Blue Foundry Bancorp is a leading financial institution that has been servicing the banking needs of individuals and businesses in New Jersey for over a century. With a rich history dating back to its founding in 1912, the company has evolved and adapted to the ever-changing banking industry, consistently delivering exceptional customer service and maintaining a strong financial position.
Business Overview Blue Foundry Bancorp, the holding company for Blue Foundry Bank, was originally established as Rutherford Savings Bank in 1846, making it one of the oldest financial institutions in New Jersey. The company’s roots can be traced back to serving the local community in Rutherford, New Jersey, providing traditional banking products and services. In the early 2000s, recognizing the need to modernize and expand its operations, the bank embarked on a journey of transformation.
A significant milestone in the company’s history occurred in July 2021 when it completed its conversion from a mutual to a stock-based structure. This process involved changing the bank’s name to Blue Foundry Bank, reflecting its updated vision and brand. The conversion was a landmark event, raising $250 million in capital, which provided the necessary resources to accelerate growth strategies, invest in technology, expand the branch network, and grow the commercial lending business.
Following the conversion, Blue Foundry Bancorp has focused on diversifying its revenue streams and transitioning from a traditional retail-focused bank to a more commercially-oriented institution. This strategic shift has allowed the company to capitalize on new opportunities in the commercial lending market while maintaining its commitment to serving retail customers.
The company’s growth journey has not been without challenges. In 2020, Blue Foundry incurred significant one-time charges related to the conversion and integration of a new core banking system. This, combined with the economic disruptions caused by the COVID-19 pandemic, resulted in a net loss for the year. However, the company’s management team worked diligently to navigate these obstacles, streamlining operations and closely monitoring credit quality to position the organization for long-term success.
Today, Blue Foundry Bancorp has expanded its presence to 25 branches throughout northern New Jersey, a significant increase from the previously mentioned 15 branches. The company offers a comprehensive suite of banking products and services to both consumer and commercial clients. Its strong deposit franchise has grown to over $1.2 billion in total deposits as of the end of 2023, showcasing the trust and confidence customers place in the institution.
Financial Performance Blue Foundry Bancorp’s financial performance has been marked by a commitment to prudent risk management and sustainable growth. As of September 30, 2024, the company reported total assets of $2.06 billion, a 1% increase from the previous year. This growth was driven by a 5.9% increase in total deposits, which reached $1.32 billion, and a 0.6% increase in the loan portfolio, which stood at $1.55 billion.
The company’s net interest income for the nine months ended September 30, 2024, was $28.08 million, a decrease of 14.2% compared to the same period in the previous year. This decline was primarily attributable to a 78 basis point increase in the cost of interest-bearing liabilities, which outpaced the 39 basis point increase in the yield on interest-earning assets. The company’s net interest margin for the nine-month period was 1.90%, down from 2.18% in the prior year.
For the three months ended September 30, 2024, Blue Foundry Bancorp recorded a net loss of $4.04 million, compared to a net loss of $1.43 million for the same period in 2023. This increase in net loss was driven by higher interest expense, which rose $2.10 million to $12.45 million, as rates paid on interest-bearing liabilities increased. Net interest income declined $800,000 to $9.09 million.
For the nine months ended September 30, 2024, the company reported a net loss of $9.22 million, compared to a net loss of $4.47 million in the prior year period. The increase in net loss was primarily due to a $4.60 million decline in net interest income, which fell to $28.08 million. Interest income grew $4.90 million to $63.67 million, but interest expense rose $9.50 million to $35.59 million.
The company’s loan portfolio totaled $1.55 billion at September 30, 2024, down $9.70 million from the prior year-end. This decline was driven by decreases in residential and multifamily loans, partially offset by growth in construction, commercial real estate, and consumer loans. Non-performing loans totaled $5.15 million, down from $6.12 million at December 31, 2023.
Deposits grew $73.80 million, or 5.9%, to $1.32 billion at September 30, 2024, primarily due to a $104.60 million, or 17.5%, increase in time deposits, which reached $701.26 million. Non-interest bearing and interest-bearing core deposits declined $30.90 million, or 4.8%, to $617.41 million.
Despite the challenges in the interest rate environment, Blue Foundry Bancorp maintained a strong capital position, with a total risk-based capital ratio of 20.76% and a Tier 1 leverage ratio of 14.11% as of September 30, 2024. These ratios well exceeded the regulatory requirements for a “well-capitalized” institution, underscoring the company’s financial stability and prudent risk management practices.
The company’s asset quality metrics remained robust, with non-performing assets declining to 0.25% of total assets as of September 30, 2024, down from 0.33% a year earlier. The allowance for credit losses as a percentage of total loans stood at 0.84%, reflecting the company’s proactive approach to managing credit risk.
Shareholders’ equity decreased $16.30 million, or 4.6%, to $339.30 million at September 30, 2024. This was driven by $14.35 million in treasury stock repurchases and the year-to-date net loss, partially offset by a $4.25 million improvement in accumulated other comprehensive income.
Liquidity Blue Foundry Bancorp has maintained a strong liquidity position, which has enabled the company to effectively manage its funding costs and capitalize on market opportunities. The company’s flexible balance sheet and proactive management of its securities portfolio have allowed it to optimize yields and manage interest rate risk effectively. This robust liquidity position provides Blue Foundry Bancorp with the financial flexibility to navigate the evolving interest rate environment and pursue strategic growth initiatives.
As of the most recent quarter, the company had $348.5 million in FHLB advances. It also maintained a $30 million line of credit with a correspondent bank and a $48.2 million line of credit with the Federal Reserve Bank of New York, providing ample liquidity. The company’s debt-to-equity ratio stood at 1.027, indicating a balanced capital structure.
Growth Initiatives and Outlook Blue Foundry Bancorp has been actively executing on its strategic initiatives to enhance its commercial banking capabilities and drive sustained growth. The company has been successful in attracting new commercial customers, as evidenced by an 11% increase in commercial deposits year-to-date. This shift towards a more commercially-oriented business model has been a key focus, as the company seeks to diversify its revenue streams and capitalize on the attractive yields in the commercial lending market.
Looking ahead, the company is well-positioned to navigate the evolving interest rate environment. With a strong liquidity position, the company is able to proactively manage its funding costs and leverage its flexible balance sheet to capitalize on opportunities as they arise. The company has also been actively managing its securities portfolio, taking advantage of market conditions to optimize its yields and manage interest rate risk.
Blue Foundry Bancorp’s commitment to innovation and technology has also been a differentiating factor in the marketplace. The company has invested in digital banking capabilities and streamlined its operations to enhance the customer experience and drive efficiency. These strategic investments position the company well to adapt to the changing preferences of its customer base and maintain its competitive edge in the local banking landscape.
For the fourth quarter of 2024, the company expects operating expenses to be in the mid to high $13 million range. Management anticipates an improvement in net interest margin as the company closes loans and reprices deposits lower. The company has a positive outlook for both the fourth quarter and the next year, with a healthy commercial loan pipeline and an expectation that recent and any subsequent Federal Reserve rate cuts will have a positive impact on net interest income.
Regarding the impact of rate cuts, the company stated that as the yield curve returns to a more normal environment, the bank’s results tend to improve. Blue Foundry Bancorp is positioning itself to shift deposits from CDs to core products and have commercial customers utilize their lines, which it believes will allow the company to demonstrate additional value to shareholders.
Despite the challenges posed by the current macroeconomic environment, Blue Foundry Bancorp remains cautiously optimistic about its future prospects. The company’s experienced management team, diversified business model, and strong capital position provide a solid foundation for continued growth and success. As the company navigates the evolving banking landscape, it remains focused on delivering value to its shareholders, customers, and the communities it serves.
Risks and Considerations While Blue Foundry Bancorp has demonstrated resilience and adaptability, the company is not immune to the risks inherent in the banking industry. The company’s financial performance is heavily influenced by interest rate movements, which can impact both its net interest income and asset quality. The company’s commercial lending portfolio is also susceptible to changes in economic conditions, which could lead to increased credit risk and potential losses.
Additionally, the banking industry is subject to a high degree of regulatory scrutiny, and changes in the regulatory environment could impose additional compliance requirements or restrictions on the company’s operations. Blue Foundry Bancorp must remain vigilant in monitoring and adapting to these regulatory changes to maintain its operational efficiency and compliance standards.
Furthermore, the company faces competitive pressures from larger regional and national banks, as well as emerging fintech players, which could challenge its market share and profitability. The company’s ability to retain and attract talented employees, particularly in the areas of commercial banking and technology, will be crucial in maintaining its competitive edge.
Conclusion Blue Foundry Bancorp’s longstanding history, strong financial position, and strategic initiatives position the company well for continued success in the evolving banking landscape. The company’s focus on commercial banking, technological innovation, and customer-centric approach have been key drivers of its growth and differentiation in the market.
Despite the challenges posed by the current interest rate environment and competitive pressures, Blue Foundry Bancorp remains committed to delivering sustainable growth and value to its shareholders. The company’s experienced management team, robust risk management practices, and adaptable business model provide a solid foundation for navigating the industry’s complexities and capitalizing on future opportunities.
As Blue Foundry Bancorp continues to build upon its legacy of community banking and drive innovation, investors can take confidence in the company’s long-term prospects and its ability to create value for all stakeholders. The company’s proactive approach to managing its balance sheet, coupled with its strategic focus on commercial banking and operational efficiency, positions it well to overcome near-term challenges and capitalize on future growth opportunities in the dynamic banking landscape.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.