Flushing Financial Corporation · NASDAQ:FFIC
Flushing Financial — KBW Winter Financial Services Symposium 2022
37 slides from Flushing Financial's conference presentation, Feb 15, 2022
Slide 1: KBW Winter Financial Services Symposium February 17, 2022
KBW Winter Financial Services Symposium February 17, 2022
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement “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
Slide 3: Our Brand Promise: Rewarding Relationships
Our Brand Promise: Rewarding Relationships Nurturing Relationships and Rewarding Customers, Employees and Shareholders Investors • Shareholder Value Communities • Community Support and Involvement Customers • Competitive Products and Reward Programs Employees • Employee Enrichment Programs Regulator
Slide 4: Key Messages
4 Key Messages Conservative Underwriting with History of Solid Value Creation ► Leading Community Bank in the Greater NYC Area ► Well Diversified and Low Risk Loan Portfolio ► History of Sound Credit Quality since IPO in 1995 ► Asian Banking Niche ► Beneficiary of a Steepening Yield Curve
Slide 5: Flushing Financial Snapshot
5 Flushing Financial Snapshot (NASDAQ: FFIC) Competitive Advantages Balance Sheet Assets $ 8.0B Loans $ 6.6B Deposits $ 6.4B 1 Equity $ 0.7B Performance GAAP/Core ROAA 1.00%/1.09% 2 GAAP/Core ROAE 12.60%/13.68% 2 Efficiency Ratio 55.72% 2 Tangible Book Value $ 21.61 Dividend Yield 3.5% 3 2021 Key St
Slide 6: Strong Asian Banking Market Focus
6 Strong Asian Banking Market Focus 15% of Total Deposits $32B Deposit Market Potential (~3% Market Share 1 ) 6.9% FFIC 5 Year Asian Market CAGR vs 3.4% 1 for the Comparable Asian Markets Asian Communities – Total Loans $709MM and Deposits $966M Multilingual Branch Staff Serves Diverse Customer Base
Slide 7: Experienced Executive Leadership Team
7 Experienced Executive Leadership Team Executive Compensation and Insider Stock Ownership (5.5% 2 ) Aligned with Shareholder Interests John Buran President and CEO Maria Grasso SEVP, COO, Corporate Secretary Susan Cullen SEVP, CFO, Treasurer Francis Korzekwinski SEVP, Chief of Real Estate Michael B
Slide 8: Year Track Record of Steady Growth
8 26 Year Track Record of Steady Growth Core EPS ($) Dividends per Share ($) Tangible Book Value per Share ($) Assets ($B) Total Gross Loans ($B) Total Deposits ($B) 1 $ - $0.84 1995 2000 2005 2010 2015 2020 2021 $ - $2.81 1995 2000 2005 2010 2015 2020 2021 $0.6 $6.4 1995 2000 2005 2010 2015 2020 20
Slide 9: 2022 Strategic Objectives: Growth Through Investment
3 4 1 2 Improve and Grow Funding Mix Generate Appropriate ly Priced Loan Growth Noninterest bearing DDA growth Increase core deposits Manage overall deposit costs Achieve historical loan growth Price loans in relation to acceptable risk More emphasis on floating - rate loans Manage Asset
Slide 10: Well-positioned to Benefit from Industry Merger Disruption
10 Well - positioned to Benefit from Industry Merger Disruption • 8 bank mergers have been announced or closed involving Long Island area banks 2 • Out of the $328B of total industry deposits in Nassau, Queens, Kings, and Suffolk Counties, $60B or 18% involve a merger participant 3 • 93% of FFIC’s d
Slide 11: New York is Coming Back; Implementing Re-opening Strategies
11 Pandemic Restrictions are Easing – Omicron hospitalizations are declining – Mask mandates and social distancing rules are loosening – Subway ridership is increasing New NYC Mayor is a Positive – Stronger approach on crime – Publicly asking for a return to offices General Economic Activity i
Slide 12: Loan Closings Increase; Satisfactions Should Decline
Loan Closings Increase; Satisfactions Should Decline 12 Closings expected to increase – Pipeline remains strong although below the record 3Q21 level – 8 bank mergers announced within footprint – Strong organic growth opportunity Pipeline up 21% YoY – Mix is balanced with real estate and business
Slide 13: Digital Banking Usage Continues to Increase
Digital Banking Usage Continues to Increase 13 Technology Enhancements Remain a Priority 31% Increase in Monthly Mobile Active Users YoY ~23,000 Active Online Banking Users 37% YoY Growth 17% Digital Banking Enrollment YoY Growth Numerated Improving Small Business Customer Experience through Automat
Slide 14: Fourth Quarter 2021 Highlights
3 4 1 2 Ensure appropriate risk - adjusted returns for loans while optimizing costs of funds Maintain strong historical loan growth Average noninterest deposits increased 33.6% YoY Record low cost of deposits at 0.25% in 4Q21; Loan yields fell 2 bps QoQ; Core Loan yields down 4 bps Net interes
Slide 15: NIM Expansion in 2021 Driven by Low Deposit Costs
NIM Expansion in 2021 Driven by Low Deposits Costs 15 Base NIM FTE 2.82% 2.60% 2.40% 2.80% 3.08% GAAP NIM FTE 2.93% 2.70% 2.47 % 2.85% 3.24% ($MM) See Appendix for definitions of Core and Base NII FTE and Core NIM, and Net Prepayment Penalties $173.1 $168.3 $164.2 $196.9 $243.3 2.93% 2.72% 2.49% 2.8
Slide 16: The Balance Sheet Naturally Reprices Higher Over Time
The Balance Sheet Naturally Reprices Higher Over Time 16 Interest Rate Risk Profile Static Balance Sheet For Base Case Net Interest Income Projections Using a static balance sheet and the year end 2021 yield curve, net interest income should expand 1 – Benefits of swap repricing • Repricing of $59
Slide 17: Preparing for a Rising Rate Environment
Preparing for a Rising Rate Environment 17 Interest Rate Risk Profile Static Balance Sheet For Base Case Net Interest Income Projections Rates Up 200 bps over 24 Months Net Interest Income declines in a rising rate environment – The duration of our assets is greater than liabilities – Approximatel
Slide 18: Deposit Mix Improves; Costs Continue to Fall
18 Deposit Mix Improves; Costs Continue to Fall Average Deposits Composition ($MM) $4,110 $4,447 $4,736 $5,013 $5,163 $6,416 0.81% 0.91% 1.36% 1.76% 0.82% 0.32% 0% 1% 1% 2% 2% 3% 3% 0 1000 2000 3000 4000 5000 6000 7000 2016 2017 2018 2019 2020 2021 Non-interest Bearing NOW Accounts Savings Money Mar
Slide 19: Diversified Loan Mix; Relatively Stable Yields
$4,819 $5,160 $5,536 $5,757 $6,702 $6,634 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2016 2017 2018 2019 2020 2021 Multifamily Commercial Real Estate Construction 1-4 Family Business Banking Total Gross Loans 19 Diversified Loan Mix; Relatively Stable Yields Loan Composition Period End Loans
Slide 20: Well-Secured Multifamily and CRE Portfolios with DCR of 1.8x
Well - Secured Multifamily and CRE Portfolios with DCR of 1.8x 20 Underwrite Real Estate Loans with a Cap Rate in Mid - 5s and Stress Test Each Loan Multifamily Geography 17% 30% 17% 18% 17% Bronx Kings Manhattan Queens Other $2.5B Portfolio • Average loan size: $1.1MM • Average monthly rent of $1,3
Slide 21: Loans Secured by Real Estate Have an Average LTV of <38%
21 Loans Secured by Real Estate Have an Average LTV of <38% Multifamily Primarily in market lending Review net operating income and the collateral plus the financial resources and income level of the borrower (including experience in managing or owning similar properties) ARMs adjust each 5 -
Slide 22: Well-Diversified Commercial Business Portfolio
22 Well - Diversified Commercial Business Portfolio Commercial Business Primarily in market lending Annual sales up to $250MM Lines of credit and term loans, including owner occupied mortgages Loans secured by business assets, including account receivables, inventory, equipment, and real est
Slide 23: Net Charge-offs Significantly Better Than the Industry
Net Charge - offs Significantly Better Than the Industry 23 NCOs / Average Loans 0.06% 0.27% 1 -0.2% 0.3% 0.8% 1.3% 1.8% 2.3% 2.8% 3.3% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 YTD 3Q21 FFIC Industry <1 basis point of Net Recoveries to Average Loans in 4Q21; 5 bps of Net Charge - offs in 20
Slide 24: Continued Strong Credit Quality
24 Continued Strong Credit Quality Note: CECL accounting adopted January 1, 2020 Forbearances totaled $71.9MM at December 31, 2021 with $60.5MM making interest payments and only $11.4MM with full payment deferrals. NPAs / Assets Criticized and Classified Loans / Gross Loans Reserves / Gross Loans &
Slide 25: Capital Expands Even With a Buyback; ~3.5% Dividend Yield
Capital Expands Even With a Buyback; ~3.5% Dividend Yield 1 25 Share Repurchase Restarted in 2H21; 56% of 4Q21 Earnings Returned 11% Book Value Per Share Growth YoY TCE Builds Post Empire Bancorp Merger $17.95 $18.63 $19.64 $20.59 $20.11 $22.26 11.79% 11.59% 10.98% 10.95% 9.88% 10.86% 9.00% 9.02% 8.
Slide 26: 2022 Outlook: Noninterest Income and Expense
26 Noninterest Income and Expense – 4Q21 noninterest income includes $2.0MM ($0.05/share, net of tax) of dividend received on retirement plan investments that is not expected to repeat – The elimination of overdraft, insufficient funds, and transfer fees on consumer checking accounts is expected t
Slide 27: Key Takeaways
27 Preparing for higher rates – Forward starting funding swaps start in 2022 and are mostly fully phased in by the end of 2023 – Adding floating - rate assets in the short and medium term to improve rate risk profile – Net Interest Income growth driven from balance sheet expansion which should mor
Slide 28: Appendix
Appendix [EEUFLUSHING
Slide 29: PPP: 75% of Lifetime Originations and Acquisitions Forgiven
PPP: 75% of Lifetime Originations and Acquisitions Forgiven 29 Period End PPP Loans ($MM) $151.9 $251.0 $197.3 $130.8 $77.4 Average PPP Loans ($MM) PPP NIM Benefit/(Drag) (0.03)% (0.04)% 0.00% 0.02% 0.03% Lifetime originations and acquisitions of $310MM with a balance of $77.4MM at 4Q21 and remain
Slide 30: Swaps Help Protect NIM from Rising Short-Term Rates
$125 $321 $121 $25 $125 $230 $50 1.86% 2.09% 1.96% 0.47% 0.88% 0.70% 0.80% 2022 2023 2024 2025 Effective Swaps Maturities Forward Swaps Start Date Effective WA Rate Forward WA Rate $MM 30 Swaps Help Protect NIM from Rising Short - Term Rates The balance sheet naturally improves over the next two y
Slide 31: Non-cash Fair Value Adjustments to GAAP Earnings
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 swaps designated to protect against rising rates and borrowing c
Slide 32: Reconciliation of GAAP Earnings and Core Earnings
32 Reconciliation of GAAP Earnings and Core Earnings 1 Core diluted earnings per common share may not foot due to rounding 2 Ratios are calculated on an annualized basis (Dollars In thousands, except per share data) GAAP income (loss) before income taxes $ 109,278 $ 45,182 $ 53,331 $ 65,485 $ 66,134
Slide 33: Reconciliation of GAAP Revenue & Pre-Provision Pre-Tax Net Revenue
33 Reconciliation of GAAP Revenue & Pre - Provision Pre - Tax Net Revenue (Dollars In thousands) GAAP Net interest income $ 247,969 $ 195,199 $ 161,940 $ 167,406 $ 173,107 Net (gain) loss from fair value adjustments on qualifying hedges (2,079) 1,185 1,678 — — Net amortization of purchase accounting
Slide 34: Reconciliation of GAAP NII & NIM to Core and Base NII & NIM
34 Reconciliation of GAAP NII & NIM to CORE and Base NII & NIM 1 Excludes purchase accounting average balances for the years ended 2021 and 2020 (Dollars In thousands) GAAP net interest income $ 247,969 $ 195,199 $ 161,940 $ 167,406 $ 173,107 Net (gain) loss from fair value adjustments on qualifying
Slide 35: Calculation of Tangible Stockholders' Common Equity to Tangible Assets
35 Calculation of Tangible Stockholders’ Common Equity to Tangible Assets (Dollars in thousands) Total Equity $ 679,628 $ 618,997 $ 579,672 $ 549,464 $ 532,608 Less: Goodwill (17,636) (17,636) (16,127) (16,127) (16,127) Core deposit Intangibles (2,562) (3,172) — — — Intangible deferred tax liabiliti
Slide 36: Contact Details
36 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 37: Flushing Financial Corporation
[age LUSHING Financial Corporation
Flushing Financial — KBW Winter Financial Services Symposium 2022 on 6ix