Financial Data and Key Metrics Changes - The company reported a net income of $40,000 for Q2 2022, with a pre-provision net revenue of $529,000, showing significant growth in core operating results [4][11] - Total loans reached $1.42 billion, an increase of $88 million or 6.6% quarter-over-quarter, marking the second consecutive quarter of over 4% loan growth [4][5] - Net interest margin expanded by 21 basis points to 2.83%, despite funding pressures from the rising rate environment [14] - Net interest income increased by $1.2 million or 10.2% to $13.2 million, while interest expense rose by $61,000 [15] Business Line Data and Key Metrics Changes - The lending team onboarded $175 million in new loans, with organic originations totaling $147 million, the largest quarterly originations in the company's history [5] - Core deposits grew by $28 million during the quarter, driven primarily by business accounts, which contributed $25 million to that growth [6] - The commercial real estate portfolio experienced strong growth, with originations of $140 million during the quarter [16] Market Data and Key Metrics Changes - The loan pipeline as of June 30 totaled $223 million with a weighted rate of 4.4%, indicating a robust near-term outlook for loan originations [5] - The company purchased $28 million of high-quality residential loans, down from $46 million in the previous quarter, indicating a selective approach to the purchase program [17] Company Strategy and Development Direction - The company is focused on small business customers and plans to open smaller branches (around 2,000 square feet) in densely populated areas, moving away from larger branches [36] - A share repurchase program was authorized for up to 2.8 million shares, reflecting a commitment to return capital to shareholders [9] Management's Comments on Operating Environment and Future Outlook - Management expressed a more conservative long-term outlook due to economic uncertainties, despite strong loan growth in the near term [5][30] - The company anticipates increased pressure on net interest margin in the upcoming quarters due to rising interest rates [34] Other Important Information - Tangible book value declined by $0.29 per share to $14.43, primarily due to a higher rate environment impacting the available-for-sale securities portfolio [11][12] - The bank's asset quality remains strong, with non-performing loans to total loans decreasing by 8 basis points to 70 basis points [18] Q&A Session Summary Question: Average duration of investment held for sale - The average duration is approximately 4 to 4.5 years for the held-for-sale portfolio [22] Question: Portion of the portfolio that is mortgage-backed - The mortgage-backed securities are included in the available-for-sale category, and while there is potential for extension, it is not projected to be material [25][27] Question: Longer-term outlook for loan growth - The loan pipeline is strong with about $220 million as of June 30, and while growth is expected to continue in Q3, guidance for Q4 is not yet provided [30] Question: Growth in multifamily and commercial real estate - All originations in the multifamily space are from the company's team, and the commercial real estate growth was also 100% direct [31] Question: Impact of PPP loans on net interest income - Approximately $170,000 of net interest income for the quarter was from PPP forgiveness, with a small remaining balance [33] Question: Expense management and future guidance - The company aims to maintain a quarterly run rate of $13.5 million in expenses moving forward [38]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Blue Foundry Bancorp's unaudited consolidated financial statements, including statements of financial condition, operations, and cash flows, with detailed accounting policy notes [Consolidated Statements of Financial Condition](index=3&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) Total assets increased to **$1.94 billion** by March 31, 2022, driven by loan and securities growth, while liabilities rose and shareholders' equity decreased due to comprehensive loss Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 (In thousands) | December 31, 2021 (In thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $101,562 | $193,446 | | Securities available for sale | $375,614 | $324,892 | | Loans receivable, net | $1,328,021 | $1,273,184 | | **Total Assets** | **$1,938,155** | **$1,914,211** | | **Liabilities & Equity** | | | | Deposits | $1,283,022 | $1,247,040 | | **Total Liabilities** | **$1,517,941** | **$1,484,740** | | **Total Shareholders' Equity** | **$420,214** | **$429,471** | [Consolidated Statements of Operations](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The company achieved a net income of **$553 thousand** for Q1 2022, a significant improvement from a prior-year loss, primarily due to a **24.4% increase** in net interest income from reduced interest expense Consolidated Operations Highlights (Unaudited) | Account | Three Months Ended Mar 31, 2022 (In thousands) | Three Months Ended Mar 31, 2021 (In thousands) | | :--- | :--- | :--- | | Total Interest Income | $13,594 | $13,942 | | Total Interest Expense | $1,655 | $4,343 | | **Net Interest Income** | **$11,939** | **$9,599** | | Recovery of provision for loan losses | ($952) | ($808) | | Total Non-interest Income | $927 | $666 | | Total Non-interest Expense | $13,216 | $12,369 | | **Net Income (Loss)** | **$553** | **($745)** | | **Basic and Diluted EPS** | **$0.02** | **n/a** | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Q1 2022 saw a net decrease in cash and cash equivalents of **$91.9 million**, driven by increased cash used in investing activities for securities and loans, despite cash provided by financing Cash Flow Summary (Unaudited) | Cash Flow Category | Three Months Ended Mar 31, 2022 (In thousands) | Three Months Ended Mar 31, 2021 (In thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($366) | $1,770 | | Net cash used in investing activities | ($127,758) | ($50,609) | | Net cash provided by financing activities | $36,240 | $24,528 | | **Net decrease in cash and cash equivalents** | **($91,884)** | **($24,311)** | [Notes to the Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes detail significant accounting policies, including CECL adoption, and provide breakdowns of financial components like securities, loans, deposits, and derivatives, alongside ESOP establishment - The company will adopt the **Current Expected Credit Loss (CECL) model** by January 1, 2023, anticipating a material increase to the allowance for credit losses[39](index=39&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Total gross loans increased to **$1.34 billion** by March 31, 2022, driven by growth in residential one-to-four family and non-residential loans[68](index=68&type=chunk) - Non-accrual loans decreased to **$10.5 million** as of March 31, 2022, indicating improved credit quality[85](index=85&type=chunk) - The company uses interest rate swaps with a notional amount of **$109.0 million** to hedge cash flows of Federal Home Loan Bank advances[118](index=118&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=37&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2022 financial performance and condition, highlighting improved net income driven by increased net interest income, alongside loan and deposit growth, asset quality, and equity changes [Comparison of Operating Results](index=38&type=section&id=Comparison%20of%20Operating%20Results) Q1 2022 operating results show a turnaround to **$553 thousand** net income, driven by a **24% increase** in net interest income from reduced interest expense, despite higher non-interest expenses - Net income increased by **$1.3 million** to **$553 thousand** for Q1 2022, compared to a net loss of **$745 thousand** for Q1 2021[169](index=169&type=chunk) - Net interest income increased by **$2.3 million (24.4%)** year-over-year, driven by a **$2.7 million (61.9%)** decrease in interest expense[171](index=171&type=chunk)[172](index=172&type=chunk) - A recovery of provision for loan losses of **$952 thousand** was recorded, driven by construction portfolio paydowns and an improving economic environment[175](index=175&type=chunk) - Non-interest expense increased by **$847 thousand (6.8%)** year-over-year, primarily due to a **$903 thousand** rise in compensation and benefits[178](index=178&type=chunk) [Comparison of Financial Condition](index=40&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew to **$1.94 billion** by March 31, 2022, driven by increases in loans and securities, while shareholders' equity declined by **$9.3 million** due to unrealized investment losses - Total assets increased by **$23.9 million (1.3%)** to **$1.94 billion** from December 31, 2021[186](index=186&type=chunk) - Gross loans increased by **$55.0 million (4.3%)** to **$1.34 billion**, including **$101.6 million** in organic originations and **$45.8 million** in residential mortgage purchases[189](index=189&type=chunk) - Total deposits increased by **$36.0 million (3%)**, with core deposits rising to **65.3%** of total deposits[191](index=191&type=chunk) - Shareholders' equity decreased by **$9.3 million (2.2%)**, primarily due to a **$10.1 million** decline in accumulated other comprehensive income from rising interest rates impacting the investment portfolio[195](index=195&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=43&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company manages significant interest rate risk through various strategies, including core deposit growth and interest rate swaps, with sensitivity analysis showing EVE changes of **-9%** for a **+100 bp** rate increase and **+14%** for a **-100 bp** decrease - The company's primary market risk is **interest rate risk**, managed by the ALCO/Investment Committee through strategies like loan diversification and interest rate swaps[204](index=204&type=chunk)[205](index=205&type=chunk) - The company is monitoring its exposure to the **LIBOR transition**, with approximately **$40.0 million** in loans, **$32.0 million** in investments, and **$109.0 million** notional of derivatives indexed to USD-LIBOR[207](index=207&type=chunk) Net Interest Income (NII) Sensitivity Analysis (at March 31, 2022) | Change in Interest Rates (bp) | Net Interest Income Change ($ thousands) | Percent Change | | :--- | :--- | :--- | | +400 | $8,178 | 16% | | +300 | $6,277 | 12% | | +200 | $4,343 | 8% | | +100 | $2,285 | 4% | | 0 | — | — | | -100 | ($2,439) | (5)% | Economic Value of Equity (EVE) Sensitivity Analysis (at March 31, 2022) | Change in Interest Rates (bp) | Estimated EVE Change ($ thousands) | Percent Change | | :--- | :--- | :--- | | +400 | ($95,454) | (33)% | | +300 | ($73,115) | (25)% | | +200 | ($49,280) | (17)% | | +100 | ($25,161) | (9)% | | 0 | — | — | | -100 | $41,014 | 14% | [Controls and Procedures](index=46&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and found to be effective as of **March 31, 2022**[216](index=216&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[216](index=216&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material legal proceedings, with routine actions not expected to materially affect financial condition or operations - The Company is not engaged in any legal proceedings of a material nature[218](index=218&type=chunk) [Risk Factors](index=46&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, were reported - No material changes to the risk factors described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 were reported[219](index=219&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item is not applicable for the reporting period - Not Applicable[219](index=219&type=chunk) [Defaults Upon Senior Securities](index=46&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable for the reporting period - Not Applicable[219](index=219&type=chunk) [Mine Safety Disclosures](index=46&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable for the reporting period - Not Applicable[219](index=219&type=chunk) [Other Information](index=46&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This item is not applicable for the reporting period - Not Applicable[219](index=219&type=chunk) [Exhibits](index=47&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including corporate documents and certifications from the Principal Executive and Financial Officers under Sarbanes-Oxley Act sections 302 and 906 - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[221](index=221&type=chunk)

Blue Foundry Bancorp (NASDAQ:BLFY) Q1 2022 Earnings Conference Call April 27, 2022 11:00 AM ET Company Participants Jim Neste - President & Chief Executive Officer Alex Angeleno - Controller & Interim Chief Financial Officer Conference Call Participants Laurie Hunsicker - Compass Point Operator Good morning. My name is Simon, and I'll be your conference operator today. I would like to welcome everyone to the Blue Foundry Bancorp Q1 2022 Earnings Call. Today's call will include forward-looking statements, in ...

Part I [Business Overview](index=6&type=section&id=Item%201.%20Business) Blue Foundry Bancorp, a Delaware corporation, became the holding company for Blue Foundry Bank on July 15, 2021, providing diverse banking services in Northern New Jersey. [Blue Foundry Bancorp Overview](index=6&type=section&id=Blue%20Foundry%20Bancorp) Blue Foundry Bancorp completed its mutual-to-stock conversion on July 15, 2021, becoming the holding company for Blue Foundry Bank, selling **27,772,500 shares** of common stock for **$277.7 million** and donating stock and cash to a charitable foundation. - Blue Foundry Bancorp completed its mutual-to-stock conversion on July 15, 2021, becoming the holding company for Blue Foundry Bank[12](index=12&type=chunk) - The company sold **27,772,500 shares** of common stock at **$10 per share**, generating **$277.7 million** in gross proceeds through its initial public offering[12](index=12&type=chunk) - The company donated **750,000 shares** of common stock and **$1.5 million** in cash to the Blue Foundry Charitable Foundation, Inc[12](index=12&type=chunk) [Blue Foundry Bank Overview](index=6&type=section&id=Blue%20Foundry%20Bank) Blue Foundry Bank, a New Jersey-chartered savings bank established in 1939, primarily offers various loan and deposit products, with revenue mainly from loan interest and funding from deposits and FHLB borrowings. - Blue Foundry Bank, a New Jersey-chartered savings bank, was established in 1939 as Boiling Springs Savings & Loan Association and rebranded as Blue Foundry Bank in 2019[13](index=13&type=chunk) - Primary business activities include originating one-to-four family residential real estate mortgage loans, home equity loans and lines of credit, consumer loans and lines of credit, and commercial real estate, multi-family, construction, and commercial and industrial loans[14](index=14&type=chunk) - Revenue primarily derives from interest on loans, followed by interest on investments and mortgage-backed securities, with primary funding sources being deposits, loan principal and interest repayments, securities, and FHLB borrowings[14](index=14&type=chunk) [Market Area](index=6&type=section&id=Market%20Area) The company's primary market is Northern New Jersey, a diverse and affluent region, where it holds less than **1%** of the bank deposit market share as of June 30, 2021, with plans to enhance competitiveness by expanding products and services. - The company's primary market area is Northern New Jersey, operating **17 full-service banking offices** in the state[16](index=16&type=chunk) - New Jersey's economy is diverse and affluent, making it one of the most attractive banking markets in the U.S., though the company's deposit market share in this region was less than **1%** as of June 30, 2021[17](index=17&type=chunk) - The company plans to expand its product and service offerings to enhance market competitiveness and grow its business through local market knowledge and customer relationships[18](index=18&type=chunk)[19](index=19&type=chunk) [Competition](index=7&type=section&id=Competition) The company faces intense competition in deposit and loan markets from large financial institutions, brokerage firms, money market funds, and non-depository financial service companies, with future competition expected to intensify due to legislative, regulatory, and technological changes. - The company faces intense competition for deposits and loans from other community banks, credit unions, large financial institutions (e.g., Bank of America, JPMorgan Chase), brokerage firms, and money market funds[20](index=20&type=chunk)[21](index=21&type=chunk) - The participation of non-depository financial service companies, such as mortgage companies and fintech firms, also intensifies competition in the loan market[21](index=21&type=chunk) - Future competition is expected to remain intense due to legislative, regulatory, and technological changes, as well as ongoing consolidation in the financial services industry[22](index=22&type=chunk) [Lending Activities](index=7&type=section&id=Lending%20Activities) The company's lending activities historically focus on one-to-four family and multi-family real estate loans, with plans to diversify into commercial real estate and commercial and industrial loans, employing strict underwriting standards and risk assessment based on loan type and collateral value. - The company's lending activities have historically focused on one-to-four family and multi-family real estate loans, which still constitute the largest portion of its loan portfolio[23](index=23&type=chunk) - The company plans to continue focusing on commercial real estate, multi-family, and traditional commercial and industrial loans to diversify its loan portfolio and enhance loan yields[23](index=23&type=chunk) Loan Portfolio Composition (As of December 31, 2021) | Loan Type | 2021 Amount (Thousands of USD) | 2021 Percentage (%) | 2020 Amount (Thousands of USD) | 2020 Percentage (%) | | :------------------------ | :------------------ | :------------- | :------------------ | :------------- | | One-to-Four Family Residential | 560,976 | 43.78 | 611,603 | 47.83 | | Multi-Family Residential | 515,240 | 40.21 | 427,436 | 33.42 | | Non-Residential | 141,561 | 11.05 | 128,141 | 10.02 | | Construction and Land | 23,419 | 1.83 | 33,691 | 2.63 | | Junior Liens | 18,464 | 1.44 | 23,814 | 1.86 | | Commercial and Industrial (including PPP) | 21,563 | 1.68 | 54,053 | 4.23 | | Consumer and Other | 87 | 0.01 | 99 | 0.01 | | **Total Loans** | **1,281,310** | **100.00** | **1,278,837** | **100.00** | Loan Interest Rate Type (As of December 31, 2021) | Loan Type | Fixed Rate (Thousands of USD) | Floating or Adjustable Rate (Thousands of USD) | Total (Thousands of USD) | | :------------------------ | :---------------- | :-------------------- | :------------ | | One-to-Four Family Residential | 307,846 | 258,069 | 565,915 | | Multi-Family Residential | 115,622 | 399,861 | 515,483 | | Non-Residential | 39,866 | 95,925 | 135,791 | | Construction and Land | 1,366 | 120 | 1,486 | | Junior Liens | 3,046 | 15,272 | 18,318 | | Commercial and Industrial (including PPP) | 16,593 | — | 16,593 | | Consumer and Other | 29 | — | 29 | | **Total** | **484,368** | **769,247** | **1,253,615** | - Total loan originations were **$321.7 million** in 2021 and **$173.3 million** in 2020, all retained by the company, with **$91.6 million** in loan purchases in 2021 and none in 2020[59](index=59&type=chunk) [Credit Policy and Procedures](index=13&type=section&id=Credit%20Policy%20and%20Procedures) The company adheres to strict loan approval and underwriting standards, regularly reviewing loan portfolio asset quality, with non-performing loans and problem assets impacting net income, and maintains an allowance for loan losses to cover potential losses, totaling **$14.4 million** as of December 31, 2021, against **$12.0 million** in non-performing assets. - Loan approval procedures follow written standards approved by the Board of Directors, with varying approval authorities based on loan type, size, and credit risk, requiring at least two officers' approval[62](index=62&type=chunk)[63](index=63&type=chunk) - Loans over **90 days past due** are generally placed on non-accrual status unless adequately collateralized and in the process of collection[69](index=69&type=chunk) Non-Performing Assets (As of December 31, 2021 and 2020) | Metric | December 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :---------------------------------------- | :---------------------- | :---------------------- | | Total Non-Accrual Loans | 11,983 | 12,856 | | Real Estate Owned Held for Sale | — | 624 | | **Total Non-Performing Assets** | **11,983** | **13,480** | | Non-Accrual Loans to Total Loans | 0.94% | 1.00% | | Non-Accrual Loans to Total Assets | 0.63% | 0.66% | | Non-Performing Assets to Total Assets | 0.63% | 0.69% | | Non-Performing Assets and Accruing Troubled Debt Restructurings to Total Assets | 0.88% | 1.02% | Allowance for Loan Losses Activity (As of December 31, 2021 and 2020) | Metric | 2021 (Thousands of USD) | 2020 (Thousands of USD) | | :------------------------------------ | :-------------- | :-------------- | | Beginning Allowance for Loan Losses | 16,959 | 14,500 | | (Recovery) Provision for Loan Losses | (2,518) | 2,518 | | Total Charge-offs | 16 | 59 | | Net Charge-offs | 16 | 59 | | Ending Allowance for Loan Losses | 14,425 | 16,959 | | Allowance for Loan Losses to Non-Accrual Loans | 120.38% | 131.92% | | Allowance for Loan Losses to Total Loans | 1.13% | 1.34% | Allocation of Allowance for Loan Losses (As of December 31, 2021 and 2020) | Loan Category | 2021 Amount (Thousands of USD) | 2021 Percentage (%) | 2020 Amount (Thousands of USD) | 2020 Percentage (%) | | :------------------------ | :------------------ | :------------- | :------------------ | :------------- | | One-to-Four Family Residential | 2,822 | 19.56 | 3,579 | 21.10 | | Multi-Family Residential | 5,263 | 36.50 | 5,460 | 32.21 | | Non-Residential | 2,846 | 19.73 | 3,244 | 19.13 | | Construction and Land | 2,678 | 18.56 | 3,655 | 21.55 | | Junior Liens | 636 | 4.41 | 916 | 5.40 | | Commercial and Industrial (including PPP) | 51 | 0.35 | 2 | 0.01 | | Consumer and Other | 38 | 0.26 | 48 | 0.28 | | **Total Allocated** | **14,334** | **99.37** | **16,904** | **99.68** | | Unallocated | 91 | 0.63 | 55 | 0.32 | | **Total Allowance for Loan Losses** | **14,425** | **100.00** | **16,959** | **100.00** | [Investment Activities](index=19&type=section&id=Investment%20Activities) The company's investment policy aims to provide income, liquidity, reduce interest rate risk, and ensure principal safety, with its portfolio primarily comprising debt securities issued by the U.S. government, agencies, and government-sponsored enterprises, as well as mortgage-backed securities, corporate bonds, and municipal bonds. - The company's investment policy objectives are to provide income, liquidity, reduce interest rate risk, ensure principal safety, manage tax burden, and meet collateral requirements[90](index=90&type=chunk) - The investment portfolio primarily includes U.S. Treasury securities, securities issued by U.S. government agencies and government-sponsored enterprises (including mortgage-backed securities), corporate bonds, municipal bonds, asset-backed securities, federal funds, and deposits in other financial institutions[92](index=92&type=chunk)[93](index=93&type=chunk) Investment Securities Portfolio Maturities and Weighted Average Yields (As of December 31, 2021) | Security Type | One Year or Less (Thousands of USD) | Weighted Average Yield (%) | One to Five Years (Thousands of USD) | Weighted Average Yield (%) | Five to Ten Years (Thousands of USD) | Weighted Average Yield (%) | Ten Years or More (Thousands of USD) | Weighted Average Yield (%) | Total Amortized Cost (Thousands of USD) | Total Fair Value (Thousands of USD) | Total Weighted Average Yield (%) | | :------------------------ | :------------------ | :----------------- | :---------------- | :----------------- | :---------------- | :----------------- | :---------------- | :----------------- | :------------------ | :------------------ | :------------------- | | **Available-for-Sale Securities:** | | | | | | | | | | | | | U.S. Treasury Securities | — | — | 30,029 | 0.88 | 34,008 | 1.28 | — | — | 36,933 | 36,832 | 0.96 | | Corporate Bonds | 1,991 | 3.44 | 44,119 | 1.63 | 6,904 | 3.15 | 6,000 | 3.75 | 86,118 | 87,619 | 2.42 | | U.S. Government Agency Bonds | 3,001 | 1.78 | 10,000 | 0.50 | 5,607 | 0.83 | 4,854 | 0.66 | 23,462 | 23,329 | 0.78 | | State and Municipal Bonds | 1,430 | 2.80 | 3,017 | 3.24 | 8,893 | 3.24 | 5,832 | 3.62 | 19,172 | 20,324 | 3.32 | | Mortgage-Backed Securities: | | | | | | | | | | | | | One-to-Four Family Residential | — | — | 274 | 1.47 | 10,836 | 1.76 | 105,056 | 1.93 | 116,166 | 114,401 | 1.91 | | Multi-Family Residential | 11,723 | 2.41 | 16,879 | 1.38 | — | — | 6,810 | 3.29 | 35,412 | 35,916 | 2.09 | | Asset-Backed Securities | — | — | 5,010 | 1.22 | 1,528 | 1.17 | — | — | 6,538 | 6,471 | 1.21 | | **Total Available-for-Sale Securities** | **18,145** | **2.45** | **109,328** | **1.31** | **67,776** | **2.51** | **128,552** | **2.12** | **323,801** | **324,892** | **1.94** | | **Held-to-Maturity Securities:** | | | | | | | | | | | | | Asset-Backed Securities | — | — | 6,071 | 1.73 | 9,210 | 2.18 | — | — | 15,281 | 14,908 | 2.00 | | Corporate Bonds | — | — | — | — | 7,000 | 2.88 | 1,000 | 4.00 | 8,000 | 7,941 | 3.02 | | **Total Held-to-Maturity Securities** | **—** | **—** | **6,071** | **1.73** | **16,210** | **2.48** | **1,000** | **4.00** | **23,281** | **22,849** | **2.35** | [Sources of Funds](index=21&type=section&id=Sources%20of%20Funds) Deposits are the company's primary funding source for loan and investment activities, supplemented by Federal Home Loan Bank (FHLB) borrowings, with diverse deposit products and rates adjusted based on market conditions and competition. - Deposits are the company's primary source of funds for loan and investment activities, supplemented by FHLB borrowings[98](index=98&type=chunk) - The company offers a wide range of deposit products and reviews deposit pricing monthly based on competition, liquidity needs, profitability, and customer preferences[99](index=99&type=chunk)[100](index=100&type=chunk) Deposit Composition (As of December 31, 2021 and 2020) | Deposit Type | 2021 Amount (Thousands of USD) | 2021 Percentage (%) | 2020 Amount (Thousands of USD) | 2020 Percentage (%) | | :------------------ | :------------------ | :------------- | :------------------ | :------------- | | Non-Interest Bearing | 44,894 | 3.60 | 44,195 | 3.26 | | NOW and Demand Accounts | 363,419 | 29.14 | 317,974 | 23.45 | | Savings | 364,932 | 29.26 | 276,584 | 20.39 | | Time Deposits | 473,795 | 38.00 | 717,431 | 52.90 | | **Total Deposits** | **1,247,040** | **100.00** | **1,356,184** | **100.00** | - As of December 31, 2021, the company had **$185.5 million** in FHLB borrowings and approximately **$319.9 million** in available FHLB credit lines[105](index=105&type=chunk) [Subsidiary Activities](index=22&type=section&id=Subsidiary%20Activities) Blue Foundry Bancorp owns Blue Foundry Bank, which in turn has six wholly-owned subsidiaries, with Blue Foundry Investment Company actively engaged in securities management and investment. - Blue Foundry Bancorp has one direct subsidiary: Blue Foundry Bank[106](index=106&type=chunk) - Blue Foundry Bank has six wholly-owned subsidiaries, including Rutherford Center Development Corp., Blue Foundry Service Corporation, Blue Foundry, LLC, 116-120 Route 23 North, LLC, TrackView LLC, and Blue Foundry Investment Company[107](index=107&type=chunk) - Blue Foundry Investment Company is active in securities management and investment[107](index=107&type=chunk) [Employees and Human Capital Resources](index=22&type=section&id=Employees%20and%20Human%20Capital%20Resources) As of December 31, 2021, the company employed **175 individuals**, approximately **64% of whom were women**, an increase from **168 employees** in 2020, and is committed to employee growth, offering comprehensive health benefits and compensation, including 401(k) matching and an Employee Stock Ownership Plan (ESOP). - As of December 31, 2021, the company employed **175 individuals**, approximately **64% of whom were women**, an increase from **168 employees** in 2020[108](index=108&type=chunk) - The company supports continuous training and career development through internal training, customized corporate training, and an education reimbursement program[109](index=109&type=chunk) - The company offers comprehensive health benefit plans, 401(k) matching up to **6% of employee salaries**, and stock accumulation opportunities through an Employee Stock Ownership Plan (ESOP)[109](index=109&type=chunk) [Supervision and Regulation](index=23&type=section&id=Supervision%20and%20Regulation) The company and its subsidiary, Blue Foundry Bank, are subject to stringent regulation by the New Jersey Department of Banking and Insurance (NJDOBI) and the Federal Deposit Insurance Corporation (FDIC), with a framework designed to protect the deposit insurance fund and depositors, imposing restrictions on banking activities, capital requirements, consumer protection, and anti-money laundering. - Blue Foundry Bancorp and Blue Foundry Bank are subject to comprehensive regulation and examination by the New Jersey Department of Banking and Insurance (NJDOBI) and the Federal Deposit Insurance Corporation (FDIC)[112](index=112&type=chunk)[114](index=114&type=chunk) - The Bank must meet several minimum capital standards, including Common Equity Tier 1 capital to risk-weighted assets ratio, Tier 1 capital to risk-weighted assets ratio, Total capital to risk-weighted assets ratio, and Tier 1 capital to average total assets leverage ratio[125](index=125&type=chunk) - As of December 31, 2021, Blue Foundry Bank was categorized as a 'well-capitalized' institution, exceeding all applicable regulatory capital requirements[134](index=134&type=chunk)[142](index=142&type=chunk) - The Community Reinvestment Act (CRA) requires banks to continuously fulfill their obligation to meet the credit needs of their communities, including low- and moderate-income communities, with Blue Foundry Bank receiving a 'Satisfactory' CRA rating in October 2021[161](index=161&type=chunk) - The CARES Act and PPP Act provided federally guaranteed loans to support eligible small businesses, with the company holding **$16.8 million** in PPP loans as of December 31, 2021[186](index=186&type=chunk) [Taxation](index=34&type=section&id=TAXATION) The company and its subsidiaries are subject to federal and state income taxes, holding **$31.7 million** in federal net operating loss (NOL) carryforwards and **$33.6 million** in New Jersey NOL carryforwards as of December 31, 2021, but has recorded a **$9.0 million** valuation allowance against deferred tax assets related to NOL carryforwards. - The company and its subsidiaries are subject to federal and state income taxes, using the accrual method of accounting[189](index=189&type=chunk)[190](index=190&type=chunk) - As of December 31, 2021, the company had **$31.7 million** in federal net operating loss (NOL) carryforwards with no expiration date, but future use is limited to **80% of taxable income**[191](index=191&type=chunk) - The company has **$33.6 million** in New Jersey net operating loss carryforwards, most of which expire within **20 years**[195](index=195&type=chunk) - The company has recorded a **$9.0 million** valuation allowance against deferred tax assets related to NOL carryforwards, deeming their future realization unlikely[508](index=508&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks, including the ongoing impact of the COVID-19 pandemic, deteriorating economic conditions, loan portfolio concentration, ineffective growth management, interest rate fluctuations, increased lending risks, operational and cybersecurity risks, loss of key management, high operating costs, and increased regulatory compliance expenses, all of which could materially adversely affect its business, financial condition, and operating results. [Risks Related to COVID-19](index=35&type=section&id=Risks%20Related%20to%20COVID-19) The COVID-19 pandemic has adversely affected the company's business, customers, and communities, with future impacts remaining uncertain, potentially leading to loss of key employees, decreased loan demand and credit quality, rising unemployment, increased allowance for loan losses, reduced guarantor net worth and liquidity, heightened cybersecurity risks, and capital market volatility. - The COVID-19 pandemic has adversely affected the company, its customers, and communities, with future impacts remaining unpredictable[198](index=198&type=chunk)[199](index=199&type=chunk) - The pandemic could lead to loss of key employees, decreased demand for loans and banking services, deterioration in loan portfolio credit quality, increased delinquencies and foreclosures due to rising unemployment, increased allowance for loan losses, reduced net worth and liquidity of loan guarantors, heightened cybersecurity risks, and capital market volatility[200](index=200&type=chunk) [Risks Related to Economic Conditions](index=36&type=section&id=Risks%20Related%20to%20Economic%20Conditions) The company's loan portfolio concentration in specific market areas makes it vulnerable to local economic and real estate market downturns, which could lead to decreased demand for products and services, increased loan delinquencies and foreclosures, reduced collateral values, and impaired ability of loan guarantors to fulfill commitments. - The company's loan portfolio is primarily concentrated in New Jersey, making it vulnerable to downturns in the local economy and real estate market[204](index=204&type=chunk) - Deteriorating economic conditions could lead to decreased demand for products and services, increased loan delinquencies and foreclosures, reduced collateral values, and impaired ability of loan guarantors to fulfill commitments[202](index=202&type=chunk) - A downturn in local economic conditions could result in loan losses exceeding the allowance, necessitating an increase in the allowance for loan losses, thereby reducing earnings and capital[204](index=204&type=chunk) [Risks Related to Growth](index=36&type=section&id=Risks%20Related%20to%20Growth) The company's business strategy includes growth, but failure to effectively manage this growth could negatively impact financial condition and operating results, as new branches may incur expenses faster than revenue, and new business lines or product services could introduce additional risks and uncertainties. - The company's business strategy includes growth in assets, deposits, and operating scale, but achieving growth targets depends on attracting and retaining experienced bankers, viable business opportunities, market competition, and the ability to effectively manage growth[206](index=206&type=chunk) - Establishing new branches involves significant costs and may initially lead to expenses growing faster than revenue, negatively impacting profitability[208](index=208&type=chunk) - Introducing new business lines or product services carries significant risks and uncertainties, potentially resulting in unmet development and rollout timelines, unfeasible pricing and profitability targets, or low customer acceptance[209](index=209&type=chunk) [Risks Related to Interest Rate Risk](index=37&type=section&id=Risks%20Related%20to%20Interest%20Rate%20Risk) The company's profitability heavily relies on net interest income, and future interest rate changes could reduce profits, as a faster rise in deposit rates than long-term loan and investment rates would narrow the interest margin; as of December 31, 2021, an instantaneous **200 basis point** interest rate increase would decrease net portfolio value by **$19.2 million**. - The company's profitability largely depends on net interest income, the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities[211](index=211&type=chunk) - If interest rates rise, and deposit rates increase faster than long-term loan and investment rates, it will narrow the interest margin, negatively impacting profitability[213](index=213&type=chunk) - As of December 31, 2021, an instantaneous **200 basis point** increase in market interest rates would decrease the company's net portfolio value by **$19.2 million**[216](index=216&type=chunk) - The transition away from LIBOR could adversely affect the value and returns of the company's LIBOR-indexed loans and investment securities[223](index=223&type=chunk)[225](index=225&type=chunk) [Risks Related to Lending Activities](index=38&type=section&id=Risks%20Related%20to%20Lending%20Activities) Increasing commercial real estate and commercial loan originations will heighten lending risks due to their reliance on borrower business success and greater collateral value volatility; if the allowance for loan losses is insufficient, it will adversely affect earnings and capital, while increased non-performing assets will reduce net income through lower interest income, higher provisions, and increased operating expenses. - Commercial real estate and commercial loans are generally riskier than residential mortgage loans, with repayment dependent on the successful management and operation of the borrower's business, making them vulnerable to adverse real estate market or local economic conditions[217](index=217&type=chunk) - If the allowance for loan losses is insufficient to cover probable and incurred credit losses inherent in the loan portfolio, it will necessitate an increase in the allowance, substantially reducing net income[218](index=218&type=chunk)[220](index=220&type=chunk) - Non-performing assets adversely affect net income by reducing interest income, increasing the allowance for loan losses, increasing non-interest expenses (such as asset impairment and legal fees), and diverting management's attention[222](index=222&type=chunk) [Risks Related to Competition](index=40&type=section&id=Risks%20Related%20to%20Competition) The company faces intense competition in the banking and financial services industry from often larger and more resourceful competitors offering broader products and more competitive pricing, with industry consolidation and technological changes further intensifying competition, potentially limiting growth and profitability. - The company faces intense competition in the banking and financial services industry from commercial banks, thrift institutions, mortgage brokerage companies, credit unions, finance companies, mutual funds, insurance companies, and broker-dealer investment banking firms[227](index=227&type=chunk) - Many competitors are larger, with greater brand recognition and market presence, offering a wider range of services and more competitive loan and deposit pricing[227](index=227&type=chunk) - Legislative, regulatory, and technological changes, along with industry consolidation trends, are likely to intensify competition in the financial services industry, as technological advancements lower entry barriers, enabling non-bank institutions to offer traditional banking services[227](index=227&type=chunk) [Risks Related to Operations and Security](index=40&type=section&id=Risks%20Related%20to%20Operations%20and%20Security) The company faces significant operational risks, including fraud, transaction processing errors, internal control weaknesses, and cyberattacks, which could lead to financial losses, reputational damage, and regulatory actions; it relies heavily on its management team, and loss of key personnel could impact business strategy implementation, while public company compliance costs and internal control requirements will increase operating expenses. - The company faces significant operational risks, including fraud by employees or external parties, unauthorized transactions, transaction processing and technological errors, internal control system weaknesses, and non-compliance with regulatory requirements[228](index=228&type=chunk) - Cyberattacks or other security breaches could lead to the disclosure or misuse of confidential information, reputational damage, increased costs, and losses, and despite various security measures, absolute assurance cannot be provided[229](index=229&type=chunk)[231](index=231&type=chunk)[233](index=233&type=chunk) - The company relies on its senior management team to implement business strategies and execute operations, and the loss of key personnel or inability to recruit qualified individuals could materially adversely affect the business[237](index=237&type=chunk)[238](index=238&type=chunk) - As a public company, meeting new reporting requirements will increase costs for financial and accounting systems, procedures, and controls, and impose additional demands on the management team[241](index=241&type=chunk) [Risks Related to Regulatory Matters](index=43&type=section&id=Risks%20Related%20to%20Regulatory%20Matters) The company is subject to strict banking regulation, and changes in laws, regulations, and increased compliance costs could adversely affect operations; stringent capital requirements may impact return on equity, necessitate additional financing, or restrict dividend payments and stock repurchases, while failure to comply with anti-money laundering and other regulations could result in fines or sanctions. - The company is subject to extensive regulation, supervision, and examination by banking regulators, and any changes in regulatory policies, new regulations, legislation, or supervisory actions could materially impact operations[246](index=246&type=chunk)[247](index=247&type=chunk) - Stringent capital requirements could adversely affect return on equity, potentially requiring additional capital raises, or restricting dividend payments or stock repurchases[248](index=248&type=chunk) - Failure to comply with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions, including restrictions on making acquisitions or establishing new branches[251](index=251&type=chunk) - Changes in management's estimates and assumptions could materially impact consolidated financial statements and financial condition or operating results, particularly concerning the allowance for loan losses, deferred income taxes, and fair value measurements[253](index=253&type=chunk)[254](index=254&type=chunk) [Various factors may make takeover attempts more difficult to achieve](index=44&type=section&id=Various%20factors%20may%20make%20takeover%20attempts%20more%20difficult%20to%20achieve.) Certain provisions in the company's charter, state and federal banking laws, and regulatory approval requirements may make it difficult for third parties to acquire control of Blue Foundry Bancorp without Board approval, such as the prohibition on any person acquiring beneficial ownership of more than **10%** of common stock without prior Federal Reserve Board approval within three years of the initial public offering. - Certain provisions in the company's charter, state and federal banking laws, and regulatory approval requirements may make it difficult for third parties to acquire control of Blue Foundry Bancorp without Board approval[255](index=255&type=chunk) - Within **three years** of the completion of the initial public offering, no person may acquire beneficial ownership of more than **10%** of the common stock without prior Federal Reserve Board approval[255](index=255&type=chunk) - Provisions in the company's charter and bylaws, such as the prohibition on any person voting more than **10%** of the outstanding common stock, and shares held by the Employee Stock Ownership Plan, may make takeover attempts more difficult[255](index=255&type=chunk) [Unresolved Staff Comments](index=44&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments in this report. - There are no unresolved staff comments in this report[256](index=256&type=chunk) [Properties](index=44&type=section&id=Item%202.%20Properties) As of December 31, 2021, the company operates through **17 full-service branches** in Northern New Jersey, owning **6 properties** and leasing **13**, with a net book value of **$28.1 million** for premises and equipment. - As of December 31, 2021, the company operates through **17 full-service branches** located in Northern New Jersey[257](index=257&type=chunk) - The company owns **6 properties** and leases **13 properties**, with one leased branch expected to open in 2022[257](index=257&type=chunk) - As of December 31, 2021, the net book value of premises and equipment was **$28.1 million**[257](index=257&type=chunk) [Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in claims and litigation in the ordinary course of business, but as of December 31, 2021, it believes no ongoing legal proceedings will have a material adverse effect on its financial condition, operating results, or cash flows. - The company is involved in claims and litigation in the ordinary course of business, such as enforcing liens, condemnation proceedings for mortgaged properties, and claims related to the origination and servicing of real estate loans[259](index=259&type=chunk) - As of December 31, 2021, the company believes no ongoing legal proceedings will have a material adverse effect on its financial condition, operating results, or cash flows[260](index=260&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to this report. - Mine safety disclosures are not applicable to this report[261](index=261&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock began trading on the Nasdaq Global Select Market on July 16, 2021, under the symbol 'BLFY,' with **28,522,500 shares** outstanding as of January 31, 2022; the company currently does not intend to pay dividends in the near future and is restricted from repurchasing shares during the first year post-IPO. - The company's common stock began trading on the Nasdaq Global Select Market on July 16, 2021, under the symbol 'BLFY'[264](index=264&type=chunk) - As of January 31, 2022, there were **28,522,500 shares** of common stock outstanding, held by approximately **1,375 record holders**[264](index=264&type=chunk) - The company currently does not intend to pay dividends on its common stock in the near future and is prohibited from repurchasing shares during the first year following the initial public offering, except to fund shareholder-approved equity benefit plans or with regulatory approval for special circumstances[265](index=265&type=chunk)[266](index=266&type=chunk) [Reserved](index=46&type=section&id=Item%206.%20Reserved) This item is reserved. [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition as of December 31, 2021, and operating results for 2021 and 2020, noting an increased net loss of **$36.3 million**, primarily due to deferred tax asset valuation allowance, pension plan withdrawal loss, and charitable contributions; net interest income grew, but non-interest expenses remained high due to one-time charges, as the company aims to enhance market position and financial returns through diversified business, technology investment, and strategic acquisitions. [COVID Update](index=47&type=section&id=COVID%20Update) The COVID-19 pandemic's impact on the company's business continues to wane, with economic stabilization and easing restrictions, while Federal Reserve policies are expected to address inflation and reduce broad financial support for asset pricing, signaling a return to a more normalized policy environment. - The impact of the COVID-19 pandemic on the company's business continues to diminish, with economic stabilization and easing restrictions[269](index=269&type=chunk) - Federal Reserve policies are expected to address recent inflation concerns and reduce broad financial support for asset pricing, signaling a return to a more normalized policy environment[269](index=269&type=chunk) [Business Strategy](index=47&type=section&id=Business%20Strategy) The company aims to enhance market position and financial returns by repositioning its business portfolio to focus on commercial and small business, developing new customer relationships, leveraging technology for improved customer experience, optimizing its branch network, and pursuing opportunistic acquisitions and partnerships. - The company's goal is to reposition its business portfolio from a traditional thrift to a full-service commercial bank with a focus on commercial and small business lending[272](index=272&type=chunk) - The company develops new customer relationships and deepens existing ones by offering low- or no-cost products, such as its 'Blue' series of deposit products, to expand market share[274](index=274&type=chunk)[276](index=276&type=chunk) - The company has invested significantly in technology infrastructure to provide high-quality, innovative products and services, and plans to continue investing in technology and data analytics for operational leverage[277](index=277&type=chunk) - The company is optimizing its branch network, expanding its geographic footprint with new branches (e.g., Chatham, Ridgewood, and Jersey City in 2021), and plans to continue opening new branches in attractive growth markets[278](index=278&type=chunk) - The company plans to prudently pursue acquisitions of banks in existing and adjacent markets, as well as partnerships with fintech companies or other fee-generating businesses[280](index=280&type=chunk) [Critical Accounting Policies](index=48&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies require complex or subjective management judgments, with the allowance for loan losses identified as a key policy, whose estimates are significantly influenced by changes in interest rates, economic performance, and borrower financial conditions. - The company's accounting policies require management to make difficult, complex, or subjective judgments, some of which involve inherent uncertainties[281](index=281&type=chunk) - The allowance for loan losses is identified as a critical accounting policy, with estimates significantly influenced by changes in interest rates, economic performance, and borrower financial conditions[281](index=281&type=chunk) [Executive Summary](index=49&type=section&id=Executive%20Summary) In 2021, the company's net loss increased to **$36.3 million**, primarily due to a deferred tax asset valuation allowance, pension plan withdrawal loss, and charitable contributions; interest income declined, but a larger decrease in interest expense led to increased net interest income, while non-interest expenses decreased due to higher one-time charges in 2020, despite significant one-time expenses in 2021. - Net loss increased to **$36.3 million** in 2021, an increase of **$4.8 million** from **$31.5 million** in 2020[283](index=283&type=chunk) - The increased loss was primarily due to a **$16.7 million** deferred tax asset valuation allowance, **$11.2 million** pension plan withdrawal loss, and **$9.0 million** charitable contribution in 2021, partially offset by a **$12.8 million** valuation allowance for bank property reclassified as held for sale and **$15.5 million** goodwill impairment in 2020[283](index=283&type=chunk) Key Financial Data Changes (2021 vs. 2020) | Metric | 2021 (Thousands of USD) | 2020 (Thousands of USD) | Change (Thousands of USD) | Change (%) | | :-------------------- | :-------------- | :-------------- | :------------ | :------- | | Interest Income | 56,053 | 61,625 | (5,572) | (9.0) | | Interest Expense | 13,104 | 22,557 | (9,453) | (41.9) | | Net Interest Income | 42,949 | 39,068 | 3,881 | 9.9 | | Net Interest Margin | 2.04% | 1.93% | 0.11% | | | Net Interest Yield | 2.20% | 2.10% | 0.10% | | | Provision (Recovery) for Loan Losses | (2,518) | 2,518 | (5,036) | (200.0) | | Non-Interest Income | 2,479 | 1,207 | 1,272 | 105.4 | | Non-Interest Expense | 74,670 | 77,129 | (2,459) | (3.2) | | Income Tax Expense (Benefit) | 9,618 | (7,866) | 17,484 | (222.3) | | Net Loss | (36,342) | (31,506) | (4,836) | (15.3) | - The allowance for loan losses recorded a **$2.5 million** recovery in 2021, compared to a **$2.5 million** provision in 2020, primarily due to changes in balances of higher loss rate portions of the portfolio and a decrease in non-performing assets[289](index=289&type=chunk) - Non-interest expense decreased by **$2.5 million** in 2021, primarily due to higher non-recurring expenses recognized in 2020 (e.g., **$12.8 million** bank property valuation allowance and **$15.5 million** goodwill impairment), partially offset by a **$11.2 million** pension withdrawal loss and **$9.0 million** charitable contribution in 2021[294](index=294&type=chunk) [Analysis of Net Interest Income](index=50&type=section&id=Analysis%20of%20Net%20Interest%20Income) Net interest income for 2021 was **$42.9 million**, an increase of **$3.9 million** from 2020, with the net interest margin rising from **2.10% to 2.20%**; interest income decreased by **9.0%** due to lower average loan balances and yields, while interest expense decreased by **41.9%** due to reduced deposit and borrowing interest expenses. - Net interest income for 2021 was **$42.9 million**, an increase of **$3.9 million** from **$39.1 million** in 2020[286](index=286&type=chunk) - The net interest margin increased by **10 basis points** to **2.20%** in 2021 from **2.10%** in 2020[287](index=287&type=chunk) Average Balances, Yields, and Costs (As of December 31, 2021 and 2020) | Metric | 2021 Average Balance (Thousands of USD) | 2021 Interest (Thousands of USD) | 2021 Average Yield/Cost (%) | 2020 Average Balance (Thousands of USD) | 2020 Interest (Thousands of USD) | 2020 Average Yield/Cost (%) | | :--------------------------------- | :---------------------- | :------------------ | :---------------------- | :---------------------- | :------------------ | :---------------------- | | **Assets:** | | | | | | | | Loans | 1,274,885 | 48,719 | 3.82 | 1,388,863 | 54,125 | 3.90 | | Mortgage-Backed Securities | 154,882 | 2,908 | 1.88 | 124,164 | 2,764 | 2.23 | | Other Investment Securities | 147,853 | 3,237 | 2.19 | 125,794 | 3,127 | 2.49 | | FHLB Stock | 14,373 | 744 | 5.17 | 17,356 | 954 | 5.50 | | Cash and Cash Equivalents | 356,458 | 445 | 0.12 | 200,068 | 655 | 0.33 | | **Total Interest-Earning Assets** | **1,948,451** | **56,053** | **2.88** | **1,856,245** | **61,625** | **3.32** | | **Liabilities:** | | | | | | | | NOW, Savings, and Money Market Deposits | 676,697 | 1,091 | 0.16 | 511,927 | 1,372 | 0.27 | | Time Deposits | 610,092 | 6,793 | 1.11 | 767,931 | 14,509 | 1.89 | | **Total Interest-Bearing Deposits** | **1,286,789** | **7,884** | **0.61** | **1,279,858** | **15,881** | **1.24** | | FHLB Borrowings | 280,985 | 5,220 | 1.86 | 344,517 | 6,676 | 1.94 | | **Total Interest-Bearing Liabilities** | **1,567,774** | **13,104** | **0.84** | **1,624,375** | **22,557** | **1.39** | | **Net Interest Income** | | **42,949** | | | **39,068** | | | Net Interest Margin | | | 2.04 | | | 1.93 | Analysis of Changes in Net Interest Income (2021 vs. 2020) | Metric | Volume Change (Thousands of USD) | Rate Change (Thousands of USD) | Net Change (Thousands of USD) | | :------------------------ | :---------------- | :---------------- | :------------ | | **Interest Income:** | | | | | Loans | (4,442) | (965) | (5,407) | | Mortgage-Backed Securities | 684 | (539) | 145 | | Investment Securities | 548 | (439) | 109 | | FHLB Stock | (164) | (46) | (210) | | Other Interest-Earning Assets | 512 | (721) | (209) | | **Total Interest Income on Interest-Earning Assets** | **(2,862)** | **(2,710)** | **(5,572)** | | **Interest Expense:** | | | | | Deposits | (2,539) | (5,458) | (7,997) | | FHLB Borrowings | (1,231) | (225) | (1,456) | | **Total Interest Expense on Interest-Bearing Liabilities** | **(3,770)** | **(5,683)** | **(9,453)** | | **Net Increase in Net Interest Income** | **908** | **2,973** | **3,881** | [Comparison of Financial Condition at December 31, 2021 and December 31, 2020](index=52&type=section&id=Comparison%20of%20Financial%20Condition%20at%20December%2031%2C%202021%20and%20December%2031%2C%202020) As of December 31, 2021, total assets decreased by **$28.3 million** to **$1.91 billion**; cash and cash equivalents decreased by **$123 million**, primarily due to securities purchases, FHLB borrowing prepayments, and reduced deposit balances; total loans slightly increased, with net increases in multi-family and non-residential loans offsetting reductions in other loan types; available-for-sale and held-to-maturity securities both increased; total deposits decreased by **$109.1 million**, mainly due to the maturity of high-cost time deposits. - As of December 31, 2021, total assets decreased by **$28.3 million** to **$1.91 billion**, primarily due to optimizing the balance sheet with proceeds from the public offering[303](index=303&type=chunk) - Cash and cash equivalents decreased by **$123 million** to **$193.4 million**, primarily influenced by securities purchases, FHLB borrowing prepayments, and reduced deposit balances[304](index=304&type=chunk) - Total loans increased by **$2.5 million** to **$1.281 billion**, driven by net increases in multi-family and non-residential loans, offsetting reductions in one-to-four family and construction loans, and PPP loan forgiveness[305](index=305&type=chunk) Loan Portfolio Composition (As of December 31, 2021 and 2020) | Loan Type | December 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :------------------------ | :---------------------- | :---------------------- | | One-to-Four Family Residential | 560,976 | 611,603 | | Multi-Family Residential | 515,240 | 427,436 | | Non-Residential | 141,561 | 128,141 | | Construction and Land | 23,419 | 33,691 | | Junior Liens | 18,464 | 23,814 | | Commercial and Industrial (including PPP) | 21,563 | 54,053 | | Consumer and Other | 87 | 99 | | **Total Loans** | **1,281,310** | **1,278,837** | | Net Loans | 1,273,184 | 1,267,114 | - Available-for-sale securities increased by **$80.3 million** to **$324.9 million**, and held-to-maturity securities increased by **$16.3 million** to **$23.3 million**[307](index=307&type=chunk)[308](index=308&type=chunk) - Total deposits decreased by **$109.1 million** to **$1.25 billion**, primarily due to the maturity of high-cost time deposits, resulting in time deposits decreasing from **52.9% to 38.0%** of total deposits, and the blended cost of deposits decreasing from **1.20% to 0.57%**[312](index=312&type=chunk) - FHLB borrowings decreased by **$143.9 million** to **$185.5 million**, primarily due to prepaid borrowings (incurring a **$2.2 million** penalty) and maturing borrowings[314](index=314&type=chunk) - Total stockholders' equity increased by **$223.9 million** to **$429.5 million**, primarily due to the conversion and related stock offering on July 15, 2021[314](index=314&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company meets short-term and long-term financial obligations primarily through deposit inflows, loan repayments, securities maturities and sales, and FHLB borrowings, with management adjusting liquid asset investments based on loan demand, deposit flows, yields, and interest rate risk objectives; as of December 31, 2021, the Bank exceeded all regulatory capital requirements and was rated 'well-capitalized'. - The company's primary sources of funds include deposit inflows, loan repayments, securities maturities and sales, FHLB borrowings, and securities repurchase agreements[316](index=316&type=chunk) - Management regularly adjusts investments in liquid assets based on anticipated loan demand, deposit flows, available yields on interest-earning deposits and securities, and interest rate risk and investment policy objectives[317](index=317&type=chunk) - As of December 31, 2021, the Bank exceeded all applicable regulatory capital requirements and was considered a 'well-capitalized' institution[318](index=318&type=chunk) - As of December 31, 2021, the company had **$16.3 million** in loan commitments and **$52.8 million** in unused lines of credit, and expects to have sufficient funds to meet these obligations[320](index=320&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's most significant market risk is interest rate risk, managed by the Asset/Liability Management Committee (ALCO/Investment Committee), employing strategies to mitigate the impact of interest rate fluctuations on net interest income and economic value, including growing targeted deposit accounts, utilizing the investment securities portfolio, and interest rate swaps; quantitative analysis as of December 31, 2021, shows an instantaneous **100 basis point** interest rate increase would result in a **4%** decrease in Economic Value of Equity (EVE). - The company's most significant market risk is interest rate risk, which is assessed and managed by the Asset/Liability Management Committee (ALCO/Investment Committee)[323](index=323&type=chunk) - The company manages interest rate risk by growing targeted deposit accounts, utilizing its investment securities portfolio, interest rate swaps, and diversifying its loan portfolio by increasing commercial loans[324](index=324&type=chunk) - LIBOR ceased to be used for new contracts after December 31, 2021, and some U.S. dollar LIBOR benchmarks will cease publication after June 30, 2023, with the company monitoring related risks[326](index=326&type=chunk) Sensitivity of Net Interest Income to Interest Rate Changes (As of December 31, 2021) | Interest Rate Change (Basis Points) | Change in Net Interest Income (Thousands of USD) | Percentage Change (%) | | :-------------- | :---------------------- | :------------- | | +400bp | 4,837 | 10 | | +300bp | 3,764 | 8 | | +200bp | 2,509 | 5 | | +100bp | 1,158 | 3 | | 0 bp | — | — | | -100bp | (1,156) | (3) | Sensitivity of Economic Value of Equity (EVE) to Interest Rate Changes (As of December 31, 2021) | Interest Rate Change (Basis Points) | Estimated EVE (Thousands of USD) | Estimated Increase/Decrease in EVE (Thousands of USD) | Percentage Change (%) | NPV as Percentage of Portfolio Value | Change in NPV Ratio (%) | | :-------------- | :--------------- | :--------------------- | :------------- | :------------------------ | :-------------- | | +400bp | 300,008 | (34,322) | (10) | 16 | (2) | | +300bp | 308,500 | (25,830) | (8) | 16 | (1) | | +200bp | 315,153 | (19,177) | (6) | 16 | (1) | | +100bp | 322,046 | (12,284) | (4) | 17 | (1) | | 0 bp | 334,330 | — | — | 17 | — | | -100bp | 381,351 | 47,021 | 14 | 20 | 2 | [Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements as of December 31, 2021, and 2020, including statements of financial condition, operations, comprehensive income (loss), changes in stockholders' equity, and cash flows, along with related notes to financial statements; the independent registered public accounting firm issued an unqualified opinion on the financial statements. [NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=66&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's significant accounting policies, including principles of consolidation, nature of business, basis of financial statement presentation, cash and cash equivalents, securities classification and valuation, derivative instruments, fair value of financial instruments, restricted stock, loans receivable, allowance for loan losses, real estate owned held for sale, premises and equipment, leases, bank-owned life insurance, goodwill and intangible assets, income taxes, retirement benefits, and employee stock ownership plan; the company has elected to defer adoption of certain new accounting standards applicable to public companies. - The company's consolidated financial statements adhere to U.S. Generally Accepted Accounting Principles, encompassing Blue Foundry Bancorp and its wholly-owned subsidiary, Blue Foundry Bank, and its subsidiaries[354](index=354&type=chunk)[357](index=357&type=chunk) - Securities are classified as held-to-maturity (measured at amortized cost) or available-for-sale (measured at fair value), with unrealized gains and losses recognized in other comprehensive income[359](index=359&type=chunk) - Derivative instruments are designated as fair value hedges, cash flow hedges, or without hedge designation upon initial recognition, with gains and losses recognized based on the designation type[364](index=364&type=chunk) - The allowance for loan losses is a valuation allowance for probable and reasonably estimable incurred credit losses in the loan portfolio, assessed by management based on historical loss experience, economic conditions, and specific loan circumstances[376](index=376&type=chunk) - The company, as an 'emerging growth company,' has elected to defer the adoption of certain new accounting standards applicable to public companies, including the Current Expected Credit Loss (CECL) model under Financial Instruments – Credit Losses (Topic 326), which becomes mandatory on January 1, 2023[413](index=413&type=chunk)[414](index=414&type=chunk) [NOTE 2 – SECURITIES](index=73&type=section&id=NOTE%202%20%E2%80%93%20SECURITIES) This note provides amortized cost, fair value, unrealized gains and losses, and contractual maturity information for available-for-sale and held-to-maturity debt securities as of December 31, 2021, and 2020; as of December 31, 2021, available-for-sale securities had an amortized cost of **$323.8 million** and a fair value of **$324.9 million**, while held-to-maturity securities had an amortized cost of **$23.3 million** and a fair value of **$22.8 million**; the company recorded no other-than-temporary impairment (OTTI) for securities in an unrealized loss position. Available-for-Sale Securities Amortized Cost and Fair Value (As of December 31, 2021) | Security Type | Amortized Cost (Thousands of USD) | Gross Unrealized Gains (Thousands of USD) | Gross Unrealized Losses (Thousands of USD) | Fair Value (Thousands of USD) | | :------------------------ | :---------------- | :-------------------- | :-------------------- | :---------------- | | U.S. Treasury Securities | 36,933 | 4 | (105) | 36,832 | | Corporate Bonds | 86,118 | 1,791 | (290) | 87,619 | | U.S. Government Agency Bonds | 23,462 | 46 | (179) | 23,329 | | State and Municipal Bonds | 19,172 | 1,152 | — | 20,324 | | Mortgage-Backed Securities: | | | | | | One-to-Four Family Residential | 116,166 | 140 | (1,905) | 114,401 | | Multi-Family Residential | 35,412 | 598 | (94) | 35,916 | | Asset-Backed Securities | 6,538 | 3 | (70) | 6,471 | | **Total Available-for-Sale Securities** | **323,801** | **3,734** | **(2,643)** | **324,892** | Held-to-Maturity Securities Amortized Cost and Fair Value (As of December 31, 2021) | Security Type | Amortized Cost (Thousands of USD) | Gross Unrealized Gains (Thousands of USD) | Gross Unrealized Losses (Thousands of USD) | Fair Value (Thousands of USD) | | :------------------ | :---------------- | :-------------------- | :-------------------- | :---------------- | | Asset-Backed Securities | 15,281 | — | (373) | 14,908 | | Corporate Bonds | 8,000 | — | (59) | 7,941 | | **Total Held-to-Maturity Securities** | **23,281** | **—** | **(432)** | **22,849** | - No other-than-temporary impairment (OTTI) charges were incurred in either 2021 or 2020[421](index=421&type=chunk) - As of December 31, 2021, the company held four U.S. government agency bonds, two U.S. Treasury securities, and twenty-nine mortgage-backed securities in an unrealized loss position, but deemed these securities not to be other-than-temporarily impaired[425](index=425&type=chunk) [NOTE 3 – LOANS RECEIVABLE, NET](index=76&type=section&id=NOTE%203%20%E2%80%93%20LOANS%20RECEIVABLE%2C%20NET) This note details net loans receivable, allowance for loan losses activity, and loan risk classifications as of December 31, 2021, and 2020; as of December 31, 2021, total loans receivable were **$1.281 billion**, with an allowance for loan losses of **$14.4 million**; the company categorizes loans into risk classes, including special mention, substandard, doubtful, and loss, based on collateral quality, borrower repayment capacity, and economic trends. Summary of Loans Receivable, Net (As of December 31, 2021 and 2020) | Loan Type | December 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :------------------------ | :---------------------- | :---------------------- | | One-to-Four Family Residential | 560,976 | 611,603 | | Multi-Family Residential | 515,240 | 427,436 | | Non-Residential | 141,561 | 128,141 | | Construction and Land | 23,419 | 33,691 | | Junior Liens | 18,464 | 23,814 | | Commercial and Industrial (including PPP) | 21,563 | 54,053 | | Consumer and Other | 87 | 99 | | **Total Loans** | **1,281,310** | **1,278,837** | | Net Loans | 1,273,184 | 1,267,114 | - The commercial and industrial loan portfolio included **$16.8 million** in PPP loans and **$4.8 million** in general commercial and industrial loans as of December 31, 2021, compared to **$53.9 million** in PPP loans and **$0.131 million** in general commercial and industrial loans as of December 31, 2020[430](index=430&type=chunk) Allowance for Loan Losses Activity (As of December 31, 2021 and 2020) | Loan Category | Beginning Balance 2021 (Thousands of USD) | Charge-offs 2021 (Thousands of USD) | Recoveries 2021 (Thousands of USD) | Provision (Recovery) for Loan Losses 2021 (Thousands of USD) | Ending Balance 2021 (Thousands of USD) | | :------------------------ | :---------------------- | :------------------ | :------------------ | :---------------------------- | :---------------------- | | One-to-Four Family Residential | 3,579 | — | — | (757) | 2,822 | | Multi-Family Residential | 5,460 | — | — | (197) | 5,263 | | Non-Residential | 3,244 | — | — | (398) | 2,846 | | Construction and Land | 3,655 | — | — | (977) | 2,678 | | Junior Liens | 916 | — | — | (280) | 636 | | Commercial and Industrial (including PPP) | 2 | — | — | 49 | 51 | | Consumer and Other | 48 | (16) | — | 6 | 38 | | Unallocated | 55 | — | — | 36 | 91 | | **Total** | **16,959** | **(16)** | **—** | **(2,518)** | **14,425** | Loan Risk Categories (As of December 31, 2021 and 2020) | Loan Category | 2021 Pass (Thousands of USD) | 2021 Special Mention (Thousands of USD) | 2021 Substandard (Thousands of USD) | 2021 Doubtful/Loss (Thousands of USD) | 2021 Total (Thousands of USD) | | :------------------------ | :------------------ | :-------------------- | :------------------ | :----------------------- | :------------------ | | One-to-Four Family Residential | 555,184 | — | 11,299 | — | 566,483 | | Multi-Family Residential | 510,815 | 5,069 | 684 | — | 516,568 | | Non-Residential | 140,377 | 144 | 1,013 | — | 141,534 | | Construction and Land | 23,420 | — | — | — | 23,420 | | Junior Liens | 18,368 | — | 182 | — | 18,550 | | Commercial and Industrial (including PPP) | 20,966 | — | — | — | 20,966 | | Consumer and Other | 88 | — | — | — | 88 | | **Total** | **1,269,218** | **5,213** | **13,178** | **—** | **1,287,609** | [NOTE 4 – REAL ESTATE OWNED (REO), NET](index=84&type=section&id=NOTE%204%20%E2%80%93%20REAL%20ESTATE%20OWNED%20%28REO%29%2C%20NET) This note discloses real estate owned (REO) activity and related gains/losses as of December 31, 2021, and 2020; the REO balance was zero in 2021, with all REO properties sold, resulting in a net loss of **$6 thousand**, while in 2020, the REO balance was **$624 thousand**, incurring **$1.39 million** in impairment. Real Estate Owned (REO) Activity (As of December 31, 2021 and 2020) | Metric | 2021 (Thousands of USD) | 2020 (Thousands of USD) | | :------------ | :-------------- | :-------------- | | Beginning Balance | 624 | 2,014 | | Additions | — | — | | REO Sales | (618) | — | | REO Impairment | (6) | (1,390) | | **Ending Balance** | **—** | **624** | REO Related Gains and Losses (As of December 31, 2021 and 2020) | Metric | 2021 (Thousands of USD) | 2020 (Thousands of USD) | | :-------------------- | :-------------- | :-------------- | | Net Gain on Sales | — | — | | REO Impairment | (6) | (1,390) | | Net Rental Income (Net of Operating Expenses) | 97 | 175 | | **REO Gain (Loss)** | **91** | **(1,215)** | - All REO properties were sold in the fourth quarter of 2021, resulting in a net REO loss of **$6 thousand**[309](index=309&type=chunk)[462](index=462&type=chunk) [NOTE 5 – PREMISES AND EQUIPMENT](index=84&type=section&id=NOTE%205%20%E2%80%93%20PREMISES%20AND%20EQUIPMENT) This note presents the net premises and equipment as of December 31, 2021, and 2020; as of December 31, 2021, net premises and equipment totaled **$28.1 million**, an increase from **$19.6 million** in 2020, with depreciation and amortization expenses of **$2.3 million** in 2021 and **$1.9 million** in 2020. Summary of Premises and Equipment, Net (As of December 31, 2021 and 2020) | Category | 2021 (Thousands of USD) | 2020 (Thousands of USD) | | :---------------- | :-------------- | :-------------- | | Land | 3,793 | 4,320 | | Buildings and Improvements | 14,583 | 11,302 | | Leasehold Improvements | 10,174 | 3,204 | | Furniture and Equipment | 9,325 | 8,640 | | Construction in Progress | 1,618 | 5,103 | | **Total** | **39,493** | **32,569** | | Accumulated Depreciation and Amortization | (11,367) | (13,000) | | **Net Premises and Equipment** | **28,126** | **19,569** | - Depreciation and amortization expense for premises and equipment was **$2.3 million** in 2021 and **$1.9 million** in 2020[464](index=464&type=chunk) [NOTE 6 – LEASES](index=85&type=section&id=NOTE%206%20%E2%80%93%20LEASES) This note discloses the company's operating lease information as of December 31, 2021; the company leases office space and equipment with terms ranging from one to **15 years**; as of December 31, 2021, right-of-use assets were **$25.5 million** and lease liabilities were **$26.7 million**, with total lease costs of **$3.27 million** in 2021. - The company leases office space and equipment, with lease terms ranging from one to **15 years**, some including renewal or termination options[467](index=467&type=chunk) Operating Lease Related Data (As of December 31, 2021) | Metric | December 31, 2021 (Thousands of USD) | | :-------------- | :---------------------- | | Right-of-Use Assets | 25,457 | | Lease Liabilities | 26,696 | Net Lease Cost Components (As of December 31, 2021 and 2020) | Lease Cost Type | 2021 (Thousands of USD) | 2020 (Thousands of USD) | | :-------------- | :-------------- | :-------------- | | Operating Lease Cost | 3,034 | 1,486 | | Finance Lease Cost | 19 | 15 | | Variable Lease Cost | 219 | 79 | | **Total Lease Cost** | **3,272** | **1,580** | - As of December 31, 2021, the weighted-average remaining lease term for operating leases was **12.2 years**, with a weighted-average discount rate of **1.97%**[468](index=468&type=chunk) [NOTE 7 – DEPOSITS](index=86&type=section&id=NOTE%207%20%E2%80%93%20DEPOSITS) This note provides deposit composition and maturity information as of December 31, 2021, and 2020; as of December 31, 2021, total deposits were **$1.247 billion**, with time deposits at **$473.8 million**; **$304.7 million** in time deposits are scheduled to mature in 2022. Summary of Deposit Composition (As of December 31, 2021 and 2020) | Deposit Type | December 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :------------------ | :---------------------- | :---------------------- | | Non-Interest Bearing | 44,894 | 44,195 | | NOW and Demand Accounts | 363,419 | 317,974 | | Savings | 364,932 | 276,584 | | Time Deposits | 473,795 | 717,431 | | **Total** | **1,247,040** | **1,356,184** | Time Deposit Maturities (As of December 31, 2021) | Maturity Year | Amount (Thousands of USD) | | :------- | :------------ | | 2022 | 304,656 | | 2023 | 121,643 | | 2024 | 34,911 | | 2025 | 6,499 | | 2026 | 6,086 | | **Total** | **473,795** | - As of December 31, 2021, time deposits exceeding the **$250,000 FDIC insurance limit** totaled **$47.3 million**, with related party deposits at **$2.4 million**[473](index=473&type=chunk) [NOTE 8 – ADVANCES FROM THE FEDERAL HOME LOAN BANK

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Blue Foundry Bancorp's unaudited consolidated financial statements and management's analysis [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Blue Foundry Bancorp's unaudited consolidated financial statements and detailed accounting notes [Consolidated Statements of Financial Condition](index=3&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) This section presents the company's assets, liabilities, and shareholders' equity at specific reporting dates | Metric (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | **ASSETS** | | | | Cash and cash equivalents | $324,291 | $316,445 | | Securities available for sale, at fair value | $314,146 | $244,587 | | Loans receivable, net | $1,238,975 | $1,267,114 | | Total assets | $2,024,333 | $1,942,546 | | **LIABILITIES** | | | | Deposits | $1,265,617 | $1,356,184 | | Advances from the Federal Home Loan Bank | $247,600 | $329,400 | | Total liabilities | $1,576,098 | $1,736,946 | | **SHAREHOLDERS' EQUITY** | | | | Total shareholders' equity | $448,235 | $205,600 | | Total liabilities and shareholders' equity | $2,024,333 | $1,942,546 | - Total assets increased by **$81.8 million** (4%) from December 31, 2020, to September 30, 2021, primarily driven by purchases of investment securities[165](index=165&type=chunk) - Total shareholders' equity significantly increased by **$242.6 million** (118.0%) to **$448.2 million** at September 30, 2021, primarily due to proceeds from the initial public offering of common stock, partially offset by a net loss[176](index=176&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section details the company's revenues, expenses, and net loss over specific reporting periods | Metric (In thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income | $14,073 | $15,137 | $41,818 | $47,449 | | Interest expense | $2,969 | $5,508 | $11,205 | $17,701 | | Net interest income | $11,104 | $9,629 | $30,613 | $29,748 | | (Recovery of) provision for loan losses | $(338) | $1 | $(1,699) | $2,754 | | Total noninterest income | $489 | $611 | $1,775 | $534 | | Total noninterest expenses | $33,118 | $13,002 | $57,290 | $63,761 | | Loss before income tax benefit | $(21,187) | $(2,763) | $(23,203) | $(36,233) | | Income tax benefit | $(6,217) | $(1,098) | $(6,485) | $(6,489) | | Net loss | $(14,970) | $(1,665) | $(16,718) | $(29,744) | | Basic and diluted earnings per share | $(0.68) | n/a | n/a | n/a | - Net loss for the three months ended September 30, 2021, increased to **$(14.97) million** from **$(1.67) million** in the prior year, primarily due to a **$9.2 million** pension withdrawal liability and a **$9.0 million** charitable contribution[142](index=142&type=chunk)[145](index=145&type=chunk) - Net loss for the nine months ended September 30, 2021, improved to **$(16.72) million** from **$(29.74) million** in the prior year, largely due to a decrease in non-interest expenses from 2020 impairments, partially offset by the 2021 pension and charitable contribution liabilities[142](index=142&type=chunk)[146](index=146&type=chunk) [Consolidated Statements of Comprehensive (Loss) Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20%28LOSS%29%20INCOME) This section presents the company's net loss and other comprehensive income components, leading to total comprehensive loss | Metric (In thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(14,970) | $(1,665) | $(16,718) | $(29,744) | | Unrealized holding (loss) gain on securities available for sale | $(1,501) | $135 | $(3,254) | $3,989 | | Unrealized holding gain (loss) arising during the period (cash flow hedge) | $1,028 | $729 | $5,084 | $(5,721) | | Total other comprehensive (loss) income | $(541) | $324 | $519 | $(1,787) | | Comprehensive loss | $(15,511) | $(1,341) | $(16,199) | $(31,531) | - Total other comprehensive (loss) income for the three months ended September 30, 2021, was **$(541) thousand**, a decrease from **$324 thousand** in the prior year, primarily due to unrealized losses on available-for-sale securities[12](index=12&type=chunk) - For the nine months ended September 30, 2021, total other comprehensive income was **$519 thousand**, a significant improvement from a loss of **$(1,787) thousand** in the prior year, driven by unrealized gains on cash flow hedges[12](index=12&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%27%20EQUITY) This section details the changes in each component of shareholders' equity, including net loss, stock offerings, and ESOP activities | Metric (In thousands) | Balance at Jan 1, 2021 | Net Loss | Other Comprehensive Income (Loss) | Proceeds of Stock Offering and Issuance of Common Shares (net) | Issuance of Common Shares Donated to Charitable Foundation | Purchase of Common Shares by ESOP | ESOP Shares Committed to be Released | Balance at Sep 30, 2021 | | :-------------------- | :--------------------- | :------- | :-------------------------------- | :------------------------------------------------------------- | :--------------------------------------------------------- | :-------------------------------- | :----------------------------------- | :---------------------- | | Common Stock | $10 | — | — | $268 | $7 | — | — | $285 | | Additional Paid-In Capital | $822 | — | — | $273,330 | $7,493 | — | $141 | $281,786 | | Retained Earnings | $205,799 | $(16,718) | — | — | — | — | — | $189,081 | | Accumulated Other Comprehensive Income (Loss) | $(1,031) | — | $519 | — | — | — | — | $(512) | | Unallocated Common Stock Held by ESOP | — | — | — | — | — | $(22,818) | $413 | $(22,405) | | Total Shareholders' Equity | $205,600 | $(16,718) | $519 | $273,598 | $7,500 | $(22,818) | $554 | $448,235 | - Shareholders' equity increased significantly from **$205.6 million** at January 1, 2021, to **$448.2 million** at September 30, 2021, primarily driven by **$273.6 million** in proceeds from a stock offering and issuance of common shares[14](index=14&type=chunk) - The company recorded a net loss of **$(16.7) million** and recognized **$519 thousand** in other comprehensive income during the nine months ended September 30, 2021[14](index=14&type=chunk) - The Employee Stock Ownership Plan (ESOP) purchased **$22.8 million** in common shares, which is reflected as a reduction in shareholders' equity, while ESOP shares committed to be released added **$554 thousand**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities | Metric (In thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $(3,671) | $(2,239) | | Net cash used in investing activities | $(66,220) | $55,526 | | Net cash provided by financing activities | $77,737 | $70,794 | | Net increase in cash and cash equivalents | $7,846 | $124,081 | | Cash and cash equivalents at end of period | $324,291 | $248,115 | - Net cash used in investing activities significantly increased to **$(66.2) million** for the nine months ended September 30, 2021, compared to **$55.5 million** provided in the prior year, primarily due to increased purchases of securities[16](index=16&type=chunk) - Net cash provided by financing activities increased to **$77.7 million** for the nine months ended September 30, 2021, from **$70.8 million** in the prior year, largely driven by net proceeds from the issuance of common shares[16](index=16&type=chunk) - Cash and cash equivalents at the end of the period increased to **$324.3 million**, up from **$316.4 million** at the beginning of the period, but the net increase in cash and cash equivalents was significantly lower than the prior year[16](index=16&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed disclosures on accounting policies, financial instruments, and other significant financial information [NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting policies, including loan accounting, ESOP, EPS, and new accounting standard adoptions - On July 15, 2021, Blue Foundry, MHC completed its conversion into a stock holding company, with the Company selling **27,772,500 shares** of common stock at **$10 per share**, generating gross proceeds of **$277.7 million**[20](index=20&type=chunk) - The Company contributed **750,000 shares** of common stock and **$1.5 million** in cash to Blue Foundry Charitable Foundation, Inc. in connection with the conversion[20](index=20&type=chunk) - The Company adopted ASU No. 2016-02, 'Leases (Topic 842)' effective January 1, 2020, resulting in the recognition of operating right-of-use assets and operating lease liabilities of **$6.0 million** each, with no material impact on expense or income recognition[38](index=38&type=chunk)[40](index=40&type=chunk) - The Company is required to adopt ASU No. 2016-13, 'Financial Instruments – Credit Losses (Topic 326)' (CECL model) on January 1, 2023, and is currently developing a methodology to implement the standard, though the impact cannot yet be reasonably estimated[41](index=41&type=chunk) [NOTE 2 – SECURITIES](index=13&type=section&id=NOTE%202%20%E2%80%93%20SECURITIES) This note details the company's securities portfolio, including available-for-sale and held-to-maturity, fair values, and unrealized gains or losses | Security Type (In thousands) | Sep 30, 2021 Amortized Cost | Sep 30, 2021 Estimated Fair Value | Dec 31, 2020 Amortized Cost | Dec 31, 2020 Estimated Fair Value | | :--------------------------- | :-------------------------- | :-------------------------------- | :-------------------------- | :-------------------------------- | | **Available-for-sale** | | | | | | U.S. Treasury Note | $6,901 | $6,773 | $9,989 | $10,000 | | Corporate Bonds | $86,169 | $88,118 | $57,478 | $59,341 | | U.S. Government agency obligations | $25,311 | $25,240 | $19,787 | $19,675 | | Mortgage-backed securities | $165,427 | $165,017 | $128,336 | $130,776 | | Total available-for-sale | $311,683 | $314,146 | $238,870 | $244,587 | | **Held-to-maturity** | | | | | | Collateralized loan obligation | $3,000 | $3,000 | $7,005 | $6,979 | | Asset-backed securities | $15,325 | $15,139 | — | — | | Corporate bonds | $5,000 | $5,008 | — | — | | Total held-to-maturity | $23,325 | $23,147 | $7,005 | $6,979 | - Proceeds from sales and calls of available-for-sale securities totaled **$14.0 million** for the nine months ended September 30, 2021, compared to **$11.4 million** for the same period in 2020[45](index=45&type=chunk) - At September 30, 2021, available-for-sale securities had total unrealized losses of **$(1,847) thousand**, primarily in U.S. Treasury Notes, Corporate Bonds, and Mortgage-backed securities, which the Company does not consider other-than-temporarily impaired due to interest rate changes and no intent to sell[43](index=43&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) [NOTE 3 – LOANS RECEIVABLE, NET](index=16&type=section&id=NOTE%203%20%E2%80%93%20LOANS%20RECEIVABLE%2C%20NET) This note details the loan portfolio composition, allowance for loan losses, and information on impaired and non-accrual loans | Loan Type (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Residential one-to-four family | $522,213 | $611,603 | | Multifamily | $511,408 | $427,436 | | Non-residential | $130,823 | $128,141 | | Construction and land | $21,337 | $33,691 | | Junior liens | $19,540 | $23,814 | | Commercial and industrial (including PPP) | $44,262 | $54,053 | | Consumer and other | $80 | $99 | | Total loans | $1,249,663 | $1,278,837 | | Allowance for loan losses | $(15,248) | $(16,959) | | Loans receivable, net | $1,238,975 | $1,267,114 | - The allowance for loan losses decreased to **$15.2 million** at September 30, 2021, from **$17.0 million** at December 31, 2020, reflecting a recovery of provision for loan losses of **$1.7 million** for the nine months ended September 30, 2021[54](index=54&type=chunk)[60](index=60&type=chunk) Impaired Loans (In thousands) | Impaired Loans (In thousands) | Sep 30, 2021 Recorded Investment | Sep 30, 2021 Allowance for Loan Losses Allocated | | :---------------------------- | :------------------------------- | :--------------------------------------------- | | With no related allowance recorded | $15,157 | $0 | | With an allowance recorded | $1,107 | $71 | | Total | $16,264 | $71 | Non-Accrual Loans (In thousands) | Non-Accrual Loans (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------- | :----------- | :----------- | | Residential one-to-four family | $10,969 | $11,813 | | Multifamily | $145 | $156 | | Non-residential | $1,236 | $805 | | Junior liens | $114 | $82 | | Total | $12,464 | $12,856 | [NOTE 4 – LEASES](index=26&type=section&id=NOTE%204%20%E2%80%93%20LEASES) This note provides information on the company's operating leases, including right-of-use assets, lease liabilities, and associated costs Metric (In thousands) | Metric (In thousands) | Sep 30, 2021 | | :-------------------- | :----------- | | Right-of-use assets | $26,101 | | Lease liabilities | $27,293 | Lease Cost (In thousands) | Lease Cost (In thousands) | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :------------------------ | :------------------------------ | :----------------------------- | | Operating lease cost | $751 | $2,264 | | Finance lease cost | $6 | $17 | | Variable lease cost | $58 | $161 | | Total lease cost | $815 | $2,442 | - As of September 30, 2021, the weighted average remaining lease term for operating leases was **12.3 years**, and the weighted average discount rate used was **1.96%**[80](index=80&type=chunk) [NOTE 5 – DEPOSITS](index=27&type=section&id=NOTE%205%20%E2%80%93%20DEPOSITS) This note summarizes the Company's deposit balances by type and provides a maturity schedule for time deposits Deposit Type (In thousands) | Deposit Type (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | NOW and demand accounts | $396,487 | $362,169 | | Savings | $347,620 | $276,584 | | Time deposits | $521,510 | $717,431 | | Total | $1,265,617 | $1,356,184 | - Total deposits decreased by **$90.6 million** (7%) from December 31, 2020, to September 30, 2021, primarily due to a **$195.9 million** decrease in time deposits, partially offset by a **$105.4 million** increase in NOW and demand accounts and savings[83](index=83&type=chunk)[171](index=171&type=chunk) Time Deposit Maturities (In thousands) | Time Deposit Maturities (In thousands) | Amount | | :------------------------------------- | :----- | | Remainder of 2021 | $128,516 | | 2022 | $246,645 | | 2023 | $113,255 | | 2024 | $20,173 | | 2025 | $6,801 | | 2026 | $6,120 | | Total | $521,510 | [NOTE 6 – DERIVATIVES](index=27&type=section&id=NOTE%206%20%E2%80%93%20DERIVATIVES) This note describes the Company's use of interest rate swap agreements as cash flow hedges to manage interest rate risk - The Company uses interest rate swap agreements with notional amounts totaling **$109.0 million** at September 30, 2021, designated as cash flow hedges for Federal Home Loan Bank advances[86](index=86&type=chunk)[87](index=87&type=chunk) Metric | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Notional amounts (In thousands) | $109,000 | $109,000 | | Weighted average pay rates | 1.4577 % | 1.4577 % | | Weighted average receive rates | 0.1241 % | 0.2303 % | | Weighted average maturity | 5.5 Years | 6.0 years | | Unrealized losses (In thousands) | $(1,520) | $(5,545) | - Unrealized losses on these swaps decreased to **$(1,520) thousand** at September 30, 2021, from **$(5,545) thousand** at December 31, 2020[87](index=87&type=chunk) [NOTE 7 – RETIREMENT PLANS](index=28&type=section&id=NOTE%207%20%E2%80%93%20RETIREMENT%20PLANS) This note details the Company's retirement plans, including its withdrawal from the Pentegra Defined Benefit Plan and associated liabilities - The Company elected to withdraw from the Pentegra Defined Benefit Plan in August 2021 and recorded an accrued withdrawal liability of **$9.2 million**, with the withdrawal expected to finalize in Q4 2021[92](index=92&type=chunk) Net Periodic Benefit Cost (In thousands) | Net Periodic Benefit Cost (In thousands) | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :------------------------------------- | :------------------------------ | :----------------------------- | | Service cost | $38 | $113 | | Interest cost | $19 | $56 | | Prior Service Cost | $17 | $51 | | Amortization: Net loss (gain) | $36 | $106 | | Total net periodic benefit cost | $110 | $326 | [NOTE 8 – FAIR VALUE OF ASSETS AND LIABILITIES](index=29&type=section&id=NOTE%208%20%E2%80%93%20FAIR%20VALUE%20OF%20ASSETS%20AND%20LIABILITIES) This note explains the fair value measurement hierarchy and summarizes the fair values of financial and non-financial assets and liabilities Asset/Liability (In thousands) | Asset/Liability (In thousands) | Sep 30, 2021 Total Fair Value | Level 1 | Level 2 | Level 3 | | :----------------------------- | :---------------------------- | :------ | :------ | :------ | | **Recurring Basis** | | | | | | Securities available for sale | $314,146 | $26,091 | $288,055 | $0 | | Derivatives | $(1,520) | $0 | $(1,520) | $0 | | **Nonrecurring Basis** | | | | | | Assets held for sale | $5,225 | $0 | $5,225 | $0 | | Real estate owned | $624 | $0 | $624 | $0 | Financial Instrument (In thousands) | Financial Instrument (In thousands) | Sep 30, 2021 Book Value | Sep 30, 2021 Fair Value | | :---------------------------------- | :---------------------- | :---------------------- | | Cash and due from banks | $324,291 | $324,291 | | Securities held-to-maturity | $23,325 | $23,147 | | Loans, net | $1,238,975 | $1,235,172 | | Deposits other than time deposits | $744,107 | $744,107 | | Time Deposits | $521,510 | $521,294 | | Federal Home Loan advances | $247,600 | $244,611 | [NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME](index=34&type=section&id=NOTE%209%20%E2%80%93%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) This note summarizes changes in accumulated other comprehensive income (AOCI) by component, including cash flow hedges and available-for-sale securities AOCI Component (In thousands) | AOCI Component (In thousands) | Balance at Dec 31, 2020 | Net Current Period Other Comprehensive (Loss) Gain | Balance at Sep 30, 2021 | | :---------------------------- | :---------------------- | :------------------------------------------------- | :---------------------- | | Cash Flow Hedges | $(3,986) | $474 | $(1,093) | | Available-for-sale Securities | $4,208 | $(1,053) | $1,722 | | Benefit Pension Items | $(1,253) | $38 | $(1,141) | | Total | $(1,031) | $(541) | $(512) | - Accumulated other comprehensive income (loss) improved from **$(1,031) thousand** at December 31, 2020, to **$(512) thousand** at September 30, 2021, primarily due to a net current period other comprehensive gain of **$597 thousand** in Q1 2021 and **$463 thousand** in Q2 2021, partially offset by a loss of **$(541) thousand** in Q3 2021[114](index=114&type=chunk) [NOTE 10 – REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME](index=36&type=section&id=NOTE%2010%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS%20AND%20OTHER%20INCOME) This note details the Company's noninterest income from customer contracts, specifically service charges on deposits and interchange income Noninterest Income (In thousands) | Noninterest Income (In thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Service charges on deposits | $246 | $188 | $706 | $527 | | Interchange income | $9 | $5 | $25 | $16 | | Total Revenue from Contracts with Customers | $255 | $193 | $731 | $543 | - Total revenue from contracts with customers increased to **$255 thousand** for the three months ended September 30, 2021, from **$193 thousand** in the prior year, and to **$731 thousand** for the nine months ended September 30, 2021, from **$543 thousand** in the prior year[120](index=120&type=chunk) [NOTE 11 – EARNINGS PER SHARE](index=37&type=section&id=NOTE%2011%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note outlines the calculation of basic and diluted earnings per share (EPS), confirming no dilutive effects for the periods presented Metric (In thousands, except EPS) | Metric (In thousands, except EPS) | Three Months Ended Sep 30, 2021 | | :-------------------------------- | :------------------------------ | | Net income applicable to common shares | $(14,970) | | Average number of common shares outstanding | 23,872,092 | | Less: Average unallocated ESOP shares | 1,892,231 | | Average number of common shares outstanding used to calculate basic earnings per common share | 21,979,861 | | Earnings per common share basic and diluted | $(0.68) | - Basic and diluted earnings per share for the three months ended September 30, 2021, was **$(0.68)**, with no dilutive effect from securities or other contracts[125](index=125&type=chunk)[126](index=126&type=chunk) [NOTE 12 – SUBSEQUENT EVENTS](index=37&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events after the balance sheet date, specifically the extinguishment of Federal Home Loan Bank borrowings - On October 21, 2021, the Bank extinguished **$62.1 million** in borrowings from the Federal Home Loan Bank of New York, incurring a prepayment penalty of **$755 thousand**[129](index=129&type=chunk) - This debt repayment is expected to enhance the Bank's overall net interest margin and reduce its wholesale funding ratio[129](index=129&type=chunk) [NOTE 13 – ESOP](index=38&type=section&id=NOTE%2013%20%E2%80%93%20ESOP) This note provides details on the Employee Stock Ownership Plan (ESOP), including shares purchased, allocation, and recognized expense - The ESOP borrowed funds to purchase **2,281,800 shares** of stock at **$10 per share**[130](index=130&type=chunk) ESOP Shares (In thousands) | ESOP Shares (In thousands) | Nine Months Ended Sep 30, 2021 | | :------------------------- | :----------------------------- | | Allocated to participants | 41,290 | | Unallocated | 2,240,510 | | Total ESOP shares | 2,281,800 | | Fair value of unearned shares | $30,897 | - An expense of **$554 thousand** was recorded during the first nine months of 2021 related to ESOP shares committed to be released[131](index=131&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial performance, condition, liquidity, and capital resources [Forward-Looking Statements](index=39&type=section&id=Forward-Looking%20Statements) This section discloses inherent uncertainties and contingencies that could cause actual results to differ materially from expectations - Forward-looking statements are subject to significant business, economic, and competitive uncertainties and contingencies, many beyond the Company's control[136](index=136&type=chunk) - Key factors that could cause actual results to differ include general economic conditions, changes in loan delinquencies and write-offs, access to cost-effective funding, fluctuations in real estate values, and changes in the interest rate environment[136](index=136&type=chunk) - Other risks include changes in laws or government regulations, technological changes, operational or security system failures (including cyber-attacks), and the ability to retain key employees[136](index=136&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there have been no material changes to the Company's critical accounting policies and estimates - There have been no material changes to the Company's critical accounting policies as compared to those described in the Company's prospectus filed on May 21, 2021[139](index=139&type=chunk) [Executive Summary](index=40&type=section&id=Executive%20Summary) The executive summary provides a high-level overview of the Company's financial performance, highlighting key trends and impacts - The Company reported a net loss of **$15.0 million** for the three months ended September 30, 2021, compared to a net loss of **$1.7 million** for the same period in 2020, primarily due to increased non-interest expenses from a pension withdrawal liability and a charitable foundation contribution[142](index=142&type=chunk) - For the nine months ended September 30, 2021, the net loss improved to **$16.7 million** compared to **$29.7 million** in the prior year, largely due to a decrease in non-interest expenses from 2020 impairments, partially offset by 2021 liabilities[142](index=142&type=chunk) Key Financial Metrics | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Interest Margin (bps change) | **+9** | | **-7** | | | Gross Loans Change (vs Dec 31, 2020, %) | **-2.28%** | | | | | Gross Loans Change (vs Dec 31, 2020, In millions) | **-29.2** | | | | | Total Non-interest Expense (In millions) | **33.1** | **13.0** | **57.3** | **63.8** | | (Recovery of) Provision for Loan Losses (In millions) | **-0.3** | **0.001** | **-1.7** | **2.8** | | Non-maturity Deposits Change (vs Dec 31, 2020, In millions) | **+105.3** | | | | | Non-maturity Deposits as % of total | **59%** | | | | | Cost of Interest-Bearing Deposits (%) | **0.52** | **1.18** | **0.70** | **1.32** | | Cost of Interest-Bearing Deposits (bps change) | **-66** | | **-62** | | | Non-accrual Loans (In millions) | **12.5** | | | | | Non-accrual Loans Change (vs Dec 31, 2020, In millions) | **-0.4** | | | | [Comparison of Operating Results for the Three and Nine Month Periods Ended September 30, 2021 and 2020](index=41&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20and%20Nine%20Month%20Periods%20Ended%20September%2030%2C%202021%20and%202020) This section compares the Company's operating results, analyzing changes in net income, interest, and non-interest items for the periods presented [General](index=41&type=section&id=General) Net income decreased for the three-month period due to significant non-interest expenses, while it improved for the nine-month period - Net loss for the three months ended September 30, 2021, was **$15.0 million**, a **$13.3 million** decrease compared to a **$1.7 million** net loss in the prior year, driven by a **$9.2 million** pension withdrawal liability and a **$9.0 million** charitable contribution[145](index=145&type=chunk) - Net loss for the nine months ended September 30, 2021, was **$16.7 million**, a **$13.0 million** increase (improvement) compared to a **$29.7 million** net loss in the prior year, primarily due to a **$12.8 million** valuation allowance and **$1.4 million** REO write-down in Q1 2020, and **$15.5 million** goodwill impairment in Q2 2020[145](index=145&type=chunk)[146](index=146&type=chunk) [Interest Income](index=41&type=section&id=Interest%20Income) Interest income decreased for both periods, primarily due to a reduction in interest income from loans and lower average loan balances - Interest income decreased by **$1.1 million** (7%) to **$14.1 million** for the three months ended September 30, 2021, and by **$5.6 million** (12%) to **$41.8 million** for the nine months ended September 30, 2021[147](index=147&type=chunk) - The decrease was mainly due to a **$1.4 million** reduction in interest income from loans for the three-month period, as average loan balances decreased by **$142.0 million** to **$1.25 billion**[147](index=147&type=chunk) - For the nine-month period, the decrease was due to a **$5.2 million** reduction in interest income from loans, with average loan balances decreasing by **$142.0 million** to **$1.27 billion** and average yield on loans decreasing by **10 basis points** to **3.82%**[147](index=147&type=chunk) [Interest Expense](index=42&type=section&id=Interest%20Expense) Interest expense significantly decreased for both periods, driven by lower interest expense on deposits and borrowed funds - Interest expense decreased by **$2.5 million** (46%) to **$3.0 million** for the three months ended September 30, 2021, and by **$6.5 million** (37%) to **$11.2 million** for the nine months ended September 30, 2021[149](index=149&type=chunk)[150](index=150&type=chunk) - For the three-month period, the decrease was driven by a **$2.1 million** reduction in interest expense on deposits and a **$0.4 million** reduction on borrowings[149](index=149&type=chunk) - Average interest-bearing deposit balances for the three months ended September 30, 2021, were **$1.27 billion** at a weighted average interest rate of **0.52%**, down from **$1.29 billion** at **1.18%** in the prior year[149](index=149&type=chunk) [Net Interest Income](index=42&type=section&id=Net%20Interest%20Income) Net interest income increased for both periods, benefiting from a larger decrease in interest expense compared to interest income - Net interest income for the three months ended September 30, 2021, was **$11.1 million**, an increase of **$1.5 million** compared to **$9.6 million** for the same period in 2020[151](index=151&type=chunk) - Net interest income for the nine months ended September 30, 2021, was **$30.6 million**, an increase of **$0.9 million** compared to **$29.7 million** for the same period in 2020[151](index=151&type=chunk) [Provision for Loan Losses](index=42&type=section&id=Provision%20for%20Loan%20Losses) The Company recorded a recovery of provision for loan losses for both periods, driven by declining balances and improving credit quality - The Company recorded a recovery of provision for loan losses of **$0.3 million** for the three months ended September 30, 2021, compared to a provision of **$1 thousand** in the prior year[153](index=153&type=chunk) - For the nine months ended September 30, 2021, a recovery of **$1.7 million** was recorded, compared to a provision of **$2.8 million** in the prior year[153](index=153&type=chunk) - The recovery was driven by declining balances in portfolio segments with higher applied loss rates and declining non-performing assets, which decreased by **$0.4 million** to **$12.5 million** at September 30, 2021[153](index=153&type=chunk)[154](index=154&type=chunk) [Non-interest Income](index=42&type=section&id=Non-interest%20Income) Non-interest income slightly decreased for the three-month period but significantly increased for the nine-month period due to a prior year valuation allowance - Non-interest income decreased by **$0.1 million** to **$0.5 million** for the three months ended September 30, 2021, from **$0.6 million** in the prior year[155](index=155&type=chunk) - For the nine months ended September 30, 2021, non-interest income increased by **$1.2 million** to **$1.8 million**, compared to **$0.5 million** in the prior year, primarily due to a **$1.4 million** valuation allowance on real estate owned in 2020[155](index=155&type=chunk) [Non-interest Expense](index=42&type=section&id=Non-interest%20Expense) Non-interest expense significantly increased for the three-month period due to specific liabilities, while decreasing for the nine-month period due to prior year impairments - Non-interest expense increased by **$20.1 million** (155%) to **$33.1 million** for the three months ended September 30, 2021, primarily due to a **$9.2 million** pension withdrawal liability and a **$9.0 million** charitable contribution[156](index=156&type=chunk)[157](index=157&type=chunk) - For the nine months ended September 30, 2021, non-interest expense decreased by **$6.5 million** (10%) to **$57.3 million**, compared to **$63.8 million** in the prior year[157](index=157&type=chunk) - The nine-month decrease was mainly due to **$12.8 million** in premises/REO write-downs and **$15.5 million** in goodwill impairment recorded in 2020, and a **$3.4 million** reduction in professional services, partially offset by the 2021 pension and charitable contribution liabilities and a **$2.7 million** increase in data processing costs[158](index=158&type=chunk) [Income Tax Expense](index=43&type=section&id=Income%20Tax%20Expense) The Company recognized an increased income tax benefit for the three-month period and a consistent benefit for the nine-month period - The Company recognized an income tax benefit of **$6.2 million** for the three months ended September 30, 2021, compared to **$1.1 million** in the prior year[159](index=159&type=chunk) - For the nine months ended September 30, 2021, the income tax benefit was **$6.5 million**, consistent with the prior year[159](index=159&type=chunk) - The effective tax rate for the nine months ended September 30, 2021, was **(27.9)%**, compared to **(17.9)%** in the prior year[159](index=159&type=chunk) [Average Balances and Yields](index=43&type=section&id=Average%20Balances%20and%20Yields) This section presents tables detailing average balances of interest-earning assets and interest-bearing liabilities, with corresponding yields and costs Average Balances and Yields (Three Months Ended Sep 30) | Metric | 3 Months Ended Sep 30, 2021 Average Balance (In thousands) | 3 Months Ended Sep 30, 2021 Interest (In thousands) | 3 Months Ended Sep 30, 2021 Yield/Cost | 3 Months Ended Sep 30, 2020 Average Balance (In thousands) | 3 Months Ended Sep 30, 2020 Interest (In thousands) | 3 Months Ended Sep 30, 2020 Yield/Cost | | :-------------------------------- | :----------------------------------------- | :---------------------------------- | :--------------------- | :----------------------------------------- | :---------------------------------- | :--------------------- | | Loans | $1,251,343 | $12,044 | 3.86 % | $1,393,319 | $13,412 | 3.86 % | | Total interest-bearing assets | $2,068,145 | $14,073 | 2.73 % | $1,871,727 | $15,137 | 3.24 % | | Interest-bearing deposits | $1,267,969 | $1,651 | 0.52 % | $1,286,828 | $3,796 | 1.18 % | | FHLB advances | $282,153 | $1,318 | 1.87 % | $352,052 | $1,712 | 1.95 % | | Total interest-bearing liabilities | $1,550,122 | $2,969 | 0.77 % | $1,638,880 | $5,508 | 1.35 % | | Net interest income (In thousands) | | $11,104 | | | $9,629 | | | Net interest rate spread | | | 1.96 % | | | 1.91 % | Average Balances and Yields (Nine Months Ended Sep 30) | Metric | 9 Months Ended Sep 30, 2021 Average Balance (In thousands) | 9 Months Ended Sep 30, 2021 Interest (In thousands) | 9 Months Ended Sep 30, 2021 Yield/Cost | 9 Months Ended Sep 30, 2020 Average Balance (In thousands) | 9 Months Ended Sep 30, 2020 Interest (In thousands) | 9 Months Ended Sep 30, 2020 Yield/Cost | | :-------------------------------- | :----------------------------------------- | :---------------------------------- | :--------------------- | :----------------------------------------- | :---------------------------------- | :--------------------- | | Loans | $1,274,274 | $36,362 | 3.82 % | $1,416,235 | $41,577 | 3.92 % | | Total interest-bearing assets | $1,977,532 | $41,818 | 2.83 % | $1,857,726 | $47,449 | 3.41 % | | Interest-bearing deposits | $1,312,253 | $6,848 | 0.70 % | $1,275,468 | $12,611 | 1.32 % | | FHLB advances | $308,614 | $4,357 | 1.89 % | $348,950 | $5,090 | 1.95 % | | Total interest-bearing liabilities | $1,620,867 | $11,205 | 0.92 % | $1,624,418 | $17,701 | 1.46 % | | Net interest income (In thousands) | | $30,613 | | | $29,748 | | | Net interest rate spread | | | 1.91 % | | | 1.95 % | [Comparison of Financial Condition at September 30, 2021 and December 31, 2020](index=45&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030%2C%202021%20and%20December%2031%2C%202020) This section compares the Company's financial condition, detailing changes in assets, liabilities, and equity between reporting dates [Total Assets](index=45&type=section&id=Total%20Assets) Total assets increased, primarily driven by purchases of investment securities - Total assets increased by **$81.8 million** (4%) to **$2.02 billion** at September 30, 2021, from **$1.94 billion** at December 31, 2020[165](index=165&type=chunk) - The increase was primarily due to purchases of investment securities, with available-for-sale and held-to-maturity portfolios increasing by **$69.6 million** and **$16.3 million**, respectively[165](index=165&type=chunk) [Cash and cash equivalents](index=45&type=section&id=Cash%20and%20cash%20equivalents) Cash and cash equivalents saw a modest increase, influenced by IPO proceeds and offsetting activities - Cash and cash equivalents increased by **$7.9 million** to **$324.3 million** at September 30, 2021, from **$316.4 million** at December 31, 2020[166](index=166&type=chunk) - The increase was primarily due to cash received from the initial public offering, largely offset by a decrease in time deposits, repayment of FHLB borrowings, and purchase of investment securities[166](index=166&type=chunk) [Gross Loans](index=45&type=section&id=Gross%20Loans) Gross loans decreased due to payoffs and amortization in residential and construction loans, and PPP forgiveness, partially offset by multifamily loan originations - Gross loans held for investment decreased by **$29.2 million** (2.28%) to **$1.25 billion** at September 30, 2021, from **$1.28 billion** at December 31, 2020[167](index=167&type=chunk) - The decrease was largely due to net payoffs and amortization in residential one-to-four family loans (**$139.0 million**) and construction loans, as well as ongoing forgiveness programs within the commercial & industrial portfolio (PPP loans, **$53.7 million** in payoffs/forgiveness)[167](index=167&type=chunk)[169](index=169&type=chunk) - Multifamily loan originations of **$161.5 million** partially offset these decreases[167](index=167&type=chunk) [Non-Performing Assets](index=46&type=section&id=Non-Performing%20Assets) Total non-performing assets experienced a slight decrease Non-Performing Assets (In thousands) | Non-Performing Assets (In thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | | Residential one-to-four family | $10,969 | $11,813 | | Multifamily | $145 | $156 | | Non-residential | $1,236 | $805 | | Junior liens | $114 | $82 | | Total non-performing loans | $12,464 | $12,856 | | Other real estate owned | $624 | $624 | | Total non-performing assets | $13,088 | $13,480 | - Total non-performing assets decreased to **$13.088 million** at September 30, 2021, from **$13.480 million** at December 31, 2020[170](index=170&type=chunk) [Securities Available-For-Sale](index=46&type=section&id=Securities%20Available-For-Sale) Securities available-for-sale increased significantly due to strategic purchases - Securities available-for-sale increased by **$69.6 million** (28.4%) to **$314.1 million** at September 30, 2021, from **$244.6 million** at December 31, 2020[170](index=170&type=chunk) - The increase was driven by purchases of residential mortgage-backed securities, agency bonds, and corporate bonds as interest rates rose during the nine months ended September 30, 2021[170](index=170&type=chunk) [Total Deposits](index=46&type=section&id=Total%20Deposits) Total deposits decreased, marked by a significant shift from time deposits to checking and savings accounts, leading to a lower blended deposit cost of funds - Total deposits decreased by **$90.6 million** (7%) to **$1.27 billion** at September 30, 2021, from December 31, 2020[171](index=171&type=chunk) - Checking and savings accounts increased by **$105.4 million** (16%) to **$744.1 million**, while time deposits decreased by **$195.9 million** (27.3%) to **$521.5 million**[171](index=171&type=chunk) - The ratio of time deposits to total deposits decreased from **52.9%** to **41.2%**, and the blended deposit cost of funds declined from **0.92%** to **0.35%**[172](index=172&type=chunk)[173](index=173&type=chunk) [Borrowings](index=47&type=section&id=Borrowings) Borrowings, consisting solely of Federal Home Loan Bank advances, decreased due to maturities and prepayments - Total borrowings decreased to **$247.6 million** at September 30, 2021, from **$329.4 million** at December 31, 2020[175](index=175&type=chunk) - During the nine months ended September 30, 2021, **$32.5 million** of borrowings matured, and an additional **$49.3 million** were prepaid[175](index=175&type=chunk) [Total Equity](index=47&type=section&id=Total%20Equity) Total shareholders' equity saw a substantial increase, primarily driven by the proceeds from the Company's initial public offering - Total shareholders' equity increased by **$242.6 million** (118.0%) to **$448.2 million** at September 30, 2021, compared to **$205.6 million** at December 31, 2020[176](index=176&type=chunk) - The increase was primarily due to the proceeds from the initial public offering of the Company's common stock, partially offset by a net loss of **$16.7 million**[176](index=176&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet financial obligations, primary funding sources, and compliance with regulatory capital requirements - Primary sources of funds include deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the Federal Home Loan Bank of New York[177](index=177&type=chunk) - The Bank exceeded all applicable regulatory capital requirements at September 30, 2021, and was considered 'well capitalized' under regulatory guidelines[179](index=179&type=chunk) Capital Ratio | Capital Ratio | Sep 30, 2021 Actual Ratio | Dec 31, 2020 Actual Ratio | | :-------------------- | :------------------------ | :------------------------ | | Common equity tier 1 | 27.66 % | 19.93 % | | Tier 1 capital | 27.66 % | 19.93 % | | Total capital | 28.91 % | 21.18 % | | Tier 1 (leverage) capital | 14.39 % | 10.72 % | - Available borrowing capacity at September 30, 2021, included **$88.7 million** with FHLB, a **$30.0 million** line of credit with a correspondent bank, and a **$2.5 million** line of credit with the Federal Reserve Bank of New York[182](index=182&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](index=49&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) This section addresses the Company's exposure to market risk, primarily interest rate risk, through qualitative and quantitative analyses [Qualitative Analysis](index=49&type=section&id=Qualitative%20Analysis) The Company identifies interest rate risk as its most significant market risk and employs strategies to mitigate this risk - Interest rate risk is the Company's most significant form of market risk, managed by the ALCO/Investment Committee[185](index=185&type=chunk) - Strategies to manage interest rate risk include growing target deposit accounts, utilizing investment securities and interest rate swaps, and diversifying the loan portfolio with more commercial loans[186](index=186&type=chunk) - The Company is monitoring the LIBOR transition, with approximately **$45.2 million** in loans, **$40.4 million** in investments, and **$109 million** notional of derivatives currently indexed to USD-LIBOR[188](index=188&type=chunk) [Quantitative Analysis](index=49&type=section&id=Quantitative%20Analysis) The quantitative analysis uses an Economic Value of Equity (EVE) model to estimate sensitivity to interest rate changes Economic Value of Equity (In thousands) | Change in Interest Rates (basis points) | Estimated EVE (In thousands) | Estimated Increase (Decrease) Percent | NPV as a Percent of Assets | | :-------------------------------------- | :--------------------------- | :------------------------------------ | :------------------------- | | +400bp | $311,847 | (9)% | 15 % | | +300bp | $318,527 | (7) | 16 | | +200bp | $323,441 | (6) | 16 | | +100bp | $330,050 | (4) | 16 | | 0 bp | $343,189 | — | 17 | | -100bp | $388,824 | 13 | 19 | - At September 30, 2021, an instantaneous **100 basis point** increase in interest rates would result in a **4%** decrease in EVE, while a **100 basis point** decrease would lead to a **13%** increase in net portfolio value[193](index=193&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=51&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021[196](index=196&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2021[196](index=196&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=52&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is not currently involved in any material legal proceedings, and existing actions are not expected to have a material adverse effect - The Company is not engaged in any legal proceedings of a material nature at the present time[199](index=199&type=chunk) - Management believes that the resolution of various legal actions arising in the normal course of business is not expected to have a material adverse effect on the Company's financial condition or results of operations[199](index=199&type=chunk) [ITEM 1A. RISK FACTORS](index=52&type=section&id=ITEM%201A.%20RISK%20FACTORS) There were no material changes to the risk factors previously disclosed in the Company's Prospectus filed on May 21, 2021 - There were no material changes to the risk factors relevant to the Company's operations as described in the Company's Prospectus filed on May 21, 2021[200](index=200&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=52&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item is not applicable to the current report - Not Applicable[200](index=200&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=52&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the current report - Not Applicable[200](index=200&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=52&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the current report - Not Applicable[200](index=200&type=chunk) [ITEM 5. OTHER INFORMATION](index=52&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This item is not applicable to the current report - Not Applicable[200](index=200&type=chunk) [ITEM 6. EXHIBITS](index=52&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of or incorporated by reference into the Form 10-Q, including organizational documents and certifications - Exhibits include the Certificate of Incorporation, Bylaws, Form of Common Stock Certificate, Certifications of Principal Executive and Financial Officers (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL financial statements and notes[201](index=201&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-40619 | --- | --- | --- | |----------------------|---------------------------------------------------------------------------|------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 333-254079 | --- | --- | --- | |----------------------------------------------------------------------------|--------------------------------------------------------- ...