OceanFirst Financial Corp. Aims for Long-Term Growth Amid Deposit Shift and Expense Management
2024-01-20
OceanFirst Financial Corp. recently held its Q4 2023 Earnings Call on January 19, 2024. The call was attended by key participants including Alfred Goon, Christopher Maher, Joseph Lebel, and Patrick Barrett. During the call, the company discussed various financial results and strategic initiatives executed in the fourth quarter.
In terms of financial results, OceanFirst Financial Corp. reported GAAP diluted earnings per share of $0.46, net interest income of $87.8 million, and operating expenses of $60.2 million (excluding the FDIC special assessment of $1.7 million). The company also highlighted the impact of deposit mix shift on net interest margins, with some pressure but improving margins.
OceanFirst Financial Corp. implemented strategic initiatives to improve efficiency and hold expenses flat for the year 2024. They focused on protecting their deposit base through competitive pricing strategies and reducing brokered time deposits by $364 million. The company aimed to maintain a loan-to-deposit ratio below 98% and achieved a common equity Tier 1 capital ratio of 10.88%. The tangible book value per share was reported as $18.35, and the quarterly cash dividend per common share was $0.20, representing 44% of GAAP earnings.
The company also discussed its core noninterest expense, which was $58.5 million for the quarter, excluding the FDIC special assessment. They aimed to hold operating expenses flat in 2024 and mentioned an effective tax rate of 24%. OceanFirst Financial Corp. planned to resume share repurchase activity and assumed three rate cuts throughout the year.
In terms of loan and deposit growth, the company aimed to achieve a 100% loan-to-deposit ratio this year. They planned to fund loan growth with core deposit growth and anticipated low single-digit loan and deposit growth to start the year. The company expected competition for deposits to remain brisk and was cautious about predicting deposit costs due to uncertainty in consumer and business response to lower rates.
OceanFirst Financial Corp.'s performance had been a mix of outperformance and slow performance. They had reduced operating expenses and increased deposits through hiring bankers and deepening relationships with clients. The company's loan portfolio was repricing, and they expected commercial real estate properties to handle higher rates well. They mentioned the potential benefit of the Fed starting to move rates, which could decrease deposit costs.
The commercial pipeline was currently focused on C&I projects, and OceanFirst had attracted new deposits in the commercial bank through defending and attracting new customers. Their priority for capital allocation was investing in themselves and continuing organic growth. The company believed that M&A activity would return to the industry once there was a better understanding of rates and financial conditions.
OceanFirst Financial Corp. aimed for a long-term growth rate of about 10% per year, although achieving this rate in 2024 may be unlikely. They expected loan marks to improve in the current quarter and were working towards aligning fair value exposure with discount rate assumptions. The franchise's first-quarter results would be published in April.
In conclusion, the Q4 2023 Earnings Call for OceanFirst Financial Corp. covered various topics including financial results, strategic initiatives, deposit mix shift, loan-to-deposit ratio, operating expenses, loan and deposit growth, fair value exposure, and long-term growth outlook. The company remained focused on improving efficiency, protecting their deposit base, and driving organic growth.