OceanFirst Financial Corp.

Good morning and welcome to the Ocean First Financial Corp Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jill Hewitt. Please go ahead.

Good morning, and thank you all for joining us. I'm Jill Hewitt, Senior Vice President and Investor Relations Officer at Ocean First Financial Corp. We will begin this morning's call with our forward-looking statement disclosure. Please remember that many of our remarks today contain forward-looking statements based on current expectations. Refer to our press release and other public filings, including the risk factors in our 10-K. where you will find factors that could cause results to differ materially from those forward-looking statements. Thank you, and now I will turn the call over to our host, Chairman and Chief Executive Officer Christopher Marr.

Christopher Marr Thank you, Jill, and good morning to all who have been able to join our second quarter 2021 earnings conference call today. This morning I'm joined by our President, Joe Lavelle, and Chief Financial Officer Mike Fitzpatrick. As always, we appreciate your interest in our performance and are pleased to be able to discuss our operating results with you. This morning we'll cover our financial and operating performance for the quarter and provide some color regarding the outlook for our business. Please note that our earnings release was accompanied by a set of supplemental slides that are available on the company's website. You may refer those slides during this call. After our discussion, we look forward to taking your questions. In terms of financial results for the second quarter, GAAP-diluted earnings per share were 49 cents, another strong quarter for the company. Earnings reflect a continuing economic recovery, with the bank demonstrating improved credit trends, a modest pickup in net interest income, and a committed loan pipeline that indicates our commercial banking expansion is gaining traction. Core earnings approximated GAAP earnings this quarter. Regarding capital management, the Board declared a quarterly cash dividend of 17 cents per common share and approximately 44 cents per depository share of preferred stock. The common share dividend is the company's 98th consecutive quarterly cash dividend. The 17-cent common share dividend represents just 35 percent of earnings. The common share dividend remains at a conservative payout ratio. and will be evaluated later in the year as the post-pandemic earnings trajectory is more established. Over the past three quarters, robust earnings have driven a $1 increase in tangible book value per share. Tangible stockholders' equity to tangible assets remains strong and now exceeds 9%. Our balance sheet remains inflated as we carried $1.1 billion, or almost 10% of the entire balance sheet, as cash at quarter end. The excess cash is a direct result of positive trends in our business. It should provide an incredible opportunity to build earnings over time. Average deposit costs for the quarter decreased by 10 basis points to 27 basis points, and ended the quarter at just 24 basis points, an all-time low point. Much of the decrease in deposit costs is linked to a rotation from high-cost CDs to the noninterest-bearing accounts. On a year-to-date basis, CDs have decreased by $416 million and were largely replaced with noninterest-bearing accounts that have increased by $372 million. The company continued share repurchase activities during the second quarter, purchasing 500,000 shares at a weighted average price of $21.93. During the quarter, the Board authorized an additional 3 million shares be added to the repurchase program, leaving a quartering capacity of slightly more than 4 million shares available for repurchase, or 6.7% of the current outstanding share base. Before we discuss the outlook for our business, I'll spend a minute reviewing market conditions in some of our operating areas. During the second quarter, local economic conditions continued to strengthen, most notably in New York City, where Manhattan has begun to show signs of activity. Clients throughout our geographies report strong demand for products and services, with labor and supply chain issues continuing to restrain output. Overall, our client base is in excellent financial position, as indicated by record low levels of delinquencies and positive trends in all other credit metrics. The New Jersey Shore continues to be our strongest market, as the shore season looks to be one of the best on record. Looking internally, our employees have also been exceptionally resilient, having completed a core systems conversion earlier this month that upgraded our back office infrastructure for the first time in decades. That project has set the stage for additional advancements in business process automation and employee efficiency. More importantly, the conversion finished well ahead of schedule and without client disruption. In addition to the long-term benefits that we will achieve from modern core systems, This transition will allow us to remove the final redundant systems in the bank, the country bank core application set, this September, an important efficiency project. Our forward focus remains on deploying liquidity, building our digital capabilities, and improving operating efficiency. To provide a more complete context for our efforts in these areas, we will be holding an Investor Day event next week. The event will be available in person at our Red Bank New Jersey administrative offices and also available online. So we hope many of you can join us. We will be walking through our progress since the last investor day in 2018, discussing the post COVID landscape and detailing our plans to increase loan growth, capitalize on the shift to digital and improve the efficiency of our retail distribution network. At this point, I'll turn the call over to Joe for a discussion regarding progress this past quarter, including an update on our expansion of the commercial bank.