Good morning. My name is Simon, and I'll be your conference operator today. I would like to welcome everyone to the Blue Foundry Bancorp Q1 2022 Earnings Call. Today's call will include forward-looking statements, including statements about Blue Foundry's future financial and operating results, outlook, business strategies and plans as well as other opportunities and potential risks that management foresees. Such forward-looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward-looking statements. Listeners are referred to the disclosures set forth under the caption forward-looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission for more information about such risks and uncertainties. Any forward-looking statements made during this call represent management's views and estimates only as of today. While the company may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so, even if management views our estimates change, and you should not rely on such statements as representing management views as of any date subsequent to today. During the call, the company 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. Please note this event is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Thank you. I will now turn the call over to Jim Neste, President and CEO.

Great. Thanks, operator, and good morning to everyone. Thank you for joining us for Blue Foundry's First Quarter Earnings Call. I'm joined today by our Controller and Interim Chief Financial Officer, Alex Angeleno. He will share the company's financial results and participate in the Q&A segment of the call. In the first quarter of 2022, we made great progress towards our goals of growing core deposits and growing higher interest earning assets. Our core deposits increased by $64.8 million in the quarter. Gross loans increased by $55 million, and our investment book grew by $57.3 million. We also worked diligently to reduce our core operating expenses, which decreased by over $1 million in the quarter. This will position us well for Q2 when our asset growth produces a full quarter of interest income. On the retail front, we continue to grow our deposit franchise, specifically within our business customers. In the quarter, our team grew core business deposits by over $40 million. New branches opened within the last year have seen strong growth and new customer acquisition success as our refreshed brick-and-mortar locations provide an inviting and exciting customer experience. Moving to our lending efforts. Our team onboarded over $147 million of new loans in the first quarter. Excluding PPP, quarterly gross loan growth came in at a net of $64.1 million with strong performance within our commercial lending teams. We are, and we will continue to benefit from the rising rate environment as we put excess liquidity to work and as we fund new loan growth with low-cost core deposits. Total cash was $101.6 million at the end of the first quarter, which represents our management team putting up over $90 million to work during the quarter. The first quarter shows evidence of our core strategy and capabilities beginning to come to provision with our migration to becoming a larger, more commercial bank funded by core deposits. I'm also pleased to announce the appointment of our new Chief Financial Officer, Kelly Siperaro; Kelly joins Blue Foundry Bank from Investors Bank, where she most recently served as the Chief Accounting Officer. She began her career in KPMG's audit practice and brings a wealth of accounting, finance and regulatory knowledge from her 35-year career that will support our growth objectives. Kelly will be formally appointed in mid-May and will work to transition responsibilities with our interim CFO of Alex. Alex will return to serving as our controller following Kelly deployment. I'd like to turn the call over to Alex Angeleno to discuss the company's financial results.

Thank you, Jim, and good morning, everyone. Our GAAP net income for the quarter was $553,000 or $0.02 per share. Core operating expenses decreased $1.4 million or 7% quarter-over-quarter to $13.4 million. This decrease was driven by a $418,000 reduction in professional fees, combined with the reduction in advertising expense of $276,000 and a reduction in occupancy expense of $199,000. This marks a significant reduction in our operating costs and will enable us to return to profitability in the coming months as we previously announced. Quarter-over-quarter, net interest income decreased $397,000 or 3% to $11.9 million. This decrease was driven primarily by a reduction in PPP fees realized, which was offset by loan and investment growth and the continued production in our cost of funds. Our net interest margin decreased by 1 basis point to 2.62% for the 3 months ended March 31, 2022, as compared to the prior quarter. Net interest margin increased by 54 basis points year-over-year from 2.08% to 2.62%, representing a 26% increase. Our adjusted PPNR was a loss of $520,000 for the quarter compared to a loss of $1.4 million in the prior quarter. These results represent progress of nearly $900,000 toward our breakeven point, which we expect will come in the next few months. Interest income decreased by $641,000 or 5% during the quarter, which was driven primarily by $600,000 lower realization of PPP income in the quarter, coupled with the timing of loan and investment portfolio growth being later in the quarter. Interest expense continued to decrease from last quarter by 13% or $244,000 to $1.7 million. This decrease was driven primarily by continued maturity of time deposits as well as slightly reduced average FHLB bottling. The fourth quarter contained a partial month of higher balances prior to the October FHLB paydown. Quarter-over-quarter,…

Thanks, Alex. The first quarter marks significant progress positioning our balance sheet to deliver strong future results, and I'm encouraged by the continued improvement in our core operating costs. We recognize the work ahead of us, and we believe we are well positioned to return to profitability in the coming months. We also would like to thank everyone for their time today and for their interest in Blue Factory Bank. We look forward to sharing our operating results next quarter. The operator can begin the Q&A session now. Thank you.

[Operator Instructions]. Our first question comes from Laurie Hunsicker of Compass Point. Laurie, your line is open. Please go ahead.

Yes, hi, thanks. Good morning, Jim, and Alex. And Kelly, congratulations to you. I was hoping that you could go back to loan growth. It looks like your commercial real estate loan growth was very, very strong. What's going on there? And how are you thinking about that? And is that also purchased?

And just to clarify, Kelly will be starting with us in a couple of weeks, and I think you could refer back to the K that we released to give the exact date and time, but she is -- we're excited to have her joining the team shortly. On loan growth, it's been an exciting quarter. It's been a lot of CRE deals coming in at good prices. It's a lot of nonresidential CRE deals as well. But I'm happy to answer questions on it if you have want to be more specific in the question.

Yes. So I'm just looking at linked quarter, you went from $142 million to $187 million. That's really a pretty big jump. What type of CRE are you adding? And are you originating that? Or are you working with other banks? How are you thinking about that?

So it is our originations. They are not purchased. Some are with other banks and some are direct from our lenders.

Got it. And sorry, what -- I mean I can follow up with you, but just very high level, what type of CRE are you adding?

It's a mix. It's industrial.

You know what…

It's just a mix of industrial and other spaces in New Jersey. It's a good mix is what I would tell you.

Okay. Yes. And so on to net interest income, I just wanted to verify the amount of PPP gains you realized this quarter was $265 million. Is that -- did I get that right?

Right around there, Laurie. It's actually just a higher right around $320,000. We have about $250 million left to go in Q2. But I don't think all of it really realized in Q2. I think it's going to take a few quarters for all of that to come to fruition.

Got it. Okay. So just stripping that out, very back of the envelope, you were 262 margin. So exiting that your $255 core. Can you help us think a little bit as you talked about putting that to work, purchasing more resi, more securities, it looks like your interest rate sensitivity as of December 31 and a 100 basis point up, is it 3% on NII. Can you just help us quantify that a little bit more? In other words, what is margin going to look like as we head into this rising rate environment? Do you have any sort of data point you can give us on every 25 basis point height yield ex -- any more color you can give us around that, maybe even thoughts on your deposits.

Sure. So in an up 100 scenario out 12 months, we're seeing NII at up 4.45%. I think we still have some bits of cash left to deploy. Q1 was deployed at a mix for our purchases and a mix of some lower yielding investments that were shorter duration, high credit quality. As we go into Q2, those rates are obviously going to be priced a bit higher as rates have moved full out in the last 2 months. So I think in the short term, margins will continue to expand slightly. And then as we get into Q3, cost of funds will be challenged slightly as we will move off of where we are right now in the 40s and move up towards a higher number.

And just to clarify, Laurie. -- the purchases, I think you will see us slowing down on investment purchases over the next quarter. But as far as 1 to 4 residential high-quality residential loans, we'll probably still fill in with a few more tranches of those in the next quarter. That's where I think we will be. It just depends on what the market is doing.

Right. Okay. That's helpful. And then can you talk a little bit about the Lomas provision line? Obviously, you had very, very strong loan growth. You're now sitting at a 1% reserve to loans or 101 ex to PPP. How should we be thinking about that in terms of provision normalizing? And I realize CECL isn't coming until 2023. But can you just help us think about how that looks going forward where you have a reserves-to-loans target?

This concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.