Q4 2024 Blue Foundry Bancorp Earnings Call

[inaudible]

Earlier. This morning, we reported a quarterly net loss of $2 $7 million and a quarterly pre provision net loss.

$3 million loans increased by $32 million.

In our commercial portfolios.

Deposits grew $25 million, the majority of which came in corporate.

Putting a 17% increase in non interest bearing accounts. Despite the net loss, we were able to maintain tangible book value.

Capital and credit quality remained strong.

Digitally our balance sheet remains well positioned for the current environment.

We are encouraged by the improvement in our yield on interest, earning assets as well as our cost of interest bearing liabilities.

This may indicate an inflection point in our net interest margin going forward.

Continuing our transformation into becoming a more commercially oriented institution my management team and I have set forth a strategic plan.

One attracting the full banking relationship of small to medium size businesses in our marketplace.

Our bank has industry, leading frictionless products.

Our focus on developing new relationships deepening our current relationships with Alexander These reserve.

All employees have a portion of their compensation aligned with achieving our strategic objectives.

We funded $59 million of wells during the quarter, yielding approximately 7.5%.

We have executed letters of intent totaling over $60 million or predominantly commercial credits.

Approximately seven 7%.

Given our demonstrated high pull through rate, we expect to deliver continued balance sheet and interest income growth over the coming quarters, all while remaining disciplined in our underwriting standards.

During the quarter, we repurchased 481000 shares at a weighted average share price of $10 49.

Repurchasing shares at this price continues to improve shareholder value.

We have repurchased six 9 million shares at a weighted average cost of $10 16.

Book value per share remained flat at $14.74 this quarter.

Our bank and holding company remained well capitalized.

With capital levels that are among the strongest in the banking industry tangent.

Tangible equity to tangible assets is 16, 1%.

One of the country continues to operate with robust liquidity and a low concentration risk to any single depositor.

End of the fourth quarter, we had $408 million.

Half of our capacity.

Our unencumbered available for sale securities and unrestricted cash provided another $211 billion of liquidity.

This liquidity is four two times larger than our uninsured uncollateralized deposits to customers, which represent only 11% of our deposit balances.

With that I'd like to turn the call over to Kelly and definitely we'll be delighted to answer your question Kelly.

Kelly: Thank you Jim and good morning, everyone.

Kelly: Net loss for the fourth quarter was $2 $7 million compared to a net loss of $4 million during the prior quarter.

Kelly: This increase was driven by increase in.

Kelly: Hum.

Kelly: This increase in expenses.

Kelly: The release of provision for credit losses, compared to a sale in the prior quarter.

Kelly: Net interest income increased by $386000.

Kelly: 70 basis point improvement in that interest margin.

Kelly: Interest income expanded $253000 well interest expense declined $133000.

Kelly: We expect our net interest margin to improve as we close loans at current rate.

Kelly: Right.

Kelly: Lower.

Kelly: Yield on loans increased by four basis points to 457%.

Kelly: I see improvement from origination.

Kelly: Partially offset by the reduction on.

Kelly: On construction loans due to the decrease in the prime rate.

Kelly: Yes, Oh interest, earning assets increased by five basis points.

Kelly: Two or three 7%.

Kelly: Cost of funds decreased six basis points.

Kelly: 293%.

Kelly: The cost of interest bearing deposits decreased 10 basis points.

Kelly: 290%.

Kelly: Alright.

Kelly: Increased 13 basis.

Kelly: 326%.

Kelly: Expenses increased by $386000.

Kelly: Compensation expense was lower this quarter.

Kelly: Given by the lower than projected variable compensation expense.

Kelly: As you'll remember we began with the variable compensation accruals earlier this year when the achievement of some coal became less probable.

Kelly: Our annual cash incentive plan has the potential payout of up to 150%.

Kelly: The plant out is approximately 60% to 70% of target as the company did not achieve all corporate goals this year.

Kelly: While we continue to promote.

Kelly: We expect operating expenses to return to the mid to high <unk>.

Kelly: Range bonus accruals, we said 100% achievement.

Kelly: Races are realized.

Kelly: Normal inflationary considerations impact other contract.

Kelly: For the fourth quarter, we had a 301000 dollar would be.

Kelly: For credit losses.

Kelly: The majority of this really wasn't the allowance for committed but unused flying as much of our loan growth. This quarter came from our bonds.

Kelly: At the end of last quarter.

Kelly: The economic forecast scenarios.

Well, that's the duration of our construction portfolio contributed to a slight movie.

Kelly: Lounged for credit losses on loans.

Kelly: We also had a smaller leaner and the allowance for credit losses are held to maturity securities.

Kelly: As a reminder, the majority of our allowance for credit loss is July quantitative measures. That's our allowance methodology still places greater weighting on the baseline and adverse forecast.

Moving onto the balance sheet.

Gross loans increased by $32 $5 million during the quarter.

Kelly: Predominantly in owner occupied commercial real estate and to a lesser extent commercial industrial and multifamily loans.

Kelly: Only approximately 2% of our loan portfolio isn't honesty.

Kelly: <unk> is in New York City.

Kelly: Our available for sale Securities portfolio.

Kelly: The duration of four two years increased $6 $2 million.

Kelly: This increase was driven by the purchase of 44.

Kelly: <unk> dollars.

Kelly: Our security at current yield.

Kelly: Partially offset by $20 million of maturing lower yielding treasury.

Kelly: $38 million of amortization.

Kelly: The $5 million deterioration unrealized loss position.

Deposits grew by $24 $7 million.

Kelly: We saw growth of $18 $6 million core accounts across all categories.

Kelly: Non interest bearing deposits grew three $7 billion checking accounts with <unk>.

Kelly: 12 $1 billion.

Kelly: Savings account.

Kelly: Two $8 million.

Kelly: Time deposits grew $6 $1 million as weekly promotional customer time deposits with $30 million of broker deposits.

Kelly: Borrowings decreased by $9 million at the Hudson, New funded loan growth with deposit growth our cash on hand.

Kelly: Finally asset quality remained strong in the current environment.

Kelly: Nonperforming assets declined modestly due to a slight increase in non accrual loans.

Kelly: Both nonperforming assets to assets and nonperforming loans to loans remains relatively flat at 25 basis points.

Kelly: <unk> 38.

Kelly: Oh definitely.

Kelly: Our allowance coverage ratios remain relatively flat as well at 83 basis points to total loans.

Kelly: 254%.

Speaker Change: Plumbing lumps.

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

Speaker Change: Thank you we will now begin the question and answer session. Thank.

Speaker Change: If you'd like to ask a question. Please do so now by pressing star followed by the number one on your telephone keypad.

Speaker Change: Please ensure that your device Andrew microphone on mute it likely before proceeding with your question.

Speaker Change: Our first question comes from the line of Justin Crowley with Piper Sandler.

Speaker Change: Please go ahead.

Justin Crowley: Hey, good morning.

Speaker Change:

Speaker Change: Just wanted to start off on your commentary on loan growth.

Speaker Change: That one to four and then multifamily bucket have been kind of a two areas that had been a drag on net growth for the past couple of years now is the expectation that that will continue to be the case looking forward.

Speaker Change: Okay.

Justin Crowley: Yeah, I think from a strategic perspective, Justin we're really looking at growing the commercial book.

Speaker Change: Boston C&I as.

Speaker Change: As well as owner occupied space the decline in our residential book has been somewhat intentional although quicker than we had envisioned.

Speaker Change: In multifamily we believe we have a large concentration there so we're watching our concentration limits on the multifamily space.

Speaker Change: Okay got it and then you mentioned the $60 million pipeline.

Speaker Change: I can't remember, where maybe that stood last quarter I'm not sure if you've shared that but just curious your just broader thoughts on just where activity stands and where do you see things starting to pick up as we head through the new year, and perhaps maybe more certainty following the election.

Speaker Change: Yeah, I definitely think the pipeline has improved from where we were last quarter.

Speaker Change: And as we mentioned we did see some pull through.

Have commitments on at the end of Q3.

Speaker Change: As Jim mentioned in his remarks, you know we have about 60 million of commercial loans that we have letters of intent out at a rate of around 715. So we are seeing some improvement in the pipeline.

Speaker Change: For that to continue.

Speaker Change: Okay got it.

Speaker Change: And then on the margin I'm, just looking to get a sense for how you're thinking about deposit cost progression over the course of the year, how much have you been able to move rates lower so far.

Speaker Change: The 100 basis points and cuts out of the fed and to what extent is that reflected in the <unk>.

Speaker Change: <unk> margin.

Speaker Change: So I think we did see improvement in deposit cost him as he mentioned that two 9% yield.

Speaker Change: Yield on that book mm Theres been cautious Justin on repricing, we have been able to bring prices down or cost down somewhat on that book, we do have probably half a million half a billion dollars 500 million coming into the first half we've intentionally kept our CV short.

Speaker Change: So we look for that was quite strong and hope that we can get benefit as rates trend lower.

Speaker Change: Okay, and then that half a billion do you have the right, but that's coming off of.

Speaker Change: And where that will reset at.

Speaker Change: Yeah, so the rate correctly on the first quarter its probably around a 475. So we're looking at promotional rates that we have out there right now is a 4% yield being C. D. So we're hoping to realize some improvement as those repriced.

Speaker Change: And then the second half or the second quarter, we're seeing a little bit lower of the yields on that so it's probably around the 450 and hope that that can reprice as well.

Speaker Change: Alright, that's helpful. And then just another input as far as the margin on the asset side with average loan yields around that mid four level is there.

Speaker Change: Expectation that that continues to move higher regardless of whether we get another cut or two just given where new production is coming on at combined with back book repricing.

Speaker Change: Yeah, I think we do anticipate that to trend higher as things are coming on at market rates and we have the amortization of our focus on lower rates.

Speaker Change: There are some challenges as well, though on the construction book. So I think it's fair to say well construction all repriced whoever is a prime rate goes down we will see improvement I suppose other asset classes or thing for us.

Speaker Change: Okay.

Speaker Change: Okay, Great I'll leave it there thanks, so much for taking the questions.

Speaker Change: Thank you.

Speaker Change: The next question comes from Chris O'connell with <unk>. Please go ahead Chris.

Hey, yeah.

Speaker Change: Good morning.

Speaker Change: Just wanted to follow up on the.

Speaker Change: Discussion.

Speaker Change: I was wondering if you guys had the spot margin handy for December they ended the quarter.

Speaker Change: Oh I think we were around 190 <unk> from a margin perspective at the end of the quarter.

Speaker Change: A little bit higher plus 190 192.

Speaker Change: Okay great.

Speaker Change: And you know just given the dynamics here on the balance sheet I mean, it seems like things are.

Speaker Change: Now moving in the right direction on the margin.

Speaker Change:

Speaker Change: And I'm sure a lot of it depends on how much growth.

Speaker Change: <unk> portfolio side.

Speaker Change: Guys are you able to put on over the course of the year, but.

Speaker Change: Any any sense of magnitude.

Speaker Change: That you could see over the course of 2025.

Speaker Change: I think that's when you look at 2025, you know of course, where we're looking to grow we're looking at probably high single digit loan growth at this point given.

Speaker Change: Given where we have some maturities coming in as well as the pipeline so back to me about it.

Speaker Change: Okay, and do you think like the margin.

Do you expect this kind of pace over the course of the year. It is similar expansionary that you saw in the fourth quarter or is that a little bit higher or lower than then what do you think you can achieve going forward.

Speaker Change: I think at this point, where we're anticipating a similar pace again, it's all dependent upon the timing of putting those on the credit side.

Speaker Change: So the ability to reprice deposits flowing.

Speaker Change: Okay. Thanks.

Speaker Change: And then for.

Speaker Change: For the expense.

Speaker Change: Back to mid to high $13 million range.

Speaker Change: Is the expectation that.

Speaker Change: That holds as a pretty good level for the remainder of 2025 after Q1 or do you expect to see growth thereafter.

Speaker Change: Yeah, I think we're looking at that mid to high $30 million range across the quarters.

Speaker Change: As we look at our achievement variable compensation and how routine throughout the year.

Speaker Change: But that's where we're seeing things fall out for 2025.

Okay and then.

Speaker Change: I guess as far as like the variable compensation.

Speaker Change: <unk> goes is there.

Speaker Change:

Speaker Change: Like what are the specific metrics for 2025.

Speaker Change: To hit that 100 per cent.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: The goals that we.

Speaker Change: Our compensation Committee and board has agreed to really align to our growth and it's tied to loan growth deposit growth low cost deposit growth.

Speaker Change: And our net interest margin really grown the balance sheet and are mindful of what.

Speaker Change: Okay. Thanks.

Speaker Change: And then.

Speaker Change: You mentioned the construction portfolio.

Speaker Change: Being potentially really the only headwind here on the loan yields.

Speaker Change: Like what are the yields coming off on that portfolio.

Speaker Change: What are.

The jewelry origination yields there.

Speaker Change: So the yields on our portfolio or a client wants to see their 50 basis points to 100 basis points within that range so dependent upon them.

Speaker Change: Our claim rate is on the.

Speaker Change: Trucks book is growing around $85 million right now.

Speaker Change: You see some of the pipeline as opposed to a maturing I'm coming on so we have some of the construction in the pipeline.

Speaker Change: Okay. That's focused constantly recycle is the way to look at.

Speaker Change: At it.

Construction project, that's finished up that loan pays off like new one comes onboard.

Speaker Change: Good.

Speaker Change: Why the construction loans.

Speaker Change: Yeah.

Speaker Change: Got it.

Speaker Change: And then.

Speaker Change: On the share repurchases is it fair to assume that that can progress that had kind of a similar pace.

Speaker Change: Over the course of 2025 premiere.

Speaker Change: Oh, Yeah, I think as we look at share repurchase we think it's a good.

Speaker Change: Use of capital.

Speaker Change: At these levels. So we will continue to be active in the market again always looking at the best use of capital S name before.

Speaker Change: Great.

Speaker Change: Thanks, Kelly appreciate the time.

Speaker Change: Great. Thank you.

Speaker Change: Thank you for your questions I will now turn the call back over to Jim Murphy for closing comments.

Jim Murphy: Thank you operator, we'd like to thank everybody for participating today, and we look forward to updating you next quarter. Thanks, so much.

Jim Murphy: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.

Jim Murphy: [music].