OceanFirst Financial Will Likely Call Its Preferred Shares

2025-02-08 11:40:00 ET

Summary

• OceanFirst Financial's Q4 performance was weaker than expected due to higher loan loss provisions, resulting in a lower net income of $21.9M.
• The preferred stock remains attractive with a current yield of 6.97%, but investors should be cautious of potential calls due to high future dividend costs.
• Management is considering partial redemption of preferred shares to manage capital costs. A full call would boost EPS on common shares by $0.10 annually.
• I hold a long position in OceanFirst’s preferred shares and I am monitoring the stock for potential investment in common shares, trading at a 6% discount to tangible book value.

Introduction

OceanFirst Financial ( OCFC ) (hereafter sometimes abbreviated as "Ocean") is a New Jersey-based bank with a balance sheet total of approximately $13.4B and an equity value of $1.7B (including almost $60M in preferred equity). The main focus of the bank is on issuing commercial real estate loans, and that likely is the main reason why OCFC is trading at attractive multiples. I own a relatively sizable position in the bank’s preferred shares as the upcoming call date means the bank will have to make a decision between calling the preferred securities or paying through the nose on future quarterly dividends given the high mark-up to the 3-month SOFR benchmark rate....

Read the full article on Seeking Alpha

For further details see: