OCEANFIRST FINANCIAL CORP Q4 FY2024 earnings call

• Financial performance: Net income, net interest income, and margin grew; loan portfolio had positive growth; deposit growth solid with reduction in brokered CDs. - Operational highlights: Loan originations totaled $515 million; added 3 new C&I bankers in Q4 and 3 more in January 2025; Premier banking team build-out; deposit balances excluding brokered CDs increased; non-interest income had modest increase excluding non-core items; funding costs declined by 16 basis points.

For the fourth quarter, OceanFirst Financial Corp. had net income of $0.36 per share on a fully diluted GAAP basis and $0.38 per share on a core basis. Net interest income and margin grew to $83 million and 2.69% respectively. Loan originations totaled $515 million for the quarter, with annualized net loan growth of 4% driven by owner-occupied and residential portfolios. C&I originations were $78 million. Deposit balances excluding brokered CDs increased ~1% quarter-over-quarter, with year-to-date runoff of brokered CDs at $557 million. Non-interest income decreased $2.5 million to $12.2 million, but excluding non-core/recurring items, it modestly increased. Asset quality remained strong with special mention and substandard loans down 16% to 1.56% of total loans, and a full-year net charge-off rate of less than 2 basis points. Capital levels were robust with a common equity Tier 1 ratio of 11.2% and tangible book value per share of $18.98.

Modified guidance to Q1 due to investments in the year; typically see a modest uptick in Q1 expenses (~$1M to $1.5M) related to compensation, payroll taxes, etc.; hesitant to provide full-year outlook, will update quarterly as investments are made; hiring success could impact deposit and loan growth guidance.

Reserve build related to day one CECL provision from Spring Garden acquisition and macroeconomic factors; competitive market for C&I lending with risk of poor risk selection; potential pushback on deposit pricing affecting cost roll-down; uncertainty in hiring season impact on expense, deposit, and loan growth guidance.

Q: Could you quantify the typical seasonal increase in OpEx and future expense changes?

A: Typically see a modest uptick in Q1 (~$1M to $1.5M) related to compensation, payroll taxes; real changes in expenses likely from hiring revenue-producing talent.

Q: What's the outlook for C&I as a percentage of the portfolio?

A: Growth will be gradual, with C&I proportion increasing as investor CRE trends downward for rebalancing.

Q: Where is more opportunity to roll down deposit costs?

A: Still in process of repricing, with deliberate pricing down of CD book slowly but methodically.

Q: What's the pipeline for Premier banking hires?

A: Most hires in Q2 and Q3, with infrastructure already built, and focus on high-quality, long-term relationships.

Q: How is the earn back considered for hired teams?

A: Blend of productivity, with expectation that teams will be productive, and giving time for maturity, with contributions expected in next 18 months.