OceanFirst Financial (US:OCFC)2024-02-23 21:13Credit Losses and Allowances - The Bank's loan allowance for credit losses (ACL) as a percentage of total loans increased to 0.66% in 2023 from 0.57% in 2022[69] - The net unamortized credit and purchased credit deteriorated (PCD) marks on all acquired loans were $7.5 million in 2023, down from $11.4 million in 2022[69] - The loan ACL as a percentage of total non-performing loans decreased to 227.21% in 2023 from 244.25% in 2022[69] - Total charge-offs for the year ended December 31, 2023, amounted to $8.693 million, significantly higher than $573,000 in 2022[71] - The provision for credit losses increased to $18.695 million in 2023 from $7.634 million in 2022[71] - The Bank's total ACL at the end of 2023 was $67.137 million, up from $56.824 million in 2022[73] Deposits and Loans - The average net loans outstanding during 2023 were $10,016.859 million, compared to $9,323.619 million in 2022[72] - The Company's deposits increased by $759.7 million to $10.43 billion at December 31, 2023, compared to $9.68 billion in the prior year[85] - Total uninsured deposits were $5.32 billion at December 31, 2023, representing 15.2% of total deposits, down from 19.6% in the prior year[87] - The Bank's total average deposits for 2023 were $10.26 billion, with time deposits making up 23.78% of total deposits[88] Investment and Equity - The Company held equity investments of $100.2 million as of December 31, 2023, down from $102.0 million in 2022[83] - The Bank's investment policy is overseen by the Board of Directors and includes a focus on government and federal agency obligations, among other securities[75] - The Bank's investment in FHLB New York stock was $53.7 million as of December 31, 2023, down from $69.4 million in 2022[160] - The Federal Reserve Bank of Philadelphia stock investment by the company was $39.7 million as of December 31, 2023, compared to $39.5 million in 2022[162] Capital and Regulatory Compliance - At December 31, 2023, the Company exceeded all regulatory capital requirements, with Tier 1 capital to average assets at 9.31% and Common equity Tier 1 to risk-weighted assets at 10.86%[123] - The Company is required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of at least 4.5%[136] - The Bank is classified as "well capitalized" under regulatory guidelines as of December 31, 2023[144] - The capital conservation buffer requirement of 2.50% was included in the capital ratios reported[141] Interest Rate Risk Management - The company actively manages interest rate risk (IRR) through various strategies, including managing loan origination and retention, and utilizing interest rate swaps[382] - The asset liability committee (ALCO) regularly reviews the company's IRR position and trends, ensuring compliance with board-approved guidelines[381] - The company’s interest rate sensitivity is monitored using an IRR model that measures changes in EVE and net interest income under various interest rate scenarios[383] Employee and Diversity Initiatives - The Bank had 920 employees as of December 31, 2023, with 67% being female and an average tenure of over seven years[99] - The Company is committed to diversity, with 20% of employees being persons of color as of December 31, 2023[103] Financial Performance - For the year ended December 31, 2023, the Bank's revenues from interchange fees were $5.0 million, a decrease of $3.3 million from 2022, due to limitations on debit card interchange fees[116] - The 2023 average net interchange fee per transaction was $0.14, compared to $0.29 in the prior year[116] - The Bank incurred total deposit insurance assessment expenses of $9.9 million in 2023, up from $5.9 million in 2022, primarily due to a special assessment of $1.7 million related to the protection of uninsured depositors[148] Corporate Governance and Strategy - The Company completed the acquisition of 60% of Trident Abstract Title Agency for $7.1 million, enhancing its service offerings[94] - The Company elected to become a financial holding company, allowing it to engage in a broader scope of financial activities[130] - The FRB has issued a policy statement that may restrict the ability of the Company to pay dividends or repurchase shares if certain financial conditions are not met[124] - The Bank's CRA Performance Evaluation rating was "Needs to Improve," affecting its ability to expand through mergers and acquisitions[156] - The Bank's management is committed to addressing deficiencies cited in the CRA evaluation, including increasing compliance staff[156] Economic Value and Sensitivity - The company's economic value of equity (EVE) decreased by 12.8% under a 300 basis points interest rate shock as of December 31, 2023, compared to a 14.3% decrease in 2022[387] - The net interest income sensitivity showed a modest asset sensitivity to falling rates and liability sensitivity to rising rates as of December 31, 2023[387] - The overall measure of EVE at risk increased in all rate scenarios from December 31, 2022, to December 31, 2023, due to rising market rates and increased deposit costs[388] - The company refined fair value assumptions related to the loan portfolio during 2023, resulting in a modest increase to EVE and a decrease in sensitivity[385] - The company's methodology for measuring EVE and net interest income IRR includes certain assumptions that may oversimplify actual market responses[389]