OCFC - Earnings call transcript Q3 2019 | OceanFirst Financial Corp.

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Operator

Good morning, and welcome to the OceanFirst Financial Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ms. Jill Hewitt, Senior Vice President and Investor Relations. Please go ahead.

Jill Hewitt

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

actual will that and of in you call to Please We from current Risk expectations. results forward-looking morning's Factors forward-looking our on could filings this disclosure. press will these included to statements the release statements with based where remember public materially remarks find our statements. our our many cause XX-K, Refer factors today other contain differ that forward-looking begin in

now over And Chief today, you. Executive I our and Thank will turn call Chairman to the Officer, Maher. Christopher host

Christopher Maher

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

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

practice, a we look to taking we for Then the quarter. As release has question. the your will results the and been few then forward some to highlight our posted color add items to

merger-related the core in Quarterly systems the contract. earnings share earnings per terms were earnings of financial share of diluted in were quarter and of net over $X.XX, year. $X.XX. resulting core professional core our X.X% consolidation benefit branch These items million In earnings to of of totaled impacted tax a increase this $X.X per second quarter, third the renegotiation charges for results by nonrecurring expenses, related reported fees

quarter $XX as Bank to as to acquisition. prior decreased we the the Core to related operating expenses million in Capital compared $XX.X realized efficiencies million

in and were an manage additional should fourth four into quarter the the which us consolidated, quarter, During legacy help XXXX. expenses

Deposit to well for quarter, pressure million. primarily the which margin New both forward plateaued appeared With cost more will company for pleased we to interest provide on the the our interest the contributing growth deposits $XXX on exceed and strongly, Joe this going positions and average York see Philadelphia purchase per margin color these impact and contracted, the future. but for have The but now net loan moderate. were should was prepayment. net the due accounting branch consolidations, cycle to

Regarding the capital management for the declared the $X.XX, quarterly quarterly dividend XXst of cash Board a consecutive quarter, cash company's dividend.

$X.XX dividend earnings. core XX% a of payout The represents

cost Given what at company continue XXX,XXX year-to-date a the basis, we average increases will an of is On shares shares quarter end, we've of at this an able repurchased at repurchase repurchase been we've our average total $XX.XX. term. opportunity price a shares shares repurchases XXX,XXX of than weighted those advantageous in share has of purchases capital the deployment favor end, an Inclusive year. Since believe a $XX.XX. near price, quarter X,XXX,XXX after repurchased additional rather dividend strategy to to the to

we be at deployment. able to one shares terms, of preferred capital as as long share repurchases As continue serve these will of our methods to repurchase

to the River During and repurchase quarter, for shareholder the limited Bank related pending be to however, remainder may the Two due fourth rules votes acquisitions. the Country the volumes of Bank

existing as the by addition, of repurchase existing expansion authority strategic of consider will exhausted planning and an shares In effort, year-end. the our Board part the to may annual plan be

assets. delinquencies a balance quarter. all remained with levels continuing since of XX.XX%, of competitive The in core efficiency XX.XX% Our core low the on equity common a on core recoveries which highly are and a X.XX%, remain with metrics performance net credit sheet return strong second tangible slightly and return assets of nonperforming of of improved ratio

both by book remained is to our value strong continue to Regulatory occur nonperforming per the in are that to to River Country process, ever closing have acquisitions recorded. the Two while should we $X.XX equity just plan XXXX. basis one and quarter In Bank we of XX applications of increased acquisitions assets Tangible $XX.XX. related tangible and in common first lowest points, fact, share asset total at ratio at the X.XX%,

provide discussion At our the this development over point, to I'll Joe turn regarding Lebel details more to business. the of

Joe Lebel

by and Thanks, $XXX with of geographies to loan add Metro high lending our million Philadelphia loans $XXX significant values both as and all-time of took the We the from after set XX%. originations York to contributions of co-op gain $XXX participation an momentum. to million closing $XXX at quarter. New growth regions loan partnering $XXX million runoff York continue Chris. to the million under for seasoned Record of respectively, drove quarterly $XX of Commercial New opportunity in loan quarters planned million book million, several average at

much As million commercial robust to in at while at portfolio million was closings solid the the a the continues expectations remains commercial pipeline a and end, closing expect quarter grew delivered record the $XXX growth. in residential despite Residential $XXX quarter result, in the and estate $XXX quarter. activity. for exceed of we pipe quarter quarter and million real portfolio $XX The fourth for total

booking loan introduced year, had synthetic fixed a borrowers can floating for rate in environment continues earlier this solid swaps book. from product, rate quarter. lumpy our a be diversify fee on income swap rates loans to quarterly And Our while this basis, with

X decreased average off basis Fed existing were points point largely decreased yields to XX originations and to interest quarter. X fee basis accounting purchase X.XX% basis impacted points down of new due net this points by lower markets, points cuts competition in XX basis and to and new basis margin just income X from and While prepayment

fierce, competition is is Deposit stable, while on abating. and pressure deposit costs are pricing

in of steadfast points the remains the the And our basis uncertainty. discipline to the unchanged this after remains quarter XX paramount quarters increasing in basis In QX pricing face cost in basis was given X points deposits approach ahead, points own at yield Our QX. volatility X rising of in fundamental and credit curve.

increase the offset has interest of an floating rate use Our and of percentage as in portfolios. our loans fixed-rate rate amount swaps to XXXX helped

interest-rate While long term. yields risk on instruments impact in we cuts term, the floating manage Fed rate these short

stable lending have teams strategic in built our a growth markets. We remain committed controlled to and strong

We as are a quality efforts. to our borrowers finding of result good still strong loans

to Moving expenses.

We take the by are in mobile million contracts cost run due in expenses, of the saves noncore online effect. seeing and Core $X.X reduced savings. additional to processor will and Bank contract as retail quarter. merger-related improvements Capital Further the rate restructured were yield upcoming the exclusive vendor reduction core expected the expense costs and items, recently the

savings XXXX will New support initiatives, treasury technology of fund portion and savings reinvested and branch in expansion in to will growing additional customer Philadelphia York, a rationalization be base expect these our services We Jersey. of some our New in

of under robo each nearly our rising the advisory note on product, management by at product Since QX. early quarter, we've XXXX, measured introducing final initial Egg. to the $XX Net double of One growth success assets seen in end the hybrid continued million organic

While likely and this represents acceptance small been the no customers XXXX, from dollars momentum on performance to ahead has XXXX has date and impact is notable, our financial in plan of building. is and growth

the the over to it call. I'll Q&A of part for turn that, back Chris With

Christopher Maher

Thanks, Joe.

Operator

Frank [Operator please. O'Neill. first with ahead Schiraldi from Instructions] question Sandler Our comes Go

Frank Schiraldi

Good morning.

Christopher Maher

Frank. Good morning,

Frank Schiraldi

questions. of couple a Just

on loan growth. First

And talk million of there? Just little you in given I And $XXX first, maybe $XX then, trend growth your about the the your about net us could past, your New if think, in bit overall? strength just in just a and York, talked two you've a in of expectation sort thoughts, Philly quarter. on to geographies. those update million thinking

Joe Lebel

are growth million think – I go. focus think it's for quarterly track on expect expectations the And $XXX New we the I York them is and on where fair number. Frank, a to Philadelphia

the think their has head earlier. the will good. And But we start positive. are like to because think trends, kind of that book, in marketplace credits of this we continue I returns New Early can a to little to York think stride should I both I Philadelphia still be assuming hit continue build. bit find

Frank Schiraldi

the of but little accounting accretion the And then outlook. things in on NIM know terms from margin complicates of Okay. purchase just kind levels. a these I thoughts just bit, the

Christopher Maher

at out purchase couple prepayments, you are And quarter. we're points that's I basis the pleased that that, that accounting think if even say look a pretty it would and of of went core we're how I kind strip just in forward. the just Frank, which transitory, down and seeing the going the NIM, things

Fed point that new you core with we place quarter little this that there a steady cuts I bit at think a course, income basis keep other volume Mike, we margin? Of to do but are points even or – have from net the and comments on rising. have a additional interest if NIM contraction probably headwind, any of can overcome quarter, if if couple of

Mike Fitzpatrick

Yes.

be slightly actually fourth purchase quarter. accretion actually the of accounting for quarter third will So the ahead

was true-ups estimates, The those to downward third that. points extra had and we because pressure quarter so of affected flow we was some there X on cash this trued basis adversely up to actual,

we Deposit of more go into the down and into a the little might in sheet there have in book. and remix seemed accretion loans is commercial – from a even within the And had from quarter. even securities bit. fourth loans cost So slightly benefit flattened balance and out to then of

slightly curve much margin. be So would we down change, the maybe another of but positives. see think of and terms those a I yield maybe to don't stable The are cut negative, Fed in it's

Frank Schiraldi

Thank Okay. you.

Christopher Maher

Thanks, Frank.

Operator

Go Davidson. comes from ahead. question Gunther, D.A. Russell next Our the

Russell Gunther

morning, guys. Good Thanks.

Christopher Maher

Russell. morning, Good

Russell Gunther

Mike, the is follow-up October while for on down on just that it. rate quarter? there, that a And the stable fourth we're slightly The assume margin an guidance cut? to does

Mike Fitzpatrick

a and funds. probably rate in that about XX slightly Prime rate LIBOR basis assets that or or think a a stable considering funding mix down. our cut, basis obviously would Without to X bit, cut, point – little sources NIM, tied of either are Rate No. Fed impact we cut to points about

Russell Gunther

Got it.

gave obviously, as pressures some But Okay, flat how the comments for then the the that next you and there? there this clarification. $XX million result a this thanks of appreciate the expense Can are improvement of in you How well. reinvestment you what better would franchise thinking guys things, Are expect rate? for some And there? incremental – about to quarter run side quarters? quarter couple on be that

Christopher Maher

get and digital around we're all order going an network and under opportunity in our Russell, $XX it's have opportunities the terms maybe that. of even fund reduce a Chris. There in It advantage bit branch taking little But contracts on can may to to probably we in IT of really stay flat. to doing is on the million. in be initiatives build-out expenses what the

the I we know of core renegotiation the numbers, our referenced, it's So in systems and contract.

that per cost of account a the vendor quarter will we to expected renegotiating sense somewhere in XX%. referenced be the you also And we'll the drop our range contracts. digital fourth We in give

the of economics top we're trying in on unit to sure So make we get digital.

our move customers it's economies to we As we digital important digital, keep the unit that in really from brick-and-mortar working.

to I a you quarters see you’re some be it $XX We're to going drop, a see lot around can little either. of but better. also going us you a pressure under not So see shouldn't think that million, might

Russell Gunther

very the on side. Chris. you. balance just helpful, then And sheet That’s Thank

So into loans. to it to growth and on growth going hear I strong of then you is sounds be lending like and remixing commercial out and continue organic securities

as in perspective? when expect show on fees pressure see of necessitate And sale when up curious I'm single-family billion sort to So of to out again, we some the you might resi? and, sale $XX that

Christopher Maher

we XXXX sales defend the we as I quarter able in So to see us through when at at economic Two at significant some look over by the and We won't we of dollar I'll fourth in kind It to numbers. loan just a increase that initiate when before staying at would as organic things refresh expect discussed you'll We the think or of us start first look throughout potentially look but everyone quarter. crossing be billion our And conditions. to maybe that profitability that. River amount, Country be to XXXX. growth soon We lot loan get to mode. beginning of acquisitions, our and $XX below $XX a NIM strategy announced billion as that

we economic XXXX, in growth do $XX throughout we and will we to think if consider cross going then Durbin see we're to look our the point the conditions, can felt we what economy loan accelerating would billion conditions lending And it's organic have we're at which But like the conditions we at possible to But on that. rate. the what and have to were and weigh – to is we're favorable growth is, enough. going see things obviously, headwinds going where organic

Russell Gunther

Got it.

very Okay, guys. helpful. you Thank

Christopher Maher

you. Thank

Operator

The next Collyn question Go KBW. comes ahead. from Gilbert,

Collyn Gilbert

Good morning, guys.

Christopher Maher

Hi, Collyn.

Collyn Gilbert

on follow-up interesting. a comment, it's just Chris, that

year growth And call. July? little obviously, you're better XX just where Is make it position that it is or was is guys back – what, the the it a relative adding after seeing from bit XXXX indicated in the change in a the So had you might – July in coming your feel just that about market? to you what

Christopher Maher

I think on at you the even. a nail Philadelphia sourcing really also with The head and and think the more bit year, little bullish with with. comfortable teams five rebound good the growth. hit the can live on the loan XX makes very York product we year feeling New we us yields We're

So we're cross the what $XX various understand time modeling to through going exercises to billion. is right

things economy that still core going. until few see, quarter don't I of like maybe default resolution first Our have is and where in answer the next months, think to trade the that and the is the and really XXXX, some agreements we'll under we hopefully,

organic push That bankers coming. credit said, hard though if lever So you credit want as there be don't cycle. always too good there's cycle you're to thinking a that a lend may

think So kind risk of get can tailor caught. your if you credit appetite to good probably and you're you bad, going times in

pretty with. conservative to we're So begin

So is our different It the still that might we're projections. things, quarter of we're XXXX, into $XX the doing first out. but play defer across multiple to about how billion we're looking thinking and options at plan

Collyn Gilbert

sure pipeline, And is this you helpful. did to about I pipeline of I want resi make majority the say the then, the you When in That’s correctly. Okay. you were point? just at Joe, heard talking

Joe Lebel

Yes.

commercial in rebounded the the was a XX, since commercial. September higher from robustly point such strong the than actually of the end of At then. but pipe time, end third had the the a the quarter the at quarter pipe commercial we – So the in resi has quarter, little pipe,

we're quarter – great a So and resi going as still to well. fourth have

Collyn Gilbert

to some That’s just back the – going NIM reconcile of helpful. Okay. to then trying comments. And

change looked having like look at the of accretion, the prepay anticipating exclude in – that same each the – quarters. NIM you guess I was the in points quarter you're is basis So core about it so fourth if X I'm X sorry, kind of I because the the fallen impact

assume – So doesn't you then, don't a I deposits, in that? know, huge granted indicate – it which it then a outlook, better what pricing drop is it cut, like driving maybe won't like NIM and would that perhaps, And what's rate know. a sounds sounds I again, but see loan better.

guys kind to quarter third the why to piece in NIM the better that your of will compression as trying be puzzle the together quarter. outlook Just in fourth saw than what happen you

Mike Fitzpatrick

Yes.

not points. X the So for accretion go the was from big to that our accounting which purchase XX, was and are interest down X prepayment third but net X of did but X – income, X down of quarter, was a they basis part fees, points basis points compression basis

So X of items. the XX was noncore

core. related So only X it to was

out earning a we're on forward, deposit said, asset then and the benefit, loans – weight I benefit. mix loan stabilized, is book a have commercial within – loan So securities looking more of is the we costs as have into

quarter $XXX,XXX more Purchase accounting quarter. in be the will was than fourth in it the accretion actually third

headwind tailwind. that's as is. a So not That's it a usually

So that's be points thinking regards rate if said, contraction slight like a negative. why that to with I cut. rate basis for would there's flat we're a that X cut, And

Christopher Maher

and ratio, being a we've experiencing XXX% in we're that XX% can environment its Also that rate we're funding under case. But in now, advantages. always a just about loan-to-deposit wholesale have Collyn, to, like at add enjoyed declining

the kind don't deposits. we'd fund we have pressure growth if as to like go fourth of to we quarter, the to of that feel we with all So into have loan see,

loads got pretty on prices. we have the at availability of side attractive wholesale the We've So alternative.

that couple help point the we've think got tools we us So at a this of will in cycle.

Collyn Gilbert

there's have Okay. see we you two and from are year the then think efficiency, also kind indicated, update target by perhaps, efficiency or to just some reinvestments you maybe happening, just on an be? kind helpful. the us, where And as the what going see guys about That's the where can that next savings that quarter, end you have you're of goal did acquisitions you then – or as you on of this to of of

Christopher Maher

over expense We're we've how to more talked – and Two Country, times given – not leverage which just quarters may and River the being with next when exactly we So that will become side. addition about cautious before, think actually of those. knowing the possible the operating help a little us NIM revenue outlook that I X%. cross this Fed especially of the both might more many impact than it's bit the the cut add think do we could We side under four

So expenses to depend but we that a levers got we've think from it's more on prevent kind side we've little got low the a to up, good revenue creeping going of handle, how goes.

Collyn Gilbert

it Okay. leave Thanks I’ll there. guys. That’s fair.

Christopher Maher

Thanks, Collyn.

Operator

[Operator Sean Go Instructions] question next Tobin from ahead. The of comes Janney.

Sean Tobin

Good morning, guys.

Christopher Maher

Good morning, Sean.

Sean Tobin

I on buyback. to the start touch guess to out

in guys back and the of restrictions the buyback two You may color we can quarter transactions. amount even of some a I in be good and to the appetite your between term see the expect deals you Thanks. what approval to have there when for give prior some and nice closing? But a stock amount bought us know can close near on guys activity now remaining. you

Christopher Maher

Sure. things. point to I'd a just few

it's when the shares First, be of just issued as the the in we mail a the pendency not vote, will the shareholder repurchasing SX for vote. technical and matter, we during

attractive. appetite is outside a that, think back to price matter But level earn the our at the we of have So that's of shares, just we this pretty follow. the for rules

then will the events, be And do where post we but the equation, appetite. the of where think is really capital you to be, two important Country it's look strong acquisition River, and at it of today, going a CECL. Two and where implementation have also we to capital So start

So that, the Xs. at the can we we're the capital between dividend we think even you I level, will likely after a look – TCE and maintaining after growth, using left of the that earnings acquisitions Xs CECL, buybacks in then think, ratio, what's our – in for remain then about payout earnings the as if that for to long And the ratio organic the keeping well think split we're can. as after probably ratio XX% rest and and

depending could have on So – this program we we circumstances buyback we did year. than more could active year, a the next

Sean Tobin

That’s it. switching gears you the deposits. Then a color what drove the the Can new helpful. Was primarily Got in from noninterest-bearing little Philadelphia very and to us York? that growth nice C&I you from saw on teams in New give relationships that?

Christopher Maher

deposits for We’ve had not things a great the that bank. underpinning with a investing now. services staff really appreciated think sales that Philadelphia the a important added for into a is we York I about had one at OceanFirst commonly line and concerted invested of deposit our businesses we've we've of XX% have we're recently the the New leadership in that product it's effort of And ago, total team, to, line treasury one technology It's us. treasury one least markets. And treasury of that's on to and in, at several folks hired years our year team base to support business we've

to we us in incredibly future. is So product probably the it's important a think that

deposits. we but little see come to a uptick going in always not have a way, effort They're surprised against concerted that. in that not noninterest-bearing we're So to

Sean Tobin

helpful. do then on what last quarter MPAs going trends at what be the And follow And kind or criticize? to quality last credit Are directionally we in to Is of similar end? they those we classify saw the you to That’s want anything there front. quarter? Good saw one stuff.

Christopher Maher

very credit I mean trends are benign. positive, there So – very the

So not to. that we've is consequence. single every able any for to to assets up credit we're We detected bankruptcy ever recoveries you I total tenant, was any nonperforming this you're special seen and going moved It would forever. That did one to commercial the to have in net the cluster in quarter where migration said, that stay classify with assets, – quarters not have given delinquencies, properties figures of We going expect quarter, that a that of we the quarters trends mention. that be the in be a of lowest right? end here to have related of estate lend included wind real don't to to a

That has resolved favorably.

There the strong Bankruptcy reaffirmed who guarantors. was They we the through period the has bankruptcy. of low loan paid had buyer resolved. So LTV. the during leases a been has

a the it But So range special from in was category. in a mention actually our of decrease take was fact, that will well-structured $XX credit. That million.

when So be at and you amortizations you good guarantors, LTVs, when it a surprise, outcome. you even have should to fast out have work a low able decent

this positive point. at all So

Sean Tobin

Thanks That’s stuff. nice That’s questions, from it. Good it quarter. taking for my me.

Christopher Maher

Thanks, Sean.

Operator

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

Christopher Maher

Thank the you. With call like participation everyone to additional We that, morning. this to for after thank their on look I'd year-end. providing forward

thank you. So

Operator

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

now may disconnect. You

OceanFirst Financial (OCFC) 25 Oct 192019 Q3 Earnings call transcript