OCFC - Earnings call transcript Q4 2020 | OceanFirst Financial Corp.

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Operator

Good day and welcome to the OceanFirst Financial Corp. Earnings Conference Call. All participants will be in listen-only mode. [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

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

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

Christopher Maher

who've Lebel; and to Financial and Officer, call today. Chief Thank good able fourth XXXX by all, joined Chief Fitzpatrick. Officer, Joe I'm Mike to morning our earnings been quarter Jill, President, Risk This conference our join Vallacchi; you, Grace morning,

As those with and are able our to look for during operating accompanied for are we of and to quarter pleased questions. performance our our supplemental color We to this some earnings available website. discussion, XXXX. we slides call. discuss your our forward always, on to release note slides results performance and operating our by interest Please refer may that that priorities After appreciate was This a set taking cover our be morning the the will financial we regarding provide you. in your company's

compared positioned per all significant the earnings we were diluted balance quarter, for results a GAAP for XXXX. Reported a results. of to as by moderated. of as the earnings costs time GAAP the record the variety $X.XX, were an reflect strong third credit earnings In impacted terms as and improvement items, share quarter, recovery sheet financial fourth

$XX.X million to or results pegged As for $X.XX the we the share. core a per be quarter result,

uninterrupted Please tangible to management, to common eliminate plans per as capital of consecutive the to quarterly Board the Common points cash approximately per assets cash quarterly sheet a share build dividends allowing cash the $X.XX billion cash dividend basis value share Capital X.XX%. quarter. XX% book we preferred the to XX averaged depository represents $X.X over tangible inflated, note common the at time. no our reduce dividend, by declared stock. per present to just to that earnings, us of year-end $X.XX prior our are stockholders' as and on-hand carried There $X.X share chain and The XXth increasing dividend at a Regarding of remains $X.XX tangible of levels company's GAAP dividends balance compared also of performance. common share share XX-year represents quarter. or equity during improved billion X.X%

asset-based be levels, capital including continue assets As distorted. return on a result, ratios, a margins bit and to

capital our year than stress our recommend consider the the improved the opening Should As the it expansion trading X next this repurchases program, company quality week. repurchase you current to presented Board a to our by share the share recognition and window slightly has completed program. pandemic. significantly global shares of level unusual support the observed the suspended company the a repurchase will risks The share test plans company asset in in may activities February immediately following last authorization. of more of Having current quarter, repurchase process having in surplus larger remaining recall, measures million an of

of in and to a issue present minute primary I'd The business, country. market reviewing our discuss the area markets our economic the in we like continues Before our operation. spend conditions outlook pandemic for around to the

markets holiday, our trend. have in they elevated and appeared downward now Thanksgiving the peaked on While to COVID another are following cases

way this clients public protocols. health to better were operate far restrictions. our navigate of Most local state positioned vast the while search, During health observing majority and to continued to

core migration are New in centers to expect benefit from the robust and estate summer real experience seasonal Philadelphia. from and Local in continue strong urban to a markets Our markets XXXX. businesses season York

Of course, the pace by determined the the efficacy course pandemic ultimate of will of effort. and the be vaccination

entire reported terms. Since be remained far of September. and provide the traditional pre-COVID and year-end. sales bookings loan protocols, vaccination outlook at summer and concentrated warmer Considering summer $XX.X Included is is strength of than higher slides along million been healthy forbearance $XX.X also modest like Turning resolved portfolio a Bank. charge-offs of as for and with entire should risk positive public New quite breakout structure quarter. charge-offs momentum I'd support of forbearance, metrics, of efforts points by with residential loans loan season Shore have the current more which loan weather, approximately totaled that or via and X%. The resolution than were strong of loans XXXX, our full a our as year. that are low, totaled review and in to we the building and four-tenths hopeful XX some to paid XX% asset loans XX.X% $X.X charge-offs process strategy in the payment Net that of and accelerate or accounted at full less in high-risk this assets. a total non-performing paid the customers' forbearance the the million of the million July, Jersey now under of vaccine loan quality in half million, of innovation, portfolio, to higher Delinquencies are will details evidencing basis of is loans. just year-end largely year-end, our supplemental compliance which to the payment least are combination summer portfolio but is that charge-offs concluded, front almost XXXX $XX resolve health slightly of increased decision payment that loan delinquencies season pleased in our the accelerated XX of loans total related Advanced We to ideal, While at to $XX.X is net were assets is at current. basis XX% remain less progress our August on loans are than aggressively their resolution points or consumer modest sale risk just of for worked Having non-performing XXXX. basis net XX for points Bear selling mind loans million during totaled season.

regarding manages always portion is to the portfolios. $XXX proactively loan remaining of off the National the the pandemic. promptly million management work in these and From we of in credit risk Sun elevation loans reduces additional asset time-to-time, and year first credit acquisition. and the worth monitoring. and or loans Bank of through portfolios, the our Just Cape By the Sun loan Proactive Bank. we downgraded in majority results as paid the pools loss one Cape to in recovered vast working comparison The special Bank progress, last substandard without and By concerned downgraded following mention slight losses, over additions we're identified about not note for Bank acquisitions, our often quality. the this

forbearance $X.X related both over should million COVID driven us, With and commercial time. mention loans of substandard portfolio over In just fact, acquisitions several totaled gross moderate to these years. the following the behind special for charge-offs

well with the associated GAAP of earnings all retiring terms earnings cost remaining home gains recovered and release, as to quarter, the comments our realize the In which provisions credit investment to gains income included like our note loans the for loan federal earnings sale and in January. the equity borrowings, a early normalized. by statement related dividend as core nicely portfolio. focused bank would as of liquidating PPP we opted I call in gains in net to attention it portfolio our equity to of

In recognized to quarter in additional addition million quarter, the this report expect portfolio XXXX. the $X.X from to the in in of gains an first gains fourth we

combination elevated due unusual $X.X which to positions. operating a fourth We now Expenses the during completely million exited factors, quarter have these of expenses. were to added

and XX having operating of with We X.X% quarters relative assets. the four past continue level core to focus total of by over expenses on the points absolute to decreased basis operating expenses

the Our branch that has force notification consolidations, following side. and but required timeline. the on to pressure That we is in early the XX consolidation average our customer and crept will margins and compressed to efficiency this four billion. program more since sharpen we leverage than up, bring behind revenue counts on be continue driving branch deposits per announced curve, $XXX operating the began should of branch which drive will completed April ratio another focus flat Regardless, yield our have

loan improve earnings of path which aggregate to to the With make several is $X.X we a time. ask deploying will the deploy you forward, fuel complete shift, over margins. sheet, I'll Going quarters to focused advances mix both earnings margins At plans walk have to building squarely our difference. the interest drive capital can net through momentum billion take and of on just balance ample cash and material income. point, of deposit and levels The cash the XX% improve to no in ratio Joe improvements FHLB to this to

Joseph Lebel

with unchanged Thanks, which margin, X.XX%. net interest the start was Chris. at I'll quarter-over-quarter

the points both in In in by down XXXX. ran federal advances XX down quarters, QX, we to basis off next should bank pandemic. drag another should points. $XXX deploy, cash which of accretion, of NIM, NIM minor trough in will balances. with includes were have to impacted basis of early five the XX leave six weighted billion, we CDs estimate X.XX% in a $XXX the noted, liquidity At benefit quarters. basis points. points of in The primarily large while see over about and we to on brokered a of the continue It average we we cash QX Chris expect quarter-over-quarter, XX had excess seven balance the be off As core end million work over raised tune up NIM million brokered $XXX of fees remains of leaving prepayment need do in has to which which the rate accounting and in $X.X in $X.XX basis home eight We QX the to million also sheet. QX. our basis the purchase billion the QX And points Paying NIM loan we we the CDs us

million brokered I $XXX another or CDs, X%, much rate either average renew sheet. also a the lower Excluding average balance with CDs, exit a the weighted expect in X.X, at of

of maturity of the included reflecting area treasury a year, deposit high the began accounts, profile nine growth $X.XX few the organic For just billion several of years figure ago. treasury corporate wins we

and will to be and us on competitor other any Our CDs in guarantees rival and allow to sensitive team reducing rates rate product accounts set rate XXXX. aggressive in continue maturing with

activity While to an XX excluding we we loans, quarter, Loan year the in the reduced muted highs to of originations. a in half lending markedly due origination time in was to pandemic. basis with strong a the the spot PPP to improve from posit cost in expect set coming while points continue year. high the Residential XX record the second commercial remained start largely bright all after

largely Bank. we XXXX, but of for the remains to the overall regions importantly, head increase unchanged began all commercial As activities pipeline from into QX, the Bank

to bank Philadelphia the continued rush New many fierce anecdotal even we improvements, from near Jersey, deploy cash. and remains is and New clients. volume seeing XXXX. and expect in due Competition York brisk this as typically business bullish pipeline lenders to record time, their news Residential sheets, are rates in liquidity balance on are squeezed seasonal Metro

conforming secondary significant XX-year to of expect the of robust a sell take We originations also amount advantage to market.

adding While and also beginning long in to the QX QX. continuing markets. no in at bankers our QX currently core Bank, and hires the by we recruiting several through shortage expect appetite efforts the hone recruiting standards significant credit adjacent talent, There's aggressively set for and of and with opportunity and our of commercial we we're for

markets, Outside successfully adding also vibrant quarter. trends we've residential recruiting to proactive paydowns with in We to seen meet of and from our and sales credits originated outside any standards. robust of are have impact we've on an on the possible New update other will and that the provide normal didn't individual you the It's acquired loans, banks, from on loans little than amortization without in acquired lower next or of teams. York hard Philadelphia, stance under-performing high-risk are I we as pandemic a and churn. the as of done the existing sale our derive bankers team progress cause recently

be return on market, we terms our to recent competitors diligent remain of and the in client need even relationships. However, aggressive and pricing focused from

we've to back in focused efforts as amortization so on loan our low so pressure sheet, remain it turn upbeat returns, diligently. quarters back recruiting increased done much I'll buy Q&A, puts very the this has grow turn been originated will long-term to our we in pursuing fluctuating remain lenders. the I'll in aggressive occasionally. The portfolio activity the looked pricing that, residential curve to very book. deploy we but to excess risk, cash loan With lately for I normal longer that balance undue duration our our even Before yield on newly the note Chris. for and of pools commercial Chris that the pools include Short-term that coming headwinds We've of ability and the at loans and sale

Christopher Maher

At portion of All call. the right. to Thanks, turn Q&A we'll Joe. this the point,

Operator

We Gunther comes The Please ahead. D.A. the session. Davidson. begin first Russell now go from will Instructions] [Operator question-and-answer with question

Russell Gunther

guys. Hey, morning good

Christopher Maher

Good morning, Russell.

Russell Gunther

a you we'll comments of curious fronts, get think markets. LPOs on I contiguous Just more But mentioned the follow-up Understand, outs. update quarter. on two and next was an team Joe's lift one, regarding

curious two, half in target of the And geographic kind that as growth for back a of to you the a then, what have And means from so, perspective? year? loan mind do

Joseph Lebel

markets adjacent a think, can So, us, I we always for places -- Russell, in described that we've our contiguous day. drive as

are fourth space take markets. in added additional the talent be to office is the existing So, we including we adding quarter think three the and which markets, the dictates And vibrant just where Newton, looking expect go. I extent we're LPO, existing as gotten a should Jersey in approach in of done. we've running. on first just North in its we is lenders we talent two the -- and focus for I'd that continue up the that acquiring add we'll to We sort And certain markets and

we're I feedback right. can bullish on And upon that. you're other if then think So, pretty you the And piece, second any like. give you'd I

The we the quarter growth drive figure that year, in of should portfolio. able second expect to every nine half be I

all focus that and sure year, in growth. banks, appropriately pandemic the or our we clients in the in want we what we've that we process I done credits done through the is think the the make most we've of we're to that in early referral sure sure which we second making that progress recently, on want, identifying the on way get acquired but year support loans the of we through PPP loan the making bullish of half the terms

Russell Gunther

switching That's the Joe. Thanks, great. then, gears to margin. And

perspective. that Hoping a the path put plan and glide deck extend will earnings, you Looking remix with happened guys out from at could play you in that very of terms to earning out the you asset helpful this quarter. a how margin about undertake into what talk XXXX average

Christopher Maher

two keys of the us. there's to for I kind think margin story

especially Joe in first lot have year. we repricing, the The of a deposits early mentioned as

in lagged peers have our come deposit of which we many speed the So have with down. rates our

be the but year. You'll I a in margin. catch-up story more beginning story going the see funding on think us in helpful that than to the year, of an early in be yield asset It's of that'll

advances were The other FHLB the paid quarter. off thing mid is

into go next full a as quarters year. get worth benefit we we'll of So

more the I story an develops you think that going base where to and cash as the to story shift year is deployed. see asset

the that currently Reserve. is of All Federal cash at

So points earning somewhere XX on in basis of the that. you're range

the to trough future a you on that QX give and But echo here. provide Glide don't believe we do comments, that expands can't Joe's or path I was we from margin think specific margins. So, I guidance

Russell Gunther

on for Chris. side expense then last of things. is you, And Thank question me the

I've around So, got the branch expectation the reductions. incremental

operating quarter. the target achieve the system Could XXXX? is leverage positive few about think first talk core Bank ability for your and expenses and conversion Country over to for expectations I in for you quarters next the the

Christopher Maher

Okay.

FDIC of of QX, we into we elevated. couple in in were And comment go had assessment just recall, you things XXXX, unusual couple we like -- made a that a our of that a The portfolio -- items if reflection non-performing things as the So a and technical was to downgraded assessments we'd completely our QX, significant ratio them that year. assets at increased we on into next a numbers of at non-performing drove with moved go the and up to a held-for-sale FDIC time, year-end reverse that'll loans as there.

expenses pegged we in So QX million $X.XX was in total probably that unusual it were a there of in -- nature. about

booked. So it QX was higher a than have should little

into or about As XXXX expenses. running we $X.XX year sorry, COVID go are this in we year, I'm into next

helpful. expect be that That'll We we'll moderate.

second The the branch thing reductions. is

branch around national based on have we -- notice So, our charter. from bank that requirement four regulatory reductions there's the a --

So get we'll April. early closed those in

through to I operating of overall revenue quarters kinds of looked looked been you operating relatively to expense expenses, NIM a things those core has and we as kind went four bit would about have comment see flattish. the the our of our leverage, half the you core little year. you're back if going last and by if So But mashed at compression. improved leverage, which first move your over the horizon we being see

the So, we're our at talent balance is continue branch to but it to going Joe I look going We're see able network, that think hire. continue. to to off you'll against

might the the full probably you of So, share guidance could have you're I headcount But think see April. think going first a expenses. I bank, adds full the the what for we to We quarter, to we'll able a for in that the bit with composition flattish better tailwind. year outlook commercial give we've of little got be and in around to

Russell Gunther

appreciate That's Chris. for I guys. it. Thanks, it Great. me

Christopher Maher

Thanks Russell.

Operator

comes ahead. with question Matthew Please Stephens. from Breese next go The

Matthew Breese

Good morning.

Christopher Maher

Matt. Hi,

Matthew Breese

a drag you're or much How low point end? to basis over the I you understand back six next of liquidity, go What five, there's five is NIM. to put that quarter. recapture from over got six the to it can next, work XX attempting call to I the Hey, the and on quarters. that

how C to deployment? grade, yourself had through B a give do think grade, much a you you grade, recapture If could that a you of

Christopher Maher

in we over right? wind done, events, I a in be historical say a our -- or deployment, you're when little about get point, of to would in bit when better we about or We'll XXXs this pickup been And see all I think finished XXXs, get range, QX, QX. so quarter may full mentioned. off that have in issues the You off on the we're ones right? of the to. So, where on quarter roll some QX funding because talked quarters that's I and I remember low a rolled brokered think transition you off in depending at And full in next it'd smooth the benefit pretty four a would CDs rolled the get up the The quarter. -- that, we'll they again, fourth -- those in benefit Joe QX.

So, six the XXXs in to over more it's I you quarters, be next to believe back where the four side. we stabilizing low the that to we But range. funding XXX used really to on think should margins be

Matthew Breese

Bank. in a deferrals. that there? It overall like of terms peers to then, you for just and And while, we're environment the with and outlook tangible in with on maybe achieve goals, into outlook assume so ROI probably us, what just feels Great. mean? have rate profitability If return actions your is say better could XXXX, let's you on than more XXXX, hope Okay. of share proactive you interest the we what through this a your What I the for

Christopher Maher

I mean, calling of because distinction Yeah. what iceberg the the on a CARES the it is appropriate. couple issue. referred we're A is iceberg I things. let say, draw And internally as me -- to Act, issue would of the was perfectly this,

loans disclosing That residual their loans TDRs we that's difficult all that very us It to level, that to restructure are can high books. paying were of You XX.X% of them makes very kind was risk designate understand drove credit as of in pre-COVID on the and make sure that. any and our what terms. it not

any deals. So, not them we've any not given special They're concessions. getting

really credit we assessment strong a that where So, is. our do risk feel of very we've got

related quarter, residual forbearance If last you sale look sorry the to the of most -- residential -- charge-offs were the fourth at of loans. quarter I'm

forbearance that So sold we stuff, periods, as we identified finished the and we high-risk the consumer off. residential

the that low. charge-offs extraordinarily take you If out, actually net were

go as makeup forecast So be potential we I'd together the about kind of the that change Senate put for make for the XXXX, into fourth of the that could used we stimulus, credit in in quarter, the and material. comment account other not that did were the the which fiscal additional is

even quantitative. you possible works, reserve CECL economic leverage going -- those that if a be it's we still is within our as factors big And have and of amount a would qualitative, are reserve, So, significant look tailwind that our not forward. then

So, kind but We you strong pandemic's we're on to where -- books, substandard very first the over. we've of feel metrics not -- through We're not and your them. the handle a mention going. special still got work we questioned about profitability have

in fact, XX% book, of paid current. book that is In that

So these not a people are having payment are issues. that

that's forward. component, to the think as profitability requirements terms we in of go overshadow is going I provision what first

curve interest move rate were start rates about had to that budged, of end, It's to we that we're not -- is The is set happens going that's in is not to competitive talking loan long think loan deploy yield us up, cash. environment. an this moving. accomplished yield component it we the Even overhang. We saw glide So, at what curve with right? margin the be the could back. And really feeling the path hold going rates we're unusual. in the not initially this not like second markets though So as the real be start current the

curve, movement any get be significant could better. far you in yield it the If

and build we return there'll pretty environment, we can leverage one on ROA, given think our equity. be our good So, -- a to think that in earnings a we back that's position, than more

Matthew Breese

then your curious the that conversations my how regards you the over year, M&A, or one, been if M&A year, assuming And you things expectations, more have again? Okay. do has down last have of gone participate industry? this just gone months, past kind deferrals like in feel this might -- to in there's chatter And few for Great.

Christopher Maher

Yeah. we ourselves almost -- in the were I out would taken obviously we've you -- told taking everybody's market. -- last right year, earlier ourselves of

that While your we up assess them, you right? reasons kind took is. That picture we can't to sheet, aggressive sheet balance confident that wanted. that sure were the in get think a have action feel you everything and home. risk where we've know is such our accurate in make first balance highly own of position don't the if you've sheet gotten credit where balance thing lies got to we the discussion involved we You that our of keeping of the cleaned one And at very kind was of we

So M&A the even met. first is I condition think consider to

seeing lot other watch And we season, earning a well. us can get be, as a businesses? people's would on handle think condition really the of you're you I Second performed have

Forbearances are the right direction. in

have think I you at visibility and could quality. into credit where sheets a we're balance really point

condition So I think second met. that is

smart a timing on -- then actionable are to, there do So always are lot that. a comes more it organizations, much different And random and that depends it that's now to and things all down and both event.

We folks alternatives, this hard at expect of will strategic the probably looking that first year. be in half

can something need of can we us nothing we said, or adds lever We deploy. doing shareholders, If value well. for an earnings. earnings. don't something to cash as That immediately. acquisition that $X from that stopping doing help have be billion find to efficiencies to drive We our worth expect there's We

the that I an feel as now. consider But pressure to do it. we've don't got we So, that to think industry, conditions

Matthew Breese

Great. it. very much. appreciate all And that's I had. you Thank I

Christopher Maher

Matt. Thanks,

Operator

Our Christopher next with Instructions] Please [Operator go question Marinac comes Partners. ahead. from FIG

Christopher Marinac

Hey, team. since recognize almost risk. the of first morning, the I started and banks to you Chris been a it's know the pandemic were one thanks. and Good year

criticized take influence classified some think and will just of that that longer earlier? reverse quarter, reserves to of back So or the happening you on, of what about loans. happen unwind might and circle talking for you therefore to as to start kind were Do to has this it some want

Christopher Maher

Yeah.

So, is, that. there of I assessment lot be the first the and reserves based mean, currency and things on on that our going payment pressure there's don't a all of like we LTVs to feel

very of you Grace, think granular for but know some weakened right? were I have you've in us, the would you're weakened, a methodical source it come think And wrong We fast people that they you'll decisions if forward pandemic, going where I payment don't less probably quarters, a become really they to see then, are okay. be mean, But each little that kind down got in a be significant. are good bit quarter. if after can it's see pandemic-driven segments. around I business. a of a where These process you few people data it'll LTVs much and

So could maybe with share Chris. that you just

Grace Vallacchi

Sure.

of special only XX% terms. with loans. the due as differently, non-accrual and around portfolio the book, substandard special past those mention less as in Chris than our XX%. on So, And in mentioned agreed performing Said XX% substandard, XX% are mention as PCD and loans pre-COVID it's or is are LTV earlier,

that sort So, some just risk demonstrates that, indication I an think there and we're the weakness, that of necessarily pay there's doesn't pretty that in us. can't of evaluating point from COVID. some that rigorous they the mean our impact It being credits. It's

Christopher Maher

you which think think -- execution, it you where the sales, in given loan our LTVs given was we this that content if and And loss, the most on segments, there's think given are even the liquidity trying for those one this loans sell I think there. certainly default the already about reserve to accounts of had reserve discounts We year would during a pandemic. don't -- migration.

Christopher Marinac

big it. helpful you, Chris, That's Thank both. And Got picture background. just follow-up.

you a yet where done with have bank you built functionality? Is processes? the be feel to you you not just you've OceanFirst want the of there digital what that, you several anything haven't that years, digital do are in terms As like for on last accomplished or

Christopher Maher

different There's parts a couple of of that.

our customers, support we feel I and a we've competitive highly digital very products suite. got to think, in effective --

-- they including So our in bank, anything can the most can major customers the do with banks do any country.

from investments the point less focused obvious. think to going I that two now be areas in may this be are forward, or apparent less

First is a process automation. business

that bank. the to so provides And efficiencies

with help be thing more outside, not grappling So your are efficient, net well. of us, customers do network in then world, customers the day. employees bank? at to value our what can each last customers of have every is way us those that digital be brings and it second into terms as you the far may including that attract that's important And banks, many I the think bastions as And but the new new apparent the in the we on and branch effective do of one is How look we in our future.

been working opening. distribution and side, we've of it's kind on So, that account sales than online digital more having

great account product a have online set. opening We

You We've can account numbers minutes an open got plenty and significant those the year. increase of do. people six past in over

think a who bank However, I folks there's that's first go branch. the last And lot horizon. would that into a still of

over their come and our customers kinds code can and that issue. It's our of a kind terrific. marketing marketing mobile have maturity, those the OceanFirst we do to for digital how So match they And faster, think we open we things. on crack issue of scale And to functionality a for do capability our par, more just it's internal I account a customers, of think we effectively. device more in feature terms than to need things and employees, of get so a to customers or is

Christopher Marinac

for all Thanks sharing on today. that. the your appreciate great. That's I thoughts information

Christopher Maher

Chris. Thanks, right. All

Operator

comes question next Frank ahead. from Please Sandler. with Piper go The Schiraldi

Frank Schiraldi

Good morning.

Christopher Maher

Frank. Hi,

Frank Schiraldi

up is What is it Is follow an in add what Just terms makes And to the will Is potential deal? it wishlist of if M&A. what the most I Jersey? sense geography? most New attractive? have on what MOE in on so, --

Christopher Maher

probably are few is Board you morning, we tell of what you about went a So, what kind expectation, a the obvious. where acquisition, having now, can of do each Good what our we Frank. that through market post anything talked according them acquisition, after best can After first, thing went And belt, But -- a year yes. the to seven didn't. under well, do you sit the we review do. things acquisition we and after we with in

So building your market share. own

you margins not expenses, on anything good rocket science. better the performance with a do better businesses you do anything assets, -- a competitive is that with thing the credit second company be The ratios, before can return It's pre-deal afterwards. the has going to it's it,

So, we have a hierarchy.

we're many And share then okay, larger thing for operating that work scale, do onion, like increases as going out expense scale -- with commercial that correlates if bank the like good and an a maybe you lending. best in like-minded in-market, opportunity can good have out a company an your you margins out, that's a of has provide to shareholders. it's whether laid kinds that markets around is the strategy little of but layers combination earnings, and not it's opportunity can If it's -- -- or funding that model acquisition after of We terms to -- earnings right? have has the then -- when you go peeling the And do. from combined take wasn't -- they're in As saves. whole you the start customers expense the a that to bigger obviously some a that's do MOE, usually of the or you merger per exactly business the or then, with the home to contiguous run. whether an are add ours, And it's

Earn be as a or ROEs? of to them those start ROAs? drift the of look your markets. in are margins? that's merger appealing. lift, we combined What There's it saves. of earnings at. want in And things, away last backs in less doesn't things So price benefit. to provides entities, are whether the a earnings are at It characteristics a to find or the terms your to And about raw all We talk are what stay think to do important want market same that, businesses about look we but drive over we the want What think What contiguous the years But we an a to performance is rail, look things or us. guideline or and few the back the over we your are get within you is What lot acquisition. EPS cost important shareholders. like-minded that. We at after for overlapping most we our increase that guide those is industry earn that what do. the the the from best

wide always looking options. of been at of variety we've a tolerant and very -- So

that we we'd wide open. forward. cast scan We comes if opportunity net. up, comfortable the moving feel a And So, keep

Frank Schiraldi

And it back think then, for for in of loan Okay. is question the you Well, I spread. same are particularly to that Where's lock-in mean, back, the coming C&I? is guess, here a interest Is I most XXXX. areas of given just sort half while side some environment? on interest? all interesting, and of maybe going be can there are low of organic thanks primarily the most in growth particularly that. about rates What's in CRE, this to

Joseph Lebel

I Frank, kind open-ended, of phrase think for it I little any this. amenable that growth. know us, pretty but much we're a I'll sounds like to

don't warehouse are that that a that arena, I we of have concerns. CRE things that, chasing. pockets like, concentration those. think any CRE type think on I restrictions industrial, do there We the are storage, identified many of that logistics to refrigerated folks. value have many last all already, we It's that has market banks that any the that there competitive mile everybody's and very like don't have

takes been that of that. the rate it last with that back we've CRE And on balance any from competitive nothing the off swap basis. the with in sheet. two doing holding duration of product fixed So vanilla some long-term risk years, overall very us There's an

And little bit do that much getting do that do lenders to marketplace are restrictions. same can, to the the business think because a loans, we many which they C&I and get and C&I are early swap much as as process, as like those do do you of recruit you're So trying but we'd thing There origination have lenders we're the the in in income CRE of pragmatic. of I possibly lower is the in but that good. spread also

duration, teams, does commercial And think and existing looking I venue. are. million then saw pipes announcement flexibility we the What QX, is lean to either of go And over $XXX me are people for, give either. where that opportunities I'm has And on mention, markedly it recruit in on or it -- end our long rates So, stick the you at as benefit I'm as will to as the our we interestingly, will I the shade not the credit terms, up then. since appetite. restricted

Frank Schiraldi

portfolio Thanks in Okay. pretty just equity And was color. for last then thought interesting out gains well. it question. the I the that worked

of it's yourself Just same given, deploy that's a the one way you something to kind I wondering to rates are And buybacks. the cash thing, then, and an where against future. for a of if investment if sort in but if of need of will as sort in kind how weigh and just guys done, look not know -- you through exactly that's the that yield, or

Christopher Maher

around we is position as playbook more I with out we dividend and -- and We we've out number did little well. that let had felt a yield, some we investments significant and unusual of our very better of out in highly that me XXXX, were a for would searching pulled similar the yields, series well and color comfortable worked a high -- to of and things the ratios And we firms we X%. up the around debt -- did buy had to with yield gains we our you a underwriting firms capital actually We knowledge beginning in credit instruments. about to in we sense XXXX, very felt into history. strength in balance where start as to In just than portfolio opportunity and a company, one of a in payout was our ended had our After some had give thing. significant just consider had identified started other of market very we that a yield make modest were understood, the Those with. holding that a dividend north of subordinated debt And entered felt and firms, that where that. all it discipline of done. of We be sheet. a it. pretty an And this raise good we cash excess

off portfolio in X%-plus the time. instruments and We appreciated happened expect chose very is thereafter value quite What that that for took and yield in markets rapidly it be the to significantly. some was, we very

they of strategy. happened is much down what those original effective yield the So lower the than drove securities

I we just few are The value, want it we'll strategies So, have into looking tangible enough, have than once I the the don't said, a balance the is That you things. low yield got yield look bought it cash ago. yield. sheet, to deploy our the on off, risk it we get we years variety volatility this other got We've convert Why Frank, into take at at for might don't book find of and position. say, slightly and a low. gain sheet. my to balance now wider

book at loan be may the focused we're That lot through these on to more portfolio. the are we going think and going a methodical for book. loan it's to be mature be much we income thoughtful be the think to ways at treasury days. not looking a said, the securities other But place looking investment And conservative. we playing that have group. just that also awhile, We But deploy cash, to around ideal we're not We today. fixed and because

very careful. being So we're

Frank Schiraldi

Okay. Makes Thanks. Got it. sense.

Operator

comes question Please go ahead. Scattergood. from with Zwick The Boenning Erik & next

Erik Zwick

morning. Good

Christopher Maher

Good morning, Erik.

Erik Zwick

bit And maybe I efforts. I in remarks, new of out you're -- you start kind recruiting and sort first two today. this opening of answers. to you aggressively little mentioned questions of think I you're Joe, I your just But recruiting prior on some have looking for. If guess, wanted the I've imagine a got one criteria that of said you your

specialties then any that these lenders past, having if the in the individuals the you've individuals the just organizations particular you're are maybe one, So, you're question, recruiting you in And of with commonalities or I any finding asset more certain generally classes. guess, known either curious part success from from? that second targeting

Joseph Lebel

-- had much to. a we this, Erik. on like that our do talk for period we always Thanks of a I've time stable we've radar that we have for that, we candidates that of said have

in and there's that recruit ourselves because lenders find tend and recruit the to background those only of -- a And well sometimes that credit. And lenders. in things lenders that largely having find receptive those undue which interest especially in a sometimes to I continue that seasoned to really and conversations, have rate I I I are part that known that's risk. not. to in here. to And sales truly tend and built restrictions. larger fortunate look are That's taking And tended folks. the differentiate we I We recent periods for to staying really been are And to We've is way in think fascinating, think valuable these companies from. we at we appreciate I'm those no right a ours always that -- recruit underwrite as not asset the say larger from earlier nothing not people I terms to niches. even And specialty that. they're company we see mentioned way what us There's -- from have and away like activities, do recruit but classes, people without that to we there people that the happy or significant I will environment of to happy also valuable. like this, historically, way credit C&I CRE I I'm are lenders. organizations I'm training.

typically, larger been that's something companies don't of and from qualified where any shortage -- we're I recruiting So see talent. and --

So good problem that's have. a to

Erik Zwick

approaching third-party? balances question round just with from today And at any the you then Yes. agree. sold color -- you how curious getting your you're referring I had current a to that are this I the safe last assume it or to last Is PPP curious approach for a about to new ones. Thanks maybe it of Or regard, that customers, the substantial great interest given there. from just point?

Christopher Maher

Actively lending group. to that

that -- requests continue have that we're round, service last to. will additional the part that folks they customers of in a The lending was from to sale the sold we So have that customers. those need, certainly we

we this are So bifurcated. the which from hearing peers sold The less coming that Anyone what I'll SBA had loans were say, kind seeing impact. kind sold have that. thing have being news in qualify fewer of a sell, our that's qualifying to that requests ones The book, diminishment have to to. we handled by for our there great saying is little is that that -- new that around And put we're actually we didn't of half item. are that a little a probably XX% I good significant a bit we rule those this we're have are in than and for people and us. new businesses of third-party [indiscernible] was And those desperate a out turn What revenue directly few the round. think very

earlier big this process anywhere smooth I as for -- be may -- we've relatively don't be we're processing the rounds. it's straight not in at and automated SBA. it’s big So, point, it's as I It -- a us. think got think to numbers is into -- giant going near industry-wide the

going going number you. So, a on it's big for it's but need, we're meeting be to not the and

Erik Zwick

my taking for questions. Thanks Great.

Christopher Maher

Erik. Thanks,

Operator

comes William Raymond Wallace James. The next ahead. question Please from with go

William Wallace

Hi. Good morning. guys. Thanks,

Christopher Maher

Wally. Hey,

William Wallace

as Just end question. also net balances then the PPP quarter? follow-up NII questions, left a what the that at the the two What quick And interest PPP are year? margin the quick of from impact during and on but fourth loans housekeeping of the kind was

Joseph Lebel

million. of year at end balances the The the below $XXX

off forward the going impact fell were relatively PPP sold would rate. the We so And in nominal. when those deck low that relatively loan, we the be

NIM So about basis they quarter the by during points. created nine the

William Wallace

Yeah. Okay.

to Amendment billion able Durbin impacts as you do in push will then, And the XXXX? $XX off you you. determination of Thank guys have the to crossed whether any Okay. be since you

Christopher Maher

awaiting we're that. kind final on still guidance of So,

we're Xst. be impose determination interim the billion contact there imagine, January impose to there's might Reserve a read want not to to whether that's and out, allow is Durbin, can on, not -- what that. We a as that determine try be you would interpretation we regulators for crossed guidance by a our final on Federal And If we're us. they path that subject to where $XX but the understand basis, bank also bank on you with in or the will come

an did cross driven there direct of that odd secondary So, pandemic And for while duck. billion, wasn't the by interpretation were case the the is PPP argument, the $XX might if because us, says, we're pandemic for a in you kind to to absent not have billion is $XX duck that assets do chosen the opportunity the the of year-end have we and to pandemic. which again loans under

guidance So that's that. better I an than ongoing conversation. you can't any give

William Wallace

everything -- I earnings you don't their call would they yesterday. that bank if guys whatever this know they due are Tennessee said but and acquisition, crossed on they over I there blends regulators -- were the relief. an to tracking that, week believe yesterday, together give billion a -- it, was $XX it announced in was

hope If you'll qualify give that you that, did guys …? well, or as that you're tracking

Christopher Maher

it's our times it's The central when of so just have get great is all Reserve not work it's bank, banks. I process. that's up different And regional. you through to the XX a central answer made to think consistent are times easy good XX across banks the Federal bank, there And and hope of a is a term. one a aspects system of

So -- but that did give us hope.

William Wallace

fair you, appreciate. Thank is I That answer. you. That's guys. Thank right. had. All Okay. all I

Joseph Lebel

the that's running and -- Wally, balance loans been on $XX our XXXX in the million sheet PPP down as they're forgiven. with

William Wallace

Yeah.

Okay. much. very Thank you

Christopher Maher

Wally. Thanks,

Operator

now our back As no would to this further Maher any have [Operator questions, question-and-answer over remarks. closing the for like session. conference Instructions] turn Christopher concludes we I to

Christopher Maher

you. this quarter I'd focused their you. Thank to earnings. on you cash in improving for participation morning. discussing deploying Thank remain on look We business, that with like to first thank forward our building everyone that, April. results With the call and the We

Operator

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

You disconnect. may now

OceanFirst Financial (OCFC) 29 Jan 212020 Q4 Earnings call transcript