertake and specifically disclaim any obligation to publicly release the results 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.

Thank you. And now I will turn the call over to our hosts this morning, President and Chief Executive Officer, John Garbarino; Chief Operating Officer, Vito Nardelli; and Chief Financial Officer, Michael Fitzpatrick.

Thank you, Jill, and good morning to all who have been able to join in on our fourth-quarter and year-end 2009 earnings conference call today. OceanFirst has just concluded its 107th year of continuous operations and our 14th as a publicly traded company.

It is no small understatement to note that the past 12 months have brought unprecedented challenges to the entire industry, and we are proud of the response our Board and management team has engineered in this period of financial turmoil.

We have posted solid, consistent core earnings for the year. We have continued to be an active lender, serving the needs of our communities. We have taken actions to build and preserve our capital in the interests of our shareholders, fortifying our balance sheet in the face of enormous market uncertainties.

We appreciate your interest in our performance and are pleased to be able to review these issues, along with our latest operating results, this morning. You have all had the opportunity to review our release from Thursday; and following our usual practice, I will not be disrespectful of your time, reciting a host of actual numbers from the release. My introductory comments will merely help frame our opportunities, to add some color to the financial results posted for the quarter and year.

On a diluted earnings per share basis of course we posted $0.12 for the quarter. This is reflecting $0.10 of nonrecurring expense items. Excluding these extraordinary items, our core earnings were $0.22 for the quarter.

The Company's 52nd quarterly cash dividend declared was also $0.12 per share, equal to the reported quarterly EPS. The Board remains committed to a strong cash dividend policy -- fully compatible, however, with our need to build and preserve capital. Accordingly, our Board continues to target a cash dividend payout ratio of approximately 50% of quarterly earnings.

The two nonrecurring items in the fourth quarter I referenced that reduced our reported earnings by $0.10 were a $703,000 tax affected item related to our terminated plan to acquire Central Jersey Bancorp and $1.1 million of unaccreted discount on our U.S. Treasury's Capital Purchase Program preferred stock repayment. There was also 4% of EPS dilution in the quarter due to the higher share count, the result of our November follow-on common stock offering.

The quarter's earnings have again benefited from an expanding net interest margin, which increased 3 basis points from the previous quarter, primarily attributable to liability cost decreases as our core deposit ratio climbed above 77% of deposits at year-end. Average interest earning assets increased only slightly for the quarter, largely due to an increase in mortgage-backed securities as we began to immediately invest and leverage the fresh capital infusion from our follow-on offering in the fourth quarter.

Working against this favorable news was a necessary increase in our loan loss provision at year-end, reflective of increased credit costs during the quarter. Chief Operating Officer Nardelli will speak to these credit issues shortly.

In this market, we remain heavily focused on the strength of our balance sheet, as opposed to being preoccupied with either short-term income or asset growth. With this strategy, our consistent 2009 earnings, and fresh capital raise, we bolstered our tangible common equity ratio, which increased to 9.23% of assets from 6.45% one year ago.

As noted earlier, I will now ask Vito Nardelli, our Chief Operating Officer, to again bring you up-to-date on our credit quality and increased loan loss provision for the quarter.

Thank you, John. Good morning, everyone. I'm pleased to update you this morning on the asset quality here at OceanFirst Bank. Credit culture at the Bank continues to be as it has been for many years -- conservative and disciplined. Of course, OceanFirst is not immune to the economic stresses affecting both the state of New Jersey and the nation as a whole.

Quarter-over-quarter we, along with industry, saw a rise in nonperforming loans. The increase was 20% or $4.8 million, bringing the total nonperforming loans to $28.3 million or 172 basis points of total loans receivable.

The lion's share of the increase is in the residential and consumer portfolios. Included in the $3.3 million quarterly increase in the residential nonperformers is $2.3 million in modifications provided to borrowers who are current as to payments, but whose loans have not yet performed for six months under the modified terms.

The increased level of nonperforming loans for OceanFirst remains substantially less than the industry and peer measures, and is a result of the current economic condition and not indicative of weakened underwriting standards.

Nonperforming commercial and commercial real estate loans increased quarter over quarter by $562,000.

The largest nonperforming loan remains a residential mortgage loan in the amount of $3.5 million that is well secured and where the Bank expects to suffer no loss. As to nonperforming commercial credits, the largest is a $2 million relationship that is secured by real estate appraised at $3.1 million.

During the quarter, we realized net loan charge-offs of $1,157,000. Included is a charge-off of $797,000 for a single commercial loan; the collateral property, which is now held as an REO, was devalued due to limited probable use.

After evaluating the Bank's delinquency profile and considering the current economic environment, including the likelihood that some time will still be needed to pass before meaningful recovery may become apparent to both homeowners and local businesses, we have increased our provision for loan losses for the quarter to $2.2 million. We felt that this increase was the prudent action to take, even though the rise in the level of nonperforming loans grew 28 basis points quarter-over-quarter.

As I have said many times before, our commitment to both credit quality and strong credit culture remain unwavering. With that, I'll return discussion back to our Chief Executive Officer, Mr. Garbarino, for some concluding comments, prior to engaging in a question-and-answer session this morning.

Thank you, Vito. Before taking your questions, I would like to briefly once again reflect on the extraordinary events our financial system has endured over the past 16 months.

Throughout this turbulent period, we have been continually challenged by the markets and unprecedented governmental interventions to address each rapidly evolving crisis. We initially chose to participate in the U.S. Treasury's Capital Purchase Program, until the unintended consequential stigma became attached to the program and challenged us to accelerate our exit strategy with a common stock qualified equity offering later in the year.

The Treasury investment was formally retired just prior to year-end, and we are actively negotiating the repurchase of our common stock warrant from Treasury, which has now been halved as a result of our qualified equity offering.

We announced a strategic combination with Central Jersey Bancorp, a local community bank, just prior to midyear 2009, which we believe offered a wonderful opportunity to increase and enhance our market franchise. Unfortunately, a lagging regulatory review process engendered a termination of the transaction, as permitted by the definitive agreement, before the end of the year.

With this as a backdrop, our outlook for 2010 continues to be cautious and restrained. Yet we continue to see encouraging signs and undeniable opportunities that will likely present themselves as a result of our actions taken over the past year to strengthen our Company.

With that, Misters Nardelli, Fitzpatrick, and I would be pleased to take your questions this morning.

(Operator Instructions) Sandy Osborne, Keefe, Bruyette & Woods.

Morning, gentlemen. I was just wondering if you could give us an update on the M&A outlook, now that CJBK is off the table. Are you guys seeing any assisted deals coming through the pipeline?

And if not, are you interested in taking another stab at a non-FDIC-assisted transaction?

Yes, Sandy, we look primarily for any type of opportunity that might present itself largely within our existing or immediately adjacent to our footprint. And we really don't see any FDIC-assisted deals in that area.

That's not saying if one did become available we might not take a look at it; but we certainly haven't seen any to date. We routinely take a look at opportunities that might present themselves.

We think Central Jersey was the premier opportunity, and it was unfortunate that in the current regulatory climate we just couldn't manage to languish in the approval process; and so we had to move on. But in terms of other things that are active, of course we would never be able to comment on that. We wouldn't comment on anything that wasn't publicly disclosed.

All right. Then just a question on the outlook for the margins. Just curious if there's any more buckets of CDs that are going to replace in the first quarter.

Well, yes -- and you know, the question is how far we can take the core deposit ratio. I mean as we talked about, we had very good experience here in the fourth quarter and the margin continued to expand 3 bps, with our ratio approaching 80% now.

We have been particularly disciplined in prices of CDs. We think we are hitting a core inelastic demand situation as far as the CD population is concerned, and most of the hot money has departed.

Likewise, we haven't really paid up for the core deposits. So I don't think there is too much more we can do to stretch that.

In terms of our borrowings repricing, we are obviously looking to lengthen those borrowings as we enter the year in 2010. So I'm not sure that there is too much left in the margin. I don't know, Mike, do you want to add anything to that?

Well, it's a little bit of repricing down and still to go, but it's starting to level off again. We still have $85 million in Home Loan Bank borrowings that are 5.05% that are going to reprice down probably at least 2%. And then in the next six months we have $167 million in CDs at 1.3%, which seems like a low number, but that would likely continue to reset down into the 1% neighborhood. So there is still some repricing down.

But I think offsetting that is some of the investment. The investment of our common stock offering proceeds went into MBS, so that's going to shrink the margin a little going forward. So I think that might be offsetting each other.

So, like John says, I think we're probably looking at some margin flattening here.

All right. That's very helpful. Thanks.

Frank Schiraldi, Sandler O'Neill.

Morning. Just a couple questions. I wondered if -- last year at one point you put out a slide that showed one-to-four family, the weighted average loan-to-value of the portfolio. Do you have any updates to that? Or do you have a number as of the end of the year?

My gut reaction says that it would not have changed very much. Mike is looking through our (multiple speakers).

No, I just have the one from last time. No, I don't have that updated.

That was June of '09. So I think in the last six months, that's likely not to have changed dramatically.

Okay.

I think a lot of the lending that we did in the second half of this year, even the refinance lending that did, was not a lot of cash out. So I don't think that there was a lot of leverage up in terms of residential portfolio during the second half of the year.

It seems to me that the loan amounts on our purchase money mortgage origination also were kind of in line with what we had seen in the past -- in fact even a little bit lower than prior years as prices have moved down. So I don't think that it's increased that leverage all that much.

In terms of the loan portfolio for next year, obviously we've seen continued commercial growth while residential has run off a bit. With refi maybe behind us to a certain degree, do you think we'll see continued decent commercial pipeline? And then maybe the residential will hold, so we will see some loan growth coming in the next couple of quarters or so?

Yes, I think we are likely to see growth on both ends this year, Frank. We're attempting to leverage up that capital raise with our own loan production where we possibly can.

Clearly in the short run we can buy some MBS and take care of it that way. But longer-term we are looking at increasing our production without any sacrificial nature to our underwriting standards.

But in the past, we have been much more aggressive sellers of our residential production; and I think that our business plan for 2010 calls us to retain a little bit more of that. We are likely to think also that some of the very attractive margins on sale that we've seen over the past year might start to shrink down. So it might be an opportunity for us to keep a little more in our portfolio.

But we have some growth targets for right across the board, from our consumer to our commercial to our residential portfolio for 2010.

Okay. Thanks. Then just finally, I know this is a tough question to answer, but in terms of provisioning, in terms of the provision in the fourth quarter, linked quarter to the third, would you say that it partly involves some sort of year-end cleanup or conservatism? Just trying to get a sense of if we may see a downtick in 1Q next year?

Yes, I would like to think so, Frank. It's going to depend upon what our experience is on quarter-to-quarter. But I think you are certainly right.

I don't think we skimped on the provision in the fourth quarter. I don't think we wanted to look upon it as a kitchen sink quarter necessarily.

But we kind of got the feeling as we ended the year that we had a little kickup -- not in our commercial portfolio, but our residential portfolio. And that began to concern us.

We took another look at the way we were reserving on a general basis for our residential production. And knowing that we are going to go through some portfolio increase in 2010, I think we wanted to bring our reserves a little more in line with where we felt them to be comfortable.

We might have been accused of being a little thin right through the first three quarters of the year. And then given our experience in the fourth quarter, I think we were willing to beef if up a little bit.

So I think your perception is right. And if we see credit conditions moderate into 2010, I think you might see some ability to pare that back.

But I don't want to forecast that. Our overall budget has some pretty aggressive provisioning in there for the entire year.

Okay. Thank you.

Laurie Hunsicker, Stifel Nicolaus.

Yes, hi, John. Good morning. Just to circle back to Sandy's question on margin, do you have the month margin available, month of December?

The month of December?

Yes.

It would have been comparable to where we ended the year at. It wasn't expanding at the end of the year.

Okay, okay. Then with respect to how you are viewing the landscape. I notice you touched on M&A. But maybe you could expand a little bit in terms of your thoughts on potentially exploring de novo branches, and how you look at that. How you weigh up breakeven in this interest rate environment, if that is something you would do.

Vito, I'll let you talk to that.

Hi, Laurie. Good morning; it's Vito. We continue to look at organic growth opportunities as well as acquisitions. And if we see an opportunity, we'll take it.

We really -- I don't think we have a very large pipeline of sites right now. But there's one or two that we might have some interest in. So we're not going to exclude that possibility for 2010.

Okay. How small an acquisition would you consider doing?

Small is always a relative term, but I mean there are some brand-new de novos in the market that I don't think would be interested in making themselves available.

I think the approach we used when we looked at Central Jersey Bank was to take a look at the strengths of our Company and what strengths we could bring to a bank that we would acquire. If it lined up in such a fashion that we saw that we had sufficient strengths, it really wouldn't matter as to size. So long as we could match our strengths against the acquired company, we would obviously look at it.

I think the other thing that's important for us is that whoever we looked at would have to have strategic value for us. Sometimes with these assisted deals there is no strategic value. So we would lean more heavily towards a strategic acquisition rather than just look at what appeared to be a bargain-basement price or fire sale from the regulators.

Okay, great. Then just last question on the credit side, the $3.5 million resi loan that came on nonperforming, do you have any further details such as recent appraisal, LTD, location?

We are looking as we speak, Laurie.

The one that we talked about this morning has a recent appraised value of $4,050,000.

Okay.

Laurie, were you talking about -- we had one -- Vito was referring to one mortgage loan that came on in the third quarter, which he talked about at last quarter's conference call. And then you were talking about the increase in the fourth quarter?

The increase to the fourth quarter, correct.

Okay, just the fourth quarter increase. Okay. Go ahead, Vito.

Not the single loan.

Yes, not the single; okay.

I'm sorry. Maybe I am confused. The single loan, the $3.5 million.

Yes, we had that huge jumbo loan that we talked -- but that was actually a third-quarter item, Laurie, that we talked about last time. That is still in a nonperforming status; but we suspect that that might be able to be cured early on in 2010. Or at least that's what our workout people are telling us.

Okay. Then the linked-quarter increase also came from resi. So the largest piece of that, how big was that?

I don't think there was anything that was extraordinarily large in that piece.

Okay.

We're just looking at the list now.

Okay.

$600,000, $700,000 was the largest loan in that entire increase.

Okay. All of this was located in New Jersey?

Yes. Yes, it's all local. It's all local product for us.

Okay, and then the same with the $3.5 million loan from last quarter?

Yes.

New Jersey? Okay.

The $3.5 million loan, in fact, I think we previously identified was up in Franklin Lakes, New Jersey.

Okay. Then the CRE charge-off of nearly $800,000, what percentage was that written down?

That was actually an REO charge-off right at the end of the quarter. It was a piece of commercial real estate that was converted to real estate owned, and an appraisal really decimated the value there. It completely disallowed any value for the structure that was on the property; and it just got it down to real estate.

It was 43% writedown, Laurie, from the book value.

I'm sorry. How much?

43%.

43%. Okay, great. Thank you very much.

(Operator Instructions) [Robert Gardell], a shareholder.

Good morning, Robert.

My name is Bob Gardell. I live in Wall Township and Vero Beach, Florida.

I hope you are in the warmer of those two right now.

Yes, right now I'm in Florida. The reason I'm calling, I'm concerned about the -- I'm a customer and a shareholder. And I depend upon dividends because I am an old retired guy, and I don't like getting a 40% dividend reduction.

I share your pain, Robert. I say that literally. We don't like to reduce it either. The simple fact of the matter is that a healthy financial institution or any operating business or any operating family budget cannot simply continue to return extraordinarily large amounts of current earnings to shareholders. That's a recipe for long-term disaster.

I understand.

And we have maintained that dividend for quite some time, I think returning extraordinarily high percentages of our current earnings back to shareholders. And that's a bit disingenuous when we are trying to build and preserve capital on our balance sheet.

So I think the action that our Board has taken for this quarter has taken the dividend down to a more sustainable level that will be -- approximate 50% of our earnings. I understand that as a retail shareholder -- and again, I share your pain, because I am also a retail shareholder; I don't want to see that check reduced.

Right.

But I think that is in the long-term interest of our shareholders, and that's the focus that we try and bring on capital management.

Okay. I just (technical difficulty) you to hear from a live shareholder versus a (multiple speakers).

No, I can appreciate that.

I listen to all the calls; they are all institutions and --

Bob, I suspect that we're going to have this conversation with a lot of our live shareholder over the coming week.

Yes, okay.

I really do. Because I understand that we held out any cut in that dividend for quite some time -- some would argue, longer than we maybe should have. So we did it because we are sensitive to the needs of our retail shareholders, to the needs of our local market, the people that have shares in the Bank. And we understand the expectations and people that invest in local community banks are that there will be a healthy dividend there.

I would point out that the dividend yield, even as it's been reduced, is still in the 4.5%, 5% range. So it's still producing a healthy yield.

Okay. Well, I just wanted to let you know my feelings.

That's fine, Bob.

I wish you well and hope you will be able to grow that in the future.

I thank you for your question.

You're welcome. Take care.

Thanks, Bob.

(Operator Instructions) Ross Haberman, Haberman Fund.

Good morning, gentlemen. Could you discuss the state of the commercial real estate world locally as well as residential? You've seen prices on both stabilizing, getting softer? What's your opinion about it over the coming year? And then I've got one follow-up.

Well, it's always an excellent question, Ross, and it's a big question in terms of the universe that's out there. But we think, and as we have answered it in the past, that our market is not necessarily indicative of what's going on in the broader market. You know, most of our commercial real estate is owner-occupied and it's local and it's of the much smaller variety than when we think of commercial real estate in a much bigger sense.

The experience that we had with this write-down on this one particular property at year-end was really a little unusual in that that was a car dealership, a Chrysler dealership that was closed down during the year. The appraisal kind of amazed us when the appraisal came in and just basically discounted any value whatsoever to any of the structure on the property.

So we think that that is kind of an outlier. I don't think that is in any way indicative of the type of price retreat that we may have seen in the commercial real estate market in general locally.

I think the market has held up real well. I tell people this all the time. You don't see a lot of vacancies. You see some, but you don't see a lot.

We don't see appraisals retreating all that much. We think the appraisal industry, in general -- the appraisal profession, in general -- is a little on the cautious side. But we see values hanging in there pretty good in the local market.

I think that that's not necessarily the case in the broader commercial real estate market in terms of what you read in the trade press. But we think locally, despite our experience with this one particular credit at year-end, we think values have held in there pretty well.

And residential, on the residential side, are you seeing other banks --?

Residential also the values have held well. But we do see a little bit of concern in the continued increase in our delinquencies. Our commercial delinquencies have pretty much flattened out; but our residential delinquencies are continuing into the fourth quarter to creep up.

It's not anything that's terribly alarming, but it's a definite creep. So again that goes back to the loan-loss provision that we -- the question we answered earlier in terms of the provision.

I think we want to be -- we don't want to be accused of being stingy with that provision at any point in time. And we remain concerned about the residential metrics in terms of delinquencies.

The market values, again, we see as fairly stabilized. We don't see a lot of retreat in the local real estate market.

It's not as we all experienced in the '80s and '90s where you have borrowers coming in giving you the keys. There is equity that remains in these properties, and you don't see people abandoning them.

I think when you reach that level, that's when you really get concerned about the residential real estate; and let's hope we don't reach that level at any point in the future.

What kind of loan growth are you expecting in 2010?

Well again, we're trying to budget for fairly aggressive growth. We think we have some ability to do that. That will necessarily entail some retreat in our loans sold.

Mike, I think, is looking for an actual number for you as I am speaking around it.

Aggressive, I would say 10% to 15%; that would be my aggressive.

Yes, well --

No, that's not our aggressive.

It would depend in what segment you are talking at, also, whether you are talking about consumer, commercial, or residential.

(multiple speakers) 5% to 10%, Ross.

5% to 10%? Okay, and just one final question. Going back to the prior question about the dividend, have you set the policy -- or I should say the new policy is that you are only going to pay out half of earnings? Or --?

Well, we consider that more than a policy, a target, Ross.

Okay.

I think our Board is willing to look at that. And of course, we violated it right off the bat here, because we paid out 100% technically of our reported earnings in the quarter. But it was obviously an unusual quarter when you take out those extraordinary items.

But even if you take out the extraordinary items, we were probably just north of 50%. I think we have based the $0.12 as sustainable under most economic circumstances. I think if you look at most analyst estimates that are out there, they range from $1.00 to $1.05 a share. If you factor in $0.48, $0.50 annual dividend, you are getting the payout ratio.

That's not -- rather than a policy, I would say it's a target that our Board is looking at.

We certainly don't want to go through any type of repeated cuts in the dividend. We want to get a level that we think is sustainable under most economic circumstances. And I think with $0.12, we are comfortable with that.

Okay, guys. Thanks again. Have a good weekend.

Okay, Ross. You too. Stay warm.

(Operator Instructions) Preston Foulks, Principal Financial Group.

Good morning. Most of my questions have been asked from the prior callers. I'm new to your Company from the secondary. One question I just had is on the release I've seen -- and this might be an old question -- is you had something with a Columbia Home Loans, and it said it was shuttered in 2007.

And there was something in the release about subprime loans. How are the subprime loans? Are you doing anything to help those customers? Or is that an issue going forward? Are they the ones defaulting on your residential mortgage side?

Well, Preston, you are right, that is a question that goes back quite some time. We did have a mortgage banking subsidiary that was heavily involved in subprime lending that we jettisoned some time ago.

Very little of that portfolio remains with the Company today. Most of it has, in fact, departed.

And we treat a subprime loan the way we would a prime loan that would be in the Bank's core portfolio in terms of any loss mitigation efforts or modification strategies that we might employ. If it makes good business sense for us, we simply avail ourselves of all the tools that are out there to either modify the loan for the benefit of the borrower and mitigate our loss.

But it's got to make good business sense for us.

I hear you.

It's not a charitable undertaking, certainly.

And the last question I had is from your prospectus back when your secondary is. I didn't follow your Company last year, but what was the reason for you to take the funds from the -- was it the TARP funds or the Treasury?

Right, the Capital Purchase Program. Well, if you can go back in time to a little over a year ago --

I know things were bad back then, so --

Well, things were bad. And the Capital Purchase Program, which was one of the programs under what is generically referred to as TARP, was set up by the federal government as a stimulus program. It was set up to make investments in healthy financial institutions only, that would allow those financial institutions to continue to lend to the market. Because there was a concern that financial institutions were not lending in the market.

We were approached by regulators; and as a healthy financial institution we accepted the Treasury's offer of a capital investment. It was a capital preferred stock investment, and we felt we were doing the right thing in terms of continuing to lend in the market.

The program quickly became corrupted by the media and by Congress to treat it as a bailout program. And people immediately looked upon it as a bailout for sick financial institutions, which is never the way it was intended.

When that stigma became attached to it is when we decided that we don't want to be a part of this program. We didn't have to be. There was never any need for us to do it. We, in fact, responded to the call of our government that said we want the healthy institutions to participate; and that's what we did.

When it went in the other direction, that's when we, as I said in my opening comments, accelerated our exit strategy to get out of the program. Because it definitely became corrupted, and we didn't want to be associated with a corrupt program.

Then the last question is, in your statement you said you see growth in the commercial. You mentioned some things in prior calls. But in your area, where do you see the growth for 2010? What areas are concentrating in for commercial real estate?

If you are familiar with our market area, it's really along the Jersey shore, along the Jersey shore coast. It runs from an area about 40 miles south of Manhattan to just say north of Atlantic City. It's an area that has been extraordinarily vibrant, and it's really led the state of New Jersey in terms of growth, in terms of per capita income, in terms of population growth.

Okay.

So we see our market area as somewhat unique and somewhat more attractive and the demographics of it are somewhat more attractive than what you might see in neighboring communities. So every day, we still see single-family home construction. We still see commercial real estate construction. And there is still a migration of families and population into our communities.

So it's kind of the contrary from what you see in other areas that are really suffering. I count my blessings on numerous occasions, because I feel that -- as I've mentioned before -- that we haven't really suffered as much as other areas of the state and certainly the northeast and God only knows the rest of the country has suffered.

I think that we are somewhat insulated from that. So we see pockets of growth throughout our market area.

Okay. Thanks for taking my call.

Thank you. Thanks for your interest, Preston.

At this time we have no further questions.

Well, thank you, Andrea. If there aren't any further questions, I will thank everyone once again for their interest.

We are certainly happy to start off 2010 with some optimism in our voice. As I say, we do see encouraging signs in the market, and we're hopeful that we'll be able to be as optimistic as we might be today when we talk to you next at the end of the first quarter. Thank you again for your interest.

This concludes today's conference. Thank you for attending. You may now disconnect.