Blue Foundry Bancorp

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 measures which exclude certain items from reported results. Please refer to today's earnings release for reconciliations 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, and good morning, everyone. Thank you for joining us for our fourth quarter earnings call. I'm joined by our Chief Financial Officer, Kelly Pecoraro. Earlier this morning, we reported a quarterly net loss of $2.7 million and a quarterly pre-provision net loss of $3 million. Loads increased by $32 million, predominantly in our commercial portfolios. Deposits grew $25 million, the majority of which came in core growth, including a 17% increase in non-interest-bearing accounts. Despite the net loss, we were able to maintain tangible book value, and both capital and credit quality remained strong. Additionally, 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, as 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 intent on attracting the full banking relationship of small to medium-sized businesses in our marketplace. Our bank has industry-leading, frictionless products, and we are focused on developing new relationships and deepening our current relationships within the communities we serve. a portion of their compensation aligned with achieving our strategic objectives. We funded $59 million of loans during the quarter, yielding approximately 7.5%. We have executed letters of intent totaling over $60 million for predominantly commercial credits at yields of approximately 7.7%. 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 481,000 shares at a weighted average share price of $10.49. Repurchasing shares at this price continues to improve shareholder value. To date, we have repurchased 6.9 million shares at a weighted average cost of $10.16. Tangible book value per share remains flat at $14.74 this quarter. Our bank and holding company remain well capitalized with capital levels that are among the strongest in the banking industry. Tangible equity to tangible common assets is 16.1%. Blue Foundry continues to operate with robust liquidity and a low concentration risk to any single depositor. At the end of the fourth quarter, we had $408 million in untapped borrowing capacity and our unencumbered available for sale securities and unrestricted cash provided another $211 million of liquidity. This liquidity is 4.2 times larger than our uninsured and uncollateralized which represent only 11% of our deposit balances. 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. The net loss for the fourth quarter was $2.7 million, compared to a net loss of $4 million during the prior quarter. This improvement was driven by an increase in net interest income a decrease in expenses, and a release of provisions for credit losses compared to a build in the prior quarter. Net interest income increased by $386,000, leading to a seven basis point improvement in net interest margin. Interest income expanded $253,000, while interest expense declined $133,000. we expect our net interest margin to improve as we close loans at current rates and reprice deposits lower. Yield on loans improved by four basis points to 4.57% as the improvement from originations was partially offset by the reduction in yield on construction loans due to the decrease in the prime rate. The yield on all interest earning assets improved by five basis points to 4.37%. Cost of funds decreased six basis points to 2.93%. The cost of interest-bearing deposits decreased 10 basis points to 2.90%, while borrowing costs increased 13 basis points to 3.26%. Expenses improved by $386,000. Compensation expense was lower this quarter, driven by the lower than projected variable compensation expenses. As you will remember, we began releasing variable compensation accruals earlier this year when the achievement of some goals became less probable. Our annual cash incentive plan has a potential payout of up to 150%. The planned payout is approximately 60% to 70% of target, as the company did not achieve all corporate goals this year. While we continue to promote expense discipline, we expect operating expenses to return to the mid to high $13 million range as bonus accruals reset to 100% achievement, merit raises are realized, and normal inflationary considerations impact other contracts. For the fourth quarter, we had a $301,000 relief in the provision for credit losses. The majority of this relief was in the allowance for commitments and unused lines, as much of our loan growth this quarter came from loans that were commitments at the end of last quarter. The economic forecast scenarios as well as the duration of our construction portfolio, contributed to a slight relief in the allowance for credit losses on loans. We also had a small relief in the allowance for credit losses on health and maturity securities. As a reminder, the majority of our allowance for credit loss is derived from quantitative measures, and our allowance methodology still places greater weighting on the baseline and adverse forecast. Moving on to the balance sheet, gross loans increased by $32.5 million during the quarter, predominantly in owner-occupied commercial real estate, and to a lesser extent, commercial industrial and multifamily loans. Only approximately 2% of our loan portfolio is in office space, and none is in New York City. are available for sales security portfolio with a duration of 4.2 years increased $6.2 million. This increase was driven by the purchase of $44.5 million of securities at current yields, partially offset by $20 million of maturing lower yielding treasuries, $13.8 million of amortization, and a $4.5 million deterioration in the unrealized loss position. Deposits grew by $24.7 million. We saw a growth of $18.6 million in core accounts across all categories. Non-interest bearing deposits grew $3.7 million. Checking accounts grew $12.1 million. and savings accounts grew $2.8 million. Time deposits grew $6.1 million as we replaced promotional customer time deposits with $30 million of broker deposits. Borrowings decreased by $9 million as the company funded loan growth with deposit growth and cash on hand. Asset quality remains strong in the current environment. Non-performing assets declined modestly due to a slight improvement in non-accrual loans. Both non-performing assets to assets and non-performing loans to loans remained relatively flat at 25 basis points and 33 basis points respectively. Our allowance coverage ratios remained relatively flat as well at 83 basis points to total loans and 254% of non-performing loans. And with that, Jim and I are happy to take your questions.