Blue Foundry Bancorp (BLFY) Q2 Earnings call transcript Jul 24, 2024

In Blue Foundry Bancorp's recent earnings call, the company highlighted a series of key themes and trends that paint a picture of both growth and challenges for the financial institution. Despite the competitive environment and inverted yield curve, Blue Foundry reported a net loss for the second quarter of $2.3 million, a significant improvement from the previous quarter's net loss of $2.8 million. This improvement was driven by an expansion of net interest income and an increase in noninterest income, with a release in the provision for credit losses.

Jim Nesci, the President and CEO, expressed satisfaction with the company's progress in attracting the full banking relationship of small- to medium-sized businesses. This focus led to a 9% increase in commercial deposits this year and a 6% increase in consumer deposits. This growth has allowed Blue Foundry to reduce its reliance on wholesale deposits by 4%, which in turn has improved the loan-to-deposit ratio. The company's strategy to become a more commercially-oriented institution is evident in its selective origination of real estate loans and the building of a commercial pipeline.

Kelly Pecoraro, the CFO, provided a detailed analysis of the financial results. She highlighted a release of provision for credit losses, driven by forecasted improvements to economic drivers used to model credit losses. This release occurred in all three categories: loans, off-balance sheet commitments, and held-to-maturity securities. However, the allowance to nonaccrual loans increased to 210% from 205% in the prior quarter. Despite this increase, nonperforming assets declined by $1.1 million due to the sale of a real estate-owned property and a $483,000 improvement in nonaccrual loans.

The company's focus on deposit growth was a central theme of the call. Jim Nesci emphasized the importance of attracting full banking relationships and reducing reliance on wholesale deposits. This focus has led to a 1.5% increase in net deposits during the quarter. The company has been strategic in its loan origination activity, with a focus on strong underwriting and a selective approach to credit.

The earnings call also touched on regulatory and economic challenges. The company's capital levels remain strong, with a tangible equity to tangible common assets ratio of 16.9%. However, the company is mindful of the economic and regulatory environment and is being strategic in its loan origination activity. The company is also actively managing its liquidity, with untapped borrowing capacity of $394 million and unencumbered available-for-sale securities providing additional liquidity.

Key shareholders and investors had the opportunity to ask questions during the call. One analyst asked about the company's margin and the potential impact of Fed rate cuts. The CFO, Kelly Pecoraro, indicated that the company expects a stable net interest margin for the remainder of the year, but this could be impacted by interest rate activity and asset growth. She also noted that the company is closely monitoring competition for deposits in the marketplace. Another analyst asked about loan origination activity and the company's pipeline, with a focus on commercial real estate credit debt maturity and repricing. The CFO provided a detailed analysis of the company's credit portfolio and forecasted trends, indicating a focus on strategic credit underwriting and a healthy pipeline of commercial credits.

In conclusion, Blue Foundry Bancorp's earnings call provided a snapshot of the company's financial health and growth prospects. The company's focus on attracting full banking relationships, deposit growth, and strategic loan origination are key themes that emerged from the call. The company's financial results for the second quarter were positive, with an improvement in net loss and a focus on deposit growth and underwriting. The company's regulatory and economic challenges were also discussed, with a focus on managing liquidity and maintaining a strong capital position. Overall, the earnings call provided a comprehensive overview of Blue Foundry Bancorp's performance and outlook for the future.