Blue Foundry Bancorp(US:BLFY)2023-03-29 16:00Loan 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].