OceanFirst Financial Corp. (OCFC)

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OceanFirst Financial Corp. (OCFC)

Q3 2008 Earnings Call

October 24, 2008 11:00 am ET


Jill Hewitt – Senior Vice President and Investor Relations Officer

John Garbarino – President and Chief Executive Officer

Vito Nardelli – Chief Operating Officer

Michael Fitzpatrick – Chief Financial Officer


Frank Schiraldi – Sandler O’Neill

Ross Haberman – Haberman Funds



Greetings and welcome to the OceanFirst financial quarterly earnings conference call. (Operator Instructions) It is now my pleasure to introduce your host, Ms. Jill Hewitt, Senior Vice President for OceanFirst. You may begin.

Jill Hewitt

Thanks. Thank you all for joining us. I am Jill Hewitt, Senior Vice President and Investor Relations Officer. We will begin this morning's call with our forwardlooking statements disclosure.

This call, as well as our recent news release, may contain certain forwardlooking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the company. These forwardlooking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," “estimate,” "project" or similar expressions. The company's ability to predict results or the actual impact of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan product, deposit flows, competition, demand for financial services in the company's profit area, and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forwardlooking statements, and undue reliance should not be placed on such statements. The company does not undertake and specifically disclaims any obligations to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Thank you.

Now I will turn the call over the our host this morning, President and Chief Executive Officer John Garbarino, Chief Financial Officer Michael Fitzpatrick, and Chief Operating Officer Vito Nardelli.

John Garbarino

Good morning to all who have been able to join in on our third quarter 2008 earnings conference call today. This morning, we are indeed pleased to be able to report on the continued improvement in our operations for the quarter just passed. We appreciate your interest in our performance and are eager to review our latest operating results with you this morning.

You have all had the opportunity to review our release; and, following my usual practice, I will not be disrespectful of your time reciting a host of actual numbers from the release. My introductory comments will merely help frame our opportunity to add some color to the earnings posted for the quarter as we continue to wrestle with the challenges in our current operating environment. It is abundantly clear that the unprecedented events of the past six weeks are having a dramatic effect on all financial institutions.

Most importantly, at OceanFirst, as a community bank, we have delivered strong financial performance and maintained the confidence of our depositors and local market as we emerge from the events of 2006 and 2007. In the coming days, as a healthy well-capitalized institution, we will certainly be further evaluating the options available to us under the Treasury's Troubled Asset Relief Program as additional details become available. For the quarter, diluted earnings per share were $0.32 representing a 6.7% increase from the link quarter and an 18.5% increase above the corresponding prior year period.

The company's 47th quarterly cash dividend was $0.20 per share, unchanged for the 23rd consecutive quarter, as our board remains committed to maintain the dividend in the near term consistent with our strengthening financial performance. The quarter’s earnings have again benefited from an expanding net interest margin, which increased 14 basis points from the previous quarter, partly offset by a decline in average interest-earning assets.

Earnings also benefited from the sale of a previously impaired, available for sale investment security, which was in fact sold during the quarter with an accounting recovery book. Partially offsetting this was the opening of our 23rd branch office, and the continuation of heavy professional fees and other administrative charges lingering from the shutdown of Columbia also resulted in higherthananticipated operating expenses. Our efforts to sublet office space previously occupied by Columbia in this market continue to fall short of our expectations. We have continued to temper these expectations and have increased our provisions for this vacant space through the first quarter of 2009.

Core deposits grew $41.4 million for the quarter, but were partially offset again by a $24.9 million decline in CD balances as we continue to exercise restraint in our CD pricing. Core deposits now exceed 71% of our total deposit base, a very satisfying transformation in the composition of our liabilities. We continue to bolster our tangible and core capital ratios which grew to 7.94% during the quarter. As noted earlier, with the strengthening of our earnings stream, our cash dividend is secure for now as our capital levels help improve our capacity to generate liquidity in the holding company.

At this point, however, irrespective of our revolving TARP strategies, with continuing plans to reserve capital, we do not anticipate any change in our moratorium on share repurchase activity for the foreseeable future.

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