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Blue Foundry Bancorp Reports First Quarter 2022 Results

RUTHERFORD, N.J., April 27, 2022 (GLOBE NEWSWIRE) -- Blue Foundry Bancorp (NASDAQ:BLFY) (the “Company”), the holding company for Blue Foundry Bank (the “Bank”), today reported net income of $553,000, or $0.02 per diluted common share, for the three months ended March 31, 2022 compared to a net loss of $745,000 for the three months ended March 31, 2021.

"We continued to make excellent progress on our strategic initiatives during a solid first quarter,” said James D. Nesci, president and chief executive officer. “We were successful in deploying meaningful liquidity as we grew our lending and investment portfolios while asset quality remained strong.”

Highlights for the first quarter of 2022:

  • Gross loans grew by $64.1 million, or 5.1%, compared to the linked quarter, excluding Paycheck Protection Program (“PPP”) loans, led by commercial real estate products.
  • Core deposits increased $64.8 million, or 8.4%, compared to the linked quarter, led by a $62.3 million increase in interest checking. Core deposits now represent 65.3% of total deposits, compared to 50.6% a year ago.
  • Realized a $1.0 million or 7.2% sequential improvement in adjusted non-interest expense due to lower professional services, marketing and occupancy.
  • Net interest income of $11.9 million, an increase of $2.3 million, or 24.4%, compared to the prior year period.
  • $952,000 recovery of provision drove a decline in reserves compared to the prior quarter, resulting in an allowance coverage of 1.00%.
  • Net interest margin of 2.62%, a 54 basis point increase from the prior year quarter.
  • The rising interest rate environment led to a decline of $10.1 million in accumulated other comprehensive income. The net unrealized gains/loss position of the Company’s available-for-sale investment portfolio deteriorated by $15.7 million, partially offset by $5.6 million of gains on cash flow hedges.

Lending Franchise

The Company continues to diversify its loan portfolio by focusing on growth within commercial real estate and commercial and industrial lending. During the first quarter of 2022, the Company produced substantial originations within its multifamily and non-residential portfolios. This resulted in gross loan growth of $55.0 million during the three months ended March 31, 2022, despite elevated pay downs.

 March 31, 2022 December 31, 2021
 (In thousands)
Residential one-to-four family$579,083  $560,976 
Multifamily 517,037   515,240 
Non-residential 187,310   141,561 
Construction and land 18,613   23,419 
Junior liens 18,071   18,464 
Commercial and industrial 16,201   21,563 
Consumer and other 37   87 
Total gross loans 1,336,352   1,281,310 
Deferred fees, costs, premiums and discounts, net 5,134   6,299 
Total loans 1,341,486   1,287,609 
Allowance for loan losses (13,465)  (14,425)
Loans receivable, net$1,328,021  $1,273,184 
        

The commercial and industrial portfolio includes PPP loans, net of deferred fees, totaling $8.1 million at March 31, 2022 and $16.8 million at December 31, 2021.

Retail Banking Franchise

The Company’s funding strategy centers on building and retaining the primary banking relationships with customers who live and work within the Company’s geographic footprint as well as promoting technologies that make banking easy and convenient for all current and prospective customers. Additionally, a focus on attracting the full banking relationship of small to medium sized businesses through an extensive suite of lending and low-cost deposit products continues to support core deposit growth. As of March 31, 2022, core deposits totaled $838.1 million.

 March 31, 2022 December 31, 2021
 (In thousands)
Non-interest bearing deposits$45,143  $44,894 
NOW and demand accounts 425,766   363,419 
Savings 367,177   364,932 
Core deposits 838,086   773,245 
    
Time deposits 444,936   473,795 
Total deposits$1,283,022  $1,247,040 
        

Consolidated Financial Performance:

Quarterly net interest income compared to the first quarter of 2021:

  • Net interest income was $11.9 million, an increase of $2.3 million.
  • Net interest margin increased by 54 basis points to 2.62%.
  • Yield on average interest-earning assets decreased five basis points to 2.98% while the cost of average interest-bearing deposits decreased 57 basis points to 0.29%.
  • An increase of $139.0 million in average core deposits coupled with a $245.1 million decrease of mostly high-cost average time deposits drove a 56 basis point improvement in the cost of deposits and a 58 basis point improvement in the cost of funds.

Quarterly provision for loan losses:

  • A $952,000 recovery of provision for loan losses was recorded for the quarter driven by significant pay downs within the construction and land portfolio coupled with a generally improving economic environment. This recovery contributed to a $960,000 decrease in the allowance for loan losses.
  • The allowance for loan losses represented 1.00% of total loans compared to 1.13% at December 31, 2021 and 1.25% at March 31, 2021. The allowance for loan losses was 128.5% of non-performing loans compared to 120.4% at December 31, 2021 and 130.4% at March 31, 2021.

Quarterly non-interest expense compared to the first quarter 2021:

  • Non-interest expense was $13.2 million, an increase of $847,000. This primarily reflects an increase of $903,000 in compensation as the Company continues to hire and retain talent at competitive rates in the current market.

Quarterly income tax expense compared to the first quarter of 2021:

  • Income tax expense was $49,000 compared to an income tax benefit of $551,000 for the prior year quarter. The increase was driven by the $1.9 million improvement in pre-tax income.

Cash and cash equivalents:

  • Cash and cash equivalents decreased $91.9 million compared to the linked quarter as the Company deployed cash into loans and invested in primarily high quality liquid securities.

Securities available-for-sale:

  • Securities available-for-sale increased $50.7 million to $375.6 million as the Company invested primarily in residential mortgage-backed securities as interest rates rose.
  • The rising rate environment contributed to a decline of $15.8 million in the net unrealized gains/loss position of the portfolio.

Gross loans:

  • Gross loans held for investment increased $55.0 million to $1.34 billion. Excluding PPP, gross loans increased by $64.1 million.
  • Compared to the linked quarter, non-residential loans increased $45.7 million and residential loans increased $18.1 million.
  • Organic loan originations totaled $101.6 million, including originations of $48.2 million in non residential loans and $36.5 million in multifamily loans. In addition, $45.8 million of conforming residential mortgages in the Bank’s geographic footprint were purchased during the quarter.

Deposits and borrowings:

  • Deposits totaled $1.28 billion, an increase of $36.0 million since December 31, 2021. Core deposits represented 65.3% of total deposits compared to 62.0% at December 31, 2021 and 50.6% at March 31, 2021.
  • Borrowing remained flat at $185.5 million.

Asset quality:

  • Non-performing loans totaled $10.5 million, or 0.78% of total loans compared to $12.0 million, or 0.94% of total loans at December 31, 2021, and $12.4 million, or 0.95% of total loans at March 31, 2021.

Capital:

  • Shareholders’ equity decreased by $9.3 million to $420.2 million. The rising rate environment adversely impacted the Company’s investment portfolio, driving a $10.1 million decline in accumulated other comprehensive income. Quarterly net income partially offset this decline.
  • Tangible equity to tangible assets was 21.68% and tangible common equity per shares outstanding was $14.72.
  • The Bank’s capital ratios remain above the FDIC’s “well capitalized” standards.

About Blue Foundry

Blue Foundry Bancorp is the holding company for Blue Foundry Bank, a place where things are made, purpose is formed, and ideas are crafted. Headquartered in Rutherford NJ, with presence in Bergen, Essex, Hudson, Morris, Passaic and Somerset counties, Blue Foundry Bank is a full-service, progressive bank serving the doers, movers, and shakers in our communities. We offer individuals and businesses alike the tailored products and services they need to build their futures. With a rich history dating back more than 145 years, Blue Foundry Bank has a longstanding commitment to its customers and communities. To learn more about Blue Foundry Bank visit BlueFoundryBank.com or call (888) 931-BLUE. Member FDIC.

Conference Call Information

A conference call covering Blue Foundry’s first quarter 2022 earnings announcement will be held today, Wednesday, April 27, 2022 at 11:00 a.m. (EDT). To listen to the live call, please dial 1-844-200-6205 (toll free), 1-646-904-5544 (local) or +1-929-526-1599 (international) and use access code 856694. The webcast (audio only) will be available on bluefoundrybank.com. The conference call will be recorded and will be available on the Company’s website for one month.

Contact:
James D. Nesci
President and Chief Executive Officer
BlueFoundryBank.com
[email protected]
201-972-8900

Forward Looking Statements

Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

Forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: conditions related to the global coronavirus pandemic that has and will continue to pose risks and could harm our business and results of operations; general economic conditions, either nationally or in our market areas, that are worse than expected; changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; our ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in our market area; our ability to implement and change our business strategies; competition among depository and other financial institutions; inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; adverse changes in the securities or secondary mortgage markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; changes in the quality or composition of our loan or investment portfolios; technological changes that may be more difficult or expensive than expected; a failure or breach of our operational or security systems or infrastructure, including cyber-attacks; the inability of third party providers to perform as expected; our ability to manage market risk, credit risk and operational risk in the current economic environment; our ability to enter new markets successfully and capitalize on growth opportunities; our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related there to; changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; our ability to retain key employees; the ability of the U.S. Government to manage federal debt limits; and changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Consolidated Statements of Financial Condition
March 31, 2022 (Unaudited) and December 31, 2021
(Dollars in thousands)

 March 31, 2022 December 31, 2021
 (In thousands)
ASSETS   
Cash and cash equivalents$101,562  $193,446 
Securities available for sale, at fair value 375,614   324,892 
Securities held to maturity (fair value of $27,993 at March 31, 2022 and $22,849 at December 31, 2021) 29,838   23,281 
Restricted stock, at cost 10,182   10,182 
Loans receivable, net of allowance of $13,465 at March 31, 2022 and $14,425 at December 31, 2021 1,328,021   1,273,184 
Interest and dividends receivable 5,780   5,372 
Premises and equipment, net 28,130   28,126 
Right-of-use assets 24,811   25,457 
Bank owned life insurance 21,776   21,662 
Other assets 12,441   8,609 
Total assets$1,938,155  $1,914,211 
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Liabilities   
Deposits$1,283,022  $1,247,040 
Advances from the Federal Home Loan Bank 185,500   185,500 
Advances by borrowers for taxes and insurance 9,840   9,582 
Lease liabilities 26,083   26,696 
Other liabilities 13,496   15,922 
Total liabilities 1,517,941   1,484,740 
    
Shareholders’ equity   
Common stock $0.01 par value; 70,000,000 shares authorized; 28,522,500 shares issued and outstanding 285   285 
Additional paid-in capital 282,100   282,006 
Retained earnings 170,010   169,457 
Unallocated common shares held by ESOP (21,677)  (21,905)
Accumulated other comprehensive loss (10,504)  (372)
Total shareholders’ equity 420,214   429,471 
Total liabilities and shareholders’ equity$1,938,155  $1,914,211 
        

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Consolidated Statements of Operations
(Dollars in Thousands) (Unaudited)

 Three months ended
 March 31,
  2022   2021 
 (In thousands)
Interest income:   
Loans$11,656  $12,262 
Taxable investment income 1,817   1,545 
Non-taxable investment income 121   135 
Total interest income 13,594   13,942 
Interest expense:   
Deposits 882   2,818 
Borrowed funds 773   1,525 
Total interest expense 1,655   4,343 
Net interest income 11,939   9,599 
Recovery of provision for loan losses (952)  (808)
Net interest income after recovery of provision for loan losses 12,891   10,407 
Non-interest income:   
Fees and service charges 800   526 
Gain on premises and equipment 1    
Other 126   140 
Total other income 927   666 
Non-interest expense:   
Compensation and employee benefits 6,924   6,021 
Occupancy and equipment 1,881   1,953 
Loss on assets held for sale    21 
Data processing 1,478   1,767 
Advertising 519   470 
Professional services 1,291   1,397 
Directors fees 136   140 
Recovery of provision for commitments and letters of credit (170)  (231)
Federal deposit insurance 78   125 
Other 1,079   706 
Total operating expenses 13,216   12,369 
Income (loss) before income tax expense (benefit) 602   (1,296)
Income tax expense (benefit) 49   (551)
Net income (loss)$553  $(745)
Basic and diluted earnings per share$0.02   n/a 
Weighted average shares outstanding 26,343,508   n/a 
      

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Consolidated Financial Highlights
(Dollars in thousands except for share data) (Unaudited)

 Three months ended
 March 31,
2022
 December 31,
2021
 September 30,
2021
 June 30,
2021
 March 31,
2021
Performance Ratios (%):         
Return (loss) on average assets 0.12   (3.97)  (2.77)  (0.19)  (0.16)
Return (loss) on average equity 0.52   (17.36)  (15.15)  (1.97)  (1.47)
Interest rate spread (1) 2.50   2.50   1.96   1.84   1.96 
Net interest margin (2) 2.62   2.63   2.15   1.99   2.08 
Efficiency ratio (non-GAAP) (3) 104.0   110.6   105.6   116.6   122.5 
Average interest-earning liabilities to average interest-bearing liabilities 131.8   132.0   133.4   119.9   140.9 
Tangible equity to tangible assets (4) 21.68   22.42   22.14   7.94   10.43 
Book value per share (5) 14.73   15.06   15.72   N/A   N/A 
Tangible book value per share (6) 14.72   15.04   15.70   N/A   N/A 
          
Asset Quality:         
Non-performing loans$10,482  $11,983  $12,463  $12,466  $12,385 
Real estate owned, net$  $  $624  $624  $623 
Non-performing assets$10,482  $11,983  $13,087  $13,090  $13,008 
Allowance for loan losses to total loans (%) 1.00   1.13   1.22   1.24   1.25 
Allowance for loan losses to non-performing loans (%) 128.5   120.4   122.3   125.1   130.4 
Non-performing loans to total loans (%) 0.78   0.94   1.00   0.99   0.95 
Non-performing assets to total assets (%) 0.54   0.63   0.65   0.51   0.66 
Net charge-offs to average outstanding loans during the period (%) %  %  %  %  %
                    

(1) Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average interest-earning assets.
(3) Efficiency ratio represents adjusted non-interest expense divided by the sum of net interest income plus non-interest income.
(4) Tangible equity equals $419.8 million, which excludes intangible assets ($452 thousand of capitalized software). Tangible assets equal $1.94 billion and excludes intangible assets.
(5) Per share metrics computed using 28,522,500.00 total shares outstanding.
(6) Tangible book value equals the Company’s tangible equity of $419.8 million divided by outstanding shares of 28,522,500.

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Analysis of Net Interest Income
(Dollars in Thousands) (Unaudited)

 Three Months Ended March 31,
 2022 2021
 Average BalanceInterestAverage
Yield/Cost
 Average BalanceInterestAverage
Yield/Cost
 (Dollar in thousands)
Assets:       
Loans (1)$1,280,678 $11,656 3.69% $1,291,713 $12,262 3.85%
Mortgage-backed securities 171,912  722 1.70%  138,060  678 1.99%
Other investment securities 198,736  1,020 2.08%  122,698  727 2.40%
FHLB stock 9,942  116 4.73%  16,465  210 5.17%
Cash and cash equivalents 188,706  80 0.17%  300,100  65 0.09%
Total interest-bearing assets 1,849,974  13,594 2.98%  1,869,036  13,942 3.03%
Non-interest earning assets 77,445     75,946   
Total assets$1,927,419    $1,944,982   
Liabilities and shareholders' equity:       
NOW, savings, and money market deposits 760,369  235 0.13%  623,192  305 0.20%
Time deposits 458,109  647 0.57%  703,160  2,513 1.45%
Interest-bearing deposits 1,218,478  882 0.29%  1,326,352  2,818 0.86%
FHLB advances 185,500  773 1.69%  324,789  1,525 1.90%
Total interest-bearing liabilities 1,403,978  1,655 0.48%  1,651,141  4,343 1.07%
Non-interest bearing deposits 42,402     40,575   
Non-interest bearing other 48,273     47,621   
Total liabilities 1,494,653     1,739,337   
Total shareholders' equity 432,766     205,645   
Total liabilities and shareholders' equity$1,927,419    $1,944,982   
Net interest income $11,939    $9,599  
Net interest rate spread (2)  2.50%   1.96%
Net interest margin (3)  2.62%   2.08%
          

(1) Average loan balances are net of deferred loan fees and costs, and premiums and discounts, and includes non-accrual loans.
(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Adjusted Pre-Provision Net Revenue (Non-GAAP)
(Dollars in Thousands) (Unaudited)

This press release contains certain supplemental financial information, described in the table below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Blue Foundry's performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding Blue Foundry's financial results. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Blue Foundry strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Net income, as presented in the Consolidated Statements of Operations, includes the provision for loan losses, provision for commitments and letters of credit, and income tax expense (benefits) while pre-provision net revenue does not.

 Three months ended
 March 31,
2022
 December 31,
2021
 September 30,
2021
 June 30,
2021
 March 31,
2021
 (Dollars in thousands)
Pre-provision net revenue (PPNR) and efficiency ratio, as adjusted:         
Net interest income 11,939   12,336   11,104   9,909   9,599 
Other income 927   704   489   621   666 
Operating expenses, as reported 13,216   17,380   33,118   11,802   12,369 
Less: Prepayment fees    754   1,401       
Less: Loss on pension withdrawal    1,974   9,232       
Less: Charitable contribution       9,000       
Less: Provision for commitments and letters of credit (170)  148   1,245   (473)  (231)
Less: Loss on assets held for sale    83         21 
Operating expenses, as adjusted 13,386   14,421   12,240   12,275   12,579 
Pre-provision net revenue (loss), as adjusted$(520) $(1,381) $(647) $(1,746) $(2,314)
Efficiency ratio, as adjusted 104.0%  110.6%  105.6%  116.6%  122.5%
          
Core deposits:         
Total deposits 1,283,022   1,247,040   1,265,617   2,008,068   1,385,829 
Less: time deposits 444,936   473,795   521,510   639,043   684,429 
Less: conversion deposits (1)          630,094    
Core deposits 838,086   773,245   744,107   738,931   701,400 
Core deposits to total deposits 65.3%  62.0%  58.8%  53.6%  50.6%
          
Tangible equity:         
Shareholders’ equity (2) (3) 420,214   429,472   448,235   204,913   205,453 
Less: intangible assets 452   437   354   251    
Tangible equity 419,762   429,035   447,881   204,662   205,453 
          
Tangible book value per share:         
Tangible equity 419,762   429,035   447,881   N/A   N/A 
Shares outstanding 28,522,500   28,522,500   28,522,500   N/A   N/A 
Tangible book value per share 14.72   15.04   15.70   N/A   N/A 
                

(1) Conversion deposits represent deposits held in advance of the initial public offering. Given their temporary nature, they are removed from the core deposit ratio.
(2) The Company recorded a deferred tax assets valuation allowance of $16.8 million as of December 31, 2021.
(3) Accumulated other comprehensive income (AOCI) declined by $10.1 million in 1Q’22, largely a result of the rising rate environment.

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