OceanFirst Financial Corp. (NASDAQ:OCFC) Q3 2018 Earnings Conference Call Transcript

Oct 26, 2018 • 11:00 am ET

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OceanFirst Financial Corp. (NASDAQ:OCFC) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the OceanFirst Financial Corp. Earnings Conference Call and Webcast. All participants will be in listen-only mode.(Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ms. Jill Hewitt, SVP of IR. Please go ahead.

Executive
Jill Hewitt

Thank you. Good morning. My name is Jill Hewitt, Senior Vice President and IR Officer for OceanFirst Financial Corp.

(Forward Looking Cautionary Statements)

Now, I'll turn the call over to Chris Maher, CEO and Chairman of OceanFirst Financial Corp.

Executive
Christopher Maher

Thank you, Jill, and good morning to all who have been able to join our third quarter 2018 earnings conference call today. This morning, I'm joined by our CFO, Mike Fitzpatrick; CAO, Joe Iantosca; and CBO, Joe Lebel. As always, we appreciate your interest in our performance and are pleased to be able to discuss our operating results with you. As has been our practice, we will highlight a few key items and add some color to the results posted for the quarter, and then we'll look forward to taking your questions.

In terms of financial results for the third quarter, diluted earnings per share were $0.50. Quarterly reported earnings were impacted by merger-related expenses and branch consolidation charges, net of tax benefit that totaled $1.6 million or $0.03 per share. Excluding those amounts, core earnings per share were $0.53, a 15% increase over the prior linked quarter. Core earnings reflect an 11.7% or $5 million decrease in operating expenses as additional Sun efficiencies were realized in the quarter.

We currently anticipate approximately a $1 million decrease to our operating expenses in the fourth quarter as the final Sun efficiencies are realized. Performance metrics for the quarter met our near-term objectives as the core ROA was 1.35%, the core return on tangible common equity was 15.35%, and the core efficiency ratio was 53.7%. Those results occurred despite the negative impact of elevated OREO expenses, and the decision to defer the application of deposit fees against former Sun clients who were converted to OceanFirst in June of this year. These factors impacted core earnings by approximately $0.02 per share.

Joe Lebel will walk you through the dynamics of the quarter, and provide some insight into market conditions later in the call. Our bias has been to protect our net interest margin as the forward curve flattened, and to protect our credit risk position as the economic expansion lengthens. This approach is deliberate, as intended to ensure we have the liquidity and the overall balance sheet capacity to grow loans and deposits more quickly when market conditions improve. With stable net interest margins, low deposit betas and a modest loan-to-deposit ratio, we have the liquidity to fund future growth. With a GCE ratio of 9.35% and low dividend payout ratio, we also have the capital base to support more rapid balance sheet expansion at the right time and under the right conditions.

Regarding