Flushing Financial Corporation · NASDAQ:FFIC
Flushing Financial — Merger or Acquisition (August 2020)
51 slides from Flushing Financial's merger presentation, Aug 18, 2020
Slide 1: Investor Presentation August 17, 2020
Exhibit 99.2 Investor Presentation August 17, 2020 contact: susan.cullen@flushingbank.com | phone: 718.961.5400 | website: www.flushingbank.comExhibit 99.2 Investor Presentation August 17, 2020 contact: susan.cullen@flushingbank.com | phone: 718.961.5400 | website: www.flushingbank.com
Slide 2: Cautionary Notes on Forward-Looking Statements and Additional Information
Cautionary Notes on Forward-Looking Statements and Additional Information This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 193
Slide 3: Experienced Executive Leadership Team
Experienced Executive Leadership Team John Buran Maria Grasso Susan Cullen Francis Korzekwinski Michael Bingold President SEVP, COO, SEVP, CFO, SEVP, Chief of SEVP, Chief Retail and and CEO Corporate Secretary Treasurer Real Estate Client Development Officer FFIC: 19 years FFIC: 14 years FFIC: 5 yea
Slide 4: Summary of Strategic Objectives
Summary of Strategic Objectives Increase Core Deposits, with an Manage Net Loan Growth and Enhance Core Earnings Power by Emphasis on Non-Interest Focus on Yield with an Emphasis Improving Scalability and Bearing DDA, and Continue to on Assets with the Best Risk- Efficiency Through Executional Impro
Slide 5: Key Messages
Key Messages Exceeding Customer Enhancing Earnings Strengthening Our Maintaining Our Strong Expectations Power Commercial Bank Risk Management Balance Sheet Philosophy § Committed to being the § Manage yield through loan § Focus on the origination of § Remain well capitalized at preeminent community
Slide 6: Flushing Financial Corporate Profile
Flushing Financial Corporate Profile (NASDAQ: FFIC) 2Q20 Key Statistics Balance Sheet Footprint 1 • Deposits primarily $7.2B $6.0B $5.1B $0.6B from 20 branches Assets Gross Loans Deposits Equity in multi-cultural neighborhoods and our online Queens division, Performance Brooklyn Nassau consisting of
Slide 7: Proven Track Record of Steady Organic Growth
Proven Track Record of Steady Organic Growth Total Assets ($B) $8.0 $7.2 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $0.7 $1.0 $- Stockholder’s Equity ($B) $0.7 $0.6 $0.6 $0.5 $0.4 $0.3 $0.2 $0.1 $0.1 $- Note: Acquisitions of Atlantic Liberty Financial Corp in 2006 (assets and deposits acquired of $180MM and $107
Slide 8: Proven Track Record of Steady Organic Growth
Proven Track Record of Steady Organic Growth Total Gross Loans ($B) $6.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.3 $- Total Deposits ($B) $6.0 1 $5.1 $5.0 $4.0 $3.0 $2.0 $0.6 $1.0 $- Note: Acquisitions of Atlantic Liberty Financial Corp in 2006 (assets and deposits acquired of $180MM and $107MM); New York
Slide 9: Strong Asian Banking Market Focus
Strong Asian Banking Market Focus § Asian Bank within Flushing Bank § New branch opened in Hicksville, NY in 4Q19 to expand our focus on the Asian population to the Long Island market § Relocated branch to Bayside Queens in 4Q19 § Loans in the Asian communities total over 1 $650MM with deposits exce
Slide 10: Strong Quarter end June 30, 2020 Results
Strong Quarter end June 30, 2020 Results § GAAP diluted EPS rose to $0.63 and Core diluted EPS increased 89% to $0.36 § Record net interest income totaled $49MM, increased 19% from 1Q20, driven by an improvement in cost of funds § Pre-provision pre-tax net revenue increased $28.1MM from 1Q20 § NIM i
Slide 11: Empire Bank Acquisition
Empire Bank Acquisition 11Empire Bank Acquisition 11
Slide 12: Empire Bank Acquisition
Empire Bank Acquisition nd § Combined entity will be Long Island’s 2 largest bank by deposit share among regional and community 1 financial institutions • Expands Flushing’s presence across Long Island with entrance into Suffolk County Compelling • Meets Flushing's strategic objectives by improving
Slide 13: Cost Saves Drive Additional Accretion
Cost Saves Drive Additional Accretion Cost Savings Breakdown 2021E ~20% EPS Accretion by Responsibility Centers ($MM) ~$63 Internal 2 ~$7 Cost savings audit Marketing 1% 7% 1 3 ~$7 EMPK standalone ~$48 Finance 9% Executive 12% 1 Non- FFIC standalone ~$48 revenue staffing 59% IT 12% 4 FFIC 2021E stan
Slide 14: Combination Creates a Leading Long Island Franchise
Combination Creates a Leading Long Island Franchise 1 1 Median Household Income ($MM) # of Businesses $119.2 20 Branches 74,963 73,116 $103.8 $96.1 4 Branches $66.0 Suffolk New York Nassau Queens Nassau Suffolk Nassau Suffolk Flushing U.S. Average County County Current County County Kings Markets 2
Slide 15: Overview of Empire Bancorp (EMPK)
Overview of Empire Bancorp (“EMPK”) 1 Empire Bancorp Branch Footprint Company Highlights § Long Island based community bank headquartered in Islandia, NY, organized around a traditional, relationship-based community bank structure § Diversified loan portfolio with 42% in multi family loans and $0.7B
Slide 16: Expansion into Suffolk County
Expansion into Suffolk County Suffolk New York Nassau Queens 1 Long Island Regional Banks Deposits Kings ($B) Apple Financial Holdings $6.1 $5.4 Pro Forma Flushing 2 Pro Forma Geographic Footprint $4.5 New York City 3 $2.4B 16 Dime Bancorp $4.5 Deposits Branches Ridgewood Savings Bank $3.7 Nassau Co
Slide 17: Transaction Overview
Transaction Overview 1 § Aggregate deal value of $85.4MM ; Empire shareholders will have the option to elect to receive either 2 0.6548 shares of Flushing common stock or $14.04 in cash for each common share of Empire they Consideration & own Structure § Pro forma stock ownership: 92% Flushing Finan
Slide 18: Pro Forma Deposit Mix
Pro Forma Deposit Mix Reduction in Cost of Deposits Empire National Bank Pro Forma Flushing Bank 13% 12% 19% 3% 22% 23% 74% 66% 68% MMDA/Savings, and other Non-interest bearing CDs Total deposits: $5.1B Total deposits: $0.9B Total deposits: $6.0B Cost of total deposits: 0.79% Cost of total deposits:
Slide 19: Pro Forma Balance Sheet Increases Loan Yield
Pro Forma Balance Sheet Increases Loan Yield Empire National Bank Pro Forma Flushing Bank 2% 6% 2% 6% 3% 9% 14% 14% 39% 38% 42% 21% 13% 13% 12% 13% 27% 26% Multi-family CRE Investor 1-4 Family C&I CRE Owner-occupied Other Total loans: $6.0B Total loans: $0.7B Total loans: $6.7B Yield on loans: 4.07%
Slide 20: Transaction Meets Flushing's Strategic Priorities
Transaction Meets Flushing’s Strategic Priorities Increase core deposits, with an emphasis on non-interest bearing accounts, and continue to improve funding mix • Lowers loan-to-deposit ratio ü • Lowers cost of deposits Manage net loan growth and focus on yield with an emphasis on assets with the be
Slide 21: COVID-19 and Credit
COVID-19 and Credit 21COVID-19 and Credit 21
Slide 22: Adaptability and Flexibility in COVID-19 Environment
Adaptability and Flexibility in COVID-19 Environment TEAM MEMBERS CUSTOMERS COMMUNITIES § Safety and health of § SBA PPP loan closings § Delivering food to hospitals employees is our top priority $93.2MM at June 30, 2020 in support of healthcare workers on the frontlines in our § 85% of back office
Slide 23: Loans Grew by 1% and Cost of Deposits Decreased
1 Loans Grew by 1% and Cost of Deposits decreased 69 bps § Yield on loans decreased 15 bps QoQ§ Core deposits, excluding escrow balances, increased 7% QoQ and non-interest bearing deposits are 12% of total deposits § Core yield on loans decreased 23 bps QoQ Total Deposits: +5% QoQ Total Loans: +1% Q
Slide 24: Composition of Our CRE and C&I Portfolios
Composition of Our CRE and C&I Portfolios § C&I closings totaled $153MM § Mortgage loan closings total $81MM § At June 30, 2020 the pipeline totaled $311MM at an average rate of 3.81% 1 C&I CRE 2% 3% Real Estate Collateral 6% $488.1MM 12% 13% 3% 2% 4% 10% 8% 3% 4% $1,094.6MM $3,931.6MM 9% Total Port
Slide 25: Outstanding Loans in Forbearance
Outstanding Loans in Forbearance § Forbearances are primarily backed by mortgages § Forbearances are either deferral of principal and interest, principal, or escrow or combination thereof § Repayment of deferred principal and interest is generally not due until loan maturity As of 6/30/20 ($MM) $728
Slide 26: COVID-19 Impact on Retail
COVID-19 Impact on Retail § FB portfolio stabilizing as many tenants were able to operate at some capacity during lockdown – Limited exposure to national chains – Gradual opening of New York economy allowed more business to operate § Shopping centers and local strip malls began to recover in Phases
Slide 27: Forbearance Process
Forbearance Process § Independent team monitors progress of loans granted forbearance during COVID-19 § Focused on the following: – Maintaining customer contact – Site visits – Follow up for current financial data – Review regular reporting to assess rent collection activity – Evaluate loan performa
Slide 28: Credit Quality 2Q20 Highlights
Credit Quality 2Q20 Highlights § Non-performing loans totaled $20.2MM, an increase of 20.5% QoQ and 28.6% YoY § Loan-to-value ratio on real estate dependent loans as of June 30, 2020 totaled 38.1% § Average loan-to-value for non-performing loans collateralized by real estate at June 30, 2020 was 30.
Slide 29: Credit Outlook
Credit Outlook § Strong credit history § Our loan portfolio is 88% collateralized by real estate with an average LTV of 38% § Minimal 90+ delinquencies representing 32 bps of gross loans § Ratio of Classified Assets to Total Capital is 3.5% at June 30, 2020 § Forbearance down 13% from intra-period p
Slide 30: Minimal Delinquencies on the Total Portfolio
Minimal Delinquencies on the Total Portfolio 1 90-Day Delinquencies as % of Loans Originated by Year Seventeen delinquent loans for vintage years covering over 10 years of originations 0.25% 0.22% 0.14% 0.14% 0.12% 0.08% 0.04% 0.03% 0.00% 0.00% 0.00% 2 3 4 5 6 7 8 9 2010 2011 2012 2013 2014 2015 201
Slide 31: 2Q20 COVID-19 Reserve Building
2Q20 COVID-19 Reserve Building Allowance for Loan Losses ($MM) % of 2Q Provision $9.6 0.61% Total 0.47% 0.38% Loans § 2Q20 economic outlook included annualized GDP decline and elevated unemployment – 2Q20 provision includes the impact of the macroeconomic environment and a qualitative assessment of
Slide 32: Increasing Coverage Ratio
Increasing Coverage Ratio Loan Loss Reserve/NPL 181.8% 167.7% 164.1% 128.9% 112.2% 103.8% 82.6% 73.4% 64.9% 34.6% 27.6% 25.8% 24.7% 24.4% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20 2Q20 32Increasing Coverage Ratio Loan Loss Reserve/NPL 181.8% 167.7% 164.1% 128.9% 112.2% 103.8%
Slide 33: Credit Discipline Paramount
Credit Discipline Paramount § Over two decades and multiple credit cycles, Flushing has a history of better than industry credit § Since the Great Recession, construction loans have decreased by 32% and mixed use by 21% ‒ LTV has improved to 38% from 48% NCOs / Average Loans 3.30% 2.80% Our Maximum
Slide 34: Earnings and Capital
Earnings and Capital 34Earnings and Capital 34
Slide 35: Consistent Core Earnings
Consistent Core Earnings § Returned to normalized core earnings after record core earnings in 2018 § 2020 core earnings includes the effects of COVID-19 reserve building of $0.43 per diluted share 1 Core Net Income ($MM) Core Diluted EPS 2 $56 $1.94 $47 $47 $1.65 $46 $1.58 $1.57 $44 $1.52 $43 $1.49
Slide 36: Total Return Historical Highlights and Outperformance
Total Return 1 Historical Highlights and Total Return Outperformance Timeline Highlights 1929 1995 2006 2008 2014 2016 2017 2018 2019 Founded FFIC IPO Launched Launched Introduced Launched Launched Launched Win Signed definitive Business Government Business Universal Banker BankPurely® Flushing Camp
Slide 37: Net Interest Margin
Net Interest Margin § NIM increased 43 basis points QoQ primarily due to decrease in cost of funds § Cost of funds decreased 62 basis points QoQ § Core NIM increased 36 basis points QoQ § Record net interest income in 2Q20 totaled $49MM, increase 19% QoQ 4.00% $55,000 Net Interest Income ($000s) $53
Slide 38: Opportunity to Reduce Funding Costs with Maturing CDs
Opportunity to Reduce Funding Costs with Maturing CDs § ~$800MM of Retail CDs are scheduled to mature through 2Q21, representing 16% of total deposits as of 2Q20, at a weighted average cost of 1.40% CDs Maturing Replacement Funding § Yields rolling off exceed current market deposit costs§ Current de
Slide 39: Protection on Asset Yields
Protection on Asset Yields § ~20% of real estate portfolio reprices annually § Individual loans contain floors § Expect limited movement in floating rate portfolio, which totals $589MM barring any interest rate fluctuation 39Protection on Asset Yields § ~20% of real estate portfolio reprices annuall
Slide 40: Controlling Non-Interest Expense
Controlling Non-Interest Expense Non-Interest Expense ($000s) 2Q20 Highlights $35,000 5.00% § Non-interest expense decreased $32,380 $3.6MM, or 11.2% QoQ 1 $3,035 $30,000§ Efficiency ratio was 54.9% for 2Q20 $28,755 $27,158 compared to 68.2% for 1Q20 and 4.00% 61.1% for 2Q19 $25,000 § Includes legal
Slide 41: Continuing to Improve Funding Mix
Continuing to Improve Funding Mix $3.9B $6.4B As of 12/31/10 As of 6/30/2020 3% 9% 10% 2% 39% 20% 26% 58% 10% 23% 1 CDs & Borrowings Money Market Now Demand Savings Progress Made…More to Come 1 Includes Mortgagors’ escrow. 41Continuing to Improve Funding Mix $3.9B $6.4B As of 12/31/10 As of 6/30/202
Slide 42: Capital Levels
Capital Levels § Remained well capitalized all the times 1 Total Risk Based Capital Ratio 15.6% 15.4% 15.3% 14.6% 14.6% 14.3% 14.0% 13.7% 13.6% 13.3% 13.2% 13.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20 2Q20 1 Capital ratios based on regulatory financial statements of subsidiary Flushi
Slide 43: Why Flushing Financial
Why Flushing Financial 1 2 § Long-standing, skilled management team§ Premium location in high growth, high income NYC area markets § Experienced lending in greater New York City markets§ Leading community bank market- share in footprint; competitive 1 § 453% total return since IPO in 1995 strength a
Slide 44: Appendix
AppendixAppendix
Slide 45: 2Q20 Operating Results
2Q20 Operating Results 2Q20 1Q20 2Q19 Earnings ($MM, except EPS data) GAAP Net Interest Income $48.7 $40.8 $40.0 Net Income (Loss) $18.3 ($1.4) $10.6 1 Core Net Income $10.3 $5.5 $12.1 EPS $0.63 ($0.05) $0.37 Core EPS $0.36 $0.19 $0.42 Profitability Ratios ROAA 1.01% -0.08% 0.61% ROAE 13.11% -0.96%
Slide 46: Reconciliation of GAAP Earnings and Core Earnings
Flushing Financial Corporation and Subsidiaries Reconciliation of GAAP Earnings and Core Earnings Non-cash Fair Value Adjustments to GAAP Earnings The variance in GAAP and core earnings is primarily due to the impact of non-cash net gains and losses from fair value adjustments. These fair value adju
Slide 47: Reconciliation of GAAP Earnings and Core Earnings
Reconciliation of GAAP Earnings and Core Earnings Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019 GAAP income (loss) before income taxes $ 24,080 $ (1,596) $ 13,828 $ 22,484 $ 23,183 Net (gain) loss from fair value adjustments (10,205) 5,993
Slide 48: Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue
RECONCILIATION OF GAAP REVENUE and PRE-PROVISION PRE-TAX NET REVENUE Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019 Net interest income $ 48,717 $ 40,826 $ 40,009 $ 89,543 $ 81,812 Non-interest income (loss) 13,737 (2,864) 2,451 10,873 3,39
Slide 49: Reconciliation of GAAP NII & NIM to Core NII & NIM
Reconciliation of GAAP NII & NIM to CORE NII & NIM Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019 GAAP net interest income $ 48,717 $ 40,826 $ 40,009 $ 89,543 $ 81,812 Net loss from fair value adjustments on qualifying hedges 365 2,073 818
Slide 50: Contact Details
Contact Details | Flushing Financial Corporation Susan Cullen SEVP, CFO & Treasurer (516) 209-3622 susan.cullen@flushingbank.com NASDAQ: FFIC 50Contact Details | Flushing Financial Corporation Susan Cullen SEVP, CFO & Treasurer (516) 209-3622 susan.cullen@flushingbank.com NASDAQ: FFIC 50
Slide 51: ‘inancial Corporation
‘inancial Corporation
Flushing Financial — Merger or Acquisition (August 2020) on 6ix