Blue Foundry Bancorp (BLFY) 26 Apr 232023 Q1 Earnings call transcript

Good morning, and welcome to Blue Foundry Bancorp's First Quarter 2023 Earnings Call. My name is Lauren, 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 measures, which exclude certain items from reported results. earnings reconciliations today's measures. these to refer release of for non-GAAP Please

a being is this As event recorded. reminder,

question-and-answer there line Your will be remarks, call. be duration a will the of muted the the After session. for speakers'

I will to CEO, Nesci. Jim call President and turn now the over

Thank you, Operator.

by will detail and morning, share financial in greater joined the my our Financial opening Officer, earnings call. first company's Good Chief quarter Kelly after remarks. to I'm welcome our Pecoraro, who results

environment team and remain remain our challenges in and continues throughout to banking management maintaining holding capital more macroeconomic the the Our capitalized. experienced liquidity monitor strong company bank well and Both being industry. steadfast than liquidity We positions. our

$XXX in end and first At of therefore million held and $XXX cash XX. quarter, untapped the of million and available-for-sale borrowing is XX% mark-to-market securities $XXX portfolio had as debt capacity, March of sources, as our million the we in securities. including in liquidity

Our total totaling bank subsidiary had representing deposits. XX% customers million, $XXX uninsured deposits to of

liquidity X% than to million experienced our March. $X.X at customers. outflows Only at uninsured or X.Xx larger in quarter Our our the quarter deposits deposit for were end of were sources

to Suite million insurance through FDIC customers our CD and over IntraFi, coverage. CASH able enhanced in are programs. We provide offer programs FDIC These coverage $XXX additional

has the on both the performance rate and pressure Jersey costs. reflects northern quarter New had Our environment our during that the in competitive borrowing deposit

reduce actively the the to pressure implementing rate been measures We have environment. funding uncertain and

with between years This to short-term $XXX during lowering reliance quarter a reduce we advances years. where enacted program ranging allowed expense. we example, executed three hedges of rate our second million the five interest us on interest swap rate while and interest For duration

the We lending active are in markets. still

have in of loan During the underwriting that quality. resulted standards million. $XX still maintain loans, first in $XX our in growth resulted strong We we originated which million credit conservative quarter,

end. at was Tangible share book $XX.XX per quarter value

book tangible a repurchase continue to at value. We discounted stock

During average XXX,XXX shares at repurchased weighted the first a $XX.XX. of cost quarter, we

of March X,XXX,XXX stock of As total XX% approximately is repurchase a the initial which of shares, program. repurchased XX, we have approved

approved at stock allow repurchase program up shares million this of us continue additional to represents second an Last authorizing the the week, we outstanding pleased to company's of shareholders. We the program. to prudent X.X be of conclusion believe of X% capital repurchase use to This the program will to shares. initial the Board return are to repurchase repurchase stock able the value a and

call questions. we to And to will with answer then delighted the over that, Kelly turn and I'd be to your like Kelly?

Thank you, Jim, morning, and everyone. good

The $XXX,XXX net first This rate income and compared to was funding of reduction loss largely during net deposit outflows. the seasonal the quarter for to was environment related million $X.X pressures from linked quarter. competitive the

we While income, $X reduction million realized also interest interest expense million, $X.X in increased our interest expansion by in $X.X income. a million in a net resulting

interest-bearing yield drove Yield XX on increased basis compared increase This, basis of the deposits by Remaining in of also the pricing, X.XX% points interest-bearing assets deposit to to basis loans competitive X.XX%. on and by basis XX all cost X.XX%. points short-term in XX for quarter. increased with funds with points prior quarter XX point X.XX%, borrowings, the to increase a an to coupled the cost increased

sensitive to of nature We liability expect due the margin balance pressure on our to our continue sheet.

losses credit letters $XXX,XXX, current adoption $XXX,XXX, for accounting of decreased The X, maturity for credit credit January established held a increased expected loans methodology and the effective The loss commitments the $XXX,XXX by the by on reserve XXXX. company to and reserve reserve adopted for on securities.

retained decrease of net a earnings. in drove adoption CECL the result, a As $XX,XXX

by release net growth in end, driven credit commitment commercial at of a reduction by we recorded provision offset quarter portfolios. losses quarter, for a the partially During of in $XX,XXX our

current the in strong remain to continues environment. quality asset Our

During loans a by X reduction total to non-performing in decreased the points loans. non-performing XX points to quarter, driven primarily basis loans basis

to and basis total quarter to from X basis due non-accrual XX allowance reduction XXX% points increased the in our loans. to allowance loans loans a XXX% Our prior points increased to to non-accrual

to increased excluding of commitments credit, the the $XXX,XXX services Expenses driven and increase for by provision equity expenses approved stockholder fees. legal an in related technology a awards, absence

We and to help explore continue top-line to pressures. opportunities the to offset save, inflationary

and Gross $XX to by driven loans X.X% $XX the on Moving originations non-residential the balance primarily by of sequentially or multi-family, grew million C&I in segments. million, sheet.

quarter, purchased standards. principal Mae in $X also our residential the loans million bank of high originated which During Fannie the market, to quality were

flow securities our portfolio maturities, debt the million cash being duration due $X.X declined X.X of loans. paydowns. used calls, These provide scheduled is and securities to continues that With years, fund to to

balance Funding been the Deposits this declined quarter. during in have X% environment. our sheet challenging

million While of overall focus X% outflow for to an we quarter, our attracting with full relationship small in deposits increase experience account business sized the in $X accounts, primarily the balances. on businesses resulted a savings or in medium

attract and maturing resulting a deposits. $X retail increase to able were retain we Additionally, CDs million time in in

replace growth Borrowings during the deposit fund to million quarter increased by and outflow. help $XXX loan

hedges help earlier, the sheet a changes at We exposure us short-term than a three million execute to to to ranging in in interest As maturities $XXX reduce lower allowed balance enacted program able to we also of years and swap Jim hedges interest rates. our from rate cost were mentioned quarter. fund five years. borrowings the with first These

are and And with that, happy Jim take questions. to your I

Thank Instructions]. [Operator you.

Chris ahead. from comes Chris, KBW. from question please O'Connell go first Our

quarter? as of I have was update to the to of flows in an morning. so how Good trended deposit far get end month since the hoping the April

seeing small deposit Chris, in are us systemic. flows, anything outflows, terms to concerning of that's So but nothing we

outflows driven that We're $X.X environment. total about still I were of in some noted think terms our million of light the outflows. but we by March rate in competitive As declines, the seeing really

go-forward Got maybe different have you on And opportunities that could deposits through the and basis? it. biggest where see rates you increase outstanding you offering walk the to a

is grow accounts really been to, bank. as looking very medium has and interest small that rate. were that alluded we some customers out looking, X% in we're able CDs, quarter to business we this have a those We team focus happy an in now, seeing driving out the rates. our lock sized into people were some and we're in do of specials the there Right to in What we the

We X% those have some product, rates focusing accounts. on nine-month business for really we are our but

in Xs. Chris, to what account be but Kelly out the there marketplace, add extend on are, as product it the to in said, savings I we seems would And looking is, competitive side, people duration. have the

we're some with lock So people going see I CDs. in do this in to quarter, think

complementary Our X% special is a a walk-in rate requires product.

we're that a higher to looking put normal our where to as out rates rate go back liability in product come relationship and if going So eventually to price, household over expand time. will expect the markets are we down interest we sensitive,

it. rates Got of are for what And the coming kind accounts on at? business what are those generally --

in probably the Xs. They're

is fee the strategy fees more component business around product. for account the that with the component, customers business We interest interest The find Our mostly are that small rate smaller part the with than businesses. rate. concerned we fees are no they small of is a attract

something on rate, as at no we to interest fee two said, The products. we around is the So focus moment. business tend more

the now guys to deposit loan overall environment don't the deposit to move Got high next I limits see of that? the do ratio you mean, internal have it. X.XX%, competitive past I that given And with want on for couple up and guess further you that do any just quarters over you the rising end

the knowing probably to higher ratio selective our taking a than we the prudent market advantage high lending So as our a this of a and little market. little brokered at challenging not lever. products think to we brokered the bit availability we that is did at deposits loan this I put within point. Chris, go funding opportunities rate, deposit for very on are We high that any point. of We But in forward, very we going know quarter. balance have this is the mindful like quality for into be We're do move sheet,

I say will the QX, deposit again would normal I because that side little in into the pressure do loan But start start the other is on from QX, a should slow up loans loan back that a to to will equation think bit relieved. to picking ratio range the in Yes. of perhaps come down loan side side, but the be

what of deposits Got amount of you broker have guys the at the end it. the And do were quarter?

Broker the deposits were of quarter. the about end $XX at million

you what the Great. And XXXX? you have put looking to are think on the and updated at outlook pipeline the I growth and as where now yields for on maybe guess front, pipeline's an what to loan do you're guys

have now, rate closing will again, rate. of about for -- overall growth. again, So of loan are in all the second all quarter, million the Xs we we high looking pipeline not not XXXX, looking I terms In in at we're high-single-digit think at $XX fund but overall that annualized our

Got it. quarter what margin, March? at for And spot of do if the you guys month the for margin or the the of end the was not have

as remarks. monthly were in for that some we our provide normally quarter we March. in Most with don't -- margin. swaps are we but later the mentioned the pleased What We those on thank thankful -- came within of not do able is to

So rate X.XX%. that came about a on at of

some that that second do quarter NIM, we're in continuing but of the will envision So take advantage we looking pressure.

next or stayed quantify quarter of environment kind that and mean, the here. of where I think environment itself rate either any it. the if you in bottom unchanged Got from NIM pressure for to or magnitude in this could way of

we Overall, NIM March NIM, were I in an average, a than mid-X.XX%s think at again, we look we probably we're I the when -- probably were were from the from perspective. lower X.XX%

it thinking where I'm for quarter. and be it while we saw line not greater there's So in than this should compression,

the prior those as to rate this what locked what just for us to in amount And was quarter, and can Okay. you remind at? that were at swaps that were

So there's at X.XX%, X.XX%. a swaps of about about rate of million $XXX

the first swap. That's

first That was program. the

exactly And those duration you when was? remind what were can the us put on just and

Initial seven years, right.

put that seven-year that about was years remaining on four swaps segment. in on XXXX, were it initial So in so back they duration

down loan the guys up from that some to to had on pursue? a you'll to or strategy so, quarter. do Great. And -- of coming you continue you trend be here? this that see in And to fee or see Is gains the pickup that similar sale quarters you think kind side, expect if

it sale So at that strategy our looking we're this Chris happy to and quarter. a is have

forward. opportunities look if you continue to I sure within quarter, we're have not sheet held-for-sale balance increase loan but we'll flat as think have to looking whether that be do our and line on that not a for there. held-for-sale. We're we this it will to close move loan noted We or

over trending coming the course see charge a lower line the pickup in quarter Great. it you any bit service is fee little And was XXXX? this of do than which

that take I'll Chris, question.

I less think business the reduction what on ours. banks is overall seeing fee for in industry you're like

solid and difficult, I customers our the trying We I to deposits we on a XXX side spreads. to the think be decent And near-term. fee spread is attract bit no our little on business it's make is a product. our we're challenged for XXX, on interest how rates loans. going target liability provide Today, think customers fee but to

or And charging fees place November longer as of XXXX. had we go until into did overdrafts, announced X to, on which are no we assessing

within So XXXX a the lot overdraft had component.

trend rate on Got opportunities to limit outlook will you where do to run the QX? forward? expense to exploring as the expense growth it. expense updates overall to you're going begin as any the an And have And following side, that

Yes.

And our Foundry are Bank. we work at people looking Blue so that at we our manpower how employ constantly

are be And to seems off more on quarters. levering quite paying technology the that in We in, earlier invested it focusing well. we've

for for we look down to come quality Our high jobs has overall employees. provide and opportunities headcount really continue to our

is I better employees. mean higher by but perhaps prices, What that fewer jobs,

the which back second for our go a answer. we're and to payable, the to So drive experience, I through Kelly know for hand a management trying constantly think company overall. better team and this Kelly constantly accounts towards I I and to is to going better I'm

Yes.

our utilizing we mindful technology. as focused said, on workforce So Jim our are enhancing and extremely

we're as equity which a QX, guiding quarter. rate XXXX run probably grants we forward, look for from a think to I Chris, quarter of that around full during provided were includes the the

that flat there's QX, that that from to in looking bit? do expect that things you expect level down the do kind XXXX of bring that you a to And at it. you're Got XQ, little following opportunities hold level or the

and QX in that I think bring are down. there number opportunities QX to

So our rate of it we're out. for remainder the for QX We not see year, run the paying that that's but things as falling work. where

performance expense relates a comp that drives to especially a expense edges, of number, around compensation margin. around Yes. lot the Chris, as I that it lot think of the the

what I alluding is to. think Kelly that's

the is weak, compensation is performance strong, you'll come line. if comp is compensation variable if up, performance So down our see there line goes because compensation in the

the I bit be out? Got the kind share as bank plan appreciate new until expect to repurchases uncertainty macroeconomic And and it. overall the turmoil given forward, that is and buyback the aggressive you of going you comment the a environment, or the do of some on slows plays around the -- and expect do

I think trajectory it'll has stay on as been. the same it

in plan. very have a or were our we're -- Very against very I for XXbX of the dramatically Board unless And I We'll to again, that. pleased program. pleased strong in with We a ability our to dynamically keep follow with so position, changes, Directors we thankful continue another but we're improving capital execute something in restating plan.

tax timeline the And overall, remain that earnings in earnings? the of path to kind would earnings us just kind expect kind what might get you outlook of the be rate? I differences guys do from negative be. if if so, a to here, forward just positive, you of you can describe positive versus And going on see do to Great. what mean, And

carefully So of come last balance kind pleased as Not able on to putting we the given I have is with some were we've of of and year to we prudent our forward, sheet. look that that growth, being market, growth terms we're weren't forward. in the and a from what look at really move our we more to rate success deposit we being last as think year, borrow the we're will But key down loan XX% We selecting and it's has interest our continue where versus to a lot lending so do and drive very From date careful, out metric shell. line, profitability perspective, side. at credit expense right? with at we another we're what fall environment, controlling offer can we what our

add three-month I I inverted. really look specifically, heavily is the dependent and crossover the and would what it's would to highly but Chris, interest love to on rates, and when on rates look five-year three-month you like. at inversion what is, able forecast is if be say it five-year, interest

that's way that So the answer can the question today. best I

great. Great. And just implications, touch the that'd could on you if be tax rate

Sure.

get currently tax a do our this you loss we quarter, that think valuation as a loss. being look for benefit at in have the But I of position allowance. we because position don't

against to that we become As XX% profitable, the on we're able have balance valuation we portion. offset of NOLs sheet that that allowance reverse the our and on the

XX% So as rate. position, zero there's loss we're around But benefit. the I a look a a at tactical position, it, in tax it's in when

Thank you.

hand We have now for Jim no remarks. back I'll questions. over further to Nesci closing

forward being all day. speaking Thanks, to everybody And I call Operator. employees like who Have look and great to the you, shareholders our participated I thank again next Bank for a and Thank today quarter. thank would in you story. part and Foundry our of Blue of with

for Thank joining. call. you today's concludes This

disconnect You lines. now your may