Blue Foundry Bancorp

Good morning, and welcome to Blue Foundry Bancorp's second quarter 2025 earnings call. 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 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'll now turn the call over to our president and CEO, Jim Nessie, to begin. Please go ahead, Jim.

Thank you, Operator. And good morning, everyone. We appreciate you joining us for our second quarter earnings call. As always, I'm joined by our Chief Financial Officer, Kelly Pecoraro, who will review our financial performance in detail following my update. Earlier today, we reported a net loss of $2 million, or 10 cents per diluted share. We are pleased with the progress made toward our strategic objectives in the second quarter and thus far in 2025. Despite the competitive environment, we were able to grow core deposits and expand the net interest margin for the third consecutive quarter. This, coupled with our expense discipline, resulted in a pre-provision net revenue improvement of approximately $1 million versus last quarter. Our strong capital and liquidity positions continue to support our transformation into a more commercially focused institution. This quarter's increase in core deposits reflects the deepening of our relationships with the businesses and communities we serve and marks continued progress in expanding efficient funding sources. We achieved approximately 3% loan growth during the quarter, while improving the yield on our loan portfolio by eight basis points. This was supported by $29 million in deposit growth, including an almost 4% increase in core deposits. and a 13 basis point reduction in our cost of deposits. Together, these results contributed to a meaningful 12 basis point expansion in our net interest margin. Loan production year to date totaled $180 million, with $90 million produced during the second quarter at a weighted average yield of approximately 7%. Year to date, Our diversification efforts have led to a $22 million increase in commercial and industrial loans, including owner-occupied commercial real estate. Additionally, construction loans increased $12 million, while we thoughtfully decreased our multifamily portfolio by $37 million. We also saw a $76 million increase in consumer loans through June 30th. primarily driven by purchases of credit-enhanced consumer loans at attractive yields. As we continue to execute our strategy of portfolio diversification, we remain focused on prioritizing asset classes that deliver higher yields and better risk-adjusted returns. Growth in our owner-occupied commercial real estate and construction lending reflects our disciplined approach to supporting local businesses while managing credit exposure. Additionally, our investment in credit-enhanced consumer loans further enhances returns while maintaining a strong risk management framework. These portfolio shifts are aligned with our goal of driving earnings and long-term value creation. Our loan pipeline remains healthy with executed letters of intent totaling more than $40 million at quarter end. primarily in commercial lending, with anticipated yields above 7%. We expect this momentum to continue in the coming quarters. Tangible book value per share increased to $14.87, up 6 cents from the prior quarter. We remain committed to enhancing shareholder value through disciplined capital management. During the quarter, we repurchased 406,000 shares at a weighted average price of $9.42, a significant discount to our tangible book value and adjusted tangible book value. Both the bank and holding company remain well capitalized, with tangible equity to tangible common assets among the highest in the industry at 15.1%. Our capital position and credit quality remain strong, and we are encouraged by the sustained momentum across both lending and deposit fronts. We believe these efforts will continue to support balance sheet and income growth in the coming quarters. With that, I'll turn the call over to Kelly for a deeper look at our financials. After her remarks, we will be happy to answer your questions. Kelly?

Thank you, Jim, and good morning, everyone. Net loss for the second quarter was $2 million. This is a $735,000 improvement to the prior quarter. We are encouraged by positive momentum in net interest income, which was partially offset by higher provision expense driven by unfunded loan commitments. Net interest income increased by $896,000 or 8.3%, driven by a 12 basis point expansion in our net interest margin. Interest income expanded $725,000 primarily due to loan growth. Interest expense declined by $171,000, reflecting lower deposit costs. The yield on loans increased by 8 basis points to 4.80%, and the yield on total interest earning assets increased by 7 basis points to 4.58%. Our positive funds declined by 13 basis points to 2.72%. The cost of interest-bearing deposits decreased 13 basis points to 2.62%, and the cost of borrowings decreased 9 basis points to 3.30%. Non-interest expense decreased by $90,000 compared to prior quarter, driven primarily by seasonal occupancy expense. We are pleased that expenses have remained relatively stable over the past several quarters and continue to expect them to stay within the mid to high $13 million range. As we progress toward our growth targets and achieve corporate goals, we anticipate a modest increase in compensation expense in the second half of the year due to higher variable compensation costs. For the quarter, we recorded a provision for credit losses of $463,000, primarily attributed to reserves required on unfunded commitments that are scheduled to close in Q3. As a reminder, the majority of our allowance is derived from quantitative models, and our methodology continues to assign greater weight to the baseline and adverse economic scenarios. From a balance sheet perspective, Gross loans increased $47.4 million during the quarter. Organic growth was primarily in owner-occupied commercial real estate and construction. We also purchased $45 million in credit enhanced consumer loans and $19 million in residential loans to support our residential portfolio. Our available for sale securities portfolio with a duration of 4.1 years, declined by $2.4 million due to maturities, calls, and paydowns. This was partially offset by purchases and a $1.7 million improvement in unrealized losses. Deposits increased $29.1 million, or 2%, we experienced $25.2 million or approximately 4% growth in core deposit accounts. Importantly, growth in core deposits was fueled by full banking relationships with commercial customers, emphasizing our strategic focus on deepening client engagement in a competitive market. Time deposits increased $3.9 million as we strategically repriced promotional fees and backfilled runoff with $20 million in broker deposits at lower rates. Borrowings increased slightly to help fund loan growth. Lastly, asset quality remained strong. Non-performing assets increased due to a slight rise in non-accrual loans. Non-performing assets the total assets picked up by three basis points. And nonperforming loans, the total loans also picked up by three basis points. Both remain low at 30 basis points and 38 basis points respectively. Allowance coverage decreased slightly with the allowance for credit losses to total loans declining by one basis point to 80 basis points. and the ratio of allowance for credit losses to non-performing loans decreased from 230% to 211%. With that, Jim and I are happy to answer your questions.