OCFC: Market Expansion Leads to Jump in Loan Pipeline, Expense Reduction Efforts Continue Apace; Reducing EPS Estimates on NIM Pressures; Reducing Target Price; Downgrading to Neutral Rating
OceanFirst Financial Corp. reported 2Q19 net income of $19.0 million, down 10.4% compared to the $21.2 million recorded in 1Q18. On a per share basis, the company posted 2Q19 EPS of $0.37 versus $0.42 in the prior quarter. Merger-related and branch consolidation expenses were $7.6 million in 2Q19 and $5.4 million in 1Q19. In addition, 2Q19 results include roughly $1.3 million in compensation expense related to an executive retirement. Excluding these items from both quarters, adjusted EPS was $0.51 in 2Q19 compared to $0.51 in 1Q19. Adjusted 2Q19 EPS exceeded our adjusted $0.50 estimate by a penny but fell $0.03 shy of the $0.54 median Street estimate. The main drivers of the outperformance versus our estimate were a lower-than-anticipated loan loss provision and a lower diluted share count, offset partially by greater-than-anticipated NIM compression and lower resulting net interest income. Highlights from the quarter include: