Blue Foundry Bancorp Q4 FY2023 earnings call

• Jim Nesci noted 2023 was challenging with bank failures, slowing economy, and rate hikes, but fourth quarter showed promise with deposits declining but resell network deposits up modestly. Focus in 2024 is on leveraging capital to grow balance sheet, organic deposit acquisition, disciplined underwriting. Capital ratios are high, share repurchase program continued with 657,000 shares repurchased in the quarter. - Kelly Pecoraro discussed the net loss for Q4, NIM contraction, provision for credit losses, asset quality remaining strong, interest income/expense trends, balance sheet changes including loan portfolio decline, securities portfolio activity, and deposit changes.

For the fourth quarter, the net loss was $2.9 million compared to a net loss of $1.4 million in the prior quarter. This deterioration was due to NIM contraction and an increase in the provision for credit losses. The loan portfolio declined slightly during the quarter. Interest income increased $162,000 but interest expense rose $842,000, resulting in a $680,000 reduction in net interest income. Yield on loans was 4.29% (up 8 basis points) and yields on all interest-bearing assets were 4.06% (up 9 basis points). Cost of funds increased 23 basis points to 2.69%. Deposits decreased $8.2 million during the quarter, but retail deposits increased ~$4 million. The asset quality remained strong with nonperforming assets to total assets decreasing 1 basis point to 32 basis points, and the allowance to total loans increasing 3 basis points to 91 basis points.

• Focus on leveraging capital to grow balance sheet and funding through organic deposit acquisition. - Expect operating expenses for Q1 2024 to be below $14 million due to reset of variable compensation plans. - Continue share repurchase program as the company trades below tangible book value. - Look to shift into C&I loans and higher-yielding assets for growth, aiming for mid-single digit growth.

• Challenges from bank failures, slowing economy, and rapid rate hikes. - NIM contraction and increase in provision for credit losses. - Competition for deposits impacting funding costs. - Uncertainty around interest rate movements and their impact on margins.

Q: Hey, good morning. Wanted to start off on the net interest margin. It seems like things are leveling off to a degree on the funding side. Curious if you could speak to that side of things and how we should be thinking about the NIM trajectory through at least the first half of the year? And then maybe just a little detail on how if and when we get rate cuts, how that plays into the margin as we head into the back half of 2024?

A: Yes. Great. Thanks, Justin. We worked through this quarter, as I said, with the slowdown in the contraction on the NIM. We do look for that trend to continue as we head into the first half of the year. We are mindful, though, that we do have a book of CDs that have some repricing that will come in the quarter. So after some cuts, we might see a slight uptick in the cost of CDs. But again, those are short maturity, about five months' maturity. So we look -- with rate cuts, we look to benefit from that if we're able to reset those lower.

Q: Hey, good morning. Maybe just following back on the loan growth. How are the pipelines compared quarter-over-quarter? And what is like the blended origination yield that you guys are putting on?

A: So I think, at 12.31%, our pipeline was strong. We had about $25 million in our pipeline, $20 million of that in the C&I space, which we were pleased with. The yield on that is just around 8%, 8.2% on that pipeline.