Q3 2022 OceanFirst Financial Corp Earnings Call
Partners Bancorp.
November 4th 2022 will be the one year anniversary of the announcement of the agreement to acquire partners.
We continue to collaborate with partners and are working with our regulators as they review the application.
As noted in the agreement after one year either party may but is not obligated to terminate the agreement without penalty.
Of course until all approvals and customary closing conditions are met we cannot schedule the merger closing.
We will publish appropriate filings when definitive information is available.
Beyond our financial performance I'm also pleased to note that earlier. This month, we held a bank wide afternoon voluntary then.
Entailed closing our branches so over 750 Ocean first employees, we call our wave makers could spend the collective 3000 plus hours at over 100 project sites to help our neighbors in five states.
While the afternoon of October six does not the only voluntary takes place at Ocean <unk>. It certainly was a significant opportunity for us to help the nonprofit organizations in our communities who do so much to help our neighbors everyday.
This commitment is a core part of how we serve our communities and build our business at.
At this point I'll turn the call over to Joe to provide some color regarding our progress during the quarter.
Thanks, Chris.
The loan portfolio had another solid quarter with $294 million and net growth.
Loan originations were $544 million driven by commercial closings of $357 million.
It is important to note that loan originations have slowed considerably.
On a 35% lower than Q2, and 47% lower than Q1.
This is a natural consequence of our conservatism regarding credit risk and consumer demand falling as interest rates rise.
However, net loan growth remains healthy and has grown at double digit levels as prepayments have decreased throughout the year.
While originating less the quality of our originations remained strong as our focus remains the diligent application of a consistent credit appetite for responsible loan growth in the face of uncertain economic environments.
The economic uncertainty affords us less visibility into 2023, but a modicum of continued responsible growth as expected in certain segments.
While we all expect continued declines in residential lending due to rising rates affecting affordability, coupled with ongoing supply constraints multi.
Multifamily demand is high as rental rates continue to outpace inflation and a constant need for housing of bounds.
We expect loan growth in the construction of multifamily.
And the conversion of existing projects to permanent amortizing loans in Q4 and into 2023.
Turning to deposits our loan to deposit ratio ticked up modestly to 97, 6%.
From 95, 9% in the prior linked quarter.
Due to loan growth, coupled with a traditional decline and the seasonality of certain deposit classes.
Organic deposit growth was $128 million for the quarter.
Our total cost of deposits of 36 basis points rose 14 basis points as compared to the same prior period prior year period.
But remains remarkably below the pace of fed increases.
We expect to aggressively look for new deposits to support prudent loan growth.
While still anticipating modest net interest income improvement.
Moving on to fee income as Chris mentioned.
This quarter is the first time, we've experienced revenue reduction as a result of reduced Durbin amendment fees.
Accordingly, bankcard fees related to Durbin fell $1 7 million for the quarter.
With that I'll turn the call over to Pat to provide more details on the margin expense trends in tax rate expectations.
Thanks, Joe.
Turning to net interest income and margin net loan growth of $294 million and our asset sensitive balance sheet drove another quarter of margin improvement, which expanded by seven basis points to 336.
While our strengthening margin was somewhat muted by higher funding costs. It's important to note that our deposit betas. So far are only about a quarter of what we saw in the last interest rate cycle.
Two factors should provide further tailwind for margins.
Quarter end loan portfolio, nearly $10 billion was $160 million higher than the third quarter average.
And second nearly a quarter of our earning assets are floating rate, providing further opportunity for margin expansion as rates increase and the remainder of the year and into 2023.
Core noninterest expense ticked modestly upward by about $1 million to $59 million, primarily due to employee medical costs incurred in the third quarter.
It's also worth noting that our effective tax rate for the quarter was just over 24% we expect that to remain in this range in future periods.
Overall, we continue to remain very disciplined around expense management.
This combined with our steady growth this year puts us in a position to highlight that we have already outperformed the quarterly efficiency and profitability targets.
We announced at last year's Investor Day.
As a reminder, those target metrics were to earn <unk> 55 per share meet or exceed a 1% ROA and achieve an efficiency ratio of 55% or better.
At this point I'll turn the call back to Chris.
Alright, Thanks, Pat will begin the question and answer portion of the call. So I'll give you a minute while we assemble everyone's questions.
Absolutely and as a quick reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason at all you would like to remove a question. Please press star followed by Tim.
To ask a question Crestwood as a reminder.
Speaker phone, please remember to pick up your handset before asking your question. We will pause briefly ask questions are interesting.
The first comes from Michael Perito with Katie Debbie Your line is open.
Thanks.
Hey, guys good morning.
Mike.
Thanks for taking my questions.
Wanted to.
A couple of big picture questions, maybe and I'll, let others kind of drilling on the model, but I guess first for starters.
Good balance sheet growth again, this quarter and good NIM trends as you guys think about your some of your more expansion type markets, where I imagine kind of the core funding isn't as robust as in your legacy New Jersey broader New York market.
Is it does it alter your appetite for expansion as those economics potentially changed with deposit betas creeping up or how do you guys think about that dynamic as you kind of continue to try to drive loan growth outside of your legacy New Jersey footprint.
It's a good question Mike. So we open these offices I always kind of cringe when people refer to them as is.
As.
Loan officers or loan production offices, because we think of them more as our commercial banking offices.
It is the case, though that deposits will grow a little slower than loans will but.
But we do expect to be raising deposits in each of these markets and over probably a period of years achieve some level of self funding in those markets.
But maybe to ask Joe to talk a little bit about our investments into <unk>.
Treasury and cash management for our clients.
Just.
I'll Echo Chris's points, Mike and I will tell you, it's an interesting even a mindset for our folks because we spent as you know the last two years, putting money to work.
Excess liquidity trying to put money to work put money out on the street.
<unk>.
Our folks are justifiably focused on one side of the balance sheet and now we're.
Focusing on both sides of the balance sheet. So I'm not overly concerned I spent two days in Boston.
Last week talking to corporate clients that have excess liquidity that are excited too.
<unk> dollars to us and as Chris mentioned, we've spent.
A lot of effort and time and product set and investing in our treasury business.
For corporate clients, So I think we're well positioned to gain.
<unk> market share in deposits in what I consider to be the non legacy geographies that we operate in.
Yes.
As noted in the past.
In the last month.
We've released a significant upgrade to our treasury suite for our corporate clients called OSB connect which is a comprehensive mobile offering which provides those corporate treasurers and cfos.
On their mobile device the kinds of things they've become accustomed to in the consumer side. So we've been investing heavily and I think it will take some time, but we do see deposit generation coming from all markets.
And I guess, just at a really high level. It sounds like you guys still expect to be able to outpace any increasing funding cost with higher earning asset yields at this time.
Yes, we're pretty confident that at least over the next couple of quarters, the asset sensitivity position should persist. So funding costs will come up as we as we kind of compete a little bit more for deposits, but we think margins.
Steady and expand even in the near term harder to see this back half of next year I don't know what the yield curve is going to look like fun.
Right.
Okay, and then just just lastly, kind of a hypothetical here and I realize this is somewhat challenging to talk about but just the timing of the November 4th year anniversary on partners deal and.
This call is being probably the last time, you guys kind of publicly speak before that just was curious if hypothetically for some reason that deal doesn't.
Happen in close.
Can you, maybe just give us a sense of what the capital priorities will be prospectively going forward as you look at the end and beginning of next end of this year beginning of next year.
Yes, I think as you can appreciate Mike we're going to be limited in what we could answer in a hypothetical case.
And we appreciate the frustration, but we share it partner shares at about the timing and the process.
Kind of setting that aside for a minute whether that transaction closes or not we've been investing heavily in our organic growth opportunities and we expect to continue to do so so the the most valuable thing. We can do is to grow customer relationships and thats, where our focus will be and that's where our highest level of capital allocation will be.
So I don't know if that helps exactly but thats.
That has been a seat.
And even while we've been doing acquisitions.
No.
I understand and I appreciate you guys, taking my questions. Thank you.
Thanks, Mike Thanks, Mike.
Thank you. Our next question comes from David Bishop with Hockey Group.
Please proceed.
Hey, good morning, gentlemen.
Hey, good morning, Dave.
Okay.
Thanks, Chris and Joe.
Investor CRE continues to.
To drive a lot of growth on the commercial side just curious.
Appetite for that product, maybe what segments are you seeing your best opportunities for for growing that on a sort of a risk risk adjusted basis.
Albert.
Dave I'll, let Joe talk to the segments I will say, though that we did see some nice growth in C&I in the last quarter on a percentage basis and continue to allocate resources to.
Building those.
Those kind of relationships out in some.
Some cases as we enter these new markets.
Your first transactions that you do to establish your brand are around.
Real estate transactions, it's usually easier to build your brand that way and then you transition more into C&I.
But Joe maybe you can talk to the segments and to the extent, we're doing CRE, which property types youre focusing on.
Hi, Dave I will tell you that I mentioned earlier about the.
Multifamily.
Segment and it is interesting because for a period of time as you may recall, you've followed us for a period of years.
We are fairly conservative in the multi space just by virtue of the competitiveness on pricing, we've seen a little bit of widening in pricing spreads which is a positive.
<unk>.
It continues to be a very strong asset class and as you know last year, we created a vertical in construction, which has been very successful in this space and we continue to gain market share there driven by Stan <unk>, who runs that group for us and his background and experience. So we.
Do see opportunities to continue to grow multi both in construction and in the.
Permanent end of it I think we're being a little thoughtful around other market segments. As you would expect I mean, nobody is chasing urban office with the exception of select opportunities I would easily say the same thing about the <unk>.
Retail and hospitality I think everybody at varying levels like industrial.
As you would expect warehousing.
But we're being thoughtful there as evidenced by more recent pronouncements around Amazon and others that are slowing down the growth there.
Of their supply chain. So I do think that there is CRE opportunity I think we've demonstrated we're very good at it and as Chris mentioned, we continue to put resources toward C&I, where you can drive as you know some needed treasury and deposit.
Growth as well.
Got it appreciate the color and then maybe Chris noticed in the slide deck I always appreciate the detail there.
Tech spend up about another million dollars. This quarter was that mostly related to maybe the cash and Treasury management. Buildout. You noted just curious maybe where you see those expenses trending from.
From a holistic basis.
As you build out your digital and mobile banking capabilities.
A few years.
Your competition is yourselves or the bigger banks like the Bofa and wells Fargo's community banks I'm, just curious where you see where you are trying to compete best against there from that viewpoint.
Yes, I think I'd start with the.
Our strategy that we think that a branch light delivery model makes sense and the state of technology today, our customers really want to use digital.
And I think we've done a good job of pointing our spend to those kinds of capabilities I mentioned be connect is one example.
We recently launched full real time zelle payments.
Those kinds of.
Where the dollars are going into those kinds of capabilities.
If I think about where tech spend is going I do think that we're kind of achieving that level.
It should be kind of plateauing for a bit for at least our size of business. We have made significant investments in the infrastructure and the platform.
And I think from here on out it's going to be more efficiency gains.
The last thing that is maybe less transparent is the investment in technology to serve our own people. So most of our investment has been focused around.
And customer experiences.
The more recent spending is focused on enhancing efficiencies internally to the folks that service our customers. So we think there is an opportunity to get much better.
But I don't think it's going to require the same levels of technology investment.
Got it and then one final question any update to the <unk>.
Targets from the analyst day last summer from an ROA or efficiency standpoint at this point.
We certainly need to update those because we think there's upside and opportunity. So we're going to do is work through as you can imagine in the next few weeks.
The outcome on the partners transaction, and then I think that would give us the opportunity to come back to you and our other investors and kind of share what we think the target should be going forward. So stay.
Stay tuned we will be back to update those numbers.
Great. Thanks, Chris.
Thank you.
Quick reminder, if you would like to ask a question. Please press star one telephone keypad.
Next question comes from Christopher Liana.
Your line is open.
Hey, Thanks, Good morning, Chris.
Chris and team just wanted to I wanted to ask about your thoughts about using some of that in wholesale to a greater extent over time or do you think it will stay roughly where it is now.
Look I think that there are opportunities in the funding market.
Where you can do interesting things in earlier this year, we saw an opportunity to exploit the brokerage CD market. So we took.
The advantage of that.
I think historically our level of wholesale <unk> borrowings is much lower than we typically run so we have that lever if we need it.
That said over the long run we think the most valuable franchises have a high quality deposits. So we don't we're not a company that's going to go over 100% loan to deposit ratio for long or to any great degree. So we might drift over 100%. If we think thats tactically the right thing to do.
In the interest rate environment, and we have the capacity to do so we've got still a very modest.
Borrowing position, so I think we're going to be opportunistic.
Watching like everybody else to see where we think kind of terminal rate might come out what the outlook might be in the back half of next year. So that we don't.
Structure funding the cost is too much down the road.
Great Thanks for that.
During the past year as you've been waiting for approval on the partners transaction have you had your normal kind of regulatory exam pass awesome has there been any sort of I guess hot buttons or observations just on that process for last year.
Yes, we've gone through the same kind of annual cycle that any bank would so theres nothing unusual in terms of our cycle and then in terms of themes I think each of the regulatory agencies has done a pretty good job of communicating publicly the things they're focused on and that's the same conversations we're having with our with our regulators as well.
Great Chris Thanks, again for hosting us this morning.
Alright, Thanks, Chris.
Thank you once again as a quick reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Question comes from Matthew Breese with Stephens, Inc.
Please proceed.
Good morning.
Hey, Matt I was hoping for a little bit more color on the on the NIM outlook, assuming we get call. It another 150 basis points of fed hikes, where do you expect the NIM to peak out.
And post kind of.
Peak, if you will.
Is there a fall off after that many asset sensitive banks, you're discussing kind of a peak in a little bit of a falloff as deposit cost continue to increase just just looking for some color on kind of the NIM trajectory over the next call it.
Nine to 12 months.
Hey, Matt It's Pat Barrett here.
Take a first run at that and then Chris <unk>, Joe can jump in on that so look I think what you saw from US this quarter with kind of a mid single digit expansion.
Is a decent run rate that we should expect as long as you see rates continuing to rise.
Not going to be linear some quarters it might be closer to flat some quarters it might be closer to 10 basis points, but it's not a bad proxy for the kind of rate increases we've seen which we do expect to continue through this quarter and probably into the first quarter.
I think we still remain asset sensitive with expansion upside even.
When.
The fed stops raising rates or wind curves.
Settle down simply by virtue of the mix of our portfolio.
Im really hesitant to put a peak or a timeframe on that because that's essentially.
Overlaying, what I think that that is going to do.
And what I think is going to happen with deposit competition and pricing.
Of which could kind of materially change it but pretty comfortable youll continue to see expansion and growth in NII.
Until rates start to come down.
Got it okay, that's very helpful.
I would just add to that.
We reached terminal.
The terminal rate.
And that.
The idea that maybe the fed would decrease rates thereafter.
The shape and the speed of that decrease is going to matter a lot in terms of what happens. So I think the us into other asset sensitive banks. So.
I think what we saw in <unk>.
Covid is this race to zero.
And in a race to zero, our asset sensitivity really hurt US you saw the margins come down under 3%.
If there is a slight pullback in rates, but it's not that kind of race to zero.
I don't think it would be that.
You shouldn't take that big of a toll on our margin. So we should be okay. If there are kind of a stable rate environment going forward, which is hopefully what we would get.
Going back down to zero unless there is a kind of an emergency out there. So let's hope we avoid one of those.
Agreed yes.
And then maybe one for Joe.
Got the sense from your comments that perhaps the loan growth outlook might slow down a little bit just being more selective.
Environment worthy of a bit more cautiousness.
Just curious as we think about kind of the longer term $250 million net growth per quarter bogey out there or is it.
Is it more than likely that we come under that at least for the near term.
Given given some of the cautiousness you talked about.
It could be met.
It ends up being just a little bit more choppy right I do think that there is we're still seeing quality loan requests.
And I think we're being a little bit more thoughtful around it but.
We're still seeing activity and I do think that there is an opportunity to outperform certain.
And there'll be other quarters that might be a little bit more muted, but I'm not I'm not uncomfortable.
Listen the capital position, we have supports high digit or high single digit growth.
If we can find good growth, we'll look to do it.
Got it okay.
And then just just trading revenues were a bit lower this quarter in the presentation. You noted that revenues will be kind of $3 million to $5 million per quarter. I'm curious what are the factors that we should be considering when thinking about a really good quarter from Triton generating 5 million bucks versus the $3 million and then maybe just updated thoughts on overall fee income and expense levels from here.
Yes, I'll take that.
Okay.
Did you say, it's Joe I'll take the risk.
I think Matt listen try to and still get to.
Solid amount of the bulk of the revenues from the residential business. We all know what's happened in the residential business.
I do think that we will get the opportunity to do more commercial business as our corporate clients get more and more comfortable with the fact that we have.
Total company and that there may be opportunities.
To do those types of businesses with us for ease of use and conformity and all that stuff.
But.
But I do think youre going to see I think that's the right level of where we're going to be for the time being I don't see any significant increases in residential activity coming in short term.
And the only thing I would add Matt to the outlook for fees is that when you think about.
Swap fee income and total originations as Joe noted with originations down you have fewer transactions happening so less opportunity for swap fees.
And then you have the spot markets themselves and the pricing on that and people thinking hard before they enter into a swap deal. So we've seen a little weakness in the swap.
Line item, which might continue for a bit.
So and then deposit fees were off as well and thats predominantly been a story around.
Overdraft and us being as conservative as we can given the focus on those fees. So I think you've got a couple of different causes here in.
In a quarter, where youre doing more transactions you could have a little bit of a benefit in both <unk> and in <unk>.
Spot fees.
But the deposit fees are probably going to stay around where they are for a while.
Okay. Okay.
And then two other ones. The first one is just regardless of whether the partners deal goes through or it doesn't go through from here, what's the message around future M&A and how does this process chain.
Changed your view on the types of deals you'd like to pursue if so just maybe discuss your thoughts around that.
Sure.
You have to be aware of kind of trends and.
When I think back about the opportunity we had to grow through tactical acquisitions over the last few years I think it's a very valuable thing for us in building a platform that I think we're going to be able to do a lot with.
That said in the seven prior transactions, we were involved in the path between announcement and closing was a lot more straightforward.
So the risk level of getting a transaction done was low.
At least for now the risk level seems to be heightened.
As I think not just us, but various regulatory agencies kind of interpret.
How they want to be evaluating M&A. So the net of that Matt is that we really don't have any interest beyond partners and pursuing any tactical M&A.
And we would be focused on the organic side because.
If <unk> got more risk.
Very much far fewer transactions are going to meet that hurdle so risks.
Risk is up which means our tolerance to do additional tactical acquisitions is quite low.
Great. Okay, and then just last one look I know TCE capital is healthy, but just looking at kind of bank level.
<unk> ratio is one that stands out is the total risk based capital below 12%.
Wanted to get your thoughts on that level. If there is.
Capital at the Holdco, you could downstream or need for sub debt anything like that.
I think we're evaluating all of our capital options, especially in light of.
Whether or not to close partners and kind of calibrating to the growth rates that Joe talked about so and as Joe mentioned that high single digits approaching say, 10% of organic growth, we can handle that with the capital we have on hand today.
If we think theres, an opportunity to grow faster than that with good quality growth.
And the economy were to appear to have gotten through this period without a significant recession.
We might look at opportunities to bolster capital through the first thing we would look at is sub.
Sub debt is probably the most efficient way to do that we had redeemed $35 million worth of sub debt at the end of Q1. So you could conceivably replace that add to it.
But that's about the extent of our thought process for now.
We are watching origination volumes were watching our balance sheet growth.
To get through the next few weeks determination on the partners transaction, then we will kind of calibrate things.
There is also the opportunity for us to manage margins.
As opposed to growth.
We could slow down the growth rates, a little bit but be more selective on pricing, which would allow us to boost profitability. So I think we're good for a period, but depending on market conditions, we may need to evaluate them.
Great. That's all I had thanks for taking my questions.
Okay. Thanks.
Thank you. Our following question is from Matthew Breese with Stephens, Inc. You May proceed.
Excuse me can you remind me.
D a davidson.
Okay.
Hi.
Yes.
Good morning.
Yeah.
Kind of a little bit of an update on pricing competition across your different markets.
And if you are still getting.
The increase in the pipeline yields everywhere.
Or is there some differences out there.
Well I think theres always differences not necessarily geographic, but depending on the.
The strength in the type of transaction that Youre doing.
So and I think the larger you go up market, depending on the size of the transaction, obviously you have different competitors.
Who have different price sensitivities I would tell you on average.
The C&I business tends to be a.
A little leaner in spread.
But it's offset by the ability to get deposits in treasury income a variety of other things that you may not yet in the CRE business, but I wouldn't anticipate that that be a significant.
Adverse impact in any one market and we do track that fairly fairly closely.
As you were talking about the.
Youre kind of NIM outlook.
Can you talk a little bit about potential ways, you could protect the NIM when.
If that stops and kind of.
What's your thoughts about that point in time.
I can maybe just give you a couple of thoughts on that the first as we think about on the funding side.
Going into the.
Pandemic, none of us have knowing that a pandemic was underway.
We had entered into a number of kind of longer range agreements with some of our commercial clients.
To provide them a rate on their invested balances over a period of time.
What that did is that gave us less flexibility as interest rates came down so our cost of deposits fell much more slowly than the peer group.
So number one we're being very thoughtful about the duration of the funding we're putting on the liability side.
On the asset side of the balance sheet.
We continue to favor kind of floating rate instruments, but.
But we are thinking more about floors.
And swaps and things we can do to protect some of that floating rate asset pool from a significant decline in rates.
But as I said earlier.
A slight pullback in rates for our terminal rate.
Is reached sometime in the first half of 'twenty three and then it pulls back 25 or 50 basis points that probably it doesn't do much it doesn't hurt us much.
What had hurt us during COVID-19 was the rate's going to zero right.
Just a dramatic shock.
Weren't as prepared for so a little better.
Strategic approach on the pricing of deposits.
And thinking as hard as we can about floors and things like that on the on the asset side. So I hope that helps.
I appreciate that.
Just kind of following up earlier.
There was a question about.
A good run rate for operating expenses.
Health care was a little bit higher in the comp line this quarter, but other than that is kind of a good run rate as a base level ex partners.
Any commentary on that would be great.
Hey, Emmanuel it's Pat Yes, I think this is a pretty decent run rate that we see right now there was a little uptick in.
Benefit through health care costs.
But as with everyone else, where we are facing pressure on wages and wage inflation. We've done some work during the year.
And that probably will continue.
Super thoughtful about incremental spending whether it be hiring or contract renewals or new contracts that we're going to do everything we can to stay in front of meaning better than.
Overall market inflation, but I do think that as we move into compensation season into next year, we certainly will see normal increases.
For whatever the market is but for now I think it's a decent run rate.
I appreciate that in your earlier commentary that some of the technology spending might be leveling off and that could offer kind.
Yeah.
Help absolutely keep that cost a little bit more contained okay.
Yes, that's actually a really good point, we don't have an overhang of a lot of incremental new spin that we have to make going forward to make sure that we have a competitive platform vis vis <unk> digital <unk>.
Product offerings for our customers so.
So that's actually we're very happy with the place we are in that.
Thank you for the time today.
Thanks, Matt.
Thank you Manuel and novice from D. A Davidson. The next question comes from Jay <unk> with <unk>.
Please proceed.
Good morning, everybody. Thanks for hosting the call here.
In regards to the.
Good morning.
In regards to the step back in the loan production that you spoke of I believe you used the terms just being a little bit more careful.
Sure.
In regards to that could you just provide a little bit of color as to is it.
Being more careful and perhaps desiring higher prices is it being more careful about what industry the creditor maybe representing.
As far as what type of businesses youre willing to lend to or not or does it have to do with the terms better.
Principally being offered work competed away against in the in the marketplace.
So I think Theres always great company.
Yeah. Thanks, Jerry I think it's a combination of.
I think it's always a combination of factors will give you. The example of the term aspect.
We still see.
Our competitors that have.
A different credit cut than we do and it's okay. I mean, not everybody has the same.
St credit appetite and there are still what I would consider to be.
Covenant Lite transactions, even in this environment out in the marketplace. So we've tended to.
As much as we like to look at most anything that comes across we've tended to be a little bit more circumspect. When it comes to that you can have some of the recent rate rises without adversely affecting the way your stress testing and I think that's something that's really important to us when we look at.
Transactions and as I mentioned earlier, we'll use CRA CRE as an example, there are certain asset classes that we've done really well with over the last few years.
And as a result, we're seeing in retail is probably a good example, urban offices and other where you don't say you won't do it I think you just are a little bit more thoughtful and careful about the ones that you you end up doing I think.
Is your friend in this environment.
Today with rate volatility.
Okay.
As far as the <unk>.
Loan originations go have you seen an uptick in the renewable percentage right. The number of times that a normal either renew with you or or renew with a competitor.
I think the.
I think I'd answer it this way I think it's a little too early to tell certainly so I think our corporate clients that are relationship clients renew with US typically it's very rare that we lose transactions to competition I would say if you look at the last couple of years, where most banks have had run off.
Has been a combination of borrowers getting exorbitant prices for owned real estate, so they get an opportunity to sell at a gain and.
Depending on the segment certain borrowers.
Refinancing to take out equity, which that's not going to occur in the near future.
That's a that allows prepay speeds to slow which allows us to grow the balance sheet, even with reduced originations.
Okay, Okay and my final question would be on expenses.
You all certainly ought to be complemented on hitting your.
Expense ratio goal already that that's great stuff, we've talked previously about the branch network.
Optimizing the number of branches up there.
Recognizing the number of people that needed when needed per branch.
And saying, hey, lets not get too carried away because we're looking to supplant personnel in some cases with technology and that requires hiring.
Poised to the technology Department, which on <unk>.
We are more expensive per head so just.
Where do you believe you are in the positioning of the company as far as the.
<unk>.
The head count that you need to advance your technology goals versus the optimization of personnel in the branches and even the total branch count.
The branch network count.
Yes.
Thanks for that question I think that that kind of plays to the strength of what we've been doing over the last couple of years, we think that transformation is I would categorize it as largely complete.
Okay.
One caveat.
And largely complete we've consolidated 77 branches over the last six years or so and.
<unk> added significant personnel to our digital banking group and our it group and you can see where those spends have come in.
I think having completed the transactions we are the consolidations, we did last year.
We feel very good about the branch network being able to serve the communities that we're in today and in fact are making capital investments in a few branches here and there to make sure they're competitive in nice places for our customers to go in and visit and do business.
So we think we've got a good network, we think that we've invested in the technology to be able to deliver digitally.
And I think we're at a reasonable kind of <unk>.
Status quo on that from this point forward I think we'll be focused on the efficiency of the back office, how we can help our folks.
Do more do more faster.
Prove customer turnaround times of those kinds of things, but I think the relative spend between retail front facing employees and technology infrastructure and digital employees is about where we think it should be at least for the foreseeable future. The caveat I'll give as we watch this every quarter and it depends heavily.
On customer appetites, so if our customers need more digital we need to be able to support that but I think we're pretty competitively positioned today and I think that that effort took us a few years to get to get through and it's not easy our people did an extraordinary job of making that transition and retaining customers.
So that we've got.
Largely in fact again more deposits now than we did when we started the process.
Yes.
Yes. It has been a long process been complemented for keeping your eye on the ball and <unk>.
<unk>. Thank you very much.
Alright, thank you.
Thank you.
No further questions in the queue. So as a quick reminder, it is star one telephone keypad, if you would like to ask a question.
There are no further questions at this time I'll pass it back to Chris Marr for closing remarks.
Alright, Thank you for.
For those who follow Ocean first you may have noticed slightly different timing for our earnings release and conference call This quarter.
Going forward in 2023, we anticipate shifting the schedule for our quarterly earnings announcement and call to be in the third week in January April July and October .
As always we appreciate your time and interest in Ocean first we look forward to speaking with you. After our fourth quarter results are published in January .
For those of you celebrating holidays from now until the end of the year. We wish you and your families are safe and healthy holiday season. So thank you very much.
Okay.
This concludes the Ocean <unk> Financial Corp Earnings Conference call. Thank you for your participation you may now disconnect your line.