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OceanFirst Financial NASDAQ: OCFC outlined fourth-quarter 2025 results that management said reflected accelerating organic growth, continued strong asset quality, and expense actions tied to a residential outsourcing initiative, while also providing updates on its pending merger with Flushing Financial Corporation and an investment agreement with Warburg Pincus.
Quarterly earnings and balance sheet growth
Chairman and CEO Christopher Maher said the company reported earnings per share of $0.23 on a fully diluted GAAP basis and $0.41 on a core basis. Maher highlighted a fifth consecutive quarter of net interest income (NII) growth, with NII up $5 million, or 5%, from the prior quarter and up 14% from the prior-year quarter. He attributed the quarter’s results to higher average net loans, which increased by $446 million.
OceanFirst’s net interest margin (NIM) was 2.87%, which Maher said declined modestly versus the third quarter. Total loans increased $474 million for the quarter, representing an 18% annualized growth rate, driven by $1 billion in originations.
President Joe Lebel said quarterly originations were “just north of $1 billion” for a second consecutive quarter and produced “record quarterly loan growth” of $474 million. Lebel also pointed to the company’s commercial and industrial (C&I) franchise, saying C&I grew 42% for the year, with much of that growth occurring in the second half of 2025. He said that timing “bodes well for interest income growth early in 2026.”
On funding, Lebel said total deposits increased $528 million in the fourth quarter, including $323 million from organic growth across multiple business lines. He noted the Premier Bank team grew deposits by $90 million, or 37%, from the linked quarter, and said the weighted average cost of the Premier deposit portfolio declined 36 basis points to 2.28% as of December 31.
Net interest margin drivers and outlook
Chief Financial Officer Pat Barrett said pre-tax, pre-provision core earnings increased 9%, or $3 million, versus the prior quarter, driven by earning asset growth over the second half of the year. He said loan yields decreased modestly due to floating-rate resets and a portfolio mix shift.
Barrett said total deposit costs increased modestly due to “very isolated upward repricing” for certain interest-bearing accounts and continued competitive deposit pricing. Borrowing costs also contributed modest pressure on margin due to subordinated debt issuance and retirement during the quarter. He added that growth in interest-earning assets included increases in both securities and loans, with securities growth tied to late third-quarter opportunistic purchases that also modestly compressed margin.
Looking ahead, Barrett said the company expects positive expansion in both NII and NIM. In response to an analyst question, he said he expects “high single-digit growth in NII for the year,” while also cautioning that the first quarter typically appears lower due to having about 2% fewer days than the fourth quarter.
On deposit costs, Barrett said he believes costs “are going to keep coming down,” noting that spot rates across deposit types are lower than quarterly averages. He described deposit repricing as lagging rate cuts, similar to prior cycles, and said management expects margin to improve steadily through the year by “a handful of basis points every quarter.”
Asset quality and credit risk transfer
Management characterized credit performance as strong. Maher said classified loans rated special mention and substandard declined 10% to $112 million, representing about 1% of total loans. Barrett reported non-performing loans at 0.2% of total loans and non-performing assets at 0.22% of total assets. He said net charge-offs increased slightly, but full-year net charge-offs remained low at five basis points of total loans.
During the Q&A, management addressed a rise in early-stage delinquencies in the 30–89 day bucket, explaining it was driven by a single loan tied to a federal government lease where a payment was delayed administratively. The loan was already rated substandard, and management said it did not have long-term concerns given the lease in place.
Barrett also discussed a credit risk transfer (CRT) transaction executed during the quarter. He said the CRT provided about 50 basis points of CET1 benefit at an annual pre-tax cost of less than $4 million. In response to a question on accounting treatment, Barrett said the recurring CRT premium expense flows through operating expense, similar to an insurance premium, rather than impacting yield or NIM.
Expenses, capital, and shareholder returns
Maher said GAAP operating expenses were $84 million, including $13 million tied to the residential outsourcing initiative, merger costs, and CRT execution costs. On a core basis, operating expenses were $71 million, down $1 million, or 2%, from the linked quarter, which management attributed primarily to the impact of outsourcing the residential lending platform.
Barrett said core non-interest expenses declined to $71.2 million from $72.4 million, driven by the sale of the title business. He detailed non-core items, including $7 million of restructuring charges related to residential outsourcing, $4 million of merger-related costs, and $1 million of professional fees related to the CRT transaction. For the first quarter, he guided to a core operating expense run rate of roughly $70–$71 million, with seasonal compensation increases offset by a full quarter of outsourcing benefits.
On capital, Maher said the estimated Common Equity Tier 1 (CET1) capital ratio was 10.7% and tangible book value per share increased to $19.79. The company did not repurchase shares during the quarter, with Maher saying capital was used to support loan growth. The board approved a quarterly cash dividend of $0.20 per common share, which Maher said was the company’s 116th consecutive quarterly cash dividend.
Flushing merger and standalone guidance
Maher reiterated that on December 29 the company announced a merger agreement with Flushing Financial Corporation and an investment agreement with Warburg Pincus. He said the Flushing acquisition is intended to support OceanFirst’s organic growth initiatives in New York by increasing operating scale and improving profitability, and the company continues to work toward an expected close in the second quarter of 2026, subject to regulatory approvals.
In Q&A, Maher said it was too early to provide precise figures on potential loan sales after closing, noting the teams are now conducting deeper portfolio review. He said management expects to do work on the combined balance sheet that could improve margins and return on assets over time while reducing credit risk, and suggested additional detail could be available within about 30 days after closing.
Barrett said there were no changes to full-year standalone guidance previously provided, emphasizing the outlook does not reflect the Flushing acquisition. He reiterated expectations for mid- to high-single-digit loan and deposit growth, growing NII and NIM (with NIM moving past 3% during the year and NII ramping in the second half), quarterly other income of $7–$9 million, and expenses relatively flat to current run rates. He also said the effective tax rate was 22% in the fourth quarter and is expected to be in the 23%–25% range quarterly absent tax policy changes.
About OceanFirst Financial NASDAQ: OCFC
OceanFirst Financial Corporation NASDAQ: OCFC is a bank holding company headquartered in Toms River, New Jersey, that provides a full range of community banking and financial services through its principal subsidiary, OceanFirst Bank. Established in the early 20th century, the company has built its business around serving the deposit, lending and wealth management needs of individuals, small businesses, municipalities and nonprofit organizations across New Jersey and portions of New York.
The company’s core activities include accepting consumer and business deposits, making commercial, municipal and consumer loans, and offering residential mortgage financing.
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