Our Business and Franchise
For over 80 years, we have served the local communities where we operate and have deep and longstanding relationships with our business and retail customers as well as local municipalities. In recent years, in recognition of the economic, social and technological developments that are impacting the banking industry, we began a process of modernizing Blue Foundry Bank in an effort to thrive in this evolving landscape. As part of these efforts, we rebranded ourselves in 2019 as Blue Foundry Bank and have recruited a substantially new management team, enhanced our business practices, streamlined our expense structure and repositioned our business strategy. We believe our look, feel and boutique approach has positioned us for success with our customers and that the actions we have taken will allow us to produce strong financial results.
Blue Foundry Bank’s principal business consists of originating loans for one-to-four family residential properties, home equity loans and lines of credit, commercial real estate, multi-family, construction, commercial and industrial, and other consumer loans in the market areas surrounding our branch footprint. In addition, we often lend outside of our branch network in more densely populated and metropolitan areas, which benefits us by diversifying our lending. We attract retail deposits from the general public in the areas surrounding our main office and branches, offering a wide variety of deposit products. We also invest in investment securities. Our revenues are derived primarily from interest on loans and, to a lesser extent, interest on investment as well as mortgage-backed securities. Our primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities.
Our Competitive Strengths
Well-positioned in attractive northern New Jersey market. Our market area includes the New Jersey counties of Bergen, Morris, Essex, Passaic and Hudson. These counties are part of one of the largest banking markets in the country, with a high concentration of successful businesses and affluent, highly educated and financially sophisticated individuals. Our over 80-year history operating in these markets has provided us with a familiarity with our local communities and customer base. Our employees have been trained to focus on customer service and utilize our significantly upgraded technology infrastructure to provide our customers with the financial products best suited to their needs. In recent years, these markets have seen a significant amount of consolidation among its banking institutions, resulting in opportunities to pursue customer relationships that may have been disrupted as a result of this consolidation.
We have hired and retained a management team supported by a committed workforce. Blue Foundry Bank hired James Nesci as its Chief Executive Officer in April 2018. Over the last several years, Mr. Nesci, with the guidance of the Board of Directors, has hired certain new senior level management, while retaining certain other key senior officers, all of whom understand and are engaged in implementing Blue Foundry Bank’s new focus and direction. In addition to their experience at Blue Foundry Bank, most of our executive officers have had prior management experience at other financial institutions, including with publicly traded banking companies. Specifically, over the course of the last three years we have retained new executives in the following positions: Chief Executive Officer, Chief Financial Officer, Treasurer, Chief Technology Officer, Chief Retail Officer, Chief Risk Officer, Chief Credit Officer and Chief Marketing Officer. Additionally, we recently added a new board member whose experience with investment management, investment banking and the financial institutions industry brings valuable skills to our board. Our leadership team is supported by a high quality, highly motivated and diverse set of managers and employees who are committed to customer service and the new focus and vision of Blue Foundry Bank.
In assembling our management team, we have sought out people whose skill sets go beyond those normally found in the traditional banking model. Key executives were selected based on their ability to deliver services similar to a modern-day web-based retailer, in addition to their knowledge and skills regarding traditional banking matters, to help us take advantage of what we believe will be the continued movement of banking services towards more electronic delivery. They bring significant knowledge related to selling consumer goods utilizing best in class digital platforms. Physical locations serve a different purpose for our bank. Customer interactions may be started online and then completed in a branch or vice-versa. We believe flexibility is a key differentiator for us and one of the major tenets around which Blue Foundry Bank is built.
We have invested in technological innovation. Over the last several years, we have modernized our technology architecture and significantly enhanced our ability to innovate and promote new products, services and technology that distinguish us from many of our peers. We believe the technological investments that we have made facilitate and support our future growth. We have improved our digital platforms for the ease of use of customers and potential customers and we have access to real-time information that enhances our ability to make rapid and well-informed decisions. By enhancing our technology, we believe we are able to develop, test and deploy new features and products more quickly and efficiently than many of our peers.
In addition, during the early stages of the COVID-19 global pandemic, we were able to quickly transition our workforce to work remotely, as needed. Our technology team worked closely with senior management to ensure that the proper systems and applications were in place to support a secure remote work environment while meeting the unprecedented increase in customer needs resulting from the pandemic. Due to this flexibility, we now have the ability to cross-train employees rapidly and move labor to meet constantly shifting customer demands.
Our investment in technology includes installing a multi-redundant, cloud-based network, running on a private global infrastructure with more than 60 points of presence. There are numerous advantages embedded in this solution, including security, cost, scalability and ease of management. We believe this network provides us with extraordinary reliability and redundancy. We have utilized software-as-a-solution applications whenever possible. Our data has been migrated to a leading global provider of cloud storage services. Nearly all paper files have been converted to an indexed digitized format. Our telephone system is also cloud-based, allowing employees to work securely and remotely from nearly anywhere.
Our newly deployed technology architecture leads to our next major tenet – buy vs build whenever possible. When customer needs change rapidly, so does our need for new applications. When the Payroll Protection Program (“PPP”) was announced, we were able to purchase and deploy the required system application to participate. Within days we trained our staff and installed a new loan origination system that was connected to the Small Business Administration (the “SBA”). Because of this flexibility within our workforce and infrastructure, we were able to assist hundreds of small businesses.
Optimization of our real estate footprint and retail distribution network. We have taken action to ensure our real estate footprint is appropriate for our needs as a growing bank and appropriate for the modern age of banking. As such, we are under contract to imminently sell our former headquarters building in Rutherford and have plans to occupy our new administrative headquarters building in Parsippany, New Jersey in the spring of 2021. Our new facility is conveniently located near major highways and population centers in northern New Jersey and has a contemporary design that assists in attracting and retaining qualified personnel. In addition, we have repositioned our branch footprint, closing certain branches, and opening new branches in locations where we believe we will prosper. Our branches have a modern look and feel that allows us to offer a boutique banking experience to both our business and retail customers. Coupled with our technological offerings, we are providing our customers a very competitive banking experience with access to a fully integrated, comprehensive suite of products and services that is superior to many of our competitors. Additionally, the actions we have taken with regard to our real estate footprint position us to maximize financial returns in the future.
Our branching strategy focuses on our next major tenet – customer migration patterns. Northern New Jersey is home to more than three million residents and thousands of small businesses. We look to locate our branches in densely populated urban cities and affluent suburban towns within top school districts. This allows us to diversify our customer base along many demographics including age, household income, mobility and occupation. We believe a diverse customer base is important to building a strong community bank. As our customers’ families grow and real estate needs change, we will be there for them as the bank they know and trust.
Our experienced, diverse and customer focused employee base. We have an established corporate culture based on personal accountability, high ethical standards and a commitment to training and career development. We will continue to look to opportunistically hire talented bankers and employees with an emphasis on recruiting highly motivated, diverse managers and employees who can establish and maintain long-term customer relationships that are key to our business, brand and culture.
Business Strategy
Our goal is to position Blue Foundry Bancorp to prosper in an evolving financial services landscape and enhance our position as one of the leading community banking institutions in our market. We intend to continue to provide a broad array of banking and other financial services to retail, commercial and small business customers while growing our presence in our markets and expanding our franchise. In recent years, we have focused on, and invested heavily in, our technology and infrastructure to improve our delivery channels and create competitive products and services, a strong workforce and an enhanced awareness of our banking brand in our market area.
As a result, we believe we are well positioned to capitalize on the opportunities available in our market by focusing on the following core strategies.
Repositioning our Business Mix: Focus on building commercial and small-business relationships. We focus on understanding our customers’ and potential customers’ financial needs and providing a wide variety of high-quality products and solutions through a collaborative approach that intends to create long-term relationships. Our goal is to continue to evolve from a traditional savings bank focusing on residential lending to a full-service commercial bank with an emphasis on providing products and services to commercial and small businesses in our market area. We believe pursuing this strategy will allow us to both grow and diversify our business mix while providing us with the best opportunities to drive strong financial returns. We intend to pursue these commercial relationships through the lending personnel that we have recruited and continue to recruit, who have the experience and relationships necessary to build this business as well as through cultural changes that have been made across the organization that emphasize our goal of pursuing this strategy. Further, our investment in technology is intended to facilitate the delivery of consumer and business solutions without the need for traditional sales channels.
Recently, we were approved by the SBA to provide loans under the 7(a) Loan Program, the SBA’s most common loan program, and we may also originate loans under the SBA’s 504 Loan Program. We believe providing 7(a) loans and 504 loans as well as traditional commercial and industrial loans and lines of credit will allow us to provide needed funding to our business communities, which will increase deposits. Often, these borrowers also keep deposits at their loan providers.
Growing our Business: Developing new customer relationships and deepening existing relationships. We seek to expand our market share in existing and contiguous markets by leveraging our distinctive brand and delivering high-quality solutions through a collaborative, relationship-based approach. Our relationship-based approach has enabled us to achieve disciplined organic growth, and we expect this trend to continue. We believe our support of small business and non-profit customers in obtaining funding beginning in April 2020 under the PPP demonstrates both our commitment and capacity to meet our customers’ needs. Through December 31, 2020, we originated approximately 575 PPP loans, representing $57.2 million. Although many of our PPP borrowers were only recently introduced to our bank through this program, we have been able to successfully establish and maintain a significant number of these new client relationships.
Building our customer relationships around low and no cost products is part of our relationship expansion strategy. Our “Blue” products, including Blue Axis Checking, Blue Axis Connect, Blue Axis Savings, and Blue Carbon Business Checking are designed to be low cost to the consumer or business, while providing us with lower interest rate deposits. Our consumer deposit products are designed to be easy to open in person or online. Our commercial deposit products include many features without fees that would customarily be included.
Leverage technology to enhance customer experience and drive operating efficiencies. We have made significant investments in our technology infrastructure to deliver high-quality, innovative products and services to our customers. For example, we have recently upgraded our mobile banking platform for both consumer and commercial customers. In addition, we have invested in our new commercial lending origination system and platform, and we intend to continue to improve our consumer lending origination platform. We are committed to continue investing in technology and data analytics. We believe these investments will differentiate us with our target customers, which will generate significant operating leverage as we grow.
Continuing to invest and optimize our facilities and expand our branch network through selective de novo branching. Recently, we have been enhancing and optimizing both our facilities and branch network. We have optimized our branch footprint though the utilization of a new forward-thinking branch model and intend to continue our strategy to broaden our existing branch network by expanding into new markets and broadening our geographic footprint. In November 2020, we relocated our branch office in Rutherford, New Jersey, continuing our strategy of operating in high density areas with vibrant commercial corridors and main streets. We also plan to continue to open additional new branches in desirable locations in attractive growth markets. New branches will feature modern design elements focused on open and efficient use of space.
Branch efficiency has been built into our locations. All branches currently employ new multifunction automated teller machines that are designed to be compatible with new services as they become available. Further, all branches utilize teller cash recycling machines to further enhance efficiency.
Pursue opportunistic acquisitions and partnerships. We intend to prudently pursue opportunities to acquire banks in our existing and contiguous markets that create attractive financial returns. Our focus will primarily be on franchises that enhance our funding profile, product capabilities or geographic density, while maintaining an acceptable risk profile. We believe the vital need to make increasingly significant technological investments has greatly amplified the importance of scale in banking. In addition, we believe that the current economic climate will increase the rate of consolidation in the banking industry. We believe that after the stock offering we will be well-positioned as a consolidator in the banking market because of our financial strength, reputation and culture. In addition, we will evaluate potential partnerships with FinTech companies or other fee income generating businesses that we believe would be additive to our business strategy and consistent with our desire to stay ahead of technological developments that we believe will continue to cause the banking industry to evolve.