May 17, 2021
Saying it sees parallels with its growing presence in the Philadelphia market, OceanFirst Financial Corp. has entered Baltimore with the addition of a team of four commercial lenders from BBVA.
Christopher Maher, CEO of $11.5 billion-asset OceanFirst (NASDAQ: OCFC), said the Toms River, New Jersey-based bank is currently looking for office space for its new team in the city of Baltimore and is finalizing the hiring of a market president. In addition, the bank has hired single commercial lenders in Washington, D.C., and Boston and three new lenders in Philadelphia. OceanFirst said it expects its new team members will need some ramp-up time but should start paying dividends during the second half of the year.
“We sensed a strong vibe between the Philadelphia and Baltimore markets,” Maher said. “We have customers that do business in both locations. And like Philadelphia, Baltimore is dominated by the larger banks. They don’t have a community bank headquartered in the city with $10 billion or more in assets.”
According to data from the Baltimore Business Journal, the five largest deposit takers in metro Baltimore are Bank of America, M&T Bank, PNC Bank, Truist Bank and Wells Fargo. And they consume a combined 81% of all deposits. In Philadelphia, the top five banks — Wells Fargo, TD Bank, PNC, Bank of American and Citizens Bank — are home to about two-thirds of all local deposits.
Maher said OceanFirst expects to grow rapidly in Baltimore like it did in the Philadelphia area, where it inherited some suburban loan production offices in Mount Laurel, Newtown Square and Doylestown from a series of bank acquisitions between 2016 and 2019 and then opened a loan office in Center City Philadelphia in 2019 and signed a lease in December to open its first retail branch in Pennsylvania at 1500 Market St. across from Philadelphia City Hall.
OceanFirst did not provide names of the former BBVA lenders hired in Baltimore, but according to Linkedin, David Patzer joined OceanFirst from BBVA this month as a senior relationship manager. He focuses on middle market commercial lending. The team also includes three other lenders and a support professional that were all expected to be on board by late May. BBVA is set to be acquired by PNC Financial Services Group in a deal that closes June 1.
According to LinkedIn, the lender in Washington, D.C., appears to be Amy Grutzner, who spent the past five years at Wells Fargo. She also holds the title of senior relationship manager and has a focus on commercial real estate lending. And the lender in Boston looks to be David Heller, whose LinkedIn page indicates he started at OceanFirst last month after hanging his own lending shingle in November and having worked previously at BMO Harris Bank and U.S. Bank.
Maher said there are no plans for loan offices in Washington and Boston. While the bank is still looking to hire in both places, it plans to move slower there.
“Unlike Baltimore, Washington and Boston do have a lot of community banks,” Maher said. “So we want to make sure we understand those markets."
OceanFirst said it now has more than $1 billion in loans from the Philadelphia area and believes it can have the same success in Baltimore. And like its approach in Philadelphia, it does not plan to open retail branches organically but would consider acquiring another community bank there to gain critical mass.
It has not been able to find the right partner yet in Philadelphia, though Maher noted that WSFS Financial Corp. was “smart” in announcing plans to acquire Bryn Mawr Bank Corp. earlier this year and that S&T Bancorp also made a good decision in acquiring DNB Financial Corp. last year.
Long based in Ocean County along the central part of the Jersey Shore, OceanFirst entered South Jersey through four acquisitions between 2016 and 2019: Cape May Courthouse-based Cape Bancorp, Ocean City-based Ocean Shore Holding Co., Mount Laurel-based Sun Bancorp and Vineland-based Capital Bank of New Jersey.
After integrating those banks, Maher said that moving into New York and Philadelphia were strategic priorities. It took care of the New York part of that equation last year when it acquired Country Bank Holding Co. of New York City as well as Two River Bancorp of Tinton Falls in Monmouth County. Sources have said OceanFirst has been talking to other banks about finding a strategic fit in southeastern Pennsylvania, where deals in prior years have thinned the options for companies as large as OceanFirst. Maher admitted as much on Monday.
“We would need a bank of a certain size to really move the needle.” Maher said.
As it has conducted its six bank mergers since 2016, OceanFirst has aggressively consolidated retail branches. It now has 62 branches according to the FDIC, virtually all in New Jersey. While trimming retail branching, the bank has been focused on adding loan production offices in existing and adjacent markets. The Philadelphia loan office is now home to 11 of the bank’s 57 commercial lenders. The bank also focuses on adding lenders from larger banks. The aforementioned three new Philadelphia lenders came from Wells Fargo, TD Bank and Univest Bank.
During its first quarter earnings call, Maher noted that there is a seasonality to the hiring of commercial lenders, who usually wait until they collect year-end financial incentives — usually in the first quarter or early second quarter — before switching banks.
“As those lenders come on, they're incrementally more productive during the course of the year,” Maher said. “So I think what we've said before is by the end of the year, we should be growing our loan portfolio at about a 10%-or-better clip, which would equate to about $250 million of growth per quarter.”
Maher said while the bank finds certain geographic markets attractive, the available talent dictates when it makes a move. For example, OceanFirst has interest in the King of Prussia and Lehigh Valley markets in Pennsylvania but has not yet found the right lenders.
“In terms of geography, we want to be able to drive to our markets,” Maher said. “So this is still a relatively compact geography. And the last thing I'd add to it is that our experience in Philadelphia and New York as well as our experience during the pandemic helps us feel more comfortable about having a little bit of distance between us and the lenders.”
As with any new additions, there is a cost — in compensation and, in the case of the Baltimore team, real estate. When asked about that on the recent earnings call, Maher said he expects OceanFirst will be able to offset much of those cost increases by further optimizing its retail branch network.
“We're looking at the data now and watching who is using branches in what way and in what locations, and that will enable us,” Maher said. “We just want the data to stabilize post-pandemic before we make further decisions about the optimization of the retail network. So you may have expenses come up a little bit in Q2 and Q3 as we add lenders. And then toward the end of the year, we expect to be getting some more synergies.”