OCFC

OceanFirst Financial Corp. (OCFC)

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Exchange: NASDAQ
Industry: Finance
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OceanFirst Financial Corporation (OCFC)

Q2 2008 Earnings Call Transcript

July 24, 2008 10:30 am ET

Executives

Jill Hewitt – SVP and IR Officer

John Garbarino – Chairman, President and CEO

Vito Nardelli – EVP and COO

Michael Fitzpatrick – EVP and CFO

Analysts

Frank Schiraldi – Sandler O'Neill & Partners

Matthew Kelley – Sterne, Agee & Leach

Presentation

Operator

Greetings, ladies and gentlemen, and welcome to the OceanFirst Financial Corp. quarterly earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jill Hewitt, Senior Vice President and Investor Relations Officer. Thank you. Ms. Hewitt, you may begin.

Jill Hewitt

Thanks, Claudia. Good morning and thank you all for joining us. I am Jill Hewitt, Senior Vice President and Investor Relations Officer and we will begin this morning’s call with our forward-looking statement and 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 expression. 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 the subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative or regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in 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 or 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 to 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, in our second quarter 2008 earnings conference call today. This morning we are indeed pleased to be able to report on the continued turnaround of our operations in the quarter just passed. We appreciate your interest in our improving performance and are eager to review our latest operating results with you this morning. You’ve all had the opportunity to review of earnings release and following our 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 distance our Bank from the troubles at our former mortgage bank subsidiary, Columbia Home Loans. We will also briefly touch on related issues in the front pages, loan portfolio credit quality and capital adequacy at OceanFirst.

Diluted EPS for the quarter, of course, was $0.30 discounting the $0.06 impairment on an equity investment. Core operating earnings of $0.36 represent a 5.9% increase from the linked quarter and dwarfed the $0.02 for the corresponding prior-year period. The Company’s 46th quarterly cash dividend declared was $0.20 per share, unchanged for the 22nd consecutive quarter as our Board remains committed to maintain the dividend in the near term, consistent with strategic plans to rebuild our capital through our improved earnings stream and controlled asset growth.

The quarter’s earnings have again benefited from an expanding net interest margin, which increased 2 basis points from the previous quarter. Absent the prior quarter’s nonrecurring 14 basis points of yield from an equity investment, however, the increase in margin was a more substantial 16 basis points. Earnings were impeded $0.06 a share by the aforementioned other than temporary impairment in that same equity investment during the past quarter.

Interest earning assets also declined for the period and the continuation of professional fees and other administrative charges, lingering from the shutdown of Columbia, also resulted in higher than anticipated operating expenses albeit lower than in the linked quarter. Progress in this continues to be made and expected.

Core deposits grew $44.3 million for the quarter but were partially offset by a $25.8 million in CD balances as we continue to exercise restraint in our CD pricing.

The smaller balance sheet couples with our improved earnings bolstered our capital ratios as our tangible and core capital ratios grew to 7.83% and risk based capital topped out at 12.74%. 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 at Holding Company.

At this point, however, with continuing plans to conserve capital, we do not anticipate any change in our strategy with regard to share repurchase activity for the foreseeable future.

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