BLUE FOUNDRY BANCORP NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of the changes in accumulated other comprehensive income by component, net of tax, inclusive of a deferred tax valuation allowance, for the periods indicated: | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------------------------------------------------|-------------------------------------------------|-------|--------------------------------------------------------------------|------- ...

Blue Foundry Bancorp (NASDAQ:BLFY) Q1 2023 Earnings Conference Call April 26, 2023 11:00 AM ET Company Participants Jim Nesci - President & CEO Kelly Pecoraro - CFO Conference Call Participants Chris O'Connell - KBW Operator Good morning, and welcome to Blue Foundry Bancorp's First Quarter 2023 Earnings Call. My name is Lauren, and I will be your conference operator today. Comments made during today's call may include forward-looking statements, which are based on management's current expectations and are s ...

Loan Losses and Credit Risk - The adoption of ASU 2016-13 will result in a minimal change in the total allowance for loan losses and reserves for unfunded commitments, with an immaterial allowance for credit losses on held-to-maturity debt securities [287]. - A downturn in the local economy could lead to an increase in non-performing loans, adversely affecting the company's operations, financial condition, and earnings [299]. - The geographic concentration of the loan portfolio makes the company vulnerable to economic downturns in its local market area, potentially reducing demand for products and services [299]. - Construction lending involves additional risks due to the uncertain value of projects before completion, which may lead to inadequate collateral for loan repayment [295]. Interest Rate Risk - The Bank has entered into derivative financial instruments with an aggregate notional amount of $109.0 million as of December 31, 2022, to reduce risk associated with interest rate volatility [473]. - The company anticipates that adjustable-rate loans will better offset the adverse effects of an increase in interest rates compared to fixed-rate loans, although this may lead to increased delinquencies and defaults [293]. - The transition from LIBOR to SOFR may have significant economic impacts, including potential disputes with borrowers over replacement reference rates [292]. Funding and Liquidity - The company relies heavily on deposits as its primary source of funds, and a decline in deposit balances could negatively impact liquidity and increase funding costs [300]. Competitive Landscape - The financial services industry is becoming increasingly competitive due to regulatory changes and technological advancements, which may affect the company's market position [307]. - The company’s growth strategy includes increasing assets, deposits, and market share, which depends on attracting customers from other financial institutions [303].

Financial Data and Key Metrics Changes - In 2022, the company generated net income of $2.4 million or $0.09 per diluted share and pre-provision net revenue of $1.4 million, reflecting the execution of strategic priorities [4] - For the fourth quarter, net income was $562,000 or $0.02 per diluted share, down from $1.2 million in the linked quarter, primarily due to funding pressures from a competitive rate environment [41][68] - The yield on loans increased by 9 basis points to 3.80%, while yields on all interest-bearing assets increased by 18 basis points to 3.55% [6] - The cost of interest-bearing deposits increased by 36 basis points to 82 basis points, leading to a total cost of funds of 1.17%, a 51 basis point increase compared to the prior quarter [72] Business Line Data and Key Metrics Changes - Gross loans grew by $51 million or 3.4% sequentially, driven by originations of $68 million, primarily in non-residential and multifamily segments [40] - Core deposits grew by $99 million or 13% in 2022, with business balances increasing by 56% [69] - The bank purchased $18 million of high-quality residential loans during the quarter, which were originated to Fannie Mae standards [40] Market Data and Key Metrics Changes - The company experienced an outflow of $28 million from non-maturity accounts but offset this with $51 million growth in time deposits, resulting in a total deposit increase of $22 million during the quarter [8] - The competitive rate environment has put pressure on the ability to retain deposits, with management focused on attracting low-cost core deposits [55][48] Company Strategy and Development Direction - The company continues to repurchase stock at a discount to tangible book value, having repurchased a total of 1,299,000 shares, approximately 46% of the approved stock repurchase program [5] - Management is focused on optimizing the business model and managing operating expenses, targeting mid to high $13 million range for operating expenses [18][73] Management's Comments on Operating Environment and Future Outlook - Management anticipates loan growth in 2023 to be in the high single to low double digits, acknowledging pressures on the deposit side [43] - The company expects continued pressure on net interest margin due to the liability-sensitive nature of its balance sheet [57] - Management is exploring various funding sources, including swaps and digital avenues, to mitigate funding challenges [31] Other Important Information - The allowance for loan losses decreased to 87 basis points, with an increase in the allowance to non-accrual loans to 173% from 162% in the prior quarter [7] - The securities portfolio has a duration of 4.3 years, providing cash flow to fund loans, with a decline attributed to maturities and scheduled paydowns [58] Q&A Session Summary Question: What is the outlook for loan growth and deposit inflows? - Management indicated that loan growth is expected to be lower than the previous year, with a focus on attracting core deposits while managing funding pressures [43][88] Question: Can you provide details on the commercial real estate portfolio? - The commercial loan portfolio contains around 3% of office loans, with no exposure to hotels or restaurants, and LTVs on that portfolio are around 50% [96] Question: What is the expected tax rate for minimal profitability? - The tax rate is pegged at 10% to 12% if the company is minimally profitable, with no tax benefit recorded in a loss position [38]

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 September 30, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-40619 BLUE FOUNDRY BANCORP (Exact name of the registrant as specified in its charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) ...

Start Time: 11:00 January 1, 0000 11:22 AM ET Blue Foundry Bancorp (NASDAQ:BLFY) Q3 2022 Earnings Conference Call October 26, 2022, 11:00 AM ET Company Participants James Nesci - President and CEO Kelly Pecoraro - EVP and CFO Conference Call Participants Laurie Hunsicker - Compass Point Operator Good morning, and welcome to Blue Foundry Bancorp's Third Quarter 2022 Earnings Call. My name is Harry, and I will be your conference operator today. Comments made during today's call may include forward-looking st ...

[ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) [CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION](index=3&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) This section presents the Company's consolidated financial position, highlighting key asset, liability, and equity balances at June 30, 2022, compared to December 31, 2021 Consolidated Statements of Financial Condition (June 30, 2022 vs. December 31, 2021) | Metric | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------- | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | **ASSETS** | | | | | | Cash and cash equivalents | $54,806 | $193,446 | $(138,640) | -71.67% | | Securities available for sale | $352,183 | $324,892 | $27,291 | 8.40% | | Loans receivable, net | $1,414,223 | $1,273,184 | $141,039 | 11.08% | | Total assets | $1,964,050 | $1,914,211 | $49,839 | 2.60% | | **LIABILITIES** | | | | | | Deposits | $1,296,674 | $1,247,040 | $49,634 | 3.98% | | Advances from the Federal Home Loan Bank | $205,500 | $185,500 | $20,000 | 10.78% | | Total liabilities | $1,551,757 | $1,484,740 | $67,017 | 4.51% | | **SHAREHOLDERS' EQUITY** | | | | | | Total shareholders' equity | $412,293 | $429,471 | $(17,178) | -4.00% | [CONSOLIDATED STATEMENTS OF OPERATIONS](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section details the Company's financial performance for the three and six months ended June 30, 2022, compared to the same periods in 2021 Consolidated Statements of Operations (Three Months Ended June 30, 2022 vs. 2021) | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :---------------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total interest income | $14,878 | $13,802 | $1,076 | 7.80% | | Total interest expense | $1,716 | $3,894 | $(2,178) | -55.93% | | Net interest income | $13,162 | $9,908 | $3,254 | 32.84% | | Provision (recovery of provision) for loan losses | $594 | $(553) | $1,147 | -207.41% | | Total non-interest income | $494 | $620 | $(126) | -20.32% | | Total non-interest expenses | $13,019 | $11,801 | $1,218 | 10.32% | | Income (loss) before income tax expense (benefit) | $43 | $(720) | $763 | -106.00% | | Income tax expense (benefit) | $3 | $283 | $(280) | -98.94% | | Net income (loss) | $40 | $(1,003) | $1,043 | -104.00% | | Basic and diluted earnings per share | $0.00 | n/a | n/a | n/a | Consolidated Statements of Operations (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :---------------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total interest income | $28,472 | $27,744 | $728 | 2.62% | | Total interest expense | $3,371 | $8,236 | $(4,865) | -59.07% | | Net interest income | $25,101 | $19,508 | $5,593 | 28.67% | | Provision (recovery of provision) for loan losses | $(358) | $(1,361) | $1,003 | -73.69% | | Total non-interest income | $1,421 | $1,287 | $134 | 10.41% | | Total non-interest expenses | $26,235 | $24,172 | $2,063 | 8.53% | | Income (loss) before income tax expense (benefit) | $645 | $(2,016) | $2,661 | -132.00% | | Income tax expense (benefit) | $52 | $(268) | $320 | -119.40% | | Net income (loss) | $593 | $(1,748) | $2,341 | -133.92% | | Basic and diluted earnings per share | $0.02 | n/a | n/a | n/a | [CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20(LOSS)%20INCOME) This section presents the Company's comprehensive loss, which includes net income (loss) and other comprehensive income (loss) components, primarily unrealized gains and losses on securities available for sale and cash flow hedges Consolidated Statements of Comprehensive (Loss) Income (Three Months Ended June 30, 2022 vs. 2021) | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net income (loss) | $40 | $(1,003) | $1,043 | | Other comprehensive (loss) income, net of tax | $(8,243) | $463 | $(8,706) | | Comprehensive loss | $(8,203) | $(540) | $(7,663) | Consolidated Statements of Comprehensive (Loss) Income (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net income (loss) | $593 | $(1,748) | $2,341 | | Other comprehensive (loss) income, net of tax | $(18,375) | $1,060 | $(19,435) | | Comprehensive loss | $(17,782) | $(688) | $(17,094) | [CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS'%20EQUITY) This section outlines the changes in the Company's shareholders' equity for the six months ended June 30, 2022, compared to 2021 Consolidated Statements of Changes in Shareholders' Equity (Six Months Ended June 30, 2022 vs. 2021) | Metric | June 30, 2022 (In thousands) | June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | :-------------------- | | Balance at January 1 | $429,471 | $205,600 | $223,871 | | Net income (loss) | $593 | $(1,748) | $2,341 | | Other comprehensive (loss) income | $(18,375) | $1,060 | $(19,435) | | ESOP shares committed to be released | $604 | $0 | $604 | | Balance at June 30 | $412,293 | $204,912 | $207,381 | [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section presents the Company's cash flow activities for the six months ended June 30, 2022, compared to 2021 Consolidated Statements of Cash Flows (Six Months Ended June 30, 2022 vs. 2021) | Cash Flow Activity | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net cash used in operating activities | $(2,444) | $(3,564) | $1,120 | | Net cash used in investing activities | $(206,374) | $(25,249) | $(181,125) | | Net cash provided by financing activities | $70,178 | $637,459 | $(567,281) | | Net (decrease) increase in cash and cash equivalents | $(138,640) | $608,646 | $(747,286) | | Cash and cash equivalents at end of period | $54,806 | $925,091 | $(870,285) | [NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS](index=9&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This comprehensive section provides detailed disclosures and explanations for the Company's financial statements, covering significant accounting policies, specific asset and liability categories, equity components, and other financial instruments [NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Blue Foundry Bancorp became the holding company for Blue Foundry Bank on July 15, 2021, following its conversion into a stock holding company, selling **27,772,500 shares at $10 per share for $277.7 million**[22](index=22&type=chunk) - The Company operates as a **single operating segment** for financial reporting purposes[24](index=24&type=chunk) - The Company is required to adopt the **CECL model by January 1, 2023**, which is expected to result in a **material increase** to the Company's accounting for credit losses on financial instruments[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company is evaluating the impact of **LIBOR cessation** on its financial instruments and developing transition plans, with the update in effect until **December 31, 2022**[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 2 – SECURITIES](index=11&type=section&id=NOTE%202%20%E2%80%93%20SECURITIES) Securities Available for Sale (June 30, 2022 vs. December 31, 2021) | Metric | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------- | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Amortized Cost | $377,703 | $323,801 | $53,902 | 16.65% | | Gross Unrealized Gains | $150 | $3,734 | $(3,584) | -96.06% | | Gross Unrealized Losses | $(25,670) | $(2,643) | $(23,027) | 871.24% | | Fair Value | $352,183 | $324,892 | $27,291 | 8.40% | Securities Held to Maturity (June 30, 2022 vs. December 31, 2021) | Metric | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------- | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Amortized Cost | $29,794 | $23,281 | $6,513 | 27.98% | | Gross Unrecognized Losses | $(2,866) | $(432) | $(2,434) | 563.43% | | Estimated Fair Value | $26,928 | $22,849 | $4,079 | 17.85% | - The number of available-for-sale securities in an unrealized loss position increased from **44 at December 31, 2021, to 96 at June 30, 2022**, primarily due to higher market interest rates. The Company does not consider these to be other-than-temporarily impaired[47](index=47&type=chunk) [NOTE 3 – LOANS RECEIVABLE, NET](index=14&type=section&id=NOTE%203%20%E2%80%93%20LOANS%20RECEIVABLE,%20NET) Loans Receivable, Net (June 30, 2022 vs. December 31, 2021) | Loan Type | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Residential one-to-four family | $590,151 | $560,976 | $29,175 | 5.20% | | Multifamily | $579,183 | $515,240 | $63,943 | 12.41% | | Non-residential | $211,683 | $141,561 | $70,122 | 49.54% | | Construction | $21,010 | $23,419 | $(2,409) | -10.29% | | Commercial and industrial (including PPP) | $5,957 | $21,563 | $(15,606) | -72.37% | | Total gross loans | $1,424,452 | $1,281,310 | $143,142 | 11.17% | | Allowance for loan losses | $(14,050) | $(14,425) | $375 | -2.60% | | Loans receivable, net | $1,414,223 | $1,273,184 | $141,039 | 11.08% | Allowance for Loan Losses Activity (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Beginning balance | $14,425 | $16,959 | $(2,534) | | Charge-offs | $(19) | $(5) | $(14) | | Recoveries | $2 | $0 | $2 | | (Recovery of) provision for loan losses | $(358) | $(1,361) | $1,003 | | Total ending allowance balance | $14,050 | $15,593 | $(1,543) | Non-Accrual Loans (June 30, 2022 vs. December 31, 2021) | Loan Type | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Residential one-to-four family | $9,268 | $10,805 | $(1,537) | -14.22% | | Multifamily | $0 | $139 | $(139) | -100.00% | | Non-residential | $676 | $857 | $(181) | -21.12% | | Junior liens | $54 | $182 | $(128) | -70.33% | | Total non-accrual loans | $9,998 | $11,983 | $(1,985) | -16.56% | [NOTE 4 – LEASES](index=23&type=section&id=NOTE%204%20%E2%80%93%20LEASES) Operating Lease Information (June 30, 2022 vs. December 31, 2021) | Metric | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Right-of-use assets | $24,163 | $25,457 | $(1,294) | -5.08% | | Lease liabilities | $25,461 | $26,696 | $(1,235) | -4.63% | | Weighted average remaining lease term | 11.9 years | 12.2 years | -0.3 years | -2.46% | | Weighted average discount rate | 1.99% | 1.97% | 0.02% | 1.02% | Total Lease Cost (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Operating lease cost | $1,540 | $1,512 | $28 | 1.85% | | Finance lease cost | $12 | $12 | $0 | 0.00% | | Variable lease cost | $113 | $93 | $20 | 21.51% | | Total lease cost | $1,665 | $1,617 | $48 | 2.97% | [NOTE 5 – DEPOSITS](index=24&type=section&id=NOTE%205%20%E2%80%93%20DEPOSITS) Deposits (June 30, 2022 vs. December 31, 2021) | Deposit Type | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Non-interest bearing deposits | $52,036 | $44,894 | $7,142 | 15.91% | | NOW and demand accounts | $455,776 | $363,419 | $92,357 | 25.41% | | Savings | $358,166 | $364,932 | $(6,766) | -1.85% | | Time deposits | $430,696 | $473,795 | $(43,099) | -9.09% | | Total deposits | $1,296,674 | $1,247,040 | $49,634 | 3.98% | - Brokered deposits totaled **$12.0 million** at June 30, 2022, with no brokered deposits at December 31, 2021[93](index=93&type=chunk) [NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN](index=25&type=section&id=NOTE%206%20-%20EMPLOYEE%20STOCK%20OWNERSHIP%20PLAN) - The ESOP borrowed funds to purchase **2,281,800 shares of stock at $10 per share**[98](index=98&type=chunk) - At June 30, 2022, the principal balance on the ESOP loan was **$21.8 million**[99](index=99&type=chunk) ESOP Compensation Expense (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | ESOP compensation expense | $604 | $0 | [NOTE 7 – DERIVATIVES AND HEDGING ACTIVITIES](index=26&type=section&id=NOTE%207%20%E2%80%93%20DERIVATIVES%20AND%20HEDGING%20ACTIVITIES) - The Company uses interest rate swap agreements with notional amounts totaling **$109.0 million** at June 30, 2022 and December 31, 2021, designated as cash flow hedges for FHLB advances[104](index=104&type=chunk) Interest Rate Swaps Designated as Cash Flow Hedges (June 30, 2022 vs. December 31, 2021) | Metric | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Notional amounts (in thousands) | $109,000 | $109,000 | | Weighted average pay rates | 1.4577% | 1.4577% | | Weighted average receive rates | 1.5944% | 0.1742% | | Weighted average maturity | 4.7 years | 5.3 years | | Unrealized gains (losses), net (in thousands) | $7,672 | $(246) | Interest Expense on Swap Transactions (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Interest expense on swap transactions | $468 | $690 | [NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME](index=27&type=section&id=NOTE%208%20%E2%80%93%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) Components of Other Comprehensive (Loss) Income (Six Months Ended June 30, 2022 vs. 2021) | Component (After Tax) | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Unrealized (loss) gain on securities available for sale | $(26,558) | $(1,433) | $(25,125) | | Unrealized gain on cash flow hedge | $7,919 | $2,419 | $5,500 | | Post-Retirement plans | $264 | $74 | $190 | | Total other comprehensive (loss) income | $(18,375) | $1,060 | $(19,435) | Changes in Accumulated Other Comprehensive Income (Net of Tax) | Metric | Balance at Dec 31, 2021 (In thousands) | Net Current Period OCI (Loss) (In thousands) | Balance at June 30, 2022 (In thousands) | | :------------------------------------------------ | :--------------------------------------- | :------------------------------------------- | :-------------------------------------- | | Unrealized Gains and (Losses) on Cash Flow Hedges | $(246) | $7,919 | $7,673 | | Unrealized Gains and (Losses) on Available-for-sale Securities | $1,091 | $(26,558) | $(25,467) | | Post-Retirement Plans | $(1,217) | $264 | $(953) | | Total | $(372) | $(18,375) | $(18,747) | [NOTE 9 – FAIR VALUE OF ASSETS AND LIABILITIES](index=30&type=section&id=NOTE%209%20%E2%80%93%20FAIR%20VALUE%20OF%20ASSETS%20AND%20LIABILITIES) - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (significant other observable inputs), and **Level 3** (significant unobservable inputs)[121](index=121&type=chunk)[122](index=122&type=chunk) - The majority of the Company's securities are valued using **Level 2 inputs** (matrix pricing), while U.S. government securities use **Level 1 inputs**. Derivatives are valued using **Level 2 inputs**. Impaired loans are generally valued using **Level 3 inputs** based on real estate appraisals[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) Fair Value of Financial Assets Measured on a Recurring Basis (June 30, 2022) | Asset Type | Total Fair Value (In thousands) | Level 1 (In thousands) | Level 2 (In thousands) | Level 3 (In thousands) | | :------------------------------------------ | :------------------------------ | :--------------------- | :--------------------- | :--------------------- | | Securities available for sale | $352,183 | $61,051 | $291,132 | $0 | | Derivatives | $7,672 | $0 | $7,672 | $0 | | Total | $359,855 | $61,051 | $298,804 | $0 | [NOTE 10 – REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME](index=34&type=section&id=NOTE%2010%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS%20AND%20OTHER%20INCOME) Revenue from Contracts with Customers (Six Months Ended June 30, 2022 vs. 2021) | Revenue Source | 6 Months Ended June 30, 2022 (In thousands) | 6 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Service charges on deposits | $496 | $459 | $37 | 8.06% | | Interchange income | $19 | $16 | $3 | 18.75% | | Total Revenue from Contracts with Customers | $515 | $475 | $40 | 8.42% | - Service charges on deposits are recognized at the time of transaction or over the month for account maintenance. Overdraft fees are recognized when the overdraft occurs[142](index=142&type=chunk) - Interchange income from debit/credit cardholder transactions is recognized daily, concurrently with transaction processing services[143](index=143&type=chunk) [NOTE 11 - EARNINGS PER SHARE](index=35&type=section&id=NOTE%2011%20-%20EARNINGS%20PER%20SHARE) Earnings Per Share Calculation (Six Months Ended June 30, 2022) | Metric | 6 Months Ended June 30, 2022 | | :------------------------------------------------ | :--------------------------- | | Net income applicable to common shares (in thousands) | $593 | | Average number of common shares outstanding | 28,522,500 | | Less: Average unallocated ESOP shares | 2,167,521 | | Average number of common shares outstanding used to calculate basic earnings per common share | 26,354,979 | | Common stock equivalents | — | | Earnings per common share basic and diluted | $0.02 | - There were no securities or other contracts that had a dilutive effect during the three and six months ended June 30, 2022, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same[147](index=147&type=chunk) [NOTE 12 - SUBSEQUENT EVENTS](index=35&type=section&id=NOTE%2012%20-%20SUBSEQUENT%20EVENTS) - On July 20, 2022, the Company announced it had adopted a program to repurchase up to **2,852,250 shares, or 10%, of its outstanding common stock**[150](index=150&type=chunk) - As of August 11, 2022, **105,759 shares totaling $1.2 million** had been acquired under the repurchase plan at an average price per share of **$11.69**[150](index=150&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=36&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Forward-Looking Statements](index=36&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements based on management's current beliefs and expectations, which are inherently subject to significant business, economic, and competitive uncertainties - This section contains forward-looking statements based on current management assumptions, subject to significant business, economic, and competitive uncertainties[153](index=153&type=chunk)[154](index=154&type=chunk) - Factors that could cause actual results to differ materially include general economic conditions, changes in loan delinquencies, funding access, real estate values, interest rate fluctuations, regulatory changes, technological changes, and the ongoing impact of the COVID-19 pandemic[154](index=154&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section emphasizes that the Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments - The Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that could differ from actual results[157](index=157&type=chunk) - The allowance for loan losses is identified as a **critical accounting policy**, discussed in Note 1 to the Consolidated Financial Statements[157](index=157&type=chunk) [COVID-19 Pandemic](index=37&type=section&id=COVID-19%20Pandemic) This section acknowledges the ongoing adverse impact of the COVID-19 pandemic on the Company, its clients, and communities, noting the difficulty in predicting its full effects due to its dynamic nature - The COVID-19 pandemic has had, and may continue to have, an adverse impact on the Company, its clients, and the communities it serves, with the full impact difficult to predict[158](index=158&type=chunk) [Comparison of Operating Results for the Three and Six Month Periods Ended June 30, 2022 and 2021](index=37&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20and%20Six%20Month%20Periods%20Ended%20June%2030,%202022%20and%202021) This section provides a detailed comparison of the Company's operating results, highlighting a significant improvement in net income from a loss position in the prior year [Interest Income](index=37&type=section&id=Interest%20Income) Interest Income Performance | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total interest income | $14,878 | $13,802 | $1,076 | 7.8% | | Interest income from securities | $2,464 | $1,779 | $685 | 38.5% | | Interest income from loans | $12,444 | $12,056 | $388 | 3.2% | | Yield on average interest-earning assets | 3.19% | 2.77% | 0.42% | 15.16% | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | **% Change** | | Total interest income | $28,472 | $27,744 | $728 | 2.6% | | Interest income from securities | $4,372 | $3,426 | $946 | 27.6% | | Interest income from loans | $24,100 | $24,318 | $(218) | -0.9% | | Yield on average interest-earning assets | 3.09% | 2.89% | 0.20% | 6.92% | [Interest Expense](index=37&type=section&id=Interest%20Expense) Interest Expense Performance | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total interest expense | $1,716 | $3,894 | $(2,178) | -55.9% | | Interest expense on deposits | $950 | $2,379 | $(1,429) | -60.1% | | Interest expense on borrowed funds | $766 | $1,515 | $(749) | -49.4% | | Cost of average interest-bearing liabilities | 0.48% | 0.94% | -0.46% | -48.9% | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | **% Change** | | Total interest expense | $3,371 | $8,236 | $(4,865) | -59.1% | | Interest expense on deposits | $1,832 | $5,197 | $(3,365) | -64.8% | | Interest expense on borrowed funds | $1,539 | $3,039 | $(1,500) | -49.4% | | Cost of average interest-bearing liabilities | 0.48% | 0.99% | -0.51% | -51.5% | [Net Interest Income](index=38&type=section&id=Net%20Interest%20Income) Net Interest Income Performance | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Net interest income | $13,162 | $9,908 | $3,254 | 33.0% | | Net interest rate spread | 2.71% | 1.83% | 0.88% | 48.1% | | Net interest margin | 1.83% | 1.83% | 0.00% | 0.0% | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | **% Change** | | Net interest income | $25,101 | $19,508 | $5,593 | 28.7% | | Net interest rate spread | 2.62% | 1.88% | 0.74% | 39.4% | | Net interest margin | 1.88% | 1.88% | 0.00% | 0.0% | [Provision for Loan Losses](index=38&type=section&id=Provision%20for%20Loan%20Losses) Provision for Loan Losses | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Provision (recovery of provision) for loan losses | $594 | $(553) | $1,147 | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | | Provision (recovery of provision) for loan losses | $(358) | $(1,361) | $1,003 | - The provision for Q2 2022 was driven by growth in multifamily and non-residential portfolios. The six-month recovery was due to significant paydowns in the construction portfolio and an improving economic environment, partially offset by growth in other portfolios[168](index=168&type=chunk) - Total non-performing loans decreased by **$2.0 million** to **$10.0 million** at June 30, 2022, from **$12.0 million** at December 31, 2021[169](index=169&type=chunk) [Non-interest Income](index=38&type=section&id=Non-interest%20Income) Non-interest Income Performance | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total non-interest income | $494 | $620 | $(126) | -20.3% | | Prepayment fees | $44 | $207 | $(163) | -78.7% | | Overdraft fees | $69 | $52 | $17 | 32.7% | | Account maintenance fees | $16 | $20 | $(4) | -20.0% | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | **% Change** | | Total non-interest income | $1,421 | $1,287 | $134 | 10.4% | | Prepayment fees | $562 | $387 | $175 | 45.2% | | Overdraft fees | $138 | $100 | $38 | 38.0% | | Account maintenance fees | $33 | $40 | $(7) | -17.5% | [Non-interest Expense](index=38&type=section&id=Non-interest%20Expense) Non-interest Expense Performance | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total non-interest expenses | $13,019 | $11,801 | $1,218 | 10.3% | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | **% Change** | | Total non-interest expenses | $26,235 | $24,172 | $2,063 | 8.5% | - The increase in non-interest expense for both periods was driven by higher compensation and benefits, increased professional services fees (audit, compliance, CECL implementation), and other public company-related costs, partially offset by lower data processing costs[171](index=171&type=chunk)[173](index=173&type=chunk) [Income Tax Expense](index=39&type=section&id=Income%20Tax%20Expense) Income Tax Expense (Benefit) | Metric | 3 Months Ended June 30, 2022 (In thousands) | 3 Months Ended June 30, 2021 (In thousands) | Change (In thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Income tax expense (benefit) | $3 | $283 | $(280) | | **6 Months Ended June 30, 2022 (In thousands)** | **6 Months Ended June 30, 2021 (In thousands)** | **Change (In thousands)** | | Income tax expense (benefit) | $52 | $(268) | $320 | | Effective tax rate | 8.1% | -13.3% | 21.4% | - The increase in tax expense for 2022 periods was due to increased pre-tax income. An additional valuation allowance of **$4.7 million** was recorded through AOCI during the six months ended June 30, 2022, for a total valuation allowance of **$21.5 million**, related to net unrealized losses from higher interest rates[174](index=174&type=chunk)[176](index=176&type=chunk) [Average Balances and Yields](index=40&type=section&id=Average%20Balances%20and%20Yields) This section provides a detailed breakdown of the Company's average balances for assets and liabilities, along with the resulting annualized average yields and costs for the three and six months ended June 30, 2022 and 2021 Average Balances and Yields (Three Months Ended June 30, 2022 vs. 2021) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Average interest-earning assets (in thousands) | $1,868,097 | $1,998,614 | | Yield on interest-earning assets | 3.19% | 2.77% | | Average interest-bearing liabilities (in thousands) | $1,420,429 | $1,663,336 | | Cost of interest-bearing liabilities | 0.48% | 0.94% | | Net interest income (in thousands) | $13,162 | $9,908 | | Net interest rate spread | 2.71% | 1.83% | | Net interest margin | 1.83% | 1.83% | Average Balances and Yields (Six Months Ended June 30, 2022 vs. 2021) | Metric | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Average interest-earning assets (in thousands) | $1,858,822 | $1,936,352 | | Yield on interest-earning assets | 3.09% | 2.89% | | Average interest-bearing liabilities (in thousands) | $1,412,103 | $1,669,680 | | Cost of interest-bearing liabilities | 0.48% | 0.99% | | Net interest income (in thousands) | $25,101 | $19,508 | | Net interest rate spread | 2.62% | 1.88% | | Net interest margin | 1.88% | 1.88% | [Comparison of Financial Condition at June 30, 2022 and December 31, 2021](index=41&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030,%202022%20and%20December%2031,%202021) This section compares the Company's financial condition at June 30, 2022, against December 31, 2021, detailing changes in total assets, cash, securities, loans, deposits, borrowings, and shareholders' equity [Total Assets](index=41&type=section&id=Total%20Assets) - Total assets increased by **$49.8 million, or 2.6%**, to **$1.96 billion** at June 30, 2022, from **$1.91 billion** at December 31, 2021[183](index=183&type=chunk) [Cash and cash equivalents](index=41&type=section&id=Cash%20and%20cash%20equivalents) - Cash and cash equivalents decreased by **$138.6 million, or 72%**, to **$54.8 million** at June 30, 2022, from **$193.4 million** at December 31, 2021, as the Company deployed cash into higher yielding loans and securities[183](index=183&type=chunk) [Securities Available-For-Sale](index=41&type=section&id=Securities%20Available-For-Sale) - Securities available-for-sale increased by **$27.3 million, or 8.4%**, to **$352.2 million** at June 30, 2022, from **$324.9 million** at December 31, 2021, primarily due to investments in residential mortgage-backed securities[184](index=184&type=chunk) - This increase was partially offset by a **$26.6 million decline** in net unrealized gains/losses due to the rising interest rate environment[184](index=184&type=chunk) [Gross Loans](index=41&type=section&id=Gross%20Loans) Gross Loans Held for Investment (June 30, 2022 vs. December 31, 2021) | Loan Type | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Residential one-to-four family | $590,151 | $560,976 | $29,175 | 5.2% | | Multifamily | $579,183 | $515,240 | $63,943 | 12.4% | | Non-residential | $211,683 | $141,561 | $70,122 | 49.5% | | Total gross loans | $1,424,452 | $1,281,310 | $143,142 | 11.2% | - Organic originations totaled **$248.5 million**, including **$131.1 million** in multifamily loans and **$86.3 million** in non-residential real estate loans. Additionally, **$73.4 million** of conforming residential mortgages in New Jersey were purchased[185](index=185&type=chunk) - PPP loans, net of deferred fees, decreased from **$16.8 million** at December 31, 2021, to **$2.0 million** at June 30, 2022[188](index=188&type=chunk) [Total Deposits](index=42&type=section&id=Total%20Deposits) Total Deposits (June 30, 2022 vs. December 31, 2021) | Deposit Type | June 30, 2022 (In thousands) | December 31, 2021 (In thousands) | Change (In thousands) | % Change | | :------------------------------------------ | :--------------------------- | :------------------------------- | :-------------------- | :--------- | | Total deposits | $1,296,674 | $1,247,040 | $49,634 | 4.0% | | Checking and savings accounts | $865,978 | $773,245 | $92,733 | 12.0% | | Time deposits | $430,696 | $473,795 | $(43,099) | -9.1% | | Core deposits to total deposits ratio | 66.8% | 62.0% | 4.8% | 7.7% | [Borrowings](index=43&type=section&id=Borrowings) - Total borrowings, consisting solely of Federal Home Loan Bank of New York advances, increased by **$20.0 million, or 10.8%**, to **$205.5 million** at June 30, 2022, from **$185.5 million** at December 31, 2021[190](index=190&type=chunk) - Of the total borrowings, **$109.0 million** are associated with longer-dated swap agreements[190](index=190&type=chunk) [Total Shareholders' Equity](index=43&type=section&id=Total%20Shareholders'%20Equity) - Total shareholders' equity decreased by **$17.2 million, or 4.0%**, to **$412.3 million** at June 30, 2022, from **$429.5 million** at December 31, 2021[190](index=190&type=chunk) - This decrease was primarily due to an **$18.4 million decline** in accumulated other comprehensive income, driven by the rising interest rate environment impacting the investment portfolio, partially offset by net income of **$593 thousand**[190](index=190&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet its financial obligations and its regulatory capital position - The Company's 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[191](index=191&type=chunk) - At June 30, 2022, the Bank exceeded all applicable regulatory capital requirements and was considered **'well capitalized'** under regulatory guidelines[193](index=193&type=chunk) Regulatory Capital Ratios (June 30, 2022 vs. December 31, 2021) | Capital Ratio | June 30, 2022 Actual Ratio | December 31, 2021 Actual Ratio | Minimum for Well Capitalized | | :-------------------------- | :------------------------- | :----------------------------- | :--------------------------- | | Common equity tier 1 | 22.30% | 25.74% | 6.50% | | Tier 1 capital | 22.30% | 25.74% | 8.00% | | Total capital | 23.50% | 26.99% | 10.00% | | Tier 1 (leverage) capital | 15.14% | 15.00% | 5.00% | - Available borrowing capacity at June 30, 2022, included **$49.0 million** with Federal Home Loan Bank of New York, a **$30.0 million** available line of credit with a correspondent bank, and a **$2.5 million** available line of credit with the Federal Reserve Bank of New York[195](index=195&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](index=45&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) [Qualitative Analysis](index=45&type=section&id=Qualitative%20Analysis) This section describes the Company's qualitative approach to managing market risk, primarily interest rate risk - The most significant market risk is **interest rate risk**, managed by the ALCO/Investment Committee to limit exposure of financial condition and results of operations to interest rate changes[198](index=198&type=chunk) - Strategies include growing target deposit accounts, utilizing investment securities and interest rate swaps, and diversifying the loan portfolio with more commercial loans[199](index=199&type=chunk) - The Company has approximately **$42.4 million** in loans, **$30.8 million** in investments, and **$109.0 million** notional of derivatives indexed to USD-LIBOR, and is monitoring and developing transition plans for LIBOR cessation[202](index=202&type=chunk) [Quantitative Analysis](index=46&type=section&id=Quantitative%20Analysis) This section provides a quantitative assessment of the Company's interest rate risk using Economic Value of Equity (EVE) and Net Interest Income (NII) sensitivity models - The Company uses **Economic Value of Equity (EVE)** analysis to estimate changes in the net present value (NPV) of assets and liabilities under various interest rate shock scenarios[204](index=204&type=chunk) Estimated Changes to Net Interest Income (June 30, 2022) | Change in Interest Rates (basis points) | Net Interest Income Change (In thousands) | Percent Change | | :-------------------------------------- | :---------------------------------------- | :------------- | | +400 | $(4,833) | (8)% | | +300 | $(3,467) | (6)% | | +200 | $(2,137) | (4)% | | +100 | $(970) | (2)% | | 0 | $0 | 0% | | -100 | $(2,488) | (4)% | Estimated Changes in Net Portfolio Value (EVE) (June 30, 2022) | Change in Interest Rates (basis points) | Estimated EVE (In thousands) | Estimated Increase (Decrease) (In thousands) | Percent Change | | :-------------------------------------- | :--------------------------- | :------------------------------------------- | :------------- | | +400 | $81,488 | $(150,869) | (65)% | | +300 | $117,085 | $(115,272) | (50)% | | +200 | $155,144 | $(77,213) | (33)% | | +100 | $194,293 | $(38,064) | (16)% | | 0 | $232,357 | $0 | 0% | | -100 | $264,317 | $31,960 | 14% | [ITEM 4. CONTROLS AND PROCEDURES](index=47&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) [Controls and Procedures Effectiveness](index=47&type=section&id=Controls%20and%20Procedures%20Effectiveness) This section confirms that the Company's management, including its Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, concluding they were effective - Disclosure controls and procedures were evaluated and deemed **effective** as of June 30, 2022[211](index=211&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[211](index=211&type=chunk) [ITEM 1. LEGAL PROCEEDINGS](index=47&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) [Legal Proceedings Status](index=47&type=section&id=Legal%20Proceedings%20Status) This section states that the Company is not currently involved in any material legal proceedings - The Company is not engaged in any legal proceedings of a **material nature** at the present time[213](index=213&type=chunk) - Management believes the resolution of current legal actions is not expected to have a **material adverse effect** on the Company's financial condition or results of operations[213](index=213&type=chunk) [ITEM 1A. RISK FACTORS](index=47&type=section&id=ITEM%201A.%20RISK%20FACTORS) [Changes to Risk Factors](index=47&type=section&id=Changes%20to%20Risk%20Factors) This section confirms that there have been 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 - There were no material changes to the risk factors relevant to the Company's operations as described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021[214](index=214&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=47&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is marked as not applicable for the reporting period, indicating no unregistered sales of equity securities or related use of proceeds to disclose - Not Applicable[214](index=214&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=47&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) [Defaults Upon Senior Securities](index=47&type=section&id=Defaults%20Upon%20Senior%20Securities) This item is marked as not applicable for the reporting period, indicating no defaults upon senior securities to disclose - Not Applicable[214](index=214&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=47&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) [Mine Safety Disclosures](index=47&type=section&id=Mine%20Safety%20Disclosures) This item is marked as not applicable for the reporting period, indicating no mine safety disclosures are required - Not Applicable[214](index=214&type=chunk) [ITEM 5. OTHER INFORMATION](index=47&type=section&id=ITEM%205.%20OTHER%20INFORMATION) [Other Information](index=47&type=section&id=Other%20Information) This item is marked as not applicable for the reporting period, indicating no other information requiring disclosure - Not Applicable[214](index=214&type=chunk) [ITEM 6. EXHIBITS](index=48&type=section&id=ITEM%206.%20EXHIBITS) [Exhibits Filed](index=48&type=section&id=Exhibits%20Filed) This section lists all exhibits filed as part of the Form 10-Q report, including corporate organizational documents, amendments to director retirement plans, certifications from executive officers, and financial data formatted in Inline XBRL - Exhibits include the Certificate of Incorporation, Bylaws, Form of Common Stock Certificate, amendments to Director Retirement Plans, certifications of Principal Executive and Financial Officers (Sarbanes-Oxley Act), and Inline XBRL financial data[216](index=216&type=chunk)

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)

Financial Data and Key Metrics Changes - In Q1 2022, the company reported a GAAP net income of $553,000 or $0.02 per share, with a decrease in net interest income by $397,000 or 3% to $11.9 million [11][12] - Core operating expenses decreased by $1.4 million or 7% quarter-over-quarter to $13.4 million, driven by reductions in professional fees, advertising, and occupancy expenses [11][12] - The net interest margin decreased by 1 basis point to 2.62% compared to the prior quarter, but increased by 54 basis points year-over-year, representing a 26% increase [12] Business Line Data and Key Metrics Changes - Core deposits increased by $64.8 million in the quarter, with gross loans increasing by $55 million and the investment book growing by $57.3 million [5] - The company onboarded over $147 million of new loans in Q1, with gross loan growth (excluding PPP) at $64.1 million, primarily from commercial lending [7][12] - The securities portfolio grew by $57.3 million during the quarter, utilizing excess liquidity to capture incremental yield as rates rose [14] Market Data and Key Metrics Changes - The total pipeline was over $130 million as of March 31, with an average expected yield of 3.9% [14] - Nonperforming loans to total loans decreased by 16 basis points from 0.94% to 0.78%, indicating improved asset quality [15] - Loans 90 days or more past due decreased by over 20% from $9.6 million at year-end to $7.6 million [16] Company Strategy and Development Direction - The company aims to grow core deposits and higher interest-earning assets while reducing core operating expenses to position itself for profitability [5][17] - Plans to reinvest excess liquidity into a mixture of loans and shorter duration securities over the coming quarters, with a focus on high-quality residential loans [15][25] - The company is transitioning to a larger, more commercial bank funded by core deposits, with a focus on strong customer acquisition through new branches [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to profitability in the coming months, citing significant progress in core operating costs and balance sheet positioning [17] - The company is aware of the challenges ahead but believes it is well-positioned to capitalize on the rising rate environment [17] - Management noted that the economic environment is stabilizing, which is reflected in the decrease in the allowance for loan losses [16] Other Important Information - The company announced the appointment of Kelly Siperaro as the new Chief Financial Officer, effective mid-May [9] - The company is currently operating under the incurred loss model and expects to adopt CECL as of January 1, 2023 [16] Q&A Session Summary Question: What is driving the strong commercial real estate loan growth? - Management indicated that the growth is due to a mix of originations, with many deals coming in at good prices and a focus on nonresidential CRE deals [19][20] Question: Can you clarify the amount of PPP gains realized this quarter? - The realized PPP gains were around $320,000, with approximately $250 million left to be realized in Q2 [22] Question: How should we think about the provision normalization and reserves-to-loans target? - Management acknowledged the strong loan growth and indicated that they are currently at a 1% reserve to loans, with plans to normalize provisions as the economic environment stabilizes [26]