OceanFirst Financial (OCFC)

Regional bank OceanFirst Financial (NASDAQ:OCFC) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 6.3% year on year to $103 million. Its GAAP profit of $0.30 per share was 15.7% below analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ:OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

OceanFirst Financial competes with other regional banks operating in the New Jersey and greater metropolitan areas including Valley National Bank (NASDAQ:VLY), Provident Financial Services (NYSE:PFS), and Investors Bancorp, as well as larger national institutions like Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Wells Fargo (NYSE:WFC).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Over the last five years, OceanFirst Financial grew its revenue at a tepid 2.7% compounded annual growth rate. This fell short of our benchmarks and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. OceanFirst Financial’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.9% annually. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, OceanFirst Financial grew its revenue by 6.3% year on year, and its $103 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 87.8% of the company’s total revenue during the last five years, meaning OceanFirst Financial barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, OceanFirst Financial’s efficiency ratio has increased by 5.2 percentage points, going from 60.8% to 70.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

OceanFirst Financial’s efficiency ratio came in at 74.1% this quarter, falling short of analysts’ expectations by 473 basis points (100 basis points = 1 percentage point). This result was 8.4 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects OceanFirst Financial to rein in some of its expenses as it anticipates an efficiency ratio of 66.3%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

OceanFirst Financial’s EPS grew at a solid 6.4% compounded annual growth rate over the last five years, higher than its 2.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For OceanFirst Financial, its two-year annual EPS declines of 22.2% mark a reversal from its (seemingly) healthy five-year trend. We hope OceanFirst Financial can return to earnings growth in the future.

In Q3, OceanFirst Financial reported EPS of $0.30, down from $0.42 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects OceanFirst Financial’s full-year EPS of $1.29 to grow 33.8%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

OceanFirst Financial’s TBVPS grew at a mediocre 4.6% annual clip over the last five years. TBVPS growth has also recently decelerated a bit to 1.8% annual growth over the last two years (from $18.85 to $19.52 per share).

Over the next 12 months, Consensus estimates call for OceanFirst Financial’s TBVPS to grow by 4% to $20.30, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, OceanFirst Financial has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, OceanFirst Financial has averaged an ROE of 7%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was good to see OceanFirst Financial narrowly top analysts’ tangible book value per share expectations this quarter. On the other hand, its EPS missed and its net interest income fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $19.33 immediately following the results.

Updated: December 3, 2025 at 11:52 PM EST

Before deciding whether to buy OceanFirst Financial or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

OceanFirst Financial doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its net interest income growth was weak over the last five years.

OceanFirst Financial’s P/B ratio based on the next 12 months is 0.7x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $21.50 on the company (compared to the current share price of $19.44).