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Blue Foundry Bancorp Reports Second Quarter 2022 Results

RUTHERFORD, N.J., July 27, 2022 (GLOBE NEWSWIRE) -- Blue Foundry Bancorp (NASDAQ:BLFY)(the “Company”), the holding company for Blue Foundry Bank (the “Bank”), today reported second quarter financial results highlighted by record loan growth. Gross loans grew by $94.3 million, or 7.1%, compared to the linked quarter, excluding Paycheck Protection Program (“PPP”) loans, led by commercial real estate products.

Net income was $40 thousand for the three months ended June 30, 2022 compared to $553 thousand for the three months ended March 31, 2022 and a net loss of $1.0 million for the three months ended June 30, 2021. Net income was $593 thousand for the six months ended June 30, 2022 compared to a net loss of $1.7 million for the six months ended June 30, 2021.

Additionally, pre-provision net revenue was $529 thousand, an increase of $1.0 million compared to the prior quarter, and an increase of $2.3 million compared to the prior year quarter.

James D. Nesci, president and chief executive officer commented, “This year has been a pivotal time in the Company’s history. On July 15th we celebrated the one year anniversary of our mutual-to stock conversion and on July 20th we announced the adoption of our first stock repurchase program.” He continued, “We are encouraged by the improvement in the results delivered for the second quarter. Strong production in both our lending and retail franchises led to profitability on an operating basis for the first time as a public company.”

Highlights for the second quarter of 2022:

  • Organic loan originations totaled $147.0 million for the quarter, including originations of $94.6 million in multifamily loans and $36.7 million non-residential real estate loans. In addition, $27.6 million of conforming residential mortgages in New Jersey were purchased during the period.
  • Core deposits increased $27.9 million, or 3.3%, compared to the linked quarter, led by a $25.0 million increase in business accounts. Core deposits now represent 66.8% of total deposits, compared to 53.6% a year prior.
  • Non-interest expense, excluding the provision for commitments and letters of credit, improved $259 thousand or 1.9% sequentially due to lower professional services, advertising, and data processing expenses.
  • Net interest income for the quarter was $13.2 million, an increase of $1.2 million, or 10.2%, compared to the prior quarter, and an increase of $3.3 million, or 32.8%, compared to the prior year quarter.
  • Net interest margin expanded to 2.83%, a 21 basis point increase compared to the prior quarter and an 84 basis point increase from the prior year quarter.
  • The rising interest rate environment negatively impacted the fair value of the Company’s available-for-sale investment portfolio leading to a temporary decline of $18.4 million in accumulated other comprehensive income during the six months ended June 30, 2022.

Lending Franchise

The Company continues to diversify its lending franchise by focusing on growing the commercial portfolio. During the second quarter of 2022, gross loans increased by $88.1 million primarily due to strong growth within the Company’s multifamily and non-residential portfolios.

Organic originations totaled $147.0 million for the quarter, including $94.6 million of originations in multifamily loans and $36.7 million in non-residential loans. In addition, $27.6 million in purchases of conforming residential loans in New Jersey contributed to the growth during the quarter.

The details of the loan portfolio is below:

 June 30, 2022 March 31, 2022 December 31, 2021
      
 (In thousands)
Residential one-to-four family$590,151  $579,083  $560,976 
Multifamily 579,183   517,037   515,240 
Non-residential real estate 211,683   187,310   141,561 
Construction and land 21,010   18,613   23,419 
Junior liens 16,421   18,071   18,464 
Commercial and industrial (including PPP) 5,957   16,201   21,563 
Consumer and other 47   37   87 
Total gross loans 1,424,452   1,336,352   1,281,310 
Deferred fees, costs, premiums and discounts, net 3,821   5,134   6,299 
Total loans 1,428,273   1,341,486   1,287,609 
Allowance for loan losses (14,050)  (13,465)  (14,425)
Loans receivable, net$1,414,223  $1,328,021  $1,273,184 

The commercial and industrial portfolio includes PPP loans, net of deferred fees, totaling $2.0 million at June 30, 2022, $8.1 million at March 31, 2022, and $16.8 million at December 31, 2021.

Retail Banking Franchise

As of June 30, 2022, core deposits totaled $866.0 million, an increase of $92.7 million or 12.0% from December 31, 2021. The Company’s 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.

The details of deposits are below:

 June 30, 2022 March 31, 2022 December 31, 2021
      
 (In thousands)
Non-interest bearing deposits$52,036 $45,143 $44,894
NOW and demand accounts 455,776  425,766  363,419
Savings 358,166  367,177  364,932
Core deposits 865,978  838,086  773,245
      
Time deposits 430,696  444,936  473,795
Total deposits$1,296,674 $1,283,022 $1,247,040

Financial Performance Overview:

Second quarter of 2022 compared to the second quarter of 2021

Net interest income compared to the second quarter of 2021:

  • Net interest income was $13.2 million, an increase of $3.3 million.
  • Net interest margin increased by 84 basis points to 2.83%.
  • Yield on average interest-earning assets increased 42 basis points to 3.19% while the cost of average interest-bearing deposits decreased 40 basis points to 0.31%.
  • An increase of $120.7 million in average interest-bearing core deposits coupled with a $231.9 million decrease of higher cost average time deposits drove a 33 basis point improvement in the cost of deposits and a 39 basis point improvement in the cost of funds.

Non-interest expense compared to the second quarter of 2021:

  • Non-interest expense was $13.0 million, an increase of $1.2 million. This primarily reflects an increase of $639 thousand in compensation and benefits costs, an increase of $430 thousand in fees for professional services due to higher audit and CECL implementation costs, and a lower recovery in the provision for commitments and letters of credit of $365 thousand.

Income tax expense compared to the second quarter of 2021:

  • Income tax expense was $3 thousand compared to an income tax expense of $283 thousand for the prior year quarter.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Net interest income compared to the six months ended June 30, 2021:

  • Net interest income was $25.1 million, an increase of $5.6 million.
  • Net interest margin increased by 69 basis points to 2.72%.
  • Yield on average interest-earning assets increased 20 basis points to 3.09% while the cost of average interest-bearing deposits decreased 48 basis points to 0.30%.
  • An increase of $116.3 million in average interest-bearing core deposits coupled with a $238.4 million decrease in higher cost average time deposits drove a 44 basis point improvement in the cost of deposits and a 47 basis point improvement in the cost of funds.

Non-interest expense compared to the six months ended June 30, 2021:

  • Non-interest expense was $26.2 million, an increase of $2.1 million. This primarily reflects an increase of $1.5 million in compensation and benefits costs.

Income tax expense compared to the six months ended June 30, 2021:

  • Income tax expense was $52 thousand compared to an income tax benefit of $268 thousand for the prior year period. The increase was driven by the $2.7 million increase in pre-tax income.

Balance Sheet Summary:

June 30, 2022 compared to December 31, 2021

Cash and cash equivalents:

  • Cash and cash equivalents decreased $138.6 million compared to December 31, 2021 as the Company deployed cash primarily into higher yielding loans and securities.

Securities available-for-sale:

  • Securities available-for-sale increased $27.3 million to $352.2 million as the Company invested primarily in residential mortgage-backed securities as interest rates rose.
  • The rising rate environment contributed to a decline of $26.6 million in the net unrealized position of the portfolio.

Gross loans:

  • Gross loans held for investment increased $143.1 million to $1.42 billion. Excluding PPP, gross loans increased by $158.4 million.
  • Non-residential real estate loans increased $70.1 million, multifamily loans increased $63.9 million, and residential loans increased $29.2 million.
  • Organic originations totaled $248.5 million, including originations of $131.1 million in multifamily loans and $86.3 million non-residential real estate loans. In addition, $73.4 million of conforming residential mortgages in New Jersey were purchased during the period.

Deposits and borrowings:

  • Deposits totaled $1.30 billion, an increase of $49.6 million since December 31, 2021. Core deposits represented 66.8% of total deposits, compared to 62.0% at December 31, 2021 and 53.6% at June 30, 2021.
  • FHLB borrowings increased by $20.0 million to $205.5 million.

Capital:

  • Shareholders’ equity decreased by $17.2 million to $412.3 million. The decrease was primarily driven by an $18.4 million reduction in accumulated other comprehensive income reflecting the net impact that the current interest rate environment had on the Company’s available-for-sale securities and the swaps agreements used in our cash flow hedges. The decrease was partially offset by net income of $593 thousand for the six months ended June 30, 2022.
  • Tangible equity to tangible assets was 20.97% and tangible common equity per share outstanding was $14.43.
  • The Bank’s capital ratios remain above the FDIC’s “well capitalized” standards.

Asset quality:

  • Non-performing loans totaled $10.0 million, or 0.70% of total loans compared to $12.0 million, or 0.94% of total loans at December 31, 2021, and $12.5 million, or 0.99% of total loans at June 30, 2021.
  • The allowance for loan losses represented 0.98% of total loans compared to 1.13% at December 31, 2021 and 1.24% at June 30, 2021. The allowance for loan losses was 140.5% of non-performing loans compared to 120.4% at December 31, 2021 and 125.1% at June 30, 2021.
  • The Company recorded a provision for loan losses of $594 thousand for the quarter ended June 30, 2022 driven by growth in the multifamily and non-residential portfolios and recorded a release of $358 thousand for the six months ended June 30, 2022 driven by significant pay downs within the construction and land portfolio, partially offset by growth in our multifamily and non-residential portfolios.
  • Net charge-offs were $9 thousand for the quarter ended June 30, 2022 and $17 thousand for the six months ended June 30, 2022.

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 second quarter 2022 earnings announcement will be held today, Wednesday, July 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 212089. 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

 June 30, 2022 March 31, 2022 December 31, 2021
 (unaudited) (unaudited) (audited)
 (Dollars in Thousands)
ASSETS     
Cash and cash equivalents$54,806  $101,562  $193,446 
Securities available for sale, at fair value 352,183   375,614   324,892 
Securities held to maturity (fair value of $26,928, $27,993 and $22,849
at June 30, 2022, March 31, 2022 and December 31, 2021, respectively)
 29,794   29,838   23,281 
Other investments 11,337   10,182   10,182 
Loans, net 1,414,223   1,328,021   1,273,184 
Interest and dividends receivable 5,945   5,780   5,372 
Premises and equipment, net 30,684   28,130   28,126 
Right-of-use assets 24,163   24,811   25,457 
Bank owned life insurance 21,892   21,776   21,662 
Other assets 19,023   12,441   8,609 
Total assets$1,964,050  $1,938,155  $1,914,211 
      
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Liabilities     
Deposits$1,296,674  $1,283,022  $1,247,040 
Advances from the Federal Home Loan Bank 205,500   185,500   185,500 
Advances by borrowers for taxes and insurance 10,126   9,840   9,582 
Lease liabilities 25,461   26,083   26,696 
Other liabilities 13,996   13,496   15,922 
Total liabilities 1,551,757   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   285 
Additional paid-in capital 282,154   282,100   282,006 
Retained earnings 170,050   170,010   169,457 
Unallocated common shares held by ESOP (21,449)  (21,677)  (21,905)
Accumulated other comprehensive loss (18,747)  (10,504)  (372)
Total shareholders’ equity 412,293   420,214   429,471 
Total liabilities and shareholders’ equity$1,964,050  $1,938,155  $1,914,211 

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Data) (Unaudited)

 Three months ended Six months ended
  June 30,
2022
   March 31,
2022
   June 30,
2021
   June 30,
2022
   June 30,
2021
 
          
 (Dollars in thousands)
Interest income:         
Loans$12,444  $11,656  $12,056  $24,100  $24,318 
Taxable investment income 2,320   1,817   1,618   4,137   3,163 
Non-taxable investment income 114   121   128   235   263 
Total interest income 14,878   13,594   13,802   28,472   27,744 
Interest expense:         
Deposits 950   882   2,379   1,832   5,197 
Borrowed funds 766   773   1,515   1,539   3,039 
Total interest expense 1,716   1,655   3,894   3,371   8,236 
Net interest income 13,162   11,939   9,908   25,101   19,508 
Provision (recovery of provision) for loan losses 594   (952)  (553)  (358)  (1,361)
Net interest income after provision for loan losses 12,568   12,891   10,461   25,459   20,869 
Non-interest income:         
Fees and service charges 365   800   537   1,165   1,063 
Gain on sales and calls of securities available for sale 14         14    
Loss on premises and equipment       (86)     (86)
Other 115   127   169   242   310 
Total other income 494   927   620   1,421   1,287 
Non-interest expense:         
Compensation and employee benefits 7,008   6,924   6,369   13,932   12,391 
Occupancy and equipment 1,914   1,881   2,043   3,795   3,996 
Loss on assets held for sale             21 
Data processing 1,393   1,478   1,885   2,871   3,652 
Advertising 349   519   521   868   991 
Professional services 976   1,291   546   2,267   1,943 
Directors fees 126   136   136   262   277 
Recovery of provision for commitments and letters of credit (108)  (170)  (473)  (278)  (704)
Federal deposit insurance 99   78   129   177   254 
Other 1,262   1,079   645   2,341   1,351 
Total operating expenses 13,019   13,216   11,801   26,235   24,172 
Income (loss) before income tax expense (benefit) 43   602   (720)  645   (2,016)
Income tax expense (benefit) 3   49   283   52   (268)
Net income (loss)$40  $553  $(1,003) $593  $(1,748)
Basic and diluted earnings per share$  $0.02  n/a $0.02  n/a
Weighted average shares outstanding 26,366,324   26,343,508  n/a  26,354,979  n/a

BLUE FOUNDRY BANCORP AND SUBSIDIARY
Consolidated Financial Highlights
(Dollars in Thousands) (Unaudited)

 Three months ended
 June 30,
2022
 March 31,
2022
 December 31,
2021
 September 30,
2021
 June 30,
2021
Performance Ratios (%):         
Return (loss) on average assets 0.01   0.12   (3.97)  (2.77)  (0.19)
Return (loss) on average equity 0.04   0.52   (17.36)  (15.15)  (1.97)
Interest rate spread(1) 2.71   2.50   2.50   1.96   1.84 
Net interest margin(2) 2.83   2.62   2.63   2.15   1.99 
Efficiency ratio (non-GAAP)(3) 96.13   104.04   110.59   105.58   116.58 
Average interest-earning assets to average interest-bearing liabilities 131.52   131.77   132.04   133.42   119.87 
Tangible equity to tangible assets(4) 20.97   21.68   22.42   22.14   7.92 
Book value per share(5)$14.46  $14.73  $15.06  $15.72  n/a
Tangible book value per share(6)$14.43  $14.72  $15.04  $15.70  n/a
          
Asset Quality:         
Non-performing loans$9,998  $10,482  $11,983  $12,463  $12,466 
Real estate owned, net$  $  $  $624  $624 
Non-performing assets$9,998  $10,482  $11,983  $13,087  $13,090 
Allowance for loan losses to total loans (%) 0.98   1.00   1.13   1.22   1.24 
Allowance for loan losses to non-performing loans (%) 140.53   128.46   120.38   122.35   125.08 
Non-performing loans to total loans (%) 0.70   0.78   0.94   1.00   0.99 
Non-performing assets to total assets (%) 0.51   0.54   0.63   0.65   0.51 
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 $411.7 million, which exclude intangible assets ($630 thousand of capitalized software).
 Tangible assets equal $1.96 billion and exclude intangible assets.
(5)Per share metrics computed using 28,522,500 total shares outstanding.
(6)Tangible book value equals the Company’s tangible equity of $411.7 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,
 June 30, 2022 March 31, 2022 June 30, 2021
 Average
Balance
 Interest Average
Yield/Cost
 Average
Balance
 Interest Average
Yield/Cost
 Average
Balance
 Interest Average
Yield/Cost
                  
 (Dollars in thousands)
Assets:                 
Loans(1)$1,369,389 $12,444 3.64% $1,280,678 $11,656 3.69% $1,285,835 $12,056 3.76%
Mortgage-backed securities 205,387  1,066 2.08%  171,912  722 1.70%  155,566  761 1.96%
Other investment securities 208,958  1,144 2.20%  198,736  1,020 2.08%  132,949  726 2.19%
FHLB stock 10,121  116 4.60%  9,942  116 4.73%  16,102  192 4.79%
Cash and cash equivalents 74,242  108 0.58%  188,706  80 0.17%  408,162  67 0.07%
Total interest-bearing assets 1,868,097  14,878 3.19%  1,849,974  13,594 2.98%  1,998,614  13,802 2.77%
Non-interest earning assets 68,003      77,445      74,211    
Total assets$1,936,100     $1,927,419     $2,072,825    
Liabilities and shareholders' equity:                 
NOW, savings, and money market deposits$800,918  312 0.16% $760,369  235 0.13% $680,262  289 0.17%
Time deposits 431,813  638 0.59%  458,109  647 0.57%  663,707  2,090 1.26%
Interest-bearing deposits 1,232,731  950 0.31%  1,218,478  882 0.29%  1,343,969  2,379 0.71%
FHLB advances 187,698  766 1.64%  185,500  773 1.69%  319,367  1,515 1.90%
Total interest-bearing liabilities 1,420,429  1,716 0.48%  1,403,978  1,655 0.48%  1,663,336  3,894 0.94%
Non-interest bearing deposits 48,763      42,402      161,804    
Non-interest bearing other 46,688      48,273      43,569    
Total liabilities 1,515,880      1,494,653      1,868,709    
Total shareholders' equity 420,220      432,766      204,116    
Total liabilities and shareholders' equity$1,936,100     $1,927,419     $2,072,825    
Net interest income  $13,162      11,939     $9,908  
Net interest rate spread(2)    2.71%     2.50%     1.83%
Net interest margin(3)    2.83%     2.62%     1.99%

(1) Average loan balances are net of deferred loan fees and costs, and premiums and discounts, and include 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.

 Six Months Ended June 30,
  2022   2021 
 Average
Balance
 Interest Average
Yield/Cost
 Average
Balance
 Interest Average
Yield/Cost
            
 (Dollars in thousands)
Assets:           
Loans(1)$1,325,134 $24,100 3.67% $1,291,048 $24,318 3.80%
Mortgage-backed securities 188,742  1,788 1.91%  146,861  1,439 1.98%
Other investment securities 203,756  2,164 2.14%  127,732  1,454 2.30%
FHLB stock 10,032  232 4.66%  16,282  402 4.98%
Cash and cash equivalents 131,158  188 0.29%  354,429  132 0.08%
Total interest-bearing assets 1,858,822  28,472 3.09%  1,936,352  27,744 2.89%
Non-interest earning assets 72,945      72,912    
Total assets$1,931,767     $2,009,264    
Liabilities and shareholders' equity:           
NOW, savings, and money market deposits 780,609  548 0.14%  664,293  593 0.18%
Time deposits 444,889  1,284 0.58%  683,324  4,604 1.36%
Interest-bearing deposits 1,225,498  1,832 0.30%  1,347,617  5,197 0.78%
FHLB advances 186,605  1,539 1.66%  322,063  3,039 1.90%
Total interest-bearing liabilities 1,412,103  3,371 0.48%  1,669,680  8,236 0.99%
Non-interest bearing deposits 46,213      89,116    
Non-interest bearing other 47,482      45,588    
Total liabilities 1,505,798      1,804,384    
Total shareholders' equity 425,969      204,880    
Total liabilities and shareholders' equity$1,931,767     $2,009,264    
Net interest income  $25,101     $19,508  
Net interest rate spread(2)    2.62%     1.88%
Net interest margin(3)    2.72%     2.03%

(1) Average loan balances are net of deferred loan fees and costs, and premiums and discounts, and include 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 Except Per Share Data) (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 while pre-provision net revenue does not.

 Three months ended
 June 30,
2022
 March 31,
2022
 December 31,
2021
 September 30,
2021
 June 30,
2021
          
 (Dollars in thousands)
Pre-provision net revenue (PPNR) and efficiency ratio, as adjusted:         
Net interest income$13,162  $11,939  $12,336  $11,104  $9,909 
Other income 494   927   704   489   621 
Operating expenses, as reported 13,019   13,216   17,380   33,118   11,802 
Less: Fee on debt extinguishment       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 (108)  (170)  148   1,245   (473)
Less: Loss on assets held for sale       83       
Operating expenses, as adjusted 13,127   13,386   14,421   12,240   12,275 
Pre-provision net revenue (loss), as adjusted$529  $(520) $(1,381) $(647) $(1,746)
Efficiency ratio, as adjusted 96.1%  104.0%  110.6%  105.6%  116.6%
          
Core deposits:         
Total deposits$1,296,674  $1,283,022  $1,247,040  $1,265,617  $2,008,068 
Less: time deposits 430,696   444,936   473,795   521,510   639,043 
Less: conversion deposits(1)             630,094 
Core deposits$865,978  $838,086  $773,245  $744,107  $738,931 
Core deposits to total deposits 66.8%  65.3%  62.0%  58.8%  53.6%
          
Tangible equity:         
Shareholders’ equity(2) (3)$412,293  $420,214  $429,472  $448,235  $204,913 
Less: intangible assets 630   452   437   354   251 
Tangible equity$411,663  $419,762  $429,035  $447,881  $204,662 
          
Tangible book value per share:         
Tangible equity$411,663  $419,762  $429,035  $447,881  n/a
Shares outstanding 28,522,500   28,522,500   28,522,500   28,522,500  n/a
Tangible book value per share$14.43  $14.72  $15.04  $15.70  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 asset valuation allowance of $16.8 million as of December 31, 2021.
(3) Accumulated other comprehensive income (AOCI) declined by $18.4 million in 2022, largely a result of the rising rate environment which negatively impacted the fair value of the Company’s available-for-sale investment portfolio

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