blue-20240930

Please wait

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-40619

BLUE FOUNDRY BANCORP

(Exact name of the registrant as specified in its charter)

Delaware

86-2831373

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification Number)

19 Park Avenue,

Rutherford,

New Jersey

07070

(Address of principal executive offices)

(Zip Code)

(201) 939-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	BLFY	The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging Growth Company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of November 8, 2024 there were 28,522,500 shares issued and 22,796,274 shares outstanding of the Registrant’s Common Stock, par value $0.01 per share.

BLUE FOUNDRY BANCORP

FORM 10-Q

Index


		PAGE
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	CONSOLIDATED BALANCE SHEETS	3
	CONSOLIDATED STATEMENTS OF OPERATIONS	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	5

	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS	8
	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	39
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	46
ITEM 4.	CONTROLS AND PROCEDURES	48
PART II.	OTHER INFORMATION	48
ITEM 1.	LEGAL PROCEEDINGS	48
ITEM 1A.	RISK FACTORS	48
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES. USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES	49
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	49
ITEM 4.	MINE SAFETY DISCLOSURES	49
ITEM 5.	OTHER INFORMATION	49
ITEM 6.	EXHIBITS	50

Part I Financial Information

ITEM 1. FINANCIAL STATEMENTS

BLUE FOUNDRY BANCORP

Consolidated Balance Sheets


	September 30, 2024		December 31, 2023
	(Unaudited)		(Audited)
	(In thousands, except share data )
ASSETS
Cash and cash equivalents	$	76,109	$	46,025
Securities available-for-sale, at fair value	290,806		283,766


Securities held-to-maturity, net (fair value of $29,257 at September 30, 2024 and $28,323 at December 31, 2023, and allowance for credit losses of $122 at September 30, 2024 and $158 at December 31, 2023)	33,119		33,254
FHLB stock and other investments	18,203		20,346

Loans receivable, net of allowance for credit losses of $13,012 at September 30, 2024 and $14,154 at December 31, 2023	1,537,971		1,546,576
Real estate owned, net	—		593
Interest and dividends receivable	8,386		7,595
Premises and equipment, net	30,161		32,475
Right-of-use assets	24,190		25,172

Bank owned life insurance	22,399		22,034
Other assets	13,749		27,127
Total assets	$	2,055,093	$	2,044,963
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits	$	1,318,670	$	1,244,904
Advances from the Federal Home Loan Bank	348,500		397,500
Advances by borrowers for taxes and insurance	9,909		8,929
Lease liabilities	25,870		26,777
Other liabilities	12,845		11,213
Total liabilities	1,715,794		1,689,323
Shareholders’ equity
Preferred stock, $0.01 par value, 10,000,000 authorized: none issued	—		—
Common stock $0.01 par value; 70,000,000 shares authorized; 28,522,500 shares issued at September 30, 2024 and December 31, 2023; 22,990,908 and 24,509,950 shares outstanding at September 30, 2024 and December 31, 2023, respectively	285		285
Additional paid-in capital	276,621		273,991
Retained earnings	155,116		164,340
Treasury stock, at cost: 5,531,592 and 4,012,550 shares at September 30, 2024 and December 31, 2023, respectively	(54,696)		(40,016)
Unallocated common shares held by Employee Stock Ownership Plan	(19,395)		(20,080)
Accumulated other comprehensive loss	(18,632)		(22,880)
Total shareholders’ equity	339,299		355,640
Total liabilities and shareholders’ equity	$	2,055,093	$	2,044,963

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(Dollars in thousands, except share data)
Interest and dividend income:
Loans	$	17,646	$	16,728	$	52,408	$	48,778
Taxable investment income	3,850		3,339		11,150		9,663
Non-taxable investment income	36		106		108		329
Total interest income	21,532		20,173		63,666		58,770
Interest expense:
Deposits	9,712		7,034		27,257		16,361
Borrowed funds	2,733		3,263		8,332		9,686
Total interest expense	12,445		10,297		35,589		26,047
Net interest income	9,087		9,876		28,077		32,723
Provision for (release of) credit losses	248		(717)		(1,049)		(597)
Net interest income after provision for (release of) credit losses	8,839		10,593		29,126		33,320
Non-interest income:
Fees and service charges	272		291		897		833

Gain on sale of loans	—		—		36		159


Other income	115		78		441		241
Total non-interest income	387		369		1,374		1,233
Non-interest expense:
Compensation and benefits	7,306		6,640		22,490		21,552

Occupancy and equipment	2,230		2,104		6,684		6,210

Data processing	1,412		1,473		4,134		4,609

Advertising	87		85		211		234
Professional services	813		646		2,166		2,390


Federal deposit insurance premiums	236		263		629		599

Other expense	1,183		1,183		3,410		3,425
Total non-interest expenses	13,267		12,394		39,724		39,019
Loss before income tax expense	(4,041)		(1,432)		(9,224)		(4,466)
Income tax expense	—		—		—		—
Net loss	$	(4,041)	$	(1,432)	$	(9,224)	$	(4,466)
Basic loss per share	$	(0.19)	$	(0.06)	$	(0.43)	$	(0.18)
Diluted loss per share	$	(0.19)	$	(0.06)	$	(0.43)	$	(0.18)
Weighted average shares outstanding - basic	21,263,482		23,278,490		21,695,895		24,289,599
Weighted average shares outstanding - diluted (1)	21,263,482		23,278,490		21,695,895		24,289,599

(1) The assumed vesting of outstanding restricted stock units had an antidilutive effect on diluted earnings per share due to the Company’s net loss for the 2024 and 2023 periods.

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Net loss	$	(4,041)	$	(1,432)	$	(9,224)	$	(4,466)
Other comprehensive income (loss), net of tax (1):
Unrealized gain (loss) on securities available-for-sale:
Unrealized gain (loss) arising during the period	8,568		(5,926)		7,820		(5,687)

	8,568		(5,926)		7,820		(5,687)
Unrealized (loss) gain on cash flow hedge:
Unrealized (loss) gain arising during the period	(7,940)		3,435		(8,461)		7,144
Reclassification adjustment for gain (loss) included in net loss	1,620		(1,535)		4,882		(3,885)
	(6,320)		1,900		(3,579)		3,259
Post-retirement plans:

Reclassification adjustment for amortization of:

Net actuarial gain (loss)	3		(1)		7		(5)
	3		(1)		7		(5)
Total other comprehensive income (loss), net of tax (1)	2,251		(4,027)		4,248		(2,433)
Comprehensive loss	$	(1,790)	$	(5,459)	$	(4,976)	$	(6,899)

(1) Reflects deferred tax valuation allowance.

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Changes in Shareholders’ Equity

Three Months Ended September 30, 2023 and 2024

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total Shareholders’ Equity
	Shares	Par Value
	(In thousands, except share data)
Balance at June 30, 2023	25,493,422	$	285	$	272,267	$	168,703	$	(31,060)	$	(23,125)	$	(20,536)	$	366,534


Net loss	—	—		—		(1,432)		—		—		—		(1,432)
Other comprehensive loss	—	—		—		—		—		(4,027)		—		(4,027)
Purchase of Treasury stock	(298,210)	—		—		—		(2,835)		—		—		(2,835)
Treasury stock allocated to restricted stock plan	(20,800)	—		246		—		(246)		—		—		—
Compensation cost for stock options and restricted stock	—	—		693		—		—		—		—		693
ESOP shares committed to be released (22,818 shares)	—	—		(12)		—		—		—		228		216
Balance at September 30, 2023	25,174,412	$	285	$	273,194	$	167,271	$	(34,141)	$	(27,152)	$	(20,308)	$	359,149

Balance at June 30, 2024	23,505,357	285		$	275,890	$	159,157	$	(49,229)	$	(20,883)	$	(19,623)	$	345,597


Net loss	—	—		—		(4,041)		—		—		—		(4,041)
Other comprehensive income	—	—		—		—		—		2,251		—		2,251
Purchase of Treasury stock	(521,685)	—		—		—		(5,556)		—		—		(5,556)
Treasury stock allocated to restricted stock plan, net of forfeitures	7,236	—		(88)		—		89		—		—		1
Compensation cost for stock options and restricted stock	—	—		811		—		—		—		—		811
ESOP shares committed to be released (22,818 shares)	—	—		8		—		—		—		228		236
Balance at September 30, 2024	22,990,908	$	285	$	276,621	$	155,116	$	(54,696)	$	(18,632)	$	(19,395)	$	339,299

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Changes in Shareholders’ Equity

Nine Months Ended September 30, 2023 and 2024

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total Shareholders’ Equity
	Shares	Par Value
	(In thousands, except share data)
Balance at December 31, 2022	27,523,219	$	285	$	279,454	$	171,763	$	(12,072)	$	(24,719)	$	(20,993)	$	393,718
Cumulative effect of adopting ASU No. 2016-13	—	—		—		(18)		—		—		—		(18)
Cumulative effect of adopting ASU No. 2022-02	—	—		—		(8)		—		—		—		(8)
Net loss	—	—		—		(4,466)		—		—		—		(4,466)
Other comprehensive loss	—	—		—		—		—		(2,433)		—		(2,433)
Purchase of Treasury stock	(3,060,787)	—		—		—		(30,480)		—		—		(30,480)
Treasury stock allocated to restricted stock plan	711,980	—		(8,411)		—		8,411		—		—		—
Compensation cost for stock options and restricted stock	—	—		2,137		—		—		—		—		2,137
ESOP shares committed to be released (68,454 shares)	—	—		14		—		—		—		685		699
Balance at September 30, 2023	25,174,412	$	285	$	273,194	$	167,271	$	(34,141)	$	(27,152)	$	(20,308)	$	359,149

Balance at December 31, 2023	24,509,950	$	285	$	273,991	$	164,340	$	(40,016)	$	(22,880)	$	(20,080)	$	355,640



Net loss	—	—		—		(9,224)		—		—		—		(9,224)
Other comprehensive income	—	—		—		—		—		4,248		—		4,248
Purchase of Treasury stock	(1,464,390)	—		—		—		(14,348)		—		—		(14,348)
Treasury stock allocated to restricted stock plan, net of forfeitures	(54,652)	—		314		—		(332)		—		—		(18)
Compensation cost for stock options and restricted stock	—	—		2,348		—				—		—		2,348
ESOP shares committed to be released (68,454 shares)	—	—		(32)		—		—		—		685		653
Balance at September 30, 2024	22,990,908	$	285	$	276,621	$	155,116	$	(54,696)	$	(18,632)	$	(19,395)	$	339,299

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
	(In thousands)
Cash flows from operating activities
Net loss	$	(9,224)	$	(4,466)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of premises and equipment	2,350		2,072
Amortization (accretion) of:
Right-of-use asset	2,155		2,109
Deferred loan fees, costs, and discounts, net	(73)		(479)
Premiums and discounts on securities	559		810




Release of provision for credit losses	(1,049)		(597)

Proceeds from sales of loans held for sale	486		2,408
Gains on sale of loans, net	(36)		(159)
Origination of loans held for sale	(450)		(4,684)

Loss on disposal of premises and equipment	3		13
Gain on sale of real estate owned	(123)		—
Increase in bank owned life insurance cash surrender value	(365)		(343)


ESOP and stock-based compensation expense	3,001		2,836

Increase in interest and dividends receivable	(791)		(894)
Decrease in other assets	10,184		2,049
Increase (decrease) in other liabilities	1,028		(3,642)
Change in lease liability	(2,080)		(1,946)
Net cash provided by (used in) operating activities	5,575		(4,913)
Cash flows from investing activities
Net change in loans receivable	25,590		(19,217)
Purchases of residential and consumer loans	(15,805)		(6,804)
Proceeds from sale of real estate owned	716		—
Purchases of securities available-for-sale	(44,560)		—




Proceeds from sales and calls of securities available for sale	—		2,520
Principal payments and maturities on securities available-for-sale	44,952		21,821


Purchase of Federal Home Loan Bank stock	(29,885)		(48,425)
Redemption of Federal Home Loan Bank stock	32,153		43,875
Proceeds from bank owned life insurance	—		582
Proceeds from disposal of fixed assets	—		38
Purchases of premises and equipment	(39)		(4,329)
Net cash provided by (used in) investing activities	13,122		(9,939)
Cash flows from financing activities
Net increase (decrease) in deposits	73,766		(35,758)

Proceeds from advances from Federal Home Loan Bank	782,000		1,848,000
Repayments of advances from Federal Home Loan Bank	(831,000)		(1,756,000)
Net increase in advances by borrowers for taxes and insurance	980		313
Purchase of treasury stock	(14,359)		(30,478)


Net cash provided by financing activities	11,387		26,077
Net increase in cash and cash equivalents	30,084		11,225
Cash and cash equivalents at beginning of period	46,025		41,182
Cash and cash equivalents at end of period	$	76,109	$	52,407

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
	(In thousands)
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	34,949	$	24,794
Taxes	81		36
Supplemental noncash disclosures

Transfers of loans to other real estate owned	—		593
Lease liabilities arising from obtaining right-of-use assets	1,173		2,088

See accompanying notes to the consolidated financial statements.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Blue Foundry Bancorp (the “Company”), and its wholly owned subsidiary, Blue Foundry Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, TrackView LLC and Blue Foundry Investment Company (collectively, the “Company”). All intercompany accounts and transactions have been eliminated in consolidation. Blue Foundry Bancorp owns 100% of the common stock of Blue Foundry Bank.

Segment Reporting: The Company operates as a single operating segment for financial reporting purposes.

Basis of Financial Statement Presentation: The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles. Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Quarterly Reports on Form 10-Q and with Regulation S-X. The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the consolidated balance sheets and the consolidated statements of income for the periods presented. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and revenues and expenses for the period. Actual results could differ from those estimates. Some items in the prior year financial statements may be reclassified to conform to the current presentation. The results of operations and other data presented for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that may be expected for subsequent periods or the full year results. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on March 27, 2024.

The accounting policies of the Company conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1, Summary of Significant Accounting Policies, included in the Company’s 2023 Annual Report on Form 10-K. Except for the below, there have been no changes to the Company’s significant accounting policies since December 31, 2023.

Accounting Standards Not Yet Adopted: As an “emerging growth company” as defined in Title 1 of the Jumpstart Our Business Startups (“JOBS”) Act, the Company elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements were made applicable to private companies.

There are no standards not yet adopted.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SECURITIES

The amortized cost of securities available-for-sale and their estimated fair values at September 30, 2024 and December 31, 2023 are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
September 30, 2024
U.S. Treasury notes	$	36,622	$	62	$	(1,067)	$	35,617
Corporate bonds	77,153		227		(3,675)		73,705
U.S. Government agency obligations	1,125		—		(85)		1,040
Obligations issued by U.S. states and their political subdivisions	6,373		—		(243)		6,130
Mortgage-backed securities:
Residential	167,025		585		(17,879)		149,731
Multifamily	10,955		—		(626)		10,329
Asset-backed securities	14,432		13		(191)		14,254
Total	$	313,685	$	887	$	(23,766)	$	290,806


December 31, 2023
U.S. Treasury notes	$	36,935	$	—	$	(1,875)	$	35,060
Corporate bonds	82,248		56		(5,681)		76,623
U.S. Government agency obligations	11,519		—		(379)		11,140
Obligations issued by U.S. states and their political subdivisions	6,423		—		(228)		6,195
Mortgage-backed securities:
Residential	149,808		—		(21,266)		128,542
Multifamily	12,522		—		(999)		11,523
Asset-backed securities	15,010		—		(327)		14,683
Total	$	314,465	$	56	$	(30,755)	$	283,766

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost of securities held-to-maturity, allowance for credit losses and their estimated fair values at September 30, 2024 and December 31, 2023, are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
September 30, 2024
Corporate bonds	$	18,600	$	—	$	(2,989)	$	15,611

Asset-backed securities	14,641		—		(995)		13,646
Total	$	33,241	$	—	$	(3,984)	$	29,257
Allowance for credit loss	(122)
	$	33,119
December 31, 2023
Corporate bonds	$	18,600	$	—	$	(3,593)	$	15,007
Asset-backed securities	14,812		—		(1,496)		13,316
Total	$	33,412	$	—	$	(5,089)	$	28,323
Allowance for credit loss	(158)
	$	33,254

At September 30, 2024 and December 31, 2023, the allowance for credit losses on securities held-to-maturity totaled $122 thousand and $158 thousand respectively, and related to the corporate bonds. The asset-backed securities are in a AAA tranche determined by a third party. No loss is expected on these securities.

Securities pledged at September 30, 2024 and December 31, 2023 had a carrying amount of $58.6 million and $11.7 million, respectively, and were pledged to our credit line with the Federal Reserve Bank and to secure public deposits.

The amortized cost and fair value of debt securities are shown below by contractual maturity as of September 30, 2024. Expected maturities on mortgage and asset-backed securities generally exceed 20 years; however, they may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.


	Amortized Cost (1)		Estimated Fair Value
	(In thousands)
Available-for-sale
Due in one year or less	$	42,941	$	42,796
Due from one year to five years	28,331		27,878
Due from five to ten years	43,011		40,700
Due after ten years	6,990		5,118
Mortgage-backed and asset-backed securities	192,412		174,314
Total	$	313,685	$	290,806
Held-to-maturity


Due from five to ten years	18,600		15,611

Mortgage-backed and asset-backed securities	14,641		13,646
Total	$	33,241	$	29,257

(1) Excludes the allowance for credit losses on held-to-maturity securities at September 30, 2024.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Credit Quality Indicators

Credit ratings are a key measure for estimating the probability of a bond’s default and for monitoring credit quality on an on-going basis. For bonds other than U.S. Treasuries and bonds issued or guaranteed by U.S. government agencies, credit ratings issued by one or more nationally recognized statistical rating organization are considered in conjunction with an assessment by the Company’s management. Investment grade reflects a credit quality of BBB- or above. None of the Company’s securities are on non-accrual status, nor are any past due.

The table below indicates the credit profile of the Company’s debt securities held-to-maturity at amortized cost for the periods shown.


September 30, 2024	AAA		A1		BBB+		BBB		BBB-		Total
	(In thousands)

Corporate bonds	$	—	$	—	$	1,600	$	16,000	$	1,000	$	18,600





Asset-backed securities	8,718		5,923		—		—		—		14,641
Total held-to-maturity	$	8,718	$	5,923	$	1,600	$	16,000	$	1,000	$	33,241


December 31, 2023	AAA		A1		BBB+		BBB		BBB-		Total
	(In thousands)

Corporate bonds	$	—	$	—	$	1,600	$	11,000	$	6,000	$	18,600





Asset-backed securities	8,844		5,968		—		—		—		14,812
Total held-to-maturity	$	8,844	$	5,968	$	1,600	$	11,000	$	6,000	$	33,412

At September 30, 2024 and December 31, 2023, there was one security with a value of $2.0 million included in the BBB rating that had a split rating.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize available-for-sale securities with unrealized losses at September 30, 2024 and December 31, 2023, aggregated by major security type and length of time in a continuous loss position.


	Less than 12 Months				12 Months or More				Total
	Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Number of Securities	Unrealized Losses		Estimated Fair Value
	(Dollars in thousands)
September 30, 2024
U.S. Treasury notes	$	—	$	—	$	(1,067)	$	25,867	3	$	(1,067)	$	25,867
Corporate bonds	(9)		9,994		(3,666)		43,022		23	(3,675)		53,016
U.S. Government agency obligations	—		—		(85)		1,040		2	(85)		1,040
Obligations issued by U.S. states and their political subdivisions	—		—		(243)		6,130		5	(243)		6,130
Mortgage-backed securities:
Residential	—		—		(17,879)		120,805		42	(17,879)		120,805
Multifamily	(3)		2,120		(623)		8,209		5	(626)		10,329
Asset-backed securities	—		5,000		(191)		4,242		3	(191)		9,242
Total	$	(12)	$	17,114	$	(23,754)	$	209,315	83	$	(23,766)	$	226,429





December 31, 2023
U.S. Treasury notes	$	—	$	—	$	(1,875)	$	35,060	4	$	(1,875)	$	35,060
Corporate bonds	(7)		8,260		(5,674)		61,156		30	(5,681)		69,416
U.S. Government agency obligations	—		—		(380)		11,140		3	(380)		11,140
Obligations issued by U.S. states and their political subdivisions	—		—		(228)		6,195		5	(228)		6,195
Mortgage-backed securities:
Residential	—		2		(21,266)		128,535		48	(21,266)		128,537
Multifamily	—		—		(999)		11,524		6	(999)		11,524
Asset-backed securities	(21)		4,991		(305)		4,680		3	(326)		9,671
Total	$	(28)	$	13,253	$	(30,727)	$	258,290	99	$	(30,755)	$	271,543

Of the 83 available-for-sale securities in an unrealized loss position at September 30, 2024, 52 are comprised of U.S. Government agency obligations, Treasury notes, and mortgage-backed securities. These securities were all issued by U.S. Government-sponsored entities and agencies, which the government has affirmed its commitment to support. Corporate bonds, obligations issued by U.S. states and their political subdivisions and asset-backed securities in an unrealized loss position all experienced a decline in fair value, which is attributable to changes in interest rates and liquidity, not credit quality. The Company also does not intend to sell these securities, nor does it foresee being required to sell them before the anticipated recovery or maturity.

The following tables summarizes held-to-maturity securities with unrealized losses at September 30, 2024 and December 31, 2023, aggregated by major security type and length of time in a continuous loss position.


	Less than 12 Months				12 Months or More				Total
	Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Number of Securities	Unrealized Losses		Estimated Fair Value
	(Dollars in thousands)
September 30, 2024
Corporate Bonds	—		—		(2,989)		15,611		9	(2,989)		15,611
Asset-backed securities	—		—		(995)		13,646		2	(995)		13,646
Total	$	—	$	—	$	(3,984)	$	29,257	11	$	(3,984)	$	29,257

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Less than 12 Months				12 Months or More				Total
	Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Number of Securities	Unrealized Losses		Estimated Fair Value
	(Dollars in thousands)
December 31, 2023
Corporate Bonds	—		—		(3,593)		15,007		9	(3,593)		15,007
Asset-backed securities	—		—		(1,496)		13,316		2	(1,496)		13,316
Total	$	—	$	—	$	(5,089)	$	28,323	11	$	(5,089)	$	28,323

The held-to-maturity securities in an unrealized loss position at September 30, 2024, are corporate bonds and asset-backed securities. Unrealized losses are attributable to changes in interest rates and liquidity, not credit quality. The Company also does not intend to sell these securities, nor does it foresee being required to sell them before the anticipated recovery or maturity.

NOTE 3 – LOANS RECEIVABLE

A summary of loans receivable, net at September 30, 2024 and December 31, 2023, follows:


	September 30, 2024		December 31, 2023
	(In thousands)
Residential	$	516,754	$	550,929
Multifamily	666,304		682,564
Commercial real estate	241,711		232,505
Construction	80,081		60,414
Junior liens	24,174		22,503
Commercial and industrial	14,228		11,768
Consumer and other	7,731		47
Total loans	1,550,983		1,560,730


Less: Allowance for credit losses (1)	13,012		14,154
Loans receivable, net	$	1,537,971	$	1,546,576

(1) For more information, see Note 4 - Allowance for Credit Losses.

Loans are recorded at amortized cost, which includes principal balance, net deferred fees or costs, premiums and discounts. The Company elected to exclude accrued interest receivable from amortized cost. Accrued interest receivable is reported separately in the consolidated balance sheets and totaled $6.5 million and $6.1 million at September 30, 2024 and December 31, 2023, respectively. Loan origination fees and certain direct loan origination costs are deferred and the net fee or cost is recognized in interest income as an adjustment of yield. At September 30, 2024 and December 31, 2023, net deferred loan fees totaled $2.2 million and $2.0 million, respectively.

The portfolio classes in the above table have unique risk characteristics with respect to credit quality:

•Payment on multifamily and commercial real estate mortgages is driven principally by operating results of the managed properties or underlying business and secondarily by the sale or refinance of such properties. Both primary and secondary sources of repayment and the value of the properties in liquidation, may be affected to a greater extent by adverse conditions in the real estate market or the economy in general.

•Properties underlying construction loans often do not generate sufficient cash flows to service debt and thus repayment is subject to the ability of the borrower and, if applicable, guarantors, to complete development or construction of the property and carry the project, often for extended periods of time. As a result, the performance of these loans is contingent upon future events whose probability at the time of origination is uncertain.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

•Commercial and industrial (“C&I”) loans include C&I revolving lines of credit, term loans, SBA 7a loans and to a lesser extent, Paycheck Protection Program (“PPP”) loans. Payments on C&I loans are driven principally by the cash flows of the businesses and secondarily by the sale or refinance of any collateral securing the loans. Both the cash flow and value of the collateral in liquidation may be affected by adverse general economic conditions.

•The ability of borrowers to service debt in the residential, junior liens and consumer loan portfolios is generally subject to personal income which may be impacted by general economic conditions, such as increased unemployment levels. These loans are predominately collateralized by first and second liens on single family properties. If a borrower cannot maintain the loan, the Company’s ability to recover against the collateral in sufficient amount and in a timely manner may be significantly influenced by market, legal and regulatory conditions.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the quality and realizable value of collateral, if any, and the ability of borrowers to service their debts such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis is performed whenever credit is extended, renewed, or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans. The Company used the following definitions for risk ratings for loan classification:

Pass – Loans classified as pass are loans performing under the original contractual terms, do not currently pose any identified risk and can range from the highest to pass/watch quality, depending on the degree of potential risk.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor, or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. They are characterized by a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loss – Assets classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset even though partial recovery may be effected in the future.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the risk category of loans by class of loan and vintage as of September 30, 2024:


	Term Loans by Origination Year
	2024		2023		2022		2021		2020		Pre-2020		Revolving Loans		Total
	(in thousands)
Residential
Pass	$	10,095	$	12,976	$	92,391	$	103,338	$	13,975	$	279,092	$	—	$	511,867
Special mention	—		—		—		—		—		647		—		647
Substandard	—		—		—		—		—		4,240		—		4,240


Total	10,095		12,976		92,391		103,338		13,975		283,979		—		516,754
Multifamily
Pass	4,307		16,989		279,121		150,019		34,775		180,968		—		666,179

Substandard	—		—		—		—		—		125		—		125


Total	4,307		16,989		279,121		150,019		34,775		181,093		—		666,304
Commercial real estate
Pass	15,748		26,630		116,483		14,564		14,747		52,692		—		240,864
Special mention	—		—		—		—		—		847		—		847



Total	15,748		26,630		116,483		14,564		14,747		53,539		—		241,711
Construction
Pass	4,198		26,050		32,343		17,490		—		—		—		80,081




Total	4,198		26,050		32,343		17,490		—		—		—		80,081
Junior liens
Pass	4,101		5,046		5,080		1,210		227		8,466		—		24,130

Substandard	—		—		—		—		—		44		—		44


Total	4,101		5,046		5,080		1,210		227		8,510		—		24,174
Commercial and industrial
Pass	5,929		5,966		97		1,520		—		—		—		13,512

Substandard	—		701		—		15		—		—		—		716


Total	5,929		6,667		97		1,535		—		—		—		14,228
Consumer and other
Pass	7,701		—		—		—		—		—		30		7,731




Total	7,701		—		—		—		—		—		30		7,731
Total gross loans	$	52,079	$	94,358	$	525,515	$	288,156	$	63,724	$	527,121	$	30	$	1,550,983

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the risk category of loans by class of loan and vintage as of December 31, 2023:


	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Pre-2019		Revolving Loans		Total
	(in thousands)
Residential
Pass	$	13,338	$	98,007	$	109,193	$	14,315	$	18,460	$	291,069	$	—	$	544,382
Special mention	—		—		—		—		—		663		—		663
Substandard	—		—		—		—		—		5,884		—		5,884


Total	13,338		98,007		109,193		14,315		18,460		297,616		—		550,929
Multifamily
Pass	17,144		281,906		158,705		35,407		56,739		132,517		—		682,418

Substandard	—		—		—		—		—		146		—		146


Total	17,144		281,906		158,705		35,407		56,739		132,663		—		682,564
Commercial real estate
Pass	26,610		118,247		14,785		15,080		5,386		51,493		—		231,601
Special mention	—		—		—		—		—		904		—		904



Total	26,610		118,247		14,785		15,080		5,386		52,397		—		232,505
Construction
Pass	22,798		21,067		16,549		—		—		—		—		60,414




Total	22,798		21,067		16,549		—		—		—		—		60,414
Junior liens
Pass	5,359		5,234		1,232		296		1,773		8,560		—		22,454

Substandard	—		—		—		—		—		49		—		49


Total	5,359		5,234		1,232		296		1,773		8,609		—		22,503
Commercial and industrial
Pass	7,055		105		4,492		77		—		—		—		11,729

Substandard	—		—		39		—		—		—		—		39


Total	7,055		105		4,531		77		—		—		—		11,768
Consumer and other
Pass	25		—		—		—		—		—		22		47




Total	25		—		—		—		—		—		22		47
Total gross loans	$	92,329	$	524,566	$	304,995	$	65,175	$	82,358	$	491,285	$	22	$	1,560,730

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Past Due and Non-accrual Loans

The following table presents the recorded investment in past due and current loans by loan portfolio class as of September 30, 2024 and December 31, 2023:


	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current		Total Loans Receivable
	(In thousands)
September 30, 2024
Residential	$	629	$	425	$	3,913	$	4,967	$	511,787	$	516,754
Multifamily	—		—		—		—		666,304		666,304
Commercial real estate	—		—		—		—		241,711		241,711
Construction	—		—		—		—		80,081		80,081
Junior liens	—		150		—		150		24,024		24,174
Commercial and industrial	—		—		15		15		14,213		14,228
Consumer and other	—		—		—		—		7,731		7,731
Total	$	629	$	575	$	3,928	$	5,132	$	1,545,851	$	1,550,983

December 31, 2023
Residential	$	887	$	752	$	3,926	$	5,565	$	545,364	$	550,929
Multifamily	—		—		—		—		682,564		682,564
Commercial real estate	—		—		—		—		232,505		232,505
Construction	—		—		—		—		60,414		60,414
Junior liens	—		—		49		49		22,454		22,503
Commercial and industrial	—		—		39		39		11,729		11,768
Consumer and other	—		—		—		—		47		47
Total	$	887	$	752	$	4,014	$	5,653	$	1,555,077	$	1,560,730

The following tables presents information on non-accrual loans at September 30, 2024 and December 31, 2023:


	Non-accrual		Interest Income Recognized on Non-accrual Loans		Amortized Cost Basis of Loans > 90 Day Past Due and Still Accruing		Amortized Cost Basis of Non-accrual Loans Without Related Allowance
September 30, 2024	(In thousands)
Residential	$	4,261	$	17	$	—	$	4,261
Multifamily	125		7		—		125


Junior liens	44		7		—		44
Commercial and industrial	716		—		—		716

Total	$	5,146	$	31	$	—	$	5,146




December 31, 2023
Residential	$	5,884	$	—	$	—	$	5,884
Multifamily	146		—		—		146


Junior liens	49		—		—		49
Commercial and industrial	39		—		—		39

Total	$	6,118	$	—	$	—	$	6,118

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company had no loans held-for-sale at September 30, 2024 and December 31, 2023. Gains and losses on sales of loans are specifically identified and accounted for in accordance with U.S. GAAP.

Modifications made to borrowers experiencing financial difficulty may include principal forgiveness, interest rate reductions, other than insignificant payment delays, terms extensions or a combination thereof intended to minimize economic loss and to avoid foreclosure or repossession of collateral. If the borrower has demonstrated performance under the previous terms and our underwriting process show the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest.

There were no modifications to borrowers experiencing financial difficulty in the third quarter of 2024. The following table presents the amortized cost basis at September 30, 2024, of loan modifications to borrowers experiencing financial difficulty during the nine months ended September 30, 2024, disaggregated by type of modification.



	Payment Delays		Term Extensions		Total Principal		% of Total Class of Loans
	(Dollars in thousands)





Commercial and industrial	$	701	$	—	$	701	4.93	%

Total	$	701	$	—	$	701	0.05	%


						Types of Modifications






Commercial and industrial						Deferral of three payments

The following table presents the amortized cost basis at September 30, 2023, of loan modifications to borrowers experiencing financial difficulty during the three months ended September 30, 2023, disaggregated by type of modification.



	Payment Delays		Term Extensions		Total Principal		% of Total Class of Loans
	(Dollars in thousands)
Residential	$	1,158	$	—	$	1,158	0.20	%






Total	$	1,158	$	—	$	1,158	0.07	%


						Types of Modifications

Residential						Amortize past due balances over the remaining life of the loans

The following table presents the amortized cost basis of loans to borrowers experiencing financial difficulty at September 30, 2023 that were modified during the nine months ended September 30, 2023, disaggregated by type of modification.


	Payment Delays		Term Extensions		Total Principal		% of Total Class of Loans
	(Dollars in thousands)
Residential	$	1,910	$	374	$	2,284	0.40	%






Total	$	1,910	$	374	$	2,284	0.15	%


						Types of Modifications
Residential						Term extensions of 3 months
						Amortize past due balances over the remaining life of the loans

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the payment status and amortized cost basis at September 30, 2024, of loans that were modified during the twelve-month period ended September 30, 2024.


	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total
	(In thousands)
Residential	$	795	$	—	$	—	$	—	$	795




Commercial and industrial	701		—		—		—		701

Total	$	1,496	$	—	$	—	$	—	$	1,496

The following table presents the payment status and amortized cost basis at September 30, 2023, of loans that were modified during the nine-month period ended September 30, 2023.


	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total
	(In thousands)
Residential	$	2,282	$	—	$	—	$	—	$	2,282






Total	$	2,282	$	—	$	—	$	—	$	2,282

The Company had $3.9 million and $4.0 million in consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process at September 30, 2024, and December 31, 2023, respectively. At September 30, 2024, the Company had no other real estate owned and reported one property totaling $593 thousand at December 31, 2023.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES

Allowance for Credit Losses - Loans

The allowance for credit losses on loans is summarized in the following table:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Balance at beginning of period	$	13,027	$	14,413	$	14,154	$	13,400
Impact of adopting ASU 2016-13 and ASU 2022-02	—		—		—		668
Charge-offs	(12)		(29)		(45)		(47)
Recoveries	2		2		10		3
Net charge-offs	(10)		(27)		(35)		(44)
Recovery of credit loss on loans	(5)		(514)		(1,107)		(152)
Balance at end of period	$	13,012	$	13,872	$	13,012	$	13,872

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the activity in the Company’s allowance for credit losses by class of loans based on the analysis performed for the three months ended September 30, 2024 and 2023:


	Balance at June 30, 2024		Charge-offs		Recoveries		(Recovery of) Provision for Credit Loss - Loans		Balance at September 30, 2024
	(In thousands)
Residential	$	1,825	$	—	$	—	$	17	$	1,842
Multifamily	6,677		—		—		(84)		6,593
Commercial real estate	3,696		—		—		(36)		3,660
Construction	636		—		—		14		650
Junior liens	84		—		—		4		88
Commercial and industrial	108		—		—		45		153
Consumer and other	1		(12)		2		35		26

Total	$	13,027	$	(12)	$	2	$	(5)	$	13,012

Consumer and other charge-offs relate to overdrafts in the three months ended September 30, 2024, which originated in the second or third quarter of 2024, as it is our policy to charge these off within 60 days of occurrence.


	Balance at June 30, 2023		Charge-offs		Recoveries		(Recovery of) Provision for Loan Loss		Balance at September 30, 2023
	(In thousands)
Residential	$	1,994	$	(18)	$	—	$	(10)	$	1,966
Multifamily	7,017		—		—		(194)		6,823
Commercial real estate	3,813		—		—		(85)		3,728
Construction	1,428		—		—		(261)		1,167
Junior liens	50		—		—		4		54
Commercial and industrial	111		—		—		23		134
Consumer and other	—		(11)		2		9		—

Total	$	14,413	$	(29)	$	2	$	(514)	$	13,872

Consumer and other charge-offs relate to overdrafts in the three months ended September 30, 2023, which originated in the second or third quarter of 2023, as it is our policy to charge these off within 60 days of occurrence.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the activity in the Company’s allowance for credit losses by class of loans based on the analysis performed for the nine months ended September 30, 2024 and 2023:


	Balance at December 31, 2023		Charge-offs		Recoveries		(Recovery of) Provision for Credit Loss - Loans		Balance at September 30, 2024
	(In thousands)
Residential	$	1,968	$	—	$	—	$	(126)	$	1,842
Multifamily	7,046		—		—		(453)		6,593
Commercial real estate	3,748		—		—		(88)		3,660
Construction	1,222		—		—		(572)		650
Junior liens	76		—		—		12		88
Commercial and industrial	94		—		—		59		153
Consumer and other	—		(45)		10		61		26

Total	$	14,154	$	(45)	$	10	$	(1,107)	$	13,012

Consumer and other charge-offs relate to overdrafts in the nine months ended September 30, 2024, which originated in the last quarter of 2023 or the first or third quarter of 2024, as it is our policy to charge these off within 60 days of occurrence.


	Balance at December 31, 2022		Impact of adopting ASU 2016-13		Charge-offs		Recoveries		(Recovery of) Provision for Loan Loss		Balance at September 30, 2023
	(In thousands)
Residential	$	2,264	$	(183)	$	(18)	$	—	$	(97)	$	1,966
Multifamily	5,491		2,057		—		—		(725)		6,823
Commercial real estate	3,357		146		—		—		225		3,728
Construction	1,697		(832)		—		—		302		1,167
Junior liens	451		(405)		—		—		8		54
Commercial and industrial	47		(23)		—		—		110		134
Consumer and other	—		1		(29)		3		25		—
Unallocated	93		(93)		—		—		—		—
Total	$	13,400	$	668	$	(47)	$	3	$	(152)	$	13,872

Consumer and other charge-offs relate to overdrafts in the nine months ended September 30, 2023, which originated in the last quarter of 2022 or the second or third quarter of 2023, as it is our policy to charge these off within 60 days of occurrence.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the allocation of allowance for loan losses and the related recorded investment, including deferred fees and costs, in loans by loan portfolio segment, disaggregated based on the impairment methodology at September 30, 2024 and December 31, 2023:


	Loans						Allowance for Credit Losses on Loans
September 30, 2024	Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total
	(In thousands)
Residential	$	4,240	$	512,514	$	516,754	$	—	$	1,842	$	1,842
Multifamily	125		666,179		666,304		—		6,593		6,593
Commercial real estate	—		241,711		241,711		—		3,660		3,660
Construction	—		80,081		80,081		—		650		650
Junior liens	44		24,130		24,174		—		88		88
Commercial and industrial (1)	701		13,527		14,228		—		153		153
Consumer and other	—		7,731		7,731		—		26		26

Total	$	5,110	$	1,545,873	$	1,550,983	$	—	$	13,012	$	13,012

(1) Includes PPP loans which carry the federal guarantee of the SBA and do not have an allowance for credit losses.


	Loans						Allowance for Credit Losses on Loans
December 31, 2023	Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total
	(In thousands)
Residential	$	5,721	$	545,208	$	550,929	$	—	$	1,968	$	1,968
Multifamily	146		682,418		682,564		—		7,046		7,046
Commercial real estate	—		232,505		232,505		—		3,748		3,748
Construction	—		60,414		60,414		—		1,222		1,222
Junior liens	49		22,454		22,503		—		76		76
Commercial and industrial (1)	—		11,768		11,768		—		94		94
Consumer and other	—		47		47		—		—		—
Unallocated	—		—		—		—		—		—
Total	$	5,916	$	1,554,814	$	1,560,730	$	—	$	14,154	$	14,154

(1) Includes PPP loans which carry the federal guarantee of the SBA and do not have an allowance for credit losses.

Allowance for Credit Losses - Securities

At September 30, 2024 and December 31, 2023, the balance of the allowance of credit losses on securities was $122 thousand and $158 thousand, respectively. The Company recorded a decrease in provision for credit losses on held-to-maturity securities of $11 thousand and $36 thousand for the three and nine months ended September 30, 2024, respectively, and a provision for credit losses on held-to-maturity securities of $2 thousand for both the three and nine months ended September 30, 2023. In addition, the Company recorded an allowance of credit losses on securities of $170 thousand upon adoption of ASU 2016-13 on January 1, 2023. Accrued interest receivable on securities is reported as a component of accrued interest receivable on the consolidated balance sheets and totaled $1.9 million and $1.5 million at September 30, 2024 and December 31, 2023, respectively. The Company made the election to exclude accrued interest receivable from the estimate of credit losses on securities.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Credit Losses - Off-Balance-Sheet Exposures

The allowance for credit losses on off-balance-sheet exposures is reported in other liabilities in the consolidated balance sheets. The liability represents an estimate of expected credit losses arising from off-balance-sheet exposures such as letters of credit, guarantees and unfunded loan commitments. The process for measuring lifetime expected credit losses on these exposures is consistent with that for loans as discussed above, but is subject to an additional estimate reflecting the likelihood that funding will occur. No liability is recognized for off-balance-sheet credit exposures that are unconditionally cancellable by the Company. Adjustments to the liability are reported as a component of provision for credit losses.

At September 30, 2024 and December 31, 2023, the balance of the allowance for credit losses for off-balance-sheet exposures was $397 thousand and $303 thousand, respectively. The Company recorded a provision for credit loss on off-balance-sheet exposures of $264 thousand and $94 thousand for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023, the Company recorded a recovery of provision for credit loss on off-balance-sheet exposures of $201 thousand and $443 thousand, respectively. The Company also recorded a decrease in the allowance for credit losses for off-balance-sheet exposures of $811 thousand upon adoption of ASU 2016-13 on January 1, 2023.

NOTE 5 – LEASES

The Company leases certain office space, land and equipment under operating leases. These leases have original terms ranging from one year to 40 years. Operating lease liabilities and right-of-use assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term.

The Company had the following related to operating leases:


		September 30, 2024			December 31, 2023
	(Dollars in thousands)
Right-of-use assets		$	24,190		$	25,172
Lease liabilities		25,870			26,777
Weighted average remaining lease term for operating leases		9.6 years			10.3 years
Weighted average discount rate used in the measurement of lease liabilities		2.54		%	2.40		%

The following table is a summary of the Company’s components of net lease cost for the three and nine months ended September 30, 2024 and 2023. The variable lease cost primarily represents variable payments such as common area maintenance and utilities.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Operating lease cost	$	882	$	873	$	2,635	$	2,588
Finance lease cost	—		—		—		4
Variable lease cost	75		75		233		202
Total lease cost included as a component of occupancy and equipment	$	957	$	948	$	2,868	$	2,794

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents supplemental cash flow information related to operating leases:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	923	$	894	$	2,792	$	2,596
Operating lease liabilities arising from obtaining right-of-use assets (non-cash):
Operating leases	$	311	$	—	$	1,173	$	2,088

Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2024 are as follows:


Through September 30,	(In thousands)
2024	$	1,968
2025	3,295
2026	3,253
2027	3,133
2028	2,785
Thereafter	14,656
Total undiscounted lease payments	29,090
Less: imputed interest	3,220
Total	$	25,870

NOTE 6 – DEPOSITS

Deposits at September 30, 2024 and December 31, 2023 are summarized as follows:


	September 30, 2024		December 31, 2023
	(In thousands)
Non-interest bearing deposits	$	22,254	$	27,739
NOW and demand accounts	357,503		361,139
Savings	237,651		259,402
Time deposits	701,262		596,624
Total	$	1,318,670	$	1,244,904

Money market accounts are included within the NOW and demand accounts and savings captions. Included in time deposits are brokered deposits totaling $125.0 million at both September 30, 2024 and December 31, 2023.

Time deposits mature as follows for the years ending December 31:


	(In thousands)
Remainder of 2024	$	310,382
2025	381,611
2026	4,335
2027	2,560
2028	1,803
2029	571
	$	701,262

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCK-BASED COMPENSATION

Employee Stock Ownership Plan

The Company maintains an Employee Stock Ownership Plan (“ESOP”), a tax-qualified plan designed to invest primarily in the Company’s common stock. The ESOP provides employees with the opportunity to receive a funded retirement benefit from the Bank, based primarily on the value of the Company’s common stock.

The ESOP borrowed funds from the Company to purchase 2,281,800 shares of stock at $10 per share. The loan is secured by the shares purchased, which are held until allocated to participants. Shares are released for allocation to participants as loan payments are made. Loan payments are principally funded by discretionary cash contributions by the Bank, as well as dividends, if any, paid to the ESOP on unallocated shares. When loan payments are made, ESOP shares are allocated to participants at the end of the plan year (December 31) based on relative compensation, subject to federal tax law limits. Participants receive the allocated vested shares at the end of employment. Dividends on allocated shares, if any, increase participants accounts.

At September 30, 2024, the principal balance on the ESOP loan was $20.6 million. There were no contributions to the ESOP during the three and nine months ended September 30, 2024, as loan payments are made annually during the fourth quarter of each year. ESOP shares are committed to be released from unallocated and compensation expense is recognized over the service period. At September 30, 2024 and December 31, 2023, there were 2,007,984 unallocated shares and 273,816 shares allocated to participants. The fair value of unallocated shares at September 30, 2024 and December 31, 2023 was $20.6 million and $19.4 million, respectively, computed using the closing trading price of the Company’s common stock on each date.

For the three and nine months ended September 30, 2024, ESOP compensation expense for the shares committed to be released from unallocated was $236 thousand and $653 thousand, respectively. Shares committed to be released from unallocated was 22,818 and 68,454 for the three and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, ESOP compensation expense for the shares committed to be released from unallocated was $216 thousand and $699 thousand, respectively. Shares committed to be released from unallocated total 22,818 and 68,454 for three and nine months ended September 30, 2023.

Equity Incentive Plan

At the annual meeting held on August 25, 2022, shareholders of the Company approved the Blue Foundry Bancorp 2022 Equity Incentive Plan (“Equity Plan”) which provides for the granting of up to 3,993,150 shares (1,140,900 restricted stock awards and 2,852,250 stock options) of the Company’s common stock.

Restricted shares granted under the Equity Plan generally vest in equal installments, over a service period between five and seven years beginning one year from the date of grant. Additionally, certain restricted shares awarded can be performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. The vesting of the awards accelerate upon death, disability or an involuntary termination at or following a change in control. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determine the fair value of restricted shares under the Equity Plan. Management recognizes compensation expense for the fair value of time-based restricted shares on a straight-line basis over the requisite service period. Performance based awards are expensed based on the fair value of the shares and the probability of achieving the performance goals.

Stock options granted under the Equity Plan generally vest in equal installments, over a service period between five and seven years beginning one year from the date of grant. The vesting of the options accelerate upon death, disability or an involuntary termination at or following a change in control. Stock options were granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price and have an expiration period of ten years.

No stock options were granted during the third quarter of 2024. There were 48,133 stock options granted during the first nine months of 2024. The fair value of stock options granted during the first quarter of 2024 were estimated utilizing the Black-Scholes option pricing model: an expected life of 6.50 years, risk-free rate of 3.94%, volatility of 32.26% and a dividend yield of 0.84%. There were no stock options granted during the three and nine months ended September 30, 2023. Due to the limited historical information of the Company’s stock, management considered the weighted historical volatility of the Company and similar entities for an appropriate period in determining the

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

volatility rate used in the estimation of fair value. The expected life of the stock option was estimated using the simplified method. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company recognizes compensation expense for the fair values of these awards, which have straight-line vesting, on a straight-line basis over the requisite service period of the awards. Upon exercise of vested options, management expects to draw on treasury stock as the source for shares.

The following is a summary of the Company’s stock option activity and related information for the nine months ended September 30, 2024:


	Number of Stock Options	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Outstanding - December 31, 2023	2,475,363	$	4.12	$	11.65	8.8
Granted	48,133	3.67		9.95		6.5

Forfeited	(227,826)	4.23		11.73
Expired	(37,045)	4.23		11.73
Outstanding - September 30, 2024	2,258,625	$	4.10	$	11.60	8.0
Exercisable - September 30, 2024	509,118

Expected future expense relating to the non-vested options outstanding as of September 30, 2024 is $6.3 million over a weighted average period of 4.5 years.

On September 18, 2024 the Company granted to employees, under the 2022 Equity Incentive plan, 10,000 restricted stock awards with a total grant-date fair value of $109 thousand. This grant vest ratably over a three-year period.

In addition, during the first quarter of 2024, the Company granted to directors and employees, under the 2022 Equity Incentive Plan, 184,625 restricted stock awards with a total grant-date fair value of $1.8 million. Of these grants, 2,900 vest one year from the date of grant, 19,255 and 162,470 vest in equal installments over five and six years, respectively, beginning one year from the date of grant. The Company also issued 193,070 performance-based restricted stock awards to its officers with a total grant date fair value of $1.8 million. Vesting of the performance-based restricted stock units will be based on achievement of certain levels of loan growth, deposit growth and net interest margin and will convert to a four-year time vest after the three-year measurement period ending December 31, 2026. At the end of the performance period, the number of actual shares to be awarded may vary between 0% and 100% of target amounts.

During the first quarter of 2024, 347,640 of performance-based restricted stock awards were forfeited when none of the performance target metrics were met. This forfeiture amount of performance shares is included in the total forfeited restricted shares for the nine months ended September 30, 2024, as shown in the table below.

The following is a summary of the status of the Company’s restricted shares as of September 30, 2024 and changes therein during the nine months ended:


	Number of Shares Awarded	Weighted Average Grant Date Fair Value
Outstanding - December 31, 2023	944,262	$	11.88
Granted	387,695	9.55
Forfeited	(442,347)	11.76
Vested	(115,415)	11.76

Outstanding - September 30, 2024	774,195	$	10.80

Expected future expense relating to the non-vested restricted shares outstanding as of September 30, 2024 is $7.6 million over a weighted average period of 4.7 years.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the share-based compensation expense for the three and nine months ended September 30, 2024 and 2023.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Stock option expense	$	373	$	403	$	1,087	$	1,199
Restricted stock expense	438		290		1,261		938
Total share-based compensation expense	$	811	$	693	$	2,348	$	2,137

NOTE 8 – DERIVATIVES AND HEDGING ACTIVITIES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The Company had interest rate swaps with notional amounts totaling $274.0 million and $259.0 million at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, they were designated as cash flow hedges of certain Federal Home Loan Bank (“FHLB”) advances and brokered deposits. They were determined to be highly effective during all periods presented. The Company expects the hedges to remain highly effective during the remaining terms of the swaps.

Summary information about the interest rate swaps designated as cash flow hedges as of period-end is as follows:


	September 30, 2024			December 31, 2023
	(Dollars in thousands)
Notional amounts	$	274,000		$	259,000
Weighted average pay rates	2.98		%	2.91		%
Weighted average receive rates	5.14		%	5.49		%
Weighted average maturity	2.5 years			3.2 years

Gross unrealized gain included in other assets	$	5,978		$	9,047
Gross unrealized loss included in other liabilities	1,975			1,465
Unrealized gains, net	$	4,003		$	7,582

At September 30, 2024, the Company held $4.2 million as cash collateral pledged from the counterparty for these interest-rate swaps and had no securities or cash pledged to the counterparty. At December 31, 2023, the Company held $8.1 million as cash collateral pledged from the counterparty and had no securities or cash pledged to the counterparty.

Interest income or expense recorded on these swap transactions is reported as a component of interest expense on FHLB advances or brokered deposits. Interest income during the three months ended September 30, 2024 and 2023 totaled $1.6 million and $1.5 million, respectively. Interest income during the nine months ended September 30, 2024 and 2023 totaled $4.9 million and $3.9 million, respectively. At September 30, 2024, the Company expected $1.4 million of the unrealized gain to be reclassified as a reduction to interest expense during the remainder of 2024.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedge

The effect of cash flow hedge accounting on accumulated other comprehensive income for the three and nine months ended September 30, 2024 and 2023 is as follows:


	Amount of (Loss) Gain Recognized in OCI (Net of Tax) on Derivative (1)		Location of Gain (Loss) Reclassified from OCI into Income/(Expense)	Amount of Gain Reclassified from OCI to Expense
	(In thousands)
Three months ended September 30, 2024
Interest rate contracts	$	(6,320)	Interest Expense	$	1,620

Three months ended September 30, 2023
Interest rate contracts	$	1,900	Interest Expense	$	1,535

Nine Months Ended September 30, 2024
Interest rate contracts	$	(3,579)	Interest Expense	$	4,882

Nine Months Ended September 30, 2023
Interest rate contracts	$	3,259	Interest Expense	$	3,885

(1) Net of tax, adjusted for deferred tax valuation allowance.

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income represents the net unrealized holding gains on securities available-for-sale, derivatives and the funded status of the Company’s post-retirement plans, as of the balance sheet dates, net of the related tax effect. The tax effect in accumulated other comprehensive income is adjusted to reflect the Company’s valuation allowance on deferred tax assets.

The following table presents the components of other comprehensive income (loss) both gross and net of tax, inclusive of a deferred tax valuation allowance, for the periods indicated:


	Three Months Ended September 30,
	2024						2023
	Before Tax		Tax Effect		After Tax		Before Tax		Tax Effect		After Tax
	(In thousands)
Unrealized gain (loss) on securities available-for-sale:
Unrealized gain (loss) arising during the period	$	8,568	$	—	$	8,568	$	(5,926)	$	—	$	(5,926)


Unrealized (loss) gain on cash flow hedge:
Unrealized (loss) gain arising during the period	(7,940)		—		(7,940)		3,435		—		3,435
Reclassification adjustment for gain (loss) included in net loss	1,620		—		1,620		(1,535)		—		(1,535)
Total (loss) gain	(6,320)		—		(6,320)		1,900		—		1,900
Post-retirement plans:

Reclassification adjustment for amortization of:

Net actuarial gain (loss)	3		—		3		(1)		—		(1)

Total other comprehensive income	$	2,251	$	—	$	2,251	$	(4,027)	$	—	$	(4,027)

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Nine Months Ended September 30,
	2024						2023
	Before Tax		Tax Effect		After Tax		Before Tax		Tax Effect		After Tax
	(In thousands)
Unrealized gain (loss) on securities available-for-sale:
Unrealized gain (loss) arising during the period	$	7,820	$	—	$	7,820	$	(5,687)	$	—	$	(5,687)


Unrealized (loss) gain on cash flow hedge:
Unrealized (loss) gain arising during the period	(8,461)		—		(8,461)		7,144		—		7,144
Reclassification adjustment for gain (loss) included in net loss	4,882		—		4,882		(3,885)		—		(3,885)
Total (loss) gain	(3,579)		—		(3,579)		3,259		—		3,259
Post-retirement plans:

Reclassification adjustment for amortization of:

Net actuarial gain (loss)	7		—		7		(5)		—		(5)
Total	7		—		7		(5)		—		(5)
Total other comprehensive income	$	4,248	$	—	$	4,248	$	(2,433)	$	—	$	(2,433)

The following is a summary of the changes in accumulated other comprehensive income by component, net of tax, inclusive of a deferred tax valuation allowance, for the periods indicated:


	Unrealized Gains on Cash Flow Hedges		Unrealized Losses on Available-for-Sale Securities		Post-Retirement Plans		Total
	(In thousands)
Balance at June 30, 2024	$	10,323	$	(31,447)	$	241	$	(20,883)
Other comprehensive (loss) income before reclassification	(7,940)		8,568		—		628
Amounts reclassified from accumulated other comprehensive income	1,620		—		3		1,623
Net current period other comprehensive (loss) gain	(6,320)		8,568		3		2,251
Balance at September 30, 2024	$	4,003	$	(22,879)	$	244	$	(18,632)


	Unrealized Gains on Cash Flow Hedges		Unrealized Losses on Available-for-Sale Securities		Post-Retirement Plans		Total
	(In thousands)
Balance at June 30, 2023	$	12,450	$	(35,944)	$	369	$	(23,125)
Other comprehensive income (loss) before reclassification	3,435		(5,926)		—		(2,491)
Amounts reclassified from accumulated other comprehensive income	(1,535)		—		(1)		(1,536)
Net current period other comprehensive gain (loss)	1,900		(5,926)		(1)		(4,027)
Balance at September 30, 2023	$	14,350	$	(41,870)	$	368	$	(27,152)

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Unrealized Gains and (Losses) on Cash Flow Hedges		Unrealized Gains and (Losses) on Available-for-Sale Securities		Post-Retirement Plans		Total
	(In thousands)
Balance at December 31, 2023	$	7,582	$	(30,699)	$	237	$	(22,880)
Other comprehensive (loss) income before reclassification	(8,461)		7,820		—		(641)
Amounts reclassified from accumulated other comprehensive income	4,882		—		7		4,889
Net current period other comprehensive (loss) gain	(3,579)		7,820		7		4,248
Balance at September 30, 2024	$	4,003	$	(22,879)	$	244	$	(18,632)


	Unrealized Gains and (Losses) on Cash Flow Hedges		Unrealized Gains and (Losses) on Available-for-Sale Securities		Post-Retirement Plans		Total
	(In thousands)
Balance at December 31, 2022	$	11,091	$	(36,183)	$	373	$	(24,719)
Other comprehensive income (loss) before reclassification	7,144		(5,687)		—		1,457
Amounts reclassified from accumulated other comprehensive loss	(3,885)		—		(5)		(3,890)
Net current period other comprehensive gain (loss)	3,259		(5,687)		(5)		(2,433)
Balance at September 30, 2023	$	14,350	$	(41,870)	$	368	$	(27,152)

The following table presents information about amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statements of income for the periods indicated:


Details about Accumulated Other Comprehensive Income Components	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Statement Where Net Income is Presented
	2024		2023		2024		2023
	(In thousands)


Losses on cash flow hedges:
Interest rate contracts	$	(1,620)	$	1,535	$	(4,882)	$	3,885	Interest expense
Amortization of post-retirement plan items:
Net actuarial loss	(3)		1		(7)		5		Compensation and employee benefits
Total tax effect (1)	—		—		—		—		Income tax expense
Total reclassification for the period, net of tax	$	(1,623)	$	1,536	$	(4,889)	$	3,890

(1) Reflects deferred tax valuation allowance.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities: For securities available-for-sale and equity securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input as defined by ASC 820, is a mathematical technique used principally to value certain securities to benchmark or comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. The Company also holds debt instruments issued by the U.S. government and U.S. government sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs.

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Company’s derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Impaired loans: The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other real estate owned (OREO): Property acquired through foreclosure or deed in lieu of foreclosure is carried at fair value less estimated disposal costs of the acquired property. Fair value of OREO is based on the appraised value of the collateral using discount rates similar to those used in impaired loan valuation.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the fair value of assets and liabilities as of September 30, 2024:


			Fair Value Measurements at September 30, 2024, Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Measured on a recurring basis:
Financial assets
Securities available-for-sale:
U.S. Treasury notes	$	35,617	$	35,617	$	—	$	—
Corporate bonds	73,705		—		73,705		—
U.S. Government agency obligations	1,040		1,040		—		—
Obligations issued by U.S. states and their political subdivisions	6,130		—		6,130		—
Mortgage-backed securities:
Residential	149,731		—		149,731		—
Multifamily	10,329		—		10,329		—
Asset-backed securities	14,254		—		14,254		—
Total securities available-for-sale	290,806		36,657		254,149		—
Derivatives	5,978		—		5,978		—

Total financial assets measured on a recurring basis	$	296,784	$	36,657	$	260,127	$	—
Financial liabilities
Derivatives	$	1,975	$	—	$	1,975	$	—

Measured on a nonrecurring basis:
Nonfinancial assets

Real estate owned	$	—	$	—	$	—	$	—

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the fair value of assets and liabilities as of December 31, 2023:


			Fair Value Measurements at December 31, 2023, Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Measured on a recurring basis:
Financial assets
Securities available-for-sale:
U.S. Treasury notes	$	35,060	$	35,060	$	—	$	—
Corporate bonds	76,623		—		76,623		—
U.S. Government agency obligations	11,140		11,140		—		—
Obligations issued by U.S. states and their political subdivisions	6,195		—		6,195		—
Mortgage-backed securities:
Residential	128,542		—		128,542		—
Multifamily	11,523		—		11,523		—
Asset-backed securities	14,683		—		14,683		—
Total securities available-for-sale	283,766		46,200		237,566		—
Derivatives	9,047		—		9,047		—
Total financial assets measured on a recurring basis	$	292,813	$	46,200	$	246,613	$	—
Financial liabilities
Derivatives	$	1,465	$	—	$	1,465	$	—

Measured on a nonrecurring basis:
Nonfinancial assets


Real estate owned	593		—		—		593

Other Fair Value Disclosures

Fair value estimates, methods and assumptions for the Company’s financial instruments that are not recorded at fair value on a recurring or non-recurring basis are set forth below.

Securities held-to-maturity: The Company’s securities held-to-maturity portfolio is carried at amortized cost less allowance for credit losses. The fair values of debt securities held-to-maturity are provided by a third-party pricing service. The pricing service may use quoted market prices of comparable instruments or a variety of other forms of analysis, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates, prepayment speeds and non-binding broker quotes.

Loans, net: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as residential mortgage and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories. Estimated fair value of loans is determined using a discounted cash flow model that employs an exit discount rate that reflects the current market pricing for loans with similar characteristics and remaining maturity, adjusted for estimated credit losses inherent in the portfolio at the balance sheet date.

Time deposits: The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates for currently offered deposits of similar remaining maturities.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Federal Home Loan Bank advances: The fair value of borrowings is based on securities dealers’ estimated fair values, when available, or estimated using discounted cash flow analysis. The discount rates used approximate the rates offered for similar borrowings of similar remaining terms.

The following tables present the book value, fair value, and placement in the fair value hierarchy of financial instruments not recorded at fair values in their entirety on a recurring basis on the Company’s consolidated balance sheets at September 30, 2024 and December 31, 2023. The fair value measurements presented are consistent with Topic 820, Fair Value Measurement, in which fair value represents exit price.

These tables exclude financial instruments for which the carrying amount approximates fair value. Financial instruments for which the carrying amount approximates fair value include cash and cash equivalents, other investments, non-maturity deposits, overnight borrowings and accrued interest, which are excluded from the table below.

The carrying amounts and fair value of financial instruments not carried at fair value, at September 30, 2024 and December 31, 2023, are as follows:


			Fair Value Measurements at September 30, 2024, Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Book Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Measured on a non-recurring basis:
Financial assets
Securities held-to-maturity:

Corporate bonds	$	18,600	$	—	$	15,611	$	—




Asset-backed securities	14,641		—		13,646		—
Securities held-to-maturity	33,241		—		29,257		—
Loans, net	1,537,971		—		—		1,453,472
Financial liabilities
Time deposits	701,262		—		700,725		—
FHLB advances	348,500		—		356,025		—
			Fair Value Measurements at December 31, 2023, Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Book Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Measured on a non-recurring basis:
Financial assets
Securities held-to-maturity:

Corporate bonds	$	18,600	$	—	$	15,007	$	—




Asset-backed securities	14,812		—		13,316		—
Securities held-to-maturity	33,412		—		28,323		—
Loans, net	1,546,576		—		—		1,332,138
Financial liabilities
Time deposits	596,624		—		592,676		—
FHLB advances	397,500		—		405,015		—

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income in the statements of income.

The following table presents the Company’s sources of revenue from contracts with customers for the three and nine months ended September 30, 2024 and 2023, respectively:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)



Service charges on deposits	$	213	$	205	$	656	$	636
Interchange income	16		13		45		38
Total revenue from contracts with customers	$	229	$	218	$	701	$	674

Service Charges on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based account maintenance. Transaction based fees, which include services such as ATM use fees, stop payment charges, statement rendering and wire transfer fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

Interchange Income: The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from debit cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. In addition, the Company earns interchange fees from credit cardholder transactions through its partnership with a third party.

BLUE FOUNDRY BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - EARNINGS PER SHARE

Basic earnings per share (“EPS”) represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as unexercised stock options and unvested restricted stock) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, plus the effect of potential dilutive common share equivalents.

Shares held by the ESOP that have not been allocated to employees in accordance with the terms of the ESOP, referred to as “unallocated ESOP shares,” are not deemed outstanding for earnings per share calculations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(Income in thousands, except share data)
Net loss applicable to common shares	$	(4,041)	$	(1,432)	$	(9,224)	$	(4,466)
Shares
Average number of common shares outstanding	23,214,421		25,320,701		23,669,569		26,354,461
Less: Average unallocated ESOP shares	1,950,939		2,042,211		1,973,674		2,064,862
Average number of common shares outstanding used to calculate basic earnings per common share	21,263,482		23,278,490		21,695,895		24,289,599
Common stock equivalents	—		—		—		—
Average number of common shares outstanding used to calculate diluted earnings per common share	21,263,482		23,278,490		21,695,895		24,289,599
Loss per common share
Basic	$	(0.19)	$	(0.06)	$	(0.43)	$	(0.18)

Diluted	$	(0.19)	$	(0.06)	$	(0.43)	$	(0.18)

Excluded from the earnings per share calculation are anti-dilutive equity awards for the three and nine months ended September 30, 2024, totaling 889,399 and 1,247,575, respectively. For the three and nine months ended September 30, 2023, anti-dilutive equity awards totaling 1,496,475 and 1,278,351, respectively, were excluded from the earnings per share calculation. Due to the Company’s net loss for the three and nine months ended September 30, 2024 and 2023, the assumed vesting of outstanding restricted stock units had an antidilutive effect on diluted earnings per share.

NOTE 13 - SUBSEQUENT EVENTS

As defined in FASB ASC 855, “Subsequent Events,” subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued. Financial statements are considered issued when they are widely distributed to stockholders and other financial statement users for general use and reliance in a form and format that complies with U.S. GAAP.

Stock Repurchase Program

On November 8, 2024, the Company adopted a program to repurchase up to 1,139,420 shares, or 5%, of its outstanding common stock commencing upon the completion of the Company’s existing stock repurchase program. As of November 8, 2024, the Company completed the initial stock repurchase plan and has repurchased 4,700 shares under the new repurchase plan.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section is intended to assist in the understanding of the financial performance of the Company and its subsidiary through a discussion of our financial condition as of September 30, 2024, and our results of operations for the three and nine month periods ended September 30, 2024 and 2023. This section should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto of the Company appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

Forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: changes in the interest rate environment that may reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; adverse changes in the securities or secondary mortgage markets; changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; general economic conditions, either nationally or in our market areas, that are worse than expected; changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; our ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in our market area; our ability to implement and change our business strategies; competition among depository and other financial institutions; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; changes in the quality or composition of our loan or investment portfolios; technological changes that may be more difficult or expensive than expected; a failure or breach of our operational or security systems or infrastructure, including cyber-attacks; the inability of third party providers to perform as expected; our ability to manage market risk, credit risk and operational risk in the current economic environment; our ability to enter new markets successfully and capitalize on growth opportunities; our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related there to; changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; our ability to retain key employees; the current or anticipated impact of military conflict, terrorism or other geopolitical events; the ability of the U.S. Government to manage federal debt limits; and changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates.

Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023

General. The Company recorded a net loss of $4.0 million for the three months ended September 30, 2024, compared to a net loss of $1.4 million for the three months ended September 30, 2023.

Interest Income. Interest income for the three months ended September 30, 2024 was $21.5 million, an increase of $1.4 million, or 6.7%, from $20.2 million for the three months ended September 30, 2023, driven by increases in the rates earned on all categories of interest-earning assets, partially offset by a decrease in the average balances of all categories of interest-earning assets. The yield on average interest-earning assets increased 35 basis points to 4.32% for the three months ended September 30, 2024 from 3.97% for the three months ended September 30, 2023.

Interest Expense. Interest expense was $12.4 million for the three months ended September 30, 2024 compared to $10.3 million for the three months ended September 30, 2023, an increase of $2.1 million primarily driven by increases in rates paid on interest-bearing liabilities. The average balance of time deposits increased $130.3 million, while the average balances of interest-bearing core deposits and FHLB advances decreased $86.2 million and $48.3 million, respectively, when compared to the third quarter of 2023. The cost of average interest-bearing liabilities increased 54 basis points to 3.03% for the three months ended September 30, 2024 from 2.49% for the three months ended September 30, 2023.

Net Interest Income. Net interest income was $9.1 million and $9.9 million for the three months ended September 30, 2024 and 2023, respectively. Net interest rate spread decreased 19 basis points to 1.29% and net interest margin decreased 12 basis points to 1.82%.

Provision for Credit Losses. The Company recorded a $248 thousand provision for credit losses for the three months ended September 30, 2024, compared to a $717 thousand release of provision for credit losses for the same period of 2023. During the three months ended September 30, 2024, the provision for off-balance sheet exposures of $264 thousand was driven by an increase in unused lines and commitments to originate loans. The provision included a release of provision of $11 thousand and $5 thousand on securities and loans, respectively. As of September 30, 2024, the Allowance for Credit Losses on loans as a percentage of total loans was 0.84%.

Non-interest Income. Non-interest income totaled $387 thousand and $369 thousand for the third quarters of 2024 and 2023, respectively, an increase of $18 thousand, or 4.9%, when comparing the two periods.

Non-interest Expense. Non-interest expense increased $873 thousand to $13.3 million for the third quarter of 2024 when compared to the same period in 2023. The increase was primarily driven by increases of $666 thousand in compensation and benefits expenses, $167 thousand in professional fees and $126 thousand in occupancy and equipment expense, partially offset by decreases of $61 thousand in data processing expense and $27 thousand in FDIC premiums.

Income Tax Expense. The Company did not record a tax benefit for the loss incurred during the current or previous year quarter due to the full valuation allowance required on its deferred tax assets. The Company’s current tax position reflects the previously established full valuation allowance on its deferred tax assets. At September 30, 2024, the valuation allowance on deferred tax assets was $22.2 million.

Average Balances and Yields

The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. The amortization and accretion of deferred fees and costs are included in interest income on loans and are not material.


	Three Months Ended September 30,
	2024						2023
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Assets:
Loans (1)	$	1,548,962	$	17,646	4.53	%	$	1,577,173	$	16,728	4.21	%
Mortgage-backed securities	181,596		1,186		2.60	%	170,326		840		1.96	%
Other investment securities	173,008		1,527		3.51	%	194,953		1,507		3.07	%
FHLB stock	17,666		406		9.15	%	21,047		456		8.60	%
Cash and cash equivalents	61,507		767		4.96	%	51,884		642		4.91	%
Total interest-earning assets	1,982,739		21,532		4.32	%	2,015,383		20,173		3.97	%
Non-interest earning assets	61,787						58,042
Total assets	$	2,044,526					$	2,073,425
Liabilities and shareholders' equity:
NOW, savings, and money market deposits	$	598,048	$	1,925	1.28	%	$	684,228	$	2,123	1.23	%
Time deposits	688,570		7,787		4.50	%	558,252		4,911		3.49	%
Interest-bearing deposits	1,286,618		9,712		3.00	%	1,242,480		7,034		2.25	%
FHLB advances	347,076		2,733		3.13	%	395,359		3,263		3.27	%
Total interest-bearing liabilities	1,633,694		12,445		3.03	%	1,637,839		10,297		2.49	%
Non-interest bearing deposits	23,421						25,540
Non-interest bearing other	43,713						44,628
Total liabilities	1,700,828						1,708,007
Total shareholders' equity	343,698						365,418
Total liabilities and shareholders' equity	$	2,044,526					$	2,073,425
Net interest income			$	9,087					$	9,876
Net interest rate spread (2)					1.29	%					1.48	%
Net interest margin (3)					1.82	%					1.94	%

(1) Average loan balances are net of deferred loan fees and costs, premiums and discounts and include non-accrual loans.

(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average interest-earning assets.

Comparison of Operating Results for the Nine Months Ended September 30, 2024 and 2023

General. The Company recorded a net loss of $9.2 million and $4.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Interest Income. Interest income totaled $63.7 million and $58.8 million for the nine months ended September 30, 2024 and 2023, respectively. This represents an increase of $4.9 million, or 8.3%, driven primarily by increases in rates earned on all categories of interest-earning assets. Average interest-earning assets declined $39.1 million from the prior year period to $1.97 billion for the nine months ended September 30, 2024. The yield on average interest-earning assets increased 39 basis points to 4.30% for the nine months ended September 30, 2024, from 3.91% for the same period in 2023.

Interest Expense. For the nine months ended September 30, 2024, interest expense increased $9.5 million to $35.6 million when compared to the 2023 period due primarily to increases in the rates paid on interest-bearing liabilities. Average interest-bearing deposit balances increased $37.0 million when compared to the 2023 period, while average borrowings decreased $43.3 million. The cost of average interest-bearing liabilities increased 78 basis points to 2.93% for the nine months ended September 30, 2024 from 2.15% for the same period in 2023.

Net Interest Income. Net interest income was $28.1 million and $32.7 million for the nine months ended September 30, 2024 and 2023, respectively, a $4.6 million decrease. Net interest rate spread was 1.37% for the nine months ended September 30, 2024 compared to 1.76%, a decrease of 39 basis points. For the nine months ended September 30, 2024 and 2023, the net interest margin was 1.90% and 2.18%, respectively, a decrease of 28 basis points.

Provision for Credit Losses. The Company recorded a release of provision for credit losses totaling $1.0 million and $597 thousand for the nine months ended September 30, 2024 and 2023, respectively. The release of provision on loans and securities totaled $1.1 million and $36 thousand, respectively, while a provision was recorded on commitments and letters of credit of $94 thousand for the nine months ended September 30, 2024. The decrease in the provision for credit losses was primarily driven by forecasted improvements to economic drivers utilized to model credit losses, coupled with a decline in loan balances. The provision on commitments and letters of credit for the 2024 period was due to an increase in unused lines.

Non-interest Income. For the nine months ended September 30, 2024 and 2023, non-interest income was $1.4 million and $1.2 million, respectively. The increase of $141 thousand, or 11.4%, was due, in part, to a gain on sale of REO property of $123 thousand recorded in the second quarter of 2024.

Non-interest Expense. Non-interest expense totaled $39.7 million and $39.0 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $705 thousand. The increase was primarily driven by increases of $938 thousand in compensation and benefits expense and $474 thousand in occupancy and equipment expense. These increases were partially offset by decreases in data processing of $475 thousand and professional fees of $224 thousand. The Company added a branch to its network in the fourth quarter of 2023.

Income Tax Expense. The Company did not record a tax benefit for the loss incurred during the first nine months of the current or previous year due to the full valuation allowance required on its deferred tax assets. The Company’s current tax position reflects the previously established full valuation allowance on its deferred tax assets. At September 30, 2024, the valuation allowance on deferred tax assets was $22.2 million.

Average Balances and Yields


	Nine Months Ended September 30,
	2024						2023
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Assets:
Loans (1)	$	1,551,734	$	52,408	4.50	%	$	1,571,204	$	48,778	4.15	%
Mortgage-backed securities	169,765		3,022		2.37	%	174,742		2,789		2.13	%
Other investment securities	177,455		4,867		3.65	%	197,522		4,523		3.06	%
FHLB stock	18,335		1,345		9.77	%	21,343		1,106		6.93	%
Cash and cash equivalents	54,810		2,024		4.92	%	46,363		1,574		4.54	%
Total interest-earning assets	1,972,099		63,666		4.30	%	2,011,174		58,770		3.91	%
Non-interest earning assets	59,245						56,762
Total assets	$	2,031,344					$	2,067,936
Liabilities and shareholders' equity:
NOW, savings, and money market deposits	$	608,677	$	5,816	1.27	%	$	753,419	$	6,350	1.13	%
Time deposits	654,639		21,441		4.36	%	472,866		10,011		2.83	%
Interest-bearing deposits	1,263,316		27,257		2.87	%	1,226,285		16,361		1.78	%
FHLB advances	352,544		8,332		3.15	%	395,800		9,686		3.27	%
Total interest-bearing liabilities	1,615,860		35,589		2.93	%	1,622,085		26,047		2.15	%
Non-interest bearing deposits	24,992						23,092
Non-interest bearing other	42,120						44,572
Total liabilities	1,682,972						1,689,749
Total shareholders' equity	348,372						378,187
Total liabilities and shareholders' equity	$	2,031,344					$	2,067,936
Net interest income			$	28,077					$	32,723
Net interest rate spread (2)					1.37	%					1.76	%
Net interest margin (3)					1.90	%					2.18	%

(1) Average loan balances are net of deferred loan fees and costs, premiums and discounts and include non-accrual loans.

(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average interest-earning assets.

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

Total Assets. Total assets were $2.06 billion and $2.04 billion at September 30, 2024 and December 31, 2023, respectively.

Cash and cash equivalents. Cash and cash equivalents increased $30.1 million, or 65%, to $76.1 million at September 30, 2024 from $46.0 million at December 31, 2023 as deposit growth and loan repayments outpaced loan originations.

Securities available-for-sale. Securities available-for-sale increased $7.0 million, or 2.5%, to $290.8 million at September 30, 2024 from $283.8 million at December 31, 2023, driven by a favorable increase of $7.8 million in the unrealized loss on available-for-sale securities, partially offset by maturities, calls and paydowns that outpaced purchases during the period.

Securities held-to-maturity. Held-to-maturity securities totaled $33.1 million and $33.3 million at September 30, 2024 and December 31, 2023, respectively.

FHLB stock and other investments. Other investments decreased $2.1 million to $18.2 million at September 30, 2024 due to a decrease in the amount of Federal Home Loan Bank stock held by the Company as a result of a reduction of borrowings from FHLB.

Gross Loans. Gross loans held for investment decreased $9.7 million to $1.55 billion at September 30, 2024, from $1.56 billion at December 31, 2023. Residential loans and multifamily loans decreased $34.2 million and $16.3 million, respectively, partially offset by increases in construction loans of $19.7 million, commercial real estate loans of $9.2 million and consumer loans of $7.7 million. During the third quarter, the Company purchased $7.8 million of residential loans and an $8.0 million participation in a pool of consumer loans. Year-to-date in 2024, loan fundings include $17.2 million in construction loans, $7.0 million in commercial and industrial loans and $2.7 million in junior liens.

The following table presents loans at September 30, 2024 and December 31, 2023 allocated by loan category:


	September 30, 2024		December 31, 2023
	(In thousands)
Residential	$	516,754	$	550,929
Multifamily	666,304		682,564
Commercial real estate	241,711		232,505
Construction	80,081		60,414
Junior liens	24,174		22,503
Commercial and industrial	14,228		11,768
Consumer and other	7,731		47
Total loans	1,550,983		1,560,730
Less: Allowance for credit losses	13,012		14,154
Loans receivable, net	$	1,537,971	$	1,546,576

The table below presents the balance of non-performing loans on the dates indicated:


	September 30, 2024		December 31, 2023
	(In thousands)
Residential	$	4,261	$	5,884
Multifamily	125		146


Junior liens	44		49
Commercial and industrial	716		39

Total non-performing loans	5,146		6,118
Other real estate owned	—		593
Total non-performing assets	$	5,146	$	6,711

Total Deposits. Total deposits were $1.32 billion at September 30, 2024, an increase of $73.8 million, or 5.9%, from December 31, 2023. Time deposits increased $104.6 million, or 17.5%, to $701.3 million at September 30, 2024 from $596.6 million at December 31, 2023. Checking and savings accounts decreased $30.9 million, or 4.8%, to $617.4 million at September 30, 2024 from $648.3 million at December 31, 2023. Uninsured and uncollateralized deposits to third party customers were $159.6 million, or 12% of total deposits, at the end of the quarter.

The following table presents the totals of deposit accounts by account type, at the dates shown below:


	September 30, 2024		December 31, 2023
	(In thousands)
Non-interest bearing deposits	$	22,254	$	27,739
NOW and demand accounts (1)	357,503		361,139
Savings (1)	237,651		259,402
Core deposits	617,408		648,280
Time deposits	701,262		596,624
Total deposits	$	1,318,670	$	1,244,904

(1) Money market accounts are included within the NOW and demand accounts and savings captions.

Borrowings. The Company had $348.5 million of borrowings at September 30, 2024, a decrease of $49.0 million, or 12.3% from $397.5 million at December 31, 2023 as the increase in deposits were partially used to pay down borrowings. Borrowings consist solely of Federal Home Loan Bank of New York advances.

Total Shareholders’ Equity. Total shareholders’ equity decreased by $16.3 million, or 4.6%, to $339.3 million at September 30, 2024 compared to $355.6 million at December 31, 2023. The decrease was primarily driven by the repurchase of treasury shares, including net shares, of 1,464,390 shares at a cost of $14.4 million or $9.80 per share. Additionally, the year-to-date loss, partially offset by favorable changes in accumulated other comprehensive income, also contributed to the decrease.

Off-Balance Sheet. To help manage our interest rate position, the Company had $274.0 million in interest rate hedges at September 30, 2024, with a weighted average duration of 2.5 years and a weighted average rate of 2.16%. This represents a increase of $15.0 million from December 31, 2023, when we had $259.0 million in interest rate hedges with a weighted average duration of 3.2 years and a weighted average rate of 2.58%. See Note 8, Derivatives and Hedging Activities, of Notes to Consolidated Financial Statements in “Item 1- Financial Statements.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Qualitative Analysis. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our balance sheet and results of operations to changes in market interest rates. Our ALCO/Investment Committee, which consists of members of management, is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a modeling program, on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk: growing target deposit accounts, such as small business accounts; utilizing our investment securities portfolio and interest rate swaps as part of our balance sheet asset and liability and interest rate risk management strategy to reduce the impact of movements in interest rates on net interest income and economic value of equity, which can create temporary valuation adjustments to equity in Accumulated Other Comprehensive Income; continuing the diversification of our loan portfolio by adding more commercial loans, which typically have shorter maturities and/or balloon payments.

By following these strategies, we believe that we are positioned to react to increases and decreases in market interest rates.

Other than cash flow hedging on interest expense, we generally do not engage in hedging activities such as engaging in futures or options, or investing in high-risk mortgage derivatives such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.

The Company has entered into derivative financial instruments to reduce risk associated with interest rate volatility by matching asset maturities and liability maturities. These derivatives had an aggregate notional amount of $274.0 million as of September 30, 2024.

Quantitative Analysis. We compute amounts by which the net present value of our cash flow from assets, liabilities and off-balance-sheet items would change in the event of a range of assumed changes in market interest rates. The economic value of equity (“EVE”) analysis estimates the change in the net present value (“NPV”) of assets and liabilities and off-balance-sheet contracts over a range of immediate rate shock interest rate scenarios. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance-sheet contract under the assumption that the United States Treasury yield curve increases or decreases instantaneously by 100 to 200 basis points in 100 basis point increments. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100-basis point increase in the “Basis Point Change in Interest Rates” column below.

The following table sets forth, at September 30, 2024, the calculation of the estimated changes to the Bank’s net interest income, at the Bank level, that would result from the specified immediate changes in the United States Treasury yield curve. For purposes of this table, 100 basis points equals 1%.


	Net Interest Income
Change in Interest Rates (basis points)	Amount		Change		Percent
	(Dollars in thousands)
+200	$	42,686	$	(1,003)	(2.3)	%
+100	43,363		(326)		(0.7)
0	43,689		—		—
-100	45,913		2,224		5.1
-200	47,813		4,124		9.4

The following table sets forth, at September 30, 2024, the calculation of the estimated changes in our net portfolio value, at the Bank level, that would result from the specified immediate changes in the United States Treasury yield curve. For purposes of this table, 100 basis points equals 1%.


	EVE						NPV as a Percent of Portfolio Value of Assets
Change in Interest Rates (basis points)	Estimated EVE		Estimated Increase (Decrease)
			Amount		Percent		NPV Ratio		Change
	(Dollars in thousands)
+200	$	134,348	$	(79,013)	(37.0)	%	6.5	%	(3.8)
+100	174,039		(39,322)		(18.4)		8.5		(1.9)
0	213,361		—		—		10.4		—
-100	250,637		37,276		17.5		12.2		1.8
-200	287,124		73,763		34.6		14.0		3.6

The tables above indicates that at September 30, 2024, in the event of an instantaneous 100 basis point increase in interest rates, we would experience a 18% decrease in EVE. In the event of an instantaneous 100 basis point decrease in interest rates, we would experience a 17% increase in EVE.

Certain short comings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above tables assume that the composition of our interest sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, the data does not reflect any actions we may take in response to changes in interest rates. In addition, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary sources of funds consist of deposit inflows, principal and interest payments on loans and securities, maturity of securities, borrowings from the Federal Home Loan Bank of New York and, to a lesser extent, proceeds from the sale of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investment securities and borrowed funds and prepayments on loans are greatly influenced by general interest rates, economic conditions and competition.

Management regularly adjusts our investments in liquid assets based upon an assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our interest-rate risk and investment policies.

At September 30, 2024, we had $31.3 million in commitments to originate loans and unused lines of credit totaled $74.6 million. We anticipate that we will have sufficient funds available to meet our current loan origination and lines of credit commitments. Certificates of deposit that are scheduled to mature in less than one year from September 30, 2024 totaled $689.3 million. Management expects, based on historical experience, that a deposit relationship will be retained with a substantial portion of certificate holders. However, if a substantial portion of these deposits is not retained, we may borrow against our available borrowing capacity or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. Available borrowing capacity at September 30, 2024 was $255.7 million with Federal Home Loan Bank of New York, a $30.0 million line of credit with a correspondent bank and a $48.2 million line of credit with the Federal Reserve Bank of New York. Total available borrowing capacity is 2.6 times total uninsured and uncollateralized deposits to third-party customers. The estimated fair market value of unencumbered securities totaled $261.5 million or 81.7% of the portfolio at September 30, 2024.

We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to originate loans, unused lines of credit and standby letters of credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments that we do for on-balance sheet instruments. Management believes that our current sources of liquidity are more than sufficient to fulfill our obligations as of September 30, 2024 pursuant to off-balance-sheet arrangements and contractual obligations.

The Bank is subject to various regulatory capital requirements administered by the New Jersey Department of Banking and Insurance (“NJDOBI”) and the Federal Deposit Insurance Corporation (“FDIC”). At September 30, 2024, the Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines.


	Actual				Minimum Capital Adequacy				For Classification With Capital Buffer				For Classification as Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
September 30, 2024
Common equity tier 1	$	290,848	19.84	%	$	65,976	4.50	%	$	102,630	7.00	%	$	95,299	6.50	%
Tier 1 capital	290,848		19.84	%	87,969		6.00	%	124,622		8.50	%	117,291		8.00	%
Total capital	304,379		20.76	%	117,291		8.00	%	153,945		10.50	%	146,614		10.00	%
Tier 1 (leverage) capital	290,848		14.11	%	82,445		4.00	%	N/A		N/A		103,056		5.00	%
December 31, 2023
Common equity tier 1	$	296,238	20.13	%	$	66,219	4.50	%	$	103,008	7.00	%	$	95,650	6.50	%
Tier 1 capital	296,238		20.13	%	88,292		6.00	%	125,081		8.50	%	117,723		8.00	%
Total capital	310,853		21.12	%	117,723		8.00	%	154,512		10.50	%	147,154		10.00	%
Tier 1 (leverage) capital	296,238		14.31	%	82,798		4.00	%	N/A		N/A		103,497		5.00	%

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not engaged in any legal proceedings of a material nature at the present time. The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.

ITEM 1.A. RISK FACTORS

There have been no material changes in risk factors from those identified in the Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES. USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table reports information regarding repurchases of our common stock during the quarter ended September 30, 2024, and the stock repurchase plan approved by our board of directors.


Period	Total Number of Shares Purchased (1)	Average Price paid Per Share	As part of Publicly Announced Plans or Programs	Yet to be Purchased Under the Plans or Programs








July	239,725	$10.53	239,725	484,463
August	159,924	10.42	159,924	324,539
September	122,036	10.73	122,036	202,503



Total	521,685	$10.55	521,685

(1) On February 21, 2024, the Company adopted its fourth repurchase program to repurchase up to 1,203,545 shares, or 5%, of its outstanding common stock. The fourth repurchase program has no expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

During the third quarter of 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

ITEM 6. EXHIBITS

The following exhibits are either filed as part of this report or are incorporated herein by reference:


3.1			Amended and Restated Certificate of Incorporation of Blue Foundry Bancorp (Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 001-40619))
3.2			Bylaws of Blue Foundry Bancorp (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-254079))
4			Form of Common Stock Certificate of Blue Foundry Bancorp (Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-254079))


31.1			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101			The following materials from the Company’s Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets; (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BLUE FOUNDRY BANCORP

Dated:

November 13, 2024

By:

/s/ James D. Nesci

James D. Nesci

Chief Executive Officer

(Principal Executive Officer)

Dated:

November 13, 2024

By:

/s/ Kelly Pecoraro

Kelly Pecoraro

Chief Financial Officer

(Principal Financial Officer)