Flushing Financial Corporation · NASDAQ:FFIC
Flushing Financial — Q4 2023 Earnings Presentation
39 slides from Flushing Financial's earnings presentation, Jan 26, 2024
Slide 1: 4Q23 Earnings Conference Call
4Q23 Earnings Conference Call January 26, 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: Quarter Features
▪ NIM Improvement – GAAP and Core NIM expanded 7 bps and 18 bps, QoQ, respectively in 4Q23 ▪ Expanding Loan Yields – GAAP and Core Loan yields increased 20 bps and 33 bps QoQ in 4Q23 ▪ Low Office Exposure – Manhattan office buildings are minimal at 0.6% of net loans ▪ Ample Liquidity Sources – $4.1
Slide 4: Balance Sheet Positioning Has Changed, But Credit Quality Has Remained Strong
▪ Over the past year, we have largely moved to interest rate neutral to position the Company for any rate movements ▪ Manhattan office buildings exposure is only 0.6% of net loans Balance Sheet Positioning Has Changed, But Credit Quality Has Remained Strong Percentage Change to Net Interest Income f
Slide 5: Areas of Focus for Long-term Success
5 Areas of Focus for Long-term Success Areas of Focus Increase NIM and Reduce Volatility • GAAP and Core NIM improved 7 bps and 18 bps QoQ, respectively, in 4Q23 • NIM improved 5 bps QoQ to 2.14%, absent episodic1 items • Largely achieved the goal of becoming interest rate neutral to 100 bps change
Slide 6: 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 December 31, 2023 39% 10% 11% 8 % 8 % 6 % 5 % 3 % 2 %2 % 2 %1 %1 % 1 % 1 % Multifamily: 39.0% Non Real Estate: 11.0% Owner Occupied CRE: 10.0% One-to-four family - Mixed
Slide 7: Multifamily Lending – Conservative Lending Standards; Minimal Losses
Multifamily Lending –Conservative Lending Standards; Minimal Losses Our Lending Looks More Like This Generally, Not Like This 7 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 8: 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 8 50 Hudson Years, Photo by Michael Young ▪ Average loan size is $3.3 million ▪ Weighted average LTV of 50% and a weighted average debt service coverage ratio of 1.8x ▪ No office loans are nonaccru
Slide 9: Retail CRE: Essential to Local Communities
9 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 malls versus larger malls ▪ Our average retail CRE loan is $2.4MM with average
Slide 10: 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 less than 36%4 – Only $12.6MM of real estate loans (0.2% of gross loans) with an LTV of 75% or more4 Net Charge-offs Significantly Bet
Slide 11: Continued Strong Credit Quality
0.63% 0.50% 0.47% 0.45% 0.54% 0.29% 0.32% 0.34% 0.40% 0 .0 0% 0 .1 0% 0 .2 0% 0 .3 0% 0 .4 0% 0 .5 0% 0 .6 0% 0 .7 0% 0 .8 0% 0 .9 0% 1 .0 0% 4Q22 1Q23 2Q23 3Q23 4Q23 FFIC Peer Median* 11 Continued Strong Credit Quality NPAs / Assets Criticized and Classified Loans / Gross Loans ACL / Gross Loans &
Slide 12: GAAP & Core NIM Expand QoQ; Closing vs Satisfaction Yields Widen
GAAP & Core NIM Expand QoQ; Closing vs Satisfaction Yields Widen 12 GAAP NIM FTE 2.70% 2.27% 2.18% 2.22% 2.29% See Appendix for definitions of Core NII FTE, Core NIM, and Core Loan Yields (1) Closings and Satisfactions Yields exclude PPP loans Closings vs Satisfaction Yields1 6.10% 7.01% 7.14% 7.48%
Slide 13: Interest Rate Hedges Provide Income and Reduce Rate Sensitivity
13 Interest Rate Hedges Provide Income and Reduce Rate Sensitivity Swap Type Notional ($MM) 2023 Avg Bal ($MM) 2023 Yield with Swaps 2023 Yield Without Swaps Net Benefit Investments $200.0 $993.9 3.84% 3.55% 0.29% Loans $702.5 $6,845.3 5.19% 4.94% 0.25% Funding $776.8 $7,629.5 2.91% 3.25% 0.34% Tota
Slide 14: Average Total Deposits Expand YoY; Pace of Deposit Costs Increase Slows
14.7% 13.2% 12.3% 12.5% 12.7% 29.5% 28.9% 29.4% 28.0% 26.8% 2.2% 2.0% 1.8% 1.7% 1.6% 32.2% 30.2% 25.4% 23.2% 23.6% 20.2% 24.7% 29.7% 33.6% 34.0% 1.2% 1.0% 1.4% 1.0% 1.3% $6,678 $6,810 $6,900 $6,819 $6,884 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 4Q22 1Q23 2Q23 3Q23 4Q23 Noninterest
Slide 15: CDs Continue to Reprice
15 CDs Continue to Reprice ▪ CDs have a weighted average rate of 4.10%1 as of December 31, 2023 ▪ Approximately 93%1 of the CD portfolio will mature within one year – $408.6 million in 1Q24 at 3.20%1 – $448.2 million in 2Q24 at 4.12% – $579.4 million in 3Q24 at 4.89% – $87.5 million in 4Q24 at 3.75%
Slide 16: Floating Rate Loans Are ~25% of the Loan Portfolio; Significant Repricing
▪ 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 $500MM, $1.7B or ~25% of the loan portfolio is effectively floating rate ▪ Through 2025, loans to reprice ~170-210 bps higher assuming index values
Slide 17: Book Value and Tangible Book Value Per Share Grow YoY and QoQ
$22.97 $22.80 $23.14 $23.06 $23.21 10.52% 10.36% 10.36% 10.14% 10.25% 8.61% 8.56% 8.54% 8.51% 8.47% 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 4Q22 1Q23 2Q23 3Q23 4Q23 Book Value Per Share CET1 Ratio Leverage Ratio Book Value and Ta
Slide 18: 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 $759MM and Deposits $1.3B Multilingual Branch Staff Serves Diverse Customer Base in
Slide 19: Key Community Events During 4Q23
▪ Hosted ribbon-cutting ceremony at Bensonhurst Branch ▪ Trunk or Treat at the Hauppauge Branch ▪ Toys for Tots in Chinatown 19 Key Community Events During 4Q23
Slide 20: Digital Banking Usage Continues to Increase
Digital Banking Usage Continues to Increase 20 Technology Enhancements Remain a Priority to Grow Customer Base and Increase Engagement 20% Increase in Monthly Mobile Deposit Active Users Dec. 2023 YoY ~33,500 Users with Active Online Banking Status 21% Dec. 2023 YoY Growth 12% Digital Banking Enroll
Slide 21: 2024 Outlook
▪ Balance Sheet – Expect stable loans – Focused on improving funding mix; expect normal seasonal funding patterns ▪ Net Interest Income – Expect near term NIM pressure largely from CD repricing; loan repricing is a potential offset – $1.5 billion of retail CDs to mature in 2024 at a weighted average
Slide 22: Key Takeaways – Incremental Improvement; Challenging Environment
22 ▪ Shifting Areas of Focus – Building a stronger base to set the foundation for improve profitability – Controlling what we can • Increase in Core NIM, even without prepayment penalty and other episodic income • Well secured and low risk loan portfolio • Strong liquidity and capital • Bending the
Slide 23: Appendix
Appendix [EaEFLUs 23
Slide 24: 4Q23 Financial Highlights
▪ Net Interest Income includes $3MM of episodic items2 in 4Q23 compared to $2.4 MM in 4Q22 and $2.6MM in 3Q23 ▪ Noninterest income in 4Q23 includes net realized gains on the sale of assets and other dividends from nonqualified plans that are expected to normalize in future periods. ▪ Noninterest exp
Slide 25: 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 $1.94 ROAA 0.29 % 0.92 % 1.09 % 0.68 % 0.68 % 0.85 % ROAE 3.69 11.42 13.
Slide 26: Track Record of Steady Growth
Over a 28 Year Track Record of Steady Growth Core EPS ($) Dividends per Share ($) Tangible Book Value per Share ($) Assets ($B) Total Gross Loans ($B) Total Deposits ($B) $- $0.88 1995 2000 2005 2010 2015 2020 2022 2023 $- $0.83 1995 2000 2005 2010 2015 2020 2022 2023 $0.6 $6.8 1995 2000 2005 2010 2
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 4Q23 (5%+ Historically) and Stress Test Each Loan Multifamily Geography 15% 30% 21% 18% 16% Bronx Kings Manhattan Queens Other $2.7B 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 $ 11,754 $ 10,752 $ 11,872 $ 5,455 $ 12,819 $ 39,83
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 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 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 $ 46,085 $ 44,427 $ 43,378 $ 45,262 $ 54,201 $ 179,152 $ 243,616 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 $ 669,837 $ 666,521 $ 670,247 $ 672,345 $ 677,157 Less: Goodwill (17,636) (17,636) (17,636) (17,636) (17,636) Core deposit intangibles (1,537) (1,651) (1,769) (1,891) (2,017) 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 December 31, December 31, December 31, December 31, (Dollars In thousands, except per share data) 2021 2020 2019 2018 GAAP
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 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 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 $ 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 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