Blue Foundry Bancorp Q1 FY2025 earnings call

• Strategic priorities for 2025 focus on driving loan growth in higher yielding asset classes, maintaining strong credit quality, and growing/diversifying low cost funding sources.
• Achieved 3% loan growth, improved loan portfolio yield by 15 basis points, had $44 million deposit growth with a 14 basis point reduction in cost of deposits, leading to a 27 basis point expansion in net interest margin.
• Recorded a net loss but increased tangible book value per share via share repurchases. Capital and credit quality remain strong, and liquidity is robust.
• Loan production included $90 million with weighted average yield ~7.1%, including commercial real estate, residential, construction, and credit enhanced consumer loans. Loan pipeline healthy with over $40 million in executed letters of intent.

For the first quarter, gross loans increased $42.2 million. Loan growth was 3% with a 15 basis point improvement in the yield on the loan portfolio. Deposits grew by $43.9 million (3.2%), and the cost of deposits decreased by 14 basis points. The net interest margin expanded by 27 basis points. The company recorded a net loss of $2.7 million ($0.13 per diluted share), but tangible book value per share increased to $14.81. Loan production totaled $90 million during the quarter at a weighted average yield of approximately 7.1%, including $33 million in commercial real estate loans, $9 million in residential mortgages, $7 million in construction loans, and $35 million in credit enhanced consumer loans. Deposits saw a 3.2% increase, with core deposit counts growing by $24.4 million (3.8%).

• Net interest income increased 13.4% due to a 27 basis point net interest margin expansion. Expect operating expenses to stay in the high $13 million to low $14 million range.
• Anticipate margin expansion of 5 to 10 basis points in the second quarter, with multifamily book repricing in later years (2026, 2027) providing potential pickup.
• On deposits, CD maturing in next quarter at 4.11%, looking to transition to core deposits and utilize brokered deposits to lower costs.
• Loan growth includes organic growth and potential purchases of consumer loans, but not a long-term strategy.

• Uncertainty in interest rate movements which could impact loan repricing and deposit costs.
• Potential changes in credit quality, although current asset quality remains strong but is monitored.

Q: Good morning. Just wanted to start off on the margin for the quarter. Do you have where that ended the period on a spot basis or perhaps for the month of March?

A: I don't have the spot in front of me right now, but as we talk about where we think our margin is going, we were very pleased with the expansion we saw this quarter. We expect some additional expansion as we head into the second quarter, probably about 5 to 10 basis points from where we were.

Q: Hi, good morning. Just following up on the consumer loan purchases. When you say it's coming along with either credit enhancements or reserves, is that showing up in your allowance? Or is it like effectively coming on, I guess, as marked? And then what is the level of reserves that they're coming on at?

A: So we do – those loans are incorporated into our CECL calculation. We look at what the loss rate is on a similar product. And if the credit reserves aren't sufficient to cover what a loss rate would be, we would apply an additional allowance on those credits. At the current quarter, there isn't an additional necessary. But again, that changes quarterly as we do our analysis. They come on with a 3% reserve level.