OceanFirst Financial (US:OCFC)2025-10-23 13:02Financial Data and Key Metrics Changes - Earnings per share for Q3 2025 were reported at $0.30 on a fully diluted GAAP basis and $0.36 on a core basis [5] - Net interest income increased by $3 million compared to the prior quarter, driven by an increase in average net loans of $242 million [6] - The net interest margin remained stable at 2.91% compared to the second quarter [6] - Total loans increased by $373 million, representing a 14% annualized growth rate [6] - Asset quality remained strong, with total loans classified as special mention and substandard decreasing 15% to $124 million, or 1.2% of total loans [7] Business Line Data and Key Metrics Changes - Loan originations for the quarter totaled $1 billion, resulting in loan growth of $373 million [9] - The commercial and industrial loan segment increased by 12% for the quarter [9] - Non-interest income increased by 5% to $12.3 million, primarily driven by strong swap demand linked to commercial growth [11] Market Data and Key Metrics Changes - Total deposits increased by $203 million, with organic growth at $321 million before decreases in broker CDs [10] - Approximately 20% of new deposit balances are in non-interest-bearing demand deposit accounts (DDA) [10] - The overall weighted average cost of deposits was reported at 2.6% [10] Company Strategy and Development Direction - The company is focusing on outsourcing residential loan originations and underwriting functions to improve operating leverage and earnings in 2026 [8] - The board approved a quarterly cash dividend of $0.20 per common share, marking the 115th consecutive quarterly cash dividend [8] - The company expects 7%-9% annualized loan growth for 2026, predominantly driven by growth in commercial and industrial loans [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong asset quality and indicated that credit quality remains among the best in the peer group [15] - The company anticipates modest short-term compression on margin in Q4 due to seasonality and residual repricing of large legacy deposit relationships [13] - Management expects to achieve a return on average assets of 90 basis points by Q4 2026, with a glide path to achieving a 1% return on assets in early 2027 [19] Other Important Information - Operating expenses for the quarter were $76 million, including $4 million of restructuring charges [8] - The CET1 ratio was reported at 10.6%, driven down by loan growth during the quarter [16] - The company plans to maintain a loan-to-deposit ratio of approximately 100% [17] Q&A Session Summary Question: Clarification on net interest income guidance - Management clarified that the 3% terminal rate refers to assumptions around Fed rate cuts, not the net interest margin [23] Question: Update on premier banking segment deposit growth - Management attributed deposit growth to the acclimation of newly hired teams and the conversion of operational accounts to funding [37] Question: Expectations on non-interest income and restructuring impact - Management indicated that restructuring would provide a $10 million pre-tax benefit, with some headwinds expected in non-interest income due to outsourcing initiatives [41][44] Question: Update on GovCon exposure and credit perspective - Management reported a $100 million exposure in GovCon, focused on mission-critical contractors, and expressed confidence in the portfolio's stability [56] Question: When can the company expect to hit a 1% ROA? - Management projected crossing above 1% ROA in the first quarter of 2027, with expectations for continued growth throughout that year [67]