Q4 2021 OceanFirst Financial Corp Earnings Call
Speaker 1: rate increases will only improve NIM and earnings with our asset-sensitive balance sheet.
Rate increases will only improve NIM and earnings with our asset sensitive balance sheet.
With that I'll turn it back to Chris.
At this point, we'd be pleased to take your questions.
Speaker 2: Can you explain how to ask a question, please, and get in the queue?
Can you explain how to ask a question please and get in the queue.
Speaker 3: As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. Please ensure you're unmuted.
As a reminder, if you'd like to register a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two please.
Please ensure your muted when speaking.
Speaker 3: Our first question comes from David, Bishop of C4 Investors.
Our first question comes from David Bishop of C for investors.
Speaker 4: David, the line is yours.
David The line is yours question, Joe Yes.
Thank you Hey, good morning, Jeff will fall as well.
Speaker 5: Hey, Chris maybe, you know, appreciate the slide where you sort of break out the expenses this quarter.
Hey, Chris maybe.
I appreciate the slide where you sort of break out the expenses this quarter.
Speaker 6: Technology spends versus other non-core just curious what sort of throw the uptick in that Technology spend this quarter any where do you see that sort of settling into into 2020 sort of The core conversion that we conducted this year was the replacement of a core that we had in place since the early 1980s
Technology expense versus other non core just curious what sort of drove the uptick in that.
Technology spend this quarter, and where do you see that sort of settling into into 2020.
So.
The core conversion that we conducted this year was the replacement of a core that we had in place since the early 19 eighties.
Speaker 6: So while it was a very old technology, it had been heavily customized for our environment, it was actually reasonably efficient given it's aid.
So while it was a very old technology had been heavily customized for our environment and was actually reasonably efficient given its age.
Speaker 6: Given the sizeable move from one platform to another.
Given the sizable move from one platform to another.
Speaker 6: a lot of ancillary things that had to be done prior to year end.
There were a lot of ancillary things that had to be done prior to year end. So these are things like making sure. Your controls are validated and that kind of one time efforts to make sure that you have the same confidence in your year end environment that you would've had in the other core system.
Speaker 6: So these are things like making sure your controls are validated and kind of one time efforts to make sure that you have the same confidence in your year end environment that you would have had in the other core system. And then there's some ripples as you work through that. There are compliance functions that were a little harder, so we use some consulting and things like that during Q4. We don't break out guidance for the IT line itself, but we do, we have issued guidance for the first quarter.
And then there is some ripples as you worked through that their compliance functions that were a little harder. So we use some consulting and things like that during Q4.
We don't break out guidance for the it lined itself, but we do we have issued guidance for the first quarter, saying that we believe total expenses should come in somewhere between 54% and $57 million I'm, sorry, 50% $55 million sorry about that.
Speaker 6: saying that we believe total expenses should come in somewhere between $54 and $57 million. I'm sorry, $54 and $55 million. Sorry about that.
Speaker 5: Yeah, thanks. So then, two in the past, in terms of the dim outlook, you're potentially settling back to that 3-23-25 range with the expectations of several fed rate foods here, any updates, in terms of longer term expectations for where the nymphia settle out.
Got it thanks and then.
In the past.
Of the NIM outlook.
Essentially settling back to that $323 25 range with the <unk>.
Expectations of.
Several fed rate moves here any update in terms of longer term expectations for for where the NIM could settle out here.
Speaker 6: I think we're still on target to continue to go back more towards our historical norm. I mentioned the end of quarter-wound balances versus the average balances. That should be good for several basis points into Q1. And then we're going to continue this mix shift. We have very strong cash flows coming off the both the bond book and the loan book that we can redeploy into new loans.
So I think we're still on target to continue to go back more towards our historical norm.
Mentioned the.
And end of quarter loan balances versus the average balances.
That should be good for several basis points into Q1, and then we're going to continue this mix shifts. So we have a very strong cash flows coming off the.
Both the bond book in the loan book that we can redeploy into new loans.
Speaker 6: And then the last thing is, you know, if you think about rates, our assumption going into 2022 when we were budgeting is that we expected somewhere in the range of two rate actions by the Fed. And it's anybody's guess, but...
And then the last thing is if you think about rates our assumption going into 2022, when we were budgeting that we expected somewhere in the range of two <unk>.
Rate actions by the fed.
And it's anybody's guess, but certainly the most of the talk this year seems to be more than that maybe three or four in some folks even thinking about five so that could be a substantial.
Speaker 6: Most of the talk this year seems to be more than that, maybe three or four, and some folks even thinking about five.
Speaker 6: So that could be a substantial tailwind as well. I'm very happy that we came into the environment with a lot of floating rate and adjustable loans. We kept that discipline throughout the last 18 months and I think we're gonna, we're gonna get the benefit from it as we go into 2022. So I think in the past day, we've talked about in the current interest rate environment working our way back up into the 320s.
<unk> as well.
Very happy that we came into the environment with a lot of.
Floating rate and adjustable loans.
We had that we kept that discipline throughout the last 18 months and I think we're going to get there.
The benefit from it as we go into 2022, so I think in the past we've talked about in the current interest rate environment working our way back up into the 300 <unk>.
Speaker 6: That would still be our expectation absent rate movements. I think if you see substantial rate movements or policy action, it's possible we could get back to our longer term average closer to 340 or 350. But I think that would take a longer period of time that might take four or five quarters.
That would still be our expectation absent.
Rate movements.
If you see substantial rate movements or policy action, it's possible, we could get back to our longer term average closer to $3 40 to $3 50, but I think that would take a longer period of time that might take.
Four or five quarters.
Got it and then one final question in terms of the securities cash flows can be how much cash flows those generate sort of on a monthly basis.
Speaker 5: And then one final question in terms of the security cash flows, how much cash flows does generate sort of on a monthly basis? Thanks.
Speaker 7: For the year, David, it's $275 million off of that. But it's pretty even throughout the year.
For the year, David $275 million off of that it's pretty even throughout the year.
Speaker 8: Great, thank you. Thanks, David. Thank you, Mr. Bishop. The next question is from the line of Russell Guckner with DA Davidson. Your line is open.
Great. Thank you.
Thanks, David Thank you. Thank you Mr. Bishop.
Next question is from the line of Russell Gunther with D. A Davidson your line is open.
Hey, good morning, guys I wanted to start on the Hey, Good morning, Chris I wanted to start on the loan growth conversation. If you guys could share kind of where footings are within the Boston and Baltimore areas.
Speaker 6: Hey, good morning guys. I wanted to start on the, like, morning Chris. Wanted to start on the long growth conversation and if you guys could share kind of where footings are within the Boston and Baltimore areas and your sense for...
Your sense for.
Speaker 6: continuing to climb towards that ultimate billion dollar target that you have.
Continuing decline towards that ultimate $1 billion target that you have.
Figures.
Speaker 1: So, that's why I want you. I think we're one with pretty much about how we did the fourth quarter with Boston and Baltimore. I think all the reach...
So Russell how are you.
I think one we're pretty bullish about how we did in the fourth quarter with Boston and Baltimore I think all the regions contributed to the loan growth, which is actually something really good to see because we have some regions that are more mature and of course you guys know the success that we've had in Philly and Boston, but our I'm, sorry, Philly and New York, but the Boston and.
Speaker 1: to the loan growth, which is actually something really good to see because we have some regions that are more mature and of course you guys know the success that we've had in Philly in Boston or I'm sorry, Philly in New York, but Boston and Baltimore collectively are north of nine figures in 90 days. So we're pretty bullish about and by that I mean in portfolio growth, originations are higher. So I think we're really looking forward to strong 2000.
Baltimore collectively are.
North of nine figures.
In 90 days, so we're pretty bullish about it.
And by that I mean in portfolio growth originations are higher so I think we're really looking forward to a strong 2022.
Speaker 6: Maybe you might also think a bit about the earnings track on.
So maybe you might also asked a little bit about the earnings drag on.
Speaker 1: actually a good point we thought about this a bit this morning or so the uh... we've got the portfolio to the size now where the uh...
That's actually a good point, we talked about this a bit this morning Russell.
We've got the portfolio to the size now where the.
The profitability off the existing portfolio totally offsets the run rate on an annualized basis.
Speaker 1: Properly off the existing portfolio, totally offsets the run rate on an annualized basis.
Speaker 1: So we've already achieved break even our slight profitability with the new regions in Boston and Baltimore collectively.
So we've already achieved breakeven or slight profitability with the new regions in Boston and Baltimore collectively.
Thats great color guys. Thank you Bob and then just one follow up in terms of the expense conversation. So the $54 55 guide for the first quarter can you just help me think about what that will reflect in terms of Chris you mentioned tailwind from optimization efforts with the new core eventually.
Speaker 6: And then just one follow up in terms of the expense conversation. So the 54-55 guy for the first quarter, can you just help me think about what that will reflect in terms of, you know, Chris, you mentioned Tillins from optimization efforts with the new core eventually, costates from the branch closures. Is that all embedded within the 54-55? And do we trend a little higher from there based on any franchise investment or hires? Just a general glide to that.
Cost saves from the branch closures is that all embedded within the 50, 455% do we trend a little higher from there based on any franchise investment or hires.
A general discussion would be helpful.
The vast majority of that is embedded of course, we do have the 10 branches that we operated for January so that'll be a little bit of a tailwind into Q2.
Speaker 6: The vast majority of that is embedded, of course. We do have the 10 branches that we operate it for January , so that'll be a little bit of a tailwind in to Q2. I guess the way to think about this is, we're all facing across the sector in stationary pressures. We were not surprised about that. We've been working towards this for the last six months to make sure we got ahead of the curve on the branch confalitation.
Yes, the way to think about this is.
We're all facing across the sector inflationary pressures.
We were not surprised about that we've been working towards this for the last six months to make sure. We got ahead of the curve on the branch consolidations.
Speaker 6: It's very hard to predict the next three quarters, which is why we're not giving so much guidance. But there's no known reason today that those quarters would be materially different from the 54 or 55 million. So I think you can see relatively flatish. But it's hard to say, we have to watch, you know, obviously compensation expenses are a line item. We're all watching carefully. But at this point, first quarter 54 to 55 million and nothing on the horizon is weasel.
It's very hard to predict the next three quarters, which is why we're not giving so much guidance, but there's no known reason today.
Quarters would be materially different from the 54 to 55 million. So I think you're going to see relatively flattish.
But it's hard to say we have to watch obviously compensation expenses are in line item, we're all watching carefully but at this point.
First quarter, 54% to $55 million and nothing on the horizon as we see that would materially change that for the remainder of the year.
Speaker 9: that would materially change that for the remainder of the year. Okay, great. That's very helpful, and that's it for me. Thank you both.
Okay, Great that's very helpful and Thats. It for me. Thank you both.
Speaker 10: Thanks, Russell. Thank you, Mr. Grandther.
Thanks Russell.
Thank you Mr. Gunther.
The next question is from Christopher Merrimack with Janney Montgomery Scott Your line is open.
Speaker 1: Thanks, good morning. Person, Joe, can you tell us about the goal posts on the technology kind of initiatives this year? You know, you educated us back in the annual stay about some of the things, and then those were repeated in the deck last night. But are the goal posts changing for kind of what you want to get out of the technology spend and kind of where you see your products going?
Yes.
Thanks, Good morning, Chris and Joe can you tell us about the goalposts on the technology kind of initiatives. This year you educate us back at analyst day about some of the things that goes we'll repeat it in the deck last night, but are the goalpost changing for kind of what you want to get out of the technology spend and kind of where do you see your products going.
Yeah, very much I think that the.
Speaker 6: The horizon for us now and the spend that we're focusing on is back office efficiency as opposed to front office capabilities. So we feel very good about the customer experience that we're delivering.
The horizon for us now and the spend that we're focusing on is back office efficiency as opposed to front office capabilities. So we feel very good about the customer experience that we're delivering but we know that we can take this new environment.
Speaker 6: But we know that we can take this new environment and tune it. The other thing is we chose a core. It's a very common core processing system that is used by thousands of banks across the US.
Tune it the other thing is we chose a core that's a very common core processing system that is used by thousands of banks across the U S.
Speaker 6: The advantage of that is there are a lot of third party opportunities to come in and automate processes. As a significant milestone, we launched our first internally developed bot in January that's doing a process for us.
The advantage of that is there are a lot of third party opportunities to come in and automate processes.
It's a significant milestone we launched our first internally developed spot.
But in January that's doing a process for us.
Speaker 6: We've got a development team in place that will be doing more of that throughout the year. So I think what we're looking at is how do we create operating leverage.
We've got a development team in place that we'll be doing more of that throughout the year. So I think what we're looking at is how do we create operating leverage in the back office in a material way now that we have an infrastructure that will accept kind of more modern technologies and we can build their own.
Speaker 6: in the back office in a material way. Now that we have an infrastructure that will accept kind of more modern technologies and we can build their own
Speaker 6: Routines into it and let me be clear we're not going to build stuff that's readily available on the open market
Routines into it and let me be clear, we're not going to build stuff that is readily available on the open market.
Speaker 6: But we have an architecture now where we can source things in the open market. We can adapt them for our environment. And we're necessary. We can build our own software to take small tasks that are repetitive and low value and automate them and take the human element out. I think the only way the industry is going to stay ahead of the expense curve is by reducing the amount of labor input it takes to operate a bank. For us, this horizon is all back office for 2020.
We have an architecture now where we can source things in the open market, we can adapt them for our environment and where necessary. We can build our own software to take small tasks that are repetitive and low value and automate them and take the human element out.
I think the only way the industry is going to stay ahead of the expense curve is by reducing the amount of labor input. It takes to operate a bank.
For Us this horizon is all back office for 2022.
Speaker 11: So, Chris, to that point, and thanks for all that background. Do we can see the expense ratios, but does like the per transaction cost become a figure that becomes more prominent as you evolve on the financial.
So Chris to that point and thanks for all that background do we can see the expense ratios, but does like the per transaction cost become a figure that becomes more prominent as you evolve on the financials.
Speaker 6: absolutely and i think you know looking at uh... total operating expense as a percent of assets for the bank as well because as joe adds you think about the long growth we had in the fourth quarter you know that was there was virtually no marginal operating expense that that so as we continue to grow we want to keep up a line on the uh... back office expenses and that should help us grow into a lower expense ratios of percent of us
Absolutely and I think looking at total operating expense as a percent of assets for the bank as well because as Joe as you think about the loan growth. We added in the fourth quarter that was virtually no marginal operating expense to add that so as we continue to grow we want to keep.
On the.
On the back office expenses and that should help us grow into a lower.
Expense ratio as a percent of assets.
Great. Thanks again.
Speaker 10: Great. Thanks again. All right. Thanks, Chris. Thank you, Mr. Demarimic.
Alright, Thanks, Chris Thank you Mr Marrone.
Speaker 8: Again, to ask a question, press star one. The next line, the next question is from the line of Eric.
Again to ask a question press star one.
Next slide the next question is from the line of Eric.
Speaker 8: Matthew Bruce, what's different in your line is open.
Matthew Breese with Stephens, Inc. Your line is open.
Good morning.
Speaker 12: oh no this is this is Matt??
Good morning, Eric.
No. This is this is Matt Breese Chris.
Speaker 12: i'm sorry whatever glad to hear you sorry about that
Oh I'm sorry.
Hi, Good morning, regardless was glad to hear you sorry about that.
Yes.
Speaker 5: I did want to go back to the NIM just to level sets because there's a few moving parts. So you have to carry through from higher loan balance.
I did want to go back to the NIM just to kind of level set because theres a few moving parts right. So you have the carry through from higher loan balances and then you have the sub debt redemption.
Speaker 5: and then you have the subbed at redemption as uh... you know we exit march and and so maybe just thinking as we get into rate height is a fair to say that the kind of a launch point for the name is kind of that three or four three or five range and then we can assume you know securities in the loans and then rate heights from there
Yes.
Exit March and so maybe just thinking as we get in two rate hikes is it fair to say that the kind of a launch point for the NIM is kind of in that 304 305 range and then we can assume securities into loans and then rate hikes from there.
Speaker 6: yeah that's fair i mean it could be as high as uh... three ten but somewhere between three or five and three ten is probably the launch point for the uh... for the rate movements to come in on top of that
Yeah, that's fair I mean, it could be as high as 310, but somewhere between 3% to five and $3 10 is probably the launch point for the for then rate movements to come in on top of that.
Speaker 13: Got it. Okay. And then, Joe, maybe one for you, just thinking about the pipeline, you know, obviously, it was a very strong quarter on loan growth this quarter.
Got it okay.
And then Joe maybe one for you just thinking about the pipeline.
Obviously, it was a very strong quarter on loan growth this quarter.
How do you feel about the $250 million net growth per quarter, and obviously plus or minus a little bit but that type of guidance for 'twenty. Two do you feel any better or worse or how would you kind of recalibrate there.
Speaker 13: How do you feel about the $250 million net growth per quarter, and obviously plus or minus a little bit, but that type of guidance for 2022, do you feel any better or worse or how would you recalibrate there?
Speaker 1: I'm pretty confident about that, Matt. I think we could, you know, there's a definite opportunity to do better than that, and I think that dovetails into the comments that, you know, we've made the last couple quarters about some of these.
I'm pretty confident about that Matt I think we could.
There's definitely an opportunity to do better than that.
And I think that dovetails into the comments that we've made the last couple of quarters about some of these <unk>.
Speaker 1: resi pools were you know what up on resi pools yet to build a loan growth report basically purchasing those just offset some of our own runoff you know some of the is some of the activity in the resi space tends to tail off if there's something worthwhile uh... will buy it just offset uh... or residential amortization if it's not we won't do it but i think from the commercial bank perspective but i think we're really really pretty confident we're we're gonna hit the two fifty if not two bit better
Resi pools were not buying resi pools to build a loan growth.
Basically purchasing those just to offset some of our own runoff some of the.
Some of the activity in the resi space tends to tail off if theres something worthwhile.
We'll buy it just to offset our residential amortization, if it's not we won't do it but I think from a commercial bank perspective, I think we're really we're really pretty confident we're going to hit the $2 50, if not a bit better.
Speaker 6: Some of that back, too, may be just an outcome of whatever payoffs there are. In the fourth quarter, we had payoffs of about $483 million, payoffs and other paydowns and prepayments. So we're able to grow a significant amount with that level of payoffs. That was a pretty robust quarter. If that number changes up or down a little bit, you can have great opportunity. We certainly have the productive capacity, and we think that's going to be a big one.
Some of that back to may be just an outcome of whatever payoffs. There are in the fourth quarter, we had payoffs of about $483 million pay offs and other pay downs in prepayments.
So we're able to grow a significant amount with that level of payoffs.
That was a pretty robust quarter.
That number changes up or down a little bit.
Great opportunity, we certainly have the productive capacity and we think that's going to be.
A big tailwind in the year.
Speaker 13: Got it. Okay. I was curious on the tax strategy. I assume this is kind of part and parcel with the exposures now in Philly, DC Baltimore and Boston.
Got it okay.
I was curious on the tax strategy I assume this is kind of part and parcel with the exposures now in Philly D C Baltimore and Boston.
Speaker 13: But are there any other kind of geographic exposures you've exposed the bank to and maybe any other strategy we should be aware of underneath the hood?
Are there any other kind of geographic exposures you have.
You expose the bank to and maybe any other strategy, we should be aware of underneath the hood.
Speaker 6: Well, I think there's a couple of things going on there, Matt. The first is obviously there are very different statutory tax rates in the areas we currently operate in, and that's all the focus today. So our lending is happening in the markets we've been talking about, but you have, you know, in those markets.
Well I think there's a couple of things going on there Matt.
The first is obviously, they're very different statutory tax rates in the areas. We currently operate in and that is all the focus today. So our lending is happening in the markets that we've been talking about.
But you have in those markets New Jersey for example has an 8% said I'm sorry, 11% statutory.
Speaker 6: New Jersey, for example, has an 8% I'm sorry, 11% statutory.
Speaker 6: Tax rate, which is very high amongst the highest in the northeast and the highest in the country. So we employ a couple strategies. One is attribution, so you can look at the portfolio and where it is, and your tax liability reflects where that collateral is or where those loans are. So it's helpful to have more and more collateral outside New Jersey.
Tax rate, which is very high amongst the highest in the northeast and the highest in the country.
So we can play a couple of strategies. One is attribution. So you can look at the portfolio and where it is and your tax liability reflects where that collateral is or where those loans are so it's helpful to have more and more collateral outside new Jersey.
Speaker 6: And then obviously we use as many banks to reach an investment corp structures that are allowable under the code and we have the ability to move our loan portfolio among those structures to optimize the...
And then obviously, we use as many banks to reach an investment corp structures that are allowable under the code.
We have the ability to move our loan portfolio among those structures to optimize the.
Speaker 12: the tax on it so by doing all of that the net you get to is about a 23% so for a new Jersey Domino's I'll bank we think that's a decent number. Great I'll leave it there thank you for taking my
The tax line so by doing all of that the net you get to is about 23%. So for New Jersey Domiciled Bank, we think thats good.
Decent number.
Great I'll leave it there. Thank you for taking my questions.
Thanks, Matt.
Speaker 8: Thank you, Ms. Dupree. The next question is from Eric Zewick with Bowen and Scattergood. Your line is open.
Thank you Ms <unk>.
The next question is from Erik Zwick with Boenning and Scattergood. Your line is open.
Speaker 14: Hello?
Hello.
Your line is open.
The next question is from Michael Perito with <unk>. Your line is open.
Speaker 8: The next question is from Michael Perito with KBW. Your line is open.
Hey, good morning, guys.
Speaker 15: Michael, I've got a couple of my questions that I've been asked to answer, which is a couple of things. Number one on the non-interesting comes out. Just curious if you could maybe try a little bit more color about where some of the growth opportunities are there for first 2022, and particularly a comment maybe around the swap income, which I would imagine the back half of the year, obviously, it's pretty strong with rates moving higher. I would think maybe there's some talent there. It's just, we'd love to start there if you have any comments.
Good morning, Michael just a couple of all my questions have been asked and answered, but just a couple of things number one on that technology interest income side. Just curious if you could maybe provide a little bit more color about where some of the growth opportunities are there for 2022.
Particularly a comment maybe around the swap income, which I would imagine that the back half of the year, obviously was pretty strong with rates moving higher I would think maybe there's some tailwind there just would love to start there if you have any comments.
I think I mean, if you think about the swap side, that's where the big opportunity is and we have opposing forces here you would think that the borrowers would be highly highly motivated to get into a fixed rate instrument right now, but the cost to get into that instrument is different than it was six months ago. So there's kind of two opposing forces there, but we would hope that you would see more so.
Speaker 6: I think, I mean, if you think about the SWAT side, that's where the big opportunity is. And, you know, we have opposing forces.
Speaker 6: You would think that borrowers would be highly motivated to get into a fixed rate instrument right now, but the cost to get into that instrument is different than it was six months ago. So there's kind of two opposing forces there, but we would hope that you'd see more swap income throughout the course of the year, especially as these loan volumes continue
<unk> income throughout the course of the year, especially as these loan volumes continue.
Speaker 12: And then we're fighting what every other bank is fighting around, depository fees and overdraft. And that's more of a long-term trend that's, you know, we're just going to have to watch. And we're in the process of working through with our folks what our fee strategy will be in the back half of the year for those deposit accounts. So, thank you. Thank you, Jim.
And then we're fighting what every other bank is fighting around depository fees, and overdraft and Thats more of a long term trend.
So we're just going to have to watch and we're in the process of working through with our folks what our fee strategy will be in the back half of the year for those deposit accounts.
Helpful. Thank you and then.
Just on the.
Okay.
Okay.
Speaker 15: I find this but did you guys give any update in terms of when you expect that partner bankorp deal to close in the first half of the year and secondly just Curious how
If I missed this but did you guys give any update in terms of when do you expect that partners Bancorp deal to close in the first half of the year and secondly, just curious how.
That process is pending in terms of kind of the team buying down there and what the pipelines look like down there.
Speaker 15: That process is pending in terms of the team buying down there. And what the pipelines look like down there. And if you guys still feel pretty bullish about the ability to kind of bolster your presence and have it be additive to your organic growth pro forma.
You guys still feel pretty pretty bullish about the ability to kind of bolster your presence and have it be additive to your organic growth pro forma.
Sure. So look we feel great about the opportunity there.
Speaker 6: Sure, so well, look, we feel great about the opportunity.
Speaker 6: their performance is continuing as we expected and I think they'll be releasing earning shortly. So everything is in line from a business standpoint to what we expected. We've had great conversations with their people and work through the onboarding to the extent we can. There are restrictions on what you can do, so we're prepared on that. Process is moving normally, nothing unexpected. We have a
Their performance is continuing as we expected and I think there'll be releasing earnings shortly.
So everything is in line from a business standpoint to what we had expected we've had great conversations with their people.
<unk> through the on boarding to the extent we can there are restrictions on what you can do so well.
We're prepared on that process is moving normally nothing unexpected we have.
Speaker 6: On the SEC and shareholder side, the partners folks have a vote scheduled for March 9th.
On the SEC and shareholder side the partners folks have a vote scheduled for March 9th.
Speaker 6: So that's kind of an ordinary course schedule. We have submitted our applications to our regulators.
So that's the kind of an ordinary course schedule, we have submitted our applications to our regulators and as you can appreciate this is an environment where.
Speaker 6: And as you can appreciate, this is an environment where
Speaker 6: It's a little bit difficult to get the transparency you'd like around timelines. So we understand they have an obligation to review application.
It's a little bit difficult to get the transparency you'd like around timelines. So we understand they have an obligation to review applications.
Speaker 6: in maybe a new way. So as you've seen with a lot of the deals in the last few months, we're responding to requests if we get them and giving them the time to do what they need to do. So we have no reason to believe that we'll have an extended approval time.
In maybe a new way.
So as you've seen with a lot of the deals in the last few months.
Responding to requests if we get them and giving them the time to do what they need to do so.
We have no reason to believe that.
That will have an extended approval time.
Speaker 6: We continue to hope that maybe sometime in the second quarter we're going close.
We continue to hope that maybe sometime in the second quarter, we're going to closing.
Great.
Speaker 15: Great. Thank you Chris. I appreciate you guys taking my question.
Thanks, Chris I appreciate you guys, taking my questions.
Thanks, Mike.
Speaker 8: Thank you, Mr. Perrito. The next question is from the line of air exhibit with Bowen and scatter good. Your line is open.
Thank you Mr Currey till.
The next question is from the line of Erik Zwick with Boenning and Scattergood. Your line is open.
Good morning can you guys hear me now.
Speaker 15: will be can't are sorry about that and then i called mad airy so sorry both of you a couple couple of thoughts no problem i'm not sure what we're going on they're but glad you guys can hear me uh... just a couple for me at this point one curious just thinking about you know i had the outlook for the strong loan growth and
We hope we can Eric sorry about that and then I called Matt Eric So sorry, both of you a couple a couple of false starts no problem I'm not sure what was going on there, but glad I'm glad you guys can hear me.
Just a couple from me at this 0.1 curious just thinking about.
The outlook for the strong loan growth.
Speaker 16: thinking about the rest of the learning assets and i guess in particular investment securities portfolio it's been to about you know fifteen percent of uh... around fifteen percent or so total assets they would how would you expect that to trend to what keep pace with uh... that alone portfolio you okay with that shrinking uh... would you assume from a yield perspective you probably prefer to the play capital there but curious about your here thoughts
Thinking about the rest of the earning assets and I guess in particular, the investment securities portfolio. It stands at about 15% of all.
Around 15% or so of total assets today, how would you expect that to trend and what keep pace with.
The loan portfolio or are you, okay with that shrinking would assume from a yield perspective, you would probably prefer to deploy capital there, but curious about your thoughts there.
Speaker 6: I think our first option would be to decrease the percentage of securities and increase the percentage of loans and get a mixed shift in improvement in them and earning it that way. And I think an important note about that is our deposit, the quality of our deposit funding, which is high quality core deposits.
I think our first option would be to decrease the percentage of securities and increased the percentage of loans and get a mix shift in improvement in NIM and earnings that way and I think important note about that is our deposit the quality of our deposit funding, which is high quality core deposits. We continue to have a loan to deposit ratio well under.
Speaker 6: We continue to have a loan-to-deposit ratio well under 90 percent and we have no federal loan bank borrowings at this time. So it's a very strong funding profile. And I think that allows us the opportunity to have a slightly lower percentage of securities than some peers.
90% and we have no federal home loan bank borrowings at this time, so it's a very strong funding profile and I think that allows us the opportunity to have a slightly lower percentage of securities than some peers.
Speaker 6: So the first thing we'll do is kind of redirect cash flows from the Securities book into the loan book.
So the first thing, we'll do is kind of redirect cash flows.
The Securities book into the loan book.
Speaker 6: But we're not averse to growing the balance sheet. And our teams are doing a great job. If we've got another string of strong quarters, we'll be taking a fresh look at what point do you just allow that to turn into balance sheet?
But we're not averse to growing the balance sheet and.
Our teams are doing a great job.
Got another string of strong quarters.
We will be taking a fresh look at what point do you just allow that to turn into balance sheet growth.
Speaker 16: Thanks, Chris. I appreciate the color there. And then maybe a question for Mike. Can you remind us what the deposit betas are? You use in your assumptions for the interest rate sensitivity modeling that shows up in the, in the keys in the case.
Thanks, Chris I appreciate the color there and then.
Maybe a question for Mike can you remind us what the deposit betas are you using your assumptions for the interest rate sensitivity modeling that that shows up in the Qs in the case.
Speaker 7: We updated the baiters every year. We've probably got about a...
Yeah, we update that the beta is every year, we've probably got a better.
12, or or more year 12 to 15 year history now.
Speaker 7: well over or more year, 12 to 15 year history now of studying this. But we're, so the basis, I think about generally about 10% the average life is probably 5, 6, 7 for money market savings and just something around there, 5 to 7 years.
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Yeah.
So the data debated as they think about generally about 10% the life. The average life is probably 567 for money market money market savings interest humping around their five to seven years.
Speaker 7: So you can see that from where we were a couple years ago in relation to our peers before the rate reductions, our cost of deposits was very low in relation to our peers.
So you can see that from us.
Where we were a couple of years ago in relation to our peers before the before the rate reductions our cost or cost of deposits was very very low in relation to our peer group.
Speaker 6: And the last rising cycle, our beta was about half that of our pure group.
The last rising cycle, our beta was about half that of our peer group.
Speaker 6: If we think about our deposit base today versus what it was, we went into the last rising cycle. We haven't even lower proportion of certificates and high rate instruments. So I think we're feeling pretty good about how that funding will work out. And we have options having. We've got the
Which I think is important and if we think about our deposit base today versus what it was when we went into the last rising cycle, we haven't even lower proportion of certificates in high rate instruments. So.
So I think we're feeling pretty good about how that funding will work out and we have we have options, having we've got the.
Speaker 6: dry powder in terms of FHLB advances so we don't have to raise our deposit prices too quickly so I think we've got the ability to manage this a bunch of different
Dry powder in terms of <unk> advances, so we don't have to raise our deposit prices.
To quickly so I think we've got the ability to to manage this a bunch of different ways.
Speaker 16: God, that's helpful. And this last one for me, and Chris, I know, and you're prepared remarks you mentioned the amount of shares that you repurchased in 2021. Sorry if I missed it. Did you address kind of your appetite for continuing to repurchase shares in 20 to you at this point?
Got it that's helpful and just last one for me, Chris I know in your prepared remarks you.
I mentioned the <unk>.
Out of shares that you repurchased in 2021, sorry.
Sorry, if I missed it did you address kind of your appetite for continuing to repurchase shares in 2002 at this point.
Speaker 6: I didn't address that specifically, so we'd be clear. We have a strong appetite to repurchase our shares. The challenge is just with the securities rules, our ability to get our hands on enough shares in any given window has been a bit of a challenge, especially the windows are tighter with a pending acquisition like partners. But we're ready and we have an interest and we can do block trades, so we can do larger trades that they become available to us.
I didn't address that specifically so let me be clear, we have a strong appetite to repurchase our shares.
The challenges just with the securities rules, our ability to get our hands on enough shares in any given window has been it's been a bit of a challenge, especially the windows are tighter with the pending acquisition like partners.
But we're ready and we have an interest and we can do block trades. So we can do larger trades, if they become available to us in certain time windows. So I think you should expect us to do to run on the pace, we were running last year and faster if we can find an opportunity to do that.
Speaker 6: certain time windows. So I think you should expect us to do the run on the pace we were running last year and faster if we can find an opportunity to do that.
Yes.
Great. Thanks for taking my questions today.
Sure.
Thank you Mr. Xu Lei.
Speaker 8: Thank you, Mr. Zee-Wook. I can't to ask a question, press the R1.
To ask a question press star one.
Again to ask a question press star one.
Speaker 8: There are no additional questions waiting at this time. I want to turn the conference over to Chris Mars for any closing remarks.
There are no additional questions waiting at this time I will now turn the conference over to Chris Morris for any closing remarks.
Alright, Thank you very much with that I'd like to thank everyone for their participation on the call. This morning, obviously, we're very pleased with the momentum of our commercial business.
Speaker 6: Thank you very much. With that, I'd like to thank everyone for their participation in the call this morning. Obviously, we're very pleased with the momentum of our commercial business.
Speaker 6: are expanding that interest margin, our asset sensitivity position, especially in light of the Fed moves that may come later in the year, and the trend towards decreasing expenses throughout the year. So we look forward to speaking with you following our quarter end results in April . Thank you.
Our expanding net interest margin, our asset sensitivity position, especially in light of the fed moves that may come later in the year.
And the trend towards decreasing expenses throughout the year. So.
We look forward to speaking with you following our quarter end results in April Thank you.
That concludes the Ocean <unk> Financial Corp Earnings Conference call. Thank you for your participation you may now disconnect your lines.
Speaker 8: That concludes the Ocean First Financial Corps our next conference call. Thank you for your participation. You may now disconnect your line.