OceanFirst Bank moved into Boston with a loan production office. July 20, 2021

July 20, 2021

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When OceanFirst Financial Corp. entered the Baltimore market with a loan production office in May, it also announced the hiring of single lenders in Boston and Washington, D.C. But CEO Christopher Maher was quick to say there were no plans for loan offices in Boston and Washington. While the bank was still looking to hire in both cities, it planned to move slower.

“Unlike Baltimore, Washington and Boston do have a lot of community banks,” Maher said at the time. “So we want to make sure we understand those markets."

Just two months later, though, the Toms River, New Jersey-based parent of OceanFirst Bank is ready to move into Boston with a loan production office. Maher said the process was sped up by the hiring of Daniel Griggs, who joined OceanFirst this month as president of the greater Boston region after spending the last 12 years as TD Bank’s market president for eastern Massachusetts.

“It was all about finding the right leadership talent and it turned out that Dan Griggs was available,” Maher said Monday. “That accelerated our plans.”

Griggs inherits one lender, David Heller, who started at OceanFirst in April after hanging his own lending shingle in November and having worked previously at BMO Harris Bank and U.S. Bank. But Maher said Griggs will be charged with hiring a small team of lenders — no more than five to start — while finding office space in Boston and introducing the OceanFirst brand to New England. Griggs will not be bringing anyone with him from TD Bank and there are no plans to complement the loan office with a retail presence anytime soon.

The strategy seems similar to the one employed in Baltimore, where the $11.5 billion-asset bank hired BBVA Mid-Atlantic Market President Tom Crawford to fill the same role at OceanFirst. Crawford brought a team of four other lenders with him from BBVA.

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. It 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 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 to gain critical mass.

Boston could produce an even slower growth model. Unlike Philadelphia and Baltimore, Maher said Boston is not dominated by larger banks. According to data from the Boston Business Journal based on June 30, 2020 FDIC deposit figures, the deposit market share in Massachusetts is much more fragmented than it is in either Baltimore or Philadelphia. Bank of America (27%) and Citizens Bank (14%) are the only banks with more than 10% market share. Santander Bank (6.83%) and TD Bank (5.74%) and third and fourth, respectively, but virtually all of the other banks in the top 20 are regional or community banks.

The big four banks in Boston consume 53% of deposit market share. In Baltimore, according to data from the Baltimore Business Journal, the five largest deposit takers – Bank of America, M&T Bank, PNC Bank, Truist Bank and Wells Fargo – 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. That means middle-market businesses, which OceanFirst generally considers to be those with $5 million to $100 million in annual revenue, have fewer options to go to in Philadelphia and Baltimore for lending and other services, like treasury management.

So while OceanFirst will be competing against four big banks in Boston that it also locks horns with in the Philadelphia market, it will have to contend with several more community banks that are serious players for commercial and private banking clients. That's why it will be more methodical and rely on Griggs to lead the way in what is somewhat of an unfamiliar market where it’s brand has no name recognition.

“He has the connections with the lawyers, accountants, developers and other commercial bankers up there,” Maher said.

The initial hiring will include three to five lenders with Mahar saying it could ultimately reach 10 or more, like Philadelphia has now. But he said that post-Covid, commercial clients can be serviced with a small team on the ground and centralized support services for the lenders in areas such as legal, compliance and treasury functions — all of which are based in New Jersey for OceanFirst.

With OceanFirst planting its flag in New England and Baltimore/Washington, D.C. this year, Maher said it wants to be an "Amtrak bank," covering the entire Northeast corridor.

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, New Jersey. According to sources, OceanFirst has talked 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 has admitted as much in recent interviews.

As it conducted its six bank mergers since 2016, OceanFirst aggressively consolidated retail branches. It now has 62 branches according to the FDIC, virtually all in New Jersey. While trimming retail locations, the bank has been focused on adding loan production offices in existing and adjacent markets.

As with any new personnel additions, there is a cost — in compensation and, in the case of the Baltimore and Boston teams, real estate. When asked about that on the bank's first-quarter 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.”

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