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OCEANFIRST FINANCIAL CORP (OCFC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean EPS of $0.35, modestly above S&P Global consensus ($0.35 vs $0.349), on sharp NIM expansion (+21 bps q/q to 2.90%) as deposit costs fell 26 bps; revenue came in below S&P consensus, with seasonally lower title fees and a higher provision for macro uncertainty tempering upside . EPS consensus: $0.3486*, revenue consensus: $95.6M*; EPS actual: $0.35; revenue actual (S&P): $92.6M* [Q1 2025 row below].
  • Management launched “Premier Bank” (9 teams, 36 bankers) to drive low-cost, relationship deposits in NY metro; expects expense run-rate to rise ~10% in Q2 (≈$4M tied to hiring) with margin benefits skewed to H2 2025; CET1 remained strong at 11.2% and the company is redeeming all preferreds on May 15, reducing future preferred dividends .
  • Credit quality remained sound: NPLs/Loans at 0.37% (up slightly q/q), criticized/classified down 5% q/q; provision rose to $5.3M on macro uncertainty; net charge-offs were a low $0.6M; ACL/Loans increased to 0.78% .
  • Near-term catalysts: sustained deposit repricing, Premier Bank deposit inflows, CRE maturity wall repricing at higher yields, preferred redemption, and potential Fed cuts; watch Q2 opex step-up and seasonality offsetting NIM progress .

What Went Well and What Went Wrong

What Went Well

  • Margin/NI growth: NIM rose 21 bps to 2.90% q/q and net interest income grew $3.3M to $86.7M on lower deposit costs (total cost of deposits 2.06% vs 2.32% q/q) .
  • Premier Bank build-out: 9 teams (36 bankers) onboarded; intent is to deliver substantial low-cost commercial deposits over time; management targets H2 margin lift and sees attractive blended deposit costs (20%+ non-interest-bearing typical) .
  • Capital/returns: CET1 11.2%; 398k shares repurchased for $6.9M (avg $17.20); declared $0.20 dividend; full preferred redemption on May 15 to eliminate ~$1.0M quarterly preferred dividends .

What Went Wrong

  • Higher provision: Provision increased to $5.3M (vs $3.5M q/q; $0.6M y/y) on macro uncertainty, lifting ACL/Loans to 0.78% (from 0.73%) .
  • Seasonality in fees: Noninterest income down $1.0M q/q to $11.3M; title fees seasonally soft; BOLI normalized after non-recurring death benefits last quarter .
  • Opex trajectory: Q2 run-rate to rise ~10% q/q due to Premier Bank hires (≈$4M), with benefits lagged to H2; efficiency ratio still elevated at 65.7% .

Financial Results

Core P&L and Profitability (USD Millions, per-share metrics)

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income$82.219 $83.329 $86.652
Total Other Income$14.684 $12.232 $11.253
Diluted EPS ($)$0.42 $0.36 $0.35
Net Interest Margin (%)2.67% 2.69% 2.90%
Efficiency Ratio (%)65.77% 67.86% 65.67%

Balance Sheet & Credit KPIs

KPIQ3 2024Q4 2024Q1 2025
Loans ($B)$9.964 $10.055 $10.058
Deposits ($B)$10.116 $10.066 $10.177
Loan-to-Deposit Ratio99.10% 100.50% 99.50%
Cost of Deposits (incl. DDA)2.44% 2.32% 2.06%
CET1 Ratio (est.)11.3% 11.2% 11.2%
NPLs / Loans0.28% 0.35% 0.37%
ACL / Loans0.69% 0.73% 0.78%
Net Loan (Charge-offs)/Recoveries ($M)+$0.088 +$0.158 -$0.636
Commercial Loan Pipeline ($M)$351.6 $306.7 $504.4

Additional Operating Drivers

  • Deposit mix/pricing: Non-maturity deposits +$72M q/q; time deposits up on $350M short-duration brokered CDs offsetting retail runoff; deposit beta trending lower; spot rates below quarterly averages .
  • C&I momentum: C&I loans +$95.1M q/q; broad-based with momentum in GovCon (VA/MD/DC); pipeline +90% q/q to $375.6M .
  • Asset quality detail: NPLs up modestly q/q; criticized/classified loans down 5% to $149.3M; coverage of NPLs rose (213% → 213%) and ACL plus credit marks total ~0.83% of loans .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
LoansQ2 2025—Mid-single-digit annualized growth New (introduced)
DepositsQ2 2025—Growth consistent with loan growth New
Operating ExpensesQ2 2025 run-rate—~+10% q/q; ≈$4M tied to Premier Bank hires New
Net Interest IncomeH1 vs H2 2025Stable/prudent“Move in step with balance sheet”; additional margin expansion expected in H2 Clarified upward bias H2
Other Income2025—Relatively stable New
Credit2025—Continued benign outlook New
Capital2025CET1 >10%Maintain CET1 >10%; redeem all preferred stock 5/15/25 Maintained CET1; capital costs lowered
Tax Rate2025—Effective tax rate ~23–25% New
DividendQ2 2025$0.20$0.20 declared for Q1; ongoing cadence implied Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Net interest margin trajectoryStabilizing NIM 2.67% in Q3; inflection to 2.69% in Q4 on deposit mix improvement NIM 2.90% on lower deposit costs; tailwinds expected H2 2025 Improving
Deposit costs/mixBrokered CD runoff; spot rates declining; deposit base stable in Q4 Total cost of deposits 2.06% (down 26 bps q/q); non-maturity up; short brokered CDs used tactically Positive
“Premier Bank” deposit initiativeNot present (teams added in Q1)9 teams, 36 bankers onboarded; low-cost, relationship deposits; ramp over 2–3 years New growth vector
Loan growth/pipelinePipeline $351.6M (Q3); Q4 growth +$95.9M C&I +$95.1M q/q; pipeline $504.4M, +90% q/q Accelerating
Credit outlookNPLs 0.28% (Q3), 0.35% (Q4); provision modest Benign performance; provision raised on macro uncertainty; criticized/classified down 5% Stable/Conservative
CRE concentration/rolloverCompetitive market; concentration managed; maturity wall discussed ~$1.2B CRE IO set to reprice ‘25–’26; DSCRs healthy; earnings upside on repricing Opportunity
Capital actionsBuybacks; CET1 >11% (Q3/Q4) Preferred redemption 5/15; continued opportunistic buybacks De-risking/optional

Management Commentary

  • “We are pleased to present our current quarter results, which reflect a meaningful expansion of net interest income and net interest margin, continued strong asset quality metrics, and further capital accretion, including share repurchases.” — Christopher D. Maher, Chairman & CEO .
  • “Both net interest income and margin grew in the quarter... deposit repricing pace may moderate in the near term, but with positive tailwinds expected in the back half of the year as our deposit gathering initiatives begin to ramp up.” — Patrick Barrett, CFO .
  • “Premier Bank... teams typically maintain a substantial portion of noninterest deposits... when you blend [with] lower-end-of-market rates, you get a very attractive cost of deposits.” — Christopher Maher .

Q&A Highlights

  • Premier Bank deposit mix/cost: Teams often carry ~20%+ non-interest-bearing; blended costs at low end of market across remaining balances; focus is net-new customers, not remapping legacy .
  • Expense run-rate: Q2 opex run-rate guided ~+10% q/q, with ~$4M tied to hires; CFO suggests using ~$66M base; run-rate should be relatively stable thereafter absent further hiring .
  • C&I growth breadth: Broad-based growth with momentum in GovCon (VA/MD/DC), benefiting from selectivity and no back-book legacy exposure .
  • NIM/NII outlook: Additional margin expansion expected in H2 2025; potential Fed cuts, Premier Bank ramp, and back-book CRE repricing are stacked tailwinds; caution on giving precise guides .
  • Capital allocation: Full preferred redemption on 5/15; continued opportunistic buybacks (1.2M shares remain authorized) while preserving balance sheet optionality .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
EPS Consensus Mean (S&P)$0.381*$0.363*$0.349*
EPS Actual$0.39 $0.38 $0.35
Revenue Consensus Mean (S&P)$92.94M*$94.95M*$95.63M*
Revenue Actual (S&P)$96.39M*$90.79M*$92.57M*

Values retrieved from S&P Global.

  • Q1 2025: EPS slight beat; revenue below S&P consensus (definitions differ from “net interest income + other income” in GAAP reporting).
  • Q4 2024: EPS beat; revenue below. Q3 2024: Beat on both EPS and revenue.

Key Takeaways for Investors

  • Margin momentum is real and broad-based: 26 bps decline in deposit costs and Premier Bank’s low-cost deposit engine position NIM for further expansion in H2 2025, especially if the Fed cuts and CRE back book reprices at higher yields .
  • Near-term trade-off: Expect a Q2 opex step-up (~10% q/q; ~$4M Premier Bank hires) before benefits accrue; watch efficiency ratio trajectory into H2 .
  • Credit remains a differentiator: Low NCOs (3 bps annualized), healthy coverage, reduced criticized/classified balances; macro-driven reserve build underscores conservative stance .
  • Capital flexibility improves post-preferred redemption; with CET1 ~11.2%, OCFC retains optionality to repurchase stock and/or refinance sub debt if attractive .
  • C&I pipeline acceleration (to $504M) and GovCon channel expand growth avenues; Premier Bank should diversify and lower funding costs as teams ramp .
  • Watch list for Q2: expense run-rate realization, deposit inflows from Premier Bank, cost of deposits trend, and continued NIM improvement.

Appendix: Notable Disclosures and Data Points

  • Dividend: $0.20 per common share declared; 113th consecutive quarterly dividend .
  • Share repurchase: 398,395 shares repurchased for $6.9M (avg $17.20) in Q1; 1,228,863 shares remain authorized .
  • Preferred redemption: Redeeming all 57,370 Series A preferred shares (7.00% fixed-to-floating) on May 15, 2025; eliminates ~$1.0M quarterly preferred dividends .

Notes:

  • Where “Revenue” refers to S&P Global consensus/actuals, figures are marked with an asterisk and sourced to S&P Global (see Estimates Context table).
  • Company-reported operating lines (Net Interest Income, Other Income, etc.) and ratios are cited to the company’s 8-K/press materials.