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

Christopher Maher: And Matt, for today, it’s still going into kind of the pace where you’ve seen over the last couple of years, a couple of bankers a quarter. If that pace changes, we’ll be communicating about it.

Matthew Breese: Perfect. I appreciate it. Thank you.

Christopher Maher: Thanks, Matt.

Operator: Thank you for your questions. The next question comes from the line of Manuel Navas with D.A. Davidson. Your line is now open.

Manuel Navas: Hi. Good morning. So on the core deposit engine, are you seeing the C&I lenders that you’ve brought on actually bring in deposits so far? Or do you have like a visible pipeline to this point?

Joe Lebel: So we are seeing them bring in deposits. If anything, they’re bringing in deposits before they bringing in loans because, as you all know, sometimes there’s limitations or maturities or pre-payments that prohibit loans coming over as fast as some deposits early on. But I think, Manuel, we’ll see more and more of that in Q3 and Q4.

Manuel Navas: And that’s kind of giving you that confidence to let some of the high-yield reprice and run off of it, the high-yield savings channel?

Christopher Maher: And also we need to understand exactly what those dynamics are. So until you start moving rates, you really don’t know what that kind of run off tolerance will be. So, we’re beginning that process, moving rates around a little bit. So we know what that marginal pricing should be. We’ve always been big fans of you can do every deposit survey you want, but the actual experience of pricing and watching deposit flows will tell you exactly what your market is. And we’re just trying to make sure we’re on top of that.

PatBarrett: Yeah I’d also add that those levers, we have a high confidence level in our ability to ramp those back up quickly if we want to, whether it’s high interest savings, brokered CDs, certainly or even time deposit specials, retail and/or other customer segments. So with that confidence level, we’re feeling a lot better about letting some things mature and roll off, not replacing rolling them and start to dial back some of the highest rates that we’ve had on offer, and we’ll learn from that and be prepared, hopefully, to see growth to pick up in core deposits.

Manuel Navas: I appreciate that color. Can we have a bit of a general update on the operating leverage strategies and where we sold the trust business and just kind of how that fits in?

Christopher Maher: Yeah. I’d make a couple of comments. First, the trust business sale is a strategic partnership where we think that with a partner, we can do more in that business than we do today. It’s relatively neutral to the P&L. So you’re not going to see much change in the P&L. In terms of the operating leverage strategy, I think the way we’re thinking about the company is that we have now, for the most part, fully absorbed all the expenses attended with coming over $10 billion. Obviously, if you add a banker here there, you’ve got some expense, but the marginal cost to support growth is quite low. So our view here is hold that non-interest expense line, allow non-interest expense to assets to decrease as we grow and that’s where you’re going to see the leverage come in.

And then I think there’s a second story from that, which is at some point and I offer no calendar for this. we might have a yield curve that’s not inverted, right? And at that point, you’re going to have the revenue side kind of kick in as well. So that’s this guidance about flat expenses. It doesn’t mean that we’re going to need to add dollars to grow. We can grow off this expense base. And then this kind of second cylinder that would hit would be at some point down the road if rates normalize.

Manuel Navas: I appreciate the comments. All right, thank you.

Operator: Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to Chris Maher for any closing remarks.