Good morning, and welcome to Blue Foundry Bancorp's First Quarter 2024 Earnings Call. Comments made during today's call may include forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Blue Foundry encourages all participants to refer to the full disclaimer contained in this morning's earnings release, which has been posted to the Investor Relations page on bluefoundrybank.com. During the call, management will refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures. As a reminder, this event is being recorded. I will now turn the call over to President and CEO, Jim Nesci. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our first quarter earnings call. I am joined by our Chief Financial Officer, Kelly Pecoraro. I'm going to provide a strategic update, and then Kelly will discuss the company's first quarter financial results in detail. We continue to focus on executing against our strategy and delivering value for all of Blue Foundry's stakeholders. Paramount to our success is our ability to leverage the company's strong capital position to fund asset and deposit growth. The first quarter was a promising step in the right direction. During the quarter, we grew deposits by $46 million. This growth was driven by the execution of our strategic initiatives and resulted in a reduction in our loan-to-deposit ratio by 500 basis points. Continued deposit growth will allow us to generate interest-earning assets and expand revenue while maintaining an appropriate amount of leverage. Given our strategy to become a more commercially oriented institution, we have been selected in originating real estate loans while building our commercial pipeline. We expect to see production and commercial credits pick up as we move through 2024. As always, we are disciplined in underwriting strong credits for all of our loan product offerings. We are committed to continuing to be good stewards of capital. Our stock, along with many of our peers, is trading at a discounted tangible book value; we believe that repurchases at these levels are a prudent use of capital. In the first quarter, our Board approved another repurchase program to go forward in less than 2 years. Under our repurchase programs, we repurchased 532,000 shares at a weighted average share price of $9.49 during the quarter. These repurchases, coupled with an improvement in our AOCI, helped increase tangible book value per share by $0.11 to $14.60. Our bank and holding company remained well capitalized with capital levels that are among the highest in the banking industry. Tangible equity to tangible common assets was 17.25% as of March 31. Blue Foundry continues to operate with a low percentage of uninsured deposits and a low concentration risk to any single depositor. Uninsured and uncollateralized deposits from customer accounts total $33 million at March 31. This is approximately 10% of the company's total deposits. At the end of the first quarter, we had $418 million in untapped borrowing capacity, and our unencumbered available-for-sale securities provided another $251 million of liquidity. We had $54 million of cash on the balance sheet, of which $38 million was unrestricted. Additionally, our available cash covers 5.3 times our uninsured and uncollateralized deposits to customers. With that, I'd like to turn the call over to Kelly, and then we would be delighted to answer your questions. Kelly?

Thank you, Jim, and good morning, everyone. The net loss for the first quarter was $2.8 million compared to a net loss of $2.9 million during the prior quarter. This improvement was driven by a release in the provision for credit losses and an improvement in net interest margin, partially offset by an increase in expenses, which was guided to last quarter. Our asset quality continues to remain strong in the current environment. During the quarter, we had a release of provision for credit losses of $535,000, driven by forecasted improvement in the economic drivers used to model our credit losses. Our release occurred in all three categories: loans, off-balance sheet commitments, and held-to-maturity securities. As a reminder, the majority of our allowance for credit loss is derived from quantitative measures, and our allowance methodology places a greater weight on the baseline and adverse forecasts. While nonaccrual loans increased by $793,000 due to a single small business credit, nonperforming assets to total assets remained low, increasing 4 basis points to 36 basis points. Our allowance to total loans decreased by 3 basis points to 88 basis points due to the decrease in the allowance for credit losses on loans. Our allowance to nonaccrual loans decreased to 205% from 240% in the prior quarter due to the increase in nonaccrual loans coupled with a decrease in allowance for credit losses on loans. Net interest income increased by $221,000, leading to an 8 basis point expansion in net interest margin. Interest income expanded by $507,000, and interest expense increased by $286,000. We may experience slight margin pressure over the next couple of quarters depending on interest rate activity and our ability to generate asset growth given the current macroeconomic environment. Yields on loans increased by 16 basis points to 4.45%, and the yield on all interest-earning assets increased by 19 basis points to 4.25%. The cost of funds increased by 11 basis points to 2.81%. We continue to remain competitive in deposit pricing. This resulted in the cost of interest-bearing deposits increasing by 22 basis points to 2.74%. Conversely, borrowing costs decreased by 14 basis points to 3.24% as we paid off higher-cost short-term wholesale borrowings. Expenses increased by $699,000, primarily driven by compensation and benefits. While compensation and benefits increased due to variable compensation bonus accruals resetting for new performance targets in 2024, our headcount remained stable throughout the quarter. We continue to explore opportunities to optimize our expense base, and we expect operating expenses for the second quarter of 2024 to be in the mid- to high $13 million range. Moving on to the balance sheet. Gross loans declined by $6.6 million during the quarter as amortization and payoffs outpaced new loan funding. As a reminder, less than 2% or $22 million of our loan portfolio is in office space, and none is in New York City. Our debt securities portfolio has a duration of 4.8 years. As a result of maturities, calls, and scheduled paydowns, this portfolio was reduced by $18.6 million during the quarter. Deposits increased by $46.3 million or 3.7% during the quarter. Our frontline staff were able to grow retail time deposits by $50.2 million and grow core deposits by approximately $500,000. This growth was partially offset as we allowed wholesale deposits to mature. Our focus remains on attracting the full banking relationship of small- to medium-sized businesses. We offer an extensive suite of low-cost deposit products to our business customers. During the quarter, commercial account balances increased by $18.5 million or 10%. As a result of our strong deposit growth and cash flow from the loan and securities portfolios, we were able to pay down $55 million of higher-cost short-term borrowings. And with that, Jim and I are happy to take your questions.

Our first question is from Justin Crowley with Piper Sandler.

I want to begin by discussing the margin. It's encouraging to observe some improvement in the quarter. Regarding your balance sheet, lower rates would naturally be beneficial. However, with the prospect of sustained higher rates, could you elaborate on what might drive net interest margin pressure moving forward compared to what you experienced in the current quarter?

Thank you, Justin, and good morning. So as we look, we were very pleased with the quarter's expansion in NIM. We are mindful though, within our portfolio, we have about $230 million of time deposits that will reprice. Currently, they're at about a 4.70% rate. Given the pressure on deposit pricing in the market, that will probably reset to a higher price level given the current rates. Depending upon that, we could see some pressure on deposit costs to go even higher.

Okay. Got you. That's helpful. And then just as far as that deposit gathering side, obviously, a good quarter to start off the year, but how are you thinking about deposit generation going forward versus having to rely on more wholesale funding channels? Obviously, you're able to reduce that in the quarter. Just curious your thoughts there. Obviously, it's a competitive environment, so.

Justin, this is Jim. We are out in the marketplace shaping all the bushes, working on small business and putting our people forward surrounding ourselves on the commercial side as much as possible. I think we have strong products and we're going to keep driving towards organic growth on that deposit side as much as possible as opposed to wholesale funding. The organic growth is what we hope to lead us to a better margin going forward.

Okay. I appreciate that. And then just on credit, you touched on, but it looks quite clean once again. And you mentioned a small tick-up in nonperformers. But obviously, you were able to release some reserves in the quarter. It seems just more of the world we live in with CECL. But what are you seeing under the hood when you look at your book in terms of any early signs of stress, if any at all?

Yes. Justin, we are pleased with our level of nonperforming. While we did tick up, we do look forward to some resolution of some nonperforming that are on our books. There's nothing right now at this point that's concerning besides what we've disclosed in the nonperforming. So pleased with the credit metrics. We have strong underwriting, and that has served us well.

Okay. And then I guess just my obligatory question on buybacks. But we think the desire to stay active is still there based on what we saw during the quarter, where capital levels stand? And then just where activity got done versus where the stock is now. Just curious, any updated thoughts there if there's possibly room to get even more active in the balance sheet continues to kind of shrink in size or at least stay roughly where it is.

The Board, Kelly, and I all strongly believe in buybacks. I think you'll see us remain active in buybacks. I don't know that there's any further comments that we have at this time. But we believe the buybacks, and the Board of Directors believe in buybacks, and we do believe it works given where the price of the shares are today.

Our next question is from Chris O'Connell with KBW.

So I just want to start off on the loan side and how the pipeline is doing and where you guys are thinking about in terms of reaching growth for the full year of 2024.

Chris, so as you saw, we had a slight reduction in our loan portfolio this quarter. Really, that's driven by a couple of things. Competition for loans, but we are, as Jim noted, being very selective in the assets that we're putting on our books. So we look at our shift, and we are pleased with the reduction in our multifamily and residential and the growth within the C&I and other commercial real estate line item. So we're looking to be prudent as we put those assets on. Our pipeline right now sits at about $40 million, in our pipeline those are in those asset classes that we're looking to focus on, the domino effect.

And what's the yield in this pipeline?

The yields in the pipeline are just right around 7.5% to 7.6%.

Great. And absent any rate change impacts, as you're looking at the next couple of quarters with the NIM pressure, any sense as to where you could see the level bottoming?

I don't think we have a level where we bottom. It's very dependent upon the repricing, our ability to gather and put on the higher-yielding assets. But we are mindful, as I mentioned, with some of the repricing of our deposit book. This quarter, we benefited from our borrowing PMTs down, both higher costs and being able to replace them with deposits. So it's just continuing.

And where are those CDs, the $230 million? Where do you see them repricing to?

Well, right now, they're on the books at about 4.70%, and our current promotional rates out there are about 5.25%.

Okay. Great. That's helpful. And then just more broadly or strategically thinking, I mean, how are you guys thinking about the pace or the movement toward profitability? Are there any incentive targets that are linked to that? And do you see that happening over the course of the next few quarters? Do you think you need the yield curve to change? What's the pathway there?

So, I'll start and let Kelly finish. The goal is always to become profitable and to continue to improve the financials for the company and for its shareholders. On the expense side, we continue to look for any expenses that we can cut or reduce or be more strategic about. We continue to consolidate vendors whenever possible. We're very mindful of our staffing and our salaries and benefits. I think there's a lot being done when you look at the company over the course of the last 3 years; much has been accomplished. But the curve, as you indicate, has changed dramatically over the last 18 to 24 months, making it more difficult for us as a liability-sensitive bank to produce a NIM that's sufficient. We will continue to look for more organic retail deposits. We're also more focused on commercial and industrial type loans to get higher-yielding assets onto the books. We think all of these efforts will lead to greater profitability over time. That's the focus. That's the strategy. The compensation structure is tied to metrics that lead to long-term profitability. Every employee at Blue Foundry Bank is focused on these items. We talk about them frequently. We have town halls. Every employee has invested in this company. So yes, it's top of mind for all of us. I appreciate the question, but I don't know if Kelly wants to add anything to it.

No, I think, Jim, you covered everything. We're looking in on those strategic initiatives and compensating relative to those targets as we look toward profitability.

And along those lines, I mean, is there anything that you've mapped out that maybe you don’t quite have hard numbers around on the expense side as you get through the year and into 2025? Any projects or anything where you think you can cut out any significant costs?

I don't have any additional guidance at this time. I don't know of any, but I don't have any guidance on that topic. I would tell you right now we're trying to be as lean as possible and, two, create a better bank every single day.

We have no further questions at this time. So I'll pass the call back to the management team for any closing remarks.

Thank you, operator. And to everyone who is listening today, thank you very much for your interest in Blue Foundry Bank. We look forward to speaking to you again in the next quarter. Have a great day.

That concludes today's call. Thank you all for your participation. You may now disconnect your line.