Blue Foundry Bancorp(BLFY) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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 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 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 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 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][42][43] - 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] - Non-accrual loans decreased to $10.5 million as of March 31, 2022, indicating improved credit quality[85] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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] - 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][172] - A recovery of provision for loan losses of $952 thousand was recorded, driven by construction portfolio paydowns and an improving economic environment[175] - Non-interest expense increased by $847 thousand (6.8%) year-over-year, primarily due to a $903 thousand rise in compensation and benefits[178] Comparison of Financial Condition 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] - 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] - Total deposits increased by $36.0 million (3%), with core deposits rising to 65.3% of total deposits[191] - 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] Quantitative and Qualitative Disclosure About Market Risk 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][205] - The company is monitoring its exposure to the LIBOR transition, with approximately $40.0 million in loans, $32.0 million in investments, and $109.0 million notional of derivatives indexed to USD-LIBOR[207] Net Interest Income (NII) Sensitivity Analysis (at March 31, 2022) | Change in Interest Rates (bp) | Net Interest Income Change ($ 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 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] - No material changes in internal control over financial reporting occurred during the quarter[216] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not Applicable[219] Defaults Upon Senior Securities This item is not applicable for the reporting period - Not Applicable[219] Mine Safety Disclosures This item is not applicable for the reporting period - Not Applicable[219] Other Information This item is not applicable for the reporting period - Not Applicable[219] Exhibits 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]