10-K: Blue Foundry Bancorp Reports Reduced Loss, Merger Nears Completion

Blue Foundry Bancorp reported a reduced net loss for 2025 and significant growth in net interest income and deposits, as its all-stock merger with Fulton Financial Corporation approaches its anticipated April 1, 2026 completion.

Summary

• Blue Foundry Bancorp reported a net loss of $10.0 million for the year ended December 31, 2025, an improvement from the $11.9 million net loss in 2024.
• Net interest income increased by $9.8 million, or 26.2%, to $47.4 million in 2025, up from $37.6 million in 2024.
• The net interest margin improved by 40 basis points, reaching 2.30% in 2025 compared to 1.90% in 2024.
• Total assets grew by $107.3 million to $2.17 billion at December 31, 2025.
• Gross loans increased by $107.1 million, or 6.8%, to $1.69 billion, driven by growth in consumer loans (+$119.1 million) and commercial real estate loans (+$46.5 million).
• Total deposits increased by $166.6 million, or 12.4%, to $1.51 billion, with core deposits representing 48.3% of the total.
• Non-performing assets significantly increased to $11.4 million in 2025 from $5.1 million in 2024, with the ratio of non-performing loans to total loans rising to 0.67% from 0.33%.
• The allowance for credit losses on loans increased to $14.392 million, but its coverage ratio to non-performing loans decreased substantially to 126.56% from 254.02%.
• Non-interest expenses rose by $4.4 million, or 8.3%, to $57.0 million, including $1.3 million in merger-related expenses.
• The company's efficiency ratio improved to 116.11% in 2025 from 133.71% in 2024, though it remains high.
• A definitive merger agreement with Fulton Financial Corporation was entered into on November 24, 2025, with Blue Foundry shareholders to receive 0.65 shares of Fulton common stock per share, implying a total transaction value of approximately $243.0 million.
• The merger has received all required regulatory approvals and shareholder approval, and is expected to close on or around April 1, 2026.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this filing as neutral to slightly positive, primarily due to the impending merger which provides a clear exit strategy and valuation for shareholders. While core banking metrics like net interest income and margin improved, the significant increase in non-performing assets and continued net losses highlight underlying challenges that the merger addresses.

Positives

• Net loss decreased to $10.0 million in 2025 from $11.9 million in 2024, indicating an improvement in profitability.
• Net interest income increased significantly by 26.2% to $47.4 million in 2025, driven by higher yields on loans and securities.
• Net interest margin expanded by 40 basis points to 2.30% in 2025, reflecting effective asset/liability management.
• Total assets grew by $107.3 million to $2.17 billion, demonstrating balance sheet expansion.
• Gross loans increased by 6.8% to $1.69 billion, with strong growth in consumer loans (+$119.1 million) and commercial real estate loans (+$46.5 million).
• Total deposits increased by 12.4% to $1.51 billion, indicating successful deposit gathering efforts.
• Core deposits (non-interest bearing, NOW, and savings accounts) increased their share of total deposits to 48.3% in 2025 from 47.3% in 2024.
• Borrowings from the FHLB decreased by $38.5 million, indicating a reduced reliance on wholesale funding.
• The efficiency ratio improved to 116.11% in 2025 from 133.71% in 2024, suggesting better cost management relative to revenue, though still high.
• The Bank was classified as a "well capitalized" institution under regulatory guidelines at December 31, 2025, exceeding all applicable capital requirements.
• The merger with Fulton Financial Corporation has been unanimously approved by both boards, received shareholder approval, and all required regulatory approvals, providing a clear path to completion.

Negatives

• The company continued to report a net loss of $10.0 million in 2025, despite improvements in net interest income.
• Provision for credit losses increased to $2.1 million in 2025 from a release of $1.4 million in 2024, indicating a deterioration in credit quality expectations.
• Non-performing assets significantly increased to $11.4 million in 2025 from $5.1 million in 2024, representing a 123.5% increase.
• The ratio of non-performing loans to total loans increased to 0.67% in 2025 from 0.33% in 2024.
• The allowance for credit losses on loans to non-performing loans ratio decreased substantially to 126.56% in 2025 from 254.02% in 2024, indicating reduced coverage for problem loans.
• Non-interest expenses increased by $4.4 million, or 8.3%, to $57.0 million, partly due to merger-related costs.
• Total shareholders' equity decreased by $19.5 million, or 5.9%, primarily due to share repurchases ($16.3 million) and the net loss.
• The company held $16.9 million in net unrealized losses on available-for-sale debt securities and $1.5 million on held-to-maturity debt securities at December 31, 2025, which could impact future capital or liquidity if realized.
• A significant portion of the loan portfolio is concentrated in New Jersey, making the company vulnerable to a downturn in the local economy and real estate markets.
• The company has a full valuation allowance of $27.3 million on its net deferred tax assets, indicating management's uncertainty about generating sufficient future taxable income to realize these assets.

Risks

• The market price of Fulton common stock may fluctuate prior to the merger, affecting the value received by Blue Foundry stockholders, as the exchange ratio is fixed.
• Fulton's business differs from Blue Foundry's, and its market price after the merger may be affected by factors different from those currently affecting Blue Foundry.
• Substantial costs related to the merger and integration are expected, and these costs may be greater than anticipated due to unexpected events.
• Combining Fulton and Blue Foundry may be more difficult, costly, or time-consuming than expected, potentially failing to realize anticipated benefits and cost savings.
• Fulton may be unable to retain key Blue Foundry personnel successfully after the completion of the merger, leading to operational disruptions or loss of customers and expertise.
• Failure to meet remaining closing conditions could prevent or delay the merger, negatively impacting both companies.
• Blue Foundry may be required to pay a termination fee of $9,694,662 to Fulton if the merger agreement is terminated under certain circumstances.
• Business uncertainties and contractual restrictions while the merger is pending could disrupt relationships with employees, customers, suppliers, and business partners.
• Blue Foundry stockholders will have a reduced ownership and voting interest in Fulton after the merger, exercising less influence over management.
• The issuance of Fulton common stock in connection with the merger may adversely affect the market price of Fulton common stock.
• Claims and litigation pertaining to the merger could prevent or delay completion and result in additional costs.
• Future changes in interest rates may reduce future profits, as the company's financial condition and results are significantly affected by market interest rate movements.
• If the allowance for credit losses on loans is not sufficient to cover actual loan losses, earnings and capital could decrease.
• Increased non-performing assets adversely affect net income through reduced interest income, higher provision for credit losses, increased non-interest expenses, and diversion of management attention.
• Adjustable-rate loans carry the risk of increased delinquencies and defaults in a rising interest rate environment due to higher monthly payments.
• Multifamily and commercial real estate loans involve greater risk due to larger balances, dependence on property operations, and vulnerability to real estate market downturns or government regulations (e.g., New York City rent stabilization).
• Construction loans involve additional risks due to uncertain project values before completion and reliance on successful project completion or permanent financing.
• Junior liens and consumer loans may entail greater risk as they can be unsecured or secured by rapidly depreciating assets, and collections depend on borrower financial stability.
• Commercial and industrial loans are higher risk, relying on business cash flows and potentially fluctuating collateral values.
• Declines in value may adversely impact the investment portfolio, particularly due to unrealized losses on available-for-sale and held-to-maturity securities.
• Geographic concentration of the loan portfolio in northern New Jersey makes the company vulnerable to a downturn in the local economy and real estate markets.
• A lack of liquidity could adversely affect the company's financial condition and results of operations, especially if deposit balances decrease or funding sources are impaired.
• Inflationary pressures and rising prices may affect results of operations and financial condition by increasing costs and reducing consumer purchasing power.
• Interruption of customers' supply chains and federal funding could negatively impact their business and ability to repay loans.
• Failure to address the Federal debt ceiling, downgrades of the U.S. credit rating, and uncertain credit/financial market conditions may affect the stability, valuation, or liquidity of federal government-issued securities.
• Severe weather, acts of terrorism, geopolitical, and other external events could impact the ability to conduct business, damage facilities, and affect loan repayments.
• Strong competition within the market area from larger institutions and non-depository providers may limit growth and profitability.
• Significant operational risks exist due to the high volume of transactions, including fraud, errors, and breaches of internal control systems.
• Cyber-attacks or other security breaches could adversely affect operations, net income, or reputation, despite safeguards.
• The inability to stay current with technological change could adversely affect the business model.
• Reliance on certain third-party vendors for critical operations exposes the company to operational and informational security risks.
• Dependence on the management team, many of whom are new, to implement business strategy, with loss of services potentially harming operations.
• High cost of operations relative to revenues (efficiency ratio of 116.11%) poses a challenge to profitability.
• Increased expenses are expected due to public company reporting requirements and the need for additional compliance, accounting, and financial staff.
• The risk management framework may not be effective in mitigating all risks, especially unanticipated or unknown ones.
• Changes in laws, regulations, and regulatory policies, and the cost of compliance, may adversely affect operations or increase costs.
• Stringent capital requirements may impact return on equity, require additional capital, or restrict dividend payments/share repurchases.
• Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws could result in fines or sanctions.
• Changes in management's estimates and assumptions (e.g., allowance for credit losses, deferred income taxes, fair value measurements) may materially impact financial statements.
• Various factors, including corporate governance provisions and federal banking laws, may make takeover attempts more difficult to achieve without Board approval.
• The New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation, such as rent control and rent stabilization laws.

Future Outlook

The company anticipates the completion of its all-stock merger with Fulton Financial Corporation on or around April 1, 2026, following shareholder and regulatory approvals. Post-merger, Blue Foundry Bank will merge into Fulton Bank, N.A. The company expects to continue focusing on commercial real estate and traditional C&I lending to diversify its loan portfolio and increase overall yield, subject to market conditions and asset-liability analysis. Management also expects to continuously evaluate product and service offerings to remain competitive.

Management Comments

• Our goal is to position ourselves to prosper in an evolving financial services landscape and enhance our position as one of the leading community banking institutions in our market.
• We have shifted our focus to engage in more commercial-like lending to include commercial mortgage loans, construction loans and commercial and industrial (C&I) loans.
• Subject to market conditions and our asset-liability analysis, we expect to continue to focus on commercial real estate and traditional C&I lending as part of our effort to diversify the loan portfolio and increase the overall yield earned on our loans.
• During 2025, credit quality remained strong with a slight rise in non-performing loan balances of $6.3 million, coupled with growth in the loan portfolio of approximately 6.76%.
• Management believes that our current sources of liquidity are more than sufficient to fulfill our obligations as of December 31, 2025, pursuant to off-balance-sheet arrangements and contractual obligations.
• The Company does not intend to sell held-to-maturity securities, nor does it foresee being required to sell them before the anticipated recovery or maturity.
• Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2025.

Industry Context

StockSavvy.ai notes that Blue Foundry Bancorp's impending merger with Fulton Financial Corporation reflects a broader trend of consolidation within the regional banking sector, driven by increasing regulatory burdens, technological investment needs, and the pursuit of economies of scale. The improvement in net interest income and margin, despite a continued net loss, suggests the company was making strides in core banking profitability in a challenging interest rate environment. However, the significant increase in non-performing assets and the reduced allowance for credit losses coverage ratio indicate that credit quality pressures, common in periods of economic uncertainty, were impacting the bank. The strategic shift towards commercial lending aligns with many community banks seeking higher yields, but also introduces greater risk, which the merger may help mitigate through a larger, more diversified entity.

Comparison to Industry Standards

• Blue Foundry Bancorp's net interest margin of 2.30% in 2025, while an improvement, remains below the industry average for U.S. banks, which often ranges from 3.0% to 3.5% or higher, depending on asset mix and rate environment. For example, larger regional banks like PNC Bank or M&T Bank typically report higher NIMs due to scale and diversified revenue streams.
• The efficiency ratio of 116.11% is significantly higher than the industry average for well-performing banks, which typically aim for ratios below 60%. This indicates substantial operational costs relative to revenue, a common challenge for smaller community banks. Comparatively, a bank like Fulton Financial Corporation, with its larger asset base, would likely have a much lower efficiency ratio, benefiting from scale.
• The increase in non-performing loans to 0.67% of total loans, while not excessively high, represents a notable deterioration from 0.33% in 2024. This trend warrants close monitoring, especially when compared to peers like Unity Bancorp Inc. or Peapack-Gladstone Financial, which might show more stable or improving asset quality metrics in a similar market.
• The allowance for credit losses to non-performing loans ratio of 126.56% in 2025 is a significant drop from 254.02% in 2024. While still above 100%, this reduced coverage suggests a more aggressive stance on expected losses or a rapid increase in NPLs not fully matched by ACL growth, potentially indicating higher future charge-offs compared to more conservatively provisioned institutions.
• The implied transaction value of approximately $243.0 million for the merger, with Blue Foundry shareholders owning 6.5% of the combined entity, provides a valuation benchmark for a community bank of its size and asset quality in the current M&A environment. This valuation would be assessed against recent acquisitions of similar-sized banks in the Northeast region, considering factors like asset quality, deposit franchise, and growth prospects.

Management Changes

Corporate Governance

Legal Proceedings

• At December 31, 2025, the company was not a party to any pending legal proceedings that management believes would have a material adverse effect on its financial condition, results of operations, or cash flows.
• In March 2026, a subsidiary of the Bank was the successful bidder for a property in Philadelphia, PA, securing a defaulted multifamily loan for $5.3 million at a sheriff's sale, becoming the equitable owner.

Related Party Transactions

• The aggregate amount of outstanding loans to an insider and related entities was approximately $1.2 million at December 31, 2025, consisting of three loans to a senior officer made before the officer became an employee of the Bank. These 'transition' loans under Regulation O were made in the ordinary course of business, did not involve more than normal risk, and are performing in accordance with their terms.
• Related party (principal officers, directors, and their affiliates) deposits totaled $2.5 million at December 31, 2025, and $2.7 million at December 31, 2024.

Stakeholder Impact

• Shareholders: Will become shareholders of Fulton Financial Corporation, with a reduced ownership and voting interest (approximately 6.5% of Fulton's common stock post-merger). The fixed exchange ratio means the value received depends on Fulton's stock price at closing.
• Employees: The merger creates uncertainty about future roles and potential retention challenges. Key employees may decide not to remain with Blue Foundry during or after the merger. The ESOP loan has been paid in full and equity awards settled in anticipation of the merger.
• Customers: The merger could lead to disruptions in ongoing business relationships or inconsistencies in standards, controls, procedures, and policies, potentially causing customers to seek alternative relationships.
• Regulatory Authorities: The company is subject to extensive regulation, and the merger required and received all necessary regulatory approvals, indicating continued compliance and oversight.
• Local Communities: The merger of Blue Foundry Bank into Fulton Bank, N.A. will impact the local banking landscape in northern New Jersey, potentially altering community banking services and relationships.

Next Steps

• Completion of the merger with Fulton Financial Corporation on or around April 1, 2026.
• Blue Foundry Bank will merge with and into Fulton Bank, N.A. around the time of systems conversion.
• ESOP loan has been paid in full and all equity awards settled in anticipation of the pending acquisition by Fulton.
• The Board of Directors will become declassified by the 2027 annual meeting of shareholders.
• The company is currently evaluating the impact of several new accounting standards (ASU 2024-03, ASU 2025-06, ASU 2025-07, ASU 2025-08, ASU 2025-09, ASU-2025-11, ASU-2025-12) on its consolidated financial statements and footnote disclosures.

Key Dates

Recommendation

The recommendation is 'hold' because the company is in the final stages of an all-stock merger with Fulton Financial Corporation. While the company showed some operational improvements (reduced net loss, increased net interest income and margin), these were offset by deteriorating asset quality (significant increase in non-performing assets and reduced ACL coverage). The merger provides a clear exit for existing shareholders into a larger, more diversified entity. Given the fixed exchange ratio, the future value for Blue Foundry shareholders is now tied to Fulton's stock performance. Investors should hold their shares to realize the merger consideration, but further analysis of Fulton Financial Corporation would be required for a post-merger recommendation.

Keywords

Banking, Financial Services, SEC Filing, 10-K, Merger, Acquisition, Fulton Financial Corporation, Community Bank, Net Loss, Net Interest Income, Net Interest Margin, Loan Growth, Deposit Growth, Non-Performing Assets, Credit Quality, Interest Rate Risk, Regulatory Capital, New Jersey, Commercial Real Estate, Consumer Loans, Cybersecurity, Corporate Governance, Share Repurchase