Could prosperity be just around the corner for Blue Foundry Bancorp?
The $2.1 billion-asset, Rutherford, New Jersey-based company has endured eight consecutive quarters of bottom-line losses, including a $2.7 million loss for the three months ended Dec. 31. However, CEO James Nesci said Wednesday on a conference call with analysts that higher loan yields and lower funding costs "may indicate an inflection point in our net interest margin going forward."
Blue Foundry reported a fourth-quarter margin of 1.89% Wednesday. While that is well below the industry average of 3.19%, according to the Federal Deposit Insurance Corp., it's seven basis points higher than the result for the quarter ended Sept. 30. Blue Foundry is expecting continued margin expansion in 2025, driven by loan growth that should reach high single digits as a percentage of total loans, according to Chief Financial Officer Kelly Pecoraro.
For banks, a wider net interest margin, or NIM, typically translates to increased net interest income. Blue Foundry reported fourth-quarter net interest income totaling $9.5 million, up 3% from a year ago.
Blue Foundry funded $59 million in loans yielding about 7.5% during the fourth quarter, Nesci said. The bank has signed letters of intent for another $60 million of loans yielding about 7.7%.
"It's still a work-in-progress, but at this stage I think things are starting to move in the right direction," Justin Crowley, who covers Blue Foundry for Piper Sandler, said Thursday in an interview. "A lot of what's on the balance sheet now is lower-yielding loans originated at much lower rates. ... As they continue to grow the portfolio, anything they do add should be accretive to loan yields. In tandem with lowering funding costs — which I think you'll see as they have some CD repricings coming up — that's only going to help the margin expand from current levels."
"It seems like things are now moving in the right direction on the margin," Keefe Bruyette and Woods Analyst Christopher O'Connell said Wednesday on the conference call.
Blue Foundry is also seeing positive momentum on the liability side of the balance sheet, with fourth-quarter deposits totaling $1.34 billion, up 8% from a year ago.
Though its antecedents date back to the 1870s, Blue Foundry was founded in 1939 as Boiling Spring Loan and Building Association. It
Since conversion, Blue Foundry's strategy has been to shift away from residential and multifamily lending and toward higher-yielding commercial loans.
"I think they're in the process of de-emphasizing areas like the one-to-four residential mortgage book and multifamily and trying to focus a little bit more on commercial loan production, particularly in the owner-occupied bucket, with the hope being they can bring some funding along with it," Crowley said.
In the wake of the interest rate spike that buffeted the financial services industry in 2022 and 2023, progress has been slow. Commercial-and-industrial loans made up 10% of Blue Foundry's $1.6 billion loan book on Dec. 31, up from 8% a year earlier. At the same time, the company's lengthening string of quarterly losses has
Blue Foundry's most recent profit came in the fourth quarter of 2022, when it reported net income totaling $1.3 million.
