OceanFirst Financial Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Daniel Tamayo - Raymond James - Analyst : Thank you. Good morning, guys. Maybe to start just on the deposit side. Curious you got a lot going on, right? You've got the new hires, you added $115 million, I think you said, Joe, including some DDA there. At the same time, the overall funding costs are starting to stabilize. So as this shift continues to happen with the deposits coming on from the new hires. If we could pull rate cuts out of this for a second, do you think you can reduce funding costs going forward? And how much of that is like further out like next year or the year after type of thought or -- and how much is more near term?

Question: Daniel Tamayo - Raymond James - Analyst : Okay. And I guess, bigger picture, kind of same theme, but on the margin, stable to slightly up in the third quarter, maybe if there was a rate cut, it would have been stable or slightly down. But I'm just trying to think about the trajectory of the margin longer term, obviously up, but your thoughts on kind of how quickly that translates into margin expansion as we get into the out quarters here.

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Hey, good morning. Thanks for taking my questions. The first one I have is just a quick clarification on the outlook for stable noninterest income. What's the base for that? Is that the adjusted number or reported?

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Yeah. What is the base we should be using for the guidance for stable noninterest income?

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Fee income.

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Okay. So like that $12 million number?

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Okay. And then can you guys -- you guys talked about it a little bit last quarter, but could you provide a little bit more details on kind of what was the expense lift from the new hires you made in Premier Bank and how did that impact the earnings this quarter? And I think we're now at a more stable run rate going forward, right? Any plans for new hires over the rest of the year?

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Okay. And then the last question I have is you guys have been pretty decent capital levels here. Can you update us on your thoughts about your approach to M&A, how much of a priority that is relative to dividends and share repurchases?

Question: Tim Switzer - Keefe, Bruyette & Woods - Analyst : Great. Thank you guys.

Question: David Bishop - Hovde Group LLC - Analyst : Hey, good morning, gentlemen. Hey, question -- good to catch up. I think you said in the preamble, the deposits thus far from the Premier team, maybe 20% DDAs, seeing that ramping up. Do you see the weighted average rate going below the average for the entire bank over time and pushing that appreciably lower as you onboard more of these accounts.

Question: David Bishop - Hovde Group LLC - Analyst : Got it. And any -- I know it's still early in the life cycle here, but any new line of sight on potential loans emanating from that segment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 3:00PM, OCFC.OQ - Q2 2025 OceanFirst Financial Corp Earnings Call

Question: David Bishop - Hovde Group LLC - Analyst : Got it. And Joe was sticking maybe with loans on the commercial side. Just curious where you're seeing sort of the best opportunity either geographically or within that C&I segment, any specific verticals that are driving the majority of growth your way when it's pretty tough environment to grow C&I in this market.

Question: David Bishop - Hovde Group LLC - Analyst : Got it. Then maybe a housekeeping item on the sub debt, just any update there in terms of the thinking of redemption or retirement? Thanks.

Question: David Bishop - Hovde Group LLC - Analyst : Great. Thanks.

Question: Manuel Navas - D.A. Davidson & Co - Analyst : Hey, good morning.

Question: Manuel Navas - D.A. Davidson & Co - Analyst : Is the 3Q loan growth guide, how sustainable is that? And how much is that based on what you've seen so far this quarter and what's expected by the year-end? How much is there in that projection?

Question: Manuel Navas - D.A. Davidson & Co - Analyst : I appreciate that. It looks like if you look at the -- what you're bringing in from the commercial deposit teams, what you have in the loan pipeline, there's like a marginal NIM close to 4%-plus. What keeps you from growing the NIM or expanding the NIM even faster?

Question: Manuel Navas - D.A. Davidson & Co - Analyst : Shifting topics a little bit. It seems like the team is largely in place at the moment, maybe for this year. Is there any shift in the hiring focus? Any expansion in geographies at the moment across the Premier Bank or even in C&I?

Question: Manuel Navas - D.A. Davidson & Co - Analyst : I appreciate the commentary. Thank you. I'll step back into the queue.

Question: Matthew Breese - Stephens Inc - Analyst : Hey, good morning everyone. First, I just wanted to circle back. I think Mr. Tamayo asked about the NIM impact from each 25 basis point cut both initially and over time, we cut out there due to the connection. I just want to make sure that was answered.

Question: Matthew Breese - Stephens Inc - Analyst : Okay. I want to go back to deposits. So the incremental Premier deposits came in at, I think, right around [$270 million. The bank as a whole is at $206 million]. So it feels like by the numbers, the incremental growth should take deposit costs higher, but you're suggesting maybe there's actually some room to reduce costs. So I'm curious, the other parts of the bank, what is kind of the blended new rate of deposits and or are there agreements with Premier banking deposits that whatever rate they're getting is more or less -- there's some short-term elements to it. Maybe help me out there.

Question: Matthew Breese - Stephens Inc - Analyst : Okay. That makes much more sense. I did want to touch on securities yields, down pretty sizably the last three quarters. What's going on there? And where do we start to hit stability in securities yield because that seems to be a headwind to the margin.

Question: Matthew Breese - Stephens Inc - Analyst : Okay. And then loan yield expansion this quarter was -- I want to say maybe 4 basis points-ish. In the absence of rate cuts, is that a decent rate of expansion from here?

Question: Matthew Breese - Stephens Inc - Analyst : And then last one for me is just as you think about loan growth and the guidance, to what extent are you baking in commercial real estate payoffs, seems to be a common theme this quarter. There's a lot of competition for paper, a commercial real estate. That's all I have. Thank you.

Question: Matthew Breese - Stephens Inc - Analyst : All right. Appreciate all that. That's all I had. Thank you.