Flushing Financial Corporation · NASDAQ:FFIC
Flushing Financial — Q2 2024 Earnings Presentation
42 slides from Flushing Financial's earnings presentation, Jul 29, 2024
Slide 1: 2Q24 Earnings Conference Call
2Q24 Earnings Conference Call July 29, 2024
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Presentation relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not d
Slide 3: 2Q24 Financial Highlights
▪ Net Interest Margin primarily impacted by balance sheet mix, loan repricing and increase in cost of funds ▪ Episodic items2 totaled $0.7 million in 2Q24, $1 million in 1Q24, and $0.5 million in 2Q23 ▪ Noninterest income includes back to back swap fee income of $0.3 million in 2Q24, $0.2 million in
Slide 4: Net Charge-offs Significantly Better Than the Industry; Strong DCR
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 0.00% 20.00% 40.00% 60.00% 80.00% 100. 0% 120. 0% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 1H24 FFIC Industry ▪ Over two decades and multiple credit cycles, Flushing Financial has a history of better than industry credit quality ▪ Average
Slide 5: Low Risk Credit Profile Results
0.47% 0.45% 0.54% 0.53% 0.61% 0.34% 0.40% 0.39% 0.42% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 2Q23 3Q23 4Q23 1Q24 2Q24 FFIC Peer Median* 5 Low Risk Credit Profile Results NPAs / Assets Criticized and Classified Loans / Gross Loans 30-89 Day Past Due /Total Loans ACL by Loan
Slide 6: Strong Credit Quality In Key Portfolios
6 Strong Credit Quality In Key Portfolios Portfolio Data Points Multifamily Investor CRE Office NPLs/Loans 52 bps 0 bp 0 bp Criticized and Classified Loans/Loans 67 bps 36 bps 2.7% Weighted Average DCR1 : 1.8x 1.8x 1.9x Portfolio Size: $2.6 billion $1.9 billion $253 million Average Loan Size: $1.2 m
Slide 7: Low Risk Multifamily Loan Portfolio
7 Low Risk Multifamily Loan Portfolio • We employ a quantitative model to determine loan risk ratings for real estate loans • The model consists of four factors: property condition, current DCR, current LTV, and loan payment history with DCR and LTV combining for 70% of the weight • The model output
Slide 8: Average Total Deposits Expand YoY and QoQ
12.3% 12.5% 12.7% 11.8% 11.4% 29.4% 28.0% 26.8% 27.3% 28.0% 1.8% 1.7% 1.6% 1.5% 1.4% 25.4% 23.2% 23.6% 24.4% 23.8% 29.7% 33.6% 34.0% 34.0% 33.9% 1.4% 1.0% 1.3% 1.0% 1.3% $6,900 $6,819 $6,884 $7,081 $7,196 0 100 0 200 0 300 0 400 0 500 0 600 0 700 0 800 0 2Q23 3Q23 4Q23 1Q24 2Q24 Noninterest Bearing
Slide 9: GAAP and Core NIM Near Stabilization
GAAP and Core NIM Near Stabilization 9 GAAP NIM FTE 2.18% 2.22% 2.29% 2.06% 2.05% See Appendix for definitions of Core NII FTE, Core NIM, and Core Loan Yields Net Interest Income and NIM ($ Millions) $43.3 $42.8 $46.6 $42.4 $42.5 2.17% 2.13% 2.31% 2.06% 2.03% 4.99% 5.26% 5.59% 5.45% 5.47% 2.68% 2.94
Slide 10: CDs Continue to Reprice
10 CDs Continue to Reprice ▪ CDs have a weighted average rate of 4.69%1 as of June 30, 2024 ▪ Current CD rates are approximately 4.85-5.40% ▪ Approximately 86%1 of the CD portfolio will mature within one year – $587.5 million in 3Q24 at 4.89%1 – $510.5 million in 4Q24 at 4.96% – $304.7 million in 1Q
Slide 11: Floating Rate Loans Are ~26% of the Loan Portfolio; Significant Repricing Through 2026
▪ Floating rate loans include any loans (including back-to-back swaps) tied to an index that reprices within 90 days; Including interest rate hedges of $500 million, $1.7 billion or ~26% of the loan portfolio is effectively floating rate ▪ Through 2026, loans to reprice ~226-242 bps higher assuming
Slide 12: Interest Rate Hedges Provide Income and Reduce Rate Sensitivity
12 Interest Rate Hedges Provide Income and Reduce Rate Sensitivity Swap Type Notional ($ Million) 1H24 Avg Bal ($ Million) 1Q24 Yield with Swaps 1Q24 Yield Without Swaps Net Benefit Investments $200.0 $1,270.2 4.88% 4.56% +0.32% Loans1 $699.1 $6,776.1 5.48% 5.25% +0.23% Funding $775.8 $7,906.0 3.48%
Slide 13: Slight Compression in Book Value and Tangible Book Value Per Share
$22.47 $22.39 $22.54 $22.39 $22.24 7.70% 7.56% 7.64% 7.40% 7.12% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% $17. 00 $18. 00 $19. 00 $20. 00 $21. 00 $22. 00 $23. 00 $24. 00 2Q23 3Q23 4Q23 1Q24 2Q24 Tangible Book Value Per Share Tangible Common Equity/Tangible Assets $23.1
Slide 14: Strong Asian Banking Market Focus
Strong Asian Banking Market Focus 18% of Total Deposits $41B Deposit Market Potential (~3% Market Share1 ) 9.8% FFIC 5 Year Asian Market CAGR vs 3.3%1 for the Comparable Asian Markets Asian Communities – Total Loans $745.5 million and Deposits $1.3 billion Multilingual Branch Staff Serves Diverse Cu
Slide 15: Key Community Events During 2Q24
▪ CPC Chinese-American Planning Council Asian American and Pacific Island Heritage Month ▪ Gujarati Samaj of NY 15 Key Community Events During 2Q24
Slide 16: Outlook
▪ Balance Sheet – Expect stable loans – Focused on improving funding mix; expect normal historical funding patterns ▪ Net Interest Income – Expect NIM is close to a bottom (assuming stable Fed rates) • Will depend primarily on the loan closings and funding mix • $1.4 billion of retail CDs to mature
Slide 17: Key Takeaways – Staying Disciplined in a Challenging Environment
17 ▪ Areas of Focus – Increase NIM and Reduce Volatility • Loan and CD repricing • Focusing on noninterest bearing deposits – Maintain Credit Discipline • Low risk profile • Conservative loan underwriting • History of low credit losses • Minimal exposure to Manhattan office buildings – Preserve Stro
Slide 18: Appendix
Appendix [EaEFLUs 18
Slide 19: Digital Banking Usage Continues to Increase
Digital Banking Usage Continues to Increase 19 Technology Enhancements Remain a Priority to Grow Customer Base and Increase Engagement 18% Increase in Monthly Mobile Deposit Active Users June 2024 YoY ~31,100 Users with Active Online Banking Status June 2024 18% Digital Banking Enrollment June 2024
Slide 20: Reported and Core Results Summary
Reported Results EPS $0.96 $2.50 $2.59 $1.18 $1.44 $1.92 ROAA 0.34 % 0.93 % 1.00 % 0.48 % 0.59 % 0.85 % ROAE 4.25 11.44 12.60 5.98 7.35 10.30 NIM FTE 2.24 3.11 3.24 2.85 2.47 2.70 Core1 Results EPS $0.83 $2.49 $2.81 $1.70 $1.65 $1.94 ROAA 0.29 % 0.92 % 1.09 % 0.68 % 0.68 % 0.85 % ROAE 3.69 11.42 13.
Slide 21: Over a Year Track Record of Steady Growth
Over a 28 Year Track Record of Steady Growth Core EPS ($) Dividends per Share ($) 2 Tangible Book Value per Share ($) Assets ($B) Total Gross Loans ($B) Total Deposits ($B) $- $0.88 1995 2000 2005 2010 2015 2020 2023 2Q24 $- $0.33 1995 2000 2005 2010 2015 2020 2023 2Q24 $0.6 $6.9 1995 2000 2005 2010
Slide 22: Approach to Real Estate Lending: Low Leverage & Shared Philosophy
Approach to Real Estate Lending: Low Leverage & Shared Philosophy 22 Our Conservative Lending Profile Has Served Us Well Over Many Cycles ▪ Since 1929, we have a long history of lending in metro New York City – Historically, credit quality has outperformed the industry and peers • From 2001-2023, me
Slide 23: Loans Secured by Real Estate Have an Average LTV of ~36%
Loans Secured by Real Estate Have an Average LTV of ~36% Manhattan Office Buildings are Approximately 0.5% of Gross Loans and All Are Performing Data as of June 30, 2024 39% 10% 11% 7 % 6 % 5 % 4 % 4 % 4 % 2 %2 % 2 % 1 % 1 % 1 %1 % Multifamily: 39.0% Owner Occupied CRE: 11.0% Non Real Estate: 10.0%
Slide 24: Multifamily: Conservative Underwriting Standards
▪ All loans underwritten with a 250-300 bps increase in rates at origination; especially when rates were low ▪ Debt coverage ratios (DCR) based on current rents; not projected cash flows ▪ Underwritten Net Operating Income (NOI) at origination includes forecasted increases in expenses and potential
Slide 25: Multifamily: Manageable Repricing Risk
Actual Repricing 25 Multifamily: Manageable Repricing Risk ▪ During 2023, $296 million of loans repriced ~196 bps higher to 6.61%; all loans repriced to contractual rate ▪ For the remained of 2024, $173.6 million of loans are forecasted to reprice 275 bps higher to a weighted average rate of 6.90%1
Slide 26: Multifamily: DCR Risks Are Well Contained
Debt Coverage Ratio Details1 Multifamily weighted average DCR 1.8x2 Amount of loans with a DCR of 1.0-1.2x $141.1 million3 LTV of loans with a DCR of 1.0-1.2x 48% Amount of loans with a DCR <1.0x $28.5 million3 LTV of loans with a DCR <1.0x 33% Of the loans with a DCR <1.2x: • None have an LTV >70%
Slide 27: Multifamily: Minimal Interest Only; High Quality Performance
27 Multifamily: Minimal Interest Only; High Quality Performance 1 As of December 31, 2023 2 Excludes co-ops ▪ Interest only loans are typically only offered to relationship customers who have a prior history with the Bank ▪ A client requests an interest only loan when cash flows early in the project
Slide 28: Multifamily: Rent Regulated Portfolio – Granular and Low Risk
Key Data Points 28 Multifamily: Rent Regulated Portfolio – Granular and Low Risk Portfolio Data Points1 Portfolio Size: $1.6 billion Average Loan Size: $1.3 million Current Weighted Average Coupon: 4.75% Weighted Average LTV: 48% % of Loans with LTV >75% 0% Weighted Average DCR: 1.8x2 Average Season
Slide 29: Investor CRE: Conservative Underwriting Standards
▪ All loans underwritten with a 250-300 bps increase in rates at origination; especially when rates were low ▪ Debt coverage ratios (DCR) based on current rents; not projected cash flows ▪ Underwritten Net Operating Income (NOI) at origination includes forecasted increases in expenses and potential
Slide 30: Geographically Diverse Multifamily and CRE Portfolios
16% 29% 21% 18% 16% Bronx Kings Manhattan Queens Other 9% 19% 17% 18% 5% 6% 9% 4% 13% Bronx Kings Manhattan Queens Other NY Nassau Suffolk NJ CT/Other Multifamily Geography Geographically Diverse Multifamily and CRE Portfolios 30 Underwrite Real Estate Loans with a Cap Rates over 6% in 1H24 (5%+ His
Slide 31: Well-Diversified Commercial Business Portfolio
31 Well-Diversified Commercial Business Portfolio Commercial Business ▪ Primarily in market lending ▪ Annual sales up to $250 million ▪ Lines of credit and term loans, including owner occupied mortgages ▪ Loans secured by business assets, including account receivables, inventory, equipment, and real
Slide 32: Reconciliation of GAAP Earnings and Core Earnings
Reconciliation of GAAP Earnings and Core Earnings 32 Non-cash Fair Value Adjustments to GAAP Earnings The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to borrowings carrie
Slide 33: Reconciliation of GAAP to Core Earnings - Quarters
33 1 Core diluted earnings per common share may not foot due to rounding 2 Ratios are calculated on an annualized basis Reconciliation of GAAP to CORE Earnings - Quarters (Dollars in thousands, except per share data) GAAP income before income taxes $ 7,136 $ 4,997 $ 11,754 $ 10,752 $ 11,872 $ 12,133
Slide 34: Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Quarters
34 Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Quarters Efficiency ratio, a non-GAAP measure, was calculated by dividing core noninterest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of core net interest income and core noninter
Slide 35: Reconciliation of GAAP to Core Net Interest Income and NIM - Quarters
35 1 Excludes purchase accounting average balances for all periods presented Reconciliation of GAAP to Core Net Interest Income and NIM - Quarters (Dollars in thousands) GAAP net interest income $ 42,776 $ 42,397 $ 46,085 $ 44,427 $ 43,378 $ 85,173 $ 88,640 Net (gain) loss from fair value adjustment
Slide 36: Tangible Stockholders' Common Equity to Tangible Assets - Quarters
36 Calculation of Tangible Stockholders’ Common Equity to Tangible Assets - Quarters (Dollars in thousands) Total Equity $ 665,322 $ 669,827 $ 669,837 $ 666,521 $ 670,247 Less: Goodwill (17,636) (17,636) (17,636) (17,636) (17,636) Core deposit intangibles (1,322) (1,428) (1,537) (1,651) (1,769) Tang
Slide 37: Reconciliation of GAAP Earnings and Core Earnings - Years
37 Reconciliation of GAAP Earnings and Core Earnings - Years 1 Core diluted earnings per common share may not foot due to rounding 2 Ratios are calculated on an annualized basis December 31, December 31, December 31, December 31, (Dollars In thousands, except per share data) 2021 2020 2019 2018 GAAP
Slide 38: Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue - Years
38 Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue - Years Efficiency ratio, a non-GAAP measure, was calculated by dividing core noninterest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of core net interest income and core noninterest
Slide 39: Reconciliation of GAAP and Core Net Interest Income and NIM - Years
39 Reconciliation of GAAP and Core Net Interest Income and NIM - Years 1 Excludes purchase accounting average balances for the years ended 2023, 2022, 2021, and 2020 (Dollars In thousands) GAAP net interest income $ 179,152 $ 243,616 $ 247,969 $ 195,199 $ 161,940 $ 167,406 Net (gain) loss from fair
Slide 40: Tangible Stockholders' Common Equity to Tangible Assets - Years
40 Calculation of Tangible Stockholders’ Common Equity to Tangible Assets - Years (Dollars in thousands) Total Equity $ 669,837 $ 677,157 $ 679,628 $ 618,997 $ 579,672 $ 549,464 Less: Goodwill (17,636) (17,636) (17,636) (17,636) (16,127) (16,127) Core deposit intangibles (1,537) (2,017) (2,562) (3,1
Slide 41: Contact Details
41 Contact Details Susan K. Cullen SEVP, CFO & Treasurer Phone: (718) 961-5400 Email: scullen@flushingbank.com Al Savastano, CFA Director of Investor Relations Phone: (516) 820-1146 Email: asavastano@flushingbank.com
Slide 42: Flushing Financial Corporation
[gc F LUSHING Financial Corporation