Q3 2023 Blue Foundry Bancorp Earnings Call

Utility.

The weighted average duration of these hedges is three four years.

Expenses declined $574000, driven by a reduction in compensation and benefits expense.

And to a lesser extent a reduction in occupancy and equipment data processing and professional services.

The reduction to compensation and benefits expense was driven by sustained lower headcount and a reduction in variable compensation.

We continue to explore opportunities to optimize our expense base.

We expect operating expenses for the fourth quarter to be below $13 million.

Moving on to the balance sheet gross loans declined by $10 $8 million as amortization and payoffs outpaced new loan funding.

As a reminder, less than 2% or $23 million of our loan portfolio is in office space.

And none is in New York City.

With a duration of four five years, our debt securities portfolio continues to provide cash flow that is being used to fund loans.

These securities declined 11 $5 million due to maturity.

Paul Unscheduled pay downs.

As well as an additional $5 $9 million increase in unrealized losses.

Deposits decreased by $14 million or one 1% during the quarter.

We were able to increase retail time deposits by $51 million.

This growth in time deposits was more than offset by an outflow of $65 million from non maturity accounts.

Our focus remains on attracting a full banking relationship of small to medium size businesses.

We offer an extensive suite of low cost deposit products to our customers.

Despite the competition for deposits, we were able to grow the number of business accounts by 2% during the third quarter.

The number of business accounts are up 7% this year.

During the quarter borrowings increased marginally.

And with that Jim and I are happy to take your questions.

As a reminder, if you'd like to register an audio question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two please.

Please ensure you're on mute hit when speaking.

Our first question comes from Justin Crowley of Piper Sandler Justin The line is yours.

Hey, good morning, guys.

I want to start on.

I wanted to start on operating expenses, it's nice to see us continue to come down in the quarter.

As I think the last update.

At least this time last quarter was perhaps thinking about costs holding steady through the back half of the year.

All right.

I was wondering if you could expand a little on exploring opportunities I think across the industry, you've seen a lot of banks formally come out with broader initiatives some of which you've already done.

It seems like you guys have also been able to do a decent job just trimming costs around the margin, but just curious if there could be even more to be done here.

And then I guess sort of a loaded question.

Kelly if I heard you right I think you mentioned below $13 million for the fourth quarter.

Not sure if you're able to get a little more specific there, but does that sort of imply that.

Base could see a little bit of a tick up into the end of the year.

Yeah, Justin So 13, we're guiding to just below $13 million, we do have a little bit of additional expense. We do have one new branch coming on in the fourth quarter, which will have additional expense, but we continue to look at opportunities to reduce our expense base.

So you asked are we do we have specific initiatives I think the initiative and the mantra around here is to look at every contract every.

Expense line item, especially as we go into our strategic planning season, and as renewals come up and see what we can do to lower that expense.

Eliminate redundancies and tests that vendors may be performing for us. So it's been paramount in our operating model.

Okay I appreciate that.

And then sort of shifting gears and turning to loan growth.

So our balances decline again can you just talk a little bit about net growth expectations going forward I'm not sure. If there's any change in the thinking in terms of the size of the balance sheet.

Looking ahead, just curious your thoughts there.

So Justin I think yes, we did see a reduction in our loan balances. We are very mindful in putting on high quality high yielding loans using both.

Our amortization from our loan book to redeploy that into higher yielding assets as well as our pay downs and amortization of our securities book.

Some of the constraints on the deposit outflow has.

Tempered that a little bit, but we're in the market looking to lend and looking for the appropriate asset class to put on our balance sheet.

Okay. So when you think about like the loan pipeline how is that.

That trend that maybe.

Now compared to this time last quarter.

I think right now, we're probably a little bit below where we were from an overall.

Nine perspective, but the rates are higher so as we look at that and you know as we said putting on those higher yielding assets and being mindful of our competition.

Okay, and do you feel comfortable sharing any sort of loan growth target just over the next.

Perhaps a year or so I'm not sure. If you are in a position to be able to do that.

No we're not in a position right now to do that.

Okay got it.

And then just lastly, I wanted to touch on share repurchases.

Obviously capital levels are pretty healthy. So just curious if theres appetite to get quite a bit more active here, possibly would seem that the math of Scotland.

More attractive when I think about where activity in the quarter got done that.

Yeah, I think we are very we support buyback.

Our board and management believes that the purchase of our shares is a good investment.

We were you know if you think about where we were in the second quarter and the volume within the market. We were able to take advantage of that the volume at that point as we headed into Q3, we saw volumes kind of trend downward.

So the timing of the transition from our first start with our second property purchase plans. The third plant had some impact on our purchases this quarter.

Yeah, Justin this is Jim good morning.

To reiterate reiterate what Kelly is saying we are still a firm believer in share buybacks and expect to be back in the marketplace.

Q4, as we go into okay.

Yes.

Okay understood.

Great I appreciate it I'll leave it there.

Thanks, Jill Thank you Justin.

Our next question comes from Chris O'connell of Cape EW, Chris. Please go ahead.

Hi, good morning.

Just circling back on the loan growth discussion.

So I mean, given where the pipelines are a bit lower.

And then last quarter I mean is it does that imply that maybe for the next couple of quarters net loan growth is kind of more of a flat line situation.

I think it's hard to tell Chris.

We look at the mall.

Get the volume in the market, what we're looking to put on the balance sheet.

Again looking for those high quality high yielding assets. So it's available in terms of funding as well yeah. We are definitely looking to put.

Loans on our balance sheet.

Yes.

Again reiterate it depends on the asset class it depends on the price. So those two go hand in glove in my opinion, we're looking we're actively looking and we are building the pipeline. So it's hard to give you a specific number where we projected that they were working in the marketplace and we do think there'll be activity.

But in the coming quarters.

Okay and what is our.

Or are the origination.

Yields on the loan pipeline.

The pipeline right now we have just under eight and a half.

From a weighted average rate.

Okay.

Yeah.

And as far as the next 12 months how much.

And the dollar amount or the loans set to mature.

You may I have a second half that might be able to get that number for you.

One of them.

$25 million or set to mature, but we do have amortization of the portfolio.

Each month is about.

Five to seven.

Million, that's coming in from an amortization perspective, as well as the securities portfolio that amortizing down.

And we have some payoffs coming more maturities doing that but probably about $12 million in the next quarter.

Okay great.

Yeah.

And.

As far as all the hedges that you guys have on the $259 million.

Can you remind us as to where each of those.

Rates are locked in.

I think it's a nice blend Chris as we put them on right now we have our.

The weighted average maturity is three four years and the weighted average rate of those hedges are at.

So both right.

Okay and Thats.

And that's being kind of apply it against the.

<unk> advances on them in terms of like the yield table.

Right. So when you take a look at that it does impact our interest expense. So it's offsetting interest expense on our partnerships.

Okay great.

Yeah.

And kind of put it all together here I mean do you guys have the September spot NIM.

Or any <unk>.

As to how much NIM pressure you might see in to the fourth quarter.

So we don't normally share our spot NIM, where we're at but we do see.

Some additional compression, but not at the pace, we saw in the third quarter.

A significant amount of our Cds had mature and went into those buckets. So we don't see that volume of activity and some of our maturing deposits.

Okay got it.

And just just taking a step back I mean.

In order.

Do you have any idea of.

In the current rate environment and is that kind of persists as it is right now.

Inverted yield curve, which I know makes things difficult.

Where the NIM could bottom and start to move back up in terms of timing.

And just what levers can be pulled to kind of get to.

Our path to profitability from here.

So I don't know that its a specific will ever while we continue to focus on is our core business strategy of banking small and medium size businesses.

We continue to look for the lower cost deposits, obviously that those businesses provide two banks like ours, but that's where we're going to stay on the strategy.

We continue to increase the deposit base of the products are working well, obviously, you want to see them scale of SaaS.

But that's where we're going to keep pushing our our manpower into.

Okay, and any sense as to timing as to you know.

Where would you get to an inflection point in the margin.

It's too hard to say at this juncture I don't have.

Any guidance on that point at this time.

Yeah.

Okay.

Alright, that's all I had thank you for taking my questions.

Of course, thanks, Thank you Chris.

With that I'll hand back to the team for any closing remarks.

Thank you operator, thank you again for joining us on our third quarter call.

Our earnings call. We look forward to speaking with you again next quarter, Thanks and have a great day.

Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

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