OceanFirst Financial Corp.

Good morning. Thank you for attending today's Ocean First Financial Corp Earnings Conference Call. My name is Bethany and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Jill Hewitt with Ocean First Financial Corp. Please go ahead.

Thank you, Bethany. 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 where you will find factors that could cause actual results to differ materially from these forward-looking statements. Thank you. And now I will turn the call over to our host, Chairman and Chief Executive Officer Christopher Maher.

Thank you, Jill. And good morning to all who have been able to join our second quarter 2022 earnings conference call. This morning I'm joined by our President, Joe Lavelle, and our Chief Financial Officer, Pat Barrett. You may recall Pat joined our team in April and assumed his role as Chief Financial Officer on June 2nd upon the retirement of Mike Fitzpatrick. So this is Pat's first quarterly earnings season with us. As always, we appreciate your interest in our performance and are pleased to discuss our results with you. This morning we'll provide brief remarks about the financial and operating performance for the quarter and then provide some color regarding the outlook for our business. As a reminder, in addition to the earnings release issued last night, An investor presentation is also available on our company's website. We may refer to those slides during the call. After our discussion, we look forward to taking your questions. Our financial results for the second quarter include a gap diluted earnings per share of 47 cents. Earnings reflect strong loan growth, expanding margins, and benign credit conditions. Core earnings were 59 cents per share and reflect non-core items primarily related to unrealized equity mark-to-market valuation adjustments on preferred stock positions, and to a lesser extent, charges related to branch closures and mergers. Turn to capital management. Given the company's strong performance, the board increased the quarterly cash dividend by 3 cents, or 18%, to 20 cents per common share. This is the company's 102nd consecutive quarterly cash dividend and represents 34% of core earnings. Tangible common equity per share increased modestly to $15.96, reflecting earnings momentum outpacing AOCI marks related to our investment portfolio, share repurchases, and the acquisition of our interest in the Trident title insurance business. The company's share repurchase activities continued during the second quarter, with 272,779 shares repurchased at a weighted average cost of $19.25. Our appetite for share repurchases will be balanced against opportunities to deploy capital in growth initiatives and reflects trading rules that limit the number of shares the company is able to retire while awaiting the regulatory review for the Partners Bank Corp acquisition. There are 2.9 million shares available under the current repurchase program. Regarding the Partners Bank Corp acquisition announced in November of 2021, The company has submitted all the necessary regulatory applications and continues to provide additional information as requested. At this time, we do not have a timeline from the regulators for when the process may be completed. Until all approvals and customary closing conditions are met, we cannot schedule the merger closing. Turning to net interest income and margin, net loan growth of $316 million and our asset-sensitive balance sheet drove another quarter of margin improvement which expanded by 11 basis points to 3.29 percent. We experienced elevated prepayment fees this quarter of $2.6 million for nine basis points and expect the level of prepayments to slow for the remainder of the year. Two factors should provide a tailwind for margins. First, the quarter end loan portfolio of $9.4 billion was $176 million higher than the second quarter average of $9.2 billion. Second, the company held $2.3 billion of floating rate loans, repricing in the third quarter, which will provide the opportunity to strengthen margins as rates increase. That should be the case in the third quarter and perhaps for the remainder of the year. The benefit from rate increases experiences a time lag. So in the coming quarters, NIM could be flat or expand, but trends should be positive overall. Core non-interest income and non-interest expenses included a full quarter of Trident Abstract title agency operations, which added $4.5 million of non-interest income and $3.2 million of non-interest expense for the quarter, resulting in $1.3 million of net income for the quarter. The purchase of our interest in Trident was completed on April 1st, so these figures reflect a full quarter impact. Excluding the impact of Trident, our disciplined expense management resulted in core operating expenses related to banking operations improving modestly to $54.7 million, or $400,000 lower than the prior quarter. I'd also like to provide some additional color regarding expense trends. As noted in our earnings release, the bank increased base salaries by 5 percent for over 80 percent of our employees. and paid a one-time award to almost 20% of our employees to support our team members who would be most impacted by inflationary challenges. The annual impact, not captured in this quarter's financial results, is $2.3 million, or almost $600,000 per quarter. I will add that compensation increases for this purpose are not typical at Ocean First. Our company is a talent-led business, and our employees provide our competitive advantage. This investment in our team reinforces our commitment to them and demonstrates an understanding of the challenges they and their families are facing during the current economic cycle. No additional compensation actions are contemplated for the remainder of 2022, and it's simply too early to speculate on the level of labor expense pressure for 2023. Fortunately, our multi-year and comprehensive program of branch consolidations has improved our ability to manage the company's overall expense base. The second quarter run rate captures our expected core operating expense for the remainder of the year. At this point, I'll turn the call over to Joe to provide some color regarding our progress during the quarter.