Q2 2025 OceanFirst Financial Corp Earnings Call
Thank you for attending. I'd like to welcome you all to the Ocean First Financial Court.
ba: Q2, 25 earnings call, my name is ba and I will be your moderator for today.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
I would now like to pass the conference over to your host. Alfred goon investor relations at OceanFirst. Thank you. You may proceed.
ba: Morning and welcome to the ocean. First second quarter, 2025 earnings call. I am Alfred goon SVP of corporate development and investor relations.
ba: before we kick off the call, we'd like to remind everyone that our quarterly earnings release and related earnings supplement, can be found on the company website, oceanfirst.com,
ba: Our remarks today may contain 4 looking statements and may refer to non-gaap financial measures all participants to refer to our SEC filings, including those found on forms.
ba: AK 10q and 10K for complete discussion of forward-looking statements and any factors that can cause actual results to differ from those statements.
Thank you and I will turn the call over to Christopher Moore chairman and CEO.
Christopher Moore: Thank you, Alfred.
Speaker Change: Good morning and thank you to all who have been able to join our second quarter of 2025 earnings conference call.
Speaker Change: This morning, I'm joined by our President, Joe lell and our Chief Financial Officer. Pat Barrett
Speaker Change: We appreciate your interest in our performance and this opportunity to discuss our results with you.
Speaker Change: This morning, we'll provide brief remarks about the financial and operating performance for the quarter.
Speaker Change: And some color regarding the art outlook for our business.
Speaker Change: We may refer to the slides filed in connection with the earnings release throughout the call.
Speaker Change: After our discussion, we look forward to taking your questions.
Speaker Change: Your reported our financial results for the second quarter which included earnings per share of 28 cents on a fully diluted Gap, basis and 31 cents on a core basis.
Before I walk through a few items, a summary of how we see the quarter may be helpful.
Speaker Change: This was an investment quarter as we added cni Bankers launched. The Premier Bank opened, a Commercial Banking office in Melville New York and opened a new Full Service branch in Perth Amboy New Jersey.
Speaker Change: All, which increased expenses as we expected. And as we had guided last quarter,
Speaker Change: Revenue growth has been on a strongly positive track and we expect that to continue while absolute expenses. Remain flat with some potential to decrease over time.
Speaker Change: As a result, we view the quarter as a trough and EPS that will build from this point as the organic growth momentum continues.
We expect this progress to continue while credit performance, remains among the best in our peer group.
Speaker Change: In terms of performance indicators, we were pleased to report a third consecutive quarter of growth in net interest income, which grew by $1 million and continued stability in our net interest margin, which expanded by 1 basis point.
Speaker Change: importantly, the loan growth in the quarter came late in June,
So, the quarterly results don't fully reflect the earnings power of the balance sheet, which is better positioned for additional improvements to net interest income in the third quarter.
Speaker Change: Total loans for the quarter increased in $60 million representing a 2% annualized growth rate.
Driven by strong originations of 777716 million.
Speaker Change: The quarter, also included strong growth in commercial and Industrial loans, which increased 8% for the quarter reflecting our focus in the segment.
Speaker Change: Operating expenses for the quarter were 71 million in line with our expectations and previous guidance.
Speaker Change: Bankrupt.
Speaker Change: These additional Bankers have been immediately productive.
Speaker Change: Joe will provide a detailed update on these initiatives in a moment.
Asset quality remained very strong as total loans classified as special mentioned in substandard. Decreased 3% to 145 million
Speaker Change: Or just 1.4% of total loans.
Classified loan levels. Remain well below our long-term average and are substantially lower than our peer group.
Speaker Change: The quarterly provision was primarily driven by net charge of 2.2 million and by a mixed shift, this commercial and Industrial loans increased while commercial real estate loans decreased slightly
Speaker Change: Capital levels remained robust.
With an estimated common Equity, Tier 1, Capital ratio of 11%, and tangible book, value per share of 19.34.
Speaker Change: The quarter included, a 17 million dollars of share repurchases or 1 million shares at a weighted average cost of 17.17.
Speaker Change: And the Redemption of 57 million dollars of preferred stock.
With the existing share repurchase, authorization, nearly completed on July 15th. The company, authorized an additional 3 million shares available to be repurchased.
Speaker Change: This will allow us to remain flexible with our Capital deployment.
This week also the board also approved, the quarterly cash dividend of 20 cents per common share.
Speaker Change: This is the company's 113th consecutive quarterly, cash dividend.
Finally, we're very pleased that our progress growing the Commercial Bank, which is on track for a strong third quarter.
Speaker Change: The commercial pipeline of 791 million is a record high, and we're seeing meaningful lending opportunities in early success Gathering deposits.
Speaker Change: We expect an increase in net interest income in the third quarter and continue to Improvement to margins in the second half of the year.
Joe: At this point, I'll turn the call over to Joe for additional call on the business.
Joe: Thanks Chris.
Joe: I'll start with loan originations for the quarter which totaled 760 million, including 426 million.
Joe: From the Commercial Bank. Inclusive of 232 million in the cni. Originations
Joe: For the second consecutive quarter. The commercial pipeline is doubled and is Chris noted.
Joe: Is the record high for the company.
Joe: This momentum is directly attributed to our investment in in talented Commercial Banking hires.
Speaker Change: Who continue to add diversity in size and geography to the pipeline?
Speaker Change: At this point, we've completed the majority of our Commercial Banking hires for the year for 13, C and bankers and 36. Premier Bankers hired in 2025.
Speaker Change: Turning to our residential business activities, increased on the link core basis. But our markets continue to remain impacted by uneven loan, demand, volatility and rates.
And limited inventory.
Speaker Change: The second quarter is typically our low point in deposit, balances for the year.
As Government balance is Decline and seasonal Shore, businesses consume cash.
Speaker Change: In preparation for the summer.
Speaker Change: The positive balances, excluding brokerage CDs, decreased approximately 1% compared to the link quarter.
Speaker Change: But increased by 117 million compared to the same period in 2024.
The addition of our new Premier Banking teams, all of which we onboarded in April,
Speaker Change: Have contributed to the bank in short order.
As of June 30th, these teams brought in to 115 million in deposits.
Speaker Change: Across more than 670, accounts representing nearly 200, new customer relationships.
Speaker Change: Approximately 20% of those balances are in non-interest bearing. DDA
Speaker Change: And the overall weighted average, cost of those deposits was 2.7%.
Speaker Change: These as these relationships begin to transition to Ocean first, we expect a percentage of DDA to increase.
Speaker Change: As many of these accounts are not yet fully operational as of quarter end.
These Bankers are on Pace to achieve our 2025 Target of nearly 500 million in deposits by year end.
Speaker Change: While also contributing to the commercial loan pipeline.
Speaker Change: We are very pleased with their results.
Speaker Change: Thus far.
Speaker Change: Lastly, non-interest income increased 5% to 11.8 million during the quarter.
Speaker Change: After excluding, non-core and non-recurring items.
Speaker Change: Not interesting, come with down 1% compared to the prior quarter.
Speaker Change: Due to lower swap activity.
Speaker Change: Largely offset by gain on sale.
Pat: With that, I'll turn over the call to Pat, to review the remaining areas for the quarter.
Speaker Change: Show.
Pat: Good morning to everyone on the call as Chris noted, both net interest income and margin grew in the quarter with loan yields. Increasing 4 basis points in total deposit, costs remaining flat
Modest declines in the Securities portfolio. While average loan balance is only increased slightly due to larger payoffs early in the quarter and higher originations late in the quarter.
Pat: We expect positive expansion in both net, interest income and margin in the back half of the Year based on period in balances and Pipelines.
Asset quality remained, very strong with non-performing loans to Total loans at 33 basis. Points and non-performing assets total assets at 31 basis points.
Pat: Delinquency levels. Continue to remain at the low end of historical levels to criticize and classified loans declined.
That charge offs for the quarter were largely driven by 2 commercial credits, totaling 1.6 million dollars.
And just over 400,000 dollars from a small sale at non-performing residential loans.
Pat: Overall credit quality continued to perform in line with our strong historical experience.
Pat: It remains among the best in our peer group.
credit reserves were stable with provision expense, only addressing
Pat: Charge offs growth and a mixed shift in loans.
Pat: Turning to non-interest expenses increased about 7 million to 71.5 million driven by increased comp expenses, professional fees and other operating expenses.
the increase in compensation expense, was driven by the recent Commercial Banking hires
Pat: While professional fees included. 1.6 million of non-recurring, recruiting fees related to these hires.
Pat: Other operating expenses, reflected some volatility across the number of minor categories, and are expected to revert back to historical levels.
Pat: Looking ahead. We expect our quarterly operating expense run rate to remain stable in the 71 to 72 million per quarter range.
Pat: With normalizing. Professional fees, being offset by a full quarterly, run rate of compensation and occupancy for the recent edition of
Pat: banking teams.
Pat: And as Chris noted, Capital levels, remained robust and included, 1 million shares repurchased at a weighted average cost of $17.16 per share.
Pat: And while we reloaded our repurchase plan by 3,000 3 million shares, we expect Capital priorities will focus on supporting expected loan growth in the near term and will Reserve any share repurchases periods of Market volatility.
Pat: Finally a word on taxes. We expect our effective tax rate which was 24% in the second quarter to remain in the 23 to 25% range absent. Any changes in policy
Pat: At this point, we'll begin the question and answer portion of the call.
Pat: Thank you, we will.
Pat: Have a session and if you would like to ask a question, please press star. Followed by 1 on your telephone keypad.
If any reason you would like to remove that question, you can do so by pressing star, followed by 2.
Pat: And again, to ask a question, please press star 1. And as a reminder, if you are using a speaker-phone, please remember to pick up your handset before asking a question.
The first question we have from the phone lines,
Pat: Comes from Daniel to with Raymond James, please go ahead.
Daniel: Thank you. Good morning, guys.
Pat: um,
Pat: maybe to start just on the deposit side.
Pat: Uh, you know, curious, uh, you got a lot going on, right? You, you got the new hires you added 115 million. I think you said Joe, um, including uh, some some DDA there.
Pat: Uh at the same time the the overall funding costs are are starting to stabilize. So as as this um
Pat: You know, shift continues to happen with with the, the deposits coming on from the new hires. Um, if we could pull rate cuts out of out of this for a second, do you think you can,
Pat: uh, reduce funding costs going forward and and how much of that is like
Pat: Further out like next year or the year after type of of thought or and how how much is more near-term?
Pat: The um, you know, far better priced and kind of market rate accounts that you'd raise, and I think, yeah, I think the only thing I'd add is, you know, historically, the second quarter is the weakest quarter for US government, seasonality tax payments, all those kinds of things are on the come and we have a lot of the operational businesses utilizing cash. So, 3Q 4q should be better.
Pat: Okay, um, and I guess bigger picture kind of same theme, but on the margin, um, you know, stable to slightly up in the third quarter. Maybe if there was a rate cut it, it would have been stable or or slightly down. But I'm just trying to think about the the trajectory of of the margin longer term, you know, obviously up. But uh, but your your thoughts on kind of how quickly that translates into margin expansion as we get into the out Quarters here.
We slow and steady process, uh, where it's going to just come up. Uh, maybe a few basis points a quarter. We think we're within Striking Distance, so that 3% which is important to us.
Pat: Unclear, whether we would get there by year end, um, but we're on the path to get there and and cross over that. So, I think it's going to spend a little bit on, you know, mix shifts and
Pat: so, how many dollars people have in different account types, but it certainly improving
Pat: And and the loan side, you know, as we grow loans.
Pat: Uh, the mix of the loans, we grow will also be important.
Pat: And and the weighted average coupon you saw the weighted average coupon on the pipeline came down a little bit quarter over quarter that just reflects more, cni deals, which tend to be priced and the short end of the curve. So they tend to have lower nominal rates but they're adjustable.
Pat: Most, which is good.
Okay, helpful and, and lastly, just just to clarify, probably not that different from last quarter. But just um, if you could kind of indicate what the um,
Uh, impact from rate cuts at this point would be. And and if you know how much of that that would be initially. Um after the First Rate cut versus uh the lag effect.
Pat: Thank you.
Speaker Change: the operator to move to the next we have, please, we have
Speaker Change: we have another question from Tim with Sir with KBW
Hey, good morning, thanks.
The first 1 I have is just a quick clarification on the outlook for stable. Uh non-interest income, what's the base for that is that the adjusted number or reported
Here, what is this? We seem to have a little technical difficulty with the operator today.
Speaker Change: I can hear you. Can you guys hear me?
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Speaker Change: Um, that offer not trying to dodge your question.
It's a pretty simple 1. Um, I was just wondering, what is the base? We should be using for the relatively stable. Uh, non-interest income guidance. Is that the adjusted number or the reported Gap?
Speaker Change: Sorry, I didn't, It's Pat. Could you say the first part of that question, 1 more time?
Speaker Change: Yeah. What is the base? We should be using for the guidance for a stable non-interest income.
Gap is the best base to use that. They're almost the same at this point for this quarter. So if you're looking at margin 291 versus 290,
Speaker Change: The reason the non the 92 coming. Oh, I'm sorry for this is not an interest income fee income.
Use the Gap. Yeah Gap.
Speaker Change: And stable.
Speaker Change: Okay. So like that 12 million number.
Speaker Change: Yes.
Speaker Change: Okay. Um,
Speaker Change: And then, can you guys you guys talked about a little bit last quarter, but could you provide a little bit more details on kind of, what was the expense list from the new hires you made in Premiere Bank? And how did that impact the earnings Discord? And I I think we we're now a more stable run rate going forward, right? Um, you know any any plans for new hires over the rest of the year?
No no plan for new hires, if you think about it in EPS terms, the additional expenses in Q2 probably hit us about 6 cents in uh, Epps.
And then, that will now reverse and we'll start the pulling out of that.
and,
Speaker Change: Just to kind of simplify from a geography perspective.
as we get the the full quarter impact, because a lot of these hires didn't start until late in April,
expect our comp expense will drift up a bit higher, so call It Go from 40 million, run rate to 42 million, run rate,
Speaker Change: But professional fees will come down.
Speaker Change: By 2 million because we won't have all the hiring costs. So net that we should be flat on Opex.
Speaker Change: Um, although I would add
We're not relaxing on expenses. We have a number of things that we're looking at, and we actually do think there are opportunities for us in absolute terms to gain some additional expense efficiencies.
Speaker Change: We're just not guiding to that right now.
Speaker Change: Okay. Um and then the last question I have is you guys have been pretty decent Capital levels here. Can you update us on your thoughts about you know your approach to m&a how much of a priority that is relative to dividends and Cherry purchases
Speaker Change: our, our primary focus is on the organic growth, plan and producing the
Speaker Change: Earnings momentum. We think that we need to show.
Speaker Change: Um, and I think we're also very mindful of where our shares trade relative to Book value.
Speaker Change: They're not very many opportunities that would make sense, uh, for our shareholders.
Speaker Change: Uh, with evaluation of our shares today. So uh, that's kind of how we think about things.
Great. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Dave Bishops.
From, I have the Great.
Hey, good morning, gentlemen.
Speaker Change: hey, um,
Speaker Change: Question. Um,
Speaker Change: Good to catch up. I think you said in the Preamble, the, um,
Speaker Change: The the deposits thus far, um, from the premier team. Maybe 20% ddas.
Speaker Change: Saying that ramping up to do. You see the weighted average rate going below? The average for the the entire Bank over time and pushing that appreciably lower issue on board more of these accounts.
Speaker Change: So yeah. So right now it's in the 260 range. It's been holding and we've seen additional growth. Since the end of the quarter uh the bank-wide cost of deposits is closer to 2%. I think we'll get we'll get down to kind of match the bank, maybe a little bit better than the bank. But our expectation is that, you know,
30% or so will be non-interest bearing. The rest is going to be
I think of think of it, kind of gravitating towards the cost of deposits for the rest of the bank.
Speaker Change: But being able to grow at a much faster clip, we've got a great deposit cost but we haven't been growing as quickly. We want to match the growth rates, we need to to fund the balance sheet.
Got it. And any, um,
Speaker Change: I know, it's still early in the uh,
Speaker Change: The life cycle here, but any, uh, you know, new line of sight on potential loans emanating from that segment.
Speaker Change: Actually they were pretty bullish on the opportunity there. Obviously with the Premier Bank, the expectation is deposit focused but we've already driven some significant activity that you're seeing in the pipe already and I expect that to continue to grow over time. So we're we're very pleased with the activity on that end of the spectrum as well.
Speaker Change: And Joe's sticking maybe with loads on the commercial side, just curious where you're seeing sort of the the best opportunity either geographically or you know within that scene. I segment any, you know, specific verticals that are are driving the majority of growth your way. When it's, you know, pretty tough environment to to grow C and I in this in this market
Speaker Change: Yeah. And and they were pretty thoughtful about, obviously what we're seeing in markets but the good news is from a geographic perspective, we're seeing it all over the footprint which I truly appreciate. It's not being driven by 1 area but we've seen good. Uh continued momentum in our North, Virginia market and Government Contracting. But I've also seen some really good activity in our home markets, which have been a little quiet. Uh, so that's good to see as well. We've seen some
equipment Finance. I I wouldn't go as far as to say there is any real concentration in vertical.
Speaker Change: uh, in any vertical but uh,
Speaker Change: But when you hire the people that we've hired, some of that is the fact that they're bringing relationships that they built over 15, 20 years to us. So even though the environment is difficult,
We're we're, uh, we're taking market share from others.
Speaker Change: Got it that may be a housekeeping item on the the sub debt that any um, update there in terms of the thinking of reception and retirement. Thanks.
Speaker Change: To that market carefully, you get to have more efficient, uh, teams, every quarter. So, uh, we don't feel, uh, you know, a burning need to have to address that immediately. We have the option to address it in either pieces or, or potentially do a new issuance, um, you know, the recent issuances in the last few weeks have looked pretty promising. So we think about it often, and, and when we think that opportunity is right,
We might refinance it uh or we might want to take on the pay down a little bit with earnings over time.
we we like having the optionality or watching the markets and, um, if you're going to need a direction over the next quarter,
Speaker Change: great, thanks.
Speaker Change: Thank you.
Speaker Change: Your next question comes from manual Deuce with da Davidson please go ahead.
Manual Deuce: Hey, good morning.
Good morning.
Manual Deuce: Is the 3Q. Um,
Manual Deuce: Loan growth guide. Um, how sustainable is that? And and and how how much is that based on what you've seen so far this quarter um, and what's expected by the year end?
And how how much give is there in that in that um, projection?
Manual Deuce: I think we,
Then given the pipeline that we have.
Manual Deuce: Pipeline growth. Uh,
Manual Deuce: I think many the, the real challenge for anybody else is what are you going to see at the other end? We've seen payoffs of dates since early in the quarter and especially in q1, which is a positive. I can't predict what could occur in the future, but in terms of what we're originating, who's originating it, where it's in, our footprint.
We're pretty confident that we're going to continue to drive that momentum forward, so on that end of it.
I think you can be as confident as you can be. So I think that's probably a fair assessment. I would add, you know, in our conversations with our clients. Um,
Manual Deuce: they're reporting to us that business conditions are good for them. They've got building backlogs, they got plenty of work, plenty of opportunity. Um, we're seeing them increasingly, you know, lean in and make investments. So I know, kind of those macro headlines are concerned over the economy.
Manual Deuce: They're going to produce.
Manual Deuce: opportunities for us for years to come because typically a commercial Banker takes, you know, could be anywhere between 18 months and 3 years to reach their full potential
Manual Deuce: So, I think this is a sustainable growth rate.
Manual Deuce: I appreciate that. It looks like if you look at the what you're bringing in, um, from the commercial deposit teams, what you have in the loan pipeline,
Manual Deuce: There's like a marginal, Nim close to 4%, plus, uh, it, what what keeps you from from growing and then or expanding and then, even faster.
Manual Deuce: I think just the pace at which there's net additions to the balance sheet. So um,
Manual Deuce: There is a scenario many under which if we're growing and compounding this growth and their rate Cuts. You can see a faster expansion and then we just don't want to um until we've seen that for a few quarters.
Manual Deuce: We don't want to get ahead of ourselves.
Speaker Change: Shifting topics a little bit. It seems like the team is largely in place at the moment. Um maybe for this year. Is there any shift in the hiring Focus? Um any expansion in geographies at the moment. Uh,
Manual Deuce: Across the Premier Bank or even in cni.
No new geographies. We're very happy. We have enough geography, that gives us, uh, the appropriate. Um,
Manual Deuce: Concentration balance. Because we don't want to have, uh, too much of anything at any 1 market. Uh, so we think we've got that covered, and our markets are exceptionally deep. We operate in the strongest banking markets, in in the country. Um, we essentially think that the hiring is done for this year.
But if a great Banker comes available to us next month, we're going to hire the great Banker because that's good for the company. So but I would, um, assume that the hiring is done for this year as we get through year end, look through our performance in Q3 Q4 heading into q1. We will consider what the appropriate. Go growth rate is for 26 based on how we're performing with the teams we hired thus far. So, um, for now, that's why I think pad guided to a flat to possibly even reduce operating expense level over time.
So, we'll we'll keep you guys updated on our plans in that regard.
Manual Deuce: I appreciate the commentary. Thank you. I'll step back into the queue.
Manual Deuce: Thank you.
Thank you.
We now have Christopher, Marinette with JMS. Your line is open. Christopher.
Hey uh good morning. Um Chris and Joe and team wanted to ask a little bit about the kind of big picture on deposits. Uh, on the Premier Bank, I mean, given the strong uh quarter you just had, I mean, is there
The potential to kind of rethink that upper number over time. Um, not thinking the next quarter of course, but just, you know, curious if the 500 million um, can be bigger as next year. Uh, in the future, coming into Focus,
Speaker Change: We've been I'll make a qualitative, comment, not a quantitative comment. We're really pleased with the relationships. We're being introduced to, um, with their customers, uh, trust and coming over to us joining the bank, you know, Joe mentioned hundreds of accounts, a couple hundred relationships. Uh, they they've really done what we would have expected to do. And this is, you know, only the first 8 weeks or so that they were on board. It does take a little while to get oriented any in any new place you have to kind of find the restroom and work through policies and all that kind of stuff. So, very pleased with the quality of the conversations. We're having, I think it'd be premature to to reset a different guidance level. Let's see how we go through the end of the year. Um,
Speaker Change: Were you out on the conversations? You've had both Joe and I have been out and met a lot of these new customers, and I really appreciate the the quality of the, the folks who are bringing over
I think the only thing I did for Chris is that we we had provided some, some guidance toward multiple years out and we fully expect, obviously that we'll continue to grow these balances into
Bigger dollars, 26 and 27. And that was a pretty wide guidance, I think, you know, so we we could outperform on the top end but
Speaker Change: days are only in this a couple months.
Speaker Change: So I want to kind of build some momentum and have a track record before we adjust anything.
Understood and and I, I see the multi-year aspirational goals. I just was curious how how we go from from, you know, this 500 million to the to the even the 2 billion and the 27th, but we'll continue to let that play out. So um thank you for the caller both of you. Um,
Speaker Change: Any comments on this sort of overall credit quality as it pertains to the, um, I guess longer term interest of trying to grow the reserve, uh, just in general is, is that still a possibility for you as um, these scenarios have played out.
Christopher Moore: Determined by the mix shift, Chris over time. So as we as the portfolio becomes um, have has larger composition of cni loans and a smaller composition of CRA runs relative to each other. Uh, we would expect to carry slightly higher reserves. So it didn't turn out that there was, you know, very small growth this quarter. So that wasn't an opportunity. The mix shift didn't provide enough.
To see a reserve bill, but I would not be surprised if you see the reserve continue to build for the next several quarters as the mix shift changes. Um,
Christopher Moore: So I did. So we think it's heading in that direction.
Christopher Moore: This was just a quarter where the numbers didn't turn out that way.
Great. And then this last question, you know, the the the small Improvement we saw on the criticized ratio, are there upgrades driving that are there other upgrades that are possible in the future, um, to sort of curious on any, um, background
Christopher Moore: well, we've got a number of things that we think May um resolved in the second half of the year that we provide some some upside to that, but
Christopher Moore: We always get cautious for 2 Reasons. First, we don't know the environment we're going into and we're at an absolute, you know, fairly low level. So as much as we might have positive resolutions, there's always situations where you may have a creditor too. That would split, you know, um, into that. But nothing we're not seeing anything in portfolio. Trends, risk ratings delinquencies.
There's no sign of a wider. Um,
Christopher Moore: Deterioration. And, you know, the composition of the loans is, is really important. We've stayed out of some of the segments that have higher levels of concern. So we have a relatively small multi family book. Uh, we don't really operate in the event stabilized World, um, our Central business district office portfolio is very small.
Christopher Moore: Uh, so, you know, I think the portfolio was structured well to not have an outside issue.
Christopher Moore: Performance, indicators are good. Might get a little bit better, but probably won't get a lot better because these are pretty low levels.
Christopher Moore: you know, the emotional
Chris: Great Chris. Uh, thank you all for the uh uh call today.
Speaker Change: All right. Thanks Chris.
Just as a reminder to ask any further questions, you need to press star for it by 1 on your telephone keypad.
Speaker Change: And we now have a question from Matt Hebrews with Stevens. Please go ahead.
Hey, good morning, everyone.
Speaker Change: Um you know first I just wanted to Circle back uh I think I think Mr. Tomo asked about the Nim impact from each 25 basis for basis point cut both initially. And over time we cut out their due to the connection. I just want to make sure that was answered.
Speaker Change: Okay, yeah, no. Thank you. Thank you for that Matt because we didn't hear that part of the question.
Speaker Change: Okay, yeah, so um, so we're we're not wildly exposed to much volatility with or without Fed rate cuts.
um, the
Speaker Change: impact for us is really more kind of on the belly of the curve, see what the 2 and the 5 year, and the 10 year
do, uh, so there's not a dramatic um,
Speaker Change: Dollar amount rounds to kind of less than a penny, a share on an annualized basis per 25 basis point cut.
Speaker Change: From the dead.
Speaker Change: And anything that we're talking about. From a guidance perspective, doesn't really contemplate anything. Meaningful from that. Any any big change in the Curve?
Kind of go with consensus. So
Speaker Change: I think we have a third quarter rate, cut and a year end rate cut.
Speaker Change: And right now which I think is what most people think would happen. But if we got 1 next week, a 25 bit cut.
um, there might be a little timing lag, but you'd see kind of the the negative on the floating rate book coming through and then the positive would would come through and
Lower deposit costs. And
Speaker Change: um, with maybe a 1 quarter lag,
Speaker Change: I think it's Pat Point. Appreciate that longer end that matters. Probably be more if if there's a Fed cut and then the long end comes up,
That might be more beneficial than just a cut. If there's a cut where the long end stays where it is popping up that much receivers always go is better.
Speaker Change: We're, we're still pretty neutral right now.
Speaker Change: Okay, I wanted to go back to the deposits.
These costs. So I'm curious you know the other parts in the bank, what is kind of the Blended?
Speaker Change: Your rate of deposits, you know, Andor are there, you know agreement with your banking deposits that you know whatever rate they're getting is more or less, you know, there there's some you know, um, you know, short-term elements to it. Maybe help me out there.
Speaker Change: The operational way that accounts, get funded met. So, you know, the bankers showed up in the mid
April.
Speaker Change: Uh, they begin to open accounts in probably by early mid-may.
Speaker Change: And and then there's a process on a commercial account. You have to go do all the beneficial ownership stuff, you know, the paperwork files.
then they have to go out and operationally kind of wind down wherever their banking today and move over their
Speaker Change: Cash management to checks, and payment methods and all that. So as a result, the early deposit you get in tend to be rate driven deposits.
Speaker Change: And then you've got the operating accounts but they've got nothing in them and then they build in their balances over time. So um I think Joe had guided the, you know, maybe closer to 30% non-interest-bearing over time that would pull that 26270 down closer to the 206.
Speaker Change: Um, and if we can do better than that, you might even outperform it, but, um, we don't think it's going to drag the deposit cost up at the bank.
Speaker Change: we think over time we can kind of gather deposits about where we're
Speaker Change: price tags.
Okay, that makes sense.
Speaker Change: Um, I did want to touch on Securities yields, you know, down, you know.
Speaker Change: Pretty sizing the last 3 quarters. What's going on there and and where do we start to hit? You know, um, stability and security yield because that seems to be, uh, a headwind to the margin.
Speaker Change: Yeah, well the, the the decline is a couple of things that are at work there. A third of our Securities book is floating rate. So as you see any movements there, you get a little bit of directional push, but then the duration is pretty slow, pretty short as well. So we've got reinvestment, that's occurring of instruments that we entered into in a higher rate environment that are repricing out already.
Speaker Change: Um, based on the the
Speaker Change: Kind of belly of the curve a little bit longer in. Um, so those are the main drivers. Um, there wasn't a huge mix shift.
Speaker Change: in in those and we still remain, you know, largely
Speaker Change: Uh, treasury treasury CMOS, agency, paper. So, whatever the rates are on on those type of instruments, is what you'll see, it's really only the floating rate piece, which is for clo book, that kind of moves around.
Um,
with the short end of breaks.
Okay. Um and then loan yield expansion, this quarter was I I want to say maybe 4ish basis points.
Uh, in the absence of rate Cuts is that a decent rate of expansion, uh, from here?
Speaker Change: I think that's a good.
Proxy.
Speaker Change: And then last 1 for me is just you know, as you think about loan growth and the guidance um to what extent are you baking in uh, commercial real estate. Payoffs seems to be a common theme in this quarter. There's a lot of competition for paper which is the commercial real estate.
Speaker Change: That's all I have. Thank you.
in terms of the commercial real estate, you know, we think we do that well and while we
Speaker Change: Are focused on adding to the cni books. We're not, you know, exiting or leaving the CRA book. We've done it. Well, it's performed well, we have great clients there. Um, you know it's a it can be episodic on pay Downs. That's the way that world works. If you have, you know, 1 big loans and make a difference.
Um, but we would hope that the CRA would remain flat. Maybe we could grow it a little bit depending on, um, opportunities. But we do have a strong pipeline CRA. We've seen a Resurgence in CRA transactions, and great example, Matt is the largest payoff. We got. This quarter was a 55 million transaction. 52 million at 3 and a half percent. So,
Speaker Change: As long as I can put that money back out and I'll put it out this quarter. I'll take that trade even though I'm not theoretically growing the balance sheet on the crease side.
Speaker Change: I do believe, I'll be able to replace those payoffs in the second half of the year.
Speaker Change: So so if you're thinking about modeling that, keeping CRA balance is steady is probably a decent bet. It might go up a little bit. It might have been a little bit but we're not I would not expect that portfolio to be in runoff.
All right. I appreciate all that. That's all I had. Thank you.
Please.
Speaker Change: All right. Thank you very much. We appreciate your time today. Apologize for the detection, technical glitch in the call that kind of got us disconnected for a little bit. Uh but we do appreciate your time and your support of Ocean. First Financial Corp. We hope you have a great summer, your plans, bring you to the Jersey Shore. Come visit us, uh and we'll talk to you in October. Thanks very much.
Speaker Change: Thank you. I can all confirm that does conclude today's conference call with Ocean. First, Financial Corp.
You all may now disconnect. Thank you all for your participation and please enjoy the rest of your day.