Flushing Financial Corporation · NASDAQ:FFIC
Flushing Financial — Q3 2023 Earnings Presentation
39 slides from Flushing Financial's earnings presentation, Nov 1, 2023
Slide 1: 3Q23 Earnings Conference Call
3Q23 Earnings Conference Call November 1, 2023
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: Executing on Our Action Plan to Improve Future Profitability
Initiative Actions/Results 1) Move towards a more interest rate neutral position • Added $100 million of interest rate hedges during 3Q23 • Approximately 60% of the loan pipeline are floating rate loans at September 30, 2023 • The Company has a goal of reaching a more neutral interest rate risk posi
Slide 4: Areas of Focus for Long-term Success
4 Areas of Focus for Long-term Success Areas of Focus Interest Rate Risk • Continuing to take actions to position the Company’s balance sheet more towards interest rate risk neutral • During 3Q23, the Company added $100 million of interest rate hedges • Approximately 60% of the loan pipeline consist
Slide 5: 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 0.6% of Net Loans Data as of September 30, 2023 38% 11% 10% 8% 8% 6% 5% 3% 3% 2% 2%1%1% 1% 1% Multifamily: 38.0% Non Real Estate: 11.0% Owner Occupied CRE: 10.0% One-to-four family - Mixed Use: 8.0%
Slide 6: Multifamily Lending – Conservative Lending Standards; Minimal Losses
Multifamily Lending –Conservative Lending Standards; Minimal Losses Our Lending Looks More Like This Generally, Not Like This 6 1 As of June 30, 2023 ▪ Average loan size is only $1.2 million ▪ Strong sponsorship with weighted average equity of 56% ▪ Weighted average debt service coverage ratio is 1.
Slide 7: Office CRE – Most of the Loans Are Outside of Manhattan
Office CRE – Most of the Loans Are Outside of Manhattan Our Lending Looks More Like This Not Like This 7 50 Hudson Years, Photo by Michael Young ▪ Average loan size is $3.2 million ▪ Weighted average LTV of 50% and a weighted average debt service coverage ratio of 1.8x ▪ No office loans are nonaccru
Slide 8: Retail CRE: Essential to Local Communities
8 Retail CRE: Essential to Local Communities Our Lending Looks More Like This Generally, Not Like This ▪ $0.9B portfolio with 42% located in Queens, Brooklyn, and the Bronx ▪ We tend to lend to shopping centers and strip mails versus larger malls ▪ Our average retail CRE loan is $2.4MM with average
Slide 9: Strong Asian Banking Market Focus
Strong Asian Banking Market Focus 19% 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 $766MM and Deposits $1.2B Multilingual Branch Staff Serves Diverse Customer Base in
Slide 10: Digital Banking Usage Continues to Increase
Digital Banking Usage Continues to Increase 10 Technology Enhancements Remain a Priority to Grow Customer Base and Increase Engagement 21% Increase in Monthly Mobile Deposit Active Users Sept. 2023 YoY ~35,000 Users with Active Online Banking Status 33% Sept. 2023 YoY Growth 13% Digital Banking Enro
Slide 11: Key Community Events During 3Q23
▪ The Hong Kong Dragon Boat Festival of New York ▪ India Day Parade of Long Island ▪ Moon Festival 2023 ▪ Opened Bensonhurst branch on September 29, 2023 11 Key Community Events During 3Q23
Slide 12: Grow Funding Sources, Maintain Loan Portfolio, Focus on Asset Quality
3 4 1 2 Grow Funding Sources Maintain Loan Portfolio ▪ Average total deposits increased 8.6% YoY but declined 1.2% QoQ ▪ Noninterest bearing deposits increased 5.6% QoQ ▪ Average CDs were $2.3B or 33.6% of total average deposits ▪ Cost of deposits increased 26 bps QoQ to 2.94%; Overall cost of funds
Slide 13: Average Total Deposits Increase YoY; NIB Deposits Expand QoQ
16.7% 14.7% 13.2% 12.3% 12.5% 28.8% 29.5% 28.9% 29.4% 28.0% 2.5% 2.2% 2.0% 1.8% 1.7% 34.0% 32.2% 30.2% 25.4% 23.2% 16.9% 20.2% 24.7% 29.7% 33.6% 1.1% 1.2% 1.0% 1.4% 1.0% $6,277 $6,678 $6,810 $6,900 $6,819 0 1 00 0 2 00 0 3 00 0 4 00 0 5 00 0 6 00 0 7 00 0 8 00 0 3Q22 4Q22 1Q23 2Q23 3Q23 Noninterest
Slide 14: Core Loan Yields Continue to Expand
37.5% 37.6% 37.7% 38.0% 37.9% 27.6% 27.6% 27.6% 28.1% 28.3% 0.9% 1.0% 0.9% 0.8% 0.9% 11.5% 11.5% 11.4% 11.3% 11.0% 22.5% 22.3% 22.4% 21.8% 21.9% $6,948 $6,926 $6,895 $6,830 $6,898 - 1,0 00 2,0 00 3,0 00 4,0 00 5,0 00 6,0 00 7,0 00 8,0 00 3Q22 4Q22 1Q23 2Q23 3Q23 Multifamily Commercial Real Estate Co
Slide 15: Effective Floating Rate Loans Rise to ~25% of the Loan Portfolio
▪ Floating rate loans include any loans (including back-to-back swaps) tied to an index that reprices within 90 days; $1.7B or ~25% of loan portfolio hedges, including the $500MM, is effectively floating rate ▪ Through 2025, loans to reprice ~180-270 bps higher assuming index values as of September
Slide 16: GAAP NIM Expands; Core NIM Compresses Slightly
$60.5 $53.0 $45.0 $43.3 $42.8 3.03% 2.63% 2.25% 2.17% 2.14% 4.35% 4.63% 4.80% 4.99% 5.26% 0.76% 1.63% 2.30% 2.68% 2.94% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 3Q22 4Q22 1Q23 2Q23 3Q23 Core NII FTE Core NIM FTE Core Loan Yields Cor
Slide 17: Interest Rate Hedges Provide Income and Reduce Rate Sensitivity
17 Interest Rate Hedges Provide Income and Reduce Rate Sensitivity Swap Type Notional ($MM) 9M 23 Avg Bal ($MM) 9M 23 Yield with Swaps 9M 23 Yield Without Swaps Net Benefit Investments $200.0 $985.0 3.68% 3.44% 0.24% Loans $746.8 $6,837.7 5.06% 4.85% 0.21% Funding $776.8 $7,610.1 2.80% 3.12% 0.32% T
Slide 18: CDs Continue to Reprice
18 CDs Continue to Reprice ▪ CDs have a weighted average rate of 3.96%1 as of September 30, 2023 ▪ Approximately 92%1 of the CD portfolio will mature within one year – $371.7 million in 4Q23 at 4.07%1 – $415.5 million in 1Q24 at 3.22% – $442.3 million in 2Q24 at 4.20% – $279.3 million in 3Q24 at 4.5
Slide 19: Net Charge-offs Significantly Better Than the Industry; Strong DSR
▪ Over two decades and multiple credit cycles, Flushing Financial has a history of better than industry credit quality ▪ Average LTVs on the Real Estate portfolio is ~36%4 – Only $20.8MM of real estate loans (0.3% of gross loans) with an LTV of 75% or more4 Net Charge-offs Significantly Better Than
Slide 20: Continued Strong Credit Quality
0.58% 0.63% 0.50% 0.47% 0.45% 0.43% 0.29% 0.32% 0.29% 0 .0 0% 0 .1 0% 0 .2 0% 0 .3 0% 0 .4 0% 0 .5 0% 0 .6 0% 0 .7 0% 0 .8 0% 0 .9 0% 1 .0 0% 3Q22 4Q22 1Q23 2Q23 3Q23 FFIC Peer Median* 20 Continued Strong Credit Quality NPAs / Assets Criticized and Classified Loans / Gross Loans ACL / Gross Loans &
Slide 21: Book Value and Tangible Book Value Per Share Grow YoY
$22.47 $22.97 $22.84 $23.18 $23.15 10.49% 10.52% 10.37% 10.38% 10.19% 8.74% 8.61% 8.58% 8.56% 8.54% 0.00% 5.00% 10. 00% 15. 00% 20. 00% 25. 00% 30. 00% $17.00 $18.00 $19.00 $20.00 $21.00 $22.00 $23.00 $24.00 3Q22 4Q22 1Q23 2Q23 3Q23 Book Value Per Share CET1 Ratio Leverage Ratio Book Value and Tangi
Slide 22: Outlook
▪ Balance Sheet – Expect stable to slight decline in loans – Focused on maintaining deposits balances while experiencing normal seasonal patterns ▪ Net Interest Income – Expect continued NIM pressure until the Fed stops raising rates – Expect NIM expansion, after a lag, once the Fed ends rate increa
Slide 23: Key Takeaways – Cautiously Optimistic
23 ▪ Executing on our Action Plan – These actions will result in improved profitability in the future and set the stage for consistent and significantly higher returns ▪ Areas of Focus improved during the quarter – Continued movement towards interest rate neutral – NPAs declined QoQ; underwriting re
Slide 24: Appendix
Appendix [EaEFLUs 24
Slide 25: Annual Financial Highlights
25 Annual Financial Highlights Reported Results EPS $2.50 $2.59 $1.18 $1.44 $1.92 $1.41 ROAA 0.93 % 1.00 % 0.48 % 0.59 % 0.85 % 0.66 % ROAE 11.44 12.60 5.98 7.35 10.30 7.74 NIM FTE 3.11 3.24 2.85 2.47 2.70 2.93 Core1 Results EPS $2.49 $2.81 $1.70 $1.65 $1.94 $1.57 ROAA 0.92 % 1.09 % 0.68 % 0.68 % 0.
Slide 26: Over a Year Track Record of Steady Growth
Over a 27 Year Track Record of Steady Growth Core EPS ($) 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 2022 9M23 $- $2.49 $0.67 1995 2000 2005 2010 2015 2020 2022 9M23 $0.6 $6.7 1995 2000 2005
Slide 27: Well-Secured Multifamily and CRE Portfolios
Well-Secured Multifamily and CRE Portfolios 27 Underwrite Real Estate Loans with a Cap Rate over 6% in 3Q23 (5%+ Historically) and Stress Test Each Loan Multifamily Geography 15% 31% 21% 17% 16% Bronx Kings Manhattan Queens Other $2.6B Portfolio • Average loan size: $1.2MM • Average monthly rent of
Slide 28: Well-Diversified Commercial Business Portfolio
28 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 estat
Slide 29: Reconciliation of GAAP Earnings and Core Earnings
Reconciliation of GAAP Earnings and Core Earnings 29 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 30: Reconciliation of GAAP to Core Earnings - Quarters
30 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 $ 12,892 $ 11,805 $ 6,959 $ 12,819 $ 32,422 $ 31,65
Slide 31: Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Quarters
31 Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Quarters (Dollars in thousands) GAAP Net interest income $ 44,427 $ 43,378 $ 45,262 $ 54,201 $ 61,206 $ 133,067 $ 189,415 Net (gain) loss from fair value adjustments on qualifying hedges (1,348) 205 (100) (936) (28) (1,243) 16
Slide 32: Reconciliation of GAAP to Core Net Interest Income and NIM - Quarters
32 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 $ 44,427 $ 43,378 $ 45,262 $ 54,201 $ 61,206 $ 133,067 $ 189,415 Net (gain) loss from fair value adjustme
Slide 33: Tangible Stockholders' Common Equity to Tangible Assets - Quarters
33 Calculation of Tangible Stockholders’ Common Equity to Tangible Assets - Quarters (Dollars in thousands) Total Equity $ 669,141 $ 671,303 $ 673,459 $ 677,157 $ 670,719 Less: Goodwill (17,636) (17,636) (17,636) (17,636) (17,636) Core deposit intangibles (1,651) (1,769) (1,891) (2,017) (2,147) Tang
Slide 34: Reconciliation of GAAP Earnings and Core Earnings - Years
34 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 (Dollars In thousands, except per share data) GAAP income (loss) before income taxes $ 104,852 $ 109,278 $ 45,182 $ 53,331
Slide 35: Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue - Years
35 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 36: Reconciliation of GAAP and Core Net Interest Income and NIM - Years
36 Reconciliation of GAAP and Core Net Interest Income and NIM - Years 1 Excludes purchase accounting average balances for the years ended 2022, 2021, and 2020 (Dollars In thousands) GAAP net interest income $ 243,616 $ 247,969 $ 195,199 $ 161,940 $ 167,406 $ 173,107 Net (gain) loss from fair value
Slide 37: Tangible Stockholders' Common Equity to Tangible Assets - Years
37 Calculation of Tangible Stockholders’ Common Equity to Tangible Assets - Years (Dollars in thousands) Total Equity $ 677,157 $ 679,628 $ 618,997 $ 579,672 $ 549,464 Less: Goodwill (17,636) (17,636) (17,636) (16,127) (16,127) Core deposit intangibles (2,017) (2,562) (3,172) — — Intangible deferred
Slide 38: Contact Details
38 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 39: Flushing Financial Corporation
[gc F LUSHING Financial Corporation