Jill Hewitt - SVP and IR Christopher Maher - President and CEO Michael Fitzpatrick - EVP and CFO Joe Lebel - Chie Lending Officer Joe Iantosca - EVP and Chief Administrative Officer.

Frank Schiraldi - Sandler O'Neill Travis Lan - KBW.

Good morning, and welcome to the OceanFirst Financial Corp. Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to Jill Hewitt.

Investor Relations Officer, please go ahead..

Thank you, Kate. Good morning and thank you all for joining us. I'm Jill Hewitt, Senior Vice President and Investor Relations Officer and we will begin this morning's call with our forward-looking statement disclosure.

On this call, representatives of OceanFirst may make forward-looking statements with respect to its financial conditions, results of operations, business and prospects.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond OceanFirst's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

OceanFirst undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. In our earnings release, we have included our Safe Harbor statement disclaimer. We refer you to this statement in the earnings release and this statement is incorporated into this presentation.

For a more complete discussion of certain risks and uncertainties affecting OceanFirst, please see the sections entitled Risk Factors and Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in OceanFirst filings with the SEC. Thank you.

And now, I will turn the call over to our host, Chief Executive Officer, Christopher Maher..

Thank you, Jill and good morning to all, who have been able to join in our first quarter 2015 earnings conference call today. This morning, I'm joined by our Chief Financial Officer, Michael Fitzpatrick, Chief Lending Officer, Joe Lebel and Chief Administrative Officer, Joe Iantosca.

As always, we appreciate your interest in our performance and are pleased to be able to discuss our operating results with you this morning. As has been our practice, we will highlight a few key items and add some color to the results posted for the quarter and then look forward to taking your questions.

In terms of financial results for the first quarter, diluted EPS was $0.32 per share which represents progress is compared to $0.30 per share in the fourth quarter of 2014 and $0.28 per share in the first quarter of last year.

Regarding capital management for the quarter, the Board declared the company's 73rd consecutive quarterly cash dividend of $0.13 per share. In addition to the quarterly dividend, during the first quarter, the company repurchased 110,143 shares of common stock at an average cost of $17.08. Stock repurchases were lower than the linked quarter.

Primarily due to a restricted trading window and the time period leading up to the announcement of our agreement to acquire Colonial American Bank. During the quarter, the company announced the appointment of Jack Farris to the Board of Directors.

Jack is Vice President and Deputy General Counsel, Information Technology, Information Security, Global Clearance and Compliance for Verizon Communications. His background and experience Information Security will add a valuable skill set to the boardroom.

The bank also announced the establishment of an additional branch to serve the Jackson, New Jersey market, which we expect will open during the second quarter. Quarterly trends included strong loan growth, core deposit growth and expense discipline.

Net charge offs for the lowest in three quarters and their provision for credit losses was slightly higher than charge offs as loan portfolio growth drove the need from modest addition to reserves. The new Loan Production Office in Mercer County and the addition of a retail branch will place some pressure on expenses in the second quarter.

These investments as well as the announced agreement to acquire Colonial American Bank are being made to provide growth opportunities and build franchise value in the quarters to come.

One important milestone achieved this quarter, is that interest income derived from the commercial business which totalled $8.3 million comfortably exceeded the $7.6 million and interest income derived from the residential mortgage portfolio.

This trend illustrates the progress being made towards changing the nature of the balance sheet and migrate towards a more valuable business model.

For the remainder of the call, I'm going to ask Joe Lebel to comment on trends in the commercials business and Joe Iantosca to comment regarding both the Colonial American Bank transaction and the decision to open an additional branch in Jackson. With that I'll now turn the call over to Joe Lebel..

Thanks, Chris. Commercial loan originations for the quarter was $69.4 million which compares to $52.5 million in the prior year quarter and the record level of $77.7 million in the linked quarter. Net growth in commercial loans was $41.3 million the seventh consecutive quarter of double-digit growth.

As we've seen in prior periods, much of the growth occurred late in the quarter which will benefit us in the coming quarter. The cumulative growth in commercial loans over the past seven quarters totals $231 million and the pipeline indicates continued methodical growth trends should continue.

As Chris noted, we formally opened our Western Jersey Loan Production Office in Mercer County in February, in advance of the opening. We began building the sales team by hiring the team leader in December, 2014 and a senior level banker in January.

We have recently hired another seasoned lender and administrative staffer and are fully operational in the marketplace. The team has been successful from the outset accounting for $14 million of new loans in the first quarter.

As we have in past quarters, we continue to bolster the build out of our sales theft; we've increased credit risk team members. In that regard, I'd like to mention a notable addition to the bank.

We recently hired Margaret Lanning as Chief Credit Officer, a newly established position that supports our strategic growth initiatives and reinforces our conservative credit culture. Marge is a 35-year banker.

Most recently serving a Senior Vice President and Senior Regional Credit Officer for the Business Banking activities in the five state Northeast region of Wells Fargo. As I've mentioned in previous call, the commercial lending market remains very competitive.

Much has been written about the multiple banks bidding [ph] quality credits and continuing pressure on interest rates, reduced financial covenants and extended loan durations. While these challenges are significant, we're pleased with the performance of our commercial lenders and credit risk team members and remain optimistic moving forward.

With that, I'll turn it over to Joe Iantosca..

Thanks, Joe. As our lending engine continues to perform funding incremental loan growth becomes an additional strategic requirements. While our wholesale funding maybe efficient in today's interest rate environment. Deposit funding will likely become increasingly important especially if the predictions of rising rate environment come to pass.

The bank has historically managed a favourable loan-to-deposit ratio and will continue to favour a conservative funding position. The acquisition of Colonial American Bank before its OceanFirst the opportunity to quickly enter two very desirable deposit markets within established presence and existing deposit base.

Shrewsbury and Middletown will rank first and third on our strategic plans list of target towns to establish a branch presence. Colonial American has established a reputation of providing high quality service in those markets. So the acquisitions of its branches and talented branch personnel did extremely well with OceanFirst strategic plan.

Just as importantly, the deal makes sense financially. We expect the old stock transaction valued at approximately $11.3 million to be accretive to OceanFirst EPS in 2016 with negligible tangible book value dilution.

Colonial has developed quality relationships with local businesses as reflected by their fourth quarter 2014 balance sheet of $127 million in loans and $129 million in deposits. We look forward to providing Colonial customers with the enhanced array of product and services OceanFirst has to offer.

Especially in the areas of wealth management and trust and investment services. Additionally, OceanFirst can wilfully accommodate the needs of Colonial's corporate borrowers with a wider array of product and a significantly higher lending limit. We've submitted the necessary regulatory applications for the merger.

Subject to receipt of regulatory approval and the approval of Colonial American shareholders, we hope to close the transaction during the second half of the year. Certainly all of us at OceanFirst look forward to welcoming the customers, employees and shareholders of Colonial American to the OceanFirst family.

Also I'd like to update you on branching activity. As part of managing the bank's loan to deposit ratio within our comfort zone. We plan to open branches as a strategy to attract core deposits. As such, we anticipate opening a second branch in Jackson over the next few months.

Noteworthy is that this branch, while occupying a traditionally sized footprint will employ two models we have deployed separately but not combined before. Universal bankers and Interactive Teller Machines or ITM. The ITM allows us to personally handle customer transaction with a teller, who is in a remote location.

You can think of it as a long distance driver. Like combining this technology an universal bankers who consult with customers and sell the banks products and also perform routine teller transaction as needed. We will service this community with the extraordinary care our customers have come to expect, yet in a more cost efficient manner.

I'll now turn the call back to Chris..

Thank you, Joe. With that, we're prepared to take your questions this morning..

[Operator Instructions] your first question comes from Frank Schiraldi of Sandler O'Neill. Please go ahead..

Just few questions, if I could. Just first on under the strong commercial growth. So you guys obviously touched on the contribution from the new Mercer office. But it seems like even ex that, the growth was still very strong obviously.

Wondering, if you could just talk maybe a little bit about the main drivers of growth outside of the LPO?.

We continue to get, Frank, its Joe Lebel. We continue to get solid performance from the existing team that we built prior to the LPO both in investments CRE and C&I and the C&I growth has really helped us drive some deposit growth as well..

Is there an uptick sort of in the economy or is it really more of taking from others and building out the new team's production?.

It's still largely building out production and taking from others Frank, we still see a fairly inorganic growth economy..

Okay and then obliviously I look at the average yields and the pipeline versus the originations. You know, I could see some contraction and I think Joe touched on it a bit already in terms of the funding side, but taking into account funding plans for the strong growth.

What do you think, this means for margin expectations going forward?.

We see that they're probably staying around similar levels. Frank, I think we're going to be expanding the balance sheet. So we'll pick up and net interest income will be from expansion of balance sheet in earning assets not from the expansion of the margins..

Okay, so this is probably a decent run rate, as you see given where the pipeline yields are?.

Yes..

Frank, its Chris. I think you know in the first quarter is just kind of seasonal anomaly the way we report our margins. So with a couple fewer days in the quarter. It looked like the margin feel back a couple basis points, but it was essentially flat if you looked at quarter-to-quarter..

Right, okay and that's I guess just, yes that's the day count on the first quarter and then that anomaly I guess gets goes away I guess in the next three quarters..

Right, but we're having extra, when we moved from last quarter to fourth quarter, first, we lost two days. So that really counts for the whole decrease in margin of three basis points. Other than that, it would have been exactly the same quarter to quarter.

Now we get, we pick up an extra quarter in the second quarter, so that's worth about $100,000 just that one day..

I got you and then just finally on provisioning. You've talked about in the past obviously the reserve-to-loan ratio continues to tick down.

So wondering, if we should expect some stabilization at these levels or is there still some room maybe to reduce that ratio, going forward?.

Frank, its Chris. It's always kind of hard one to figure out because it's very dependent upon conditions and the quarter and we see at the portfolio moves and what variety of different markers point towards. I would say though, still in the first quarter that, while it wasn't a big number.

Our provision's exceeded charge offs by about $100,000 they come from loan growth, so it fully recovered, but that was the part of the equation.

I do think we'll have a little more pressure to cover in that loan growth to maintain somewhat stable coverage of the portion, but you know conditions we'll have to, have to look at each quarters and move along. We could have the portfolios performing and then react accordingly.

Between the fourth quarter and the first quarter, one metric we look at is our under allocated amount, it was relatively stable. So we want to make sure that we continue to have roughly the same coverage levels, we're at but it's going to be conditions related..

Great. Okay, thank you..

Thanks, Frank..

[Operator Instructions] our next question comes from Travis Lan of KBW. Please go ahead..

How do we think about, Chris I know you mentioned this a little bit, but how would you think about the standalone OceanFirst expense trajectory from what it was kind of $13.7 million on a core basis in the first quarter?.

Yes, so I think well we have the end of year conference call. We had kind of said that we expected kind of inflationary pressure to the expense line. We did better than that in the first quarter. We actually saw expenses come down a bit from Q4 to Q1. In the second quarter, we'll have full quarter of the Loan Production Office.

We will have some of the impact of the Jackson branch, but that's offset again some of the expense phase, we took into the first quarter for handling the loans that were sold late last year as well, as the servicing expenses. So all in all, ex-Colonial I think we see just maybe if you look the fourth quarter of last year.

You looked at it, that's probably where we think expenses will get to overtime. So the other impact is that in the second quarter that's our season for equity awards. So it's a little bit of uptick in compensation expenses related to that..

Got you okay and then on the fee side, it looks like all bank card, wealth and deposit fees feel for the second straight quarter and I think there were some seasonality in there, but how does the outlook feel for those lines versus where we were a year ago?.

I think on the banking fees and the cards, so core deposit fees and card interchange revenue. It was a little bit weak during the quarter due to seasonality of it, and what it wasn't great and all that and the first quarter is not the biggest quarter for that stuff anyway. So I think on that segment of fee income, some of with seasonality.

On the wealth side, we do both advisory work, but we also do work for state resolution. So we function as a fiduciary in that regard and that business can be a little bit more lumpy. We had one largest state come to conclusion that kind of came off of earnings during the quarter. So that may bounce around a little bit and that's more susceptible.

It's a smaller number and there is some lumpiness in the way, we recognize income there. So that may bounce around a little bit..

Okay, all right and then I missed in Joe's comment, but do you have an updated expected close date for the merger and then how do you feel also about the previously announced expectations for a minimal tangible book impact and the 2.5% or in secretion for 2016?.

Well I'll take the easier question first, which is how do we feel about the original assumptions very much on track. So really nothing of consequences change in our view of what the expected book value dilution will be or the accretion in 2016. We're just always very cautious about the process in closing. So we don't want to get ahead of ourselves.

The regulators have their work to do, filed everything that we need to file that we would be hopeful, it will be closed in the second half, but we have to let that one to its own course..

Got it, all right thank you guys very much..

Thanks, Travis..

[Operator Instructions] there are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Chris Maher for any closing remarks..

All right, thank you. Once again. Thanks to everyone for joining us this morning for the call. We look forward to presenting additional updates as the year progresses. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..