OceanFirst Financial Q4 2025 OceanFirst Financial Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 OceanFirst Financial Corp Earnings Call
Speaker #1: Hello, everyone, and welcome to the OceanFirst Financial Corp Q4 2025 earnings release. My name is James, and I'll be your operator for today. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number one on your telephone keypads.
Operator: Hello everyone, and welcome to the OceanFirst Financial Corp Q4 2025 earnings release. My name is James, and I'll be your operator for today. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number one on your telephone keypads. The conference call will now start, and I'll hand it over to our host, Alfred Goon. Please go ahead.
Operator: Hello everyone, and welcome to the OceanFirst Financial Corp Q4 2025 earnings release. My name is James, and I'll be your operator for today. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number one on your telephone keypads. The conference call will now start, and I'll hand it over to our host, Alfred Goon. Please go ahead.
Speaker #1: The conference call will now start, and I'll hand it over to our host, Alfred Goon. Please go ahead.
Speaker #2: Thank you, James. Good morning and welcome. I am Alfred Goon, SVP of Corporate Development and Investor Relations. 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.
Alfred Goon: Thank you, James. Good morning and welcome. I am Alfred Goon, SVP of Corporate Development and Investor Relations. 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. Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q, and 10-K, for a complete discussion of forward-looking statements and any factors that could cause actual results that differ from those statements. Thank you, and now I will turn the call over to Christopher Maher, Chairman and CEO.
Alfred Goon: Thank you, James. Good morning and welcome. I am Alfred Goon, SVP of Corporate Development and Investor Relations. 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. Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q, and 10-K, for a complete discussion of forward-looking statements and any factors that could cause actual results that differ from those statements. Thank you, and now I will turn the call over to Christopher Maher, Chairman and CEO.
Speaker #2: Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q, and 10-K, for a complete discussion of forward-looking statements and any factors that could cause actual results to differ from those statements.
Speaker #2: Thank you, and now I will turn the call over to Christopher Maher, Chairman and CEO.
Christopher Maher: Thank you, Alfred. Good morning, and thank you to all for being able to join our Q4 2025 Earnings Conference Call. This morning I'm joined by our President, Joe Lebel, and our Chief Financial Officer, Pat Barrett. We appreciate your interest in our performance and this opportunity to discuss our results with you. This morning we will provide brief remarks about the financial and operating performance for the quarter and some color regarding the outlook for our business. We may refer to the slides filed in connection with the earnings release throughout the call. After our discussion, we look forward to taking your questions. We reported our financial results for the fourth quarter, which included earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis.
Christopher Maher: Thank you, Alfred. Good morning, and thank you to all for being able to join our Q4 2025 Earnings Conference Call. This morning I'm joined by our President, Joe Lebel, and our Chief Financial Officer, Pat Barrett. We appreciate your interest in our performance and this opportunity to discuss our results with you. This morning we will provide brief remarks about the financial and operating performance for the quarter and some color regarding the outlook for our business. We may refer to the slides filed in connection with the earnings release throughout the call. After our discussion, we look forward to taking your questions. We reported our financial results for the fourth quarter, which included earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis.
Speaker #3: Thank you to all who have been able to join our fourth quarter 2025 earnings conference call. Thank you, Alfred. Good morning, and thank you. This morning, I'm joined by our President, Joe Lebel, and our Chief Financial Officer, Pat Barrett.
Speaker #3: We appreciate your interest in our performance and this opportunity to discuss our results with you. This morning, we will provide brief remarks about the financial and operating performance for the quarter.
Speaker #3: And some color regarding the outlook for our business. We may refer to the slides filed in connection with the earnings release throughout the call.
Speaker #3: After our discussion, we look forward to taking your questions. We reported our financial results for the fourth quarter, which included earnings per share of $23.00 on a fully diluted GAAP basis, and $0.41 on a core basis.
Speaker #3: In terms of performance indicators, we're pleased to report a fifth consecutive quarter of net interest income growth, which increased by $5 million, or 5%, as compared to the prior quarter, and up 14% as compared to the prior year quarter.
Christopher Maher: In terms of performance indicators, we're pleased to report a fifth consecutive quarter of net interest income growth, which increased by $5 million, or 5%, as compared to the prior quarter and up 14% as compared to the prior year quarter. The current quarter results were fueled by an increase in average net loans of $446 million. Our net interest margin of 2.87% declined modestly compared to the third quarter. Total loans for the quarter increased $474 million, representing an 18% annualized growth rate, driven by $1 billion in originations. Joe, I'll have more to add regarding our growth strategy in a few minutes, but we're very pleased to see the organic growth momentum that is a direct result of the investments we made in the first half of 2025.
In terms of performance indicators, we're pleased to report a fifth consecutive quarter of net interest income growth, which increased by $5 million, or 5%, as compared to the prior quarter and up 14% as compared to the prior year quarter. The current quarter results were fueled by an increase in average net loans of $446 million. Our net interest margin of 2.87% declined modestly compared to the third quarter. Total loans for the quarter increased $474 million, representing an 18% annualized growth rate, driven by $1 billion in originations. Joe, I'll have more to add regarding our growth strategy in a few minutes, but we're very pleased to see the organic growth momentum that is a direct result of the investments we made in the first half of 2025.
Speaker #3: The current quarter results were fueled by an increase in average net loans of $446 million. Our net interest margin of 2.87% declined modestly compared to the third quarter.
Speaker #3: Total loans for the quarter increased $474 million, representing an 18% annualized growth rate. This was driven by $1 billion in originations. Joe, I have more to add regarding our growth strategy in a few minutes.
Speaker #3: But we're very pleased to see the organic growth momentum that is a direct result of the investments we made in the first half of 2025.
Speaker #3: Asset quality remained exceptional, as total loans classified as special mention and substandard decreased 10% to $112 million, or just 1% of total loans. This continues to place us among the top decile of our peer group.
Christopher Maher: Asset quality remained exceptional, as total loans classified as special mention and substandard decreased 10% to $112 million, or just 1% of total loans. This continues to place us among the top decile of our peer group. The quarterly provision was primarily driven by improvements in asset quality and a decrease in unfunded commitments offset by loan growth. GAAP operating expenses for the quarter were $84 million and include $13 million of expenses related to our residential outsourcing initiative, merger costs, and execution costs for our credit risk transfer. On a core basis, operating expenses of $71 million were down $1 million, or 2%, from the linked quarter, primarily driven by the impact of our strategic initiative to outsource our residential lending platform. Pat will provide additional commentary on the credit risk transfer and a detailed update on our financial outlook in a moment. Capital levels remained robust.
Asset quality remained exceptional, as total loans classified as special mention and substandard decreased 10% to $112 million, or just 1% of total loans. This continues to place us among the top decile of our peer group. The quarterly provision was primarily driven by improvements in asset quality and a decrease in unfunded commitments offset by loan growth. GAAP operating expenses for the quarter were $84 million and include $13 million of expenses related to our residential outsourcing initiative, merger costs, and execution costs for our credit risk transfer. On a core basis, operating expenses of $71 million were down $1 million, or 2%, from the linked quarter, primarily driven by the impact of our strategic initiative to outsource our residential lending platform. Pat will provide additional commentary on the credit risk transfer and a detailed update on our financial outlook in a moment. Capital levels remained robust.
Speaker #3: The quarterly provision was primarily driven by improvements in asset quality and a decrease in unfunded commitments, offset by loan growth. GAAP operating expenses for the quarter were $84 million and include $13 million of expenses related to our residential outsourcing initiative.
Speaker #3: Merger costs and execution costs for our credit risk transfer. On a core basis, operating expenses of $71 million were down $1 million, or 2%, from the linked quarter.
Speaker #3: Primarily driven by the impact of our strategic initiative to outsource our residential lending platform. Pat will provide additional commentary on the credit risk transfer and a detailed update on our financial outlook in a moment.
Speaker #3: Capital levels remained robust, with an estimated common equity tier one capital ratio of 10.7%, and tangible book value per share increased to $19.79. We did not repurchase any shares this quarter under the existing plan, as our capital was utilized to support loan growth.
Christopher Maher: An estimated Common Equity Tier 1 capital ratio of 10.7% and Tangible Book Value per share increased to $19.79. We did not repurchase any shares this quarter under the existing plan, as our capital was utilized to support loan growth. This week, our board also approved the quarterly cash dividend of $0.20 per common share. This is the company's 116th consecutive quarterly cash dividend. Finally, on 29 December, we announced the merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. The acquisition of Flushing will directly support our organic growth initiatives in New York, positioning OceanFirst as a scaled competitor in the deepest banking markets in the country. The resulting company is expected to demonstrate improved profitability and increased operating scale, which should deliver meaningful upside to our shareholders.
An estimated Common Equity Tier 1 capital ratio of 10.7% and Tangible Book Value per share increased to $19.79. We did not repurchase any shares this quarter under the existing plan, as our capital was utilized to support loan growth. This week, our board also approved the quarterly cash dividend of $0.20 per common share. This is the company's 116th consecutive quarterly cash dividend. Finally, on 29 December, we announced the merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. The acquisition of Flushing will directly support our organic growth initiatives in New York, positioning OceanFirst as a scaled competitor in the deepest banking markets in the country. The resulting company is expected to demonstrate improved profitability and increased operating scale, which should deliver meaningful upside to our shareholders.
Speaker #3: This week, our board also approved the quarterly cash dividend of $0.20 per common share. This is the company's 116th consecutive quarterly cash dividend. Finally, on December 29th, we announced the merger agreement with Flushing Financial Corporation, and an investment agreement with Warburg Pincus.
Speaker #3: The acquisition of Flushing will directly support our organic growth initiatives in New York, positioning OceanFirst as a scale competitor in the deepest banking markets in the country.
Speaker #3: The resulting company is expected to demonstrate improved profitability and increased operating scale, which should deliver meaningful upside to our shareholders. We continue to work towards an expected close in the second quarter of 2026 and will provide more updates as regulatory approval progresses.
Christopher Maher: We continue to work towards an expected close in Q2 2026 and will provide more updates as regulatory approval progresses. In the meantime, we remain focused on OceanFirst's continued organic growth efforts, which are proving successful, as shown in the results of this quarter. At this point, I'll turn the call over to Joe for additional color on the businesses.
We continue to work towards an expected close in Q2 2026 and will provide more updates as regulatory approval progresses. In the meantime, we remain focused on OceanFirst's continued organic growth efforts, which are proving successful, as shown in the results of this quarter. At this point, I'll turn the call over to Joe for additional color on the businesses.
Speaker #3: In the meantime, we remain focused on OceanFirst's continued organic growth efforts, which are proving successful as shown in the results of this quarter. At this point, I'll turn the call over to Joe for additional color on the businesses.
Speaker #2: Thanks, Chris. I'll start with loan originations for the quarter, which totaled just north of $1 billion for the second consecutive quarter and resulted in record quarterly loan growth of $474 million.
Joseph Lebel III: Thanks, Chris. I'll start with loan originations for the quarter, which totaled just north of $1 billion for the second consecutive quarter and resulted in record quarterly loan growth of $474 million. Our C&I business grew 42% for the year as we reaped the benefit of our continued recruitment of talent, coupled with favorable conditions for many of our borrowers. Much of that was in the second half of the year, which bodes well for interest income growth early in 2026. As discussed in the previous quarter, we made the decision to outsource the residential and title businesses, and we have worked through the remainder of the existing pipeline and expect to see measured runoff in the portfolio going forward.
Joe Lebel: Thanks, Chris. I'll start with loan originations for the quarter, which totaled just north of $1 billion for the second consecutive quarter and resulted in record quarterly loan growth of $474 million. Our C&I business grew 42% for the year as we reaped the benefit of our continued recruitment of talent, coupled with favorable conditions for many of our borrowers. Much of that was in the second half of the year, which bodes well for interest income growth early in 2026. As discussed in the previous quarter, we made the decision to outsource the residential and title businesses, and we have worked through the remainder of the existing pipeline and expect to see measured runoff in the portfolio going forward.
Speaker #2: Our C&I business grew 42% for the year as we reaped the benefit of our continued recruitment of talent, coupled with favorable conditions for many of our borrowers.
Speaker #2: Much of that was in the second half of the year, which bodes well for interest income growth early in 2026. As discussed in the previous quarter, we made the decision to outsource the residential and title businesses, and we have worked through the remainder of the existing pipeline and expect to see measured runoff in the portfolio going forward.
Speaker #2: The loan pipeline of $474 million, while lower quarter over quarter, is due to the outsourcing of residential and is still markedly higher than this time last year, reflecting the robust growth in the commercial bank.
Joseph Lebel III: The loan pipeline of $474 million, while lower quarter over quarter, is due to the outsourcing of residential and is still markedly higher than this time last year, reflecting the robust growth in the commercial bank. Total deposits in the fourth quarter increased $528 million, with $323 million driven by organic growth across varied business lines. Among those lines, the Premier Bank team grew deposits $90 million, or 37%, from the linked quarter, with the weighted average cost of their deposit portfolio declining 36 basis points to 2.28% as of 31 December. To date, the Premier Banking teams have brought in $332 million in deposits across more than 1,300 accounts and representing more than 350 new customer relationships. Approximately 21% of those balances are in non-interest-bearing DDA.
The loan pipeline of $474 million, while lower quarter over quarter, is due to the outsourcing of residential and is still markedly higher than this time last year, reflecting the robust growth in the commercial bank. Total deposits in the fourth quarter increased $528 million, with $323 million driven by organic growth across varied business lines. Among those lines, the Premier Bank team grew deposits $90 million, or 37%, from the linked quarter, with the weighted average cost of their deposit portfolio declining 36 basis points to 2.28% as of 31 December. To date, the Premier Banking teams have brought in $332 million in deposits across more than 1,300 accounts and representing more than 350 new customer relationships. Approximately 21% of those balances are in non-interest-bearing DDA.
Speaker #2: Total deposits in the fourth quarter increased $528 million, with $323 million driven by organic growth across varied business lines. Among those lines, the Premier Bank team grew deposits $90 million, or 37%, from the linked quarter, with the weighted average cost of their deposit portfolio declining 36 basis points to 2.28% as of December 31st.
Speaker #2: To date, the premier banking teams have brought in $332 million in deposits across more than 1,300 accounts and representing more than $350 million.
Speaker #1: He customer new relationships . noninterest 21% of those . Lastly , noninterest income decreased by 3.3 million to noninterest bearing DDA . , noninterest income decreased by quarter , 3.3 million to 9 million during the primarily driven by lower title and a fees gain on sale of reduction in loans related outsourcing to the of our residential and title platforms .
Joseph Lebel III: Lastly, non-interest income decreased by $3.3 million to $9 million during the quarter, primarily driven by lower title fees and a reduction in the gain on sale of loans related to the outsourcing of our residential and title platforms. We continue to see strong swap demand linked to our commercial growth and look for that to continue in the coming quarters. Overall, non-interest income levels were in line with our expectations, as guided in the previous quarter. With that, I'll turn the call over to Pat to review the remaining areas for the quarter.
Lastly, non-interest income decreased by $3.3 million to $9 million during the quarter, primarily driven by lower title fees and a reduction in the gain on sale of loans related to the outsourcing of our residential and title platforms. We continue to see strong swap demand linked to our commercial growth and look for that to continue in the coming quarters. Overall, non-interest income levels were in line with our expectations, as guided in the previous quarter. With that, I'll turn the call over to Pat to review the remaining areas for the quarter.
Speaker #1: We continue to see strong swap demand linked to our commercial, and growth. We look for that to continue in the coming quarters. Overall, noninterest income.
Speaker #1: In levels were in line with our expectations, as guided in the previous quarter. With that, I'll turn the call over to review the remaining Pat-to areas for the quarter.
Speaker #1: In levels were in line with our expectations as guided in the previous quarter. With that, I'll turn the call over to review the remaining Pat to areas for the quarter.
Patrick Barrett: Thanks, Joe. As Chris noted, net interest income grew while margin declined modestly, as we had previously guided. Pre-tax, pre-provision, core earnings grew 9%, or $3 million, from the prior quarter, driven by earning asset growth over the second half of the year. Loan yields decreased modestly, reflecting the impact of floating rate resets and a continued mixed shift in our portfolio. Total deposit costs increased modestly, reflecting very isolated upward repricing for certain interest-bearing accounts, combined with continued competitive deposit pricing. Borrowing costs also contributed a modest one basis point of pressure on our margin, reflecting the net impact of our subordinated debt issuance and retirement during the fourth quarter. Average interest-earning assets increased meaningfully compared to the prior quarter, reflecting increases in both the securities and loan portfolios.
Pat Barrett: Thanks, Joe. As Chris noted, net interest income grew while margin declined modestly, as we had previously guided. Pre-tax, pre-provision, core earnings grew 9%, or $3 million, from the prior quarter, driven by earning asset growth over the second half of the year. Loan yields decreased modestly, reflecting the impact of floating rate resets and a continued mixed shift in our portfolio. Total deposit costs increased modestly, reflecting very isolated upward repricing for certain interest-bearing accounts, combined with continued competitive deposit pricing. Borrowing costs also contributed a modest one basis point of pressure on our margin, reflecting the net impact of our subordinated debt issuance and retirement during the fourth quarter. Average interest-earning assets increased meaningfully compared to the prior quarter, reflecting increases in both the securities and loan portfolios.
Speaker #2: Joe Thanks , . Chris . net Noted income interest while margin grew declined modestly as we had previously guided pre-tax pre-provision core earnings grew 9% , or $3 million , from prior quarter , driven by earning asset growth over year the second half of the .
Speaker #2: Yields on loans decreased modestly, reflecting the impact of floating rate and a continued mix shift in our portfolio. Total deposit resets increased modestly, reflecting a very isolated upward movement.
Speaker #2: repricing for certain interest bearing accounts combined with continued competitive deposit pricing , borrowing also contributed costs a one basis point of pressure on our margin , reflecting the net impact of our debt issuance and retirement during the average interest earning assets increased compared to meaningfully fourth quarter , the prior quarter , reflecting increases in both the securities and loan portfolios .
Patrick Barrett: Growth in securities was from our late third quarter opportunistic purchases, which also had a modestly compressing impact on our margin. Looking ahead, we expect positive expansion in both NII and margin. As Chris mentioned, asset quality remained very strong, with non-performing loans to total loans at 0.2% and non-performing assets to total assets at 0.22%. Asset quality continues to remain at the low end of historical levels for criticized and classified loans, as risk ratings across our commercial portfolio remain stable. Net charge-offs ticked up slightly, but full-year net charge-offs as a percentage of total loans remained extremely low at five basis points. Turning to expenses, core non-interest expenses decreased from $72.4 million to $71.2 million, driven by the sale of our title business.
Growth in securities was from our late third quarter opportunistic purchases, which also had a modestly compressing impact on our margin. Looking ahead, we expect positive expansion in both NII and margin. As Chris mentioned, asset quality remained very strong, with non-performing loans to total loans at 0.2% and non-performing assets to total assets at 0.22%. Asset quality continues to remain at the low end of historical levels for criticized and classified loans, as risk ratings across our commercial portfolio remain stable. Net charge-offs ticked up slightly, but full-year net charge-offs as a percentage of total loans remained extremely low at five basis points. Turning to expenses, core non-interest expenses decreased from $72.4 million to $71.2 million, driven by the sale of our title business.
Speaker #2: Growth in securities was from late in our third quarter opportunistic purchases, which also had a modestly compressing impact on our margin. Looking ahead, we expect positive expansion in both NII and margin.
Speaker #2: As Chris mentioned, quality remained very strong, with non-performing loans to total loans at 0.2%, and non-performing assets to total assets at 0.22%.
Speaker #2: Asset quality continues to remain at the low end of historical levels for criticized and classified loans, as risk ratings across our commercial remain portfolio stable.
Speaker #2: Net charge offs ticked up slightly , with full year net charge offs as a percentage of total loans remained extremely low at five basis points .
Speaker #2: Turning to expenses , core net expenses decreased from 72.4 million to 71.2 million , driven by the sale of our title business , non-core items include restructuring charges of $7 million related to our residential outsourcing initiative , $4 million of merger related costs , and $1 million of professional fees related to the credit risk transfer transaction .
Patrick Barrett: Non-core items include restructuring charges of $7 million related to our residential outsourcing initiative, $4 million of merger-related costs, and $1 million of professional fees related to the credit risk transfer transaction we executed during the quarter. Looking ahead, we expect our first quarter core operating expense run rate to remain in the range of $70 to $71 million, with seasonal compensation increases offset by a full quarter's benefit of our residential outsourcing initiative. Capital levels remained strong, with our CET1 ratio increasing to 10.7%, reflecting strong loan growth during the quarter combined with the benefits of the credit risk transfer transaction. This trade provided approximately 50 basis points of CET1 ratio benefit at an annual pre-tax cost of less than $4 million. A word on taxes.
Non-core items include restructuring charges of $7 million related to our residential outsourcing initiative, $4 million of merger-related costs, and $1 million of professional fees related to the credit risk transfer transaction we executed during the quarter. Looking ahead, we expect our first quarter core operating expense run rate to remain in the range of $70 to $71 million, with seasonal compensation increases offset by a full quarter's benefit of our residential outsourcing initiative. Capital levels remained strong, with our CET1 ratio increasing to 10.7%, reflecting strong loan growth during the quarter combined with the benefits of the credit risk transfer transaction. This trade provided approximately 50 basis points of CET1 ratio benefit at an annual pre-tax cost of less than $4 million. A word on taxes.
Speaker #2: We executed . Looking ahead , we during the expect our first quarter core operating expense run rate to remain in the range of 70 to 71 million , with seasonal compensation increases , offset by a full quarter's benefit of our residential initiative outsourcing .
Speaker #2: Capital levels remain strong, with our CET1 ratio increasing to 10.7%, reflecting strong loan growth during the quarter. Combined with the benefits of the credit risk transfer transaction, this trade provided approximately 50 basis points of CET1 ratio benefit at an annual pre-tax cost of less than $4 million.
Patrick Barrett: We expect our effective tax rate, which was 22% in Q4, to remain in the 23 to 25% range quarterly, absent any changes in tax policy. There are no changes to our full-year guidance, as stated in the third quarter's earnings release. Mid to high single-digit loan and deposit growth. NII and NIM growing, with NIM growing past 3% during the year and NII ramping in the second half of the year. Other income: $7 to $9 million per quarter and expenses relatively flat to current run rates. Note that these are standalone expectations that do not reflect the impact of the Flushing acquisition. We've also added our first quarter outlook for convenience, but again, remember that the first quarter always reflects the impact of 2% fewer days and the impact that has on a lot of our P&L items and NII.
We expect our effective tax rate, which was 22% in Q4, to remain in the 23 to 25% range quarterly, absent any changes in tax policy. There are no changes to our full-year guidance, as stated in the third quarter's earnings release. Mid to high single-digit loan and deposit growth. NII and NIM growing, with NIM growing past 3% during the year and NII ramping in the second half of the year. Other income: $7 to $9 million per quarter and expenses relatively flat to current run rates. Note that these are standalone expectations that do not reflect the impact of the Flushing acquisition. We've also added our first quarter outlook for convenience, but again, remember that the first quarter always reflects the impact of 2% fewer days and the impact that has on a lot of our P&L items and NII.
Speaker #2: Word on taxes. We expect our effective tax rate, which was 22% in Q4, to remain in the 23% to 25% range.
Speaker #2: Quarterly. Absent any changes in tax policy, there are no changes to our full year guidance, as stated in the third quarter earnings release.
Speaker #2: Mid to high single-digit loan and deposit growth. NII and NIM growing, with NIM growing past 3% during the year, and NII ramping in the second half of the year.
Speaker #2: Other income 7 to 9 million per quarter and expenses relatively flat to current run rates . Note that these are standalone expectations that do not reflect the impact of the flushing acquisition .
Speaker #2: We've also added our first quarter outlook for convenience, but again, remember that the first quarter always reflects the impact of 2% fewer days, and the impact that has on a lot of our personnel items and NII point. We'll—
Patrick Barrett: At this point, we'll begin the question-and-answer portion of the call.
At this point, we'll begin the question-and-answer portion of the call.
Operator: Thank you. So our lines are now open for questions. And as a reminder for our audience, if you would like to ask a question, you may do so by pressing star, followed by the number one on your telephone keypads. And of course, when preparing to ask your questions, please ensure your devices are unmuted locally. And moving on to our questions, we have one from Daniel Tamayo from Raymond James. Go ahead, please. Your line is now open.
Operator: Thank you. So our lines are now open for questions. And as a reminder for our audience, if you would like to ask a question, you may do so by pressing star, followed by the number one on your telephone keypads. And of course, when preparing to ask your questions, please ensure your devices are unmuted locally. And moving on to our questions, we have one from Daniel Tamayo from Raymond James. Go ahead, please. Your line is now open.
Speaker #2: At this, we begin the question-and-answer portion of the call.
Speaker #3: Thank you . So our lines are now open for questions . And as a reminder for our audience , if you would like to ask a question , you may do so by pressing star followed by the number one on your telephone And of course , when preparing to keypad .
Speaker #3: Questions, please ensure your devices are unmuted locally. Moving on to our questions, we have one from Daniel Tamayo from Raymond James.
[Analyst] (Raymond James): Thank you. Good morning, everyone.
Daniel Tamayo: Thank you. Good morning, everyone.
Patrick Barrett: Morning.
Pat Barrett: Morning.
Speaker #3: Go ahead, please. Your line is now open.
[Analyst] (Raymond James): Maybe just clarity on your net interest income guidance, Pat. The growth in dollars matching the growth in loans, that's to be read as the back-of-the-envelope from assets, just under $90 million, I guess, in loan growth. So that's the way to think of that. That number is the net interest income growth, or how should we be thinking?
Daniel Tamayo: Maybe just clarity on your net interest income guidance, Pat. The growth in dollars matching the growth in loans, that's to be read as the back-of-the-envelope from assets, just under $90 million, I guess, in loan growth. So that's the way to think of that. That number is the net interest income growth, or how should we be thinking?
Speaker #4: Thank you . Good morning everyone . Good morning . Maybe just a clarity on your net interest income guidance . Pat the growth in dollars matching the growth in loans .
Speaker #4: That's to read . As you be know , back of the envelope math is just under 90 million . I guess . And loan growth .
Patrick Barrett: No, it actually will probably grow at a bit higher clip than whatever our loan balances grow, just because of the compounding effect of how big the balance sheet is today. So I was just reminding that Q1 always looks disappointing because you have to shave 2% off for fewer days in the quarter with the drop from Q4 to Q1, and then it will begin to ramp back up. I think you'll see high single-digit growth in NII for the year.
Pat Barrett: No, it actually will probably grow at a bit higher clip than whatever our loan balances grow, just because of the compounding effect of how big the balance sheet is today. So I was just reminding that Q1 always looks disappointing because you have to shave 2% off for fewer days in the quarter with the drop from Q4 to Q1, and then it will begin to ramp back up. I think you'll see high single-digit growth in NII for the year.
Speaker #4: So that's the way to think—that that number is the interest income net growth. Or how should we be thinking?
Speaker #2: It'll actually probably grow at a bit of a higher clip than whatever our loan balance is growing, just because of the compounding effect of how big the balance sheet is today.
Speaker #2: So I was just reminding that Q1 always looks disappointing because you have to shave 2% off for fewer days in the quarter, with the drop from fourth quarter to first quarter, and then it will begin to ramp back up.
[Analyst] (Raymond James): Great. Okay. That's perfect. Then let's see here. I guess as it relates to the deal, any kind of updated commentary around what loan sales might end up looking like after the close?
Daniel Tamayo: Great. Okay. That's perfect. Then let's see here. I guess as it relates to the deal, any kind of updated commentary around what loan sales might end up looking like after the close?
Speaker #2: I think . think you'll you'll see high single digit growth in NII for the year .
Speaker #4: Great . Okay . That's that's perfect . And then let's see here the I guess relates as it to the the deal , any kind of updated commentary around what loan sales might end up looking like after the after the close .
Joseph Lebel III: It's a little bit too early to give you any precise figures on that. We're undergoing a process right now to review the portfolios. A lot of the work we could not really kind of get deep into when we were still in a confidential mode of negotiating with Flushing. So now we've got a little better ability to do that. So we'll update you as our thoughts evolve, but we do expect to be able to do some work on the balance sheet in a way that improves our margins and ROA outlook over time while also reducing credit risk.
Joe Lebel: It's a little bit too early to give you any precise figures on that. We're undergoing a process right now to review the portfolios. A lot of the work we could not really kind of get deep into when we were still in a confidential mode of negotiating with Flushing. So now we've got a little better ability to do that. So we'll update you as our thoughts evolve, but we do expect to be able to do some work on the balance sheet in a way that improves our margins and ROA outlook over time while also reducing credit risk.
Speaker #5: It's a little bit too early to give you any precise figures on that. We're undergoing a process right now to review portfolios.
Speaker #5: A lot of the work we could not really kind of get deep into when we were still in a confidential mode of negotiating with, with Flushing.
Speaker #5: So now we've got a little better ability to do that. So we'll update you as our thoughts—expect to be able to evolve.
Speaker #5: But we do some work on the balance sheet in a way that improves our margins and ROA outlook over time, while also reducing credit risk.
[Analyst] (Raymond James): Understood. Thanks, Chris. And then maybe just a clarification question for you, Pat, on the expense line. Where's the recurring CRT premium expense? In what line?
Daniel Tamayo: Understood. Thanks, Chris. And then maybe just a clarification question for you, Pat, on the expense line. Where's the recurring CRT premium expense? In what line?
Speaker #4: Understood . Thanks , Chris . And then maybe just a a clarification question for you , Pat , on the expense line . Where's the the recurring CRT premium expense and what line .
Patrick Barrett: Comes through other, just like insurance premium expense, essentially.
Pat Barrett: Comes through other, just like insurance premium expense, essentially.
Joseph Lebel III: So it's not in the yield. It won't be in the NIM, or it'll look like OPEX.
Joe Lebel: So it's not in the yield. It won't be in the NIM, or it'll look like OPEX.
Speaker #2: Comes through other, just like insurance premium expense, essentially.
[Analyst] (Raymond James): Got it.
Daniel Tamayo: Got it.
Speaker #5: So expense it's not in the yields . It won't be in the Nim or in the . It look like OpEx . .
Patrick Barrett: That wonderful connection of other.
Pat Barrett: That wonderful connection of other.
[Analyst] (Raymond James): All right. Oh, yes.
Daniel Tamayo: All right. Oh, yes.
Patrick Barrett: Thanks, Dave.
Pat Barrett: Thanks, Dave.
Speaker #4: Got it . Okay , that wonderful . . All right . Oh yes . Thanks . All right I will I'll step back .
[Analyst] (Raymond James): All right. I'll step back. Appreciate the color, guys.
Daniel Tamayo: All right. I'll step back. Appreciate the color, guys.
Patrick Barrett: Thank you.
Pat Barrett: Thank you.
Operator: Thank you for that question. Moving on, we have Tim Switzer from KBW. Go ahead, please. Your line is now open.
Operator: Thank you for that question. Moving on, we have Tim Switzer from KBW. Go ahead, please. Your line is now open.
Speaker #4: Appreciate the color guys .
Speaker #5: Thank you .
Speaker #3: that Thank you for question . Moving on . We have Tim Switzer from CCB . please . line is now Your Go open ahead .
[Analyst] (Stephens Inc.): Hey, good morning. Thanks for taking my questions. I got a few on.
Tim Switzer: Hey, good morning. Thanks for taking my questions. I got a few on.
Operator: Thank you.
Joe Lebel: Thank you.
[Analyst] (Stephens Inc.): Morning. I got a few on balance sheet growth here. So first up on commercial balances, C&I, on a dollar basis, it looks like it's accelerated for four straight quarters, basically every quarter this year, with a pretty meaningful pickup in Q4. What kind of pace should we expect for 2026?
Tim Switzer: Morning. I got a few on balance sheet growth here. So first up on commercial balances, C&I, on a dollar basis, it looks like it's accelerated for four straight quarters, basically every quarter this year, with a pretty meaningful pickup in Q4. What kind of pace should we expect for 2026?
Speaker #6: Hey . morning . Good Thanks for taking my questions . I got a few one morning . I got a few on balance sheet growth here .
Speaker #6: So first up on commercial balances CNI on a dollar basis , it looks like it's accelerated for four straight quarters . quarter this Basically every year with a pretty meaningful pickup in Q4 .
Joseph Lebel III: Tim, it's Joe. Look, I think we probably snuck in a couple of Q1 stuff into Q4, but that's what the borrower wants, and that's what we're going to do. But the seasonality side, which tends to be a little slower in Q1, as everybody's waiting for year-end financial statements, I would tend to think that you're going to see very similar growth rates. I think we've got it in that 7% to 9% range, which I think is fair. Look, we put a ton of dollars into talent in that space, and I think that space is now just starting to deliver what we expected. So more to come.
Joe Lebel: Tim, it's Joe. Look, I think we probably snuck in a couple of Q1 stuff into Q4, but that's what the borrower wants, and that's what we're going to do. But the seasonality side, which tends to be a little slower in Q1, as everybody's waiting for year-end financial statements, I would tend to think that you're going to see very similar growth rates. I think we've got it in that 7% to 9% range, which I think is fair. Look, we put a ton of dollars into talent in that space, and I think that space is now just starting to deliver what we expected. So more to come.
Speaker #6: Do you know what kind of pace we should expect for 2026?
Speaker #1: Tim . It's Joe . Look , I think we probably snuck in a couple Q1 in the stuff Q4 , but that's what the borrower wants .
Speaker #1: That's going to what we're do. But seasonality side, which tends to be a little slower in Q1, as everybody's waiting for year-end financial statements.
Speaker #1: I would tend to think that you're going to see very, you know, similar growth rates. I think we've got it in that 7 to 9% range, which I think is fair.
Speaker #1: put a ton Look , we've of we put a ton of into dollars talent in that space . And I think that space is starting to now just deliver what we expected .
Patrick Barrett: Okay. Okay. That's helpful. And I think you guys disclosed this last quarter, but I didn't even talk about how much of the growth this quarter in C&I was driven from the Premier Bank in cross-sales?
Tim Switzer: Okay. Okay. That's helpful. And I think you guys disclosed this last quarter, but I didn't even talk about how much of the growth this quarter in C&I was driven from the Premier Bank in cross-sales?
Speaker #1: So, more to come, okay.
Speaker #6: Okay, that's helpful. And I think you guys disclosed this last quarter, where you talked about how much of the growth this quarter in CNI was driven from the Premier Bank in cross-sales.
Joseph Lebel III: Yeah. So I don't have the quarterly number in front of me, but I do have the half-a-year number. So they generated just shy of $200 million in gross closed loans, and the outstanding is at the end of the year about $64 million, which is pretty much what we figured, right? They're going to be more deposit-heavy loans. The deposit number is going to be really good. But they do have a solid C&I clientele, which is a benefit. And I think we'll see more of that to come in 2026 as well. Hey, Tim, it's Chris. One other thing I'd mention is that we're really pleased that the level of self-funding in the C&I customers was pretty strong this year. So we're seeing pretty strong deposits come in. The C&I teams have done a nice job with that.
Joe Lebel: Yeah. So I don't have the quarterly number in front of me, but I do have the half-a-year number. So they generated just shy of $200 million in gross closed loans, and the outstanding is at the end of the year about $64 million, which is pretty much what we figured, right? They're going to be more deposit-heavy loans. The deposit number is going to be really good. But they do have a solid C&I clientele, which is a benefit. And I think we'll see more of that to come in 2026 as well.
Speaker #1: Yeah . So I don't have the quarterly number in front of me , but I do have the the half a year number .
Speaker #1: So they generated just shy of $200 million in gross closed loans. And the outstandings at the end of the year are about $64 million, which is pretty much what we figured.
Speaker #1: They're going to be more Right . deposit heavy loan to deposit number are going to be really good . But they do have solid CNI clientele , which is a benefit .
Christopher Maher: Hey, Tim, it's Chris. One other thing I'd mention is that we're really pleased that the level of self-funding in the C&I customers was pretty strong this year. So we're seeing pretty strong deposits come in. The C&I teams have done a nice job with that.
Speaker #1: And I think we'll see more of that to come in '26 as well.
Speaker #5: It's Chris. One other thing I'd
Speaker #5: Hey Tim, what we're really pleased about is that the level of self-funding in the C&I, pretty customers was strong this year.
Joseph Lebel III: So we had just shy of like a 40% coverage of outstanding self-funding. So as that book rotates, we do more C&I, and on a relative basis, less CRE, the deposit portfolio is going to strengthen as well.
So we had just shy of like a 40% coverage of outstanding self-funding. So as that book rotates, we do more C&I, and on a relative basis, less CRE, the deposit portfolio is going to strengthen as well.
Speaker #5: So we're seeing pretty strong deposits come in. The CNI teams have done a nice job with that. So we had just shy of, like, a 40% coverage of self-funding.
Speaker #5: So, book is that rotates. You know, we do more C&I and, on a relative basis, less CRE. The deposit portfolio is going to strengthen as well.
Patrick Barrett: Gotcha. Yeah. Yeah. That's great. And then on the Premier Bank specifically, it looks like the deposit growth maybe slowed down a little bit. I know it's just one quarter. It's probably some volatility, maybe some seasonality in there. But can you add some color on that and then reconfirm if you still feel good about the target for $2 to $3 billion of deposits by the end of 2027?
Tim Switzer: Gotcha. Yeah. Yeah. That's great. And then on the Premier Bank specifically, it looks like the deposit growth maybe slowed down a little bit. I know it's just one quarter. It's probably some volatility, maybe some seasonality in there. But can you add some color on that and then reconfirm if you still feel good about the target for $2 to $3 billion of deposits by the end of 2027?
Speaker #6: Gotcha . Yeah , yeah . That's great . And then on the bank specifically , it the looks like deposit growth may slowed down a little bit .
Speaker #6: I know it's just one quarter. It's probably some volatility, maybe some seasonality in there. But can you add some color on that?
Speaker #6: And then, you know, reconfirm if you still feel good about your target for deposits—$2 to $3 billion—by the end of...
Joseph Lebel III: Yeah. So, Tim, I think you hit it on the head. We had higher balances up until really the last week of the year. We had some seasonality, some distributions, some bonus payments. I think that's hard for us to learn about the clientele as well. You onboard 350 new clients, you're trying to solve for what works. So we saw nothing but a ramp-up until the last week. So I think you're going to see recoveries as the year goes on. You're going to see continued growth. I don't see any reason why we would back off the 2027 targets.
Joe Lebel: Yeah. So, Tim, I think you hit it on the head. We had higher balances up until really the last week of the year. We had some seasonality, some distributions, some bonus payments. I think that's hard for us to learn about the clientele as well. You onboard 350 new clients, you're trying to solve for what works. So we saw nothing but a ramp-up until the last week. So I think you're going to see recoveries as the year goes on. You're going to see continued growth. I don't see any reason why we would back off the 2027 targets.
Speaker #1: Yeah . So
Speaker #1: Tim , I 27 . the head , hit on we had higher balances up until the really last week of the year . We had some seasonality , some distribution , some bonus payments .
Speaker #1: I think that's to learn about, in part, for us clientele as well. You know, the onboard 350 new clients, trying to solve for what works.
Speaker #1: So, we saw nothing but a ramp up until the last week. So I think you're going to see recoveries as the year goes on.
Speaker #1: You're going to see continued growth. I don't see any reason why we would back off the 2027 targets.
Patrick Barrett: Awesome. Good to hear. Thanks for taking my questions.
Tim Switzer: Awesome. Good to hear. Thanks for taking my questions.
Operator: Thank you for that question, Tim. Moving on, we now have Christopher Marinak from Janney Montgomery Scott. Go ahead, please. Your line is now open.
Operator: Thank you for that question, Tim. Moving on, we now have Christopher Marinak from Janney Montgomery Scott. Go ahead, please. Your line is now open.
Speaker #6: Awesome. Good to hear. Thanks for taking my questions.
Speaker #3: Thank you for that question , Tim . Moving on . We now have Christopher Marinac from Janney , Montgomery Scott . please . Go ahead Your line is now open .
Christopher Maher: Thanks very much. Chris, Pat, and Joe, I wanted to ask about the Premier Banking new money rate that came in. You may have mentioned it. I just missed it. And then I had a follow-up.
Christopher Marinac: Thanks very much. Chris, Pat, and Joe, I wanted to ask about the Premier Banking new money rate that came in. You may have mentioned it. I just missed it. And then I had a follow-up.
Speaker #7: Very thanks much, Chris. And Pat and Joe. I wanted to ask about the Premier Banking new money rate that came in.
Joseph Lebel III: Yeah. I don't know that we have the new money rate handy. The overall portfolio was down nicely to just like a 225 cost. We're seeing non-interest bearings coming in faster now. And although the balances were seasonally weak, as Joe mentioned, we continue to open new accounts and establish new relationships at a good clip. So I think you're going to see that trend with more non-interest over time, better or lower yields on those deposits, and a faster pace of growth in Q1.
Christopher Maher: Yeah. I don't know that we have the new money rate handy. The overall portfolio was down nicely to just like a 225 cost. We're seeing non-interest bearings coming in faster now. And although the balances were seasonally weak, as Joe mentioned, we continue to open new accounts and establish new relationships at a good clip. So I think you're going to see that trend with more non-interest over time, better or lower yields on those deposits, and a faster pace of growth in Q1.
Speaker #7: You may have mentioned it; I just missed it. And then I had a follow-up.
Speaker #5: Yeah, I don't know that we have the money at the new rate handy. We did, overall, with the portfolio down nicely to just like a 2.25% cost.
Speaker #5: We're seeing noninterest coming in bearing is faster now, and although balances were seasonally weak, as Joe mentioned, we continue to open new accounts and establish new relationships at a good clip.
Speaker #5: So I think you're going to see that trend with more noninterest over time, better your lower yields on those deposits, and a faster pace of growth in Q1.
Christopher Maher: Okay. So 225 is the overall rate, and that works with what I was asking. Chris, as you move forward with Flushing, can you just go back through the opportunity to kind of reset deposit rates? And is there anything instructive from what you're doing now with Premier Banking and those new customers with what you can do with Flushing? And I guess part of my question is also how much of that is sort of additional potential earnings beyond what you underwrote going in?
Christopher Marinac: Okay. So 225 is the overall rate, and that works with what I was asking. Chris, as you move forward with Flushing, can you just go back through the opportunity to kind of reset deposit rates? And is there anything instructive from what you're doing now with Premier Banking and those new customers with what you can do with Flushing? And I guess part of my question is also how much of that is sort of additional potential earnings beyond what you underwrote going in?
Speaker #7: Okay . So 225 is the overall rate . And that that that works with what I was asking , Chris , as you move forward with flushing , can you just go back through the opportunity to kind of reset deposit rates ?
Speaker #7: And is there anything instructive from what you’re doing now with Premier Banking and those new—what your customers can do with flushing?
Speaker #7: And I guess part of my question is also, how much of that is sort of additional potential earnings beyond what you underwrote going in?
Joseph Lebel III: Yeah. So look, I think there's a tremendous opportunity there, Chris. So let me just kind of walk through mechanically what we think it is. And I hope you understand also kind of shy away from any numbers around that opportunity. But the premise is, well, first, I should say, if you look at Flushing's numbers, they've done a nice job of building non-interest-bearing accounts at a pretty good clip. They've built nicely over the course of the year and have had some momentum on their side. I think our Premier folks who operate in the markets where the Flushing branches are today will find a higher rate of success because they have the opportunity to offer that kind of branch distribution network over time.
Christopher Maher: Yeah. So look, I think there's a tremendous opportunity there, Chris. So let me just kind of walk through mechanically what we think it is. And I hope you understand also kind of shy away from any numbers around that opportunity. But the premise is, well, first, I should say, if you look at Flushing's numbers, they've done a nice job of building non-interest-bearing accounts at a pretty good clip. They've built nicely over the course of the year and have had some momentum on their side. I think our Premier folks who operate in the markets where the Flushing branches are today will find a higher rate of success because they have the opportunity to offer that kind of branch distribution network over time.
Speaker #5: So
Speaker #5: I think there's tremendous a opportunity there , . Chris . So let me Yeah . just kind of walk through mechanically what we think it is .
Speaker #5: hope you Also kind of shy away And I around numbers opportunity . that But understand . premise is , well , first I should say , if Flushing's numbers , you look at they've done a nice job of building noninterest bearing accounts at a pretty good clip .
Speaker #5: They built nicely over the course of the year and have had some momentum on their side. I think our premier folks who operate in the markets with Flushing branches are today.
Speaker #5: We'll find a higher rate of success because they have the opportunity to offer that kind of branch distribution network over time . And then I think the real important part of this is that for both us and for flushing , being a stronger , regional bank larger is going to help us in recruiting top tier talent .
Joseph Lebel III: I think the real important part of this is that for both us and for Flushing, being a stronger, larger regional bank is going to help us in recruiting top-tier talent. So I think we are a more attractive destination for career commercial bankers who are looking for a platform to continue to build their brand and build their teams and build their legacy. So I kind of see it a few ways. Flushing was doing a great job on its own. We can probably do a little better with our Premier teams giving them a branch distribution network. And then we're going to be a much more competitive place to land. I think as we go through the first few quarters as a combined company, hopefully later this year, we'll be able to put a finer point of what we think that growth rate will look like.
I think the real important part of this is that for both us and for Flushing, being a stronger, larger regional bank is going to help us in recruiting top-tier talent. So I think we are a more attractive destination for career commercial bankers who are looking for a platform to continue to build their brand and build their teams and build their legacy. So I kind of see it a few ways. Flushing was doing a great job on its own. We can probably do a little better with our Premier teams giving them a branch distribution network. And then we're going to be a much more competitive place to land. I think as we go through the first few quarters as a combined company, hopefully later this year, we'll be able to put a finer point of what we think that growth rate will look like.
Speaker #5: So I think we are becoming more of a destination for career commercial bankers who are looking for a platform to continue to build their brand, build their teams, and build their legacy.
Speaker #5: So so I kind of see it a few ways . Flushing was doing a great job on its own . We can probably do a little better with our premier teams , giving them a branch network distribution , and then we're going to be a much more competitive place to land as we go .
Speaker #5: through the first few quarters as a I think combined company , hopefully later this year , we'll be able finer to put a point of we think that growth rate will look like , but those those deposit markets are absolutely massive .
Joseph Lebel III: But those deposit markets are absolutely massive. So although you do in the Northeast, you're always picking up share from someone else. That's kind of the name of the game. There's a lot of share out there in the markets we're picking. And we really like the branch distribution network, where it is, the neighborhoods they're in, the streets they're on. And I think that's going to help both of us grow faster than either one of us would have grown standalone.
But those deposit markets are absolutely massive. So although you do in the Northeast, you're always picking up share from someone else. That's kind of the name of the game. There's a lot of share out there in the markets we're picking. And we really like the branch distribution network, where it is, the neighborhoods they're in, the streets they're on. And I think that's going to help both of us grow faster than either one of us would have grown standalone.
Speaker #5: So , you although know , you do in the northeast , you're always picking up share from someone else . That's kind of the name of the game .
Speaker #5: There's a lot of share out there in the markets . We're picking and the we really like the branch distribution network where it is the neighborhoods they're in , the streets they're on .
Christopher Maher: Great. That's helpful, Chris. And I guess without getting too deep in the weeds, I mean, in general, it doesn't seem like what you had told us in late December really is dependent on adjusting these rates. That as you can have success later on that, then that creates future opportunities for earnings.
Christopher Marinac: Great. That's helpful, Chris. And I guess without getting too deep in the weeds, I mean, in general, it doesn't seem like what you had told us in late December really is dependent on adjusting these rates. That as you can have success later on that, then that creates future opportunities for earnings.
Speaker #5: I think that's going to help both of us grow faster than either one of us would have grown standalone.
Speaker #7: helpful . Great . That's Chris . And I guess , you know , without getting too deep in the weeds , I mean , in general , it doesn't seem like what you had told us in late December really is dependent on adjusting these rates that as you can have success later on that then that creates future opportunities for earnings .
Joseph Lebel III: Yeah. So, with the one caveat, and we are thinking through the balance sheet. In every bank, you have a variety of different funding sources and a variety of different assets. This is an opportunity for us to be very thoughtful about thinking through the higher-cost deposits and the lower-yielding loans and securities, and kind of looking at that mix and say the marginally highest-cost funding and the lowest-yielding assets present an opportunity to be much more efficient together. That's really what the balance sheet process is about. That's something that we may not be able to solve exactly at closing, but we would hope that within 30 days of closing, we would be able to provide some really good data on that.
Christopher Maher: Yeah. So, with the one caveat, and we are thinking through the balance sheet. In every bank, you have a variety of different funding sources and a variety of different assets. This is an opportunity for us to be very thoughtful about thinking through the higher-cost deposits and the lower-yielding loans and securities, and kind of looking at that mix and say the marginally highest-cost funding and the lowest-yielding assets present an opportunity to be much more efficient together. That's really what the balance sheet process is about. That's something that we may not be able to solve exactly at closing, but we would hope that within 30 days of closing, we would be able to provide some really good data on that.
Speaker #5: So with the one caveat and you are know , we thinking through the balance sheet Yeah . . And in every bank you have a variety of different funding sources variety of and a different assets .
Speaker #5: And this is an opportunity for us to be very thoughtful about thinking through the higher cost deposits and the lower yielding loans . And securities and kind of saying , looking at that mix and say the the marginally highest cost funding and the lowest yielding assets present an opportunity to be much more efficient together .
Speaker #5: And that's really what the balance sheet is about process . And that's something that we may not be able to solve exactly at closing , but we would hope that , you know , within 30 days of closing , we would be able to some , some really good data on that provide .
Christopher Maher: Okay. Sounds great. Thank you for all the background on that. I appreciate it.
Christopher Marinac: Okay. Sounds great. Thank you for all the background on that. I appreciate it.
Joseph Lebel III: Thanks, Chris.
Christopher Maher: Thanks, Chris.
Speaker #8: Okay .
Speaker #7: Sounds great. Thank you for all the background on that. I appreciate it.
Operator: Thank you for that question, Chris. We now have David Bishop from Hovde Group. Go ahead, please. Your line is now open.
Operator: Thank you for that question, Chris. We now have David Bishop from Hovde Group. Go ahead, please. Your line is now open.
Speaker #5: Chris Thanks , .
Speaker #3: that Thank you Chris question , . have We now David Bishop from Go ahead Group . please . Your line is now open .
Patrick Barrett: Hey, good morning, guys. Hey, quick question on the back to the C&I growth here and maybe for Joe. Just curious geographically maybe where you're seeing the best strength there. And is any of this growth also driven by maybe expiration of non-compete or handcuffs that were maybe placed against some of these lenders you had hired over the past year?
David Bishop: Hey, good morning, guys. Hey, quick question on the back to the C&I growth here and maybe for Joe. Just curious geographically maybe where you're seeing the best strength there. And is any of this growth also driven by maybe expiration of non-compete or handcuffs that were maybe placed against some of these lenders you had hired over the past year?
Speaker #4: Hey good morning guys . Hey quick question on the back to the CNI growth here . And maybe for Joe , just curious geographically maybe where you're seeing the best there strength is any of this growth also , you know , driven by maybe expiration of or handcuffs that were maybe against some of placed these lenders you had hired over year the past .
Joseph Lebel III: So the good news is it's pretty geographically dispersed, David, which I appreciate because we've hired lenders in all markets. Yep. Some of the handcuff stuff that comes off, even if it's really like what I consider to be not really true handcuffs, people do feel that obligation. And that's a fair assessment. So I anticipate that we'll see more and more out of those folks as they get a little deeper into their OceanFirst tenure. But I wouldn't say that there's anywhere where we're not performing up to standard. And then I think I've mentioned earlier that we've even got some of that activity from the Premier Bank, which is really valuable in terms of some of their clientele in New York City-centric. And there is, David, there's like a positive flywheel as these new bankers come on.
Joe Lebel: So the good news is it's pretty geographically dispersed, David, which I appreciate because we've hired lenders in all markets. Yep. Some of the handcuff stuff that comes off, even if it's really like what I consider to be not really true handcuffs, people do feel that obligation. And that's a fair assessment. So I anticipate that we'll see more and more out of those folks as they get a little deeper into their OceanFirst tenure. But I wouldn't say that there's anywhere where we're not performing up to standard. And then I think I've mentioned earlier that we've even got some of that activity from the Premier Bank, which is really valuable in terms of some of their clientele in New York City-centric. And there is, David, there's like a positive flywheel as these new bankers come on.
Speaker #1: So the good news is , it's pretty geographically dispersed , David , which which I appreciate because we've hired lenders in all markets .
Speaker #1: Yep. We have some of the handcuff stuff that comes off, even if it's really, like, what I consider to be not—not really true.
Speaker #1: Handcuffs . People do feel that obligation . And that's a fair you know , that's a fair assessment . So I anticipate that we'll see more and more out of those folks as they get a little deeper into the into their oceanfirst tenure .
Speaker #1: I don't But I wouldn't say that there's anywhere where we're not performing up to standard . And I think I mentioned earlier that we've even got , you know , some of that activity from the Bank , which is really valuable in Premier terms of some of their clientele in New York City .
Joseph Lebel III: Their first few clients take a little bit of time, and then those clients have good experience. They tell not just their friends, but the accountants, the attorneys, and get better known. And then it becomes incrementally better to pick up kind of the second round of clients and the third round. So we see a lot of opportunity going forward.
Their first few clients take a little bit of time, and then those clients have good experience. They tell not just their friends, but the accountants, the attorneys, and get better known. And then it becomes incrementally better to pick up kind of the second round of clients and the third round. So we see a lot of opportunity going forward.
Speaker #1: Centric .
Speaker #5: And there is—there’s like a positive flywheel. As these new bankers come on, their first few clients take a little bit of time, and then those clients have a good experience.
Speaker #5: They tell not just their friends, but the accountants, the attorneys, and get better known. And then it becomes incrementally picked up better to the second round of clients.
Speaker #5: And the third round. So, there's a lot of opportunity we see going forward.
Patrick Barrett: Got it. I saw the earnings narrative on the deposit funding side. It sounded like one large deposit client reset in terms of deposit rates from zero upwards. I don't know, Pat or Joe, if you have that number in terms of maybe what the NIM headwind is, is that sort of just a one-time ephemeral impact?
David Bishop: Got it. I saw the earnings narrative on the deposit funding side. It sounded like one large deposit client reset in terms of deposit rates from zero upwards. I don't know, Pat or Joe, if you have that number in terms of maybe what the NIM headwind is, is that sort of just a one-time ephemeral impact?
Speaker #4: Got it. And I saw the earnings narrative on the deposit funding side. Sounds like one large deposit client reset in terms of rates from zero deposit upwards.
Speaker #4: I don't know . Pat or Joe , if you that number what the in terms have of maybe Nim headwind is , that sort of just a one time ephemeral impact ?
Patrick Barrett: Yeah, it's a one-time. It happens all the time where customers don't know where they want their money, and they keep it out of higher-earning promotional type things if they think they need it. So it was noteworthy because of its size. It's very infrequent, and we'd expect not recurring.
Pat Barrett: Yeah, it's a one-time. It happens all the time where customers don't know where they want their money, and they keep it out of higher-earning promotional type things if they think they need it. So it was noteworthy because of its size. It's very infrequent, and we'd expect not recurring.
Speaker #2: it's a one time . Yeah , It happened all the time where customers don't know where they want their money , keep it out of and they higher , higher promotional type things .
Speaker #2: earning If they think they So it was just it was noteworthy of its because need it . size and it's very infrequent and we would expect not recurring .
Joseph Lebel III: It was fully reflected in Q4. Actually, it was kind of like a late Q3 thing. So you're not going to see that drag or provide a headwind going into Q1, so.
Joe Lebel: It was fully reflected in Q4. Actually, it was kind of like a late Q3 thing. So you're not going to see that drag or provide a headwind going into Q1, so.
Speaker #5: It was it was fully reflected in Q4 . It actually it was kind of like a late Q3 thing . So you're not going to see that drag or provide a headwind going into Q1 .
Patrick Barrett: I could have just said that NIM hardly moved at all just due to a lot of little things and noise. But that didn't feel like it was a good enough explanation for 3 basis points of contraction. So it was that kind of quarterly.
Pat Barrett: I could have just said that NIM hardly moved at all just due to a lot of little things and noise. But that didn't feel like it was a good enough explanation for 3 basis points of contraction. So it was that kind of quarterly.
Speaker #5: So .
Speaker #5: So .
Speaker #2: I could have just said that NIM hardly moved at all, just due to a lot of little things and noise, but that didn't feel like it was a good enough explanation for three basis points in contraction.
Patrick Barrett: I know this number bumps around, especially at the end of the year, but to a noticeable pickup at the early stage delinquencies in the 30-89-day bucket, any commentary there that could be driving that?
David Bishop: I know this number bumps around, especially at the end of the year, but to a noticeable pickup at the early stage delinquencies in the 30-89-day bucket, any commentary there that could be driving that?
Speaker #2: So, that kind of quarter.
Speaker #4: And number bumps especially at the around , year , the but noticeable pickup in the early stage , delinquencies in the 3089 day bucket , any , any there that could be driving commentary that
Joseph Lebel III: Yeah. It was just a one loan, David, that has a federal government lease where the lease payment is a little bit late. So we don't have any concern in the long term. But it was already a loan that we had in the substandard bucket. We've been watching it because of that tendency. So we'll give you an update as time goes on. But they have a good lease in place. Looks like it was just a payment issue, meaning their collection of their rent was just delayed administratively.
Christopher Maher: Yeah. It was just a one loan, David, that has a federal government lease where the lease payment is a little bit late. So we don't have any concern in the long term. But it was already a loan that we had in the substandard bucket. We've been watching it because of that tendency. So we'll give you an update as time goes on. But they have a good lease in place. Looks like it was just a payment issue, meaning their collection of their rent was just delayed administratively.
Speaker #5: It . a one loan , Dave , that has a government federal the lease lease where payment is a little bit late . So we don't have any concern the term , but it long was already a had in loan that we substandard bucket .
Speaker #5: the We've been watching it because of that So tendency . so we'll give you an update as time goes on . good lease they have a place it was just a .
Patrick Barrett: Got it. Got it. Then maybe a holistic question for you, Chris. Looks like the Netflix studio is entering into sort of the final stages, the building of the studio, sound stages, and such. Any thoughts about maybe is there a potential to sort of set up branches within that footprint or any sort of branding within that community or within that development to sort of take advantages of branding the company there and backing the caterers, the builders, etc.? Do you see any sort of longer-term opportunities as that builds out?
David Bishop: Got it. Got it. Then maybe a holistic question for you, Chris. Looks like the Netflix studio is entering into sort of the final stages, the building of the studio, sound stages, and such. Any thoughts about maybe is there a potential to sort of set up branches within that footprint or any sort of branding within that community or within that development to sort of take advantages of branding the company there and backing the caterers, the builders, etc.? Do you see any sort of longer-term opportunities as that builds out?
Speaker #5: Looks like
Speaker #4: like the is sort of the Netflix entering into building , the studio stages . soundstages and such . maybe is there a about .
Speaker #4: branches to sort within that , that any sort of branding Looks within that footprint or community or within that development to sort take of , you know , the branding company there the backing and , , the you know , caterers , the builders , etc.
Joseph Lebel III: Well, it's going to be a tremendous thing for the Monmouth County, which is our second-strongest county after Ocean County. So I think we've got a few branches that provide some good coverage for that market already. I don't know that we'll need to open other branches. But I'll make a broader comment. That's a great kind of boon to the Monmouth County market. But we continue to see over the course of our core, called the Jersey Shore market, that the post-pandemic period has been a seismic shift. More people are down at the shore more parts of the year. There's been a significant demand for the infrastructure you need, everything from hospital systems having to expand to hospitality, office, and all sorts of stuff. So our core, our strongest market in kind of the central New Jersey Shore, is doing pretty well.
Christopher Maher: Well, it's going to be a tremendous thing for the Monmouth County, which is our second-strongest county after Ocean County. So I think we've got a few branches that provide some good coverage for that market already. I don't know that we'll need to open other branches. But I'll make a broader comment. That's a great kind of boon to the Monmouth County market. But we continue to see over the course of our core, called the Jersey Shore market, that the post-pandemic period has been a seismic shift. More people are down at the shore more parts of the year. There's been a significant demand for the infrastructure you need, everything from hospital systems having to expand to hospitality, office, and all sorts of stuff. So our core, our strongest market in kind of the central New Jersey Shore, is doing pretty well.
Speaker #4: Do you see any sort of longer-term opportunities that build out?
Speaker #5: Well , it's going to be a tremendous thing for the Monmouth County , which is our second strongest county after Ocean County . So I think we've got a few branches that provide some coverage for that .
Speaker #5: Market that already. I don't know that we'll open other branches, but I'll make a broader comment. That's a great kind of boon to the Monmouth County market.
Speaker #5: But , you know , we continue to see over the course of our core call it the Jersey shore market , that the post-pandemic period has been a seismic shift .
Speaker #5: More people are down at the shore , more parts of the year been a . significant There's demand for the infrastructure you need everything from , you know , hospital systems having to expand to , you know , hospitality and office and all sorts of stuff .
Joseph Lebel III: And I think that's going to be a pretty sticky thing. We see that happening probably for several more quarters.
And I think that's going to be a pretty sticky thing. We see that happening probably for several more quarters.
Speaker #5: So, our core, strongest market in kind of the central New Jersey shore is doing pretty well. And that's going to be, I think, a pretty sticky thing.
Patrick Barrett: Got it. Appreciate the color.
David Bishop: Got it. Appreciate the color.
Speaker #5: We probably see that happening for several more quarters.
Operator: Thank you for that question. Next up, we have Matthew Breese from Stephens Inc. Go ahead. Your line is now open.
Operator: Thank you for that question. Next up, we have Matthew Breese from Stephens Inc. Go ahead. Your line is now open.
Speaker #4: I appreciate the color .
Speaker #3: Thank you for for that question . Next up we have Matthew Breeze from Stephens Incorporated . Go ahead . Your line is now open .
[Analyst] (Stephens Inc.): Good morning.
Matthew Breese: Good morning.
Joseph Lebel III: Good morning, Matt.
Christopher Maher: Good morning, Matt.
[Analyst] (Stephens Inc.): On Premier Banking, I guess I was a little bit surprised by the loan and deposit growth guide and outlook maintaining a 100% loan-to-deposit ratio. I was thinking once the Premier Banking effort got up and running, there would be a reduction to that ratio. I was hoping you could maybe talk a little bit to that. And then the other one is I know it's still early days with these teams, but on the DDA side, is 30% DDAs from Premier Banking? Is that still the right long-term number?
Matthew Breese: On Premier Banking, I guess I was a little bit surprised by the loan and deposit growth guide and outlook maintaining a 100% loan-to-deposit ratio. I was thinking once the Premier Banking effort got up and running, there would be a reduction to that ratio. I was hoping you could maybe talk a little bit to that. And then the other one is I know it's still early days with these teams, but on the DDA side, is 30% DDAs from Premier Banking? Is that still the right long-term number?
Speaker #9: Good morning .
Speaker #8: Matt .
Speaker #9: I'm Banking Premier. I guess I was a little bit surprised by the loan and deposit growth guide and outlook. Maintaining a 100% loan-to-deposit ratio.
Speaker #9: I was thinking, once the Premier making effort got up and running, there would be a reduction to that ratio. I was hoping you could talk a little bit to that. Then the other one is, you know, I know it's still early days with this.
Speaker #9: You know , these teams . But on the DDA side is 30 days from Premier Banking . Is right long still the term number that ?
Joseph Lebel III: So I'll take the first side, then Joe can take the question about the non-interest bearing. In terms of the loan-to-deposit ratio, we'd like to see that down under 100. On any particular quarter, it's a little bit of wait till the last few days as you see deposits come in or go out. I don't expect us to be a bank that's going to wind up at a 90% loan-to-deposit ratio, but I'd like to be substantially lower than 100. I think we're going to see how things play out. We're opportunistic too about earnings and making sure that we've got the right earnings power. And I would note that we've got a very robust set of deposit verticals. So we have our consumer deposit vertical. We have a government banking vertical. We have our corporate cash management and C&I vertical.
Christopher Maher: So I'll take the first side, then Joe can take the question about the non-interest bearing. In terms of the loan-to-deposit ratio, we'd like to see that down under 100. On any particular quarter, it's a little bit of wait till the last few days as you see deposits come in or go out. I don't expect us to be a bank that's going to wind up at a 90% loan-to-deposit ratio, but I'd like to be substantially lower than 100. I think we're going to see how things play out. We're opportunistic too about earnings and making sure that we've got the right earnings power. And I would note that we've got a very robust set of deposit verticals. So we have our consumer deposit vertical. We have a government banking vertical. We have our corporate cash management and C&I vertical.
Speaker #5: take the first side then . I'll Joe can take the question about the noninterest bearing in terms of the loan to deposit ratio .
Speaker #5: We'd like to see that down under 100 on any particular quarter. It's a little bit of, you know, wait till the last few days as you see deposits come in or go out.
Speaker #5: I don't expect us to be a bank that's going to wind up at a 90% loan-to-deposit ratio, but I'd like to be substantially lower than 100.
Speaker #5: I think we're going to see how things play out. We're opportunistic, too, about earnings and making sure that we've got, you know, the right earnings power.
Speaker #5: And I would note that we have a very set group of deposit verticals. So we have our consumer deposit vertical, and we have our government banking vertical.
Joseph Lebel III: And we have the Premier vertical, which overlaps a lot with the C&I vertical. So we have a lot of different sources of deposits and feel comfortable running at the higher end, which is not unusual for banks in the Northeast. But to your point, we'd like to be further under 100. I think you may see that over the next several quarters, but not dramatically under 100.
And we have the Premier vertical, which overlaps a lot with the C&I vertical. So we have a lot of different sources of deposits and feel comfortable running at the higher end, which is not unusual for banks in the Northeast. But to your point, we'd like to be further under 100. I think you may see that over the next several quarters, but not dramatically under 100.
Speaker #5: We have our corporate cash management and CNI vertical. And we have the Premier vertical, which overlaps a lot with the CNI vertical.
Speaker #5: So, we have a lot of different sources of deposits and feel comfortable running at the higher end, which is not unusual for banks in the Northeast.
Speaker #5: but to your But point , we'd like to be further under 100 . I think you may see that over the next several quarters , but but not dramatically under 100 .
Patrick Barrett: I think on the second half, Matt, I'd tell you that between 25 and 30 is actually, in my mind, still the right number. What we're hearing a lot from clients and clients that I've met personally is that their anticipation in mid-year 2025, late 2025, was a transition into full operating businesses coming across to OceanFirst in 2026. So we still have a significant number of unfunded operating accounts that we've opened getting ready for people to migrate. So I anticipate you're going to see a higher percentage of DDA as time goes on during the 2026 fiscal year.
Joe Lebel: I think on the second half, Matt, I'd tell you that between 25 and 30 is actually, in my mind, still the right number. What we're hearing a lot from clients and clients that I've met personally is that their anticipation in mid-year 2025, late 2025, was a transition into full operating businesses coming across to OceanFirst in 2026. So we still have a significant number of unfunded operating accounts that we've opened getting ready for people to migrate. So I anticipate you're going to see a higher percentage of DDA as time goes on during the 2026 fiscal year.
Speaker #1: I think on the second half , Matt , I tell you that between 25 and 30 is actually mind , , in my still the right number .
Speaker #1: What we're hearing a lot from clients, and clients that I've met, is that they're anticipating. In mid-year of '25, late year '25 was a transition into full operating businesses coming OceanFirst in '26.
Speaker #1: So, we still have a significant number of unfunded operating accounts that we've opened, getting ready for people to migrate. So I anticipate you're going to see a higher percentage of DDA as time goes on.
[Analyst] (Stephens Inc.): Got it. Okay. And then, Chris, going back to Flushing, you had mentioned that there were some higher-cost components. Of the $7.3 billion of Flushing deposits, could you just describe some of the business lines tied to the higher-cost components? And then oppositely, what are the highest-quality parts that you're more likely to kind of keep and grow? What's on the whiteboard there?
Matthew Breese: Got it. Okay. And then, Chris, going back to Flushing, you had mentioned that there were some higher-cost components. Of the $7.3 billion of Flushing deposits, could you just describe some of the business lines tied to the higher-cost components? And then oppositely, what are the highest-quality parts that you're more likely to kind of keep and grow? What's on the whiteboard there?
Speaker #1: During the 2026 fiscal year.
Speaker #9: Got it . Okay . And then Chris , going back to flushing , you had mentioned that there was some some higher cost , you know , of the 7.3 billion of flushing deposits , could you describe some of the just business lines tied to the higher cost components and then obviously , you know , what are the highest quality parts that you're more likely to kind of keep and grow ?
Joseph Lebel III: So if you think about, everyone has kind of pockets of deposits, and everyone has more kind of promotionally priced deposits. If you think about their national deposit vertical, the iGObanking, for example, or BankPurely, which is not a lot of dollars, it's a good capability for us to have and preserve going forward. But those are higher-cost deposits. Not surprising, some of the government deposits are higher-cost because they wind up being excess fund accounts, and you've got to be competitive on that. And then there are some money market accounts across the base that have been kind of priced more to acquire deposits. But there's still a pretty big slug of long-term, high-quality deposits that either historically have been at Flushing for a long time. I remember the bank was chartered in 1929, so they've got a really long history.
Christopher Maher: So if you think about, everyone has kind of pockets of deposits, and everyone has more kind of promotionally priced deposits. If you think about their national deposit vertical, the iGObanking, for example, or BankPurely, which is not a lot of dollars, it's a good capability for us to have and preserve going forward. But those are higher-cost deposits. Not surprising, some of the government deposits are higher-cost because they wind up being excess fund accounts, and you've got to be competitive on that. And then there are some money market accounts across the base that have been kind of priced more to acquire deposits. But there's still a pretty big slug of long-term, high-quality deposits that either historically have been at Flushing for a long time. I remember the bank was chartered in 1929, so they've got a really long history.
Speaker #9: What's on the whiteboard there?
Speaker #5: So, if you think about it, you know, everyone has kind of pockets of deposits, and everyone has more kind of promotionally priced deposits.
Speaker #5: If you think about there , the National deposit vertical , the ego banking , for example , or bank purely , which is not a lot of dollars , it's a good capability for us to have and preserve going forward .
Speaker #5: But those are higher cost deposits . Not surprising . Some of the government deposits are higher cost because they wind up being excess fund accounts .
Speaker #5: And you've got to be competitive on that . And then , you know , there are some money market accounts across the base that have been kind of priced more to to acquire deposits .
Speaker #5: But , you know , there's still a pretty big slug of long term , high quality deposits that either historically have been at flushing for a long time .
Joseph Lebel III: Very strong in Queens, very strong in the Asian communities. Significant number of the branches they've opened in the last several years have been to serve the Asian communities around the city, which are not just in Flushing, but places like Bay Ridge, Lower Manhattan, Sunset Park, kind of those areas. So I think the real opportunity here is those long-term consumer accounts that go back in a lot of the franchise, the Asian markets, and a lot of their commercial clients keep operating accounts with them. So that's all high-quality stuff. Around the edges, we might decrease the amount of dollars that are out in iGObanking, maybe some of the higher-yield money market, maybe some of the higher-cost government. That's kind of the high-quality, lower quality. And I think every bank has some of that. We're looking at our own stuff too in the way we price.
Very strong in Queens, very strong in the Asian communities. Significant number of the branches they've opened in the last several years have been to serve the Asian communities around the city, which are not just in Flushing, but places like Bay Ridge, Lower Manhattan, Sunset Park, kind of those areas. So I think the real opportunity here is those long-term consumer accounts that go back in a lot of the franchise, the Asian markets, and a lot of their commercial clients keep operating accounts with them. So that's all high-quality stuff. Around the edges, we might decrease the amount of dollars that are out in iGObanking, maybe some of the higher-yield money market, maybe some of the higher-cost government. That's kind of the high-quality, lower quality. And I think every bank has some of that. We're looking at our own stuff too in the way we price.
Speaker #5: I remember the bank was chartered in 1929, so they've got a really long history, very in Queens, very strong in the Asian communities.
Speaker #5: A significant number of the branches they've opened in the last several years have been to serve the Asian communities around the city, which are not just in Flushing, but places like Bay Ridge and Lower Manhattan.
Speaker #5: Park , Sunset those areas . So I think the real opportunity here is those long term consumer accounts that go back in a lot of their franchise , the Asian markets and a lot of commercial their clients keep operating accounts with them .
Speaker #5: So that's all high-quality stuff around the edges. You know, we might decrease the amount of dollars that are out in banking.
Speaker #5: Maybe some of the higher yield money market , maybe some of the higher cost government kind of the . kind That's of the high quality , quality lower .
Speaker #5: And I think every bank has some of that. You know, we're looking at our own stuff too, in the way we price.
[Analyst] (Stephens Inc.): Understood. Very helpful. And Pat, just looking at deposit costs up this quarter, and I know you've mentioned there was an isolated incident. Obviously, Premier Banking as a blend is higher than the average cost. Could you help us out with the deposit cost outlook for the year? Where do we peak? And without any rate cuts or using your rate cut kind of forecast, where do you expect deposit costs to be at the end of the year?
Matthew Breese: Understood. Very helpful. And Pat, just looking at deposit costs up this quarter, and I know you've mentioned there was an isolated incident. Obviously, Premier Banking as a blend is higher than the average cost. Could you help us out with the deposit cost outlook for the year? Where do we peak? And without any rate cuts or using your rate cut kind of forecast, where do you expect deposit costs to be at the end of the year?
Speaker #8: It .
Speaker #9: Very Understood . helpful . And Pat , just looking at deposit costs up this quarter . And I know you've mentioned , you know , there was an isolated incident .
Speaker #9: Obviously, Premier Banking as a blend is higher than the average cost. Could you help us out with the deposit costs outlook for the year?
Speaker #9: Where do we peak, and without any rate cuts—or using your rate cut kind of forecast—where do you expect deposit costs to be at the end of the year?
Patrick Barrett: Yeah. I am not going to give you a guess of where deposit costs are going to be at the end of the year, but I do think that they're going to keep coming down. They are coming down. They're lagging a little bit from a speed of repricing relative to rate cuts, which is exactly what happened when we were in a rising rate environment. We lagged before they started going up. So I think we're seeing the same kind of thing. So starting off slowly, repricing, and then picking up. I'm encouraged by the fact that all of our spot rates across all of our deposit types are noticeably lower than the averages for the quarter. So they are steadily coming down already. Rate cuts help because there's a lot of promotionally priced stuff.
Pat Barrett: Yeah. I am not going to give you a guess of where deposit costs are going to be at the end of the year, but I do think that they're going to keep coming down. They are coming down. They're lagging a little bit from a speed of repricing relative to rate cuts, which is exactly what happened when we were in a rising rate environment. We lagged before they started going up. So I think we're seeing the same kind of thing. So starting off slowly, repricing, and then picking up. I'm encouraged by the fact that all of our spot rates across all of our deposit types are noticeably lower than the averages for the quarter. So they are steadily coming down already. Rate cuts help because there's a lot of promotionally priced stuff.
Speaker #2: Yeah, I am not going to give you a guess of where deposit costs are going to be at the end of the year, but I do think that they're going to keep coming down.
Speaker #2: They are coming down. They're lagging a little bit from a speed of repricing relative to rate cuts, which is exactly what happened when we were in an upright environment.
Speaker #2: We we lagged before they started up . So I think going we're starting we're seeing the same kind of thing . So starting off slowly , replacing repricing and then picking up , I'm encouraged by the the fact that all of our spot rates across all of our deposit types are noticeably lower than the averages for the quarter .
Patrick Barrett: It's not contractually indexed, but a lot of the larger promotional balances definitely are linked there. And frankly, the pace of loan growth and the opportunity for loan growth is going to drive a lot of how that ends up occurring, similar to the loan-to-deposit ratio. It's less something that we drive the business towards rather than an outcome. And if there's high-quality loan growth that is a little bit higher than our deposit growth outlooks, then we'll probably fill the buckets with some higher-cost deposits just to secure the longer-term lending relationships. So I think you'll probably see deposit costs and loan yields roughly moving in line with each other, with a slight edge on the loan yields due to growth. And that's going to drive our margin, I think, steadily improving as we move through the year, a handful of basis points every quarter.
It's not contractually indexed, but a lot of the larger promotional balances definitely are linked there. And frankly, the pace of loan growth and the opportunity for loan growth is going to drive a lot of how that ends up occurring, similar to the loan-to-deposit ratio. It's less something that we drive the business towards rather than an outcome. And if there's high-quality loan growth that is a little bit higher than our deposit growth outlooks, then we'll probably fill the buckets with some higher-cost deposits just to secure the longer-term lending relationships. So I think you'll probably see deposit costs and loan yields roughly moving in line with each other, with a slight edge on the loan yields due to growth. And that's going to drive our margin, I think, steadily improving as we move through the year, a handful of basis points every quarter.
Speaker #2: So they are steadily coming down already . Rate cuts help because there's a lot of priced promotionally stuff . It's not it's not contractually indexed , but a lot of larger promotional balances the definitely are are linked .
Speaker #2: There. And frankly, the pace of loan growth and the opportunity for loan growth is going to drive a lot of how that ends up occurring.
Speaker #2: to the loan Similar to deposit ratio , it's less something that we drive the business towards rather than an outcome . And if there's high quality loan growth , is a little that bit higher than our deposit growth outlooks , then we'll probably fill the fill the buckets with some higher cost deposits just to secure the longer term lending relationships .
Speaker #2: So, I think you'll probably see deposit costs and loan yields moving in line with each other, with a slight edge on the loan yields due to growth.
Speaker #2: And that's going to drive our margin . I think steadily improving as we move through the year . You know , a handful of basis points every quarter .
Patrick Barrett: That's a backhanded way of not answering your question exactly, so.
That's a backhanded way of not answering your question exactly, so.
[Analyst] (Stephens Inc.): No, all very helpful. Maybe just to drill in on one category that looks like it has the most room, your time deposit costs. The spot cost at the end of the quarter was 364. What is kind of the blended all-in cost of CDs as they? I know there's going to be some promotional stuff in there, but the all-in blend of stuff resets.
Matthew Breese: No, all very helpful. Maybe just to drill in on one category that looks like it has the most room, your time deposit costs. The spot cost at the end of the quarter was 364. What is kind of the blended all-in cost of CDs as they? I know there's going to be some promotional stuff in there, but the all-in blend of stuff resets.
Speaker #2: That's a backhanded way of not answering your question. Exactly. So.
Speaker #9: No , all very I no , all very helpful . And maybe just to drill in on one category that looks like it has the most room your time deposit cost , the spot cost at the end of the quarter was 3.64 .
Speaker #9: What is kind of the blended all in cost of CDs as you know , I know there's going to be some promotional stuff in there , but the all in blend of stuff resets .
Joseph Lebel III: Yeah. Well, one thing, Matt, I'd note that when we think about the balance sheet restructure to your prior question, that's the first hours when you give up. We don't have a lot of brokers, but we do have some. And we've kept those durations really short. So as we kind of zero in on the combined balance sheet with Flushing, the very first thing we will do is let those brokers run off. And those are in the high threes, but coming down. So even if we kept them, they would be coming down. So I think there's a strong opportunity there. And all of that is probably the weighted average duration on that is under six months, Pat?
Christopher Maher: Yeah. Well, one thing, Matt, I'd note that when we think about the balance sheet restructure to your prior question, that's the first hours when you give up. We don't have a lot of brokers, but we do have some. And we've kept those durations really short. So as we kind of zero in on the combined balance sheet with Flushing, the very first thing we will do is let those brokers run off. And those are in the high threes, but coming down. So even if we kept them, they would be coming down. So I think there's a strong opportunity there. And all of that is probably the weighted average duration on that is under six months, Pat?
Speaker #8: Yeah .
Speaker #5: Well , one thing , Matt , I note that when we think about the balance sheet restructure to your prior question . That's the first hours we give up .
Speaker #5: We don't have a lot of brokered , but we do have some . And we've kept those durations really short . So as we kind of zero in on the combined balance sheet with flushing the , very first thing we will do is let those brokered run off and those are in the high threes .
Speaker #5: But coming down. So even if we kept them, they would be coming down. So I think there's a strong opportunity there.
Patrick Barrett: Yes. It's about 4 months. So we can pretty rapidly change prices. And we actually do. We don't wait for a rate cut and mess around with kind of daily changes. And we see, are we able to keep rollover balances or not? Are we attracting any new balances or not? With it, again, that being just one of the components of funding base that we would need to maintain to support whatever the loan growth rate is.
Pat Barrett: Yes. It's about 4 months. So we can pretty rapidly change prices. And we actually do. We don't wait for a rate cut and mess around with kind of daily changes. And we see, are we able to keep rollover balances or not? Are we attracting any new balances or not? With it, again, that being just one of the components of funding base that we would need to maintain to support whatever the loan growth rate is.
Speaker #5: And all of that is probably—the weighted average on that duration is under six months.
Speaker #2: Yes . It's about four months . So we can pretty rapidly change prices . And we actually do . We don't wait for a rate cut and mess around with kind of daily changes .
Speaker #2: And we see are we able to keep rollover or balances not . Are we attracting any new balances or not . With again , that being just one of the components of funding base that we we need to to maintain to support whatever the loan growth rate is .
[Analyst] (Stephens Inc.): I'll leave it there. Thanks for taking all my questions.
Matthew Breese: I'll leave it there. Thanks for taking all my questions.
Joseph Lebel III: All right. Thank you, Matt.
Christopher Maher: All right. Thank you, Matt.
Operator: Thank you. And that is it for all the questions. Thank you, everyone, for participating on that. And the Q&A is now clear. And I'll hand it back to Chris Maher for some final remarks.
Operator: Thank you. And that is it for all the questions. Thank you, everyone, for participating on that. And the Q&A is now clear. And I'll hand it back to Chris Maher for some final remarks.
Speaker #9: I'll leave it. I'll leave it there. Thanks for taking all my questions.
Speaker #5: All right. Thank you, Matt.
Speaker #3: Thank you. And that is it for all the questions. Thank you, everyone, for participating in that, and the Q&A is now clear.
Joseph Lebel III: All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in April about our first quarter results. Thanks very much. Bye.
Christopher Maher: All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in April about our first quarter results. Thanks very much. Bye.
Speaker #3: I'll hand it back to Chris Maher for some final remarks.
Speaker #5: All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in April about our first quarter results.
[Analyst] (Stephens Inc.): This concludes today's call. Thank you all for joining. You may now disconnect your lines. Have a great one.
Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines. Have a great one.
