FFIC - Earnings call transcript Q1 2024 | Flushing Financial Corporation

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Operator

Good day, and welcome to Flushing Financial Corporation's First Quarter 2024 Earnings Conference Call. Hosting the call today are Mr. John Buran, President and Chief Executive Officer; and Ms. Susan Cullen, Senior Executive Vice President and Chief Financial Officer and Treasurer. Today's call is being recorded. will question-and-answer there presentation, today's be session. a After website the release will and Instructions] Investor referencing A presentation press of copy Relations its on company [Operator slide earnings that is available flushingbank.com. at today be the

XXXX. that Before to U.S. you may discussions from we Reform Private Exchange factors forward-looking made Securities during remind harbor risks safe with of actual contain that results any and statements, you. materially other under uncertainties Securities may Litigation set Commission filings begin, the cause would to differ we Such call refer the provisions those such and to subject and which the company statements U.S. the statements company's in contained to like forth are including, this as of in Act the

in this review U.S. financial During measures are to supplemental to references GAAP. These made information with substitute non-GAAP prepared performance. considered presented be or call, measures intended in measures the and non-GAAP as financial accordance for the may isolation and not as financial operating a assess to be

presentation. information would Mr. these and For overview of Executive for results. refer this and to to measures any like the Officer, about earnings and will John and/or release Buran, GAAP, provide an to introduce press reconciliation non-GAAP President who please Chief I the strategies

John Buran

concerns and our that situation competitors. we was the our that the lack this the business. around Despite of quarter us With contraction reported regard backdrop, of EPS the institution the $X.XX unique trends first on one Fed to with its EPS XXXX as credit quarter underwriting us a of of due of XXXX due first applications The largest demand benign by result quarter rising low-risk our GAAP their banks, loan persist. and the opportunities that to activity weak environment community in $X.XX. for and first for hallmark may see largely that criteria quarter real return history, largely changing morning, negative rates, Consistent be to meet the credit and curve manage as Against for stated lending office and in thank in competitor, joining to exposure lowering expectations of that the we about of of continue core end for available multifamily posted you has Good to and results earnings been call. X a with commercial company. the long company portfolio strong our operating the to yields our dominated events: estate

We're results results Turning than for points. the proud the culture, of X and assets point which to term Slide quarter-over-quarter X. quarter has $X,XXX totaled XX of in and long the or the this. support Net excellent quarter Nonperforming basis were our loans. only first flat credit less charge-offs were over produced basis

a ratios quality only are classified credit show There future behind delinquencies originate low We're XX% down conservative excellent these to stand points issues. no cash and loans XX- loan at basis underwriter. indicators quarter-over-quarter. reasons with criticized and XX flows. points, We high loans several Our XX basis metrics. loan-to-value and XX-day were

But a shows noncurrent you underwriting and credits the support. Both show results than over versus results our the industry. compare charge-offs me loans of our next significantly and time. net our peers. and sponsor the We have let better have been with historically on We slides, we how industry believe for X strong Slide our of history have speak long the couple themselves. borrowers the

Our underwriting stress higher includes test origination. a at of rates

these an operating X% a X.Xx. expenses point rate proforma LTV increase and end, than about At that have or in in increase of had of loans. In classified XX% demonstrate peers. and Slide debt further fact, assets and XX% our low-risk underwriting, conservative loans criticized we of quarter had coverage insurance. nonperforming in X debt LTVs to a X/X profile. less and with and basis portfolio history quarter-over-quarter mortgage a improvements to stressing The yields more ratios to loss metrics XXX rates our of We compared strong assets low shows coverage loans loans have some credit gross

X Our peer continue XX-day ratios XX while over criticized peers below expected basis points. median gross our XX- loans to is low, remain levels. to and similar classified the remain are loans to delinquencies to to peer performance, have

is concerns. basis particularly increased Slide comfortable by in especially over ratio credit loan metrics. summary the a segment segments industry X credit for with Overall, losses risk key portfolio to bottom allowance allowance Our to losses during for XX risk shows and our points credit of key slightly these the loans presented the right We're chart. potential quarter. profile,

with There portfolio loan Our average of similar portfolio high LTV nonperforming issues XX% an multifamily loans. the portfolio criticized and credit is size is performance. excellent a has portfolio real ratio X.Xx. small coverage largest average delinquencies ratios credit are debt next debt million. granular with of of Investor estate loans, coverage and with low that very weighted like largest average commercial characteristics shares a our $X.X minimal size, loan This and is and classified low LTVs,

this We portfolio. have in X nonperformers

on has of of a want X Slide to X% a statistics our low strong and peers. clear This step less well to debt key XX%, none loans. compared Our culture levels of provide performed deeper We credit and and these loans. our credit low-risk are which office of quality classified nonperforming. portfolio. average weighted office than outlines portfolio buildings, time. Less loans that Xx multifamily has believe overview of LTV X% criticized portfolio a coverage metrics go our of over are than of I ratios Manhattan is

put We ratio would loans at XX group. still multifamily year-end, The proven this loans. total of use through is low years quarter, was credit of rank XX of points, peer estate multifamily at reserve which to end classified the high this peer X multifamily risk payment At end loans main rate rating of was several and upgraded still at criticized end the at of be condition, quantitative to be the criticized are At It model first history. the model The many As ratio real property value quarter was has which current classified At were XX% the end use and XXX% cannot in points been the model basis our cycles. the DCR, high year-end, its LTV any our account would has group. the multifamily DCR factors. a group. the loans, qualitative inputs, the downgraded. XX%, and lower the and basis the long of This us for LTV and group. can peer only end for the current peer of rating which of end, and has for

risk now Susan metrics, turn to it on detail we provide limited metrics. the over these financial see horizon. on more to other our I'll Given

Susan Cullen

Slide and The to X about episodic points CD the the and outlines from in a GAAP first NIM points, repricing episodic seasonal basis interest quarter XX NIM the margin net respectively, declined in XX decrease the items, core declined increase cash. quarter. Absent The and to points basis and interest XX items, was growth basis X.XX%. trends. and margins X.XX% income net quarter-over-quarter during the XX

the and CD impacting the are forward, loan loan NIM repricing factors repricing. originations, Going primary

did will has Fed rates pricing the a of full begin approximately of This of if curve the residential its $XX income continued second determines purchase towards market loans the cut of occur the committed long remain to loan quarter, NIM The loan the quarterly helped We benefit will has end has the our higher the the and will underwriting in we rates, purchase quarter, at so repricing. standards. the for the and which of the increased. in remain second million dampened the pool the quarter. of longer, end along quarter, mortgage was While demand, with end timing to

While have NIM is the all for products. a is relatively in all to model feel in spend in I will the being we expand. to basis sheet Taking to assume we interest equal. faster the change rates certain talk reduction rates, model. to want minute and assumed We balance the in we should conservative neutral let the bottom to deposit to account, close else the This for a rates, what expect nuances betas in is XXX to NIM the all opportunities than into reduce lead start expansion, this the model and point

increase X% quarter-over-quarter. for focus quarter-over-quarter Despite deposit deposits is incentive heavily activity. Average openings seasonality to Slide XX. decreased were quarter-over-quarter. and in partially all X% deposits due in groups down checking noninterest-bearing Our noninterest-bearing product deposits, year-over-year quarterly elevated our to was promotional $X.X The to attributable account and is was plans year-over-year billion. CDs. as increased on Average X% accounts. this CDs Average a Checking growth X% XXXX increased these challenges of are weighted as XX% to portfolio

impact Our XX% at or CDs next Historically, $XXX non-swap $X.X improved second weighted mature from level About that our detail net ago. on and of deposits XX% loan-to-deposit mature in have we current the billion provides interest CDs portfolio. year billion retained million our of expected to approximately are a ratio more a total our from the quarter CDs of Slide rate $X.X on has XX X.XX%. will X.XX%. CDs at of reprice XX% XXX% a the Total range significant end. average that With retail about over CDs these year rates X.XX% are to to margin. CD turn of the quarter,

half rates $X.X XX portfolio. XX% contractual This minimal. repriced For the be in detail to short-term repricing in the CDs of costs. billion in should Approximately on that funding increase more the loan repricing should the provides or second XXXX, our of are of are repricing indices. expected help loans the Slide stabilizing

position hedge increased loans on percentage XX%. rate interest Our to this these

index XX net of the our rate the yield. the any remainder margin rates portfolio. once interest XXX loans rate Federal Slide $XXX move funding due approximately should rate consider the basis XX higher on based quarter. and to underlying hedging Bank the the moves, are in point Loan XXXX, the are XX, stabilize. reprice including to X-year XXXX, points than interest do expansion of current costs drive XX repricing outlines basis million at since For This March future Home not the These of at end

split about hedges and million portfolio maturities the provides mitigate helped hedges hedges change NIM not balance effective interest have sheet moved in and benefit rates basis does between rate interest from XXX in rate and billion compression funding XX position These to rate $X.X income. neutral hedges combined XXXX. The asset interest side asset hedges basis yields of basis have XX million. on funding these $XXX approximately of on benefit about the We $XXX points points. is of is point with an any The The significant rates. immediate margin

Our is quarter-over-quarter XX per tangible X.X%. Book million is value shown decreased XX. on capital securities. book basis and position common to primarily year-over-year. in The equity points decline tangible The Slide increased by value to increase due the $XXX share ratio

of our sheet. $XXX XX, of During capital of the a quarter, as we million of account view vital X/X as Asian Overall, discuss purchased of we securities strength we balance base some a markets, million our branches. floating which and conservative our for we $XXX source our On growth. Slide invested of component rate our deposit

$XXX $XX a deposits is of there deposits. only over for share of the growth. and these have total billion of We room markets. million These we X% billion of substantial our in have market loans while deposits market, And XX% are $X.X

drive of franchise, will success our see and Slide sponsorships. important On approach previously. future. the to activities key our outlined advisory believe support be our supported involvement through we an strategy is just opportunity of that one participation as Our our this can staff, community market our Asian by corporate part cultural multilingual This XX, beyond in a you and us continues to in for market is board Asian

ties During the strengthen first events to quarter, customer local numerous we our in to participated our base.

high-level us as recent communities Year New to giveaway. types provides and environment. Year performance of local in very has popular in Some PradeaFlushing of while on Lunar the Slide a current perspective our our XX driving Tokpag to great highlights Participating include way loyalty. New we where Lunar integrate outlook a ourselves our served further initiatives the customer share our these

We loan balances. continue to expect stable

summer. normal the deposits typical, to in we winter seasonality certain As the months in decline is experience and expect

loan feel fees closings. In by the big X the be factors repricing in swap close and back-to-back to should are We XXXX. start half of should originations loan terms to the of from earned the is the expand second bottom driven and Noninterest CDs. NIM, the income NIM of primarily the

noninterest the expenses low follow priorities as intact of year with growth decline expect remains and to mid-single remains XXXX. this We one in to second full normal sequential a digits of quarter the top patterns seasonal for our quarter

fluctuate, a XXXX. we back to tax can it effective mid-XXs John. While expect over now will rates for tax turn rate I

John Buran

control year we volume through We areas spreads results. production, XX. Turning to interest to to I Loans getting can the favorable what and long-term Clearly, that sacrifice contractual the to this on about impact new net the pressured, share levels a margin. profitability and our into and working are to we're margin priced higher We're control wanted largely on ensure success will market terms. means we're how impact. The spreads. lending Slide their be of be we prepared for improve think and function according separated to profitability. is

a focused at The on the funding sales assets noninterest-bearing expenses. funding funding of mix. continue yield our the reduce checking are focus, return on pressure position and funding also sloped in rates costs widen we'll move sheet the incentivizing balance we've expense all areas to as spread harder costs one basis will the normal Despite in taken of between our reduction XXX evaluate curve have of CD should we'll Pending rates rates, a and opportunities curve point help accounts. look shift neutral We and help to of a and positively are is our X and yields.

should account, and expect low. all X% time. conservative the believe should profile keep we we Taking into return NIM our plus Lastly, double-digit equity a strong to average with factors over costs on these trend credit underwriting risk

strong environment, of yield environment. some concentrating a areas up X control rate we this positively focus curve of need On XX, I'll While these key we certain factors, takeaways. sloped wrap volatility, credit in a at during Slide we on our Capital liquidity more looking We're to expected maintaining and expect We're increase our reduce XXXX. progress our and and way. and are see NIM profile. are to to that remain credit discipline our low-risk and

expense and Lastly, curve the expense expect we are looking lower bend to XXXX. in growth

environment and I'll the remains term. the control over open over improving what controlling we're setting you it foundation the While for for long lines can turn profitability challenging, Operator, the to we questions. to

Operator

Instructions] [Operator question Piper will Fitzgibbon Sandler. The from come with Mark first

Mark Fitzgibbon

rate excess sort are they mentioned this And quarter Susan, grown I with on those? clarify, just you securities. to you some What had of yields of the think mentioned you securities had liquidity. initial were floating

Susan Cullen

Around right $XXX high rate, have floating so they the pretty a coupon now.

Mark Fitzgibbon

net And then secondly, margin? do you happen to have your interest March

Susan Cullen

Yes. Obviously, we do. XXX.

Mark Fitzgibbon

correctly, margin reading a So it to then of am suggesting that tea little think bit quarter and back second lease flat in starts year? you the I be the will half the the you're the expand in

Susan Cullen

what have we That's shown, been yes.

Mark Fitzgibbon

that trying then I'm it's rent-regulated And a of time? guess picture. sort you the I are portfolio. curious, to multifamily Is bigger plan shrink over the

John Buran

to stick in be with our want we want area. obviously excellent portfolio. that metrics think we to spreads that that do sure credit what I long-standing clearly was Well, on improved And the there we

particular credit we to loans caused all. viable that But think So at not grow continue has for getting us in that can on. to clearly, category. a sense quarter will we be also We and want count make be it's we quality category. us still But to spreads that significantly we're that we sure think lending this

Mark Fitzgibbon

banks of nowhere all they loans Or Do for of million these it end paper being because go? to borrowers due where $XXX else like now go are coming basically and their to the those those else between the have you think forced is there's borrowers? a I anywhere year. curious, can I'm own John, kinds situation have roll of the

Susan Cullen

maturing. not marks, repricing are those So

Mark Fitzgibbon

you. Got

are loans maturing on that then. Just

John Buran

our I are think for an have top maturing answer off you of the we heads. don't

some we but in So at point. recall numbers, have places the this can't it is I what

Mark Fitzgibbon

me? you Can hear

Susan Cullen

relationship the Yes, is number bar, the at number. we presentation, gray Mark, very maturing that and/or the small to if million have of showing you you look you the at if And of loans It's worth what's that. look Slide XX that reprice mature. see we're $XXX a if

Mark Fitzgibbon

And I if then could. one last question,

it book value, it wonder back of and sense of sense stock at any shrink would a the I stock to kind levels. to capital trading do lending. if make of guess I at dramatically grow And all the balance sheet, buy XX% about at these With build makes lot to

John Buran

pricing been budgeted been continuing our We maintain planning throughout maybe the our loans, of in we we've to Banks portfolio. and much opportunity only space, to a us this aggressive I have for So the grow but much to being a kind going about credit order talking better at time. to board. not maintaining said, as pretty of waiting are little lending refinance in pricing their we're bit period more with the level multifamily loan pretty in But point this stick levels pricing. the across

this put rate particular that better securities we obviously could available in of lending. on a in for So market the in be quarter, event event for the example, some floating

Mark Fitzgibbon

you're just you can any opportunities other back ROE double-digit a going a stock half tangible I of suggesting guess that to to think go capital a from buyback. to value, and for I'm the of are book there's today if and buy investment better the than it's you imagine hard dollar ROE X%

John Buran

valid point. a It's

Operator

question Steve come with Moss James. Raymond from Your will next

Stephen Moss

the pace upcoming the fee of the of quarter and your just there here things, On side X? income or swap curious about expectations for activity

Susan Cullen

swap pipeline of $XXX is about low XX% of which million, our program $XXX So to the is related million.

XX% is rate normal our So and XX%. between pull-through

that straight expect everything. we just So continued would and line pull-through rate

Stephen Moss

that of purchased mortgage in was portfolio? quarter, on yield what residential pool the terms the in late then the And was that

Susan Cullen

about After the discount is XXX.

Stephen Moss

structure? fixed, about XX-year do or fixed the we And will how XX-year that think

John Buran

adjustables. Are

Stephen Moss

And any lines those purchases do guys along additional forward? anticipate going you

John Buran

opportunistically. this at look We

Stephen Moss

seasonality here. the in realize of of there's X.X terms I then million expenses, And

run is good to $XX.X So here? million rate assume fair is a it

John Buran

they Should be out billion, Yes. that a good $X.X run rate. pull the would

Operator

D.A. question next Manuel from Navas The will come Davidson. with

Manuel Navas

and Any back expansion seeing type in of if half the thoughts you NIM of same, that the pace on rates start year, it would what be? stay the

John Buran

factors to pace with I loan there. X handle about the a originations. think level, X% And gradual because obviously what what's are we're it's happening going talking be currently, obviously the

loan at in retaining portfolio, what which talked around coming maturities course, you XXX-plus addition, CD is And of then, have up the that area. In CDs about, to we closer some which rates has today. the at the repricing we're

just make the those I would year. movement the in course, of factors So a of the activity second that Fed any do improvement, think absent, for margin in slower the half

we So without do is rates. change that see expect a bottoming even to NIM in

Manuel Navas

you out into helped advantage some opportunities go please. already competitor Can in a you Just all? on kind any detail for trends the of some with lay of out that of that space. more yet some Has issues at take could it of large your me,

John Buran

Well, month beginning since our pipeline grown year. of has by month the the

some see is for to credit in our starting earlier, board of activity we're to look the stick loan improving already. very our more yields across while on as And criteria it's with And desire, the said I what we're bringing strict we So really really function board. a portfolio.

Manuel Navas

So Has you has from deposit that of this well? loan the benefited this. from the would some say as of pipeline some growth benefited

John Buran

Yes, both.

Manuel Navas

have you? loose seen And that any shake then you talent interest

John Buran

competitors as not many some We've of announced. had have limited, as our

Manuel Navas

of of with then the quarter, loan-to-deposit somewhat kind better And seasonality going quarter? here across And growth slow the just thoughts on year? is because from deposit ratio it the this next to

John Buran

Yes.

frame. that built seasonality into there So some time was

normally months. a in little So the expect to bit of a we see dip summer

Manuel Navas

you? the multifamily finalized. guess, comment of how a through, could question, in it not on There's going number impact issues just you policy, then budget last I can just And my they're

all? stand you you, impact at that do could on where Just how if

John Buran

some draconian now. be Well, where about obviously, pretty There's a appear right possibilities. board range you're things, off talking which the there's to of

less until it So get bit of There's not what into while based spoken it we've understanding our at really things get and yet But a upon got watered is is entire we down. I lot detail the be looks more have off can not been, board, clearly, taking stressful the its extreme being than full a examination implications. like about and they of the most legislature. a some of the budget of the that drastic little versions may clearly think least, dramatic

a So nuances able judgment major is to of I but legislation. less the think of so, the disaster until would pick little expectation full are I we the a reserve apart actually bit all

Operator

Chris The with next will O'Connell come question from KBW.

Christopher O'Connell

any that or you in of of sense loan the just timing those what XQ their margin? hoping impact kind the given timing, the net the provide add the were impact on could was the purchases the Just investments to I securities and when additions, of quarter?

Susan Cullen

in late So in the March the of February and loan March. investments late purchase bought the was bulk through were

Christopher O'Connell

XQ? margin so is their repricing to the And lingering offsets benefit pressures that the expectation funding kind any of in from

Susan Cullen

being would equal, or improve XXX Well, our and have a is handle. they everything since so has funding X the handle else they a NIM

increase NIM, equal. So else that being the everything just would mathematically

Christopher O'Connell

guys And the talking think asset And additional your then are your migrating being maturities on have discussion repricing. service about to this of in just borrowers looking repricing set And QX kind as are kind you I of following viability particularly, the this up on you're and any where in you Do for long-term to you to? just ratios seeing of and about year with the the from class? market. guess, how what market, color multifamily coverage general as borrowers debt and

John Buran

on Well, the think of side is overbuilding, York market. nationally abate. occurring demand not the is New not you going for some is affordable in associated New the to what York some hear think certainly with housing I clearly in I which And

to accommodate. So them debt any before who XX watch with still portfolio, rate very a out are close customers, our we're keeping reaching frankly, seeing respect in we're And coverage we're very what up the our seeing solid on to ratios. moved maturity. in months We're able borrowers seeing to

new very, how would operate under a picture rising of very clear a rate environment. got we've So they

by accommodate basis point and borrowers So and we're seeing or XXX so obviously, to our a that large. upward, with some able we're benefits seeing positive jump

Christopher O'Connell

exact. and moving you've you've where as forward ratios And service seen coverage to total portfolio specifically anything very repricing But necessarily debt recent repricings. to mapped more to, the more referring out recently strong, not where obviously, or specific,

John Buran

Yes.

one deck think the flat the when in really was ago we rates. where loan that XXX basis out about a a the in a we had we point put set while on I projected increase was books

at very room the starting ratios time to part increases. criteria based that is across Obviously, fair a that stress points, down we XXX. in was portfolio, that basis in this underwriting stress in also when So up At and at and the was stress was did on XXX.So seems XXX their off this about XXXX. in a little might the we have our XXX that performance debt down a been ratio that operating necessarily significant one repricing time, you borrowers we initial stressed that are with point have debt the seeing more, we're held are loan liking we the accommodate when that We as the environment that one to coverage did our point went of under a sales. XXX a but coverage we happening, to took you're upon amount bit any that stress what's then detrimental and so scenario. have And not strong the stressors origination, came testing reality not when place, to

Christopher O'Connell

and sheet longer growth as thinking more And any into towards around you as XXXX? balance move overall you guys XXXX, the get loan strategically end about term, thoughts of in

John Buran

to we'll about is happy environment that talk XXXX we XXXX, and hope see a than better be we when it. Well,

Susan Cullen

pricing they our little bit are, maintain discipline also happening growth influence 'XX. be to the they're what That rates doing the today. with on seem to obviously a going depending into what's will on appetites still borrowers' sidelines We're sitting like and

Operator

session. our John question-and-answer to over I This closing like would Mr. to conference back the for concludes any turn Buran remarks

John Buran

everybody, and for rest quarter operator, attending of thank day. presentation. great all And you our the have a first you, Thank

Operator

attending now conference today's The for has presentation. you concluded. Thank

now may You disconnect.

Flushing Financial (FFIC) 24 Apr 242024 Q1 Earnings call transcript