Blue Foundry lifts NII and loans but remains unprofitable as expenses and provisions rise

Blue Foundry Bancorp (NASDAQ: BLFY) - quick take

Inside the company: management is pushing loan growth and has expanded hedges and wholesale funding to lock in margins. Net interest income and margin improved year-over-year, but the bank remains unprofitable on the quarter and year‑to‑date as credit provisioning and operating costs weigh on results.

Key points & statistics (amounts in thousands unless noted)

- Total assets: $2,127,504

- Loans receivable, net: $1,659,732 (gross loans $1,673,036)

- Deposits: $1,416,321 (brokered time deposits $225,000 at 6/30/25)

- Securities available‑for‑sale: $284,239; securities held‑to‑maturity: $29,062

- Interest rate hedges (swaps) notional: $426,000; unrealized hedge gain (net) $3,012

- Q2 2025 net interest income: $11,640 (Q2 2024: $9,573); net interest margin Q2: 2.28% (up 32 bps y/y)

- Provision for credit losses Q2 2025: $463 (Q2 2024: release $762); allowance for loan losses: $13,304 (ACL / loans = 0.80%)

- Non‑interest income Q2 2025: $405 (down vs $536); non‑interest expense Q2 2025: $13,539 (up vs $13,215)

- Net loss Q2 2025: $(1,957); six months loss: $(4,649)

- Basic loss per share Q2: $(0.10); six months: $(0.23)

- Capital: CET1 18.11%, Total capital 18.98% - well above regulatory minima

- Share repurchases Q2: 406,391 shares at average $9.45 (sixth repurchase program authorized up to 1,082,533 shares)

Positive aspects

- NII up materially: loan interest income increased (Q2 loans $19,763 vs $17,570 y/y), driving net interest income growth and higher NIM.

- Loan growth: gross loans increased to $1.673B from $1.583B at 12/31/24 - new consumer and CRE originations supporting growth.

- Funding and liquidity: deposits increased $73M YTD; available borrowing capacity (~$256.1M with FHLB + Fed line) and unencumbered securities ($188.5M) support liquidity needs.

- Strong capital ratios: CET1 18.11% and leverage well above regulatory thresholds provide cushion for stress.

Negative aspects (income statement & credit highlights)

- Still losing money: Q2 net loss $(1,957) and YTD $(4,649) - no tax benefit recognized due to full valuation allowance on deferred tax assets ($25.6M valuation allowance at 6/30/25).

- Rising operating costs: non‑interest expense increased to $13.539M in Q2; compensation, data processing and marketing are higher and compress operating leverage.

- Credit provisioning trend: moved from a release in prior year to a provision of $463 in Q2 2025 driven by off‑balance sheet exposure and portfolio mix changes; non‑accrual loans totaled $6,281 and past‑due balances increased vs year‑end.

- Portfolio mark-to-market: AFS and HTM portfolios carry unrealized losses (AFS unrealized loss ~$22,355 at 6/30/25); cash‑flow hedge volatility has produced OCI swings (cash flow hedge loss reduced AOCI).

- Capital return vs earnings: management bought back stock ($8.6M purchase in period) despite ongoing losses - dilutes capital that could offset credit stress or support organic growth.

What to watch next

- Quarterly profitability drivers: can higher NII and loan yields offset rising expenses and provisions?

- Credit trends: changes in ACL, non‑accruals, and past‑due balances - construction and residential categories showed notable arrears in the quarter.

- Impact of July 4, 2025 tax law (OBBB): company will record effects in Q3 2025; management currently expects no material impact but is evaluating.

- Share repurchase cadence vs capital preservation - continued buybacks while loss-making is a governance point to monitor.

Bottom line: Blue Foundry Bancorp is executing balance‑sheet growth and benefiting from higher interest income, but profitability is still negative due to higher operating costs and recent provisioning. Capital and liquidity are solid today; the near‑term story hinges on sustaining margin improvement while controlling expenses and containing credit deterioration.