OceanFirst (OCFC) Q1 2026 Earnings Transcript

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DATE

Friday, April 24, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Christopher D. Maher
• President and Chief Operating Officer — Joseph J. Lebel
• Chief Financial Officer — Patrick S. Barrett

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TAKEAWAYS

• GAAP EPS -- $0.36 per fully diluted share, representing a $0.01 increase compared to the previous year’s quarter.
• Core EPS -- $0.43 per share, up $0.08, or 23%, from the same quarter last year.
• Net Interest Income -- Increased by $1 million sequentially and $10 million, or 11%, year over year, marking a fifth consecutive quarter of growth.
• Net Interest Margin -- Expanded to 2.93%, supported by lower funding costs and growth in average net loans.
• Total Loan Growth -- Loans grew by $92 million, or a 3% annualized rate, stemming from $429 million in originations.
• C&I Loan Originations -- Commercial & industrial business grew at a 19% annualized pace from the linked quarter, with C&I and commercial real estate closed loan volume up 81% year over year.
• Asset Quality -- Loans classified as special mention or substandard are 1.5% of total loans, which is below the ten-year average of 1.8% and among the best in peer comparisons.
• Nonperforming Ratios -- Nonperforming loans to total loans and nonperforming assets to total assets each stood at 0.31%.
• Net Charge-Offs -- Were de minimis at 3 basis points annualized of average total loans.
• Deposits -- Total deposits increased by $192 million, or 2%, with core (excluding brokered) deposits up $314 million on broad-based organic growth.
• Premier Bank Segment -- Deposits rose $9 million, or 3%, sequentially, and since inception, the team brought in over 1,500 new accounts across 400 relationships, about 20% of which are noninterest-bearing.
• Operating Expenses -- GAAP expenses were $73 million, including $4 million in merger-related costs; core expenses were $69 million, down $2.1 million, or 3%, from the linked quarter, mainly due to outsourcing the residential lending platform.
• Noninterest Income -- Decreased by $2.7 million sequentially to $7 million, chiefly due to a $779,000 lower gain on loan sales linked to the Q4 2025 outsourcing, as well as reduced commercial loan swap income.
• Capital Position -- Estimated CET1 capital ratio was 10.7%; tangible book value per share rose to $19.86.
• Share Repurchase Activity -- Only shares for employee award vesting were repurchased; no repurchases under board authorization.
• Dividend -- Quarterly dividend of $0.20 per share declared, marking the 117th consecutive quarterly payout.
• Flushing Merger Progress -- Both companies’ shareholders approved the merger; regulatory approvals received from New York and OCC, with Federal Reserve approval still pending to complete the deal.
• Expense Guidance -- The company expects core operating expenses to remain between $70 million and $71 million for the next quarter, matching guidance even as hiring continues.
• Loan and Deposit Growth Guidance -- Management reaffirmed guidance for mid- to high-single-digit growth, as well as expectations for NIM to exceed 3% in the second half of the year.
• AI and Technology Initiatives -- Investments in artificial intelligence have begun to yield efficiency gains in legacy processes, with broader implementation anticipated for future scalability and operating leverage.

SUMMARY

OceanFirst Financial Corp. (NASDAQ:OCFC) delivered sequential and year-over-year growth in earnings, net interest income, and deposits while maintaining strong capital and asset quality metrics. The company noted that C&I and commercial real estate lending outpaced other segments, supported by notable hiring activity and expansion into Boston, New York, and Baltimore/DC markets. Management provided assurance that integration planning for the Flushing Financial merger remains on track with no material changes to merger assumptions, regulatory approvals nearly complete, and a detailed financial update scheduled for the next quarter.

• Management stated that "competition is pretty intense," explaining current loan yield trends and noting that any benefit from maturities and rollovers "is being competed away for new originations."
• Patrick S. Barrett said the expense mix will reflect "compensation expenses go up and data processing expenses go down, with the net being a push" as new bankers are hired without overall expense inflation.
• The effect of recent Federal Reserve rate cuts reduced deposit costs by 16 basis points this quarter, but future NIM guidance excludes further Fed cut impacts, and the net income impact for this year is described as "de minimis."
• Christopher D. Maher indicated the company remains "focused on executing our organic growth strategy," particularly via the Premier Bank segment and targeted talent additions across geographies.
• Integration work for the Flushing merger already accommodates full cross-branch customer access on day one, and management expects the additional branch network to provide an "immediate and meaningful competitive advantage."
• Management confirmed that any balance sheet restructuring associated with the merger—spanning loan portfolios, hedges, and securities—will be thoroughly outlined at legal close, with no concerns raised about earn-back periods or enterprise marks at this time.

INDUSTRY GLOSSARY

• C&I (Commercial and Industrial): Lending or banking business focused on non-real estate, often operating-company loans to business customers.
• NIM (Net Interest Margin): The ratio of net interest income to average earning assets, a critical profitability measure for banks.
• CET1 (Common Equity Tier 1 Capital Ratio): A regulatory capital metric measuring a bank’s core equity capital compared with its risk-weighted assets.
• Premier Bank Segment: OceanFirst Financial Corp.'s specialized business/wealth banking team targeting high-value client relationships, primarily through dedicated bankers.
• Special Mention and Substandard Loans: Regulatory categories for loans showing potential weaknesses that require management attention but are not yet impaired.

Full Conference Call Transcript

This morning, I am joined by our President, Joseph J. Lebel, and our Chief Financial Officer, Patrick S. Barrett. We appreciate your interest in our performance and this opportunity to discuss our results. This morning, we will provide brief remarks about the financial and operating performance for the quarter and some color regarding the outlook for our business. We may refer to the slides filed in connection with the earnings release throughout the call. After our discussion, we look forward to taking your questions. We reported solid first quarter results, which included earnings per share of $0.36 on a fully diluted GAAP basis and $0.43 on a core basis.

GAAP earnings per share increased a penny and core earnings per share increased $0.08, or 23%, as compared to the prior year’s quarter. In terms of performance indicators, we delivered our fifth consecutive quarter of net interest income growth, which increased by $1 million, or 1%, as compared to the linked quarter, and was up $10 million, or 11%, as compared to the prior year’s quarter. This performance was driven by an increase in average net loans of $268 million and net interest margin expansion to 2.93%, supported by lower cost of funds and earning asset growth. Total loans for the quarter increased by $92 million, representing a 3% annualized growth rate, driven by $429 million in originations.

Asset quality remained exceptional as total loans classified as special mention and substandard were 1.5% of total loans, below our ten-year average of 1.8% and within the top decile of our peer group. The quarterly provision was primarily driven by loan growth and an increase in criticized and classified loans, partly offset by lower unfunded commitments. GAAP operating expenses for the quarter were $73 million, which includes $4 million of merger-related expenses. On a core basis, operating expenses of $69 million declined by $2.1 million, or 3%, from the linked quarter, primarily driven by the impact of our strategic initiative to outsource the residential lending platform and disciplined expense management across the company.

Looking forward, we worked diligently to restructure our core IT infrastructure and position the bank to benefit from the deployment of artificial intelligence across all departments. We have invested in AI through existing vendor relationships and have started to see the efficiency benefits in legacy bank processes while looking to further enhance our capabilities. We see significant opportunities to date, and these efforts will enable our ability to improve operating leverage, building further scalability as the bank grows. We will provide additional commentary on our financial outlook in a moment. Capital levels remain strong with an estimated common equity Tier 1 capital ratio of 10.7% and tangible book value per share increasing to $19.86.

During the quarter, we also repurchased a modest number of shares solely related to the vesting of employee equity awards. We did not repurchase any shares under the board-approved authorization. As previously announced, a quarterly cash dividend of $0.20 per common share was declared, marking the company’s 117th consecutive quarterly cash dividend. Finally, on 12/29/2025, we announced our merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. To date, both companies have received shareholder approval. In addition, we have received regulatory approvals from the State of New York Department of Financial Services and from the OCC. Approval from the Federal Reserve remains the final outstanding regulatory requirement to complete the merger.

We continue to work towards an expected closing in 2026 and a full systems integration and rebranding in 2026. Importantly, we have made arrangements to accommodate branch transactions for all customers in all branches effective on our first day of operation. We have undertaken that work as we believe that the additional Flushing branches will provide an immediate and meaningful competitive advantage. We plan to provide a detailed financial update on the Flushing merger in connection with our second quarter earnings, which will include a discussion on the pro forma balance sheet and other projections from our latest view of the merger model.

In the meantime, we remain focused on executing our organic growth strategy, which is clearly reflected in our results this quarter. At this point, I will turn the call over to Joe for additional color on these businesses.

Joseph J. Lebel: Thanks, Chris. I will start with loan originations for the quarter, which totaled $429 million and resulted in quarterly loan growth of $92 million, which was in line with our expectations given typical first quarter seasonality and a handful of customer-accelerated closings at the end of Q4. Our C&I business grew 19% on an annualized basis from the linked quarter, with closed loan volume in C&I and commercial real estate up 81% year-over-year, reflecting continued momentum from our recruitment of talent added in 2024 and 2025. We added another three C&I bankers in Q1 2026, with plans for more in the coming quarters. Total deposits grew by $192 million, or 2%, in the quarter.

Excluding brokered deposits, deposits increased $314 million, driven by broad-based organic growth across our core business lines and institutional deposits. The Premier Bank deposits grew $9 million, or 3%, from the linked quarter. The team has brought in over 1,500 new accounts across 400 relationships since the May 2025 inception, approximately 20% representing noninterest-bearing accounts. As an added benefit, the teams contributed $21 million in loan originations for the quarter, and the loan pipeline in Premier stands at $40 million. Customer engagement and calling activity has been significant, and the addition of the Flushing branch footprint will provide a meaningful tailwind moving forward.

We remain confident in our 2026 Premier deposit targets and have recently added two new Premier teams located in Manhattan and Long Island, with a few more on the horizon. Lastly, noninterest income decreased by $2.7 million to $7 million during the quarter, primarily driven by a lower gain on sale of loans of $779,000 relating to the Q4 2025 outsourcing of our residential platform. Additionally, we saw some reductions in commercial loan swap income due to lower swap origination volume for the quarter. That should improve through the year as seasonal origination volumes increase. Overall, noninterest income levels were in line with our expectations and as guided in the previous quarter.

With that, I will turn the call over to Pat to review the remaining areas.

Patrick S. Barrett: Thanks, Joe. As Chris noted, net interest income increased and margin expanded in line with our previous outlook. Compared to the previous year’s quarter, net interest income grew $10 million, or 11%, attributed to the tremendous loan growth in the latter half of 2025. Pre-tax pre-provision core earnings grew 4%, or $1.2 million, from the prior quarter, driven by earning asset growth during the quarter and in 2025. Loan yields decreased modestly, reflecting both lower rates and a continued mix shift within the portfolio. Total deposit costs decreased 16 basis points, driven by disciplined pricing across our relationship base and reflecting the positive impact of the Fed’s rate cuts in late 2025.

Looking ahead, we expect positive expansion in net interest income in line with our loan growth and a stable to modest increase in margin over the next quarters. As Chris mentioned, asset quality remained very strong with nonperforming loans to total loans and nonperforming assets to total assets both at 0.31%. Criticized and classified loans increased during the quarter, driven by one large commercial relationship that remains current and well collateralized. Even including this increase, asset quality continues to remain at the low end of historical levels for criticized and classified loans. Lastly, net charge-offs were de minimis, representing only 3 basis points of average total loans on an annualized basis.

Turning to expenses, core noninterest expense decreased from $71 million to $69 million, driven by our initiative to outsource the residential business. Non-core items in the first quarter were almost entirely Flushing merger-related costs. Looking ahead, we expect our second quarter core operating expense run rate to remain in the range of $70 million to $71 million. Capital levels remain strong with our estimated CET1 ratio at 10.7%. A word on taxes: We expect our effective tax rate, which was 24% in the first quarter, to remain in the 23% to 25% range absent any tax policy changes. This will change with the impact of the Flushing acquisition, and we will update you accordingly once the transaction closes.

There are no changes to our full year guidance as stated in the previous quarter, although we have removed the modest impact of further Fed rate cuts from our outlook. To recap, our guidance is for mid- to high-single-digit loan and deposit growth, NIM growing past 3% in the back half of the year, other income ranging from $7 million to $9 million per quarter, and expenses stable at $70 million to $71 million per quarter. Note that these are stand-alone expectations and do not reflect the impact of the Flushing acquisition. We have also added our second quarter outlook for your convenience. At this point, we will begin the question and answer portion of the call.

Operator: Thank you. Ladies and gentlemen, we will now begin the Q&A session. At this time, I would like to remind you to press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking the question. Our first question comes from the line of Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo: Thank you. Good morning. Maybe starting first on the deposit side. Nice quarter of growth for you, and it sounds like the Premier folks are making an impact there. You touched on this a little bit in the prepared remarks, but how sustainable do you think this is? Is there any seasonality in the first quarter numbers, and are you able to maintain the mix shift that you have had? Any color on the deposit side would be great. Thanks.

Christopher D. Maher: Dana, I think you see some seasonality. It is not uncommon for us in our space, given where our geography is. Frankly, given the Premier team’s momentum, we are going to see more in Q2 and Q3.

Joseph J. Lebel: We are still pretty bullish there. It was a little bit of a slow start to the year for them, but it was more than made up for in other areas of the company. So we are pretty happy with the trajectory. More work to do, but overall, we are generally optimistic.

Daniel Tamayo: And the reiteration of the net interest income guide despite pulling the cuts out—correct me if I am wrong, but is the read there that competition is increasing and impacting loan spreads, or is it something else?

Patrick S. Barrett: I would say yes, competition is pretty intense. You see that in our loan yields—stable versus expanding. So any benefit from maturities and rollovers is being competed away for new originations, and of course the yield curve is playing a little bit of havoc with repricing. We have been positioned relatively neutral for several quarters on interest rates, and the impact of the Fed cuts is less of a thing that rolls through our balance sheet than it is a reason that gives us the ability to reduce deposit costs. There is about a quarter lag on seeing the benefit of that when we do it.

We saw nice benefit from the Fed’s rate cuts in September, November, and December rolling through this quarter. We had only modeled, I think, a September rate cut and a December rate cut previously. So when we take that out—because we tend to track with consensus where the market views and predicts rates to be—it was less than a $0.5 million impact on the year. It is a little bit more on an annualized basis for next year, but pretty much de minimis for this year.

Daniel Tamayo: Got it. Thanks for the color, Pat. And then maybe one for you, Chris, just on the portfolio sale for Flushing. Any update there on potential size, timing—anything you can give us in terms of where you stand with that now?

Patrick S. Barrett: Yeah. So the only thing I can tell you is that—

Christopher D. Maher: When we work through legal day one and have all those answers, we will promptly share them with folks. Nothing has changed our outlook since the last time that we spoke. The merger model is holding up, so there is really no deviation in terms of marks, earn-backs, anything like that. We are pretty much on track to where we thought we would be. I would leave the details around the balance sheet restructure for legal day one, and we will talk to you then. I would note that certainly there are some loan segments we are looking at, but it even goes deeper than that. We are looking at hedges and liability structures and securities portfolios.

It is an all-encompassing review to make sure we have the right balance sheet coming together as a combined company. There are a lot of different things we would tick and tie, but we will report them out to you promptly. Our views have not changed, the merger model is on track, and there is no reason to have any concern about either marks or earn-back periods at this point.

Daniel Tamayo: Alright. I appreciate it. Thanks, guys. I will step back.

Operator: Our next question comes from the line of Timothy Jeffrey Switzer with KBW. Please go ahead.

Timothy Jeffrey Switzer: Hey. Good morning. Thanks for taking the question. You mentioned you hired a few C&I bankers already, two other Premier bank teams, and you are looking to do a little bit more hiring. Any goals in terms of how many bankers you would like to add, and how should we think about this impacting the expense outlook?

Christopher D. Maher: Tim, the way I think about it is we are really bullish on the opportunity to be building out our franchise in New York. We think there is so much opportunity there that the more qualified bankers we can bring on, the better. As we see that opportunity, it is getting us interested in adding a few more bankers. But, Joe, you might talk a little bit about the work you are doing now—this is kind of key hiring season—so why do you not take it from there?

Joseph J. Lebel: There are a lot of irons in the fire. I am a big believer that you hire talent when talent is available to you. We were fortunate to get a couple folks just ahead of the hiring season. We are in the thick of it today. I think you will see more from us in the coming quarters, and we are pretty bullish. A lot of that now is going to come in the C&I section of the bank, which is where you are going to see the vast majority of the loan growth as we diversify the mix over time. But there is good talent to be had across the geographies we are in.

Christopher D. Maher: I would also note, and we mentioned this in the prepared remarks, that we have made a lot of progress on a few things that relate to costs around the company. We did guide on stand-alone expenses, and those reflect us being able to add a significant amount of talent but not have expenses go up. We are seeing material decreases in some of the operations areas, which is helping us fund the new folks that we are bringing on board. I think we are going to have a brisk hiring season and we are going to be able to comply with the expense guidance that we put out earlier.

Do not look for expenses to move up if we are able to hire several more high-quality bankers. We have room to do that.

Patrick S. Barrett: Do not be surprised if you see compensation expenses go up and data processing expenses go down, with the net being a push.

Timothy Jeffrey Switzer: Understood. You touched on this in your comments earlier, but there was some slight credit migration across some of the more forward-looking metrics—nothing crazy and all from low levels—but just to check the box, is there anything systemic in there or concentrations in certain sectors?

Christopher D. Maher: No. It is really just a single business. A single customer had a weak year last year, so you look at your risk ratings on that basis. At this point, it looks like they have runway to recover and migrate back out of that over the foreseeable time period. We are watching closely, but it was only one credit, and it was not something that had a pattern or that we would be concerned about bleeding from there.

Timothy Jeffrey Switzer: Great. And one last quick one from me: the timing of close for the merger—should we be thinking 2Q?

Christopher D. Maher: We are going to close pretty promptly after we receive the final regulatory approval, but we have to respect their process and understand where they are. Typically, you are not able to close for about 15 days after you receive the final federal approval. We would be hopeful that we are doing it earlier in the quarter, but who knows. We have to respect the process and see how things fall out.

Operator: Our next question comes from the line of David Jason Bishop with The Hovde Group. Please go ahead.

Christopher D. Maher: Morning, Dave.

David Jason Bishop: Hey. Chris, Joe, as you get to know the legacy Flushing franchise and customer and deposit base, any update on your assumptions in terms of your ability to go in there and maybe reprice and remap some of their deposit products and realize some of the deposit cost saves you may have contemplated on first pass?

Christopher D. Maher: I think there is opportunity, Dave, in a lot of different ways. First, we have been very pleased as we start working face-to-face with people in broad numbers and get to know them better. We have hundreds of people with OceanFirst Financial Corp. and Flushing working together and preparing for not just the closing, but the integration and how we are going to run the business together, and we really enjoy that opportunity. There is a lot of good talent there. A particular call-out: we think the branch folks are fantastic. We are working through a process of integrating the commercial bankers as well.

In terms of deposit pricing, I think some of that will be a little bit market driven. We have to understand where the market comes. The yield curve bouncing around the last few weeks has at least raised the question in our mind about how much you could reprice. But the model was not especially dependent upon that. We are looking at the whole balance sheet. If we have an opportunity to restructure the balance sheet, we may be able to be less dependent on certain sources of funding, which could give us some options as well.

We still feel good about it, but we are also watching the broader world and where short-term rates are and what Fed policy becomes, because that will probably make a little bit of a difference over the next couple of quarters. As Pat pointed out, it is not going to make a big difference in our full-year earnings or the NIM, but around the margins, it could be better.

David Jason Bishop: Got it. Then maybe one follow-up question. Obviously the focus with the merger is in the New York Metro Area, but there is a lot of disruption from integration and M&A down in the greater Baltimore/DC region. Are you still looking to potentially add talent down in this metro area as well as Boston?

Christopher D. Maher: Absolutely. I was just staying with that team a couple of weeks ago, and we think there is a great opportunity there. Joe, maybe you can walk through that a little more.

Joseph J. Lebel: We have almost a dozen folks down there now. We have continued to build that team out in the last 18 months and remain out there looking for more. I think we are still just scratching the surface of our opportunities down there.

Christopher D. Maher: One of the things we are seeing is the advent of technology—there are a lot of smaller technology players that are working in the mission-critical government space, from defense to cybersecurity and more. Because they are smaller companies, it particularly suits our banking model where the relationship matters a great deal; they are looking to align themselves with a bank over the long term, and a bank that can grow with them because they may be small today but have aspirations to grow quickly. I really enjoyed meeting and working with a lot of those clients, and we think we can grow that pretty nicely in the coming years.

David Jason Bishop: Great. Appreciate the color.

Christopher D. Maher: Alright. Thanks, Dave. How about next?

Operator: Our next question comes from the line of Christopher William Marinac with Janney. Please go ahead.

Christopher D. Maher: Thanks. Good morning.

Christopher William Marinac: I wanted to ask about the non-New York geographies—new C&I business you are doing in Philadelphia, Boston, and the DC corridor—and how those markets can complement what you are building now with Flushing and the combined OceanFirst Financial Corp. footprint.

Joseph J. Lebel: Chris, I will start with Boston to give you a little bit of flavor. The three C&I hires this year were in the Boston footprint. We are pretty happy with that addition; the team is now eight folks or so. As I mentioned earlier, we are almost a dozen down in the DC/Baltimore metro. Philly has always been a consistent performer. It is a book that is north of $2 billion today. We are really bullish on all three markets, continuing to add people in those segments. The C&I business is growing in all three segments.

If you recall, initially the CRE business was very strong in Philly and Boston, but the focus for us has been to diversify the books, and I think we have done a really good job there. We are just touching the surface; I think there is a wealth of opportunity going forward.

Christopher William Marinac: Great, Joe. Thank you for that. And, Chris or Joe, if you go back to when Signature failed a couple of years ago, how much business is still out there to move if you had to ballpark it today?

Christopher D. Maher: There is always some opportunity there, but what we are really focused on is winning share across a wider group of different competitors. In fact, the hires we made—including a number of hires we made into the Premier Group this year—came from other banks and have other targets. What we tried to build when we brought our teams over was to hire folks that had a history of working in this model and bring in bankers from a variety of different institutions, bringing them into the Premier model and making it work. We are less dependent upon any particular competitor, but there is still opportunity out there.

The Premier Group, although recruiting from a variety of sources, is still a deposit-heavy, deposit-centric hire. The bankers we are looking at there are bankers that can bring management portfolios with them, which is a slightly different focus. The C&I folks bring cash management with them as well, and we are really happy that our C&I bankers are funding almost 50% of their asset growth with their own deposits, which exceeds our expectations in that segment. In the Premier segment, we expect it to be more of a contributor of excess funding. So it is a slightly different candidate but looks very similar to what we have done over the years.

Christopher William Marinac: Great. Thank you, Chris. I appreciate the background here.

Christopher D. Maher: Alright. Thanks, Chris.

Operator: Thank you. At this time, we have no further questions. We will now turn the call back over to Chris for closing remarks.

Christopher D. Maher: Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in July at our second quarter results and hope we will have the opportunity to go a little deeper in the Flushing merger model at that time as well. Thanks, everyone.

Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect your lines at this time. Thank you for your participation, and have a pleasant day.

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