OceanFirst Financial Corp. (OCFC) Q3 2026 Earnings Report, Transcript and Summary

Good morning and welcome to the OceanFirst Third Quarter 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 D. Maher, Chief Executive Officer of OceanFirst.

Thank you, Alfred. Good morning, and thank you to all who have been able to join our third quarter 2026 earnings conference call. This morning, I am joined by our President, Joseph J. Lebel; and our Chief Financial Officer, Patrick S. 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 will move forward to taking your questions. We reported third quarter results that reflect our first full quarter as a combined company. Following the acquisition of Flushing Financial Corporation. On a GAAP basis, we reported earnings per share of $0.17 which included $0.30 per share, or $29.4 million of nonrecurring merger related expenses. Net of taxes. On a core basis, which excludes nonrecurring 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 the third quarter of 2025, net interest margin has expanded 27 basis points Core return on average assets has improved 20 basis points to 80 basis points. And our core efficiency ratio has improved more than 8 percentage points to 62%. This reflects both the early benefits of the flushing combination and the multiyear 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. 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 the third quarter, as we prioritize 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. Patrick will discuss our capital outlook and current capital ratios in his remarks. We completed our acquisition of Flushing Financial Corporation on June 1. And on September 21, completed the operational integration and rebranding of Flushing's 30 branches across New York City and Long Island. Pleased with the acquisition closing on June 1, balance sheet restructure on June 26, and operational integration on September 21. 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 third quarter 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 fourth quarter run rate. Even more importantly, we continue to see competitive wins in both talent acquisition and customer acquisition across the Flushing footprint. With the integration complete, our focus remains fully on 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.

Thanks, Christopher. I will start with loans. Total loans grew $216 million during the quarter to $16.5 billion, approximately 5% annualized growth which included $2 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 Excluding brokered 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 202 thousand accounts. And contributed $42 million in loan originations for the quarter. The 2 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. 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 with the Premier Bank. In terms of calling activity across the Flushing footprint, including the Asian American community, we continue to surface meaningful C&I and CRE loan and deposit opportunities and client retention. Retention through the conversion has been in line or better than our expectations. Lastly, noninterest income was $13 million during the quarter, 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 lower commercial loan swap income. This was well within the range of $12 million to $16 million we guided to in July. With that, I will turn the call over to Patrick to review the remaining areas of the quarter.

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's earning asset growth, and a $5.5 million nonrecurring benefit from the payoff of a nonperforming loan. Acquired from Flushing. Pretax pre provision core earnings were $71 million, up 59% from the prior quarter. Third quarter net interest margin expanded 13 basis points to 3.18%. Excluding the impact of the nonrecurring 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. The increase in deposit costs reflected a full quarter of Flushing partly offset by the nonrecurring benefit from purchase accounting adjustments. Our asset quality remains strong, Excluding purchased credit-deteriorated or PCD loans, nonperforming loans were 0.37% of total loans. Nonperforming 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 nonperforming loans increased to 0.85% of total loans, 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 the second quarter. We have no broad based concerns in the portfolio. Our allowance for credit losses remained at 1.29% of 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 4 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 June 30 as capital generation was offset by merger related expenses and loan growth. 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 an accumulated other comprehensive loss. This is primarily reflecting the higher interest rate environment adjustment on the securities. But 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 the fourth quarter. We expect modest growth in both loans and deposits in the near term. 1% to 2% quarterly. Subject to growth and adjusted for the nonrecurring interest recovery, we expect net interest margin to be stable to modestly higher in the fourth quarter. This assumes 1 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 the first quarter of 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. But 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.

We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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.

Thank you. Good morning, guys. Morning. Yeah, may-- maybe just if we could just start on the margin, Patrick. You know, maybe you could just talk about some of the puts and takes that are impacting the margin. Obviously, lot happening with the integration of Flushing's balance sheet. But I appreciate the guidance out a couple of quarters. But maybe give us a sense for you know, 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, but maybe give us an early sense of how you, how you think the margin could trend next year given the volatility we have seen and the integration of the balance sheet. Thanks.

Sure. Sure. it is not actually a lot to unpack there, but you articulated all the different elements well. So thanks for the detailed question. So, yeah, it was noisy. And I think the kind of high-level view of where we think we are heading as we move into the fourth quarter and into the first quarter. is 1 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 deposits. Time deposits that will reprice relatively short term FHLB borrowings will reprice short term. But this should be offset by the repricing of the fixed rate. Book, which we would expect to be, you know, close to a billion dollars a quarter. it is 1.2 billion. In Q4. And then about 3. Over 3 billion across 2027 split evenly per quarter. And so these are all gonna be moving up as they reprice, and we think that gives us a modest tailwind. As we move forward. Then you add in any incremental growth that we have and assuming that we are. Well, 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. So given our rate hike expectations, that would translate to about a 40%, or a 40-basis-point data. On the Fed rate hikes. But it is such an early time in that cycle that we are actually going to have to kind of wait and see how that happens. And, of course, deposit mix can have a big impact on that. So the more lower cost deposits we are able to generate organically, the better the improvement might be. And the more fixed rate at market deposits, obviously, you know, we would not get that benefit. Does that help?

Very helpful, Patrick. Thanks for all that detail. And then I guess you know, on the expense side, so, again, appreciate that you are going out to Q1 with the guide.

Is. Does that feel like and I think you said it in the presentation that $105 million is now a number to build off of. As we think of the progression of expenses next year. Yeah. But our goal would be to not grow expenses. From that level and continue to work on. We have a variety of-- you know, we did not wanna say AI too many times on the call, but we have a lot of automation and efficiency efforts that are underway. And so 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. So 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.

Alright. Great. Well, thanks for taking my questions. Appreciate it.

Your next question from the line of Timothy Switzer with KBW. Your line is open. Please go ahead.

Hey, good morning. Thank you for taking my questions.

Morning, man.

My first 1 here is on loan competition in your market. Has that evolved at all over the last I do not know, maybe 6 months or so? And, you know, how. What is happening to lending spreads right now?

Timothy, it is Joe. I would tell you, it really just depends. We have seen competitors come in and come out. I think, really, driven by what their appetite is at certain times of the market. So I would like a normal environment, it tends to be pretty consistent. It has not been that consistent. We would be we have 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 is been some rate compression competitively for the best credits. it is not unexpected. there is been a little bit more competition than we have seen historically. I think people have largely gotten over the qualms and concerns about CRE. But, look, I also think that for the most part, you are seeing fairly stable rates. You are seeing rates with 7 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 they are realistic in terms of pricing.

Okay. that is good to hear. And I was looking for an update on the Premier Bank as well. Good. 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? And, you know, have your thoughts on the kind of ultimate deposit cost of that program changed at all.

Yeah. Timothy, it is Christopher. You know, look, we are still heading in that direction. Whether we get there exactly by year end will be kind of a question or could it come a quarter or 2 later? that is that is possible. We were pretty pleased with this quarter is being able to grow and reduce the cost of the deposits at the same time. And I think, you know, 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. And we. We are having a lot of. very healthy conversations. So I think you are going to see it continue to grow. And know, we are feeling pretty bullish on it.

Awesome. Yeah. Thank you for taking my questions. Thanks, Timothy.

Your next question from the line of Peter Winter with D.A. Davidson. Your line is open. Please go ahead.

Just Pat, if I could go back to the margin. When you talk about stable to modest, in the fourth quarter and first quarter, is that the reported 3.18%, or the off the core NIM of 3.08% So you can look at it either way.

Quite frankly, because the impact of accretion is pretty stable. Throughout the period. So, you know, we would expect you know, a basis point or 2 basis points of expansion on either.

I would. Yeah. Just let's just make sure we are real clear on that.

So The 3.18% is going to come down to, say, the 3.08%-ish. Somewhere around there. that is kind of the baseline as we go forward.

The gap and the core will be closer together. Yes. Next quarter. But we are not gonna be coming off the 3.18%. We are going to be coming off closer to, like, a 3.08%, right?

Got it. Got it. Okay.

And then of the complexity is just on. You know, we are talking about margin before. Some of the complexity is we are applying traditional ocean first pricing against the new customer base. And so far, that is gone well. But know, we are just gonna have to watch it and kinda move through things. Because, you know, we have got a different pricing methodology and different product set and all that. So a big deposit base that is adjusted. So far, we are feeling pretty good about it, but we need a little more time.

Okay. that is helpful and then just the. You have got very strong loan pipeline, so it does not seem like demand is being impacted from this macro uncertainty higher rates. But is higher rates impacting commercial real estate as you move forward?

Look. I that there is absolutely an effect on a commercial real estate investor, someone who has an existing loan 's gonna reprice higher. Right? And 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. And I think the density that we have in New York is just gonna be monumental shift for us We were in this space before, but with the additional flushing, that just gives us a wider brand recognition as well as geography to cover. I am I am pretty bullish that we are going to have opportunity. We are smart enough to realize that the diversification of the loan book still remains the best strategy for us. Got it.

If I could just slip in 1 more. You know, as you spent more time with Flushing, are there any loan portfolios that you would look to deemphasize? Or any positive surprises as you kind of dig deeper into the balance sheet, get to know the business better?

Just to make sure that we are we are-- this should be obvious, but in case it is not. You know, the rent stabilized multifamily business was never important to us. And so, you know, we obviously right sized that and do not expect to see us in that in that market. In terms of positive surprises, I think lots of great people. 1 of the really fascinating things that Flushing has built over the years is a multicultural and multilingual distribution base. So, you know, when you go out and visit the folks in these branches, they. They have been terrific. You have got us right through the conversion, wonderful advocates for their customers. We have so many employees in front of the customer that speak 2, 3, or 4 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 1, you know, real positive surprise and. Is we were impressed with the branch people to begin with, but the more we get to know them, the better we feel about them. And the opportunity, you know, we are the most diverse country in the world. New York's 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 it is gonna be a real long term opportunity for us. that is great. Thanks, Christopher. Appreciate it.

Thank you. Your next question from the line of David Bishop with Hovde Group. Your line is open. Please go ahead.

Hey, good morning, gentlemen.

Morning, babe. Morning.

Hey. Question, Christopher, Patrick. On slide 17, you have broken 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.

it is hard to put a number to that right now, David. What I will tell you what we are experiencing, which is interesting. So, obviously, you know, historically, our growth has really been the commercial side. So think, you know, treasury management services, especially as C&I grew, you know, the opportunity to self fund that And we are seeing in our C&I book we are self funding about 40% of those credit extensions, which is terrific. What would 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 at the beginning of October. So it is very early days. Response has been nice. We have a promotional campaign going on now. Just in the first few weeks has accumulated over $60 million of accounts. And the blended. And it is promotional money, but the blended rate on those is 3.9%. Which, you know, to get customers and to, you know, to be getting that growth is not a bad number. I do not know yet how durable that will be, what the play 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 brokered deposits with consumer deposits especially given the New York franchise. We are working on that now.

Got it. Appreciate that color. And then Patrick, looking ahead to the expected cost saves, the coming quarter or first quarter, 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 low hanging fruit coming from.

Yeah. it is it is mainly gonna be in staff costs. Compensation expense. And 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. So we will continue to work on that. And look, you know, if you look at our outlook for next quarter and think about it in terms of our run rate for next year, the EPS goal that we have. We have got a gap to close. We know that. And it is probably, you know, $5 million a quarter type gap. that is gotta come from either lower expenses or higher revenues. For us to hit that gap. So we are we are cognizant of every dollar that we spend and looking to continue to find opportunities to reduce. Got it.

Appreciate the color.

Your next question from the line of Christopher Marinac with Brean Capital. Your line is open. Please go ahead.

Christopher and Joe, you have a full quarter now of the funding cost of around 2.50%. And obviously, we have some headwinds with higher interest rates. Where do you see the relative funding cost going? Like, out 18, 24 months? And 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, I hesitate to get too precise. Because that is kind of a long time frame and you know, 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. I would 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 gonna 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. But the headwind about how many rate hikes and how quickly would be you know, you know, where you kind of have to wait and see. On balance, I think we make progress versus where we stand against peers. That would be positive. But I think Patrick's guidance was very good. Think about overall NIM, you know, the best we can tell now would have a tailwind of couple basis points a quarter going forward. And I think we are gonna be able to hold that regardless of rate increases. You know, when the rate increases come in, depends on the speed with which they come in. So if you have 1 every 6 months or so, I think you can generally adjust to that. Which is a very different environment than the 1 we saw a few years ago. I think that is kind of what is spooking the market a little bit. But it was not the amount of rate increases. It was the speed with which they hit. And I do not anticipate that in this cycle.

that is great, Christopher. 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 that case gonna be the same? I just missed that. Point earlier.

So I think, gave good guidance on our baseline expense ratio. Or baseline expenses quarter by quarter. You know, every spring, we have a hiring season. And you know, we have a yield of bankers. We do not wanna hire a banker just to hit a number. And if we have an extraordinary banker, but slightly above our budget, we are going to hire that extraordinary banker as well. So 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. But I think the guide Patrick 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.

Fair enough, Christopher. Thanks again for feedback and for taking our questions this morning. Thanks, Christopher.

Your next question from the line of Manuel Navas with Piper Sandler. Your line is open. Please go ahead.

Good morning. Can 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 in strategy in terms of where you are adding the teams?

Okay. So I will I will unpack a few things there. So first, you know, Eric's been helping us for the last 2 years with the strategy and with recruiting. he is 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 we are bullish on that. 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, you know, although the 2.5 percent is not the best funding around, this environment, 2.5 percent funding that you can grow. Something you can make money off, and we can expand our margin on. So we feel very good about that. In terms of kind of direction, no different direction. 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 2 reasons. Obviously, Eric Cumming, I think, a great leader. A lot of folks know him. In addition to that, we only rebranded the Flushing branches on September 20. We started advertising the OceanFirst brand in New York in October. So. And we tried to have a pervasive campaign, you know, with it is a subway, Long Island Railroad, print, social media, all sorts of stuff. I think that as our brand becomes more recognizable in New York, going to help us attract more talent. it is also going to help us attract clients, and it is gonna make the, you know, client experience a little bit easier. So we are just weeks into having 1 brand, but we think with that brand in New York, and Eric's addition, we have an opportunity. Also asked about geography. The strongest, you know, 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. And the strength of that franchise is in Long Island, the boroughs in Manhattan. And that is exactly where these 30 plush and branches help us out. So, you know, we think there is a potential to grow a little faster next year. But, obviously, when Eric's got himself settled here and all that, we will refresh our targets. 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. So just kind of speak to where the deposit growth came from in the different channels. 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 non. Than consumers. So most of it was premier, CNI, CRE, those verticals. The retail base across both the OceanFirst and the new Flushing franchise was stable. And, you know, we feel comfortable with that. We were in that awkward period where we did not wanna 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 the fourth quarter. But consumers within a kind of a range is kind of range bound right now. We hope to be able to grow that and retire some of the you know, brokered and wholesale as I talked about earlier. But we will give you an update on that next quarter. But so far, we are feeling very good about the stability in the franchise. And thus far, I think Patrick used a 40% beta on Fed increases. that is the best we can guess now, but that seems to be what is going on. that is great. And my last question is, you talked a little bit Patrick talked a little bit about the EPS gap for next year and the wildcards on OpEx. The guidance is really strong on the OpEx side. But what are some of the wildcards on better revenue? Is it is it really loan growth acceleration? or NIM? Just kind of your thoughts on where the revenue has upside, potential upside next year. I think the upside in. We are gonna have to be, you know, very thoughtful as we kinda go through the next year, Patrick. Mentioned, we have got more than $1 billion of assets repricing in the next quarter. And 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 a to some degree, a factor of competitive pressure. But it is also a factor of, you know, building good relationships and having the ability to get you know, 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. And then, potentially, you know, we could see you know, a little bit of movement of fees over time too if the origination volumes continue to grow, that may bring more swap fees for us.

Did you did you say what those buckets of fixed loans were gonna reprice from? Do you have, like, a average rent? I do not think I caught that before. I apologize that you said it.

Sure. So the well, I do not know. This could get very detailed. But at a high level, we have got the billion 1 that is repricing next quarter. Those are coming off of a high fives, so 5 nineties. Range. The fixed loans are at $4.80. So we have got adjustables that are in there as well. And then it is coming up an even lower rate in Q1. So 4 sixties. Appreciate it.

Thank you. For the commentary.

Your next question from the line of Matthew Breese with Stephens Inc. Your line is open. Please go ahead.

Hey, good morning.

Hey, Matthew.

Hey, Matthew.

Hi. Can you help me out with flushing all integrated and some of the repositioning, what percentage of loans and securities today are floating rate based off of SOFR or Prime And then what is kind of the go forward strategy around securities? Today, it is. 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. Right.

So the loan portfolio is about a third floating. So 32% and 45% fixed. Half of that is the residential back book, which is all fixed and is just in runoff mode. And then a quarter is adjustable and has the periodic repricing at about $100 million a quarter, $400 million a year. Pretty steady. So that is on the loan side. On the security side, because the duration is relatively short on those, those are about 80% fixed. But less than 4-year duration for the most part. And 20% floating. Are kicking off pretty substantial cash flows, about $75 million per month. So I think just under $200 million for next quarter will either be cash flow earnings or normal maturities of that. And so we have got options on what to do with those. And we can use it for liquidity to provide for loan growth. But then, of course, know, it would impact our loan to deposit ratio if we do that. So we have to think that through. We also can pay down wholesale funding with that, whether that is brokered 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 coming down by you know, 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 do not like we would like the liquidity of that, and we need to keep it at least about 15% of total assets. So it is it is a higher concentration of securities in the balance sheet today than what is normal for us. By, you know, 4 quarters out, it will be probably about right a concentration perspective. Subject to where loan growth comes in.

Okay. That lands you kind of in the 17% of assets range. Is that fair? Yep.

Yep. Okay.

Okay. And then from your banking deposits, I mean, could you talk a little bit about the composition? I think 1 of the big selling points has always been you know, 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 is passing the smell test.

So it is about 21% non-interest today. Interestingly, there is another big slug of it that is interest bearing checking. So Almost 75% of the deposits are checking of some sort or another. You are you are not far off that when we pay rate, you know, we pay like everybody else. And, you know, the relationships that we have that we have to manage. Have seen the non interest portion building. And we think that you know, that is that is a tailwind where the costs are coming down a little bit. The market rate stuff is market rate stuff. Mean, 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. So. But I. You know, but we are comfortable that we are in that 2.5 percent range. I think we can. In this environment, you can grow that at that cost. And that is not a bad bargain for us.

it is 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 you know, billions in deposits being brought in already, why not the same for you?

Yeah. Just a matter of scale. So if you look at the number of people that they hired, they hired vastly larger numbers of people. So it is a. it is a people business and it is gonna be based on how many folks you have producing. So look, folks who performed really well, I think our performance will gravitate towards the mean over time. But we did not. We made a much smaller bet in terms of the number of folks that we brought on board. And it was a little different You know? We waited a little longer. We did not have market brand awareness in New York, so, you know, we came in a little bit slower, but know, that. that is what I attribute to Matthew. Just fewer resources dedicated to it, less brand awareness in the market. But both of those things are changing over time.

Okay. And then last 1. 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. And, you know, you feel like there is pressure to maximize shareholder value if those targets are not hit by that time frame?

Yes. Well, I will answer the second is easier. We feel the pressure to maximize shareholder value every day. But our targets have not changed. You know, look, I am 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. So we need to do better than that. And our targets for the 1% ROA in 2027, you know, remain in place. And if we cannot get there exactly on the NIM, you know, we are looking really hard to have the operating expense base and opportunities for us to improve the expenses as a percent of assets. So our target next year is somewhere in the range of 1.75%. You know, that. that is big progress for us. But if we can do something better than that, that helps as well, especially in a world where you know, NIM may take-- May take a little bit longer. But our targets have not shifted in we have a lot of focus on getting to that split point.

I will leave it there. Thanks for taking my questions. Appreciate it. Thanks, Matthew.

There are no further questions at this time. I will now turn the call back to Christopher D. Maher for closing remarks.

All right. Thank you. We appreciate your time today. Your continued support of OceanFirst Financial Corp. We look forward to speaking with you in January about our fourth quarter and full year results. Thank you.

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