OCFC - Earnings call transcript Q1 2019 | OceanFirst Financial Corp.

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Operator

Good morning and welcome to the OceanFirst Financial Corporation Earnings Conference Call. All participants will be in a 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. ahead. go Please,

Jill Hewitt

Good us. Andrea. Investor thank all you Officer Thank Jill morning, Hewitt, joining Corp. I'm OceanFirst and Senior for at you, Financial and Vice Relations President

materially our in will other including forward-looking many to We differ these public our contain XX-K, will expectations. filings, and on today our the statements, remarks morning's cause this press Maher. Refer will actual Christopher Thank where And forward-looking morning, this call Officer, find could to you. of to you statements. that statements Please turn factors our remember begin results disclosure. the that based current our Chairman Factors forward-looking Risk from with now, I release Executive call and Chief over host

Christopher Maher

to Chief and morning, who Lebel; Officer, join conference Jill, able to XXXX morning our first This and call Financial today. Mike you, by been Operating good our joined Fitzpatrick. have quarter earnings Officer, Joe Chief am all I Thank

appreciate be able As always, our to are you. discuss with your and performance we results operating to pleased our in interest

practice, questions. our for then we'll the look and a taking items, add few been some results color quarter, has As we to forward posted key to your the highlight

that In $X.X per impacted Quarterly charges quarter, reported and million financial by expenses benefit. for earnings net tax Capital diluted terms totaled of share the consolidation first branch were results of earnings were $X.XX. Bank merger-related

the this the of $X.XX, addition branch Core provide fourth which than earnings power due will systems were $X.XX additional Bank the per are a June core elevated to was the earnings year. and professional amounts, share annual share increases, operation, benefit compensation fees XXXX, of Capital which through integration and slightly following earnings in XXXX. scheduled increase earnings the those consolidations, quarter XX% of Excluding quarter core of of cost per first lower over

allowing XXth company's that pursue cash payout declared growth management a initiatives. the of in The a $X.XX dividend levels, us dividend. build Regarding represents deploy dividend the as opportunities $X.XX, consecutive capital quarter, for core quarterly to capital Board to the XX% earnings, a of cash capital variety of we

to Over the repurchase metrics $XX.XX. XXXX margin challenging of improved made under equity core return price performance against Comparing also of a quarter, to our average X.XX% include From improving X.XX%, the are we've And of prior a of rate remaining our perspective, the There helpful. at a compared XX shares the A versus the XXX,XXX a in XX.XX%. the first relatively basis prior year first points weighted the X.X interest period million ahead progress basis repurchased assets year, during prior XXXX. business return well environment. reaching program. X the highlights company year. points sheet shares existing net tangible comparisons on improve Performance the profile the of of on is versus quarter balance results X.XX% the posted interest strong of quarter common are

preserved the ratio year; the prior We liquidity to loan-to-deposit tangible and strengthen built of compared points position strong ratio prior X% tangible measures. share, increased per XX%, by common to increased to XX compared value year. several with continued We position the company's the which key as basis equity as the a book by

in consider years. we Asset quality the economic of remains a the key conditions coming possibility weaker focus, as

points evident net That basis extremely of and on we've X discipline few the to is loan points assets risk discussed XX quarters, in commitment growth. the low total which the even During basis. totaled past NOI level of credit just totaled continuing assets, modest our that when non-performing charge-offs, commitment management, which dampened our basis just

prepared be the current in prudent to While downside threats surprise. see no possible we expansion, is for near-term a economic it

additional by quarters, achieving expansion and Capital is synergies acquisition the planned with Over City and well of and of the the markets further us and limited to York coming the as focusing loan lending activity are expansion Bank of have to drive been by markets growth New continuous accessing known few metropolitan strategy growth. Philadelphia earnings over source our past years. source The a

and Our strategy in these organic on a highly these is risk to growth. markets through approach to consistent build is credit discipline. knowledge of operating and markets long-term Capitalizing expansion methodical our expansion leverage our management high-quality valuable

the dense States. New position simply geographic economically incredibly provides in an advantage diverse City and to the dense stretching operating York market of most banking Our Philadelphia in metropolitan part largest and metropolitan United from the

of win sheet, consolidations includes that much completion strong metropolitan be from office which foundation was projects we operating these market the of back commercial position banks integration the foundation in to XXXX, our the impacted now of on internally enter of that areas markets. focus With sources capital, the and liquidity and During Completing excellent in our to a expect set strength. to billion $X share those XXX%. balance generated largest able of Sun

meeting more to I'd increased webcast will to webcast a A Joe be our At the administrative discussion at we meeting. will like business. our PM Bank, scheduled regarding As who year Jersey. held This in development the will New offices added shareholder shareholder X introducing over a hope the and meeting annual point, this is for shareholder our reminder, provide we're of Red simultaneous details Lebel XX. the on convenience of encourage May turn

Joe Lebel

including our and members quarter Loan headwind commercial Chris. exceeded $XXX acquired strong activity newly our team of expectations for teams, had Thanks our from a production Capital was with We early originations region. expanding Philadelphia Bank and the some our from million.

in the York second year. New building purchased the Sun to which first out bodes quarters. by In as new seasoned the comes came York half of stream. from originations market end is our the overall City Dan of of expected to and us has net of to team back-end commercial interest City in quarter New closings incumbent allowed bolstered more we opportunistic growth half pool second Bank expect quickly be own New many the million the well two portfolio growth we us years as subsequent we loaded the our the our acquired our regional million had which hiring While York $XXX and in loan limited you And of Bank reflected and generate president. with Dan in announced experience residential loan positively, our success acquisition. to loans. today, regard many grow of XXXX, income were which a we portfolio know, Harris yet region, at isn't for including the $XX quarter and the fundings activity of in Much one the and to in Dan the Capital lenders a of

We expect to that team grow.

region offset solid We we are a second of quarter announcement of our each of the traction. second region that the as business saw half core government largely and today candidate too as a lenders $XX are deposits, are regional and accordance also five There expect president million in finalizing success early results acquisition, expect team Philadelphia in pleased Philadelphia expansion for and we our and seasonal with other. the gains region movements net Bank In the increase president's Capital small election. to

overall our had and should noted increase cost saw to larger the bulk treasury by proactively of completed of begun in managed As some service moderate. clients costs We we actively points. accordingly we basis increase rates deposit repricing has believe quarter, last been the this nine and

bolstered as a performing mentioned well services. treasury earlier, is loan interest our by disciplined client model, management banking result pricing and margin and net penetration Chris deposit expertise As relationship our of in and

addition environment due markets our of reductions in costs. of and in purchase as M&A increased margins to loans Bank deposits, the to we slightly conversion from are we quarter. expenses expect quarter, systems efficiency Capital $X and accounting, Given compensation largely entry million the the Expenses challenging into the benefit coming expenses, external rate downward new second June. Operating in and net trend on in increased the expected and our gain to contract

branches related the have three the July. the Capital of acquisition, closing OceanFirst late to Bank of will in In consolidation branches legacy which addition announced another three to we occur

update our expectations, but our initiatives that hybrid out had account quarter Two advisory have announced for impact. quick are last digital not a Lastly, account. our we roll XXXX and significant meeting robo AmiGo, products statement NestEgg, will account; visual online in Both a on XXXX. income

NestEgg begin We in administration reporting assets metric will the wealth an quarter. additional second beginning under as

to to third-party advisory $XXX financial We be XX% migrate under to as by margin the In initiatives. expected. assets base NestEgg slight the of clients net it of should that, out. expenses growth pace York accelerate building AmiGo teams New the The half I'll to out call. directed the NestEgg third of governed quarter, yields been With to New expect Q&A management expect adoption discipline. expense Philadelphia of decrease will the interest for the platform, organic Chris the the build the end pricing in of at Phillie retail XXXX million bringing our by down, loan part more NestEgg the prior the back cost than NestEgg market trend client will contraction are of some City, as has product summary, we Operating moderate and turn in and York for and of our better although deposit our than second

Christopher Maher

pleased point, to At your you. Mike, Thank and take questions. be I would this Jill,

Operator

We of [Operator O'Neill. And will from Instructions] question-and-answer ahead. Sandler session. Please Schiraldi now first our comes begin the go Frank question

Frank Schiraldi

morning. Good

Christopher Maher

Frank. morning, Good

Frank Schiraldi

follow-up here. to originated likely it, growth, missed Chris, still still would And I wondered million if a you million of could it's you with backfill it loan might have Is get is comments your the if don't thinking on said. there a if quarter? on -- do sorry I think purchase? product, $XX you you on But thoughts you $XXX it just

Christopher Maher

something that opportunistically. remains is we’ll The Yeah, backfilling I do think guidance consistent.

makes condition to able to have sense portfolio we for So find have us. that of a being

quarter the happened that. add as flexibility and toward quarter, it first we and to end the do had the portfolio nice and in the a of funding of the the in found So closing to

growth, have guidance if that organic So it a would our intact. been it we remains is around the standards and held They but think possible find execute. that portfolio I to can't that credits we have pricing don't

half by I we the be expect second of year, predominantly doing that again. we’d the think

Frank Schiraldi

local with borrowers? your participations is also for of banks what And other appetite

Christopher Maher

buy many both the So we on side. we for the sell years, and participated

collegially many a one So of our from our this competitors We've time-to-time. of characteristics I sector. think defining is worked with

over maintained than completely we've the cover portfolio long-term active of That relationships ourselves. it's think for to much us. too less We value we got the wanted portfolio, constitute a a because only said So loan we it's book, not an years. business that don't primary

relatively expect of to So it's and percentage a we small loan portfolio, compensate. the

Frank Schiraldi

the is on scuttlebutt is lower out And looking how whether I came at all Great. still York at to rates taxed then know state it's any way the change still basically on at? tax there the any something the state Is may or structure of New REIT they or accepting that, if of that conversation the and that be the sort rates.

Christopher Maher

aware there. not of we’re developments Yeah, any

Specifically over the state budget conversation for up summer. the the heats

So closely heard watching anything. not we've but we're

Frank Schiraldi

Okay. And of accretion capital? also here? give And how from in then to ,finally if is would sort would total off that just us run you And just scheduled margin accounting in quarter? end to Sun wondered what's the a the fair left be that I the purchase

Mike Fitzpatrick

its the margin. of in accretion Frank, points XX purchase basis accounting Yeah.

York still the $X some et Cape Ocean So there's the the a it's Sun, the $XXX,XXX million. through about $XXX,XXX two City, next then over that's for in year, Capital for cetera. it quarter down And that through months. -- there's And terms remainder New the this from runoff, about was came from Capital. of from year. this generally and But some of $XXX,XXX -- of besides runs

Frank Schiraldi

Okay.

quarter from that's accounting and delta $XXX,XXX the Capital, purchase quarter's that accretion? basically last between So this

Christopher Maher

That's the decrease. the had we Sun and increase,

So...

Mike Fitzpatrick

Last Yeah. basis XX accounting purchase points. quarter was

down So we book quarter. it had the and -- down Capital, some to rest related winds then every accretion the winds of

less or offset more each it other. So

one purchase in points margin. had of accretion basis So only the in increase of we accounting

Frank Schiraldi

Great.

Thank you. Okay.

Christopher Maher

Frank. Thanks,

Operator

of Curtiss Hovde Our Please go next ahead. question Group. Will comes from

Will Curtiss

morning. Good Hey.

Christopher Maher

Good Will. morning,

Will Curtiss

Frank accretion. just on asked question my the

said color -- ask expense to had to wanted think So Wanted the and expenses, to about just there. back the you the clarify I you've base. appreciate -- I go what

that And that Just looking -- the for kind pretty a that of too. the closing in trend given deal the suspect of this deal full quarter quarter. next how in load had the I you first will

expense quarter great? second the on help any just So will be base

Christopher Maher

helped began benefits. expense So January when I had and just out X, our think about that a higher-than-normal base benefits our expense that's first the increase in you I we year much quarter, to think this pointed

We annual all to compensation increase company is X calibrated the flow through. also as the so merit actions on beginning going January well, the for that

not recurring to audit so that throughout to that did we So had We a related the have would January, in year. our bit related some elevated, that we some were year-end expenses absorbed little Capital. expenses we have that that

high-watermark So I probably of think for this the year the expenses. is kind for

we Now happening I forward, as caution move those but have consolidations, the we are in June. would branch

see And expenses, a not Philadelphia as the then expansion those we're So back expenses to allocate of out third to our going until those quarter. you're Joe really York. in portion said, going to and New pull

is do quota add? you would in the sales this high-watermarking executives. we the Mike expenses So for anything

Michael Fitzpatrick

Yeah.

two came in, was $X.X it months. the Capital, million was For that in for quarter first

the month with in $XXX,XXX see quarter next increase just we'll -- So the quarter, Capital. of in the extra second

extra other as revenue that Chris revenue month on target. course in than will Of is cost, but be well, there

the will steady. taking settle We and quarter fourth quarter be expect And the start third from the that the quarter in increase will for then costs we'll out first branch in, consolidation. number quarter

Will Curtiss

I'd the Okay. interested you you for or view one on announcements in market with the what updates just getting for in And closed, Bank an Also year? how Chris very M&A comments be seeing perspective? from of additional M&A Thank potential much. kind the you general me this are the last Capital on deal any then

Christopher Maher

probably always a the I certainly level larger on, a M&A We've news our model. time on going advance of had some of has think heightened a the quarter lot of the that but and conversation, of little day, last people there's But we with end our we will meaning changed, some acquisitions it than with lot this for potential. was year. opportunities business conversation view in had more got deals, not that look first

of where for got enhance deal the where to of was things metrics strong are being The our we high-quality good value the That the you've where announcement. Capital closed deposit aspect days. the Capital things, we like acquisition, you we looking have find provide earnings, So performance XX that closure Bank funding franchise. existing opportunity said, from

We're attractive proud to are things online. today. pretty we're the of the is extent, that integration comfortable And So that. in there that market

that expect opportunity them feel will carefully, if sense. We further could if the engaging arises. You comfortable activity make evaluate and in they we M&A

Will Curtiss

Right. very Thank you much.

Operator

Please comes from of question Our DA Gunther next Russell Davidson. go ahead.

Russell Gunther

guys. morning, good Hey,

Christopher Maher

Russell. morning, Good

Russell Gunther

conversations. to follow-up I wanted on some growth loan

you mentioned lending we some So rest from guys metro the to those a year? you'd contribution And you've and you of know how bit could expect quantify quarter? guys been But new and the throughout kind Philadelphia of of area ramp into had hires York New for the this a the any then while.

Joe Lebel

pretty it's first year, million I'm didn't just Russell, the we $XX they the closed Joe. guys. we'd in first traction in We the over there see us quarter. the happy started Philadelphia expect as quarter early in with that with but

are their -- So pipelines and solid.

and there in process ramp his out the teams. the building of with traction rate. So happy early we're the is pretty Dan

folks of at had build he's expect, and quickly. done us that inherited we'll who's well I So we Dan one Sun, for and team that the obviously, fairly

a going I as for little we've prior of half really talked second him he's So think about to bit be the slower year. forecasting

I to think quarter second to continue in go. be Philadelphia continue and meaningful the can just

I year million of net loan targets of original in $XXX the think second half plus track. on growth that Our remains

Russell Gunther

Joe. trended share helpful, versus this how could be very If you paydowns could too? Thank guys that last? That's quarter helpful would And that activity you. quantify you payoff

Joe Lebel

we that figures. to but the we in was type much in lower -- than were quarters, the those exit and not Yes, to substandard but the want did performing, a were of keep take moderate it credits prior opportunity eight was credits it few it's

growth. So have impact it some on did overall

Russell Gunther

would have Okay. the by of XXXX we Great. efficiency Thanks, achieved shaping though it How this you quarter or terms up? I is for just Joe. in already. expenses. on together And appreciate then the that's year? of guys lastly follow-up target be ratio a you tie are whether Can the how color that it fourth -- shared core

Joe Lebel

saves we'll quarter. and our out We have beginning the consolidation from branch by Capital from the fourth think cost of more that

So approaching think the a we run quarter that good XXs rate will be be the low at that point. fourth and we'll

Mike Fitzpatrick

If Joe's the you ratios of the coming of sides have to that to out helps will then. comments get efficiency and us loan about up have million then so cost at you're a be the growth efficiency growth hundred look out tap couple of both really And if ratio. costs the by low dollars the able to

Russell Gunther

me. much, from so it Thanks That’s good. Very guys.

Mike Fitzpatrick

Thank you.

Operator

Please Tobin [Operator go Sean Instructions] ahead. of Partners. our from will question FIG come And next

Sean Tobin

Good morning, guys.

Christopher Maher

Good morning, Sean.

Sean Tobin

just can said from that economy but to coming the in of Jersey you I your of general New guess know health New the footprint? come and your you I in is York, Southern loan see Philadelphia XXXX touch from going New most on growth Jersey? you do any

Christopher Maher

is positive we way The market. things across set our reasonably

we're what they not our in the in shut-down and associated the with are one is is the we that earnings good less far little and over near balance might that government of soon might well. are optimism are when maybe in up. that financial the you them year as and the but a Paris. stronger of of our of terms the in reviews of saw sheets. as hearing There last our strong year-end be third having members have bit what beginning So performance doing quarter year, clients volumes and outcomes but relationship were seeing concerns annual the like we're clients from They how years Actually tomorrow, noteworthy

markets are are our pretty are estate in as are So higher. better. Delinquencies bellwethers values we of low. good. Occupancy rates key kind scores very improving. is at employment FICO data look Real

the all those all have very signaling. So positive -- we

was would questions looking forward not of that the looking. think of I that most be one data backward

Fed their watching we national So sending with are level. obviously a on signals is The pause. some

weakness to being in leading Europe still resolved. weakness Asia Paris see with can that You in not Brexit and

So that different. today, XXXX, a XXXX, we're any concern looking this see maybe could we but at and we be sign for reasons don't see bunch of little XXXX saying a

as So, the in credit past. risk make of vigilant see once continue sure we had kind discipline the exceedingly same you and we

So, we're are good but all on so this. far, signals not the thinking

Sean Tobin

one I approval. not little that? thresholds under or That's aggressive how million aggressive And guess you have the remaining are to will the then helpful. you. be over some determine shares switching Got of you'll buyback that gears a What on

Christopher Maher

I mean look qualifications of when M&A buying we lens buybacks except for at look similar have we ourselves. other

So, about And think transaction. book or best. tangible about hope always the We earn-backs. we think -- value you IRRs know the think dilution. yourself maybe however, of the about We know you

to acquire be appetite our than transaction. buying will M&A stock stock our someone an stronger a So, probably own of bit share little share else's through of

our we saying, We $XXX have of So, while you appetite is back own buy dilution. average back share a those price of I you price in great then little a opportunity earn-backs about share. the take go might the was we think first And buying simply and think can transaction to quarter be potential back. for our see with were is buy which discipline a value we book to three-year stock further

Sean Tobin

guess the you cost moderating quarter. the Got lastly second it, noted this see you then in okay. it And we total deposits, And descent saw uptick on quarter. I

half stabilizing? figure at you kind second look to year, were the that the even you see of of If could

Christopher Maher

little in is at products. point. quarter you It's hard so saw that far road reflects that look of costs. It the business deposit this increases which to more down our segments cost first competitive very the treasury The seems

with deposits short-term in average bank worth higher overnight We funds to at balances. those service And have folks have investments. and the and billion of one of about us. obviously, out take the least that and have have They of ability $X treasury sweep advantage

deposit So, structures serve the and we the very for fourth the our with bit sat ourselves year. worked out going clients think and to both are throughout well the down that in our quarter we remainder of a and methodically quarter, largest clients little first

pressure there in markets pressure of lot the see that a and don't see don't certainly seen we the we have pace we would year. last of So,

of in number banks market in money a and rates and tone the of those special So, set in offering CDs the that. that don't much although participate we're markets seeing we

of So, rest change absent lift you'll more it the you a a last of little environment in probably increases see this going bit see than those modestly macro in quarter. then of through it. a And

On the other the is downsides the of Fed side, one though, pause.

driven been mix Some by the product. of of our margin expansion in the has increases

going rates not have much we're not have opportunities that the deposit involved. but getting of So, pressure as we're loan to also

Sean Tobin

Got sense. guys. quarter. Thanks makes it, Nice

Christopher Maher

you, All right. Sean. Thank

Operator

question next Please from will Our come KBW. Gilbert ahead. Collyn of go

Collyn Gilbert

morning Thanks. guys. Good

Christopher Maher

Collyn. morning Good

Collyn Gilbert

book a to dig bit. little into Just loan the

$XXX So, weighted this on that quarter, average made, guys you you yield was book the the purchases million the that that? resi what bought

Joe Lebel

About X% Collyn.

Collyn Gilbert

of that between Okay. the mortgages, rates? fixed so books your how billion on on And and now ARMs resi split or have $X does you then that

Mike Fitzpatrick

It's about two-thirds fixed rate.

Collyn Gilbert

Okay. and And is the of fixed differential a at there portion ARM between rate the portion this much point?

Mike Fitzpatrick

up now Yes, fixed are the out-yields catching the ARMs portion, the ARM adjustments. still with but portion

Collyn Gilbert

Okay.

Okay. moving efforts then expansion of throughout Philly of you loan much structure and are to City just in the these markets? Southern then among seeing Jersey Joe your some New or in variation market And pricing York legacy geographies, here terms

Joe Lebel

going be obviously, in to pricing see is Yes, already, tighter. - to we're a New York see we going bit little

started that variety And see not of we I it's Philly or as we're in ways, a something much of in the market it's -- we're build expansion. used always market. is of not the expected not to. afraid structure competition in to don't a difference that the not We but out It's we're something everywhere.

the get efficient Harris and our companies. pricing we credit lifelong other of the can York It's of is markets. type So some A we credit of there. lives, be the that more He a guy. folks the from understands offset know Dan where that confident want good the New obtain still and we pretty example. remain We'll quality And want. in going driven by cut we're will that kind the credits -- we we to and that

Christopher Maher

ability get the have competitive -- different a to loans. of our if markets in kinds Also different are markets

last. we seeing deposit owner-occupied above CRE, So balances in but -- where love we the our lending always get those

I think Philadelphia the a to will going more the in core bit CRE we'll estate markets the we're a New centered, competitive metro, to that C&I more we've longer where because -- little York contraction. us, our markets need in like from in in little in real and had be markets. do owner-occupied okay early different be that's we just different with lending get things Probably we

Collyn Gilbert

Okay.

thought. That's discussion, Okay. guess maybe as very ultimately expenses higher made. little are the you it settling that it year into just helpful. I -- so expectation you to comment And the bit to goes a than I like you're obviously then efficiency just hearing ties going of level what expense on Mike start that the the components seems and on the decline on. And that

you fourth think said I low XXs quarter. now by

when to of hairs. I just you the that think to curious think can kind Maybe that. more XX%. definitive closer slicing target, ability in to about been I'm prior commentary But you get XX% has do

Mike Fitzpatrick

lot York high-quality a because you're engaging not there. expensive. which Yes, our on talent New on think, I talent, has right, and investment been inexpensive Collyn, out Philadelphia is building demand networks not of And in certain relationship competition. focus level quarterly out real we spot have the or estate either not of transactions expense And in markets. those We're and branch people in a building biggest that's retail of

or forward. look XX% be comes New making how of see that, investing to and going we expect do as towards because that investments we York, cover the the think this loan quickly efficiency not on volume Depending and Philadelphia going may in get year may the year, -- get that's expenses we're could maybe we we loan to you more the that -- we're XXXX. sized. those ratio So on, will reasonably volume But something the about this than are in

Collyn Gilbert

Okay.

this than capital, just quarter bought fourth indicated XX. Chris, the you just where less helpful. you quarter pricing, your or That's Okay. back given And then where that on in guys

are dividends? how the kind buybacks, your balancing just you here. organic build limited Just mean, growth of I capital is given

Christopher Maher

-- highest-quality Well, [Indiscernible] we're if those the give that's you dollar highly can valued. every the service expansion I you organic of of is do part you markets. at, if be margins in with mortgage margins full the operating you think to the Doesn’t thought going behind think growth new so growth

use don't expect it's that company. And capital. capital dividend we're that However, at run we're amount not We from significant the going fully be it to and there's in able deploy organic -- of to to excess a our growth. the remains rate going

The do with could that good delivering be that transactions accretive second record are thing think M&A I on best find a those track to to tricky. but would of demonstrate value those,

make find you the have to You sure volumes. right

months changed changes make don't how responsibly you fundamentals on the make price the You up. to stick sure which months, multiples to the And you six have to acquisition. the the bit in have you of trip have that past sure a nine you to disciplines. And calculation an reality that is

and So organic our if we've the tool say, we've buybacks dividends a that great and in second is we past [Indiscernible]. at M&A, we it, to organic as spectrum about the dividend but longer continue -- Then regular M&A and we were think in the to. look got best. rate effectively of used and things buybacks

Collyn Gilbert

Okay.

Okay. just acquisitions. we XXXX. where about any for ties question XXXX's thinking That's you guess think I EPS first don't the to my broadly growth have helpful. of more And just final I today And sit year going then be on kind as

do no rates the of growth pickup making. maybe the tailwinds of be the kind semi-stable a Let's change are maybe guys think EPS in you in reasonable outlook assume of lending of some now and NIM you of would target What efforts for that the of is asking has I'm what just to the so it's trying it of it acquisitive-based been see organization you or a strength of that growth? see again, to to because get relates kind historic so organic of as sense the much And XXXX? it's EPS

Christopher Maher

loans Yes, at you it we feel a talking then it's M&A component about going we as EPS. modest if them, well. increase with is to EPS the we're about the organic I growth growing relatively backfilled Organically, think to be think and we're growing level if

that there's company. So lot took always of northwards math the move a and value to the we're looking and others. you of But improve if out the models of there you and good

loans of you're your sudden worth all add top You $XXX of of have going in that, a per share. a earnings dramatic million change not on

deliver we'd together accretive next internal year consistently some However, the and is it's opportunity see, pretty not another short-term this the us. And hopefully, if a -- things, the are to year things M&A And we're like able find to been target we XX% it's long-term a the EPS around we'd over it's after period increase level. of to And deal. through one a powerful. at growth kind a could of and do moving up long-term if period. somewhere we'll for like two compound the that year Those point problem

So X% if there, little think can XX% maybe that little and look piece we be bit target, term buybacks, of and got M&A an X%. I the fill bit but longer organic years or of achievable a over a may that got you've in only do of to growth is you here there

Collyn Gilbert

Okay.

That's Okay. helpful. Thanks All right. guys.

Christopher Maher

Collyn. All right. Thanks,

Operator

Please Erik from Scattergood. go comes and question next Boenning Zwick Our ahead. of

Erik Zwick

Good morning.

Christopher Maher

Erik. morning, Good

Erik Zwick

allowed since the strong First, the loan side. declined rates? you pipeline still you Can originations pull-through to our have improving strong that on generate balances the been commercial about the achieve of last looking you've have particularly year. such factors to at talk trends recent and able Yet middle

Joe Lebel

be tend cautiously by pipeline, optimistic I focus because to of stuff nervous especially the Quarter-over-quarter occasions. look and a I'm to basis that commercial at on in core can focus the really increase year-over-year to time of net the get seasonal. in pipeline can on the difficult. pipeline, continued continue the always company, the in be happy points which the the our markets But is at I am little a when with I expansion, yields. expect look I I improvement on grow.

treasuries the also quarter-over-quarter that but an improve. of that but off on have But see in over drop the bit a I come the know in the resi Fed overall has I quarter. nature, to the seasonal think you've out, be and continued basis, some than think don't you pipeline X commercial year more XX the pipeline I dipped last given bit a to fact yields seen tend

So think - pretty us normally solid. is pull-through that and I for

we optimistic cautiously So as forward. I'm move

Erik Zwick

And for material able any then update the that resolution the on are color the provide of for to you there. issue? Thanks weakness

Mike Fitzpatrick

I you give on the can on certainly this some color issue. --

issue of we the integrity which order to opinion financial were in of to the So we into external address with clear our In through were that, have the obviously, point the comfortable statements have qualified in we able the to another auditor go where certainly that is terms cohort KPMG. there. to case

to year, year the that of course make not and we'll there Although, that, the the so interim actually resolved we've in do expense satisfaction us an would issue identify our could is through could mechanism the we the basis, and go on audit. during gone public allow prepare to the to been will next who's for to a that it. work able quarter. the clear company, we that do in We've test to first through The we sure that another do

That our we around would will coming expect We able So you that year-end. over expect full our a be did effect formidable business. to not see the of at that to next bit from not this the the a first distraction not in quarter our has action it material it's to audit, it. which expenses will get said company And until it's have elevate were little year. arms -- to It's something that remediated. been any course the although, lift we

Erik Zwick

for questions. Great. my taking Thanks

Mike Fitzpatrick

Erik. Thanks,

Operator

next [Operator ahead. go come Piper our question of Instructions] And Please Jaffray. Breese Matthew from will

Matthew Breese

morning. good Hey,

Christopher Maher

Matt. morning, Good

Matthew Breese

and the accretable guidance. core that's back lower trending NIM a under NIM color yield the course NIM create to is Is that over with Obviously, as the I circle wanted reported the to what year? to do NIM. going to headline well? the pressure But expected on natural the of

Christopher Maher

So it has not been under much pressure.

loans than stronger to we in first see you the yields is expect a are this So the in originated there the saw in later full better in newly what quarter is little at process year. of portfolio. the But coming probably

That So offset enough NIM pressure to GAAP as it slowly said, the have will quarter we The the as a that. expanding. gone price Mike that on question and rotate the NIM should we noted, degree. and down about expand accounting the $XXX,XXX deposit is is purchase the absent core be through bogey

it's given originations, So doing second in be the be organic this. of half amount growth the giant a to not offset to the should book number and expect we the year of the in able loan

interest don't the around the it margin, don't quarters. always guidance see materially on bit. want I'm up of a give moving over little little several forward-looking -- we But to down a So course because moves or next net we any about cautious

a direction, see three, five could basis NIM. in to in a or points You either sustained increase not the see you're decrease sustained going four, GAAP but

bouncing around. can it of You kind see

Mike Fitzpatrick

NIM the points Matt, was for first the the that's from up fourth quarter, four core basis quarter. X.XX%

expanded. actually and excludes take accounting it We fee. that non-core. prepayment purchase So call the that that We the

core think we will don't it. it but we So think by NIM be It will surprised the if expanded four, steady. pretty

purchase decline non-core The like run for us. a elevated in first They fees the only Typically, slightly I prepayment for in quarter. I will And basis down us were said come basis think the the accounting the that's was will earlier. points. point three items.

Matthew Breese

your lower it -- cost longer sounded year. Okay. you structure the And end of structural But pause if your about at going Fed put Fed more the even funds will cuts if a versus peers optimistic natural a bit on thinking cost still period the over or of the it's cutting the towards a quite your with increase difference back risk deposit deposits, to of just peers the just your is on of for maybe Chris, than the many in time? of commentary, pause will a even bit Feds more

Christopher Maher

to not concerned walk that. you about I'm going We're typically through why.

I incredibly composition think the important. deposits of is

and So no few near money zero have accounts. we -- today promotional we virtually have market very CDs

to not We for bank products many of either have fund years. used the those

cases of just last there risk were are be highest were the squeeze commercial keep rates increase being the -- and quarters I betas about competitive. dollar look large and result, better some in $XX large have entities. income of be it a we look we two into tend or where ones Give can and have depositor fixed careful Those million to And kind we sure have hey, funds. our me to commercial got a rate are a we do there those out sheet. ahead call We I the had them who we and at we government here. depositors I'll had deposits as So make to entities the might not think say on balance our

the clients got we deals and bank. So we those in for work need to our

on the cost So, of consumer particularly And if is a have don't front think on out structure we those have that of commercial we susceptible think we side, it. you product increases. that in to side, been the kind

there's not a So structural of It's of certainly issue. five a that may right a you're much lag a cost out, group. go to because risk points up XX basis every difference. peer above the are point costs market deposit deposits than But quarter. that's by or to But our

from all across have our We same the branches. the all of street competitors

of deposits. And cost acceleration I don't on so expect an

Matthew Breese

such way things given two be typically That's the and and How just a you. higher then And And into tying shouldn't the through value about about do think aren't that means growing as franchise to -- why grow how negative book garnering is book. portfolio kind competitive Thank connotation building that may balance of environment clearly think purchased this about between the loans means things? have are quarter organic in growth the I balance thinking they inorganic great the do? perhaps thinking color. purchased organic those multiple this you

Christopher Maher

in strategy. you part to able interest to moderation we the things. deploy to right and and There's key. great portfolio to can I'll particular watch excess are got You've look way Overemphasizing of business deploy an the is liquidity at effective had also tell a life liquidity. We position. way any purchases everything be of it. manage the rate variety were They

relatively the So want last to end neutral. be preparing after take to an be want asset-sensitive, don't company at we several We our the rate spending day years of interest position. the risk to

to organic product. of our interest purchase side is So earlier the we that put or we slightly would ability our use reason will be rate had and good our participation some And the neutral. this side dated risk longer the business. are to comment good on we I relationship a which for liquidity. never loans about as talked that the and One the on actually closer make moderate pool They reason, are position finding a as assets

ability making proposition. of a part So to loans, the our when client our of commercial is because deposits we're those commercial key value own fund our

relationship them funding, cash work I loan originations bring continue we other opportunistically that company bring we to to So have won't, drive with think, our put to deposit products. but treasury in the for and bring commercial services opportunities

So, think fine. moderation it's in I done

with we in much nature that consumer. larger and to is relying degree cost it were longer that I a think have term on something

Matthew Breese

in regards to is My Understood. one really last just Okay. CECL.

kind composition you CECL, given heavy it estate about reserve of a as out? about under you that on aspects the your little first process, versus book different loan incremental through shake gone the true-up just to think If And does the forward-looking can you've day of then of dynamic the the give the us and real thinking of some bit any might color where strategy the commercial of new force methodology? residential

Christopher Maher

we'll some make effective been track guidance you requirement we're make I but that. to comments few of -- we've implementation we I'll in very and for CECL few for the precise I a effective the be Obviously, that year it. So, early quite more there. I'll we're But time for feel imagine would to with impact a in suspect now next comfortable don't later year. around give the preparing enough, on the comments the

we loan the structure, portfolio And of under when in our acquire business essentially portion last fair acquired. of first discipline way The CECL. that a by is that our few a that value significant built under is nature same you would the you're using the years you

you And loan loan book. reserve the about book when life the can our of as loan is you So is see balances. marked the and this already acquired an majority book think of our

We have for of an the let's loan range call, allowance losses, million. $XX

margin credit accounting the million. purchase unamortized in of a $XX have We range

-- majority us. think our our the our that's are set CECL purchase half if comment the allowance reason about having transition for on loan accounting impact in actually not I up of that effectively you dampen more book will than there already because So asides was side of in low. CECL's the to credit -- made the

just is in very three look first were period if including thing obviously points. of about But basis probably losses other long XX points. the basis The our losses go the crisis, a historical of range at the quarter back the time you in loan loan you over if

has you the if kind the call and average it, So would that's around think our ballpark about, can loan be book long-term what six-year back reserves. you of life, into

If today you not you have look far it's at market credit from in that. the very the allowance

expect we impact be So the don't material. to that

sure, start but think The none of second to are for us lending this mean really changes. don't to And I question, though, see does is going know what forward. for going you

The first longer-dated is loan instruments.

be in than long-term the potential a So is of loans. residential going case loan. loan's short-term higher The a loan loss the to on life take our

multiyear to So, the cost that loan to embedded different trend, of than assets a going embedded provision assets. the cost is commercial loan. commercial trend for around consumer this be continues think And for over the residential favoring provision I just

see you only So, next year. something effect comes think, I into

to more profitability around pressure are which assets. predominantly You're and assets consumer a favorable long-dated see commercial going of treatment

you've So, assets and they to bank at was a go the us. that's have consumer significant one They are minority for now continued probably And not path. did. that a new story seen majority you've seen the what down point

Matthew Breese

Chris. taking questions. Thanks for That’s great appreciate I it my color.

Christopher Maher

Matt. Thanks,

Operator

Maher concludes Chris turn This conference session. question-and-answer for I the like to over to closing Instructions] would our any remarks. back [Operator

Christopher Maher

providing look updates that, throughout like We you. you. in to everyone to year. their the With Great, additional morning. for I'd participation this the forward thank Thank call thank

Operator

The for Thank conference concluded. presentation. today's attending is now you

You disconnect. may now

OceanFirst Financial (OCFC) 26 Apr 192019 Q1 Earnings call transcript