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YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.34pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.24pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.91pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+8
terminate+4
delay+3
terminated+3
against+2
Positive rising
effective+7
success+3
achieve+2
efficiencies+2
beneficial+2
Risk Factors (Item 1A)
10,452 words
ITEM 1A. RISK FACTORS
Risks Relating to the Merger
Because the market price of Fulton common stock may fluctuate prior to the effective time, including as a result of Blue Foundry’s financial performance prior to the effective time, stockholders cannot be certain of the market value of the merger consideration to be received by Blue Foundry stockholders.
At the effective time, each share of Blue Foundry common stock issued and outstanding immediately prior to the effective time (other than certain excluded shares as described in the merger agreement) will be converted into the right to receive 0.650 of a share of Fulton common stock. This exchange ratio is fixed and will not be adjusted for changes in the market price of either Fulton common stock or Blue Foundry common stock. Changes in the price of Fulton common stock between now and the effective time will affect the value that Blue Foundry stockholders will receive in the merger. Neither Fulton nor Blue Foundry is permitted to terminate the merger agreement as a result of any increase or decrease in the market price of Fulton common stock or Blue Foundry common stock.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
No words rose this year.
Positive rising
beautiful+1
gains+1
favorable+1
MD&A (Item 7)
3,265 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section is intended to assist in the understanding of the financial performance of the Company and its subsidiary through a discussion of our financial condition as of December 31, 2025, and our results of operations for the years ended December 31, 2025 and 2024. This section should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements that appear at the end of this report.
Business Strategy
The Company’s 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. 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.
Critical Accounting Policies
Certain of our accounting policies are important to the presentation of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. The Company has identified the allowance for credit losses on loans and income taxes to be critical accounting policies. These accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included in Part II, Item 8.
Comparison of Operating Results for the Years Ended December 31, 2025 and 2024
General . The Company recorded a net loss for the year ended December 31, 2025 of $10.0 million compared to net loss of $11.9 million for the year ended December 31, 2024. The decreased loss was largely driven by an increase of $9.8 million in net interest income offset by an increases in provision for credit losses and non-interest expenses.
Interest Income. Interest income increased $9.9 million, or 11.5%, to $95.3 million for the year ended December 31, 2025 from $85.5 million for the year ended December 31, 2024. Interest income from loans and securities increased $10.5 million and $655 thousand, respectively. The average balance of loans increased $108.9 million while the average balance of securities decreased $14.9 million, respectively. The yield on loans and securities increased as loans and securities generally were originated at higher rates during the year. Additionally, the average balances of cash and cash equivalents increased $10.9 million, however, the yield on cash and cash equivalents decreased 95 basis points during 2025.
Interest Expense. Interest expense was flat at $47.9 million for the years ended December 31, 2025 and 2024. The average balance of interest-bearing deposits increased $125.7 million as we grew average interest-bearing core deposits (checking, savings and money market accounts) and average time deposits by $46.1 million and $79.5 million, respectively. The average balance of FHLB advances decreased $19.5 million. During 2025, the cost of funds decreased by 18 basis points. The cost of time deposits decreased by 66 basis points, while the cost of interest-bearing core deposits and FHLB advances increased by 16 basis points and 13 basis points, respectively.
Net Interest Income and Margin. For the year ended December 31, 2025 net interest income was $47.4 million, an increase of $9.8 million or 26.2%, compared to $37.6 million for same period in 2024.
Net interest margin for the year ended December 31, 2025 increased by 40 basis points to 2.30% from 1.90% for the year ended December 31, 2024. During the year, the increase in yield on interest-earning assets outpaced the decrease in cost of interest-bearing liabilities. The yield on average interest-earning assets increased 31 basis points to 4.63% for the year ended December 31, 2025 from 4.32% for the year ended December 31, 2024, while the cost of average interest-bearing liabilities decreased 18 basis points to 2.77% for the year ended December 31, 2025 from 2.95% for the year ended December 31, 2024. The total cost of deposits and total cost of funds decreased 23 basis points and 18 basis points, respectively.
Provision for Credit Losses . The Company recorded a provision for credit losses of $2.1 million for the year ended December 31, 2025 compared to a release of provision for credit losses of $1.4 million for the year ended December 31, 2024. The net provision in 2025 consisted of $1.5 million on loans and $653 thousand for commitments and letters of credit, and a release of provision of $7 thousand on held-to-maturity securities. 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%.
Non-interest Income . Non-interest income was relatively stable at $1.7 million for the year ended December 31, 2025 compared to $1.8 million for the year ended December 31, 2024. The decrease of $111 thousand was due, in part, to a gain on sale of REO property of $123 thousand recorded in the 2024 period that did not occur in the 2025 period.
Non-interest Expense . Non-interest expense totaled $57.0 million and $52.6 million for the year ended December 31, 2025 and 2024, respectively, an increase of $4.4 million or 8.3%, which includes current period merger-related expenses of $1.3 million. The increase was primarily driven by increases in compensation and benefits costs of $2.5 million and professional services of $1.5 million, of which $1.1 million are merger related.
Income Tax Expense . The Company’s current tax position reflects the previously established full valuation allowance on its deferred tax assets. At December 31, 2025 and 2024 the valuation allowance on deferred tax assets was $27.3 million and $25.1 million, respectively. The Company did not record a tax benefit for the loss incurred during 2025 and 2024 because a full valuation allowance was required on its deferred tax assets.
On July 4, 2025, the “One Big Beautiful Bill” (“OBBB”) was enacted into law. The legislation includes a number of significant tax-related provisions, including changes affecting corporate tax incentives, international tax provisions and various business credits and deductions. The Company has evaluated the impact of the OBBB on its financial statements and, based on its assessment, has determined the legislation will not have a material impact.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the rates of interest earned on such assets and paid on such liabilities.
Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Non-accrual loans are included in average balances only. Amortization of loan origination fees are included in interest income on loans and are not material.
Year Ended December 31,
Average Balance
Interest
Average
Yield/Cost
Average Balance
Interest
Average
Yield/Cost
(Dollars in thousands)
Assets:
Loans (1)
Mortgage-backed securities
Other investment securities
FHLB stock
Cash and cash equivalents
Total interest earning assets
Non-interest earning assets
Total assets
Liabilities and shareholders' equity:
NOW, savings, and money market deposits
Time deposits
Interest bearing deposits
FHLB advances
Total interest bearing liabilities
Non-interest bearing deposits
Non-interest bearing other
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
Net interest income
Net interest rate spread (2)
Net interest margin (3)
(1) Average loan balances are net of deferred loan fees and costs, premiums and discounts and includes non-accrual loans.
(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
Rate/Volume Table
The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments excluded from this table.
Year Ended December 31,
Increase (Decrease) Due to
Volume
Rate
Net
(In thousands)
Interest income:
Loans
Mortgage-backed securities
Other investment securities
FHLB stock
Cash and cash equivalents
Total interest-earning assets
Interest expense:
Interest-bearing deposits
FHLB advances
Total interest-bearing liabilities
Net decrease in net interest income
Comparison of Financial Condition at December 31, 2025 and December 31, 2024
Total Assets. Total assets increased $107.3 million to $2.17 billion at December 31, 2025.
Cash and cash equivalents . Cash and cash equivalents was $53.1 million at December 31, 2025 and $42.5 million at December 31, 2024.
Securities Available-For-Sale . Securities available-for-sale increased $4.2 million, or 1.4%, to $301.2 million at December 31, 2025 from $297.0 million at December 31, 2024 due to a $10.5 million improvement in the unrealized loss position on the portfolio and purchases, partially offset by amortization, maturities, calls and paydowns during the year.
Securities Held-To-Maturity . Securities held-to-maturity totaled $27.0 million at December 31, 2025 decreasing $6.1 million from $33.1 million at December 31, 2024, primarily due to paydowns and amortization.
FHLB Stock and Other investments. Other investments decreased $1.4 million, or 8.0%, to $16.4 million at December 31, 2025 from $17.8 million at December 31, 2024. The change was due to a decrease in Federal Home Loan Bank of New York stock as a result of a reduction in FHLB borrowings.
Gross Loans . Gross loans held for investment increased $107.1 million, or 6.8%, to $1.69 billion at December 31, 2025 from $1.58 billion at December 31, 2024. Consumer loans increased $119.1 million, commercial real estate loans increased $46.5 million, and nonresidential owner occupied loans increased $36.8 million, while construction loans and the multifamily loan portfolio decreased $34.2 million and $30.1 million, respectively. Loan fundings totaled $192.6 million during 2025, including originations of $154.0 million in commercial real estate loans and $17.7 million in commercial and industrial loans. In addition, the Company acquired $137.8 million in consumer loans and purchased $46.5 million of conforming residential mortgages in New Jersey during the year.
The following table presents loans allocated by loan category:
December 31, 2025
December 31, 2024
(In thousands)
Residential
Multifamily
Commercial real estate
Construction
Junior liens
Commercial and industrial
Consumer and other
Total loans
The table below presents the balance of non-performing assets on the dates indicated:
December 31, 2025
December 31, 2024
(In thousands)
Residential
Multifamily
Junior liens
Commercial and industrial
Total non-performing assets
Other Assets. Other assets decreased $3.0 million, or 18.4%, to $13.3 million at December 31, 2025 from $16.3 million at December 31, 2024 primarily due to a decrease of $5.2 million in gross unrealized gains on interest rate swaps in the 2025 period partially offset by increases in pending electronic fund transfers at December 31, 2025. See Note 12, Derivatives, of Notes to Consolidated Financial Statements in “Part II, Item 8- Financial Statements.”
Total Deposits. Total deposits increased $166.6 million or 12.4% to $1.51 billion at December 31, 2025 compared to $1.34 billion at December 31, 2024. Customer deposits increased $93.5 thousand and core deposits (defined as non-interest bearing deposits, NOW and demand accounts, and savings accounts) represented 48.3% of total deposits at December 31, 2025 compared to 47.3% at December 31, 2024. Time deposits increased $73.1 million, which includes $120.0 million in brokered deposits, bringing the total brokered deposit balance to $275.0 million at December 31, 2025. All brokered deposits are associated with longer-dated swap agreements. See Note 12, Derivatives, of Notes to Consolidated Financial Statements in “Part II, Item 8- Financial Statements.” Uninsured and uncollateralized deposits from third-party customers were $196.0 million, or 13% of deposits, at the end of December 31, 2025.
The following table presents the totals of deposit accounts by account type, at the dates shown below:
December 31, 2025
December 31, 2024
(In thousands)
Non-interest bearing deposits
NOW and demand accounts (1)
Savings (1)
Time deposits
Total deposits
(1) Money market accounts are included within the NOW and demand accounts and savings captions.
Borrowings. The Company had $301.0 million of borrowings at December 31, 2025, a decrease of $38.5 million, or 11.3%, from $339.5 million at December 31, 2024. During the year, we replaced maturing borrowings with brokered deposits. Borrowings consisted solely of Federal Home Loan Bank of New York advances; $251.0 million of which are associated with longer-dated swap agreements. See Note 12, Derivatives, of Notes to Consolidated Financial Statements in “Part II, Item 8- Financial Statements.”
Total Shareholders’ Equity. Total shareholders’ equity decreased by $19.5 million, or 5.9%, to $312.7 million at December 31, 2025 compared to $332.2 million at December 31, 2024. The decrease was driven by the Company’s repurchase of 1,707,864 of its shares at a cost of $16.3 million and the net loss of $10.0 million. These decreases were partially offset by favorable changes in accumulated other comprehensive income and unallocated ESOP.
Off-Balance Sheet. To help manage our interest rate position, the Company had $526.0 million in interest rate hedges at December 31, 2025, with a weighted average duration of 1.8 years. This represents an increase of $177.0 million from December 31, 2024, when interest rate hedges totaled $349.0 million with a weighted average duration of 2.4 years. See Note 12, Derivatives, of Notes to Consolidated Financial Statements in “Part II, Item 8- Financial Statements.”
Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary sources of funds consist of deposit inflows, principal and interest payments on loans and securities, maturities of securities and FHLB advances and other borrowings. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investment securities and borrowed funds and prepayments on loans are greatly influenced by general interest rates, economic conditions and competition. Additionally, deposit flows are impacted by general deposit behavior. Our primary use of funds is for the origination and purchase of loans and the purchase of securities.
Management regularly adjusts our investments in liquid assets based upon an assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our interest-rate risk and investment policies.
The Bank has entered into derivative financial instruments to reduce risk associated with interest rate volatility by aligning repricing terms of assets and liabilities. These derivatives had an aggregate notional amount of $526.0 million and $349.0 million as of December 31, 2025 and 2024, respectively. See Note 12, Derivatives, of the Notes to the Consolidated Financial Statements in “Part II, Item 8- Financial Statements.”
At December 31, 2025, we had outstanding commitments to originate loans of $24.3 million and unused lines of credit of $151.4 million. We anticipate that we will have sufficient funds available to meet our current loan origination commitments. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2025 totaled $766.3 million, including $275.0 million of brokered time deposits. Management expects, based on historical experience, that a substantial portion of the maturing certificates of deposit to customers will be retained. However, if a substantial portion of these deposits is not retained, we may utilize additional wholesale funding or raise interest rates on customer deposits to attract new accounts, which may result in higher levels of interest expense. Available borrowing capacity at December 31, 2025 was $318.2 million with FHLB. We also had the ability to borrow up to $68.1 million at the FRB’s Discount Window and a $30.0 million available line of credit with a correspondent bank at December 31, 2025. Additionally, 75.9% of the Bank’s investment securities are unencumbered and could be used as collateral for additional borrowing capacity.
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to originate loans, unused lines of credit and standby letters of credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments that we do for on-balance sheet instruments. 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.
Blue Foundry Bancorp is a separate legal entity from Blue Foundry Bank and must provide for its own liquidity to fund dividend payments, stock repurchases, and other corporate risk factors. The Company’s primary source of liquidity is the issuance of stock and the receipt of dividend payments from the Bank in accordance with applicable regulatory requirements. At December 31, 2025, Blue Foundry Bancorp (unconsolidated) had liquid assets of $23.3 million.
The Bank is subject to various regulatory capital requirements administered by the NJDOBI and the FDIC. At December 31, 2025, the Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines. See “Item 1. Business—Supervision and Regulation—Federal Banking Regulation—Capital Requirements” and Note 19 of the Notes to the Consolidated Financial Statements.
Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Fulton’s and Blue Foundry’s businesses, operations and prospects, the performance of peer companies and other financial companies, volatility in the prices of securities in global financial markets, including market prices of Fulton, Blue Foundry and other banking companies, the effects of proposed or imposed tariffs by the U.S. government and retaliatory tariffs proposed or imposed by U.S. trading partners and the risk of any recession or slowdown in economic growth, particularly in the states of Pennsylvania, Delaware, Maryland, New Jersey and Virginia, and regulatory considerations and tax laws, many of which are beyond Fulton’s and Blue Foundry’s control.
The market price of Fulton common stock after the merger may be affected by factors different from those currently affecting the independent businesses of Fulton and Blue Foundry.
As a result of the merger, Blue Foundry stockholders will become Fulton shareholders. Fulton’s business differs from that of Blue Foundry and certain adjustments may be made to Fulton’s business as a result of the merger. Accordingly, the results of operations of Fulton and the market price of Fulton common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of Blue Foundry.
Fulton and Blue Foundry are expected to incur substantial costs related to the merger and integration, and these costs may be greater than anticipated due to unexpected events.
Fulton and Blue Foundry have incurred and expect to incur a number of significant non-recurring costs associated with the merger. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs and other related costs. Some of these costs are payable by either Fulton or Blue Foundry regardless of whether or not the merger is completed.
In addition, Fulton will incur integration costs following the completion of the merger as Fulton and Blue Foundry integrate their businesses, including facilities and systems consolidation costs and employment-related costs. Fulton and Blue Foundry may also incur additional costs to maintain employee morale and to retain key employees. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing and benefits. While Fulton and Blue Foundry have assumed that a certain level of costs will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration costs. Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately. These integration costs may result in Fulton taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time.
Combining Fulton and Blue Foundry may be more difficult, costly or time-consuming than expected, and Fulton and Blue Foundry may fail to realize the anticipated benefits and cost savings of the merger.
The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Fulton and Blue Foundry. To realize the anticipated benefits and cost savings from the merger, Fulton and Blue Foundry must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth. If Fulton and Blue Foundry are not able to successfullyachieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.
An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of Fulton following the completion of the merger, which may adversely affect the value of the common stock of Fulton following the completion of the merger. Fulton and Blue Foundry have operated and, until the effective time of the Merger, must continue to operate, independently. It is possible that the integration process could result in the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on each of Fulton and Blue Foundry during this transition period and for an undetermined period after completion of the merger on Fulton.
The future results of Fulton following the completion of the merger may suffer if Fulton does not effectively manage its expanded operations.
Following the merger, the size of the business of Fulton will increase beyond the current size of either Fulton’s or Blue Foundry’s business. Fulton’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. Fulton may also face increased scrutiny from governmental entities as a result of the increased size of its business. There can be no assurances that Fulton will be successful or that it will realize the expected operating efficiencies, revenue enhancement or other benefits currently anticipated from the merger.
Fulton may be unable to retain legacy Blue Foundry personnel successfully after the completion of the merger.
The success of the merger will depend in part on Fulton’s ability to retain the talent and dedication of key employees currently employed by Blue Foundry. It is possible that these employees may decide not to remain with Blue Foundry while the merger is pending or after the completion of the merger. If Fulton and Blue Foundry are unable to retain key employees, including management, who are critical to the successful integration and future operations of Fulton following the merger, Fulton and Blue Foundry could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the completion of the merger, if key employees terminate their employment, Fulton’s business activities following the merger may be adversely affected, and management’s attention may be diverted to successfully hiring suitable replacements, all of which may cause Fulton’s business following the merger to suffer. Fulton and Blue Foundry also may not be able to locate or retain suitable replacements for key employees who leave either company.
If the remaining conditions to the closing of the merger are not met, the merger agreement may be terminated in accordance with its terms and the merger may not be completed.
The merger agreement is subject to a number of remaining conditions which must be fulfilled in order to complete the merger. Those conditions include: (i) the filing of a notification of listing of the shares of Fulton common stock to be issued in the merger with Nasdaq and non-objection by Nasdaq to such listing; and (ii) the absence of any law, order, injunction or decree or other legal restraint prohibiting or making illegal the consummation of the merger. Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the merger agreement, and (c) receipt by such party of an opinion from its counsel to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Fulton’s obligation to complete the merger is also subject to the absence of a material adverse effect with respect to Blue Foundry since the execution of the merger agreement.
These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after the requisite Blue Foundry stockholder approval, or Fulton or Blue Foundry may elect to terminate the merger agreement in certain other circumstances.
Failure to complete the merger could negatively impact Fulton or Blue Foundry.
If the merger is not completed for any reason, there may be various adverse consequences and Fulton and/or Blue Foundry may experience negative reactions from the financial markets and from their respective customers and employees. For example, Fulton’s or Blue Foundry’s respective businesses may be adversely impacted by the failure to pursue other beneficialopportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of Fulton common stock or Blue Foundry common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. If the merger agreement is terminated under certain circumstances, Blue Foundry may be required to pay a termination fee of $9,694,662 to Fulton.
Additionally, each of Fulton and Blue Foundry has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing materials related to the Merger, and all filing and other fees paid in connection with the merger. If the merger is not completed, Fulton and Blue Foundry will have to pay some of these expenses without realizing the expected benefits of the merger.
Fulton and Blue Foundry will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Fulton and Blue Foundry. These uncertainties may impair Fulton’s or Blue Foundry’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Fulton or Blue Foundry to seek to change existing business relationships with Fulton or Blue Foundry. In addition, subject to certain exceptions, Blue Foundry has agreed to operate its business in the ordinary course consistent with past practice in all material respects and to refrain from taking certain actions that may adversely affect or delay its ability to consummate the transactions contemplated by the merger agreement on a timely basis without the consent of the other party. These restrictions may prevent Fulton and/or Blue Foundry from pursuing attractive business opportunities that may arise prior to the completion of the merger.
The pendency of the proposed merger could disrupt Fulton’s and Blue Foundry’s relationships with their employees, customers, suppliers, business partners and others, as well as their operating results and business generally.
Whether or not the merger is ultimately consummated, as a result of uncertainty related to the proposed transaction, risks relating to the impact of the pendency of the merger on Fulton’s and Blue Foundry’s business include the following:
• their employees may experience uncertainty about their future roles, which might adversely affect Fulton’s and Blue Foundry’s ability to retain and hire key personnel and other employees;
• customers, suppliers, business partners and other parties with which Fulton and Blue Foundry maintain business relationships may experience uncertainty about their future and seek alternative relationships with third parties, seek to alter their business relationships with Fulton and Blue Foundry or fail to extend existing relationships with Fulton and Blue Foundry; and
• Fulton and Blue Foundry have each expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed merger.
If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact each party’s results of operations and financial condition.
The shares of Fulton common stock to be received by Blue Foundry stockholders as a result of the merger will have different rights from the shares of Blue Foundry common stock.
Upon completion of the merger, the rights of former Blue Foundry stockholders who receive shares of Fulton common stock in the merger and thereby become Fulton shareholders will be governed by the Fulton articles and the Fulton bylaws. The rights associated with Blue Foundry common stock are different from the rights associated with Fulton common stock. In addition, the rights of shareholders under Pennsylvania law, where Fulton is organized, may differ from the rights of stockholders under Delaware law, where Blue Foundry is organized.
Blue Foundry stockholders will have a reduced ownership and voting interest in Fulton after the consummation of the merger and will exercise less influence over management.
Blue Foundry stockholders currently have the right to vote in the election of the board of directors and on other matters affecting Blue Foundry. When the merger is completed, each Blue Foundry stockholder will become a Fulton shareholder, with a percentage ownership of the shares of common stock of Fulton that is smaller than the holder’s percentage ownership of Blue Foundry prior to the consummation of the merger. Based on the number of shares of Fulton common stock outstanding as of November 24, 2025, the date of the merger agreement, and based on the number of shares of Fulton common stock expected to be issued in the merger, we estimate that existing Fulton shareholders will own approximately ninety-three and one-half percent (93.5%) and former Blue Foundry stockholders will own approximately six and one-half percent (6.5%) of the common stock of Fulton following the completion of the merger. Because of this, Blue Foundry stockholders may have less influence on the management and policies of Fulton than they now have on the management and policies of Blue Foundry.
Issuance of shares of Fulton common stock in connection with the merger may adversely affect the market price of Fulton common stock.
In connection with the payment of the merger consideration, Fulton expects to issue approximately 13.5 million shares of Fulton common stock to Blue Foundry stockholders. The issuance of these new shares of Fulton common stock may result in fluctuations in the market price of Fulton common stock, including a stock price decrease.
Fulton or Blue Foundry or both may be subject to claims and litigation pertaining to the merger that could prevent or delay the completion of the merger.
Any lawsuits filed in connection with the merger could prevent or delay completion of the merger and result in additional costs to Fulton and Blue Foundry, including any costs associated with indemnification. The defense or settlement of any lawsuit or claim that may be filed seeking remedies against Blue Foundry, the Blue Foundry board of directors or Fulton or the Fulton board of directors in connection with the merger that remains unresolved at the effective time may adversely affect Fulton’s business, financial condition, results of operations and cash flows.
Risks Related to Interest Rate Risk
Future changes in interest rates may reduce any future profits.
Like most financial institutions, whether we are profitable or not depends to a large extent upon our net interest income, which is the difference between our interest income on interest-earning assets, such as loans and securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowed funds. Accordingly, our results of operations depend largely on movements in market interest rates and our ability to manage our interest-rate sensitive assets and liabilities in response to these movements. Factors such as inflation, recession and instability in financial markets, among other factors beyond our control, may affect interest rates. For the year ended December 31, 2025, we recorded a loss of approximately $10.0 million.
Our financial condition and results of operations are significantly affected by changes in market interest rates, and the degree to which these changes disparately impact short-term and long-term interest rates and influence the behavior of our customer base. Our results of operations substantially depend on our net interest income, which is the difference between the interest income we earn on our interest earning assets and the interest expense we pay on our interest-bearing liabilities. A flattening yield curve, or one that inverts, could negatively impact our net interest margin and earnings.
If the Federal Reserve lowers market interest rates below current levels, our net interest income could also be negatively affected if competitive pressures prevent us from reducing rates on our deposits, while the yields on our assets decrease through loan prepayments and interest rate adjustments. Conversely, if the Federal Reserve raises interest rates, our interest-bearing liabilities may be subject to repricing or maturing more quickly than our interest-earning assets. If short-term rates increase rapidly, we may have to increase the rates we pay on our deposits and borrowed funds more quickly than we can increase the interest rates we earn on our loans and investments, resulting in a negative effect on interest spreads and net interest income. In addition, the effect of rising rates could be compounded if deposit customers move funds into higher yielding accounts or are lost to competitors offering higher rates on their deposit products.
Changes in interest rates also affect the value of our interest-earning assets and in particular our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At December 31, 2025, our available-for-sale debt securities portfolio totaled $301.2 million with net unrealized losses of $16.9 million and are reported as a separate component of stockholders' equity. Therefore, decreases in the fair value of securities available-for-sale resulting from increases in interest rates could have an adverse effect on stockholders' equity. At December 31, 2025, our held-to-maturity debt securities portfolio totaled $27.1 million with net unrealized losses of $1.5 million. The net unrealized losses on our held-to-maturity securities are not recorded in the financial statements until realized upon sale. 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.
Volatility and uncertainty related to inflation and the effects of inflation, which may lead to increased costs for businesses and consumers and potentially contribute to poor business and economic conditions generally, may also enhance or contribute to some of the risks discussed herein. For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company's products, adversely affect the creditworthiness of the Company's borrowers or result in lower values for the Company's investment securities and other interest-earning assets.
Any substantial change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. While we pursue an asset/liability strategy designed to mitigate our risk from changes in interest rates, such changes can still have a material adverse effect on our financial condition and results of operations. At December 31, 2025, our net portfolio value would decrease by $65.2 million if there was an instantaneous 200 basis point increase in market interest rates. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk.”
Risks Related to Lending Activities
If our allowance for credit losses on loans is not sufficient to cover actual loan losses, our earnings and capital could decrease.
Lending is inherently risky and we are exposed to the risk that our borrowers may default on their obligations. A borrower’s default on its obligations may result in lost principal and interest income and increased operating expenses as a result of the allocation of management’s time and resources to the collection and work-out of the loan. In certain situations, where collection efforts are unsuccessful or acceptable work-out arrangements cannot be reached, we may have to charge-off the loan in whole or in part, or sell it at a discount. In such situations, we may acquire real estate or other assets, if any, that secure the loan through foreclosure or other similar available remedies, the amount owed under the defaulted loan may exceed the value of the assets acquired, and post-default remedies may be unavailable or unfeasible.
We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for our loans. In determining the amount of the allowance for credit losses on loans, we review our loans and our loss and delinquency experience, and we evaluate other factors including, among other things, current economic conditions. If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for credit losses on loans may not be sufficient to cover losses in our loan portfolio, which would require additions to our allowance, which could materially decrease our net income. Our allowance for credit losses on loans was 0.85% of total loans and 126.56% of non-performing loans at December 31, 2025.
In addition, bank regulators periodically review our allowance for credit losses on loans and, based on their judgments and information available to them at the time of their review, may require us to increase our allowance for credit losses on loans or recognize further loan charge-offs. An increase in our allowance for credit losses on loans or loan charge-offs as required by these regulatory authorities may reduce our net income and our capital, which may have a material adverse effect on our financial condition and results of operations.
If our non-performing assets increase, our earnings will be adversely affected.
At December 31, 2025, our non-performing assets, which consist of non-performing loans, were $11.4 million, or 0.55% of total assets. Our non-performing assets adversely affect our net income in various ways:
• we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned;
• we must provide for expected loan losses through a current period charge to the provision for credit losses on loans;
• non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values;
• there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance and maintenance fees; and
• the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.
Risks Related to Loan Underwriting
Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, an increased monthly payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is somewhat limited by the annual and lifetime interest rate adjustment limits on adjustable-rate loans. To help minimize the risks associated with rising interest rates and the subsequent risk of default, we often perform a stress analysis during underwriting.
Multifamily and Commercial Real Estate Loans. Loans secured by commercial and multifamily real estate generally have larger balances and involve a greater degree of risk than residential real estate loans. Of primary concern in commercial real estate and multifamily lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the asset. Payments on loans secured by income producing properties often depend on the successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than residential real estate loans. To monitor cash flows on income properties, we generally require borrowers and loan guarantors, if any, to provide annual financial statements on commercial real estate and multifamily loans. In reaching a decision whether to make a commercial real estate or multifamily loan, we consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. At times, we may also perform a global cash flow analysis of the borrower. We generally have required that the properties securing these real estate loans have debt service coverage ratios (the ratio of net operating income to debt service) of at least 1.25x. We require a Phase One environmental report on all commercial real estate loans in excess of $1.0 million or when we believe there is a possibility that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials. Further in situations where environmental risks may be present, we utilize the services of an independent and qualified environmental consultant to assess any underlying risks.
Construction Loans. Our construction loans are based upon our estimates of costs to complete a project and the value of the completed project. Typically, said reviews are conducted by third party’s approved by the bank. Underwriting is focused on the borrowers’ financial strength, credit history and demonstrated ability to produce a quality product and effectively market and manage its operations.
Construction lending involves additional risks when compared to permanent residential lending because funds are advanced upon the collateral of the project, which is of uncertain value before its completion. Because of the uncertainties inherent in estimating construction costs, it is difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be overstated, we may have inadequate collateral for the repayment of the loan upon completion of construction of the project and may incur a loss. We use a discounted cash flow analysis to determine the value of any construction project of five or more units. Our ability to continue to originate a significant amount of construction loans is dependent on the strength of the general real estate market in our market areas.
Junior Liens and Consumer Loans. Consumer loans may entail greater risk than residential mortgage loans, as they can be unsecured, subordinately secured or secured by assets that depreciate rapidly. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a resulting deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
Commercial and Industrial Loans. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more readily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business and the collateral securing these loans may fluctuate in value. Our commercial and industrial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, collateral for commercial and industrial loans consists of accounts receivable, inventory and/or equipment. Credit support provided by the borrower for most of these loans is based on the liquidation of the pledged collateral and enforcement of a personal guarantee. Furthermore, collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself.
Risks Related to Economic Conditions
Declines in value may adversely impact our investment portfolio .
As of December 31, 2025, the Company had approximately $328.2 million in its investment portfolio, with $301.2 million designated as available-for-sale and $27.1 million designated as held-to-maturity. For securities available-for-sale, ASU 2016-13 requires entities to determine if impairment is related to credit loss or non-credit loss. If an assessment of the security indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security, and if the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis. Held-to-maturity securities are evaluated under the allowance for credit losses model. Held-to-maturity securities are charged off against the allowance when deemed to be uncollectible and adjustments to the allowance are reported as a component of credit loss expense. If the credit loss expense is significant enough it could affect the ability of Blue Foundry Bank to upstream dividends to the Company, which could have a material adverse effect on our liquidity and our ability to pay dividends to shareholders and could also negatively impact our regulatory capital ratios.
The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in our local market area.
Our loan portfolio is concentrated primarily in New Jersey. This makes us vulnerable to a downturn in the local economy and real estate markets. Adverse conditions in the local economy such as unemployment, inflation, recession, regulatory changes, a catastrophic event or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income. Decreases in local real estate values caused by economic conditions, recent changes in tax and rent regulation laws or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. Further, deterioration in local economic conditions could drive the level of loan losses beyond the level we have provided for in our allowance for credit losses on loans, which in turn could necessitate an increase in our provision for loan losses and a resulting reduction to our earnings and capital.
A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could adversely affect our operations, financial condition and earnings.
Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans. A deterioration in economic conditions, especially local conditions, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations, and could more negatively affect us compared to a financial institution that operates with more geographic diversity:
• demand for our products and services may decline;
• loan delinquencies, problem assets and foreclosures may increase;
• collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power and reducing the value of assets and collateral associated with existing loans; and
• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
Moreover, a significant decline in general economic conditions caused by inflation, recession, tariffs, acts of terrorism, civil unrest, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.
A lack of liquidity could adversely affect the Company’s financial condition and results of operations.
Liquidity is essential to the Company’s business. The Company relies on its ability to generate deposits and effectively manage the repayment of its liabilities to ensure that there is adequate liquidity to fund operations. An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. The Company’s most important source of funds is its deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk adjusted return, which are strongly influenced by such external factors as the direction of interest rates, local and national economic conditions and the availability and attractiveness of alternative investments. Further, the demand for deposits may be reduced due to a variety of factors such as negative trends in the banking sector, the level of and/or composition of our uninsured deposits, demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the Federal Reserve or regulatory actions that decrease customer access to particular products. If customers move money out of bank deposits and into other investments such as money market funds, the Company would lose a relatively low-cost source of funds, which would increase its funding costs and reduce net interest income. Any changes made to the rates offered on deposits to remain competitive with other financial institutions may also adversely affect profitability and liquidity. Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and/or loans, brokered deposits, borrowings from the FHLB and/or FRB discount window, and unsecured borrowings. The Company also may borrow funds from third-party lenders, such as other financial institutions. The Company’s access to funding sources in amounts adequate to finance or capitalize its activities, or on terms that are acceptable, could be impaired by factors that affect the Company directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry, a decrease in the level of the Company’s business activity as a result of a downturn in markets or by one or more adverse regulatory actions against the Company or the financial sector in general. Any decline in available funding could adversely impact the Company’s ability to originate loans, invest in securities, meet expenses, or to fulfill obligations such as meeting deposit withdrawal demands, any of which could have a material adverse impact on its liquidity, business, financial condition and results of operations.
Inflationary pressures and rising prices may affect our results of operations and financial condition.
Inflation may present a significant risk as it can lead to increased costs and reduced purchasing power for consumers. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly. Furthermore, a prolonged period of inflation could cause wages and other operating costs to increase. These factors could adversely affect our results of operations and financial condition.
Interruption of our customers’ supply chains and federal funding could negatively impact their business and operations and impact their ability to repay their loans.
Any material interruption in our customers’ supply chains, such as a material interruption of the resources required to conduct their business, such as those resulting from interruptions in service by third-party providers, trade restrictions, including increased tariffs or quotas, embargoes or customs restrictions, reductions in federal subsidies or grants, social or labor unrest, natural disasters, epidemics or pandemics or political disputes and military conflicts, that cause a material disruption in our customers’ supply chains, could have a negative impact on their business and ability to repay their borrowings with us. In the event of disruptions in our customers’ supply chains, the labor and materials they rely on in the ordinary course of business may not be available at reasonable rates or at all. Additionally, changes in distribution of federal funds or freezing of federal funds, including reductions in federal workforce causing unemployment, could have an adverse effect on the ability of consumers and businesses to pay debts and/or affect the demand for loans and deposits.
The failure to address the Federal debt ceiling in a timely manner, downgrades of the U.S. credit rating and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the Federal government, which may affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs.
As a result of uncertain political, credit and financial market conditions, including the potential consequences of the federal government defaulting on its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose credit default and liquidity risks. Given that future deterioration in the U.S. credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investments will not occur. At December 31, 2025, we had approximately $96.5 million, $599 thousand and $152.9 million invested in U.S. Treasury securities, U.S. government agency securities and residential mortgage-backed securities issued or guaranteed by government-sponsored enterprises, respectively. Downgrades to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities, and could result in our counterparties requiring additional collateral for our borrowings. Further, unless and until U.S. political, credit and financial market conditions have been sufficiently resolved or stabilized, it may increase our future borrowing costs.
Severe weather, acts of terrorism, geopolitical and other external events could impact our ability to conduct business.
Weather-related events have adversely impacted our market area in recent years, especially areas located near coastal waters and flood prone areas. Such events that may cause significant flooding and other storm-related damage may become more common events in the future. Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems and the metropolitan New York area, including New Jersey, remain central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including the Russia and Ukraine and Iran wars, terrorism or other geopolitical events.
Risks Related to Competition
Strong competition within our market area may limit our growth and profitability.
Competition in the banking and financial services industry is intense. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. Our smaller asset size also makes it more difficult to compete, as many of our competitors are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our continued ability to successfully compete in our market area. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected. For additional information see “Business of Blue Foundry Bank—Competition.”
The financial services industry could become even more competitive as a result of continuing legislative, regulatory and technological changes and continued industry consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services than we can as well as better pricing for those products and services.
Risks Related to Operations and Security
We face significant operational risks because the nature of the financial services business involves a high volume of transactions.
We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control systems and compliance requirements. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards, adverse business decisions or their implementation, or customer attrition due to potential negative publicity. In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or sufferdamage to our reputation.
Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.
We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.
Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and phishing. Phishing, a means for identity thieves to obtain sensitive personal information through fraudulent e-mail, text or voice mail, is a threat targeting the customers of financial entities. A failure in or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches or due to employee error, malfeasance or other disruptions could adversely affect our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and/or cause losses.
If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss.
Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of information does occur, those events will be promptly detected and addressed. Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf, our policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit us to confirm the third party’s compliance with the terms of the agreement. As information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.
Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.
Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, but such events may still occur and may not be adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.
In addition, we outsource a majority of our data processing to third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.
The occurrence of any system failures, interruptions, or breaches of security could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny or expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
The inability to stay current with technological change could adversely affect our business model.
Financial institutions continually are required to maintain and upgrade technology in order to provide the most current products and services to their customers, as well as create operational efficiencies. This technology requires personnel resources, as well as significant costs to implement. Failure to successfully implement technological change could adversely affect the Company’s business, results of operations and financial condition.
Our operations rely on certain third party vendors.
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These third party vendors are sources of operational and informational security risk to us, including risks associated with operational errors, information system interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
In addition, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements. While we have selected these external vendors carefully, we do not control their actions. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and results of operations. Replacing these external vendors could also entail significant delay and expense.
We depend on our management team, many of whom are new to the Bank, to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.
We depend upon the services of the members of our senior management team to implement our business strategy and execute our operations. Over the last several years we have hired certain senior level management to implement the Bank’s new focus and direction. Our future success will depend, to a significant extent, on the ability of our new management team to operate effectively, both individually and as a group. We must successfully manage issues that may result from the integration of the new members of our senior management. Members of our senior management team and bankers who have expertise and key business relationships in our markets could be difficult to replace. The loss of these persons or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete.
While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Our Board of Directors takes an active role in the cybersecurity risk tolerance of the Company and all members receive cybersecurity training annually. The Board reviews the annual risk assessments and approves information technology policies, which include cybersecurity. Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. We also engage outside consultants to support our cybersecurity efforts. However, our directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, its ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants.
Our cost of operations is high relative to our revenues.
Our non-interest expense totaled $57.0 million and $52.6 million for the years ended December 31, 2025 and 2024, respectively. We continue to analyze our expenses and achieveefficiencies where available. Although we strive to generate increases in both net interest income and non-interest income, our efficiency ratio remains high. Our efficiency ratio was 116.11% and 133.71% for the years ended December 31, 2025 and 2024, respectively.
The cost of additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements will increase our expenses.
As a result of the completion of the stock offering, we became a public reporting company. We expect that the obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our operations.
We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
We are a community bank and our reputation is one of the most valuable assets of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and operating results may be materially adversely affected.
Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks. While we use broad and diversified risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk. Accordingly, we could sufferlosses if we fail to properly anticipate and manage these risks.
Risks Related to Regulatory Matters
Changes in laws, regulations and the regulatory policies of the Federal government, and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.
We are subject to extensive regulation, supervision and examination by our banking regulators. Such regulation and supervision govern the activities in which a financial institution and its holding company may engage and are intended primarily for the protection of insurance funds and the depositors and borrowers of Blue Foundry Bank rather than for the protection of our shareholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our allowance for credit losses. These regulations, along with the currently existing tax, accounting, securities, deposit insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives, and govern financial reporting and disclosures. As a smaller institution, we are disproportionately affected by the ongoing increased costs of compliance with banking and other regulations. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially retroactively, how we report our financial condition and results of operations.
Additionally, Congress and the administration through executive orders control fiscal policy through decisions on taxation and expenditures. Depending on the industries and markets involved, changes to tax law and increased or reduced public expenditures could affect us directly or the business operations of our customers.
We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or restrict us from paying dividends or repurchasing shares.
Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios and define what constitutes “capital” for calculating these ratios. The regulations also establish a “capital conservation buffer” of 2.5%, effectively resulting in the following minimum ratios: (1) a common equity Tier 1 capital ratio of 7.0%, (2) a Tier 1 to risk-based assets capital ratio of 8.5%, and (3) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, repurchasing its shares and paying discretionary bonuses, if its capital levels fall below the buffer amount.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. During the last year, several banking institutions have received large fines for non-compliance with these laws and regulations. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventingviolations of these laws and regulations.
Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.
In preparing the periodic reports we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including our consolidated financial statements, our management is required under applicable rules and regulations to make estimates and assumptions as of specified dates. These estimates and assumptions are based on management’s best estimates and experience at such times and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for credit losses, the determination of our deferred income taxes, and our fair value measurements.
Various factors may make takeover attempts more difficult to achieve.
Certain provisions of our certificate of incorporation and bylaws and state and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of Blue Foundry Bancorp without our Board of Directors' approval. Under federal law, subject to certain exemptions, a person, entity or group must notify the Federal Reserve Board before acquiring control of a bank holding company. There also are provisions in our certificate of incorporation and bylaws that may be used to delay or block a takeover attempt, including a provision that prohibits any person from voting more than 10% of our outstanding shares of common stock. Furthermore, shares of restricted stock and stock options that we may grant to employees and directors, stock ownership by our management and directors, shares held by the employee stock ownership plan and other factors may make it more difficult for companies or persons to acquire control of Blue Foundry Bancorp without the consent of our Board of Directors. Taken as a whole, these statutory provisions and provisions in our certificate of incorporation and bylaws could result in our being less attractive to a potential acquirer and thus could adversely affect the market price of our common stock.
Our New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation.
Multifamily loans generally involve a greater risk than residential real estate loans because of legislation and government regulations involving rent control and rent stabilization, which are outside the control of the borrower or the Bank. This could impair the value of the collateral securing the loan or the future cash flow of such properties. For example, New York State passed the Housing Stability & Tenant Protection Act, impacting one million rent-regulated apartment units. The Legislation, limited rent increases from material capital improvements, eliminated the ability for apartments to exit rent regulation, did away with vacancy decontrol and high-income deregulation and repealed the 20% vacancy bonus. As of December 31, 2025, the Company has approximately $86.5 million, or 5.1% of total loans, in New York multifamily loans that have some form of rent stabilization or rent control. Of these loans, only 14% reprice or mature in 2026, respectively, with the remainder maturing or repricing in 2027 through 2032.
