OceanFirst Financial Q4 2025 Earnings Results & Report

OceanFirst Financial EPS Results

• Actual EPS: $0.41
• Consensus EPS: $0.39
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A
• EPS Beat Rate: 6 of last 8 quarters

OceanFirst Financial Revenue Results

• Actual Revenue: $104.69 million
• Expected Revenue: $103.20 million
• Beat/Miss: Beat by +$1.49 million
• YoY Revenue Growth: N/A

OceanFirst Financial (NASDAQ:OCFC) is the bank holding company for OceanFirst Bank, a community-focused financial institution headquartered in Toms River, New Jersey. The company provides banking and financial services to individuals, families, businesses and nonprofit organizations through its branch network and digital banking channels.

OceanFirst Bank offers deposit products, including checking, savings, money market and certificate accounts, along with residential mortgage, home equity, commercial real estate, commercial and industrial, consumer and small-business loans. Its services also include online and mobile banking, cash management and other financial solutions designed to support personal and business banking needs.

Founded in 1902, OceanFirst has developed from a local savings institution into a regional bank serving communities primarily across New Jersey, with additional activity in the greater Philadelphia and New York metropolitan areas. Christopher D. Maher serves as president and chief executive officer of OceanFirst Financial Corp. and OceanFirst Bank.

OceanFirst Financial Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reported EPS of $0.23 GAAP and $0.41 core, with net interest income up 5% linked-quarter and loan originations of $1.0 billion driving record quarterly loan growth of $474 million, although NIM dipped modestly to 2.87%.
• Positive Sentiment: Asset quality remains strong — special-mention and substandard loans fell to $112 million (~1% of loans), non-performing loans at 0.2%, and full-year net charge-offs only five basis points of loans.
• Negative Sentiment: The decision to outsource residential and title businesses reduced non-interest income (down ~$3.3 million) and drove transition charges (included in Q4 GAAP expense), with measured runoff in the residential portfolio expected going forward.
• Positive Sentiment: Capital is solid with an estimated CET1 ratio of 10.7% and tangible book value of $19.79; the executed credit-risk-transfer added roughly 50 bps of CET1 benefit at an annual pre-tax cost below $4 million, and the board declared a quarterly dividend of $0.20.
• Positive Sentiment: Announced acquisition of Flushing Financial (with Warburg Pincus investment) — expected close in Q2 2026 — to scale the franchise in New York, improve profitability and operating scale, and create balance-sheet optimization opportunities after close.

Presentation

[Operator]

Thank you all for your patience. The conference call titled "OceanFirst Financial Corp. Q4 2025 Earnings Release" will begin shortly. During the presentation, you will have the opportunity to ask a question by pressing star followed by the number one on your telephone keypads. Again, please stand by, and we will begin in a few minutes. Hello everyone, and welcome to the OceanFirst Financial Corp. Q4 2025 Earnings Release. My name is James, and I'll be your operator for today. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number one on your telephone keypads. The conference call will now start, and I'll hand it over to our host, Alfred Goon. Please go ahead.

[Alfred Goon, SVP of Corporate Development and Head of Investor Relations at OceanFirst Financial Corp.]

Thank you, James. Good morning and welcome. 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 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 CEO.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Thank you, Alfred. Good morning, and thank you to all for being able to join our fourth quarter 2025 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 will 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. We reported our financial results for the fourth quarter, which included earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

In terms of performance indicators, we're pleased to report a fifth consecutive quarter of net interest income growth, which increased by $5 million, or 5%, as compared to the prior quarter and up 14% as compared to the prior year quarter. The current quarter results were fueled by an increase in average net loans of $446 million. Our net interest margin of 2.87% declined modestly compared to the third quarter. Total loans for the quarter increased $474 million, representing an 18% annualized growth rate, driven by $1 billion in originations. Joe, I'll have more to add regarding our growth strategy in a few minutes, but we're very pleased to see the organic growth momentum that is a direct result of the investments we made in the first half of 2025.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Asset quality remained exceptional, as total loans classified as special mention and substandard decreased 10% to $112 million, or just 1% of total loans. This continues to place us among the top decile of our peer group. The quarterly provision was primarily driven by improvements in asset quality and a decrease in unfunded commitments offset by loan growth. GAAP operating expenses for the quarter were $84 million and include $13 million of expenses related to our residential outsourcing initiative, merger costs, and execution costs for our credit risk transfer. On a core basis, operating expenses of $71 million were down $1 million, or 2%, from the linked quarter, primarily driven by the impact of our strategic initiative to outsource our residential lending platform. Pat will provide additional commentary on the credit risk transfer and a detailed update on our financial outlook in a moment. Capital levels remained robust.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

An estimated Common Equity Tier 1 capital ratio of 10.7% and tangible book value per share increased to $19.79. We did not repurchase any shares this quarter under the existing plan, as our capital was utilized to support loan growth. This week, our board also approved the quarterly cash dividend of $0.20 per common share. This is the company's 116th consecutive quarterly cash dividend. Finally, on December 29th, we announced a merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. The acquisition of Flushing will directly support our organic growth initiatives in New York, positioning OceanFirst as a scaled competitor in the deepest banking markets in the country. The resulting company is expected to demonstrate improved profitability and increased operating scale, which should deliver meaningful upside to our shareholders.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

We continue to work towards an expected close in the second quarter of 2026 and will provide more updates as regulatory approval progresses. In the meantime, we remain focused on OceanFirst's continued organic growth efforts, which are proving successful, as shown in the results of this quarter. At this point, I'll turn the call over to Joe for additional color on the businesses.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Thanks, Chris. I'll start with loan originations for the quarter, which totaled just north of $1 billion for the second consecutive quarter and resulted in record quarterly loan growth of $474 million. Our C&I business grew 42% for the year as we reaped the benefit of our continued recruitment of talent, coupled with favorable conditions for many of our borrowers. Much of that was in the second half of the year, which bodes well for interest income growth early in 2026. As discussed in the previous quarter, we made the decision to outsource the residential and title businesses, and we have worked through the remainder of the existing pipeline and expect to see measured runoff in the portfolio going forward.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

The loan pipeline of $474 million, while lower quarter-over-quarter, is due to the outsourcing of residential and is still markedly higher than this time last year, reflecting the robust growth in the commercial bank. Total deposits in the fourth quarter increased $528 million, with $323 million driven by organic growth across varied business lines. Among those lines, the Premier Bank team grew deposits $90 million, or 37%, from the linked quarter, with the weighted average cost of their deposit portfolio declining 36 basis points to 2.28% as of December 31st. To date, the Premier Banking teams have brought in $332 million in deposits across more than 1,300 accounts and representing more than 350 new customer relationships. Approximately 21% of those balances are in non-interest-bearing DDA.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Lastly, non-interest income decreased by $3.3 million to $9 million during the quarter, primarily driven by lower title fees and a reduction in the gain on sale of loans related to the outsourcing of our residential and title platforms. We continue to see strong swap demand linked to our commercial growth and look for that to continue in the coming quarters. Overall, non-interest income levels were in line with our expectations, as guided in the previous quarter. With that, I'll turn the call over to Pat to review the remaining areas for the quarter.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Thanks, Joe. As Chris noted, net interest income grew while margin declined modestly, as we had previously guided. Pre-tax, pre-provision, core earnings grew 9%, or $3 million, from the prior quarter, driven by earning asset growth over the second half of the year. Loan yields decreased modestly, reflecting the impact of floating rate resets and a continued mixed shift in our portfolio. Total deposit costs increased modestly, reflecting very isolated upward repricing for certain interest-bearing accounts, combined with continued competitive deposit pricing. Borrowing costs also contributed a modest one basis point of pressure on our margin, reflecting the net impact of our subordinated debt issuance and retirement during the fourth quarter. Average interest-earning assets increased meaningfully compared to the prior quarter, reflecting increases in both the securities and loan portfolios.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Growth in securities was from our late third quarter opportunistic purchases, which also had a modestly compressing impact on our margin. Looking ahead, we expect positive expansion in both NII and margin. As Chris mentioned, asset quality remained very strong, with non-performing loans to total loans at 0.2% and non-performing assets to total assets at 0.22%. Asset quality continues to remain at the low end of historical levels for criticized and classified loans, as risk ratings across our commercial portfolio remain stable. Net charge-offs ticked up slightly, but full-year net charge-offs as a percentage of total loans remained extremely low at five basis points. Turning to expenses, core non-interest expenses decreased from $72.4 million to $71.2 million, driven by the sale of our title business.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Non-core items include restructuring charges of $7 million related to our residential outsourcing initiative, $4 million of merger-related costs, and $1 million of professional fees related to the credit risk transfer transaction we executed during the quarter. Looking ahead, we expect our first quarter core operating expense run rate to remain in the range of $70-$71 million, with seasonal compensation increases offset by a full quarter's benefit of our residential outsourcing initiative. Capital levels remained strong, with our CET1 ratio increasing to 10.7%, reflecting strong loan growth during the quarter combined with the benefits of the credit risk transfer transaction. This trade provided approximately 50 basis points of CET1 ratio benefit at an annual pre-tax cost of less than $4 million.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

A word on taxes, we expect our effective tax rate, which was 22% in Q4, to remain in the 23%-25% range quarterly, absent any changes in tax policy. There are no changes to our full-year guidance, as stated in the third quarter's earnings release. Mid to high single-digit loan and deposit growth, NII and NIM growing, with NIM growing past 3% during the year and NII ramping in the second half of the year. Other income, $7 million-$9 million per quarter, and expenses relatively flat to current run rates. Note that these are standalone expectations that do not reflect the impact of the Flushing acquisition. We've also added our first quarter outlook for convenience, but again, remember that the first quarter always reflects the impact of 2% fewer days and the impact that has on a lot of our P&L items and NII.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

At this point, we'll begin the question-and-answer portion of the call.

[Operator]

Thank you. Our lines are now open for questions. As a reminder for our audience, if you would like to ask a question, you may do so by pressing star, followed by the number one on your telephone keypads. Of course, when preparing to ask your questions, please ensure your devices are unmuted locally. Moving on to our questions, we have one from Daniel Tamayo from Raymond James. Go ahead, please. Your line is now open.

[Daniel Tamayo, VP at Raymond James]

Thank you. Good morning, everyone.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Morning.

[Daniel Tamayo, VP at Raymond James]

Maybe just clarity on your net interest income guidance, Pat. The growth in dollars matching the growth in loans, that's to be read as the back of the envelope math is just under $90 million, I guess, in loan growth. So that's the way to think of that. That number is the net interest income growth, or how should we be thinking?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

No, it actually will probably grow at a bit higher clip than whatever our loan balances grow, just because of the compounding effect of how big the balance sheet is today. So I was just reminding that Q1 always looks disappointing because you have to shave 2% off for fewer days in the quarter with the drop from fourth quarter to first quarter, and then it will begin to ramp back up. I think you'll see high single-digit growth in NII for the year.

[Daniel Tamayo, VP at Raymond James]

Great. Okay. That's perfect. And then let's see here. I guess as it relates to the deal, any kind of updated commentary around what loan sales might end up looking like after the close?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

It's a little bit too early to give you any precise figures on that. We're undergoing a process right now to review the portfolios. A lot of the work we could not really kind of get deep into when we were still in a confidential mode of negotiating with Flushing. So now we've got a little better ability to do that. So we'll update you as our thoughts evolve, but we do expect to be able to do some work on the balance sheet in a way that improves our margins and ROA outlook over time while also reducing credit risk.

[Daniel Tamayo, VP at Raymond James]

Understood. Thanks, Chris. And then maybe just a clarification question for you, Pat, on the expense line. Where's the recurring CRT premium expense? In what line?

[Daniel Tamayo, Analyst at Raymond James]

Comes through other just like insurance premium expense, essentially.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

It's not in the yield. It won't be in the NIM or in the, it'll look like OpEx.

[Daniel Tamayo, VP at Raymond James]

Got it. Okay.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

That wonderful connection of us.

[Daniel Tamayo, VP at Raymond James]

All right. Oh, yes.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Thanks, Dave.

[Daniel Tamayo, VP at Raymond James]

All right. I'll step back. Appreciate the color, guys.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Thank you.

[Operator]

Thank you for that question. Moving on, we have Tim Switzer from KBW. Go ahead, please. Your line is now open.

[Tim Switzer, VP in Equity Research at KBW]

Hey, good morning. Thanks for taking my questions. I got a few on.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Morning.

[Tim Switzer, VP in Equity Research at KBW]

Morning. I got a few on balance sheet growth here. So first up on commercial balances, C&I, on a dollar basis, it looks like it's accelerated for four straight quarters, basically every quarter this year, with a pretty meaningful pickup in Q4. What kind of pace should we expect for 2026?

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Tim, it's Joe. Look, I think we probably snuck in a couple Q1 stuff into Q4, but that's what the borrower wants, and that's what we're going to do. But the seasonality side, which tends to be a little slower in Q1, as everybody's waiting for year-end financial statements, I would tend to think that you're going to see very similar growth rates. I think we've got it in that 7%-9% range, which I think is fair. Look, we've put a ton of dollars into talent in that space, and I think that space is now just starting to deliver what we expected. So more to come.

[Tim Switzer, VP in Equity Research at KBW]

Okay. Okay. That's helpful. And I think you guys disclosed this last quarter, but I believe you talked about how much of the growth this quarter in C&I was driven from the Premier Bank in cross-sales?

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Yeah. So I don't have the quarterly number in front of me, but I do have the half-year number. So they generated just shy of $200 million in gross closed loans, and the outstandings at the end of the year are about $64 million, which is pretty much what we figured, right? They're going to be more deposit-heavy loans. The deposit number is going to be really good. But they do have a solid C&I clientele, which is a benefit. I think we'll see more of that to come in 2026 as well. Hey, Tim, it's Chris. One other thing I'd mention is that we're really pleased that the level of self-funding in the C&I customers was pretty strong this year. So we're seeing pretty strong deposits come in. The C&I teams have done a nice job with that.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

So we had just shy of like a 40% coverage of outstanding self-funding. So as that book rotates, we do more C&I, and on a relative basis, less CRE. The deposit portfolio is going to strengthen as well.

[Tim Switzer, VP in Equity Research at KBW]

Gotcha. Yeah. Yeah. That's great. And then on the Premier Bank specifically, it looks like the deposit growth maybe slowed down a little bit. I know it's just one quarter. It's probably some volatility, maybe some seasonality in there. But can you add some color on that and then reconfirm if you still feel good about the target for $2 billion-$3 billion in deposits by the end of 2027?

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Yeah. So Tim, I think you hit it on the head. We had higher balances up until really the last week of the year. We had some seasonality, some distributions, some bonus payments. I think that's hard for us to learn about the clientele as well. You onboard 350 new clients, you're trying to solve for what works. So we saw nothing but a ramp-up until the last week. So I think you're going to see recoveries as the year goes on. You're going to see continued growth. I don't see any reason why we would back off the 2027 targets.

[Tim Switzer, VP in Equity Research at KBW]

Awesome. Good to hear. Thanks for taking my question.

[Operator]

Thank you for that question, Tim. Moving on, we now have Christopher Marinac from Janney Montgomery Scott. Go ahead, please. Your line is now open.

[Christopher Marinac, Chief Operations and Strategy Officer at Janney Montgomery Scott]

Thanks very much. Chris and Pat and Joe, I wanted to ask about the Premier Banking new money rate that came in. You may have mentioned it. I just missed it. And then I had a follow-up.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Yeah. I don't know that we have the new money rate handy. The overall portfolio is down nicely to just like a 225 cost. We're seeing non-interest bearings coming in faster now. And although the balances were seasonally weak, as Joe mentioned, we continue to open new accounts and establish new relationships at a good clip. So I think you're going to see that trend with more non-interest over time, better or lower yields on those deposits, and a faster pace of growth in Q1.

[Christopher Marinac, Chief Operations and Strategy Officer at Janney Montgomery Scott]

Okay. So 225 is the overall rate, and that works with what I was asking. Chris, as you move forward with Flushing, can you just go back through the opportunity to kind of reset deposit rates? And is there anything instructive from what you're doing now with Premier Banking and those new customers with what you can do with Flushing? And I guess part of my question is also how much of that is sort of additional potential earnings beyond what you underwrote going in?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Yeah. So look, I think there's a tremendous opportunity there, Chris. So let me just kind of walk through mechanically what we think it is. And I hope you understand I'll kind of shy away from any numbers around that opportunity. But the premise is, well, first, I should say, if you look at Flushing's numbers, they've done a nice job of building non-interest-bearing accounts at a pretty good clip. They've built nicely over the course of the year and have had some momentum on their side. I think our Premier folks who operate in the markets with Flushing branches are today will find a higher rate of success because they have the opportunity to offer that kind of branch distribution network over time.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Then I think the real important part of this is that for both us and for Flushing, being a stronger, larger regional bank is going to help us in recruiting top-tier talent. So I think we are a more attractive destination for career commercial bankers who are looking for a platform to continue to build their brand and build their teams and build their legacy. So I kind of see it a few ways. Flushing was doing a great job on its own. We can probably do a little better with our Premier teams giving them a branch distribution network. Then we're going to be a much more competitive place to land. I think as we go through the first few quarters as a combined company, hopefully later this year, we'll be able to put a finer point of what we think that growth rate will look like.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

But those deposit markets are absolutely massive. So although you do in the Northeast, you're always picking up share from someone else. That's kind of the name of the game. There's a lot of share out there in the markets we're picking. And we really like the branch distribution network where it is, the neighborhoods they're in, the streets they're on. And I think that's going to help both of us grow faster than either one of us would have grown standalone.

[Christopher Marinac, Chief Operations and Strategy Officer at Janney Montgomery Scott]

Great. That's helpful, Chris. I guess without getting too deep in the weeds, I mean, in general, it doesn't seem like what you had told us in late December really is dependent on adjusting these rates that as you can have success later on that, then that creates future opportunities for earnings.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Yeah. So, with the one caveat, we are thinking through the balance sheet. In every bank, you have a variety of different funding sources and a variety of different assets. This is an opportunity for us to be very thoughtful about thinking through the higher-cost deposits and the lower-yielding loans and securities and kind of looking at that mix and say the marginally highest-cost funding and the lowest-yielding assets present an opportunity to be much more efficient together. That's really what the balance sheet process is about. That's something that we may not be able to solve exactly at closing, but we would hope that within 30 days of closing, we would be able to provide some really good data on that.

[Christopher Marinac, Chief Operations and Strategy Officer at Janney Montgomery Scott]

Okay. Sounds great. Thank you for all the background on that. I appreciate it.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Thanks, Chris.

[Operator]

Thank you for that question, Chris. We now have David Bishop from Hovde Group. Go ahead, please. Your line is now open.

[David Bishop, Director at Hovde Group]

Hey, good morning, guys. Hey, quick question, getting back to the C&I growth here and maybe for Joe. Just curious geographically maybe where you're seeing the best strength there. And is any of this growth also driven by maybe expiration of non-compete clause or handcuffs that were maybe placed against some of these lenders you had hired over the past year?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

So the good news is it's pretty geographically dispersed, David, which I appreciate because we've hired lenders in all markets. Yep. Some of the handcuff stuff that comes off, even if it's really like what I consider to be not really true handcuffs, people do feel that obligation. And that's a fair assessment. So I anticipate that we'll see more and more out of those folks as they get a little deeper into their OceanFirst tenure. But I wouldn't say that there's anywhere where we're not performing up to standard. And then I think I'd mentioned earlier that we've even got some of that activity from the Premier Bank, which is really valuable in terms of some of their clientele in New York City-centric. And there's like a positive flywheel as these new bankers come on.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Their first few clients take a little bit of time, and then those clients have good experience. They tell not just their friends, but the accountants, the attorneys, and get better known. Then it becomes incrementally better to pick up kind of the second round of clients and the third round. We see a lot of opportunity going forward.

[David Bishop, Director at Hovde Group]

Got it. I saw the earnings narrative on the deposit funding side. It sounded like one large deposit client reset in terms of deposit rates from zero upwards. I don't know, Pat or Joe, if you have that number in terms of maybe what the NIM headwind is, is that sort of just a one-time ephemeral impact?

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Yeah, it's a one-time. It happens all the time where customers don't know where they want their money, and they keep it out of higher-earning promotional type things if they think they need it. So it was just it was noteworthy because of its size. And it's very infrequent, and we would expect not recurring.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

It was fully reflected in Q4. Actually, it was kind of like a late Q3 thing. You're not going to see that drag or provide a headwind going into Q1, so.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

I could have just said that NIM hardly moved at all just due to a lot of little things and noise, but that didn't feel like it was a good enough explanation for 3 basis points of contraction. So it was that kind of quarterly.

[David Bishop, Director at Hovde Group]

I know this number bumps around, especially at the end of the year, but to see a noticeable pickup at the early stage delinquencies in the 30-89-day bucket, any commentary there that could be driving that?

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

It was just a 1-loan, Dave, that has a federal government lease where the lease payment is a little bit late. So we don't have any concern in the long term. But it was already a loan that we had in the Substandard bucket. We've been watching it because of that tendency. So we'll give you an update as time goes on, but they have a good lease in place. Looks like it was just a payment issue, meaning their collection of their rent was just delayed administratively.

[David Bishop, Director at Hovde Group]

Got it. Got it. And then maybe a holistic question for you, Chris. Looks like the Netflix studio is entering into sort of the final stages, the building of the studio, sound stages, and such. Any thoughts about maybe is there a potential to sort of set up branches within that footprint or any sort of branding within that community or within that development to sort of take advantages of branding the company there and backing the caterers, the builders, etc.? Do you see any sort of longer-term opportunities as that builds out?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Well, it's going to be a tremendous thing for the Monmouth County, which is our second-strongest county after Ocean County. So I think we've got a few branches that provide some good coverage for that market already. I don't know that we'll need to open other branches, but I'll make a broader comment. That's a great kind of boon to the Monmouth County market. But we continue to see over the course of our core, call it the Jersey Shore market, that the post-pandemic period has been a seismic shift. More people are down at the shore, more parts of the year. There's been a significant demand for the infrastructure you need, everything from hospital systems having to expand to hospitality and office and all sorts of stuff. So our core, our strongest market in kind of the central New Jersey Shore, is doing pretty well.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

I think that's going to be a pretty sticky thing. We see that happening probably for several more quarters.

[David Bishop, Director at Hovde Group]

Got it. Appreciate the color.

[Operator]

Thank you for that question. Next up, we have Matthew Breese from Stephens. Go ahead. Your line is now open.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

Good morning.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Morning, Matt.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

On Premier Banking, I guess I was a little bit surprised by the loan and deposit growth guide and outlook maintaining a 100% loan-to-deposit ratio. I was thinking once the Premier Banking effort got up and running, there would be a reduction to that ratio. I was hoping you could maybe talk a little bit to that. And then the other one is I know it's still early days with these teams, but on the DDA side, is 30% DDAs from Premier Banking? Is that still the right long-term number?

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

So I'll take the first side, then Joe can take the question about the non-interest bearing. In terms of the loan-to-deposit ratio, we'd like to see that down under 100. On any particular quarter, it's a little bit of wait till the last few days as you see deposits come in or go out. I don't expect us to be a bank that's going to wind up at a 90% loan-to-deposit ratio, but I'd like to be substantially lower than 100. I think we're going to see how things play out. We're opportunistic too about earnings and making sure that we've got the right earnings power. And I would note that we've got a very robust set of deposit verticals. So we have our consumer deposit vertical. We have a government banking vertical. We have our corporate cash management and C&I vertical.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

We have the Premier vertical, which overlaps a lot with the C&I vertical. We have a lot of different sources of deposits and feel comfortable running at the higher end, which is not unusual for banks in the Northeast. To your point, we'd like to be further under 100. I think you may see that over the next several quarters, but not dramatically under 100.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

I think on the second half, Matt, I'd tell you that between 25 and 30 is actually, in my mind, still the right number. What we're hearing a lot from clients and clients that I've met personally is that their anticipation in mid-year 2025, late year 2025, was a transition into full operating businesses coming across to OceanFirst in 2026. So we still have a significant number of unfunded operating accounts that we've opened getting ready for people to migrate. So I anticipate you're going to see a higher percentage of DDA as time goes on during the 2026 Fiscal Year.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

Got it. Okay. And then, Chris, going back to Flushing, you had mentioned that there were some higher-cost components. Of the $7.3 billion of Flushing deposits, could you just describe some of the business lines tied to the higher-cost components? And then oppositely, what are the highest-quality parts that you're more likely to kind of keep and grow? What's on the whiteboard there?

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

So if you think about everyone has kind of pockets of deposits, and everyone has more kind of promotionally priced deposits. If you think about their national deposit vertical, the iGObanking, for example, or BankPurely, which is not a lot of dollars, it's a good capability for us to have and preserve going forward. But those are higher-cost deposits. Not surprising, some of the government deposits are higher-cost because they wind up being excess fund accounts, and you've got to be competitive on that. And then there are some money market accounts across the base that have been kind of priced more to acquire deposits. But there's still a pretty big slug of long-term, high-quality deposits that either historically have been at Flushing for a long time. I remember the bank was chartered in 1929, so they've got a really long history.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

Very strong in Queens, very strong in the Asian communities. Significant number of the branches they've opened in the last several years have been to serve the Asian communities around the city, which are not just in Flushing, but places like Bay Ridge and Lower Manhattan, Sunset Park, kind of those areas. So I think the real opportunity here is those long-term consumer accounts that go back in a lot of the franchise, the Asian markets, and a lot of their commercial clients keep operating accounts with them. So that's all high-quality stuff. Around the edges, we might decrease the amount of dollars that are out in iGObanking, maybe some of the higher-yield money market, maybe some of the higher-cost government. That's kind of the high-quality, lower quality. And I think every bank has some of that. We're looking at our own stuff too in the way we price.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

Understood. Very helpful. Pat, just looking at deposit costs up this quarter, and I know you'd mentioned there was an isolated incident. Obviously, Premier Banking as a blend is higher than the average cost. Could you help us out with the deposit cost outlook for the year? Where do we peak? And without any rate cuts or using your rate cut kind of forecast, where do you expect deposit costs to be at the end of the year?

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Yeah. I am not going to give you a guess of where deposit costs are going to be at the end of the year, but I do think that they're going to keep coming down. They are coming down. They're lagging a little bit from a speed of repricing relative to rate cuts, which is exactly what happened when we were in an upright environment. We lagged before they started going up. So I think we're seeing the same kind of thing. So starting off slowly, repricing, and then picking up. I'm encouraged by the fact that all of our spot rates across all of our deposit types are noticeably lower than the averages for the quarter. So they are steadily coming down already. Rate cuts help because there's a lot of promotionally priced stuff.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

It's not contractually indexed, but a lot of the larger promotional balances definitely are linked there. And frankly, the pace of loan growth and the opportunity for loan growth is going to drive a lot of how that ends up occurring, similar to the loan-to-deposit ratio. It's less something that we drive the business towards rather than an outcome. And if there's high-quality loan growth that is a little bit higher than our deposit growth outlooks, then we'll probably fill the buckets with some higher-cost deposits just to secure the longer-term lending relationships. So I think you'll probably see deposit costs and loan yields roughly moving in line with each other, with a slight edge on the loan yields due to growth. And that's going to drive our margin, I think, steadily improving as we move through the year, a handful of basis points every quarter.

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

That's a backhanded way of not answering your question exactly, so.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

No, all very helpful. And maybe just to drill in on one category that looks like it has the most room, your time deposit costs. The spot cost at the end of the quarter was 364. What is kind of the blended all-in cost of CDs as they? I know there's going to be some promotional stuff in there, but the all-in blend of stuff resets.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

Yeah. Well, one thing, Matt, I'd note that when we think about the balance sheet restructure to your prior question, that's the first source when you give up. We don't have a lot of brokers, but we do have some. And we've kept those durations really short. So as we kind of zero in on the combined balance sheet with Flushing, the very first thing we will do is let those brokers run off. And those are in the high threes, but coming down. So even if we kept them, they would be coming down. So I think there's a strong opportunity there. And all of that is probably the weighted average duration on that is under six months, Pat?

[Patrick Barrett, CFO at OceanFirst Financial Corp.]

Yes. It's about 4 months. So we can pretty rapidly change prices. And we actually do. We don't wait for a rate cut and mess around with kind of daily changes. And we see, are we able to keep rollover balances or not? Are we attracting any new balances or not? With, again, that being just one of the components of funding base that we need to maintain to support whatever the loan growth rate is.

[Matthew Breese, Managing Director and Research Analyst at Stephens Inc.]

I'll leave it there. Thanks for taking all my questions.

[Joseph Lebel III, President and COO at OceanFirst Financial Corp.]

All right. Thank you, Matt.

[Operator]

Thank you. That is it for all the questions. Thank you, everyone, for participating on that. The Q&A is now clear. I'll hand it back to Chris Maher for some final remarks.

[Christopher Maher, Chairman and CEO at OceanFirst Financial Corp.]

All right. Thank you. We appreciate your time today and your continued support of OceanFirst Financial Corp. We look forward to speaking with you in April about our first quarter results. Thanks very much. Bye.

[Operator]

This concludes today's call. Thank you all for joining. You may now disconnect your lines. Have a great one.

Participants

Executives

• Alfred Goon, SVP of Corporate Development and Head of Investor Relations
• Christopher Maher, Chairman and CEO
• Joseph Lebel III, President and COO

Analysts

• Patrick Barrett, CFO at OceanFirst Financial Corp.
• Daniel Tamayo, VP at Raymond James
• Daniel Tamayo, Analyst at Raymond James
• Tim Switzer, VP in Equity Research at KBW
• Christopher Marinac, Chief Operations and Strategy Officer at Janney Montgomery Scott
• David Bishop, Director at Hovde Group
• Matthew Breese, Managing Director and Research Analyst at Stephens Inc.