Alfred Goon: Good morning, and welcome to the OceanFirst Q3 Earnings Call. I am Alfred Goon, SVP of Corporate Development and Investor Relations. Before we kick off the call, we would 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 I will turn the call over to Christopher Maher, Chief Executive Officer of OceanFirst.
Christopher Maher: Thank you, Alfred. Good morning, and thank you to all who have been able to join our Q3 2026 earnings conference call. This morning, I am joined by our President, Joe 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 Q3 results that reflect our first full quarter as a combined company following the acquisition of Flushing Financial Corporation.
Christopher Maher: On a GAAP basis, we reported earnings per share of $0.17, which included $0.30 per share, or $29.4 million of non-recurring merger-related expenses, net of taxes. On a core basis, which excludes non-recurring items, earnings per share were $0.48 or $46.9 million, up 54% from the prior quarter and up 131% from the prior year. Compared to Q3 2025, net interest margin has expanded 27 basis points. Core return on average assets has improved 20 basis points to 80 basis points. Our core efficiency ratio has improved more than eight percentage points to 62%. This reflects both the early benefits of the Flushing combination and the multi-year return on our revenue-generating investments. This week, our board also approved the quarterly cash dividend of $0.20 per common and common equivalent shares, marking the company's 119th consecutive quarterly cash dividend.
Christopher Maher: Regarding capital, our priorities are, first, supporting organic growth in our core businesses, second, maintaining our dividend, and third, returning excess capital through share repurchases when the returns are compelling. We did not repurchase shares under the share repurchase program during Q3 as we prioritized capital flexibility through the Flushing integration, leaving 3.2 million shares available under our existing repurchase authorization. With integration risks behind us and earnings growing, we expect to be more active with share repurchases. Share repurchases at the current valuation are accretive to both tangible book value and earnings per share. If that remains the case, we expect to be opportunistic with repurchases going forward. Pat will discuss our capital outlook and current capital ratios in his remarks.
Christopher Maher: We completed our acquisition of Flushing Financial Corporation on 1 June, and on 21 September, completed the operational integration and rebranding of Flushing's 30 branches across New York City and Long Island. We are pleased that the acquisition closing on 1 June, balance sheet restructure on 26 June, and operational integration on 21 September have all been completed on schedule and executed in a manner consistent with the original merger announcement. We remain on track to achieve the cost savings and returns outlined at the transaction announcement and note that Q3 core operating expenses came in below the range we guided to in July. We expect the majority of the remaining cost saves to be reflected in our Q4 run rate. Even more importantly, we continue to see competitive wins in both talent acquisition and customer acquisition across the Flushing footprint.
Christopher Maher: With the integration complete, our focus remains fully to executing our organic growth strategy, which is reflected in this quarter's loan and deposit growth. I am proud of the pace at which our team has moved on both fronts. At this point, I will turn the call over to Joe for additional color on these businesses.
Joe Lebel: Thanks, Chris. I will start with loans. Total loans grew $216 million during the quarter to $16.5 billion, approximately 5% annualized growth, which included $202 million of commercial real estate growth and another $123 million of C&I growth, partly offset by the expected residential runoff. Commercial loan originations increased 15% to $735 million from $642 million in the prior quarter. This is our first full quarter of growth as a combined company and reflects our focus on core relationships. Our mission to grow the C&I business across our markets to diversify our commercial loan portfolio continues as C&I grew approximately 13% on an annualized basis. We have recruited 11 C&I bankers so far in 2026 and continue to be opportunistic with hiring. Moving to deposits, total deposits grew $319 million or 1.8% during the quarter to $18.1 billion.
Joe Lebel: Excluding broker CDs, deposits grew $156 million, led by interest-bearing checking and money market balances. Non-interest-bearing checking averaged $2.9 billion or 16% of total average deposits, and our loan-to-deposit ratio ended the quarter at 91%. The Premier Bank teams had their strongest quarter to date, growing deposits by $181 million during the quarter to $674 million, while the cost of deposits was 2.49%. The group now manages 490 client relationships and 2,209 accounts and contributed $42 million in loan originations for the quarter. The two Premier Bank teams we added in Manhattan, Long Island during the summer are ramping up in line with our expectations. I also wanted to take the opportunity to announce the hiring of Eric Howell as the President of the Premier Bank.
Joe Lebel: As you know, Eric was instrumental in the growth and success of the deposit-focused model at Signature Bank and has been a consultant for us for the past 24 months. We look forward to Eric's leadership and our continued success in the Premier Bank. In terms of calling activity across the Flushing footprint, including the Asian American community, we continue to service meaningful C&I and CRE loan and deposit opportunities, and client retention through the conversion has been in line or better than our expectations. Lastly, non-interest income was $13 million during the quarter, up from $10.6 million in the prior quarter, reflecting a full quarter of Flushing's fee and BOLI income, partly offset by lower gains on other real estate and lower commercial loan swap income. This was well within the range of $12 to $16 million we guided to in July.
Joe Lebel: With that, I will turn over the call to Pat to review the remaining areas of the quarter.
Pat Barrett: Thanks, Joe. Good morning to everyone on the call. We delivered our ninth consecutive quarter of net interest income growth. Net interest income was $172 million, up $51 million or 43% from the prior quarter, and 90% from the prior year, driven by a full quarter of Flushing, earning asset growth and a $5.5 million non-recurring benefit from the payoff of a non-performing loan acquired from Flushing. Pre-tax, pre-provision core earnings were $71 million, up 59% from the prior quarter. Q3 net interest margin expanded 13 basis points to 3.18%. Excluding the impact of the non-recurring recovery, net interest margin was 3.08%. Loan yields increased 27 basis points to 5.82%, reflecting new originations and a full quarter of the Flushing portfolio, while total deposit costs were 2.17%, up 11 basis points.
Pat Barrett: The increase in deposit costs reflected a full quarter of Flushing, partly offset by the non-recurring benefit from purchase accounting adjustments. Our asset quality remained strong. Excluding purchased credit deteriorated or PCD loans, non-performing loans were 0.37% of total loans. Non-performing assets were 0.32% of total assets, both consistent with our historically low levels. Early-stage delinquencies improved or declined $4 million during the quarter. Reported non-performing loans increased to 0.85% of total loans, with substantially all of the increase coming from acquired PCD loans, which carry the fair value marks established at the time of acquisition. Criticized and classified loans were approximately 3.13% of total loans, essentially flat to Q2. We have no broad-based concerns in the portfolio.
Pat Barrett: Our allowance for credit losses remained at 1.29% total loans, and the provision for the quarter was $4.3 million, reflecting loan growth, replenishment of net charge-offs, and continued macroeconomic uncertainty. Net charge-offs were de minimis at approximately four basis points of average loans on an annualized basis. Turning to expenses, GAAP operating expenses for the quarter were $151 million, which included $37 million of merger-related expenses. Core operating expenses were $114 million, below the $120 million to $125 million range that we guided to back in July. This reflects higher cost saves in the quarter than we originally projected and continued expense discipline. Capital remains strong with an estimated common equity Tier 1 capital ratio of 10.6%, a modest decrease from 30 June as capital generation was offset by merger-related expenses and loan growth.
Pat Barrett: Tangible book value per share was $18.08, which was down slightly from the prior quarter, reflecting merger-related costs of approximately $0.30 per share and a $14 million after-tax increase in accumulated AOCI. This is actually accumulated other comprehensive loss. This is primarily reflecting the higher interest rate environment adjustment on the securities book. With merger expenses largely behind us, we expect tangible book value and capital ratios to grow from here. On a normalized basis, our effective tax rate was approximately 29%. Going forward, our expected tax rate is 28% to 29%, absent any impact of tax credit benefits. Turning to our outlook for Q4, we expect modest growth in both loans and deposits in the near term, 1% to 2% quarterly. Subject to growth and adjusted for the non-recurring interest recovery, we expect net interest margin to be stable to modestly higher in Q4.
Pat Barrett: This assumes one additional 25 basis point increase in short-term rates in December. We continue to expect other income of $13 million per quarter and core operating expenses to decline to $110 million with the full run rate of cost saves reflected in Q1 2027. As we complete the integration of Flushing and move into 2027, we continue to focus on generating positive operating leverage. Capital is expected to continue to build with earnings net of any opportunistic share repurchases. We plan to provide detailed guidance for the full year of 2027 during next quarter's call, so in January. I want to reiterate that our 2027 profitability targets remain unchanged from when we announced the Flushing acquisition. At this point, we will begin the question and answer portion of the call.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Daniel Tamayo with Raymond James. Your line is open. Please go ahead.
Daniel Tamayo: Thank you. Good morning, guys.
Pat Barrett: Morning.
Daniel Tamayo: Yeah. Maybe if we could just start on the margin, Pat. If you could just talk about some of the puts and takes that are impacting the margin. Obviously, a lot happening with the integration of Flushing's balance sheet. I appreciate the guidance out a couple quarters. Maybe give us a sense for deposit beta expectations within that, and then how you think. I know you just said you are going to give full 2027 guidance in January. Maybe give us an early sense of how you think the margin could trend next year given the volatility we have seen and the integration of the balance sheet. Thanks.
Pat Barrett: Sure. It is not actually a lot to unpack there, but you articulated all the different elements of it well. Thanks for the detailed question. Yeah, it was noisy, and I think the high-level view of where we think we are heading as we move into Q4 and into Q1 is one of relative stability with a little bit of positive tailwind from floating rate assets and from fixed rate asset repricings. We have a lot of time deposits that we will reprice relatively short term. FHLB borrowings will reprice short term. But these should be offset by the repricing of the fixed rate book which we would expect to be close to $1 billion a quarter. It is $1.2 billion in Q4, and then over $3 billion across 2027 split evenly per quarter.
Pat Barrett: These are all going to be moving up as they reprice, and we think that that gives us a modest tailwind as we move forward. You add in any incremental growth that we have, and assuming that whatever we are originating at that margin will be either accretive or dilutive to the balance sheet repricing trends. Right now it is pretty early but we are expecting about a 10 basis point increase in cost of deposits next quarter and into Q1. Given our rate hike expectations, that would translate to about a 40 basis points beta on the Fed rate hikes. But it is such an early time in that cycle that we are actually going to have to wait and see how that happens. Of course, deposit mix can have a big impact on that.
Pat Barrett: The more lower cost deposits we are able to generate organically, the better the improvement might be. The more fixed rate at market deposits, obviously we would not get that benefit. Does that help?
Daniel Tamayo: Very helpful, Pat. Thanks for all that detail. I guess on the expense side, again, appreciate that you are going out to Q1 with the guide. Does that feel like, and I think you said it in the presentation that 105 is now a number to build off of as we think of the progression of expenses next year?
Pat Barrett: Yeah. Our goal would be to not grow expenses from that level and continue to work on. We have a variety. We did not want to say AI too many times on the call. We have a lot of automation and efficiency efforts that are underway. We are hopeful that we would be able to offset any investments, primarily producer investments, RMs, deposit gathering teams with reductions in other expense categories. I think stability would be for us an expectation from Q1 going forward, and if we are successful in some of these efforts, possibly a little bit lower.
Daniel Tamayo: All right, great. Well, thanks for taking my questions. Appreciate it.
Operator: Your next question from the line of Tim Switzer with KBW. Your line is open. Please go ahead.
Tim Switzer: Hey, good morning. Thank you for taking my questions.
Joe Lebel: Morning, Tim.
Tim Switzer: My first one here is on loan competition in your markets. Has that evolved at all over the last, I don't know, maybe 6 months or so? What is happening to lending spreads right now?
Joe Lebel: Tim, it's Joe. I tell you, it really just depends. We've seen competitors come in and come out, I think really driven by what their appetite is at certain times of the market. I'd like to In a normal environment, it tends to be pretty consistent. It hasn't been that consistent. We've seen people come in the C&I space, come out of the space. Come in the CRE space, come out of the space. I think if I had to put it in any perspective in the rate environment, there's been some rate compression competitively for the best credits. It's not unexpected. There's been a little bit more CRE competition than we've seen historically. I think people have largely gotten over the qualms and concerns about CRE. Look, I also think that for the most part, you're seeing fairly stable rates.
Joe Lebel: You are seeing rates with seven handles now. There are the oddities that people want to win something, but we are smart enough to realize that you do not need to win everything. But I would not term it as crazy out there. I think people are realistic in terms of pricing.
Tim Switzer: Okay. That is good to hear. I was looking for an update on the Premier Bank as well. Great to see the strong growth this quarter. Has there been any change to the target for $2 billion to $3 billion of deposits by the end of 2027? Have your thoughts on the ultimate deposit cost of that program changed at all?
Christopher Maher: Yeah, Tim, it is Chris. Look, we are still heading in that direction. Whether we get there exactly by year-end will be a question. It could come a quarter or two late. That is possible. What we were pretty pleased with this quarter is that we are able to grow and reduce the cost of the deposits at the same time. I think, having Eric here full time is going to make a real difference. Obviously, we are recruiting the class of bankers we would like to put on for the spring. We are having a lot of very healthy conversations. So I think you are going to see it continue to grow and we are feeling pretty bullish on it.
Tim Switzer: Awesome. Yeah. Thank you for taking my questions.
Joe Lebel: Thanks, Tim.
Operator: Your next question from the line of Peter Winter with D.A. Davidson. Your line is open. Please go ahead.
Peter Winter: Thanks. Good morning. Pat, if I could go back to the margin. When you talk about stable to modest in Q4 and Q1, is that the reported 318 or off the core NIM of 308?
Pat Barrett: You can look at it either way, quite frankly, because the impact of accretion is pretty stable throughout the period. So, we would expect a basis point or 2 basis points of expansion on either.
Christopher Maher: Let's just make sure we are real clear on that. So the 318 is going to come down to, say, the 308-ish, somewhere around there. That's kind of the baseline as we go forward. The GAAP and the core will be closer together.
Pat Barrett: Yes
Christopher Maher: next quarter, but we are not going to be coming off the 318. We are going to be coming off closer to like a 308.
Peter Winter: Got it. Helpful.
Christopher Maher: Some of the complexity is just on, we were talking about margin before. Some of the complexity is we are applying traditional OceanFirst pricing against a new customer base, and so far that's gone well. But we are just going to have to watch it and kind of move through things, because we have got a different pricing methodology and different product set and all that. So it's a big deposit base that is adjusting. So, so far we are feeling pretty good about it, but we need a little more time.
Peter Winter: Okay. That is helpful. That you have got very strong loan pipeline, so it does not seem like demand is being impacted from this macro uncertainty, higher rates. Is higher rates impacting commercial real estate as you move forward?
Joe Lebel: Look, I think that there is absolutely an effect on a commercial real estate investor, especially someone who has an existing loan who is going to reprice higher, right? I am sure we have had a bunch of those conversations already. Some of it is jockeying to get the best rate that you can. I do think that rates are not so far out of the marketplace where people are dissuaded from making the proper investments. It may require a little bit more equity, but it has not really adversely affected demand. I think that the density that we have in New York is just going to be a monumental shift for us. We were in the space before, but with the addition of Flushing, that just gives us a wider brand recognition as well as geography to cover.
Joe Lebel: I am pretty bullish that we are going to have opportunity.
Joe Lebel: We are smart enough to realize that the diversification of the loan book still remains the best strategy for us.
Peter Winter: Got it. If I could just slip in one more. As you spent more time with Flushing, are there any loan portfolios that you would look to de-emphasize or any positive surprises as you dig deeper into the balance sheet, get to know the business better?
Christopher Maher: Just to make sure that we are kind of This should be obvious, but in case it is not, the rent-stabilized multifamily business was never important to us.
Peter Winter: Right.
Christopher Maher: We obviously right-sized that and do not expect to see us in that market. In terms of positive surprises, I think lots of great people. One of the really fascinating things that Flushing has built over the years is a multicultural and multilingual distribution base. So when you go out and visit the folks in these branches, they have been terrific. They got us right through the conversion, were wonderful advocates for their customers. We have so many employees in front of the customer that speak two, three, four languages. Flushing had about a $1.4 billion Asian banking deposit base. We think we can grow that from here. So I would say the one real positive surprise, and we were impressed with the branch people to begin with, but the more we get to know them, the better we feel about them.
Christopher Maher: The opportunity, we are the most diverse country in the world. New York is the most diverse city in the world, and Queens is the most diverse borough in the world. So, to have those quality bankers who can converse with clients in their own languages, I think is going to be a real long-term opportunity for us.
Peter Winter: That is great. Thanks, Chris. Appreciate it.
Christopher Maher: Thank you.
Operator: Your next question from the line of David Bishop with Hovde Group. Your line is open. Please go ahead.
David Bishop: Hey, good morning, gentlemen.
Christopher Maher: Morning, Dave.
Pat Barrett: Morning.
David Bishop: Hey, a question, Chris, Pat. On slide 17, you break out nicely the mix between consumer and commercial deposits. As you look ahead, do you have any sort of targets or expectations for how that graph may look, say, at the end of next year or 2028?
Christopher Maher: It's hard to put a number to that right now, Dave. I'll tell you what we're experiencing, which is interesting. So obviously, historically, our growth has really been on the commercial side. So think treasury management services, especially as C&I grew, the opportunity to self-fund that. And we're seeing in our C&I book, we're self-funding about 40% of those credit extensions, which is terrific. What'll be really interesting to assess over time is whether the consumer markets in New York are markets where we think we can kind of make some inroads. We only started advertising in New York under the unified brand in the beginning of October. So it's very early days. Response has been nice. We have a promotional campaign going on now that just in the first few weeks has accumulated over $60 million of accounts.
Christopher Maher: It's promotional money, but the blended rate on those is 3.9%, which to get customers and to be getting net growth is not a bad number. I don't know yet how durable that will be, what the pricing will be on that. But my baseline would be to expect the stability in the split between commercial and consumer with maybe some opportunity for us to replace broker deposits with consumer deposits, especially given the New York franchise. We're working on that now.
David Bishop: Got it. Appreciate that color. Then, Pat, looking ahead to the expected cost saves the coming quarter, Q1, just curious from a line item segment, are you expecting most of those to come from personnel, data processing, other? Just curious some expectations where you see those, the low-hanging fruit coming from. Thanks.
Pat Barrett: Yeah. It is mainly going to be in staff costs, compensation expense. I think we continue to attack all of our vendors, not just from a Flushing cost save perspective, but renegotiating all of our data processing contracts. We are finding that this is a pretty favorable environment to be renegotiating software as a service and banking as a service type provision. We will continue to work on that. Look, if you look at our outlook for next quarter and think about it in terms of our run rate for next year and the EPS goal that we have, we have got a gap to close. We know that. It is probably a $5 million a quarter type gap, and that has got to come from either lower expenses or higher revenues for us to hit that gap.
Pat Barrett: We are cognizant of every dollar that we spend and looking to continue to find opportunities to reduce.
David Bishop: Got it. Appreciate the color.
Operator: Your next question from the line of Christopher Marinac with Brean Capital. Your line is open. Please go ahead.
Christopher Marinac: Hey, thanks. Good morning. Chris and Joe, you have a full quarter now of the funding costs of around 250, and obviously we have some headwinds with higher interest rates. Where do you see the relative funding costs going like out 18, 24 months? I am kind of saying relative to your competitors. Do you think you can push that down and maybe just give us some mile markers for how that can play out?
Christopher Maher: You know, Chris, I hesitate to get too precise because it is a kind of a long timeframe, and we are not quite sure exactly how many Fed hikes we might see and what the shape of the curve will be because the, although we focus a lot on Fed hikes, the shape of the curve makes a big difference here too. I will make a couple general comments. I think over time, we will probably bring the Flushing deposit base to look more like the OceanFirst deposit base. So that is going to be a tailwind in terms of helping us hold down the rate of cost increases on funding. The second thing is I think that we will hope to rotate portions of the funding out of wholesale or brokered and into more traditional client relationships. That should also have a little bit of a tailwind.
Christopher Maher: But the headwind about how many rate hikes and how quickly would be, we are just going to have to wait and see. So on balance, I think we make progress versus where we stand against peers. That would be positive. But I think Pat's guidance was very good. I think about overall NIM, the best we can tell now would have a tailwind of a couple basis points a quarter going forward. I think we are going to be able to hold that regardless of rate increases. When the rate increases come in, it depends on the speed with which they come in.
Christopher Maher: If you have one every six months or so, I think you can generally adjust to that. Which is a very different environment than the one we saw a few years ago. I think that is kind of what is spooking the market a little bit.
Christopher Maher: That it was not the amount of rate increases, it was the speed with which they hit. I do not anticipate that in this cycle.
Christopher Marinac: That is great, Chris. Thank you for that. That is very helpful. And then just a quick follow-up. On the number of hires, is that number going Is it accelerating or is the pace going to be the same? I just missed that point earlier.
Christopher Maher: I think Pat gave good guidance on our baseline expense ratio or baseline expenses quarter by quarter. Every spring we have a hiring season, and we have a yield of bankers. We do not want to hire a banker just to hit a number. If we have an extraordinary banker that is slightly above our budget, we are going to hire that extraordinary banker as well. Right now, we have budgeted for and expect to be able to self-fund a fair degree of hiring, and we are out recruiting in the market. I think we can do that. If we do not find the talent, then we might outperform on the expense side. If we find phenomenal talent, then we may come back to you with the revenue outperformance and maybe slightly higher expenses.
Christopher Maher: I think the guide Pat gave was a good best guess as of right now based on the recruiting pipeline we have and the conversations we are having with bankers.
Christopher Marinac: Fair enough, Chris. Thanks again for the feedback and for taking our questions this morning.
Christopher Maher: Thanks, Chris.
Operator: Your next question from the line of Manuel Navas with Piper Sandler. Your line is open. Please go ahead.
Manuel Navas: Good morning. Could you speak a little bit more to the Eric Howell addition to the Premier team? What does that potentially do to longer-term deposit targets? Maybe add some color to the hiring pipeline in that division in Premier Bank. And any kind of contemplation of a shift to strategy in terms of where you are adding the teams?
Christopher Maher: Okay. So I will unpack a few things there. First, Eric has been helping us for the last 2 years with the strategy and with recruiting. But he has functioned as a consultant. He was not an operating officer of the bank. And this opportunity to bring him on as an operating officer, I think will help him be even more effective for us, both in recruiting talent and in bringing client relationships. So we are bullish on that.
Christopher Maher: We feel very comfortable that the pace at which that business is growing, that it should be a long-term part of our portfolio. And that although 2.5% is not the best funding around, in this environment, 2.5% funding that you can grow is something you can make money off and we can expand our margin on. We feel very good about that. In terms of kind of direction, no different direction.
Christopher Maher: We would be hopeful that we might be able to hire teams in a little bit of a faster fashion. We think that the productivity of the existing teams has the potential to improve for two reasons. Obviously, Eric coming, I think a great leader. A lot of folks know him. In addition to that, we only rebranded the Flushing branches on 20 September. We started advertising the OceanFirst brand in New York in October. We tried to have a pervasive campaign. It is subway, Long Island Railroad, print, social media, all sorts of stuff. I think that as our brand becomes more recognizable in New York, that is going to help us attract more talent. It is also going to help us attract clients. It is going to make the client experience a little bit easier.
Christopher Maher: We are just weeks into having one brand, but we think with that brand in New York and Eric's addition, we have an opportunity. You also asked about geography. The strongest geography for the Premier teams has been and will continue to be New York. That is where Eric had his focus for the last 20-plus years. The strength of that franchise is in Long Island, the Boroughs, and Manhattan. That is exactly where these 30 Flushing branches help us out. We think there is a potential to grow a little faster next year. Obviously, when Eric has got himself settled here and all that, we will refresh our targets.
Manuel Navas: I appreciate that. Can you speak a little bit more on where the deposit growth this quarter came from? Maybe touch on Flushing trends, any success on fighting off any attrition. It seemed like Premier was most of the core deposit growth, and then you added some wholesale as well. Just kind of speak to where the deposit growth came from and the different channels.
Christopher Maher: It was really, the deposit growth was all commercial. So it was Premier, and we consider Premier largely commercial. I mean, some of it is high-net-worth people, but they function more like commercial folks than consumers. So most of it was Premier, C&I, CRE, those verticals. The retail base across both the OceanFirst and the new Flushing franchise was stable. We feel comfortable with that. We were in that awkward period where we did not want to advertise the Flushing brand, and we could not advertise the OceanFirst brand. So we will have a better update on that as we get through Q4. Consumers within kind of a range, it is kind of range bound right now. We hope to be able to grow that and retire some of the brokered and wholesales I talked about earlier. We will give you an update on that next quarter.
Christopher Maher: So far, we are feeling very good about the stability in the franchise. Thus far, I think Pat used a 40% beta on Fed increases. That is the best we can guess now, but that seems to be what is holding.
Manuel Navas: That is great. My last question is, you talked a little bit, Pat talked a little bit about the EPS gap for next year and the wild cards on OpEx. The guidance is really strong on the OpEx side. What are some of the wild cards on better revenue? Is it really loan growth acceleration, all NIM? Just kind of your thoughts on where the revenue has upside, potential upside next year.
Christopher Maher: I think the upside, and we are going to have to be very thoughtful as we kind of go through the next year. Pat mentioned we have more than $1 billion of assets repricing in the next quarter. We average about that going forward in 2027, it is a little more than $3 billion in 2027. The upside would be where those rates go to which is to some degree a factor of competitive pressure, but it is also a factor of building good relationships and having the ability to get paid for the relationship that you bring to the table. So, I think in terms of margin, any incremental progress over where we have guided is more likely to come on the asset side. Then potentially, we could see a little bit of movement in fees over time too.
Christopher Maher: If the origination volumes continue to grow, that may bring more swap fees for us.
Manuel Navas: Did you say what those buckets of fixed loans were going to reprice from? Do you have an average view?
Christopher Maher: Sure, Pat.
Manuel Navas: I do not think I caught that before. I apologize if you said it.
Pat Barrett: Sure. So, well, I do not know. This could get very detailed, but at a high level, we have got the 1.1 billion that is repricing next quarter. Those are coming off of a high 5s, so 590s range. The fixed loans are at 480. So we have got adjustables that are in there as well.
Manuel Navas: That is all.
Pat Barrett: Then it is coming off an even lower rate in Q1, so 460s.
Manuel Navas: Appreciate it. Thank you. Thank you for the commentary.
Operator: Your next question from the line of Matthew Breese with Stephens Inc. Your line is open. Please go ahead.
Matthew Breese: Hey, good morning.
Christopher Maher: Go ahead.
Matthew Breese: Pat, can you help me out with Flushing all integrated and some of the repositioning? What percentage of loan securities today are floating rate based off of SOFR prime? What is kind of the go-forward strategy around securities? Today it was down a little bit this quarter. You are at about 21% of total assets, and I am curious if that holds or grows.
Pat Barrett: Right. The loan portfolio is about a third floating, so 32%, 45% fixed. Half of that is the residential back book which is all fixed and is just in runoff mode. A quarter is adjustable and has the periodic repricing at about $100 million a quarter, $400 million a year. Pretty steady. That is on the loan side. On the security side, because the duration is relatively short on those are about 80% fixed, but less than four-year duration for the most part, and 20% floating. They are kicking off pretty substantial cash flows, about $75 million per month. I think just under $200 million for next quarter will either be cash flow earnings or normal maturities of that. We have got options on what to do with those. We can use it for liquidity to provide for loan growth.
Pat Barrett: But then, of course, it would impact our loan-to-deposit ratio if we do that. So we have to think that through. We also pay down wholesale funding with that, whether that is broker CDs or FHLB, we think of those as pretty interchangeable, and do that. We are unlikely to reinvest any of the cash flows for the securities book. So over time, you would see that coming down by a steady reduction in the securities book, probably at least down by $1 billion over the next year or so, year and a half. And we will have to reevaluate then based on where we are, because we like the liquidity of that, and we need to keep it as at least about 15% of total assets. So it is a higher concentration of securities in the balance sheet today than what is normal for us.
Pat Barrett: By the four quarters out, it will be probably about right from a concentration perspective, subject to where loan growth comes in.
Matthew Breese: Okay. So that lands you kind of in the 17% of assets range. Is that fair?
Pat Barrett: Yeah.
Matthew Breese: Okay. And then from your banking deposits, could you talk a little bit about the composition? I think one of the big selling points has always been you get, call it 25% or 30% DDAs. So I am curious if that is playing out for you, if you are getting, in fact, a high bogey of DDAs. And I am also trying to figure out the cost on the interest-bearing portion. If I am in that kind of 25% DDA range, it sounds like the interest-bearing portion is close to Fed funds, and I wanted to see if that passes the smell test.
Pat Barrett: It is about 21% non-interest today. Interestingly, there is another big slug of it that is interest-bearing checking. Almost 75% of the deposits are checking of some sort or another. You are not far off that when we pay rate, we pay like everybody else, and the relationships that we have to manage. We have seen the non-interest portion building, and we think that is the tailwind where the costs are coming down a little bit. The market rate stuff is market rate stuff. We are a little better than Fed funds, but Fed funds dictates kind of the benchmark for folks that have a lot of excess liquidity. But we are comfortable that we are in that 2.5% range. I think in this environment, you can grow that at that cost, and that is not a bad bargain for us.
Matthew Breese: I guess the follow-up and maybe uncomfortable question is why do you think there is such a difference in performance between the banks that have hired away from Signature? We have seen maybe 3 or 4 banks of those billions in deposits being brought in already. Why not the same for you?
Christopher Maher: It is just a matter of scale. If you look at the number of people that they hired, they hired vastly larger numbers of people. So it is a people business, and it is going to be based on how many folks you have producing. Look, folks have performed really well. I think our performance will gravitate towards the mean over time. But we made a much smaller bet in terms of the number of folks that we brought on board. It was a little different. We waited a little longer. We did not have market brand awareness in New York, so we came in a little bit slower, but that is what I attribute it to, Matt, just fewer resources dedicated to it, less brand awareness in the market. But both of those things are changing over time.
Matthew Breese: Okay. Last one. I know longer term, we have kind of set bogeys of 1% ROA, perhaps even a 3.25% type NIM. Obviously, the rate environment has changed, but I am curious if those bogeys still kind of hold by year-end 2027. Do you feel like there is pressure to maximize shareholder value if those targets are not hit by that timeframe?
Christopher Maher: Yes. Well, I will answer the second question, it is easier. We feel the pressure to maximize shareholder value every day, but our targets have not changed. Look, I feel a little bit more comfortable that this quarter we did achieve a double-digit return on tangible common equity. That is progress, but it is not where we need to be. We need to do better than that.
Christopher Maher: Our targets for the 1 ROA in 2027 remain in place. If we cannot get there exactly on the NIM, we are looking really hard at the operating expense base and opportunities for us to improve the expenses as a percent of assets. Our target next year is somewhere in the range of 1.75%. That is big progress for us, but if we can do something better than that helps as well, especially in a world where NIM may take a little bit longer.
Christopher Maher: Our targets have not shifted and we have a lot of focus on getting there swiftly.
Matthew Breese: I will leave it there. Thanks for taking my questions. Appreciate it.
Christopher Maher: Thanks, Matt.
Operator: There are no further questions at this time. I will now turn the call back to Christopher Maher for closing remarks.
Christopher Maher: All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in January about our Q4 and full year results. Thank you.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
