Slide 1: 4Q22 Earnings Conference Call January 27, 2023
4Q22 Earnings Conference Call January 27, 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
Slide 3: 4Q22 highlights: funding mix, loan growth, asset quality, investing in the future
3 4 1 2 Improve and Grow Funding Mix Generate Appropriately Priced Loan Growth Average noninterest bearing deposits increased 0.3% YoY Core deposits are 79.8% of average deposits and mortgage escrow Core deposit yields increased 87 bps QoQ to 1.63%; Interest bearing deposit beta of 45.4% to da
Slide 4: Annual Financial Highlights
4 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 Core 1 Results EPS $2.49 $2.81 $1.70 $1.65 $1.94 $1.57 ROAA 0.92 % 1.09 % 0.68 % 0.68 % 0.
Slide 5: Balance Sheet is Prepared for the Macro Environment
5 Balance Sheet is Prepared for the Macro Environment Credit Quality Liquidity Interest Rates • Conservatively underwritten loan portfolio with a history of low losses • Average LTV of <37% for all real estate based loans • 1.7x Debt Service Coverage Ratios on Multifamily and Non Owner Occupied CRE;
Slide 6: Digital Banking Usage Continues to Increase
Digital Banking Usage Continues to Increase 6 Technology Enhancements Remain a Priority 24% Increase in Monthly Mobile Deposit Active Users Dec 2022 YoY ~27,700 Users with Active Online Banking Status 20% Dec 2022 YoY Growth 11% Digital Banking Enrollment Dec 2022 YoY Growth Numerated Small Business
Slide 7: Key Events During 4Q22
Signed Lease for Bensonhurst Branch Expanding our Asian Banking Footprint Maintained Investment Grade Rating by Kroll Bond Rating Agency, Inc. Presented Sponsorship Check to Queens Tech + Innovation Challenge Assisting to help transform Queens into a leading hub of innovation and technology
Slide 8: Deposit Mix Shifts With Higher Market Rates
Deposit Mix Shifts With Higher Market Rates 8 Average Core Deposits are 80% of Average Deposits 1 in 4Q22 Total Average Deposits 1 ($MM) 1 Includes mortgage escrow deposits Average noninterest bearing deposits up 0.3% YoY Noninterest bearing deposits are 14.7% of average deposits 1 , down from 1
Slide 9: Deposit Rates Rise But At Slower Pace Than Fed Moves
Deposit Rates Rise But At Slower Pace Than Fed Moves 9 Year to Date, Weighted Average Interest Bearing Deposit Beta of 45.4% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Average Fed
Slide 10: Loan Yields Improve YoY and QoQ; Balances Flat QoQ
37.9% 38.0% 37.5% 37.5% 37.6% 26.8% 26.7% 27.6% 27.6% 27.6% 0.9% 1.0% 1.1% 0.9% 1.0% 12.8% 12.4% 12.0% 11.5% 11.5% 21.6% 21.9% 21.8% 22.5% 22.3% $6,634 $6,601 $6,752 $6,948 $6,926 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 4Q21 1Q22 2Q22 3Q22 4Q22 Multifamily Commercial Real Estate Constructi
Slide 11: 40% of the Loan Portfolio to Reprice Through 2024
Floating rate loans include any loans (including swaps) tied to an index that reprices within 90 days Through 2025, loans to reprice ~200+ bps higher assuming index values as of December 31, 2022 ~15% of loans reprice with every Fed move and an additional 10 - 15% reprice annually 40% of the L
Slide 12: Core Loan Yields Increase 28 bps; Core Deposit Costs Up 87 bps
GAAP NIM FTE 3.29% 3.36% 3.35% 3.07% 2.70% Core Loan Yields Increase 28 bps; Core Deposit Costs Up 87 bps 12 $61.2 $62.7 $64.6 $60.5 $53.0 3.21% 3.31% 3.33% 3.03% 2.63% 4.05% 4.04% 4.15% 4.35% 4.63% 0.25% 0.22% 0.29% 0.76% 1.63% -0.25% 0.75% 1.75% 2.75% 3.75% 4.75% 5.75% $10.0 $20.0 $30.0 $40.0 $50.
Slide 13: NIM Should Start to Rebound ~2 Qtrs After Fed Stops Raising Rates
2.00 2.20 2.40 2.60 2.80 3.00 3.20 - 0.50 1.00 1.50 2.00 2.50 3.00 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 3Q15 - 1Q19 Rising Rate Cycle Fed Funds (Lt) NIM (Rt) NIM Bottoms Fed Starts % % Last rising rate cycle, the NIM started
Slide 14: Swaps to Reprice 65 bps Lower in 2023
Funding Swaps to reprice lower during 2023 – $295.8MM of effective swaps with a rate of 2.23% will mature in 2023 and will be replaced by $230MM of forward swaps with a rate of 0.70% – By the end of 2023, $591.5MM of funding swaps with a rate of 2.41% will reprice to $525.8MM with a rate of 1.76%
Slide 15: 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 <37% 4 – Only $23.4MM of real estate loans (0.3% of gross loans) with an LTV of 75% or more 4 Net Charge - offs Significantly Better T
Slide 16: Continued Strong Credit Quality
16 Continued Strong Credit Quality NPAs / Assets Criticized and Classified Loans / Gross Loans ACL / Gross Loans & ACL / NPLs ACL by Loan Segment (4Q22) $2,602 $1,913 $554 $235 $6 $71 $23 $1,522 0.37% 0.43% 0.34% 0.38% 0.00% 0.37% 9.45% 1.15% -70.00% -60.00% -50.00% -40.00% -30.00% -20.00% -10.00% 0
Slide 17: Book Value and Tangible Book Value Per Share Grow in 4Q22
Book Value and Tangible Book Value Per Share Grow in 4Q22 17 374,862 Shares Repurchased in 4Q22; 71% of Earnings Returned in 2022 3.2% YoY Book Value Per Share Growth 3.2 % YoY Increase in Tangible Book Value Per Share $21.61 $21.61 $21.71 $21.81 $22.31 8.22% 8.05% 7.82% 7.62% 7.82% 6.90% 7.10% 7.30
Slide 18: Notable Items Impacting 4Q22 Results
18 Notable Items Impacting 4Q22 Results • Sale of Investment Securities (Non - Core) • $84.2MM of MBS sold with an approximate yield of 1.17% • $10.9MM pre - tax loss incurred; most of which was previously included in tangible capital ratios • Proceeds are in the process of reinvestment in securitie
Slide 19: 2023 Outlook
2023 Outlook 19 With a Lag, the NIM Should Begin to Rebound After Fed Rate Increases Stop Loan Growth – Higher rate environment to impact origination volumes and prepayments speeds Funding – Focused on deposits; borrowings will fill any gaps Net Interest Income – Expect NIM pressure until Fed
Slide 20: 2023 Strategic Objectives: Navigating Through the Environment
3 4 1 2 Grow Funding Sources Maintain Loan Portfolio Focus on full relationships across all business units Emphasize noninterest bearing DDA Navigate the rate environment More selective in lending Focus on risk - adjusted returns Full relationship lending Focus on Asset Quality Leverage
Slide 21: Key Messages
21 2022 was the second highest core earnings year ever; despite challenging rate environment Solid credit quality with a history of low losses – Average real estate LTVs <37%; Over 88% of the loan portfolio is real estate secured – Weighted average Debt Service Coverage Ratio of 1.7x for multifa
Slide 22: Appendix
Appendix [EHUFLUSHING 22
Slide 23: Reconciliation of GAAP Earnings and Core Earnings
Reconciliation of GAAP Earnings and Core Earnings 23 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 borrowing c
Slide 24: Reconciliation of GAAP to Core Earnings - Quarters
24 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 $ 12,819 $ 32,422 $ 34,971 $ 24,640 $ 22,826 Net (g
Slide 25: Reconciliation of GAAP to Core Earnings - Years
25 Reconciliation of GAAP to CORE Earnings - Years (Dollars In thousands, except per share data) GAAP income (loss) before income taxes $ 104,852 $ 109,278 $ 45,182 $ 53,331 $ 65,485 $ 66,134 Day 1, Provision for Credit Losses - Empire transaction — — 1,818 — — — Net (gain) loss from fair value adju
Slide 26: Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Quarters
26 Reconciliation of GAAP Revenue and Pre - provision Pre - tax Net Revenue - Quarters (Dollars in thousands) GAAP Net interest income $ 54,201 $ 61,206 $ 64,730 $ 63,479 $ 62,674 Net (gain) loss from fair value adjustments on qualifying hedges (936) (28) 60 129 (1,122) Net amortization of purchase
Slide 27: Reconciliation of GAAP Revenue and Pre-provision Pre-tax Net Revenue - Years
27 Reconciliation of GAAP Revenue and Pre - provision Pre - tax Net Revenue - Years (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 adjustments on qualifying hedges (775) (2,079) 1,185 1,678 — — Net amortizat
Slide 28: Reconciliation of GAAP to Core Net Interest Income and NIM - Quarters
28 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 $ 54,201 $ 61,206 $ 64,730 $ 63,479 $ 62,674 Net (gain) loss from fair value adjustments on qualifying he
Slide 29: Reconciliation of GAAP to Core Net Interest Income and NIM - Years
29 1 Excludes purchase accounting average balances for all periods presented Reconciliation of GAAP to Core Net Interest Income and NIM - Years (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 adjustments on q
Slide 30: Contact Details
30 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 31: Flushing Financial Corporation
[age LUSHING Financial Corporation