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OCEANFIRST FINANCIAL CORP (OCFC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 GAAP diluted EPS was $0.30; core diluted EPS was $0.36. Net interest income rose to $90.7M and net interest margin (NIM) was stable at 2.91% .
  • Core EPS modestly beat S&P Global consensus (Primary EPS 0.356 vs actual 0.36); revenue missed (consensus $103.1M vs actual $98.9M). Values retrieved from S&P Global.*
  • Total loans increased $372.9M (+14% annualized) on $1.01B originations; commercial & industrial (C&I) loans grew $219.1M. Deposits rose to $10.436B; excluding $117.7M brokered CD run-off, deposits increased $321.2M .
  • Strategic pivot: company is outsourcing residential loan originations & title business; recognized $4.1M restructuring charges in Q3 and expects ~$8M additional charges in Q4, with ~$14M annual expense savings beginning 2026 (offset by reduced residential loan gains) .
  • Management guided to modest NIM compression in Q4 before resuming expansion in Q1 2026, and outlined 2026 targets including NIM >3.00% and 7–9% loan growth; CET1 expected to remain >10.5% .

What Went Well and What Went Wrong

What Went Well

  • Robust organic growth: Total loans +$372.9M (+14% annualized); C&I +$219.1M; commercial originations $739.2M; pipeline remains robust at $710.9M .
  • Deposit momentum: Deposits +$204M to $10.436B; excluding brokered CD run-off, deposits +$321.2M; Premier Banking teams contributed $242M at a 2.64% weighted average cost and ~20% non-interest DDA mix .
  • Credit quality stable: NPAs/Assets 0.34%; net charge-offs $0.617M (annualized 2bps); criticized and classified loans declined; allowance coverage of NPLs ~197% .
  • Quote: “We are pleased to present our current quarter results, which reflect increased earnings, driven by strong organic loan and deposit growth while maintaining a robust commercial loan pipeline.” – CEO Christopher D. Maher .
  • CFO note on NIM: “Absent [lower loan fees and sub debt repricing], our overall NIM would have improved to 2.95%.” – Patrick Barrett .

What Went Wrong

  • Expense pressure: Operating expenses rose to $76.3M, including $4.1M restructuring; core (excluding non-core) OpEx +$10.3M YoY on comp, professional fees, data processing, occupancy and other opex .
  • NPLs up sequentially: Non-performing loans increased to $41.3M (0.39% of loans) vs $33.5M (0.33%) at June 30; allowance coverage of NPLs declined vs prior quarter .
  • Borrowing costs up: Cost of other borrowings increased due to subordinated debt repricing to variable in May 2025, contributing to modest margin headwind .
  • Provision higher: Provision for credit losses was $4.1M vs $3.0M in Q2, driven by loan growth and increased unfunded commitments .
  • Other income down YoY: Other income was $12.3M vs $14.7M YoY, reflecting absence of prior-year gains on equity investments and trust sale .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Interest Income ($M)$153.703 $154.825 $162.194
Net Interest Income ($M)$86.652 $87.636 $90.657
Other Income ($M)$11.253 $11.733 $12.304
Provision for Credit Losses ($M)$5.340 $3.039 $4.092
GAAP Diluted EPS ($)$0.35 $0.28 $0.30
Core Diluted EPS ($)$0.35 $0.31 $0.36
Net Interest Margin (%)2.90 2.91 2.91
Efficiency Ratio (%)65.67 71.93 74.13

Segment/Portfolio Composition – Loans (Ending, $M)

CategoryMar 31, 2025Jun 30, 2025Sep 30, 2025
CRE – Investor-owned$5,200.137 $5,068.125 $5,211.220
C&I – Real Estate$896.647 $914.406 $997.122
C&I – Non-Real Estate$748.575 $862.504 $998.860
Residential Real Estate$3,053.318 $3,119.232 $3,135.200
Home Equity & Other Consumer$226.633 $220.820 $215.581
Total Loans$10,125.310 $10,185.087 $10,557.983

Key Performance Indicators

KPIQ1 2025Q2 2025Q3 2025
Deposits (Ending, $M)$10,177 $10,232 $10,435.994
Loan-to-Deposit Ratio (%)99.50 99.50 101.20
CET1 Ratio (Est.) (%)11.2 11.0 10.6
Non-Performing Loans ($M)$36.970 $33.511 $41.263
NPAs / Assets (%)0.29 0.31 0.34
Net Charge-offs ($M)$0.636 $2.218 $0.617
Allowance for Loan Credit Losses ($M)$78.798 $79.266 $81.236

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loans (sequential growth)Q4 2025N/A2–3% growth; driven by C&I; CRE muted New
DepositsQ4 2025N/AGrow in line with loans; LDR ~100% New
NIMQ4 2025N/AModest decline to NIM%; expansion expected to return in Q1 2026 New
Other Income ($M)Q4 2025N/A$8–$9; subject to swap activity & service charges New
Operating Expenses ($M)Q4 2025N/A$70–$71 excl. ~$8M one-time residential/title outsourcing charges New
Capital (CET1)Q4 2025N/AStrong >10.5% New
Loans (YoY growth)2026N/A7–9% growth; C&I-led; residential run-off New
Deposits2026N/AGrow in line with loans; LDR ~100% New
NIM2026N/A>3.00% trajectory (three 25bp cuts modeled) New
Other Income ($M)2026N/A$25–$35 (lower given outsourcing) New
Operating Expenses ($M)2026N/A$275–$285 (reflects savings, inflation) New
Capital (CET1)2026N/A>10.5%; capital optimization ongoing New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
NIM trajectoryExpanded to 2.90% in Q1; stable 2.91% in Q2; aim to cross 3% near year-end was uncertain NIM 2.91%; absent noise would be 2.95%; modest Q4 compression; crossing >3% in H1 2026 Improving after short-term dip
Premier Banking depositsLaunched April; $115M by Q2 at 2.71% cost; target $500M 2025 $242M by Q3 at 2.64% cost; ~20% DDA; +1,100 accounts; trajectory intact Accelerating
C&I growth & pipelineC&I +$95M in Q1; +$132M in Q2; pipeline record $791M Originations $1.01B; C&I +$219M; pipeline $711M Strong & durable
Credit qualityNPLs ~0.33–0.37%; NPAs ~0.29–0.31%; benign charge-offs NPLs 0.39%; NPAs 0.34%; net charge-offs 2bps; criticized loans down Slight uptick in NPLs; overall solid
Residential/title outsourcingNot present in Q1; Q2 discussed run-rate OpEx with hires Announced outsourcing; $4.1M Q3 charges; ~$8M Q4; ~$14M annual savings from 2026 Structural cost action
Rate/cost of depositsDeposit beta declining; total cost stable ~2.06% Lag in repricing; CD duration <6 months; deposit cost benefits expected with lag Improving in 2026
Securities pre-fundingNot in Q1; Q2 book declining Pre-funded 2026 growth in securities; low-risk, capital-efficient One-time action completed
NDFI & GovCon exposureNot detailed in Q1/Q2NDFI small (~3% loans) and commercial; GovCon ~$100M, mission-critical, well-liquid Managed risk niches

Management Commentary

  • Strategy: Focus capital on loan growth; defer share repurchases near-term; CET1 ~10.6% remains robust .
  • Margin outlook: “We expect positive expansion in net interest income...but modest short-term compression on margin in the fourth quarter” – CFO .
  • Deposit costs: Expect lagged benefit from down-rate cycle; CD book under six months will reprice in coming months .
  • Residential outsourcing: ~$10M pre-tax annual improvement (gross ~$14M savings, ~$4M reduced gain on sale), with final ~$8M non-recurring charges in Q4 .
  • Growth cadence: Loans expected to grow ~$250M per quarter average in 2026; NIM crossing >3% in H1 2026 .

Q&A Highlights

  • NII/NIM guidance clarified: Terminal “3%” refers to Fed rate assumption; NIM expected to breach 3% in H1 2026; NII growth high-single digits aligned with loan growth .
  • Premier Banking: Strong deposit ramp and early lending contributions ($85M originations YTD); DDA mix ~20% now, targeting ~30% over time .
  • Residential/title outsourcing: ~$10M pre-tax annual benefit; title business non-material to bottom line but removes ~$10M revenue and ~$10M expense from consolidation .
  • Risk exposures: NDFI is small and commercial-focused; GovCon ~$100M, mission-critical and liquid counterparties; reserve modeling sensitive to criticized loans but qualitative factors applied .

Estimates Context

MetricConsensus (S&P Global)ActualResult
Primary EPS (Q3 2025)$0.356*$0.36*Beat (normalized EPS)
Revenue (Q3 2025)$103.1M*$98.869M*Miss

Values retrieved from S&P Global.*

Notes: OCFC reports GAAP diluted EPS of $0.30, while S&P “Primary EPS” reflects normalized EPS. On GAAP EPS, results are below normalized consensus; on normalized basis, a slight beat .

Key Takeaways for Investors

  • Core EPS beat vs normalized consensus and sequential improvement; GAAP EPS impacted by $4.1M restructuring charges; expect ~$8M additional non-recurring in Q4 .
  • Near-term margin headwind (Q4) from deposit pricing and sub debt repricing; management guides to resumed NIM expansion in Q1 2026 and NIM >3.00% during 2026 .
  • Growth engine is working: C&I-led loan growth (+$219M), strong originations ($1.01B), and a robust commercial pipeline ($711M) support 2026 high single-digit NII growth .
  • Premier Banking is a meaningful funding channel: $242M deposits at 2.64% cost; rising DDA mix helps lower funding costs over time .
  • Credit remains a differentiator: NPAs/Assets 0.34% and net charge-offs at 2bps; allowance coverage strong; slight sequential NPL uptick bears monitoring .
  • Strategic outsourcing should structurally lower OpEx (~$14M annual savings) starting in 2026, with modelled 2026 OpEx $275–$285M .
  • Trading implications: Q4 headline EPS likely burdened by ~$8M one-time charges and modest NIM compression; watch for deposit cost inflection and early 2026 NIM trajectory as catalysts. Longer-term, premier deposits + C&I growth + expense actions support ROA glide path (>0.90% by Q4 2026, ~1% in early 2027) .