Blue Foundry Bancorp(BLFY) - 2021 Q4 - Annual Report

Part I Business Overview 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 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] - 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] - The company donated 750,000 shares of common stock and $1.5 million in cash to the Blue Foundry Charitable Foundation, Inc[12] Blue Foundry Bank Overview 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] - 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] - 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] Market Area 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] - 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] - 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][19] 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][21] - The participation of non-depository financial service companies, such as mortgage companies and fintech firms, also intensifies competition in the loan market[21] - 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] Lending Activities 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] - 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] 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] Credit Policy and Procedures 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][63] - Loans over 90 days past due are generally placed on non-accrual status unless adequately collateralized and in the process of collection[69] 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 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] - 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][93] 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 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] - The company offers a wide range of deposit products and reviews deposit pricing monthly based on competition, liquidity needs, profitability, and customer preferences[99][100] 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] Subsidiary Activities 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] - 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] - Blue Foundry Investment Company is active in securities management and investment[107] Employees and Human Capital Resources 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] - The company supports continuous training and career development through internal training, customized corporate training, and an education reimbursement program[109] - 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] Supervision and Regulation 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][114] - 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] - As of December 31, 2021, Blue Foundry Bank was categorized as a 'well-capitalized' institution, exceeding all applicable regulatory capital requirements[134][142] - 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] - 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] 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][190] - 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] - The company has $33.6 million in New Jersey net operating loss carryforwards, most of which expire within 20 years[195] - The company has recorded a $9.0 million valuation allowance against deferred tax assets related to NOL carryforwards, deeming their future realization unlikely[508] Risk Factors 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 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][199] - 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] Risks Related to Economic Conditions 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] - 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] - 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] Risks Related to Growth 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] - Establishing new branches involves significant costs and may initially lead to expenses growing faster than revenue, negatively impacting profitability[208] - 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] Risks Related to Interest Rate Risk 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] - 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] - 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] - The transition away from LIBOR could adversely affect the value and returns of the company's LIBOR-indexed loans and investment securities[223][225] Risks Related to Lending Activities 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] - 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][220] - 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] Risks Related to Competition 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] - 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] - 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] Risks Related to Operations and Security 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] - 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][231][233] - 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][238] - 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] Risks Related to Regulatory Matters 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][247] - Stringent capital requirements could adversely affect return on equity, potentially requiring additional capital raises, or restricting dividend payments or stock repurchases[248] - 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] - 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][254] Various factors may make takeover attempts more difficult to achieve 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] - 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] - 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] Unresolved Staff Comments There are no unresolved staff comments in this report. - There are no unresolved staff comments in this report[256] Properties 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] - The company owns 6 properties and leases 13 properties, with one leased branch expected to open in 2022[257] - As of December 31, 2021, the net book value of premises and equipment was $28.1 million[257] Legal Proceedings 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] - 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] Mine Safety Disclosures Mine safety disclosures are not applicable to this report. - Mine safety disclosures are not applicable to this report[261] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - As of January 31, 2022, there were 28,522,500 shares of common stock outstanding, held by approximately 1,375 record holders[264] - 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][266] Reserved This item is reserved. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] Business Strategy 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] - 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][276] - 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] - 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] - 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] Critical Accounting Policies 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] - 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] Executive Summary 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] - 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] 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] - 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] Analysis of Net Interest Income 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] - The net interest margin increased by 10 basis points to 2.20% in 2021 from 2.10% in 2020[287] 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 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] - 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] - 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] 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][308] - 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] - 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] - 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] Liquidity and Capital Resources 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] - 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] - As of December 31, 2021, the Bank exceeded all applicable regulatory capital requirements and was considered a 'well-capitalized' institution[318] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] 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 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 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][357] - 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] - 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] - 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] - 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][414] NOTE 2 – SECURITIES 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] - 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] NOTE 3 – LOANS RECEIVABLE, NET 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] 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 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][462] NOTE 5 – PREMISES AND EQUIPMENT 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] NOTE 6 – LEASES 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] 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] NOTE 7 – DEPOSITS 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] [NOTE 8 – ADVANCES FROM THE FEDERAL HOME LOAN BANK