OceanFirst Financial Corp. (NASDAQ:OCFC) Q1 2024 Earnings Call Transcript

OceanFirst Financial Corp. (NASDAQ:OCFC) Q1 2024 Earnings Call Transcript April 19, 2024

OceanFirst Financial Corp. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. Thank you for attending the OceanFirst Financial First Quarter 2024 Earnings Release. My name is Victoria, and I’ll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to your host, Alfred Goon with OceanFirst Financial. Thank you. You may proceed, Alfred.

Alfred Goon: Thank you very much. Good morning and welcome to the OceanFirst first quarter 2024 earnings call. 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 our 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. Thank you. And now I will turn the call over to Christopher Maher, Chairman and Chief Executive Officer.

Christopher Maher: Thank you, Alfred. Good morning and thank you to all been able to join our first quarter 2024 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’ll 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. Our financial results for the first quarter included GAAP diluted earnings per share of $0.47.

Our earnings reflect net interest income of $86 million, representing a modest decrease compared to the prior linked quarter of $88 million. Operating expenses decreased to $59 million. First quarter results demonstrated a stable quarter for margins as our core net interest margin was flat at 2.77%, the same level as the prior quarter. Margins were impacted by our continuing efforts to improve the quality of deposit funding. These efforts resulted in another quarter of decline in brokered CDs, our loan to deposit ratio below 100% and a negligible increase in deposit betas to 40%. We continue to see a gradual shift in deposit mix towards higher yielding products, but that velocity is slowing and is now largely offset by the ongoing repricing of our loan and securities portfolios.

Capital levels continue to build with our common equity Tier 1 capital ratio increasing to 11% and continued growth in tangible book value, which increased by $0.28 or 1. 5% to $18.63. These results include nearly 1 million shares repurchased under the company’s repurchase program at a weighted average cost of $15.64. Further on capital management, the Board has approved the quarterly cash dividend of $0.20 per common share. This is the company’s 109th consecutive quarterly cash dividend that represents a 43% of GAAP earnings. We continue to remain focused on positioning the company for a variety of economic and industry outlooks through responsible growth, expense discipline and prudent balance sheet management. At this point, I’ll turn the call over to Joe to provide some more detail regarding our performance during the first quarter.

Joe Lebel: Thanks, Chris. Non-maturity deposits remain relatively stable, decreasing approximately 1% compared to the prior quarter. Our overall deposit balances declined by approximately 2%, reflecting our planned continued runoff of brokered CDs and a decline in high yield savings balances driven by targeted refinements to both marketing efforts and rates offered. On the loan origination side, we saw modest decline in loan balances of less than 1%, driven by reduced demand from customers combined with price and credit discipline. Given the slow start to the year, growth in loans and deposits may be modest for the remainder of 2024. Growth is expected to be lower in Q2, but ramp up in the second half of the year. Said another way, we expect our 2024 year-end loan balances to be higher than 2023 by low-to-mid single-digits with the majority of the growth coming in the third and fourth quarters.

Asset quality metrics remain strong with non-performing loans and criticized and classified assets representing 0.35% and 1.65% of total loans, respectively. We reported 0.01% in net charge-offs to average total loans for the quarter, which marks essentially no net charge-offs in the 11 of the last 12 quarters. With that, I’ll turn it over to Pat to review margin and expense outlook.

Pat Barrett: Thank you, Joe. GAAP net interest income and margin were $86 million and 2.81%, respectively, reflecting the continued repricing of assets offset by the higher interest expense from a continued modest mix shift in funding. As Chris noted, funding costs reflect cycles in a deposit betas of 40%, up modestly from 38% in the prior quarter, while initial signs show relative stabilization in net interest margin. This is subject to unpredictability around loan growth and funding mix trends. So you shouldn’t be surprised to see either stability or possibly some modest compression in the near-term. GAAP non-interest expenses decreased linked quarter to $59 million. We continue to make every effort to hold operating expenses stable in the $58 million to $60 million per quarter range, but modest quarterly volatility may occur.

Our effective tax rate for the quarter of 27% included a one-time non-recurring charge of $1.2 million, excluding this charge, the full year effective tax rate is expected to remain at 24% in line with prior periods and guidance. Finally, as Chris mentioned earlier, capital strengthened appreciably with growth in our CET1 ratio to 11%, and we’re pleased to report capital accretion even while repurchasing 958,000 shares for approximately $15 million during the quarter. At this point, we’ll begin the question-and-answer portion of the call.

Operator: Of course. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Frank Schiraldi with Piper Sandler. Your line is now open.

See also

Top 12 Ultra-High Yield Dividend Stocks to Buy and

25 States With the Highest Gas Prices.

To continue reading the Q&A session, please click here.