The details of deposits are below:

Financial Performance Overview:

Third quarter of 2023 compared to the third quarter of 2022

Net interest income compared to the third quarter of 2022:

• Net interest income was $9.9 million in the three months ended September 30, 2023 compared to $13.8 million in same period in 2022 due to increases in rates paid on interest-bearing liabilities.

• Net interest margin decreased by 90 basis points to 1.94%.

• Yield on average interest-earning assets increased 60 basis points to 3.97%, while the cost of average interest-bearing liabilities increased 201 basis points to 2.49%.

• Average loans increased by $112.1 million and average interest-bearing liabilities increased by $157.2 million.

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

• Non-interest expense was $12.4 million, a decrease of $1.1 million excluding the provision for commitments and letters of credit, driven by a decrease of $793 thousand in compensation and benefits expenses, a decrease of $366 thousand in professional services, a decrease of $168 thousand in other operating expenses and a decrease of $86 thousand in data processing partially offset by an increase of $183 thousand in occupancy and equipment and an increase of $165 thousand in FDIC assessment.

• 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 third quarter of 2022, the Company recorded a $170 thousand provision for commitments and letters of credit.

Income tax expense compared to the third quarter of 2022:

• The Company did not record a tax benefit for the loss incurred during the current quarter due to the full valuation allowance required on its deferred tax assets. The prior year quarter effective tax rate of 9.0% was a result of the taxable income produced during the prior year 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 September 30, 2023, the valuation allowance on deferred tax assets was $23.1 million.

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Net interest income compared to the nine months ended September 30, 2022:

• Net interest income was $32.7 million, a decrease of $6.2 million.

• Net interest margin decreased 58 basis points to 2.18%.

• Yield on average interest-earning assets increased 73 basis points to 3.91% while the cost of average interest-bearing liabilities increased 160 basis points to 2.15%.

• Average loans increased by $198.9 million and average interest-bearing deposits decreased by $5.2 million.

• Average borrowings increased by $190.0 million.

• The Company executed $150 million of hedges on interest rates with maturities ranging from three to five years. The Company’s hedging program aims to reduce the Company’s sensitivity to interest rate by locking in spread.

Non-interest expense compared to the nine months ended September 30, 2022:

• Non-interest expense was $39.0 million, a decrease of $993 thousand excluding the provision for commitments and letters of credit, driven by decreases of $889 thousand in fees for professional services and $759 thousand in advertising, partially offset by increases of $494 thousand in occupancy and equipment costs, $324 thousand in FDIC assessment and $179 thousand in data processing expense.

• The Company recorded a $108 thousand provision for commitments and letters of credit in the first nine months of 2022.

Income tax expense compared to the nine months ended September 30, 2022:

• The Company did not record a tax benefit for the loss incurred during the nine months ended September 30, 2023 due to the full valuation allowance required on its deferred tax assets. The effective tax rate for the nine months ended September 30, 2022 of 8.7% 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 September 30, 2023, the valuation allowance on deferred tax assets was $23.1 million.

Balance Sheet Summary:

September 30, 2023 compared to December 31, 2022

Cash and cash equivalents:

• Cash and cash equivalents increased $11.2 million compared to December 31, 2022.
  

Securities available-for-sale:

• Securities available-for-sale decreased $30.6 million to $283.6 million due to amortization and payoffs.

• Unrealized losses increased $5.9 million to $41.9 million.

Total loans:

• Total loans held for investment increased $25.9 million to $1.57 billion.

• Construction and land loans increased $27.3 million, non-residential real estate loans increased $20.3 million and commercial and industrial loans increased $5.3 million.

• A residential loan totaling $593 thousand was transferred to other real estate owned.
  

Deposits:

• Deposits totaled $1.25 billion, a decrease of $35.8 million from December 31, 2022, largely the result of the competitive rate environment.

• Core deposits (defined as non-interest bearing checking, NOW and demand accounts and savings accounts) represented 54.3% of total deposits, compared to 67.7% at December 31, 2022 and 71.1% at September 30, 2022.

• Brokered deposits totaled $125.0 million at September 30, 2023, an increase of $50.0 million from December 31, 2022.

• Uninsured and uncollateralized deposits to third party customers were $127.3 million, or 10% of total deposits, at the end of the third quarter.

Borrowings:

• FHLB borrowings increased by $92.0 million to $402.5 million to support loan growth and replace deposit attrition.

• As of September 30, 2023, the Company had $336.6 million of additional borrowing capacity at the FHLB and $32.5 million of other unsecured lines of credit.

Capital:

• Shareholders’ equity decreased by $34.6 million to $359.1 million. The decrease was primarily driven by the repurchase of shares at a cost of $30.5 million.

• In addition, the net loss of $4.5 million and the $2.4 million reduction in accumulated other comprehensive income was partially offset by stock-based compensation activity.

• Tangible equity to tangible assets was 17.07% and tangible common equity per share outstanding was $14.24.

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

Asset quality:

• As of September 30, 2023, the Allowance for Credit Losses as a percentage of gross loans was 0.88%.

• The Company recorded a net release of provision for credit losses of $717 thousand for the quarter ended September 30, 2023, driven by decreases in the allowance for loans and in the allowance for commitments.

• Non-performing loans totaled $6.1 million, or 0.39% of total loans compared to $7.8 million, or 0.50% of total loans at December 31, 2022, and $8.4 million, or 0.56% of total loans at September 30, 2022.

• Net charge-offs were $26 thousand for the quarter ended September 30, 2023 and $43 thousand for the nine months ended September 30, 2023.

• Ratio of non-performing loans to allowance for credit losses on loans was 225.97% at September 30, 2023 compared to 172.52% at December 31, 2022 and 161.73% at September 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 a presence in Bergen, Essex, Hudson, 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 covering Blue Foundry’s third quarter 2023 earnings announcement will be held today, Wednesday, October 25, 2023 at 11:00 a.m. (EDT). To listen to the live call, please dial 1-833-470-1428 (toll free) or +1-404-975-4839 (international) and use access code 849840. The webcast (audio only) will be available on ir.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: 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.

(1) The assumed vesting of outstanding restricted stock units had an antidilutive effect on diluted earnings per share due to the Company’s net loss for the 2023 periods.

(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 $358.5 million, which excludes intangible assets ($644 thousand of capitalized software). Tangible assets equal $2.10 billion and exclude intangible assets.
(5) September 30, 2023 per share metrics computed using 25,174,412 total shares outstanding.

(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.

(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.

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 credit losses (in the 2023 periods), provision for loan losses and provision for commitments and letters of credit (in the 2022 periods) and income tax expense, while pre-provision net revenue does not.