Q2 2026 OceanFirst Financial Corp Earnings Call

July 31, 2026

Alfred Goon: I am Alfred Goon, SVP of Corporate Development and Investor Relations. Before we kick off the call, we'd like to remind everyone that our quarterly earnings release and related earnings supplement can be found on the company website, oceanfirst.com. Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings for a complete discussion of forward-looking statements and associated risk factors. Thank you, and now I will turn the call over to Christopher Maher, Chief Executive Officer of OceanFirst.

Speaker #1: Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings for a complete discussion of forward-looking statements and associated risk factors.

Speaker #1: Thank you, and now I will turn the call over to Christopher Maher, Chief Executive Officer of OceanFirst.

Speaker #2: Thank you, Alfred. Good morning. And thank you to all who've been able to join our second quarter of 2026 earnings conference call. This morning, I'm joined by our president, Joe Labelle, and our chief financial officer, Pat Barrett.

Christopher Maher: Thank you, Alfred. Good morning, and thank you to all who've been able to join our Q2 2026 earnings conference call. This morning, I'm joined by our President, Joseph Lebel, and our Chief Financial Officer, Pat Barrett. We appreciate your interest in our performance and this opportunity to discuss our results with you. 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 Q2 results that reflect the closing of our transformational acquisition of Flushing Financial Corporation on 1 June.

Speaker #2: We appreciate your interest in our performance and this opportunity to discuss our results with you. 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.

Speaker #2: 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.

Speaker #2: We reported second quarter results that reflect the closing of our transformational acquisition of Flushing Financial Corporation on June 1st. On a GAAP basis, we reported a net loss of $0.04 per fully diluted share, which was driven by $0.47 per share, or $33.6 million, of non-recurring merger-related expenses, net of taxes.

Christopher Maher: On a GAAP basis, we reported a net loss of $0.04 per fully diluted share, which was driven by $0.47 per share or $33.6 million of non-recurring merger-related expenses, net of taxes. On a core basis, which excludes non-recurring items, earnings per share was $0.43 or $30.5 million, unchanged from the prior quarter and up 39% from the prior year. Pre-tax, pre-provision core earnings grew by 29% from the prior quarter to $44.5 million. We've seen quarterly improvement in the company's performance from Q2 2025 in net interest income, net interest margin, and return on average assets. This highlights our multi-quarter journey from our revenue-generating investments as we continue to improve towards peer profitability levels. This week, our board also approved the quarterly cash dividend of $0.20 per common share, marking the company's 118th consecutive quarterly cash dividend.

Speaker #2: On a core basis, which excludes non-recurring items, earnings per share was 43 cents, or 30.5 million dollars, unchanged from the prior quarter and up 39% from the prior year.

Speaker #2: Pre-tax, pre-provision core earnings grew by 29% from the prior quarter to 44.5 million dollars. We've seen quarterly improvement in the company's performance in the second quarter of 2025, and net interest income, net interest margin, and return on average assets.

Speaker #2: This highlights our multi-quarter journey from our revenue-generating investments as we continue to improve toward peer profitability levels. This week, our board also approved the quarterly cash dividend of $0.20 per common share, marking the company's 118th consecutive quarterly cash dividend.

Speaker #2: As mentioned previously, we completed our acquisition of Flushing Financial Corporation on June 1, concurrent with a $225 million strategic investment from Warburg Pincus, which was priced at $19.76 per share.

Christopher Maher: As mentioned previously, we completed our acquisition of Flushing Financial Corporation on 1 June, concurrent with the $225 million strategic investment from Warburg Pincus, which was priced at $19.76 per share. Flushing added approximately $8.7 billion in total assets, $5 billion in loans, and $7.4 billion in deposits, along with 30 retail branches across New York City and Long Island, bringing our combined franchise to approximately $23 billion in assets. We're thrilled to welcome the Flushing team and their customers to the OceanFirst family. We also repositioned our balance sheet by selling $1.3 billion of multifamily loans acquired from Flushing, which eliminated the majority of our exposure to New York City rent-regulated properties and reduced the bank's commercial real estate concentration by approximately 50 percentage points to 381%. The proceeds were reinvested into highly liquid investment-grade securities.

Speaker #2: Flushing added approximately $8.7 billion in total assets, $5.0 billion in loans, and $7.4 billion in deposits, along with 30 retail branches across New York City and Long Island.

Speaker #2: Bringing our combined franchise to approximately $23 billion in assets. We're thrilled to welcome the Flushing team and their customers to the Ocean First family.

Speaker #2: We also repositioned our balance sheet by selling 1.3 billion dollars of multifamily loans acquired from Flushing, which eliminated the majority of our exposure to New York City rent-regulated properties and reduced the bank's commercial real estate concentration by approximately 50 percentage points to 381 percent.

Speaker #2: The proceeds were reinvested into highly liquid investment-grade securities. Integration planning is well underway, and we anticipate full integration of Flushing's operations and systems including the systems conversion and rebranding by the end of the third quarter of 2026.

Christopher Maher: Integration planning is well underway. We anticipate full integration of Flushing's operations and systems, including the systems conversion and rebranding, by the end of Q3 2026. We're confident in the strategic and financial rationale of this combination. We are already seeing competitive wins in both talent and customer acquisition. We remain on track to achieve the cost savings and returns outlined at the transaction announcement. A significant portion of our cost saves is expected shortly following systems conversion. Pat will provide additional details on the financial impact of the transaction in his remarks. We remain focused on executing our organic growth strategy, which continues to be reflected in our underlying results this quarter, while also approaching the integration of Flushing with a sense of urgency. I'm proud of the pace at which our staff is moving related to both organic initiatives and the Flushing integration.

Speaker #2: We're confident in the strategic and financial rationale of this combination and we are already seeing competitive wins in both talent and customer acquisition. We remain on track to achieve the cost savings and returns outlined at the transaction announcement.

Speaker #2: A significant portion of our cost savings is expected shortly following systems conversion. Pat will provide additional details on the financial impact of the transaction in his remarks.

Speaker #2: We remain focused on executing our organic growth strategy which continues to be reflected in our underlying results this quarter, while also approaching the integration of Flushing with a sense of urgency.

Speaker #2: I'm proud of the pace at which our staff is moving related to both organic initiatives in the Flushing integration. At this point, I'll turn the call over to Joe for additional color on these businesses.

Christopher Maher: At this point, I'll turn the call over to Joe for additional color on these businesses.

Speaker #1: Thanks, Chris. I'll start with loan originations for the quarter, which totaled $642 million, an increase of 50 percent from the prior quarter. Excluding the impact of the Flushing acquisition and the multifamily loan sale, underlying commercial organic loan growth was approximately $154 million, or 2 percent from the prior quarter, reflecting the company's focus on core relationships.

Joseph Lebel: Thanks, Chris. I'll start with loan originations for the quarter, which totaled $642 million, an increase of 50% from the prior quarter. Excluding the impact of the Flushing acquisition and the multifamily loan sale, underlying commercial organic loan growth was approximately $154 million or 2% from the prior quarter, reflecting the company's focus on core relationships. These results underscore the continued strength of the core growth initiatives, which the Flushing franchise will further bolster. The C&I business grew 8% on an annualized basis, reflecting the continued momentum from our recruitment efforts in 2024 and 2025. We've recruited another 17 investment bankers so far in 2026 and will continue to be opportunistic with hiring efforts throughout the remainder of the year. Total deposits grew by $6.6 billion during the quarter to $17.8 billion, driven by the $7.4 billion of deposits acquired from Flushing.

Joe Lebel: Thanks, Chris. I'll start with loan originations for the quarter, which totaled $642 million, an increase of 50% from the prior quarter. Excluding the impact of the Flushing acquisition and the multifamily loan sale, underlying commercial organic loan growth was approximately $154 million or 2% from the prior quarter, reflecting the company's focus on core relationships. These results underscore the continued strength of the core growth initiatives, which the Flushing franchise will further bolster. The C&I business grew 8% on an annualized basis, reflecting the continued momentum from our recruitment efforts in 2024 and 2025. We've recruited another 17 investment bankers so far in 2026 and will continue to be opportunistic with hiring efforts throughout the remainder of the year. Total deposits grew by $6.6 billion during the quarter to $17.8 billion, driven by the $7.4 billion of deposits acquired from Flushing.

Speaker #1: These results underscore the continued strength of the core growth initiatives, which the Flushing franchise will further bolster. The C&I business grew 8 percent on an annualized basis, reflecting the continued momentum from our recruitment efforts in 2024 and 2025.

Speaker #1: We've recruited another seven C&I bankers so far in 2026, and will continue to be opportunistic with hiring efforts throughout the remainder of the year.

Speaker #1: Total deposits grew by $6.6 billion during the quarter to $17.8 billion, driven by the $7.4 billion of deposits acquired from Flushing. Excluding Flushing, deposits declined modestly, primarily due to seasonal outflows in government deposits and a reduction in broker deposits.

Joseph Lebel: Excluding Flushing, deposits declined modestly, primarily due to seasonal outflows in government deposits and a reduction in broker deposits. Positively, we did see a 6% increase in non-interest-bearing deposits. The Premier Banking deposits grew by $150 million, while the cost of deposits dropped by 17 basis points. Non-interest-bearing deposits crossed the $100 million mark during the quarter. The group now manages 426 clients and 1,879 accounts and continues to build this momentum. As an added benefit, the Premier teams contributed $45 million in loan originations for the quarter. Customer engagement and calling activity has been significant, and the addition of Flushing's branch footprint throughout New York City and Long Island now provides a tailwind moving forward. We remain confident in our 2026 deposit targets and have recently added two new Premier teams in Manhattan and Long Island.

Joe Lebel: Excluding Flushing, deposits declined modestly, primarily due to seasonal outflows in government deposits and a reduction in broker deposits. Positively, we did see a 6% increase in non-interest-bearing deposits. The Premier Banking deposits grew by $150 million, while the cost of deposits dropped by 17 basis points. Non-interest-bearing deposits crossed the $100 million mark during the quarter. The group now manages 426 clients and 1,879 accounts and continues to build this momentum. As an added benefit, the Premier teams contributed $45 million in loan originations for the quarter. Customer engagement and calling activity has been significant, and the addition of Flushing's branch footprint throughout New York City and Long Island now provides a tailwind moving forward. We remain confident in our 2026 deposit targets and have recently added two new Premier teams in Manhattan and Long Island.

Speaker #1: Positively, we did see a 6% increase in non-interest-bearing deposits. The Premier Bank deposits grew by $150 million, while the cost of deposits dropped by 17 basis points.

Speaker #1: Non-interest-bearing deposits crossed the 100 million dollar mark during the quarter. The group now manages 426 clients and 1,879 accounts and continues to build its momentum.

Speaker #1: As an added benefit, the premier teams contributed $45 million in loan originations for the quarter. Customer engagement and calling activity have been significant, and the addition of Flushing's branch footprint throughout New York City and Long Island now provides a tailwind moving forward.

Speaker #1: We remain confident in our 2026 deposit targets and have recently added two new premier teams in Manhattan and Long Island. I wanted to add a brief summary of our calling efforts to date with the Flushing teams, and the commercial and retail segments of their market.

Joseph Lebel: I wanted to add a brief summary of our calling efforts to date with the Flushing teams in the commercial and retail segments of their market. Clients and notable centers of influence in all segments of the business have been welcoming. They are optimistic that we can continue to support their needs while using the scale of the combined company to grow with them, and in some cases, in the commercial bank specifically, grow exponentially. Recent visits in the Asian community specifically have surfaced several significant loan and deposit opportunities in both C&I and CRE. Lastly, non-interest income was $10.6 million during the quarter, up from $6.7 million in the prior quarter. Excluding non-core items and Flushing's contribution of $1.4 million, other income increased $2.5 million, primarily driven by higher net gains on other real estate activity and commercial loan swap income.

Joe Lebel: I wanted to add a brief summary of our calling efforts to date with the Flushing teams in the commercial and retail segments of their market. Clients and notable centers of influence in all segments of the business have been welcoming. They are optimistic that we can continue to support their needs while using the scale of the combined company to grow with them, and in some cases, in the commercial bank specifically, grow exponentially. Recent visits in the Asian community specifically have surfaced several significant loan and deposit opportunities in both C&I and CRE. Lastly, non-interest income was $10.6 million during the quarter, up from $6.7 million in the prior quarter. Excluding non-core items and Flushing's contribution of $1.4 million, other income increased $2.5 million, primarily driven by higher net gains on other real estate activity and commercial loan swap income.

Speaker #1: Clients and notable centers of influence in all segments of the business have been welcoming. They are optimistic that we can continue to support their needs, while using the scale of the combined company to grow with them, and in some cases, in the commercial bank specifically, grow exponentially.

Speaker #1: Recent visits in the Asian community specifically have surfaced several significant loan and deposit opportunities in both C&I and CRE. Lastly, non-interest income was $10.6 million during the quarter, up from $6.7 million in the prior quarter.

Speaker #1: Excluding non-core items in Flushing's contribution of $1.4 million, other income increased $2.5 million, primarily driven by higher net gains on other real estate activity and commercial loan swap income.

Speaker #1: Overall, non-interest income levels were in line with our expectations. With that, I'll turn the call over to Pat to review the remaining areas of the quarter.

Joseph Lebel: Overall, non-interest income levels were in line with our expectations. With that, I'll turn the call over to Pat to review the remaining areas of the quarter.

Joe Lebel: Overall, non-interest income levels were in line with our expectations. With that, I'll turn the call over to Pat to review the remaining areas of the quarter.

Speaker #2: Thanks, Joe. Good morning, everyone. We delivered our eighth consecutive quarter of net interest income growth, which increased $24 million, or 25 percent, from the prior quarter, and $33 million, or 38 percent, from the prior year.

Pat Barrett: Thanks, Joe. Good morning, everyone. We delivered our eighth consecutive quarter of net interest income growth, which increased $24 million or 25% from the prior quarter, $33 million or 38% from the prior year. This performance was driven by the addition of Flushing, which contributed $19 million of net interest income, with the remaining increase largely reflective of earning asset growth. Net interest margin expanded 12 basis points to 3.05%. Loan yields increased, reflecting new originations and the net impact of adding the Flushing portfolio. Total deposit costs were 2.06%, reflecting the addition of Flushing's deposit base. Looking ahead, we expect net interest income to benefit further from a full quarter of the combined franchise. Our underlying asset quality remains strong.

Speaker #2: This performance is driven by the addition of Flushing, which contributed $19 million of net interest income, with the remaining increase largely reflective of earning asset growth.

Speaker #2: Net interest margin expanded 12 basis points to 3.05 percent. Loan yields increased, reflecting new originations and the net impact of adding the Flushing portfolio.

Speaker #2: Total deposit costs were 2.06%, reflecting the addition of Flushing's deposit base. Looking ahead, we expect net interest income to benefit further from a full quarter of the combined franchise.

Speaker #2: Our underlying asset quality remains strong. Reported ratios this quarter reflect the fair value marks on Flushing's acquired loans, including purchased credit-deteriorated loans, which elevated our reported non-performing and criticized loan levels, but are not indicative of underlying credit deterioration.

Pat Barrett: Reported ratios this quarter reflect the fair value marks on Flushing's acquired loans, including purchased credit deteriorated loans, which elevated our reported non-performing and criticized loan levels but are not indicative of underlying credit deterioration. Excluding acquired credit deteriorated loans, non-performing loans to total loans were 0.33%, and non-performing assets to total assets were 0.38%, both consistent with our historically low levels. Criticized and classified loans did increase to 3.12% of total loans impacted by the Flushing acquisition but still remain below peer averages. The increase in criticized and classified loans was driven by the application of OceanFirst credit rating methodology to the Flushing portfolio, which bears repeating does not reflect a deterioration in credit performance. We have no inherent concerns in the pro forma customer base. Our allowance for credit losses increased to 1.29% of total loans, primarily reflecting the day one reserve established for the Flushing portfolio.

Speaker #2: Excluding acquired credit-deteriorated loans, non-performing loans to total loans were 0.33%, and non-performing assets to total assets were 0.38%, both consistent with our historically low levels.

Speaker #2: Criticized and classified loans did increase to 3.12% of total loans, impacted by the Flushing acquisition, but still remain below peer averages. The increase in criticized and classified loans was driven by the application of OceanFirst credit rating methodology to the Flushing portfolio, which, it bears repeating, does not reflect a deterioration in credit performance.

Speaker #2: We have no inherent concerns in the pro forma customer base. Our allowance for credit losses increased to 1.29 percent of total loans, primarily reflecting the day-one reserve established for the Flushing portfolio.

Speaker #2: Net charge-offs were de minimis, representing only 5 basis points of average total loans on an annualized basis. Turning to expenses, GAAP operating expenses for the quarter were $130 million, including $43 million of merger-related expenses.

Pat Barrett: Net charge-offs were de minimis, representing only 5 basis points of average total loans on an annualized basis. Turning to expenses, GAAP operating expenses for the quarter were $130 million, including $43 million of merger-related expenses. On a core basis, operating expense of $87 million included approximately $15 million of one month of Flushing operations. Excluding Flushing, our core expense base of $72 million continued to reflect disciplined expense management across the company. Capital levels remained strong following the acquisition, with an estimated common equity tier one ratio of 10.7%, flat to the previous quarter. That capital position was supported by the $225 million strategic investment from Warburg Pincus that funded concurrently with the closing of the Flushing transaction. Tangible book value per share was $18.19, reflecting the impact of purchase accounting and the very substantial increase in our allowance for credit losses. Quick word on taxes.

Speaker #2: On a core basis, operating expense of $87 million included approximately $15 million for one month of Flushing operations. Excluding Flushing, our core expense base of $72 million continued to reflect disciplined expense management across the company.

Speaker #2: Capital levels remained strong, following the acquisition, with an estimated common equity tier-one ratio of 10.7 percent, flat to the previous quarter. That capital position was supported by the $225 million strategic investment from Warburg Pincus, that funded concurrently with the closing of the Flushing transaction.

Speaker #2: Tangible book value per share was $18.19, reflecting the impact of purchase accounting and the various substantial increase in our allowance for credit losses. Quick word on taxes.

Speaker #2: Our reported effective tax rate this quarter was impacted by non-deductible merger expenses and a one-time deferred tax revaluation related to the acquisition. On a normalized basis, our ETR was approximately 28 percent. Given our new profile and taxability, we expect our go-forward rate to remain around that level, absent any tax policy changes, for the near term.

Pat Barrett: Our reported effective tax rate this quarter was impacted by nondeductible merger expenses and a one-time deferred tax revaluation related to the acquisition. On a normalized basis, our ETR was approximately 28%. Given our new profile taxability, we expect our go-forward rate to remain around that level absent any tax policy changes for the near term. With the Flushing acquisition now closed, we're updating our guidance on the pro forma combined company for the remainder of 2026. For loans and deposits, we expect 1% to 2% growth from our June 30th levels by year-end. Net interest margin should continue to expand to a range of 307 to 312 in Q3 and 309 to 314 in Q4, subject to average balance, seasonal volatility, and with no rate changes modeled through the H2 of the year. We expect other income of $12 to $16 million per quarter.

Speaker #2: With the Flushing acquisition now closed, we're updating our guidance on the pro forma combined company for the remainder of 2026. For loans and deposits, we expect 1% to 2% growth from our June 30 levels by year-end.

Speaker #2: Net interest margin should continue to expand, to a range of 307 to 312 in Q3, and 309 to 314 in Q4, subject to average balance, seasonal volatility, and with no rate changes modeled through the second half of the year.

Speaker #2: We expect other income of $12 million to $16 million per quarter. We expect operating expenses for the third quarter to decline to the $120 million to $125 million range, declining further in the fourth quarter to $110 million to $115 million, as cost savings begin to be realized.

Pat Barrett: We expect operating expenses for Q3 to decline to the $120 to $125 million range, declining further in Q4 to $110 to $115 million as cost savings begin to be realized. As we complete the integration of Flushing and mature our efforts to apply AI-driven automation, we expect that operating leverage will continue to improve throughout 2027. Finally, capital is expected to remain strong and grow with earnings from the current level. We plan to provide detailed guidance for 2027 in Q4, but I just wanted to highlight that our 2027 profitability targets remain essentially unchanged from when we announced the Flushing deal. One last point, just to talk about consensus estimates.

Speaker #2: As we complete the integration of Flushing and mature our efforts to apply AI-driven automation, we expect that operating leverage will continue to improve throughout 2027.

Speaker #2: Finally, capital is expected to remain strong and grow with earnings from the current level. We plan to provide detailed guidance for 2027 in the fourth quarter, but I just wanted to highlight that our 2027 profitability targets remain essentially unchanged from when we announced the Flushing deal.

Speaker #2: One last point, just to talk about consensus estimates: While there's a fair amount of variability among individual analysts and line items within our financials, on average, the earnings estimates look reasonable and should be generally aligned with our outlook for the second half of the year and for next year. Both of which, again, remain consistent with our initial estimates at the time we announced the transaction.

Pat Barrett: While there's a fair amount of variability among individual analysts and line items within our financials, on average, the earnings estimates look reasonable and should be generally aligned with our outlook for the H2 of the year and for next year. Both of which, again, remain consistent with our initial estimates at the time we announced the transaction. At this point, begin the question and answer portion of the call.

Speaker #2: At this point, can the question and answer portion of the call?

Operator 3: We will now begin the question and answer portion of the call. Our first question comes from Peter Winter from D.A. Davidson. Peter, your line is open.

Operator: We will now begin the question and answer portion of the call. Our first question comes from Peter Winter from D.A. Davidson. Peter, your line is open.

Speaker #1: We will now begin the question and answer portion of the call. Our first question comes from Peter Winter from D.A. Davidson. Peter, your line.

Speaker #1: Is open.

Peter Winter: Thanks. Good morning. I wanted to

Speaker #3: Thanks. Good morning. I wanted to...

Speaker #2: Good morning, Peter.

Pat Barrett: Good morning, Peter

Speaker #3: Let's start with the margin. I wanted to start with the margin. You know, the outlook for the second half of the year assumes no rate changes, but can you talk about how you're positioned if we do get one or two rate hikes? And then, second, on page nine of the presentation, you mentioned that, you know, due to competitive pressures, it could pressure the margin, and if you could just elaborate on that. Is that contemplated in the margin guidance for the second half of this year?

Peter Winter: Morning. I wanted to start on the margin. The outlook for the H2 of the year assumes no rate changes. Can you talk about how you're positioned if we do get one or two rate hikes? Second, on page nine of the presentation, you mentioned that due to competitive pressures, it could pressure the margin. If you could just elaborate on that, and is that contemplated in the margin guidance for the H2 of this year?

Speaker #2: Sure. Maybe I'll take a quick, a quick shot. This is Pat. Let's see. Impact of rate hikes. So when we, combine the organization, we absorbed Flushing's, liability sensitivity with our relative neutrality on interest rates.

Pat Barrett: Sure. Maybe I'll take a quick shot. This is Pat. The impact of rate hikes. When we combined the organization, we absorbed Flushing's liability sensitivity with our relative neutrality on interest rates. It was just kind of the shape of where the balance sheets were in respect. We added hedges to that kind of brought us back into a more neutral rate position. We're modeling something that's modestly liability sensitive. A rate hike would be very modestly dilutive, if you will, to revenue. I'd say that from a 25 basis point rate hike on an annual basis would be about a $5 million pre-tax impact to revenues. Conversely, if we got a rate cut, which nobody's modeling, but if we did, because of our modest liability sensitivity, that would be about a $4 million a year run rate. We remain relatively neutral.

Speaker #2: It was just kind of the shape of where the balance sheets were in respect. We added hedges to that that kind of brought us back into a more neutral rate position.

Speaker #2: So, we're modeling something that's modestly liability sensitive. So a rate hike would be very modestly dilutive, if you will, to revenue. I'd say that a 25 basis point rate hike, on an annual basis, would be about a $5 million pre-tax impact to revenues.

Speaker #2: Conversely, if we got a rate cut, which nobody's modeling, but if we did, because of our liability modest liability sensitivity, that would be about a $4 million a year run rate.

Speaker #2: So we, we remain relatively neutral. I think the as important, if not more so, is what happens in the belly of the curve and what happens with five-year and ten-year rates.

Pat Barrett: I think as important, if not more so, is what happens at the belly of the curve and what happens with 5-year and 10-year rates for new originations and renewals, because I think most people would agree that we're at fairly elevated levels for those. We like the shape of the curve, so if there's a parallel increase in the curve, we're kind of indifferent to rate hikes or cuts. The second part of your question was competitive pressure. I think that's just a continuous pressure on pricing for new loans, particularly the kind of loans that we're considering. Both bank and non-bank pressures are keeping spreads on new loans at pretty historically tight levels. Joe, I don't know if you want to add to that.

Speaker #2: For new originations and renewals, because I think most people would agree that we're at fairly elevated levels for those. We like the shape of the curve, so if there's a parallel increase in the curve, we're kind of indifferent to rate hikes or cuts.

Speaker #2: And then your second part of the question was competitive pressure. I think that's just a continuous pressure on pricing for new loans, particularly the kind of loans that we're considering.

Speaker #2: So, both bank and non-bank pressures are keeping spreads on new loans at pretty historically tight levels, Joe. I don't know if you want to add to that?

Speaker #4: I think it's a I think it's a fair statement. I, we've seen an increase and a focus on our, construction business, which tends to have better margins.

Joseph Lebel: I think it's a fair statement. We've seen an increase. A focus on our construction business, which tends to have better margins. I think as you've seen in the latest quarter, the average yield is pushing 670, 672, which I think is indicative of us focusing on construction and C&I versus permanent CRE loans.

Joe Lebel: I think it's a fair statement. We've seen an increase. A focus on our construction business, which tends to have better margins. I think as you've seen in the latest quarter, the average yield is pushing 670, 672, which I think is indicative of us focusing on construction and C&I versus permanent CRE loans.

Speaker #4: So I think, as you've seen in the latest quarter, the average yield is pushing 6.70%, 6.72%, which I think is indicative of us focusing on construction and C&I versus, you know, permanent CRE loans.

Speaker #3: Got it. if I could ask on credit, any guidance maybe you can provide with regards to net charge-offs or, or provision expense in the back half of this year?

Peter Winter: Got it. If I could ask on credit, any guidance maybe you can provide with regards to net charge-offs or provision expense in the H2 of this year? Also in the press release, it mentioned a $21 million commercial relationship that went non-performing, and then two commercial relationships for $56 million that went to criticized. Just any details on those loans?

Speaker #3: And then, also, in, in the press release, it mentioned a, a 21 million commercial real est real est commercial relationship that went, not performing, and then two commercial relationships for 56 million, that went to criticize.

Speaker #3: Just any details on those loans?

Speaker #2: So I guess I'll give you just some sense on net charge-offs. I think, as the company gets Trevor's on here...

Christopher Maher: I guess I'll give you just some sense on net charge-offs. I think as the company gets. Trevor, you're

Speaker #1: I can hear you. Apologies for the brief technical delay.

Operator 3: I can hear you. Apologies for the brief technical delay.

Operator: I can hear you. Apologies for the brief technical delay.

Joseph Lebel: Thanks. Peter, are you still there?

Joe Lebel: Thanks. Peter, are you still there?

Speaker #2: Right. Right. Peter, are you still there?

Speaker #3: I am. you started with net charge-offs and then I lost you.

Peter Winter: I am. You started with the charge-offs, I lost you.

Speaker #2: Sorry about that. So if you think about net charge-offs, I mean, historically both Ocean First and Flushing had, you know, close to between five basis points and zero, and of, of charge-offs in any given quarter.

Christopher Maher: Sorry about that. If you think about net charge-offs, I mean, historically, both OceanFirst and Flushing had close to between 5 basis points and zero in charge-offs in any given quarter. I think as our business shifts to more C&I lending, you're going to see that it won't be unusual to have charge-offs from quarter to quarter. I don't think they're going to be a material impact on profitability. Slightly higher than our historical performance, nothing that would stand out or be unusual, and probably still well at or below the kind of peer group levels of net charge-offs. I'm sorry, Peter, your second question was on the criticized loan. Let me just ask Joe to cover that for you.

Speaker #2: I think as our business shifts to more C&I lending, you're going to see that it won't be unusual to have, you know, charge-offs from quarter to quarter.

Speaker #2: But I don't think they're going to have a material impact on profitability. So, you know, slightly higher than our historical performance, but nothing that would stand out or be unusual.

Speaker #2: And probably still well at or below the kind of peer group levels of net charge-offs. I'm sorry, Peter. Your second question was on the, criticized loan.

Speaker #2: Let me just ask Joe to cover that for you.

Speaker #4: Yeah. Peter, on the $21 million loan, the bank and the borrower have a plan in place. We believe we're well secured. We have updated appraisals, and I expect that that'll resolve itself.

Joseph Lebel: Yeah. Peter, on the $21 million loan, the bank and the borrower have a plan in place. We believe we're well secure. We have updated appraisals, and I expect that that'll resolve itself before the end of the year, either through an upgrade or a refinance. We're well informed on our large borrowers.

Joe Lebel: Yeah. Peter, on the $21 million loan, the bank and the borrower have a plan in place. We believe we're well secure. We have updated appraisals, and I expect that that'll resolve itself before the end of the year, either through an upgrade or a refinance. We're well informed on our large borrowers.

Speaker #4: Before the end of the year, either through an upgrade or a refinance. And we're well informed on our large borrowers.

Speaker #3: Okay, that's it. It broke up, Joe, on your end, I think.

David Brown: Okay. It broke up, Joe, on your end, I think.

Peter Winter: Okay. It broke up, Joe, on your end, I think.

Speaker #1: One moment for technical difficulties, please.

Operator 3: One moment for technical difficulties, please.

Operator: One moment for technical difficulties, please.

Speaker #5: Your line is now live is now live is now live.

Christopher Maher: Your line is now live. Operator, we're just checking to make sure the backup line is working.

Speaker #1: Operator, we're just checking to make sure the backup line is working. Yes, the backup line has been staged. Please ensure to mute all other lines and microphones in the room and proceed.

Christopher Maher: Operator, we're just checking to make sure the backup line is working.

Operator 3: Yes, the backup line has been staged. Please ensure to mute all other lines and microphones in the room and proceed.

Operator: Yes, the backup line has been staged. Please ensure to mute all other lines and microphones in the room and proceed.

Speaker #2: Okay. sorry for that, interruption again, Peter. I think we were on the, classified loan. I just want Joe to, take that from the top again and walk through that.

Christopher Maher: Okay. Sorry for that interruption again, Peter. I think we were on the classified loan. I just want Joe to take that from the top again and walk through that.

Speaker #3: Right. So he had started with the 21 million commercial.

Peter Winter: Right. He had started with the 21 million commercial-

Speaker #2: Yeah. So the 21 million dollar, creed loan, we have a we have a plan in place. The borrower and the bank, we expect that that will be resolved before the end of the year, either through an upgrade or a refinance.

Peter Winter: Yeah.

Peter Winter: -that resolved year end.

Joseph Lebel: The $21 million CRE loan, we have a plan in place. The borrower and the bank, we expect that that will be resolved before the end of the year, either through an upgrade or a refinance. On the other assets you referenced in criticized, downgrades come and go quarter-over-quarter. We are well aware of what we need to do on both sides of the house, we remain pretty confident. I will leave it at that.

Joe Lebel: The $21 million CRE loan, we have a plan in place. The borrower and the bank, we expect that that will be resolved before the end of the year, either through an upgrade or a refinance. On the other assets you referenced in criticized, downgrades come and go quarter-over-quarter. We are well aware of what we need to do on both sides of the house, we remain pretty confident. I will leave it at that.

Speaker #2: And then on the other assets you referenced and criticized, classes or criticized downgrades come and go quarter over quarter. We're well aware of what we need to do on both sides of the house, and we remain pretty confident.

Speaker #2: And I'll leave it at that.

Speaker #3: Okay. And then, just one quick housekeeping item. You mentioned with the expense guidance for the third quarter, there's the one-time expense associated with the new digital banking platform.

Peter Winter: Okay. Just one quick housekeeping. You mentioned with the expense guidance for Q3, there is the one-time expense associated with the new digital banking platform. How much is that?

Speaker #3: H-how much is that?

Christopher Maher: It is not significant. It is probably $2 million.

Pat Barrett: It is not significant. It is probably $2 million.

Speaker #2: It's not significant. It's probably $2 million.

Speaker #3: Got it. Okay, thanks for taking the question.

Peter Winter: Got it. Okay. Thanks for taking the question.

Speaker #2: It's a number. I just want to demonstrate that we're continuing funding our ongoing platform investments out of our kind of, our core run rate.

Christopher Maher: It's a number. We just want to demonstrate that we're continuing funding our ongoing platform investments out of our kind of core run rate, which still is hovering kind of at the $70-ish million a quarter range.

Pat Barrett: It's a number. We just want to demonstrate that we're continuing funding our ongoing platform investments out of our kind of core run rate, which still is hovering kind of at the $70-ish million a quarter range.

Speaker #2: Which is still hovering kind of at the $70 million-ish per quarter range.

Speaker #3: Got it. Thanks, Pat.

Peter Winter: Got it. Thanks, Pat.

Speaker #1: Our next question comes from the line of David Bishop with HUFDI Group. David, your line is open.

Operator 3: Our next question comes from the line of David Bishop with Hovde Group. David, your line is open.

Operator: Our next question comes from the line of David Bishop with Hovde Group. David, your line is open.

Speaker #6: Yeah. Thank you. Good morning, gentlemen. Hey, quick, quick follow-up on the, the net interest margin. in terms of the guidance, do you think that's going to be mostly driven, from earning asset yield improvement or, still room to move on the, the deposit side or maybe a combination of both?

David Bishop: Yeah. Thank you. Good morning, gentlemen. Hey, quick follow-up on the net interest margin in terms of the guidance. Do you think that's going to be mostly driven from earning asset yield improvement or still room to move on the deposit side or maybe a combination of both? Just curious how you see that rise occurring.

Speaker #6: Just curious. How you see that, that rise sort of occurring?

Speaker #2: It’s definitely both. We’ve got opportunities to improve our funding base and even bigger opportunities with Flushing’s funding base, as we move forward and kind of redeploy some of the extra liquidity that we have today.

Pat Barrett: It's definitely both. We've got opportunities to improve our funding base and even bigger opportunities with Flushing's funding base as we move forward and redeploy some of the extra liquidity that we have today. There's really good opportunity on the funding side. On the yield side, I think it depends on the mix and competitive pressures. The more construction and small business that we do, the better. From a straight yield perspective, C&I, which carries with it a lot of other opportunities and self-funding, obviously has super tight spreads and is probably the most competitive space right now.

Speaker #2: So, there's really good opportunity on the funding side. On the yield side, I think it kind of depends on the mix and competitive pressures.

Speaker #2: So, the more construction and small business that we do, the better. From a straight yield perspective, CNI — which carries with it a lot of other opportunities and self-funding — obviously has super tight spreads, and it is probably the most competitive space right now.

Speaker #6: Got it. Then in terms of the, the, the multifamily loans sold there, just curious, is, is there still, you know, sort of a banking relationship with those, those customers or is that been completely divested?

David Bishop: Got it. In terms of the multifamily loans sold there, just curious, is there still a banking relationship with those customers, or has that been completely divested?

Speaker #2: It's a great question, David. No, we actually sorted out the primary relationships in that and retained loans for that exact reason.

Christopher Maher: That's a great question, Dave. No, we actually sorted out the primary relationships in that and retained loans for that exact reason. We retained loans where we had primary relationships and strong deposit profiles. Those customers typically had pretty strong cash flows. That's one of the ways we split out what we wanted to keep and what we wanted to move away from. We don't think that'll have any impact on the other areas of the bank. For the most part, the loans that we sold were lending-only relationships.

Speaker #2: So, we retained loans where we had primary relationships and strong deposit profiles, and those customers typically had pretty strong cash flows. So that's one of the ways we kind of split out what we wanted to keep and what we wanted to move away from.

Speaker #2: So, we don't think that'll have any impact on the other areas of the bank. But for the most part, the loans that we sold were lending-only relationships.

Speaker #6: Got it. Appreciate the color.

David Bishop: Got it. Appreciate the color.

Speaker #2: All right. Thanks, Dave.

Christopher Maher: All right. Thanks, Dave.

Speaker #1: Our next question comes from the line of Daniel Tamayo with Raymond James. Daniel, your line is open.

Operator 3: Our next question comes from the line of Daniel Tamayo with Raymond James. Daniel, your line is open.

Operator: Our next question comes from the line of Daniel Tamayo with Raymond James. Daniel, your line is open.

Speaker #6: Thank you. good morning, guys.

Daniel Tamayo: Thank you. Good morning, guys.

Speaker #2: Good morning.

Christopher Maher: Morning.

Speaker #6: So yeah, I, you know, I guess maybe just to, to go back to the margin. I apologize for being a dead horse here, but, so you, you reiterated your, the guidance for the, the 320 margin in 2027, post, post-merger there.

Daniel Tamayo: I guess maybe just to go back to the margin. I apologize for beating a dead horse here. You reiterated the guidance for the 320 margin in 2027 post-merger there. Can you give us your deposit cost assumptions underlying that margin in 2027? It just seems like most banks are talking about, and you guys mentioned as well, competition being pretty stiff right now on the funding side. I think a lot of banks are talking about funding cost bottoming. I get you guys have the Flushing funding base to integrate, but just curious how that plays out. Maybe there's some color on the Flushing, some of the components that how you can lower that. Just trying to fill in the gap between maybe funding costs going down where others are saying they're bottoming or maybe even moving up.

Speaker #6: And, I guess, you know, d can you give us your deposit cost assumptions underlying that margin in '27? you know, I, I, it just seems like, most banks are talking about and then you guys mentioned as well, like, competition being pretty stiff right now on the, on the funding side.

Speaker #6: And I think a lot of banks are talking about depo, you know, funding costs bottoming. I get you guys have the Flushing funding base to integrate, but just curious how that plays out.

Speaker #6: Maybe there's, there's some color on, on the Flushing, some of the components that how you can, lower that. But just trying to get, you know, fill in the gap between maybe funding cost going down where others are saying they're, they're bottoming or maybe even moving up.

Speaker #2: I think it's on both sides, Danny. It's Chris Moore. On both sides, you're going to see a little bit more of a mix shift than you are, kind of, environmental trends.

Christopher Maher: I think it's on both sides. Danny, it's Chris Maher. Both sides, you're going to see a little bit more of a mix shift than you are environmental trends. Both on the loan side, as Joe mentioned, beefing up. Historically, OceanFirst has done a nice job around construction. We have an opportunity to do a little more of that moving with the extra balance sheet from Flushing. And then on the deposit side, a mix shift around products. The pressure you see out in the markets and others have talked about is out there. CDs cost a fair amount, but we're talking about bringing down the level of brokered. We're talking about optimizing pricing in the government deposit base, particularly in New York. The New York government deposit base costs a fair amount more than the New Jersey government deposit base.

Speaker #2: So, both on the loan side, as Joe mentioned, you know, kind of beefing up—historically, OceanFirst has done a nice job around construction.

Speaker #2: So we have an opportunity to do a little more of that moving with the extra balance sheet from Flushing. And then on the deposit side, a mix shift around products.

Speaker #2: So, the pressure you see out in the markets, and others have talked about, is out there. You know, CDs cost a fair amount, but we're talking about bringing down the level of brokered.

Speaker #2: We're talking about optimizing, pricing in the government deposit base, particularly in, New York. The New York government deposit base is, cost a fair amount more than the New Jersey government deposit base.

Speaker #2: So, we see some tactical opportunities there, but think mixed; mixed shift in product. As you saw, we had a nice increase in non-interest bearing this quarter. Flushing's done a nice job, historically, over the last several quarters around non-interest.

Christopher Maher: We see some tactical opportunities there, but think mix shift in product. As you saw, we had a nice increase in non-interest bearing this quarter. Flushing's done a nice job historically over the last several quarters around non-interest. Kind of leaning into that new branch network and doing a little bit of a mix shift.

Speaker #2: So, kind of leaning into that new branch network and doing a little bit of a mix shift.

Speaker #6: All right. Thanks for that, Chris. So I guess, next, just on the expenses, I want to make sure I understand the guidance. So I think you said it was $2 million for the digital banking, the one-timers within the guidance that you put out there, Pat.

Daniel Tamayo: All right. Thanks for that, Chris. I guess next, just on the expenses, want to make sure I understand the guidance. I think you said it was $2 million for the digital banking, the one-timers within the guide that you put out there, Pat. As we think about back half of the year, is the way to think about that just taking $2 million off of the 110 to 115? Or just from a run rate end of the year number, is it 108 to 113 in Q4, and then that's a good number to grow off of?

Speaker #6: So, as we think about kind of the back half of the year, is that the way to think about that—just taking $2 million off of the $110 to $115 million? Or is it just from a kind of run rate at the end of the year—like, is it $108 to $113 million in the fourth quarter, and then that's a good number to grow off of?

Speaker #2: Yeah. Well, I'd rather think of expenses as a good number to shrink off of as we exit this year, because just remember that the majority of our cost saves are only just kicking in.

Pat Barrett: Well, I'd rather think of expenses as a good number to shrink off of as we exit this year because just remember that the majority of our cost saves are only just kicking in Q4 because of our system conversions that won't be fully completed until the end of the quarter. There's some cost saves that occur, but the biggest chunk of those will start in Q4, and then there's continued opportunities to further rationalize vendors as we move into next year. I would hope that we're on a glide path to continue to bring it down a little bit, even in the face of inflationary pressures, and see us with a run rate that's closer to 100 than 110 as we start out the year.

Speaker #2: in the fourth quarter. Because of our system conversions that won't be fully completed until the end of the quarter. So there's, there's some cost says that occur.

Speaker #2: But the biggest chunk of those will start in the fourth quarter, and then there's continued opportunities to further rationalize vendors as we move into next year.

Speaker #2: So I would hope that we're on a glide path to continue to bring it down a little bit, even in the face of inflationary pressures.

Speaker #2: And, see us with a run rate that's closer to 100 than 110 as we start out the year.

Speaker #3: A good way to think about the expense momentum is, in Q3, we had some employee separations related to the initial consolidation in the merger.

Christopher Maher: A good way to think about the expense momentum is in Q3, we had some employee separations related to the initial consolidation in the merger. As we get into Q4, the systems conversion is likely to happen in September. It's been our practice to keep most of the staff within the bank for at least a month afterwards to make sure that the customer experience is exactly what we want it to be. You'll see staff departures in earnest at the end of October, which will benefit Q4 a bit, but that will help even more in Q1 of 2027.

Speaker #3: But as we get into Q4, the systems conversion is likely to happen in September. It's been our practice to keep most of the staff within the bank for at least a month afterward to make sure that the customer experience is exactly what we want it to be.

Speaker #3: So you'll see, you know, staff departures in earnest at the end of October, which will benefit the fourth quarter a bit, but that will help even more in the first quarter of '27.

Speaker #6: Okay. So I mean, how should we think about the amount of cost saves left in the first quarter? And is the is the first quarter then the kind of the first clean quarter and that we should build on or is or is even '27 you're hoping to take it down from that first quarter number?

Daniel Tamayo: Okay. How should we think about the amount of cost saves left in Q1? Is Q1 then the first clean quarter that we should build on, or is even 2027, you're hoping to take it down from that Q1 number?

Speaker #2: The first '27 will be the first clean quarter, but we think there are opportunities to improve operating leverage throughout the year. So even if that means just kind of holding expenses flat or down a little bit quarter to quarter.

Christopher Maher: 2027 will be the Q1 clean quarter, we think there are opportunities to improve operating leverage throughout the year. Even if that means just kind of holding expenses flat or down a little bit quarter-to-quarter and avoiding what would be typically the inflationary increase in Q1 as you're going to go through merit increases and that kind of stuff. You'll see we're planning for more significant growth in loans and deposits in 2027. If you're holding expenses flat or coming down a little bit, the operating leverage could really build up by the end of 2027.

Speaker #2: And, avoiding what would be typically the inflationary increase in the first quarter, is, you know, kind of going through merit increases and that kind of stuff.

Speaker #2: So, and then you'll see, we—you know, we're planning for more significant growth in loans and deposits in '27. So, if you're holding expenses flat or coming down a little bit, the operating leverage could really build up by the end of '27.

Speaker #6: Okay, great. Thanks for all the color, Chris. I appreciate it.

Daniel Tamayo: Okay, great. Thanks for all the color, Chris. Appreciate it.

Speaker #2: Sure.

Christopher Maher: Sure.

Speaker #1: Our next question comes from the line of Christopher Marinac with Breen Capital. Christopher, your line is open.

Operator 3: Our next question comes from the line of Christopher Marinac with Brean Capital. Christopher, your line is open.

Operator: Our next question comes from the line of Christopher Marinac with Brean Capital. Christopher, your line is open.

Speaker #5: Hey, thanks. Good morning. Chris and Pat and team. You've wanted to have a large reserve for a long time, so you're finally here. I guess my question is, should we think of this as a permanent change number one and number two is the extra tangible broke dilution, something that you can kind of make up for relatively quickly?

Christopher Marinac: Hey, thanks. Good morning. Chris and Pat and team, you've wanted to have a large reserve for a long time, you're finally here. I guess my question is, should we think of this as a permanent change, number one, number two, is the extra tangible book dilution something that you can kind of make up for relatively quickly?

Speaker #2: Yeah, so I think, you know, we see a lot of earnings momentum going into ’27. So I think you’ll be building back tangible book value as you go throughout the year.

Christopher Maher: Yes, we see a lot of earnings momentum going into 2027, I think you'll be building back tangible book value as you go throughout the year. One thing I just want to point out, Pat mentioned this in his comments, if you think about the source of the tangible book value dilution, the most significant individual line item is the build in the ACL. We moved what was in the equity account over into the ACL account, which provides for a much stronger balance sheet and more consistent ACL coverage with our peer group. It's not like that money left the company in any way. It's just a stronger ACL. If you think about it in dollar terms, that was about $80 million of net reserve build on top of the reserves that both Flushing and OceanFirst had coming into the quarter.

Speaker #2: And then one thing I just want to point out, and Pat mentioned this in his comments: if you think about the source of the tangible book value dilution, the most significant individual line item is the build in the ACL.

Speaker #2: So we moved what was in the equity account over into the ACL account, which provides for a much stronger balance sheet, and more consistent ACL coverage with our peer group.

Speaker #2: but it's not like that money was you know, left the company in any way. It's just a, a stronger ACL. So that was about if you think about it in dollar terms, that was about, $80 million of net reserve build, on top of the reserves that, both Flushing and Ocean First had coming into the quarter.

Speaker #2: So that was the most significant line item, and we certainly don't expect that that's lost content. The second biggest item is the purchase accounting marks, which will come back to us and be accretive to income over the next couple of years.

Christopher Maher: That was the most significant line item, we certainly don't expect that that's loss content. The second biggest item is the purchase accounting marks, which will come back to us in accreted income over the next couple of years. Because of the sources of the dilution, we were a little less concerned about that. We do expect earnings to pick up nicely in 2027 and start to build that tangible book back.

Speaker #2: So, so because of the sources of the dilution, we were a little less concerned about that. But we do expect earnings to pick up, nicely in '27 and start to build that tangible book back.

Speaker #5: Great, Chris. Thank you for that background, and thanks for hosting us this morning.

Christopher Marinac: Great. Chris, thank you for that background, thanks for hosting us this morning.

Speaker #2: All right. Thank you.

Christopher Maher: All right. Thank you.

Speaker #1: Our next question comes from the line of Emily Lee with KBW. Emily, your line is open.

Operator 3: Our next question comes from the line of Emily Lee with KBW. Emily, your line is open.

Operator: Our next question comes from the line of Emily Lee with KBW. Emily, your line is open.

Speaker #7: Hey everyone, this is Emily stepping in for Tim Switzer. Thanks for taking my question.

Emily Lee: Hey, everyone, this is Emily stepping in for Tim Switzer. Thanks for taking my questions.

Speaker #2: Sure.

Christopher Maher: Sure.

Speaker #7: So given progress made in commercial banking initiatives and the recruitment of some revenue-producing talent over the last few years and, your commentary on remaining opportunistic on the hiring front, can you maybe dive deeper into any incremental investments you plan to make in that area?

Emily Lee: Given the progress made in commercial banking initiatives and the recruitment of some revenue-producing talent over the last few years and your commentary on remaining opportunistic on the hiring front, can you maybe dive deeper into any incremental investments you plan to make in that area?

Speaker #2: I guess one thing I would say, Emily, is that if you think about the companies we go into, the recruiting season is typically heaviest in Q1, because your best commercial bankers, you know, typically they're having a good year.

Christopher Maher: I guess one thing I would say, Emily, is that if you think about the company as we go into The recruiting season is typically heaviest in Q1 because your best commercial bankers, typically they're having a good year, and they like to collect their bonuses from wherever they are and then move on. We expect the hiring season really to be in Q1. We have already seen an uptick in interest from qualified commercial bankers who really like, first, the coverage in New York that we got from Flushing. We're talking to commercial bankers in New York that wouldn't, I think, have considered us as strong an opportunity as they did in the past. There's just the dynamics of having a larger balance sheet, bigger capital base.

Speaker #2: And they, you know, like to collect their bonuses from wherever they are and then move on. So, we expect the hiring season really to be in Q1.

Speaker #2: we have already seen an, an uptick in interest from qualified commercial bankers. We really like first the coverage in New York that we got from Flushing.

Speaker #2: So we're talking to commercial bankers in New York that wouldn't, I think, have considered us as strong an opportunity as they did in the past.

Speaker #2: And then there's just the dynamics of having a larger balance sheet and a bigger capital base. So, players from larger banks, which is typically our recruiting base, would feel more comfortable coming to a firm of the size we are now.

Christopher Maher: Players from larger banks, which is typically our recruiting base, would feel more comfortable coming to a firm of the size we are now. I think we will be a more attractive destination for talent in Q1. At this point, we don't expect any significant increase in expenses because we think that we can self-fund a lot of this through technology initiatives and through kind of the rotation of how we spend our money instead of spending net extra. We'll keep everybody posted, and if we have good news in H1 of next year, we're able to hire more bankers than we thought, we'll certainly give you updated guidance.

Speaker #2: So, I think we've got—we will be a more attractive destination for talent in the first quarter. At this point, we don't expect any significant increase in expenses because we think that we can self-fund a lot of this through technology initiatives and through kind of the rotation of how we spend our money.

Speaker #2: Instead of spending net extra. but, you know, we'll keep everybody posted. And if we have good news in the first half of next year, we're able to hire more bankers than we thought.

Speaker #2: We'll certainly give you updated guidance.

Speaker #7: That's really helpful. Thank you. And then, just on capital—following the completion of the Flushing acquisition, can you discuss your capital priorities going forward?

Emily Lee: That's really helpful. Thank you. Just on capital. Following the completion of the Flushing acquisition, can you discuss your capital priorities going forward? What level of repurchases should we anticipate going forward? Do you have any appetite for further bank M&A, maybe in 2027 or beyond?

Speaker #7: You know, what level of repurchases should we anticipate going forward? And, do M&A, maybe in 2027 or beyond?

Speaker #2: So let me take the— the priorities are pretty straightforward. I mean, our best priority is always organic growth. And so we hope to be able to use the capital we expect to accrete in organic growth next year.

Christopher Maher: Let me take the priorities are pretty straightforward. I mean, our best priority is always organic growth. We hope to be able to use the capital we expect to accrete in organic growth next year. That's the biggest priority. We're always very discriminating about the credits we put on and the spreads and managing our margin. If we don't find the right quality of growth and we wind up with an excess capital position, our number one priority would be buybacks. That's it. We're heads down focused on the franchise right now. We're not talking about M&A.

Speaker #2: So that's the, the biggest priority. but we're always very discriminating about, the credits we put on and the spreads and managing our margin. So if we don't find the right quality of growth and we wind up with an excess capital position, our number one priority would be buybacks.

Speaker #2: and, and that's it. We're, we're heads down focused on the franchise right now. We're not talking about, M&A.

Speaker #7: Great. Well, thank you for taking my questions. Congrats on the quarter.

Emily Lee: Well, thank you for taking my questions. Congrats on the quarter.

Speaker #2: All right. Thank you.

Christopher Maher: Thank you.

Speaker #1: Our next question comes from the line of Matthew Brees with Steven Zinc. Matthew, your line is open.

Operator 3: Our next question comes from the line of Matthew Breese with Stephens Inc. Matthew, your line is open.

Operator: Our next question comes from the line of Matthew Breese with Stephens Inc. Matthew, your line is open.

Speaker #3: Hey, good morning.

Matthew Breese: Hey, good morning.

Speaker #2: Good morning, Ed.

Christopher Maher: Good morning.

Speaker #3: I was hoping we could start with, you know, maybe overall balance sheet size—kind of your thoughts and guidance. And I guess I’m most curious about the interplay between loan growth and securities from here.

Matthew Breese: I was hoping we could start with maybe overall balance sheet size kind of thoughts and guidance. I guess I'm most curious about the interplay between loan growth and securities from here. Should we be thinking there's like a one-for-one offset, securities into loans, basically maintaining a flat balance sheet? If that is the case, how long do you anticipate that dynamic going on for?

Speaker #3: you know, should we be thinking there's, you know, like a one-for-one offset, you know, securities into loans, basically maintaining a flat balance sheet? and, and if that is the case, how long do you anticipate that dynamic going on for?

Speaker #2: Oh, that's a good question, Matt. So, if you were to kind of go back a step, we did inflate, to a degree, the amount of securities on the balance sheet when we did the loan sale.

Christopher Maher: That's a good question, Matt. If you were to kind of go back a step, we did inflate to a degree the amount of securities in the balance sheet when we did the loan sale. Curiously, we were able to buy securities at a lower risk weight that had a higher yield than the loans that we sold. It wound up being a very good trade. As we go forward, we're probably a little heavy in securities, we'd pull that down a little bit. We do want to maintain a pretty good liquidity position. We think that's one of the most important things we achieved this quarter in terms of making sure we had on-hand liquidity, a lower loan-to-deposit ratio and all of that. The first place we would go is pulling down securities a little bit.

Speaker #2: Curiously, we were able to buy securities at a lower risk weight that had a higher yield than the loans that we sold. So it ended up being a very good trade.

Speaker #2: As we go forward, we're probably a little heavy in securities, so we'd pull that down a little bit. But, you know, we do want to maintain a pretty good liquidity position.

Speaker #2: We think that's one of the most important things we achieved this quarter, in terms of making sure we had on-hand liquidity, a lower loan-to-deposit ratio, and all of that.

Speaker #2: So the first place we would go is pulling down securities a little bit. So, I think you'll see a flattish balance sheet this year.

Christopher Maher: I think you'll see a flattish balance sheet this year, and then to the extent you'll see any growth, it would probably be coming in 2027. After we've kind of massaged the securities number a little bit.

Speaker #2: And then, to the extent you'll see any growth, it would probably be coming in '27. But after we've kind of, you know, massaged the securities number a little bit.

Speaker #3: I guess my follow-up there is, does that does that balance sheet outlook is that what's giving you the flexibility and the opportunity to kind of test run higher-cost community deposits, maybe work off some brokered deposits, and lower deposit costs?

Matthew Breese: I guess my follow-up there is, does that balance sheet outlook, is that what's giving you the flexibility and the opportunity to kind of test run higher cost-money deposits, maybe work off some broker deposits and lower deposit costs? I think the spot cost at the end of the quarter is 2.26%, right? About 20 basis points higher. Is that what's providing you the room to kind of lower that from current levels and see where it goes?

Speaker #3: I think the spot cost at the end of the quarter is 2.26%, right? So, about 20 bps higher. Is that what’s providing you the room to kind of lower that from current levels and see where it goes?

Speaker #2: Absolutely. That's the chief advantage of having that excess liquidity and the lower loan-to-deposit ratio. So we don't have to be as, kind of, careful.

Christopher Maher: Absolutely. That's the chief advantage of having that excess liquidity and the lower loan-to-deposit ratio. We don't have to be as kind of careful. We don't have to match the market every day. I will say that to give you longer-term guidance, we think being more liquid, all things equal, makes us a more valuable franchise. You might see loan-to-deposit tick up a little bit, but you still think of it as staying below 95%, as opposed to in the past, we would have been closer to 100%. We will use that advantage in the way we think about pricing.

Speaker #2: We don't have to match the market every day. But I will say that, to give you, you know, longer-term guidance, we think being more liquid, you know, all things equal, makes us a more valuable franchise.

Speaker #2: So, you know, you might see loan-to-deposit tick up a little bit, but, you know, you should still think of it as staying below 95%.

Speaker #2: As opposed to in the in the past, we would have been closer to 100, 100%. But we will use that advantage in the way we think about pricing.

Speaker #4: And, I will add, Matt, this is Pat, that there, there's probably three or four hundred million of, of securities where we park them just because the yields were better than leaving them in cash.

Pat Barrett: I will add, Matt, this is Pat, that there's probably $300 or 400 million of securities where we parked them just because the yields were better than leaving them in cash, that we'll look to recycle those and maybe some cash flows into better yielding opportunities as they come up. Most of that'll probably, hopefully be done this quarter, in Q3. We didn't have much time, and we wanted to put all the cash to work as fast as we could. There'll be some churn there, but it shouldn't affect the overall magnitude of the portfolio or the mix of loans versus securities.

Speaker #4: We'll look to recycle those and maybe some cash flows into better-yielding opportunities as they come up. Most of that will hopefully be done this quarter, in the third quarter.

Speaker #4: But we didn't have much time, and we wanted to put all the cash to work as fast as we could. So there'll be some churn there, but it shouldn't affect the overall magnitude of the portfolio or the mix of loans versus securities.

Speaker #3: Okay, I do want to come back to that, but just one more on the balance sheet mix. What is the strategy with the remaining sub-amount of rent-regulated multifamily?

Matthew Breese: Okay. I do want to come back to that. Just one more on kind of balance sheet mix. What is the strategy with the remaining sub-amounts of rent-regulated multifamily? Is that saleable at similar marks? Is that something you intend to do or is that more of a work down over time through maturities and payoffs? I'm also curious, same question line, if there's anything else within the Flushing kind of loan portfolio that we should think of as running off or getting rid of on an expedited basis.

Speaker #3: Is that saleable at similar marks? Is that something you intend to do, or is that more of a, you know, work down over time through maturities and payoffs?

Speaker #3: Also curious, you know, seeing, seeing question in line—if there's anything else within the Flushing kind of loan portfolio that we should think of as running off or, you know, getting rid of on an expedited basis.

Speaker #2: So I would consider that asset class to be in a runoff posture. So we expect that it's going to decline slowly over the next, probably, 8 to 12 quarters.

Christopher Maher: I would consider that asset class to be in a runoff posture. We expect that it's going to decline slowly over the next probably 8 to 12 quarters. I will make the point that those were pretty good loans. We had loans to deposit customers. We had loans there that might have had an interest rate swap or a participant position that just made them less liquid. You really couldn't sell them into a capital markets execution. Strong debt service, very low LTVs, delinquencies, de minimis. We're happy to have those clients and just let that kind of resolve itself over time. That said, we recognize that there's a public policy risk to the asset class. We've got a 14.5% credit reserve against them, so we've marked them pretty aggressively. It's small.

Speaker #2: I will make the point that those were, you know, pretty good loans. We had loans to deposit customers. We had loans there that might have had an interest rate swap or a participant position.

Speaker #2: It just made them less liquid. You know, you really couldn't sell them into a capital markets execution. You know, if it's strong debt service, very low LTVs, delinquencies de minimis, we're happy to have those clients and just let that kind of resolve itself over time.

Speaker #2: That said, you know, we recognize that there's a public policy risk to the asset class, so we've got a 14.5% credit reserve against them.

Speaker #2: So, we've marked them pretty aggressively. But it's small. It's going to run off and, you know, we'll just kind of see that happening slowly over probably two to three years.

Christopher Maher: It's going to run off. We just kind of see that happening slowly over probably two to three years.

Speaker #4: And, and I, I would say these aren't bad assets to hang on to. So these LTVs, 140 debt service coverage, 5.5% average yield. Of what we're left with, they were just not as easily secure or tiesable.

Pat Barrett: I would say these aren't bad assets to hang on to. These are 50% LTVs, 140 debt service coverage, 5.5% average yield of what we're left with. They were just not as easily securitizable, so they weren't as fast to sell at as high a price because of that feature, which is why they didn't go into an even larger pool of sale that we did in June.

Speaker #4: So they weren't as, as fast to sell at as high a, a price because of that feature, which is why they didn't go into a large even a even larger pool of sale.

Speaker #4: That we did in June.

Speaker #2: I think your second question, Matt, about other assets, I think we're done with the balance sheet restructure. This is kind of where we are.

Christopher Maher: I think your second question, Matt, about other assets, I think we're done with the balance sheet restructure. This is kind of where we are. It's kind of a clean 1 July balance sheet to then move off of. We're focused on organically growing that as we outlined earlier.

Speaker #2: It's kind of a clean, you know, July 1st balance sheet to then move off of, and we're focused on, you know, organically growing that, as we outlined earlier.

Speaker #3: Okay, and then my last one, going back to the NIM, you know, let's just assume that the 226 deposit costs might be down a little bit.

Matthew Breese: Okay. My last one, going back to the NIM. Let's just assume that the $2.26 deposit costs might be down a little bit. It still implies that there's quite a bit of moving pieces on the earning asset side to get to that Q3 range. Can you just help me out with your expectations for kind of loan yields? Obviously, there's accretion that impacts that. Pat, you'd mentioned some movement of securities portfolio. Could you just give us some idea of where yields on those two components will shake out that's kind of supporting the NIM range for the Q3. That's all I have. Thank you.

Speaker #3: It still implies that there's quite a bit of moving pieces on the earning asset side to get to that third quarter range.

Speaker #3: Can you just help me out, with, with your expectations for kind of loan yield and obviously there's accretion that impacts that? And, and Pat, you had mentioned, you know, some movement of securities portfolio.

Speaker #3: Could you just give us some idea of where yields on those two components will shake out that's kind of supporting the NIM range for the third quarter?

Speaker #3: And that's all I have. Thank you.

Speaker #4: And, one thing

Matthew Breese: Matt, one thing I'd point out is that just like the deposit spot costs, on the loan side, we only had 1 month worth of purchased credit deteriorated accounting accretion on the loan side. You're going to see a little bit of an offset there as we experience a full quarter's worth of kind of mark on that loan portfolio. That'll be helpful in terms of bringing the loan yields up. Pat?

Speaker #2: I'd point out that, just like the deposit spot costs, on the loan side we only had one month's worth of purchase accounting accretion on the loan side.

Speaker #2: So you're going to see a little bit of an offset there as we experience a full quarter's worth of kind of mark on that loan portfolio.

Speaker #2: So that'll be helpful in terms of bringing the loan yields up. But, Pat?

Speaker #4: Yeah. I think probably the biggest driver of that is the full quarter's worth of accretion moving it up. So we had about $8 million of accretion in the second quarter.

Pat Barrett: Yeah. Probably the biggest driver of that is the full quarter's worth of accretion moving it up. We had about $8 million of accretion in Q2 net interest income, and we'll have $16, $17 million as we move into the next quarter on a run rate basis.

Speaker #4: Net interest income. And we'll have $16–17 million as we move into the next quarter, on our run rate basis.

Speaker #3: Okay, okay. I'll leave it there. Thank you very much. I know we asked a lot—thank you.

Matthew Breese: Okay. I'll leave it there. Thank you very much. I know I ask a lot. Thank you.

Speaker #2: Thanks, Matt.

Christopher Maher: Thanks, Matt.

Speaker #3: Our next question comes from the line of Manuel Navas with Piper Sandler. Manuel, your line is open.

Operator 3: Our next question comes from the line of Manuel Navas with Piper Sandler. Manuel, your line is open.

Operator: Our next question comes from the line of Manuel Navas with Piper Sandler. Manuel, your line is open.

Speaker #5: Staying on the balance sheet for a moment, can you talk about the hedging strategy a bit? Flushing was liability sensitive. What are you putting on?

Manuel Navas: Staying on the balance sheet for a moment, can you talk about the hedging strategy a bit? Flushing was liability sensitive. What are you putting on, and how long is it termed out for? Does it contemplate you shifting your own funding base to eventually not need that in the future? Just kind of talk through that a bit, please.

Speaker #5: And how long is it termed out for? Does it contemplate you shifting your own funding base to eventually not need that in the future?

Speaker #5: Just kind of talk through that a bit, please.

Speaker #2: I would, Pat, walk you through the duration and all that. But if you think about it philosophically, you know, we want to run a reasonably balanced shop.

Christopher Maher: I'll let Pat walk you through the duration and all that. If you think about it philosophically, we want to run a reasonably balanced shop. We were pretty neutral prior to the acquisition, as Pat mentioned, made us liability sensitive. What we were focused on with the hedges is more of the tail risk, like outside the normal operating environment. Because the normal plus or minus 100 basis points really doesn't move the number much for us. What you would have seen if you looked at our interest rate risk models without the hedges, you would have seen more risk going in the kind of +200, +300, +400, and -200, -300 and -400. It was really an exercise around limiting our longer-term risk. You might talk about the duration and our return to the more neutral position over time.

Speaker #2: We were, you know, pretty neutral prior to the acquisition, as Pat mentioned. You know, it made us liability sensitive. So what we were focused on with the hedges is more of the tail risk, like outside the normal operating environment.

Speaker #2: Because the normal, you know, plus or minus 100 basis points really doesn't move the number much for us. But what you would have seen if you looked at our interest rate risk models without the hedges, you would have seen more risk going in the kind of plus 200, plus 300, plus 400, and minus 200, 300, and 400.

Speaker #2: So, it was really an exercise around, you know, limiting our longer-term risk. You might talk about the duration and our return to the more neutral position over time.

Speaker #4: Sure. So, yeah. And the hedges that we did put on were essentially caps and collars, as Chris mentioned, just to hedge against spikes or larger increases in rates.

Pat Barrett: Sure. The hedges that we did put on were essentially caps and collars, as Chris mentioned, just to hedge against spikes, larger increases in rates, about $1.3 billion that ranged out over three, four, five, six year kind of period. What we're left with is some modest liability sensitivity that is largely driven by the fixed rates on the deposit side that we've inherited. As we roll out of deposits and more fixed rate deposits and into non-maturity deposits, that'll continue to help that. Our goal would be to continue to have a relatively neutral balance sheet because predicting short-term rates has proven to be very difficult. Predicting long-term rates has proven to be very difficult. We feel like staying short is the way to go.

Speaker #4: About $1.3 billion. That ranged out over a 3-, 4-, 5-, 6-year kind of period. And what we're left with is some modest liability sensitivity that is largely driven by the fixed rates on the deposit side.

Speaker #4: That we've inherited. So as we roll out of deposits, and more fixed-rate deposits, and into non-maturity deposits, that'll continue to help that. And, you know, our goal would be to continue to have a relatively neutral balance sheet.

Speaker #4: Because predicting short-term rates has proven to be very difficult. Predicting long-term rates has proven to be very difficult. So we feel like staying short is the way to go. We've ticked up our duration modestly with the acquisition.

Pat Barrett: From a duration perspective, we've ticked up our duration modestly with the acquisition, and we're probably in the four to five range on the asset side, years duration. The securities duration has ticked up along with the loans. They're both in that range. On the liability side, for the most part, we remain quite short.

Speaker #4: And we're probably in the 4 to 5 year range on the asset side, in terms of duration. And the securities duration has ticked up, along with the loans.

Speaker #4: So they're both in that range. On the liability side, for the most part, we remain quite short.

Speaker #5: That's helpful. Can I shift to kind of loan growth drivers? It seems like, just to kind of walk through the loan portfolio, places where you might see continued runoff.

Manuel Navas: That's helpful. Can I shift to kind of loan growth drivers? Just kind of walk through the loan portfolio places where you might see continued run-off. There's a comment of resis running off. Also you have a lot of legacy momentum in the commercial side. If you could just talk about go forward loan growth mix a bit, and when does the Flushing team kind of add even more to it?

Speaker #5: There's a comment of resi's running off, but also you have a lot of legacy momentum on the commercial side. If you could just talk about go-forward loan growth mixed a bit.

Speaker #5: And when does the Flushing team kind of add even more to it?

Speaker #2: I'll make a couple of comments. I'm sure Joe will add in as well. So, you know, some of the momentum is just by adding the commercial bankers, as Joe talked about—you know, new bankers, new relationships.

Christopher Maher: I'll make a couple comments. I'm sure Joe will add in as well. Some of the momentum is just by adding the commercial bankers, as Joe talked about, new bankers, new relationships. As we've seen in other times when we've made acquisitions, we think hopefully a meaningful opportunity in the Flushing base to become a bigger part of many of these clients' kind of wallet share. Just by nature of the size of the balance sheet and loan limits and things like that, we've already met just a wonderful group of long-term Flushing clients who can do more with us than they could with Flushing, and I think that that could be a meaningful driver over the next several quarters. Joe, anything you'd add?

Speaker #2: As we've seen in other times when we've made acquisitions, we think there's hopefully a meaningful opportunity in the Flushing base to become a bigger part of many of these clients' wallet share.

Speaker #2: So, just by nature of the size of the balance sheet and loan limits and things like that, we've already met a wonderful group of long-term Flushing clients who can do more with us than they could with Flushing.

Speaker #2: And I think that could be a meaningful driver over the next several quarters. But Joe, anything you'd add?

Speaker #6: I think I'd add two things. One, typically when you do these, there's a little bit of a lull just because clients are trying to assess the combined entity.

Joseph Lebel: I'd add two things. One, typically when you do these, there's a little bit of a lull just because clients are trying to assess the combined entity and quite frankly, some of your salespeople are as well. As Chris mentioned, we've got a pretty good positive outcome pretty early on. We've done a variety of customer events and days in market, which I think have been really valuable for us and the client base. The combined scale I think is really going to make a difference. Remember, the vast majority of the Flushing book was smaller CRE transactions. They had a fledgling C&I business. The opportunity to do things at a larger scale with a little bit more boots on the ground and some sophistication, I think is going to really benefit. It's one of the densest markets in the country.

Joe Lebel: I'd add two things. One, typically when you do these, there's a little bit of a lull just because clients are trying to assess the combined entity and quite frankly, some of your salespeople are as well. As Chris mentioned, we've got a pretty good positive outcome pretty early on. We've done a variety of customer events and days in market, which I think have been really valuable for us and the client base. The combined scale I think is really going to make a difference. Remember, the vast majority of the Flushing book was smaller CRE transactions. They had a fledgling C&I business. The opportunity to do things at a larger scale with a little bit more boots on the ground and some sophistication, I think is going to really benefit. It's one of the densest markets in the country.

Speaker #6: And quite frankly, some are you know, some of your salespeople are as well. But I as Chris mentioned, we've got a pretty good positive, outcome pretty early on.

Speaker #6: We've done a variety of customer events and days in market, which I think have been really valuable for us and the client base.

Speaker #6: So, and the combined scale, I think, is really gonna make a difference. And remember, the vast majority of the Flushing book was smaller, pre-transactions.

Speaker #6: They had a fledgling CNI business. So the opportunity to, to do things at a larger scale with a little bit more, a little b a little bit more boots on the ground and, and some sophistication I think is gonna really benefit it.

Speaker #6: It's one of the densest markets in the country.

Speaker #5: And individual portfolios? You have some expected runoff in residential. You talked about the rent-regulated; it's going to run off slowly. Where are some of the headwinds?

Manuel Navas: Individual portfolios, you have some expected runoff in residential. You talked about the rent-regulated is going to run off slowly. Where are some of the headwinds?

Speaker #2: Those are certainly headwinds. But I think the guidance we gave you around growth in '27 would be net of those headwinds. So that's kind of where we would be.

Christopher Maher: Those are certainly headwinds, I think the guidance we gave you around growth in 2027 would be net of those headwinds. That's where we would be. I'd also note that we think our win percentage in New York is going to go up. As you recall, we entered New York in 2019 with five branches, a $2 billion franchise. We were doing well in winning clients. Adding the 30 branches and the visibility of that, we think is going to be very helpful. I mentioned in my comments that we will rebrand the Flushing branches. That'll be done by 1 October. One of the reasons you see a slight elevation in expenses in Q4 is we expect to do a significant kind of brand launch in New York that we hope provide a little more visibility and credibility.

Speaker #2: I'd also note that we think our win percentage in New York is going to go up. As you recall, we entered New York in 2019.

Speaker #2: We had five branches at a $2 billion franchise. We were doing well and winning clients. But adding the 30 branches and the visibility of that, we think, is going to be very helpful.

Speaker #2: I mentioned in my comments that we will rebrand the Flushing branches—that'll be done by October 1st. And one of the reasons you see a slight elevation in expenses in Q4 is we expect to do a significant kind of brand launch in New York.

Speaker #2: That will, we hope, provide a little more visibility and credibility. So, the win percentage in New York, we think, is going to be better in '27 than it was in '26.

Christopher Maher: The win percentage in New York we think is going to be better in 2027 than it was in 2026 because people will just know us better, feel more comfortable. It's hard to pin down, but there's a comfort level people get when they drive by your branches, even if they never walk through them.

Speaker #2: Because people will just know us better, feel more comfortable. There's a—it's hard to pin down, but there's a comfort level people get when they drive by your branches, even if they never walk through them.

Speaker #5: That makes sense. my final one is, obviously 1% ROA next year isn't the final, target. c with things closed now, what are kind of your, your thoughts on, on how you can exit '27 with, a trajectory to a better ROA and, and the best ways to accomplish that?

Manuel Navas: That makes sense. My final one is obviously 1% ROA next year isn't the final target. With things closed now, what are your thoughts on how you can exit 2027 with a trajectory to a better ROA and the best way to accomplish that?

Speaker #2: So, I mean, I think if you think long-term ROA targets, the minimum floor for us would be more like a 1.20. 'Cause if you don't get to that level, our capital levels are gonna remain reasonably, you know, range-bound.

Christopher Maher: I think if you think long-term ROA targets, the minimum for us would be more like a 120. Because if you don't get to that level, our capital levels are going to remain reasonably range bound. You're not going to get to your cost of capital unless you're somewhere up in that area or better. I think in 2027 it's to not just get to a one, but get above a one, exit the year strong and then look towards that target in 2028.

Speaker #2: So, you're not gonna get to your cost of capital unless you're, you know, somewhere up in that area or better. So, I think in '27, it's to not just get to a one, but get above a one, exit the year strong, and then look towards that target in '28.

Speaker #5: Executing on cost saves, more substantial loan growth, getting the 3-to-20 NIM—any other pieces to that better trajectory?

Manuel Navas: Executing on cost saves, more substantial loan growth, hitting the 320 NIM. Any other pieces to that better trajectory?

Speaker #2: No, I think if we do those things, it all holds together. You know, we've got—you know, we think that, over time, as the balance sheet grows—

Christopher Maher: No, I think if we do those things, it all holds together. We think that over time as the balance sheet grows we would get non-interest expenses closer to a range of like 175 basis points, 1.75%. You couple that with a 320 margin and you're doing pretty well.

Speaker #2: You know, we would get non-interest expenses closer to a range of, like, 175 basis points—1.75%. So, you couple that with a 3.20% margin and, you know, you're doing pretty well.

Speaker #5: Thank you for the commentary.

Manuel Navas: Thank you for the commentary.

Speaker #2: Thank you.

Christopher Maher: Thank you.

Speaker #1: Our next question comes from the line of Matthew Brees with Stephens Inc. Matthew, your line is open.

Operator 3: Our next question comes from the line of Matthew Breese with Stephens Inc. Matthew, your line is open.

Operator: Our next question comes from the line of Matthew Breese with Stephens Inc. Matthew, your line is open.

Speaker #3: Hey, just a quick follow-up. I want a clarification. Pat, I think you had said $8 million in accretable yield this quarter. The press release says net accretion was closer to, I don't know, $1.1 or $1.2 million.

Matthew Breese: Just a quick follow-up point of clarification. Pat, I think you had said $8 million in accretable yield this quarter. The press release says net accretion was closer to, I don't know, $1.1 million, $1.2 million.

Christopher Maher: Yeah.

Speaker #3: I was modeling like $4.5 million, $5 million next quarter. I think you were referring just to the loan side. Maybe you could clarify.

Matthew Breese: I was modeling like four and a half million, $5 million next quarter. I think you were referring just to the loan side. Maybe you could clarify.

Speaker #2: Yeah, you're absolutely right. It was about $1 million in June, one month. That will be about $5 million in the third quarter, and it's driven in part by loan maturities.

Christopher Maher: Yeah, you're absolutely right. It was about $1 million in June, one month. That will be about $5 million in Q3. It's driven in part off of loan maturities. It'll drop down a little bit, $3 million-ish, maybe a little under that in Q4. The full year impact for this year is a little over $8 million. That will double and will be $16 million, $17 million, $18 million per year for at least the next two to three years. That's what we're expecting.

Speaker #2: It'll drop down a little bit—$3 million-ish, maybe a little under that in the fourth quarter. So, the full-year impact for this year is a little over $8 million.

Speaker #2: That will double and will be $16, $17, $18 million per year for at least the next two to three years. That's what we're expecting.

Speaker #3: Yeah. Okay, that's it. I'll leave it there. Thank you.

Matthew Breese: Got it. Okay. That's it. I'll leave it there. Thank you.

Speaker #2: Yeah. Sorry for the misspeak, miss.

Matthew Breese: Yeah.

Christopher Marinac: Yeah.

Matthew Breese: Thanks.

Pat Barrett: Thanks.

Christopher Maher: Sorry for the misspoke, missing that.

Speaker #3: No, that's all right. Appreciate it.

Matthew Breese: No, that's all right. Appreciate it.

Operator 3: We have reached the end of our Q&A session. I will now turn the call back to Christopher for closing remarks.

Operator: We have reached the end of our Q&A session. I will now turn the call back to Christopher for closing remarks.

Speaker #1: We have reached the end of our Q&A session. I will now turn the call back to Christopher for closing remarks.

Speaker #4: Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in October about our third quarter results, and we'll provide an update on our merger integration at that point, too.

Christopher Maher: Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in October about our Q3 results, and we'll provide an update in our merger integration at that point too. Thanks very much. Enjoy the rest of your summer.

Speaker #4: Thank you very much. Enjoy the rest of your summer.

Operator 3: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 OceanFirst Financial Corp Earnings Call

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