Blue Foundry Bancorp

Good morning and welcome to Blue Foundry Bancorp's fourth quarter 2022 earnings call. My name is Glenn and I will be your conference operator today. Comments made during today's call may include forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Blue Foundry encourages all participants to refer to the full disclaimer contained in this morning's earnings release, which has been posted to the investor relations page. on BlueFoundryBank.com. During the call, management will refer to non-GAAP measure, which excludes certain items from reported results. Please refer to today's earnings release for reconciliation of these non-GAAP measures. As a reminder, this event is being recorded. Your line will be muted for the duration of the call. After the speaker's remarks, there will be a question and answer session. I will now turn the call over to President and CEO Jim Nessie.

Thank you, Operator. Good morning, everyone, and welcome to our fourth quarter earnings call. I'm once again joined by our Chief Financial Officer, Kelly Pecoraro. After my opening remarks, Kelly will share the company's financial results. Earlier this morning, we reported fourth quarter net income of $562,000 or two cents per diluted share, and a pre-provisioned net revenue of $299,000. Our performance was largely driven by continued growth in commercial loans. Our lending team originated 68 million of loans, primarily in non-residential and multifamily. While this origination activity was not as robust as in previous quarters, net loan growth remained strong as payoffs slowed. In 2022, we generated net income of $2.4 million, or 9 cents per diluted share, and pre-provision net revenue of $1.4 million. These financial results reflect the execution of our strategic priorities. Our lending team produced 594 million of loans, which drove 20% net loan growth during the year. Core deposit growth remained strong in 2022, Core deposits grew by $99 million, or 13%. Our focus on attracting and retaining the full banking relationship of small to medium-sized businesses led to an increase in core business deposits. Business balances increased by 56%. As of December 31st, loans totaled $1.54 billion, up $51 million from the prior quarter. This represents loan growth of 3% quarter over quarter. Deposits totaled $1.29 billion, increasing $22 million sequentially. While the competitive rate environment in our primary market has put pressure on our ability to retain deposits, we are committed to attracting low-cost core deposits within our customer-friendly suite of consumer and business products. We continue to repurchase stock at a discounted tangible book value. During the fourth quarter, we repurchased 632,000 shares at a weighted average cost of $12.40. We have now repurchased a total of 1,299,000 shares, which is approximately 46% of the approved stock repurchase program. Tangible book value per share was $14.28 at year end. This increased 19 cents during the quarter as the aforementioned share repurchases were executed at a discount potential book. With that, I'd like to turn the call over to Kelly, and then we will be delighted to answer your questions. Kelly?

Thank you, Jim, and good morning, everyone. Our financial results were highlighted by net income of $562,000, compared to $1.2 million during the linked quarter. This reduction was largely related to funding pressures from the competitive rate environment. While we realized a $1.2 million expansion in interest income, our interest expense also increased $2.1 million, resulting in an $888,000 reduction in net interest income. Yield on loans increased by nine basis points to 3.80%, and yields on all interest-bearing assets increased by 18 basis points to 3.55%. Remaining competitive in deposit pricing, the cost of interest-bearing deposits increased 36 basis points to 82 basis points. This, coupled with an increase in short-term borrowings, drove the cost of funds to 1.17%. a 51 basis point increase compared with the prior quarter. We expect pressure on our margin to continue due to the liability sensitive nature of our balance sheet. During the quarter, we released $224,000 from the allowance for loan losses and $203,000 from the allowance for commitments due to positive credit metrics and the continued change in the mix of our loan portfolio. our asset quality continues to remain strong in the current environment. During the quarter, non-performing loans to total loans decreased six basis points to 50 basis points, primarily driven by a reduction in non-performing loans. While our allowance to total loans decreased four basis points to 87 basis points, our allowance to non-accrual loans increased to 173% from 162% the prior quarter due to a reduction in non-equal loans. As a reminder, we are currently operating under the incurred loss model and will adopt CECL as of January 1st, 2023. Expenses, excluding our provision for commitments, declined $427,000. Management continues to be focused on expense management. This quarter, we reduced our reliance on temporary personnel and consultants, continued to focus on our advertising spend, and successfully negotiated a credit for technology services. As we move into 2023, we will continue to explore opportunities to save to offset the pressure we expect from inflation. Moving on to the balance sheet, gross loans grew by 51 million, or 3.4% sequentially, driven by originations of 68 million, primarily in the non-residential and multifamily segments. During the quarter, the bank also purchased 18 million of high-quality residential loans in our principal market, which were originated to Fannie Mae standards. With a duration of 4.3 years, Our securities portfolio continues to provide cash flow that is being used to fund loans. $9.3 million of the quarterly decline in the securities portfolio was attributed to maturities, calls, and scheduled paydowns. Funding our balance sheet has been challenging as rates continue to rise. While we experienced an outflow of $28 million from non-maturity accounts, We more than offset this with $51 million of growth in time deposits through both retail and wholesale channels. This drove an increase in total deposits of $22 million during the quarter. Additionally, during the quarter, borrowings increased $15 million to help fund loan growth. And with that, Jim and I are happy to take your questions.