OceanFirst Financial Corp. (OCFC)

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OceanFirst Financial Corp. (OCFC)

Q1 2009 Earnings Call Transcript

April 24, 2009 11:00 am ET


Jill Hewitt – SVP and IR

John Garbarino – President and CEO

Vito Nardelli – COO

Michael Fitzpatrick – CFO


Frank Schiraldi – Sandler O’Neill

Ross Haberman – Haberman Funds

Julienne Cassarino – Prospector Partners

Matthew Breese – Sterne Agee

John Shibles - Regal Securities



Hello and welcome to the OceanFirst Financial Corp earnings conference call and webcast. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator instructions).

Now, I would like to turn the conference over to Jill Hewitt. Ma'am please begin.

Jill Hewitt

Good morning and thank you all for joining us. I’m Jill Hewitt, Senior Vice President and Investor Relations Officer and I will begin this morning’s call with our forward-looking statement disclosure. This call, as well as our recent news release, may contain certain forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the company.

These forward-looking 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 effect 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 regulatory changes, monetary and fiscal policies of the US Government, including policies of US Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competitions, demand for financial services on the company’s market area and accounting principles and guidelines.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The company does not undertake and specifically disclaims any obligation 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.

And 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

Thank you, Jill and good morning to all who have been able to join in on our first quarter 2009 earnings conference call today. We are indeed pleased to have posted solid consistent earnings for the period when compared to both the linked and prior year quarters. During the past three months we have continued to demonstrate the ability to face the challenges posed by the economic climate and have fortified our balance sheet and capital positions in several ways. Not the least of these was our previously reported voluntarily acceptance of 38.3 million in preferred stock under the US Treasury capital purchase program.

We appreciate your interest in our performance and are pleased to be able to review our latest operating results with you this morning. You have all had the opportunity to review our release from Thursday and following our usual practice I will not be disrespectful of your time residing a host of actual numbers from the release. My introductory comments will nearly help frame our opportunity to add some color to the earnings posted for the quarter and comment briefly on the strength of our balance sheet and the continuing challenging economic environment.

Diluted EPS for the quarter was $0.30 matching the linked quarter and was $0.04 below the prior year quarter. The company's 49th quarterly cash dividend was declared and maintained at $0.20 per share unchanged for the 25th consecutive quarter. There were two unusual items in the quarter, there again was a small recovery of $34,000 in the reserve for repurchase loans established against potential continuing exposure from our 2007 mortgage banking shutdown as our experience there continued to be favorable.

This was offset by a loan servicing asset impairment of $263,000 resulting from heavy pre-payments in the current mortgage refinance market. The quarter's earnings have again benefited from increased net interest income as the net interest margin grew to 3.47% as compared to 3.35% in the previous quarter, reflective primarily of liability cost decreases in the lower rate environment.

Additionally, average interest earning assets increased $25.4 million reflecting our investment of the treasury capital purchase program stock. Although retail certificates of deposit remained difficult to attract given our disciplined pricing and our highly competitive retail market our core deposits increased 51.6 million, driven primarily by government deposits. Our core deposits currently comprise are growing 72.5% of average deposits.

Our efforts to sublet office space previously occupied by Columbia continue to fall short of expectations in a worsening commercial office market. We have again supplemented the reserves associated with these vacant properties through the end of 2009, otherwise operating expenses were closely controlled and on the whole decreased a $161,000 even as our FDIC insurance expense increased $350,000, and our effective tax rate rose to 37%.

In this market, we remain heavily focused on the strength of our balance sheet as opposed to being preoccupied with growth. Well capitalized by all standards prior to the treasury capital purchase program investment, which we accepted in January our tangible and core capital ratios grew to 8.27% and the banks total risk based capital ratio was 14.25% at the end of the quarter.

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