Retail Franchise

As of December 31, 2023, total deposits were $1.24 billion, a decrease of $44.0 million or 3.41% from December 31, 2022. While we continue to see a shift into time deposits, the Company remains focused on attracting the full banking relationship of small- to medium-sized businesses through an extensive suite of deposit products.

The details of deposits are below:

Financial Performance Overview:

Fourth quarter of 2023 compared to the fourth quarter of 2022

Net interest income compared to the fourth quarter of 2022:

• Net interest income was $9.2 million, a decrease of $3.7 million.

• Net interest margin decreased 78 basis point to 1.84%.

• Yield on average interest-earning assets increased 51 basis points to 4.06%.

• Cost of average interest-bearing deposits increased 170 basis points to 2.52%, reflecting the competitive rate environment in our primary market.

• Average loans increased by $52.9 million and average interest-bearing deposits increased by $14.7 million.
  

Non-interest income compared to the fourth quarter of 2022:

• Non-interest income increased $128 thousand, or 28.83%, largely driven by a gain on sale of loans of $72 thousand in the fourth quarter of 2023.
  

Non-interest expense compared to the fourth quarter of 2022:

• Non-interest expense was $12.5 million, a decrease of $529 thousand, excluding the provision for commitments and letters of credit, driven by lower compensation and benefit costs and professional services expense of $733 thousand and $207 thousand, respectively, partially offset by increases in occupancy and equipment expense of $231 thousand and data processing expense of $186 thousand.

• Since the adoption of the current expected credit loss (CECL) methodology on January 1, 2023, the provision for commitments and letters of credit is recorded in the provision for credit losses. This expense was previously recorded in non-interest expense. During the fourth quarter of 2022, the Company recorded a $203 thousand release of provision for credit losses on commitments and letters of credit.

Income tax expense compared to the fourth quarter of 2022:

• The Company did not record a tax benefit for the loss incurred during the fourth quarter of 2023 due to the full valuation allowance required on its deferred tax assets. The fourth quarter of 2022 effective tax rate of 22.59% was a result of the taxable income produced during that quarter, partially offset by the ability to utilize a portion of the net operating losses that were fully reserved.

• The Company’s current tax position reflects the previously established full valuation allowance on its deferred tax assets. At December 31, 2023, the valuation allowance on deferred tax assets was $24.0 million.

Year ended December 31, 2023 compared to the year ended December 31, 2022

Net interest income compared to the year ended December 31, 2022:

• Net interest income was $41.9 million, a decrease of $9.9 million.

• Net interest margin decreased by 64 basis points to 2.09%.

• Yield on average interest-earning assets increased 66 basis points to 3.94%.

• Cost of average interest-bearing deposits increased 150 basis points to 1.97%, due to an increase in higher-cost time deposits and the competitive rate environment in our primary market.

• Average loans increased by $162.1 million and average interest-bearing deposits decreased by $1.9 million.
  

Non-interest income compared to the year ended December 31, 2022:

• Non-interest income decreased $859 thousand, or 32.24%, largely due to the discontinuation of overdraft charges in 2022, partially offset by a gain on sale of loans of $231 thousand in 2023.
  

Non-interest expense compared to the year ended December 31, 2022:

• Non-interest expense was $51.6 million, a decrease of $1.5 million excluding the provision for commitments and letters of credit, driven by a decrease in professional services, compensation and benefits and advertising expenses of $1.1 million, $808 thousand and $707 thousand, respectively, offset in part by increases in occupancy and equipment, FDIC premiums and data processing expense of $725 thousand, $418 thousand and $365 thousand, respectively.

• As noted in the quarter comparison, the provision for commitments and letters of credit is recorded in the provision for credit losses in 2023. In 2022, the Company recorded a release of the provision for commitments and letters of credit of $311 thousand.

Income tax expense compared to the year ended December 31, 2022:

• The Company did not record a tax benefit for the loss incurred during 2023 due to the full valuation allowance required on its deferred tax assets. The effective tax rate for 2022 of 12.36% was a result of the taxable income produced during the prior year period, partially offset by the ability to utilize a portion of the net operating losses that were fully reserved.

• The Company’s current tax position reflects the previously established full valuation allowance on its deferred tax assets. At December 31, 2023, the valuation allowance on deferred tax assets was $24.0 million.

Balance Sheet Summary:

December 31, 2023 compared to December 31, 2022

Securities available-for-sale:

• Securities available-for-sale decreased $30.5 million to $283.8 million due to sales, maturities and calls during the year partially offset by purchases and a $5.5 million improvement in the unrealized loss position on the portfolio.

• In the fourth quarter of 2023, the Company sold $9.3 million of securities available for sale for a net gain of $20 thousand and purchased $15.5 million in higher yielding securities.

Gross loans:

• Gross loans held for investment increased $15.6 million to $1.56 billion.

• Construction loans increased $42.6 million, non-residential real estate loans increased $15.7 million and commercial and industrial loans increased $7.9 million, while residential and multifamily loans decreased $46.3 million and $8.1 million, respectively.

• Originations totaled $119.6 million, including originations of $35.6 million in construction loans, $27.4 million in non-residential real estate loans and $17.3 million in multifamily loans. In addition, the Company originated $7.8 million of residential mortgage loans and purchased $6.8 million of conforming residential mortgages in New Jersey during the year.
  

Deposits and borrowings:

• Deposits totaled $1.24 billion, a decrease of $44.0 million since December 31, 2022. Core deposits represented 52.1% of total deposits compared to 67.7% at December 31, 2022.

• FHLB borrowings increased by $87.0 million to $397.5 million to support loan growth and offset the decrease in deposits.

Capital:

• Shareholders’ equity decreased by $38.1 million to $355.6 million. The decrease was primarily driven by the repurchase of shares at a cost of $36.3 million.

• The net loss of $7.4 million was partially offset by $3.8 million in share-based plan activity and a $1.8 million favorable change in accumulated other comprehensive loss.

• Tangible equity to tangible assets was 17.37% and 19.24% at December 31, 2023 and 2022, respectively.

• Tangible common equity per share outstanding was $14.49 at December 31, 2023 and $14.28 at December 31, 2022.

• The Bank’s capital ratios remain above the FDIC’s “well capitalized” standards.
  

Asset quality:

• Non-performing loans totaled $5.9 million, or 0.38% of total loans at December 31, 2023 compared to $7.8 million, or 0.50% of total loans at December 31, 2022.

• The allowance for credit losses on loans represented 0.91% of total loans at December 31, 2023 compared to 0.87% at December 31, 2022. The allowance for credit losses on loans was 239.98% of non-performing loans compared to 172.52% at December 31, 2022.

• The Company recorded a net provision for credit losses of $156 thousand for the quarter ended December 31, 2023 and a release of net provision for credit losses of $441 thousand for the year ended December 31, 2023.

• Net charge-offs were $16 thousand and $60 thousand for the quarter and year ended December 31, 2023, respectively.

Off-Balance Sheet:

• To help manage our interest rate position, the Company had $259.0 million in interest rate hedges at December 31, 2023, with a weighted average duration of 3.2 years and a weighted average rate of 2.58%, increasing by $150.0 million from $109.0 million at December 31, 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 a presence in Bergen, Essex, Hudson, Middlesex, Morris, Passaic, Somerset and Union counties, Blue Foundry Bank is a full-service, innovative 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 discussing Blue Foundry’s fourth quarter and year ended December 31, 2023 financial results will be held today, Wednesday, January 24, 2024 at 11:00 a.m. (EST). To listen to the live call, please dial 1-833-470-1428 (toll free) and use access code 416218. Participants are encouraged to preregister to listen via webcast at https://events/q4inc.com/attendee/888056143. 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
[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: 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; 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 credit 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; the effects of the recent turmoil in the banking industry (including the failures of two financial institutions); 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 current or anticipated impact of military conflict, terrorism or other geopolitical events; the impact of potential government shutdown; 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.

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.