Blue Foundry Bancorp (BLFY) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Financial performance shows improvements in net interest income and loan growth, but there's a net loss and slight increase in nonperforming assets. The Q&A indicates limited net interest margin expansion in the near term and vague responses on profitability strategies, suggesting uncertainty. Positive aspects include tangible book value increase and disciplined capital management. Overall, the sentiment is balanced, leading to a neutral rating.
Key Financial Performance
Net Loss $2 million, a $735,000 improvement compared to the prior quarter. The improvement was due to positive momentum in net interest income, partially offset by higher provision expense driven by unfunded loan commitments.
Net Interest Income Increased by $896,000 or 8.3%, driven by a 12 basis point expansion in net interest margin. Interest income expanded $725,000 due to loan growth, while interest expense declined by $171,000 reflecting lower deposit costs.
Loan Growth Gross loans increased by $47.4 million during the quarter, with organic growth primarily in owner-occupied commercial real estate and construction. Additionally, $45 million in credit-enhanced consumer loans and $19 million in residential loans were purchased.
Core Deposits Increased by $25.2 million or approximately 4%, fueled by full banking relationships with commercial customers. This reflects the strategic focus on deepening client engagement in a competitive market.
Net Interest Margin Expanded by 12 basis points, supported by an 8 basis point increase in loan yield to 4.80% and a 13 basis point reduction in the cost of deposits to 2.62%.
Allowance for Credit Losses Decreased slightly, with the allowance for credit losses to total loans declining by 1 basis point to 80 basis points. The ratio of allowance for credit losses to nonperforming loans decreased from 230% to 211%.
Noninterest Expense Decreased by $90,000 compared to the prior quarter, primarily due to seasonal occupancy expense. Expenses have remained stable over the past several quarters.
Tangible Book Value Per Share Increased to $14.87, up $0.06 from the prior quarter, reflecting disciplined capital management.
Deposits Increased by $29.1 million or 2%, with time deposits increasing by $3.9 million. Growth was strategically managed through repricing promotional CDs and adding $20 million in broker deposits at lower rates.
Nonperforming Assets Increased slightly, with nonperforming assets to total assets ticking up by 3 basis points to 30 basis points, and nonperforming loans to total loans also increasing by 3 basis points to 38 basis points.
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Operating Highlights
Loan production: Year-to-date loan production totaled $180 million, with $90 million produced in Q2 at a weighted average yield of approximately 7%.
Portfolio diversification: $22 million increase in commercial and industrial loans, $12 million increase in construction loans, $37 million decrease in multifamily portfolio, and $76 million increase in consumer loans driven by purchases of credit-enhanced consumer loans.
Core deposits growth: Core deposits grew by almost 4%, contributing to a $29 million increase in total deposits.
Net interest margin expansion: Net interest margin expanded by 12 basis points, supported by deposit growth and improved loan yields.
Expense discipline: Noninterest expense decreased by $90,000 compared to the prior quarter, with expenses expected to remain stable in the mid- to high $13 million range.
Capital management: Repurchased 406,000 shares at a weighted average price of $9.42, enhancing shareholder value.
Focus on higher-yield asset classes: Prioritizing owner-occupied commercial real estate, construction lending, and credit-enhanced consumer loans to deliver better risk-adjusted returns.
Deepening client engagement: Growth in core deposits fueled by full banking relationships with commercial customers, emphasizing strategic focus on client engagement.
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Risk or Challenges
Net Loss: The company reported a net loss of $2 million for the second quarter, which, although an improvement from the prior quarter, indicates ongoing financial challenges.
Provision for Credit Losses: Higher provision expenses were driven by unfunded loan commitments, which could impact profitability and reflect potential credit risks.
Nonperforming Assets: Nonperforming assets and loans increased slightly, indicating a potential rise in credit risk and asset quality concerns.
Competitive Environment: The company operates in a competitive market, which could pressure margins and hinder growth in deposits and loans.
Economic Scenarios: The allowance for credit losses methodology assigns greater weight to adverse economic scenarios, suggesting sensitivity to economic downturns.
Compensation Expense: Anticipated increases in compensation expenses in the second half of the year could pressure operating costs.
Borrowings: Slight increase in borrowings to fund loan growth could elevate financial leverage and interest expense.
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Guidance & Outlook
Loan Pipeline and Growth: The loan pipeline remains healthy with executed letters of intent totaling more than $40 million at quarter end, primarily in commercial lending with anticipated yields above 7%. The company expects this momentum to continue in the coming quarters.
Portfolio Diversification: The company continues to focus on portfolio diversification, prioritizing asset classes that deliver higher yields and better risk-adjusted returns. Growth is expected in owner-occupied commercial real estate and construction lending, supported by disciplined credit exposure management.
Compensation Expense: A modest increase in compensation expense is anticipated in the second half of the year due to higher variable compensation costs.
Net Interest Margin and Income: The company expects sustained momentum in net interest margin and income growth, supported by loan growth and lower deposit costs.
Capital Management: The company remains committed to enhancing shareholder value through disciplined capital management, including share repurchases at a discount to tangible book value.
Credit Quality and Allowance: Provision for credit losses is expected to increase in Q3 due to reserves required on unfunded commitments scheduled to close. Asset quality remains strong, with allowance coverage expected to remain stable.
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Shareholder Return Plan
Share Repurchase: During the quarter, we repurchased 406,000 shares at a weighted average price of $9.42, a significant discount to our tangible book value and adjusted tangible book value.
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Key Q&A
Q:Can you quantify what loan repricings look like through the back half of this year and into 2026, including details on volume and rate pickup?
A:In 2026, $75 million of loans at a rate of 3.75% will reprice, spread throughout the year. For the remainder of 2025, $23 million at a rate of 4.75% will reprice during Q3 and Q4. Additionally, maturities in the construction portfolio will occur, but new construction funding will lag.
Q:Has the pricing opportunity for CDs largely run its course, and would lower rates be required to see funding costs decrease significantly?
A:The CD book has been kept short at around a 3-month maturity, but an 8-month CD was introduced, extending maturity to January or February. Market competition will also influence pricing opportunities.
Q:Would you expect limited net interest margin (NIM) expansion in the back half of this year, with more significant improvement in 2026?
A:Yes, only a couple of basis points expansion is expected in Q3, with limited expansion in Q4 depending on the pipeline and market conditions. Significant improvement is anticipated in 2026.
Q:What is the thinking on adding to the consumer loan portfolio, currently at 5% of loans?
A:The consumer loan portfolio is currently at 5% of loans, and the company is comfortable increasing it to 7%-8% over the next few quarters.
Q:What are the credit enhancements for the consumer loan portfolio, and how much potential loss is protected?
A:The consumer loan portfolio has a 3% reserve against credits, which runs through the normal allowance calculation to assess additional exposure.
Q:Are there any additional measures being considered to accelerate profitability, aside from margin tailwinds?
A:The company is focused on expense discipline, including monitoring headcount and exploring efficiencies through AI. They are constantly evaluating ways to achieve greater output with fewer resources.
Q:What is the strategy for growing noninterest-bearing deposits and asset generation?
A:The strategy includes focusing on full relationships with borrowers across all asset classes, including commercial real estate and C&I. By offering good products, the company aims to attract more core deposits from both commercial and consumer customers.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timing or detailed plans for achieving efficiencies through AI and other measures to accelerate profitability. Additionally, responses about market competition influencing CD pricing and the strategy for growing noninterest-bearing deposits were somewhat vague.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bruyette Woods
CEO Director
CEO today
CFO Konrad
Co Research
Crowley Piper
Director Executive
Division Conference
Division Justin
ET measure
Executive VP
Foundry
Frank Crowley
Inc Research
Instructions Blue
Justin Frank
Keefe Bruyette
Konrad Keefe
Piper Sandler
Research Division
Sandler Co
consumer loan
core deposit
credit consumer
date
diversification
effort
estate construction
increase core
lending
momentum
owner estate
position
progress
return
BLFY Transcript
Blue Foundry Bancorp (BLFY) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call reveals mixed signals: while there is improvement in net loss and net interest margin, concerns about rising expenses and nonperforming loans persist. The Q&A highlights management's cautious stance on future guidance, and while there are positive developments like loan growth and share buybacks, the lack of clear future guidance tempers optimism. Given these factors, a neutral sentiment is appropriate, with the stock price likely to remain stable in the near term.
Blue Foundry Bancorp (BLFY) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call presents a mixed picture. Financial performance shows improvements in net interest income and loan growth, but there's a net loss and slight increase in nonperforming assets. The Q&A indicates limited net interest margin expansion in the near term and vague responses on profitability strategies, suggesting uncertainty. Positive aspects include tangible book value increase and disciplined capital management. Overall, the sentiment is balanced, leading to a neutral rating.
Blue Foundry Bancorp (BLFY) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call reveals mixed signals: strong net interest income growth and share repurchases are positive, but the net loss and competitive pressures pose concerns. The Q&A section highlights potential margin expansion and continued share buybacks, but management's lack of clarity on certain metrics may worry investors. Overall, the positive and negative factors balance out, leading to a neutral sentiment.
Earnings call transcript: Blue Foundry Bancorp beats Q1 2025 EPS forecast
Unknown4-30
The earnings call presents a mixed picture: while there are positives like increased net interest income, share repurchases, and improved tangible book value, challenges such as a net loss, rising nonperforming assets, and potential regulatory and liquidity risks temper optimism. The Q&A reveals some avoidance in providing details, suggesting potential uncertainties. Overall, the neutral sentiment reflects balanced positive and negative factors, with no strong catalysts to drive significant stock price movement in either direction.
BLFY Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
