OceanFirst Financial Corp. Q4 FY2025 earnings call

• Net interest income grew for the fifth consecutive quarter, driven by an increase in average net loans. - Asset quality remained exceptional with special mention and substandard loans down 10%. - GAAP operating expenses included costs related to residential outsourcing, merger, and credit risk transfer; core operating expenses down QoQ due to outsourcing. - Capital levels robust with CET1 ratio 10.7% and tangible book value up. - Loan originations totaled just north of $1 billion for the second consecutive quarter, C&I business grew 42% YoY. - Deposits increased $528 million in Q4, with Premier Bank growing deposits $90 million QoQ. - Noninterest income down due to lower title fees and loan sale gains, but swap demand strong.

In the fourth quarter, OceanFirst Financial Corp. reported earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis. Net interest income grew for the fifth consecutive quarter, increasing by $5 million or 5% compared to the prior quarter and up 14% compared to the prior-year quarter, fueled by an increase in average net loans of $446 million. The net interest margin was 2.87%, modestly down from the third quarter. Total loans increased $474 million, representing an 18% annualized growth rate driven by $1 billion in originations. Asset quality remained exceptional with special mention and substandard loans decreasing 10% to $112 million (1% of total loans). GAAP operating expenses were $84 million, including $13 million related to residential outsourcing, merger, and credit risk transfer costs. Core operating expenses were $71 million, down $1 million or 2% from the linked quarter. Capital levels were robust with a CET1 ratio of 10.7% and tangible book value per share at $19.79. A quarterly cash dividend of $0.20 per common share was approved, and a merger with Flushing Financial Corp. was announced, expected to close in Q2 '26.

• Expect positive expansion in NII and margin. - Full year guidance: mid- to high single-digit loan and deposit growth, NII and NIM growing, NIM past 3% by year end, other income $7M-$9M QoQ, expenses relatively flat. - First quarter outlook considering fewer days in quarter. - Merger with Flushing expected to close in Q2 '26, expected to improve profitability and scale.

• Potential impact of regulatory approval on merger. - Seasonality and volatility in deposit growth. - Isolated large deposit client reset affecting NIM temporarily. - Early-stage delinquencies in 30-89-day bucket, though single loan issue with federal government lease is not a major concern.

Q: Clarity on net interest income guidance A: NII may grow higher than loan balance due to compounding, Q1 may look disappointing but will ramp up Q: Update on loan sales after Flushing deal A: Reviewing portfolios, expect balance sheet improvements Q: Recurring CRT premium expense A: Comes through other, like insurance premium Q: Growth pace for C&I in 2026 A: Expected to be in 7% to 9% range Q: Premier Bank deposit growth and 2027 targets A: Seasonality caused recent slowdown, but targets for $2B-$3B deposits by end of '27 remain Q: Premier banking new money rate A: Overall portfolio cost down to ~2.25%, noninterest-bearing deposits growing faster Q: Flushing acquisition and deposit rate reset A: Opportunity to reset deposit rates with Premier banking experience, potential to improve margins through balance sheet restructure