OceanFirst Financial was busy over the last few months of 2021. With a strong presence along the Shore, the bank played a key role in the region’s booming real estate market and the economic recovery in general. And in November, OceanFirst announced that it would acquire Salisbury, Md.-based Partners Bancorp in a deal valued at about $186 million. The transaction will extend the buyer’s footprint into Delaware, Maryland, Virginia and the Washington, D.C.-metro area, creating a company with approximately $13.5 billion in assets, $9.3 billion in loans and $11.2 billion in deposits.
All of which gives OceanFirst CEO Christopher Maher an excellent perch from which to assess the state and national economies. NJBIZ recently spoke with Maher about the bank’s performance and his outlook for 2022. “I think in the short term you’ll see things like the omicron story play out a little bit, but I don’t think it’s going to be anywhere near as devastating as the first wave of the pandemic was,” he said.
What follows is an abridged version of that discussion. The questions and answers have been edited for length and clarity. The full interview is available at njbiz.com/njbizconversations.
NJBIZ: Let’s talk a little bit about what’s happening, first in New Jersey. What are you hearing from clients, what are you seeing on the ground, about where things stand? How is how is business, especially because you do a lot of business along the Shore? What was the summer like, and how are things looking for the for the winter? What is the business climate out there right now?
Christopher Maher: Business conditions are actually quite strong and there’s three drivers in the New Jersey Shore market, which was terrific this summer. That strength continued — people are able to work remotely, they’re choosing to invest their time and energy into second homes or primary homes along the Shore so that’s very busy.
The second big thing is the logistics economy, and you know New Jersey, is at the heart of the logistics economy with the deepest port, busiest port on the East Coast, and in fact we’re able to move container ships through in a much more rapid fashion than they can do in Los Angeles. So, we’re now seeing China cargo bypass California, come through the Panama Canal and ship out to the Midwest through New Jersey. So that’s pretty strong.
The last one is health care. We’ve always been a health care state. There’s a new emphasis on research and development — you’ve seen some staggeringly large investments in the New Brunswick area. But we’re seeing clients across the spectrum in those three areas doing quite well so growth is good.
Obviously, we’re watching the new omicron variant, but I don’t think that’s going to derail anything in the short term.
Q: Well that’s what I think sort of threw everybody for a loop. I mean it looked like, yes delta was still still a problem, but it looked like most folks have tried to get back to normal. I’m interested to hear, though, that the real estate market along the Shore has remained strong. What kind of legs does that have? How long do you see that going? Is that something that’s going to last throughout next year?
A: I think it’s going to be very sustainable. What’s happened is in the early days of the pandemic I think people were looking for more space and then they realized they can work in many cases remotely even if it’s just a couple days a week. I’m from Long Beach Island – in the north we see that attraction to New York and New Yorkers coming down to wanting to buy that second home for long weekends and all that. And then from Long Beach Island south it’s the Philadelphia crowd.
But demand is strong. There’s no inventory. Prices keep going up, and we think that’s going to persist well past the end of the pandemic.
Q: There’s also going to be an influx of infrastructure spending from the federal government. The wind projects off the coast should start to really take off at a certain point. How important is that, for the region that you work in and from the folks you’re talking to? What’s the thinking there?
A: I think it’s really important in several ways. The first is the renewable energy side — our ability to be a leader. The offshore wind farm is going to make a big difference to our economy. It’s also going to give us people with the skills and the ability to do that kind of work, not just here in New Jersey, but elsewhere in the country.
The other thing I would point to is the aging rail infrastructure and the hope that we will get finally get the tunnels fixed into New York — that is a probably a 10-year multibillion dollar project that’s sorely needed. It will strengthen the local economy.
Q: So you’re looking for some positive effects from all that money coming in.
A: Oh, absolutely. We see that as one of the reasons that we’re looking at the economy continuing to expand through much of 2022 and likely into 2023 as well. There’s just too much spending going on. Consumers are still spending, changing a little bit about what they spend and how they spend it. But the consumer businesses are strong, have a lot of liquidity. We’ve got all-time high levels of deposits and now you have the fiscal stimulus that the government is spending on top of it.
Q: You mentioned a couple of times that the biggest threat you see is that somehow the pandemic flares back up again and people start to stay home.
A: Right, there are two threads. I mean that’s certainly one. The second thread is, we have a very delicate balance around interest rates, inflation and the public policy around that. So inflation has been really hurting folks of modest means. When your food and energy prices go up it’s easy to say, well, inflation excepting food, energy is OK. [But] people need to eat, they need to drive, they need to heat their home, so we have to watch inflation. It’ll be important that we get inflation under control next year. Hopefully we’re on the course to do that.
But if that gets resolved, I think we have to watch for potential shocks to the economy, as potentially interest rates may come up, homes may become a little more expensive. A little bit is OK, we just have to make sure we thread a pretty narrow needle.
Q: Well you anticipated what I was going to ask you next, and that is about the national economy. As you mentioned, New Jersey is obviously tied to the national economy, all those things that are being shipped to the port and then out to the rest of the country require people to buy them. And you mentioned interest rates. Jay Powell was just recently reappointed as Fed chairman — are you comfortable with that continuity? Is that better than a change in direction at this point?
A: I think Chair Powell has shown incredible leadership over the course of the last couple years. It’s a difficult time. I think the Fed has spent a lot of time and energy making sure they get policy right in a period of time where it’s very hard to look at historical precedents. There’s not much guidance we have–the playbooks aren’t exactly clear.
But I think what you’ve got in the Fed is a group that’s listening and is really trying to tune in and understand what concerns people have and to translate them into a monetary policy that will help the country, but also help each and every one of us.
Q: I’m curious where you come down on how persistent inflation might be. One view holds that it’s relatively transitory and it will dissipate after a while. Others say it’s going to persist. Where do you come down on that debate?
A: I think I share Chair Powell’s view that we should probably retire the transitory word. I think that it will be sustained for a little bit of time as we get into next year — that there will continue to be inflationary pressures. It’s really two things happening. There’s a lot of cash in the economy. And the economy is struggling to produce the goods and services people want. So you’re going to have more demand, less supply. You’re going to have inflation.
I do think, though, that, as the supply chain comes back to normal – that will probably be somewhere around the middle of next year – as that normalizes you should see a lot of these price pressures pull back and then maybe you’ll start to see us return to that target. And the back half of next year, the first half of ‘23 getting closer to that 2% long-term target.
Q: Well, that’s the next thing I was going to talk about. It does sort of suggest that there’s demand out there and there’s spending power. That consumers really do want to get back to get back out and into the stores, the restaurants, bars, the live events – all the things that they couldn’t do – so that suggests that as long was there isn’t something that keeps them home, the economy should be OK. The last thing I was going to ask you about was the outlook for 2022 and what you’re expecting. That demand is a good thing — are you expecting that to stick around?
A: Absolutely, the demand is a good thing. I do think supply chain gets resolved. It will take a little while to get resolved. The major question mark we have … will be the labor market. We have seen a significant number of Americans decide to retire early or to change their views the appropriate life balance around the way they work, the locations they work in, the kind of work they’re willing to do. I think we’ll adjust to that as well.
One thing to watch in the beginning of 2022 is will we be able to find the labor to fill all these open jobs. It’s not going to be an issue to create jobs, those jobs are out there. I think it’s just an issue of getting them filled so we’ll watch that closely. But otherwise, we’re in good shape.[/vc_column_text][/vc_column][/vc_row]