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Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.30 and core earnings per share of $0.35, with core earnings improving 55% year over year [3][4] - Net interest margin expanded by 10 basis points quarter over quarter, with GAAP net interest margin increasing to 2.64% and core net interest margin to 2.62% [3][4] - Net charge-offs totaled 7 basis points for the third quarter, improving 15 basis points from the second quarter [4] - The tangible common equity ratio remained stable at 8.01%, increasing 101 basis points from the third quarter of 2024 [4][17] Business Line Data and Key Metrics Changes - Core net interest income increased by $8.6 million, or over 19% year over year, driven by loan security yields [7] - Average non-interest-bearing deposits increased 5.7% year over year and 2.1% quarter over quarter [4][17] - The company retained 80% of loans scheduled to reprice at a weighted average rate of 6.65%, which is 222 basis points higher than the prior rate [9] Market Data and Key Metrics Changes - The company has grown deposits in Asian banking communities to $1.4 billion, representing an 11.3% compound annual growth rate since Q3 2022 [18] - The company holds a 3% market share in a $47 billion market, indicating significant growth opportunities [18] Company Strategy and Development Direction - The company focuses on improving profitability, maintaining credit discipline, and preserving strong liquidity and capital [3][6] - The asset repricing strategy is expected to drive further net interest margin expansion, with real estate loans expected to reprice approximately 147 basis points higher through 2027 [6][22] - The company is investing in its people and branches to drive core business improvements [6][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to improve earnings, with 2026 expected to present better opportunities than 2025 [37] - The company anticipates stable total assets for the remainder of 2025, with loan growth being market dependent [19] - Non-interest income is expected to benefit from a healthy pipeline of approximately $59 million in back-to-back swap loans scheduled to close by the end of the year [20] Other Important Information - The company maintains a strong liquidity position with $3.9 billion in undrawn lines and resources [17] - Uninsured and uncollateralized deposits represent only 17% of total deposits, providing a stable funding base [17] Q&A Session Summary Question: What is the expected NIM for next quarter? - Management indicated that the NIM was 2.68 at the end of September and may be slightly elevated but not as high as in Q3 [26][27] Question: What is the deposit beta expected for non-maturity deposits? - Management expects the deposit beta to closely mirror the Fed's actions, with a recent reduction of 20 to 25 basis points on a $1.8 billion portfolio of deposits [28] Question: Why not buy back stock at current levels? - Management is focused on maintaining dividends and keeping capital ready for future growth opportunities rather than stock buybacks [33][34] Question: Is there a timeline for achieving double-digit ROTCE or ROE? - Management indicated that achieving double-digit ROTCE could be possible by late 2027 [38]

3Q25 Earnings Conference Call October 30, 2025 Building Rewarding Relationships FlushingBank.com 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 descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litiga ...

Core Insights - Flushing Financial reported revenue of $58.57 million for the quarter ended September 2025, reflecting a year-over-year increase of 12.9% [1] - The earnings per share (EPS) for the quarter was $0.35, up from $0.26 in the same quarter last year, resulting in an EPS surprise of +12.9% against the consensus estimate of $0.31 [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $58.92 million, showing a surprise of -0.58% [1] Financial Performance Metrics - The efficiency ratio stood at 71%, slightly better than the average estimate of 71.9% based on two analysts [4] - Total interest-earning assets averaged $8.18 billion, below the two-analyst average estimate of $8.37 billion [4] - The net interest margin was reported at 2.6%, matching the average estimate [4] - Net interest income was $53.83 million, exceeding the average estimate of $53.57 million [4] - Banking services fee income reached $2 million, surpassing the estimated $1.74 million [4] - The net gain on the sale of loans was $0.32 million, compared to the average estimate of $0.14 million [4] - Total non-interest income was $4.75 million, below the average estimate of $5.35 million [4] - Bank owned life insurance income was $2.32 million, slightly above the average estimate of $2.2 million [4] - Other income was reported at $0.91 million, exceeding the average estimate of $0.73 million [4] - Federal Home Loan Bank of New York stock dividends were $0.37 million, lower than the average estimate of $0.54 million [4] Stock Performance - Flushing Financial's shares have returned -5.2% over the past month, contrasting with the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Flushing Financial (FFIC) reported quarterly earnings of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.31 per share, and showing an increase from $0.26 per share a year ago, resulting in an earnings surprise of +12.90% [1] - The company posted revenues of $58.57 million for the quarter ended September 2025, which was slightly below the Zacks Consensus Estimate by 0.58%, but an increase from $51.88 million year-over-year [2] - Flushing Financial shares have underperformed the market, losing about 8.3% since the beginning of the year compared to the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.30 on revenues of $59.88 million, and for the current fiscal year, it is $1.16 on revenues of $238.27 million [7] - The estimate revisions trend for Flushing Financial was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Financial - Savings and Loan industry, to which Flushing Financial belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Flushing Financial reported GAAP and Core EPS of $0.30 and $0.35, respectively, compared to $0.30 and $0.26 a year ago[4]. - Net income for the three months ended September 30, 2025, was $10,447,000, compared to $14,203,000 in the previous quarter, showing a decrease of 26.0%[36]. - Core net income for the three months ended September 30, 2025, was $11,957,000, compared to $11,162,000 for the previous quarter, reflecting a 7.1% increase[56]. - Basic earnings per common share for the three months ended September 30, 2025, was $0.30, unchanged from the previous quarter[36]. - Core diluted earnings per common share increased to $0.35 for the three months ended September 30, 2025, up from $0.32 in the previous quarter, representing a 9.4% growth[56]. Interest Income and Margin - The net interest margin (NIM) expanded by 10 basis points quarter-over-quarter to 2.64% for GAAP and 2.62% for Core, driven by asset repricing and growth in noninterest-bearing deposits[4]. - Net Interest Margin FTE increased to 2.64%, up 54 bps YoY and 10 bps QoQ; yield on interest-earning assets rose to 5.70%[16]. - GAAP net interest income for Q3 2025 was $53,828,000, an increase from $51,235,000 in Q2 2025, and $45,603,000 in Q3 2024, representing a year-over-year growth of 18.8%[59]. - Core net interest income for Q3 2025 reached $53,543,000, compared to $48,133,000 in Q3 2024, reflecting a 11.3% increase year-over-year[59]. - The net interest margin for the three months ended September 30, 2025, was reported at 3.45%, compared to 3.50% for the previous quarter[42]. Deposits and Loans - Average noninterest-bearing deposits increased by 5.7% year-over-year, now representing 12.2% of total deposits, reflecting strong customer relationships[4]. - Average total deposits decreased by 1.6% year-over-year to $7.3 billion, while average noninterest-bearing deposits increased[11]. - Total deposits decreased to $7,345,547 from $7,607,080 in the previous quarter[31]. - The loan pipeline increased by 18.0% year-over-year and 91.0% quarter-over-quarter to $345.6 million, with a strong loan closing of $252.8 million, up 16.4% year-over-year[11]. - Total loan closings for the three months ended September 30, 2025, reached $252,760, a significant increase from $159,176 in the previous quarter[48]. Asset Quality - Nonperforming assets (NPAs) totaled $62.1 million, representing 70 basis points of assets, compared to $54.9 million a year ago[11]. - Net charge-offs were $1.1 million in 3Q25, down from $3.0 million in 3Q24, reflecting improved credit quality[13]. - Nonperforming loans increased to 67 bps of gross loans in 3Q25 from 50 bps in 3Q24, but decreased from 74 bps in 2Q25[22]. - The allowance for credit losses increased to $41,837, representing a 1.4% increase from the previous quarter and a 3.7% increase year-over-year[50]. - The total allowance for credit losses to nonperforming loans ratio improved to 93.3% as of September 30, 2025, compared to 83.8% in the previous quarter[51]. Expenses and Efficiency - Noninterest income decreased by 24.4% year-over-year to $4.7 million, reflecting challenges in generating noninterest revenue[12]. - Core noninterest expenses rose to $42.2 million in 3Q25, reflecting a 9.4% YoY increase[16]. - The efficiency ratio improved to 71.03% from 67.69% in the previous quarter[31]. - Noninterest expense for Q3 2025 was $43,365,000, an increase from $40,356,000 in Q2 2025, reflecting rising operational costs[59]. Capital and Equity - The tangible common equity ratio improved by 101 basis points year-over-year to 8.01%, indicating robust capital levels[4]. - Stockholders' equity reached $711,226 as of September 30, 2025, up from $706,377 as of June 30, 2025, indicating a growth of 0.12%[39]. - Tangible stockholders' common equity reached $710,372 thousand, reflecting a slight increase from $705,437 thousand in the prior quarter[65]. - The tangible stockholders' common equity to tangible assets ratio was 8.01%, slightly down from 8.04% in the previous quarter[65]. - The company continues to maintain a strong balance sheet with stable growth in equity and assets[65].

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) The registrant is FLUSHING FINANCIAL CORPORATION, filing for the quarterly period ended June 30, 2025 - The registrant is FLUSHING FINANCIAL CORPORATION, filing for the quarterly period ended June 30, 2025[2](index=2&type=chunk) - The company is an accelerated filer[4](index=4&type=chunk) - As of July 31, 2025, **33,778,438 shares of Common Stock** were outstanding[4](index=4&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) The report is structured into PART I – FINANCIAL INFORMATION and PART II – OTHER INFORMATION, detailing financial statements, management's discussion, and other disclosures - The report is structured into PART I – FINANCIAL INFORMATION and PART II – OTHER INFORMATION[6](index=6&type=chunk) - PART I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosures About Market Risk, and Controls and Procedures[6](index=6&type=chunk) - PART II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, Other Information, and Exhibits[6](index=6&type=chunk) [PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2025, and December 31, 2024 [ITEM 1. Financial Statements - (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20-%20(Unaudited)) This section presents the unaudited consolidated financial statements of Flushing Financial Corporation and its subsidiaries, including the Statements of Financial Condition, Operations, Comprehensive Income, Changes in Stockholders' Equity, Cash Flows, and accompanying notes, for the periods ended June 30, 2025, and December 31, 2024 [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets decreased by **$262.4 million** to **$8.78 billion**, primarily due to reductions in securities and loans held for sale, while total liabilities decreased by **$244.3 million** from reduced borrowed funds | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $8,776,524 | $9,038,972 | | Total Liabilities | $8,070,147 | $8,314,433 | | Total Stockholders' Equity | $706,377 | $724,539 | - Securities available for sale decreased by **$106.1 million** to **$1.39 billion** at June 30, 2025, from **$1.50 billion** at December 31, 2024[8](index=8&type=chunk) - Loans held for sale decreased from **$70.1 million** at December 31, 2024, to **zero** at June 30, 2025[8](index=8&type=chunk) - Total borrowed funds decreased by **$315.9 million** to **$600.2 million** at June 30, 2025, from **$916.1 million** at December 31, 2024[8](index=8&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Net income for the three months ended June 30, 2025, significantly increased to **$14.2 million**, but for the six months, it decreased to **$4.4 million** due to a goodwill impairment charge Net Income and EPS (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | $14,203 | $5,322 | 166.9% | | Basic earnings (loss) per common share | $0.41 | $0.18 | 127.8% | Net Income and EPS (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | $4,407 | $9,006 | -51.1% | | Basic earnings (loss) per common share | $0.12 | $0.30 | -60.0% | - Net interest income for the three months ended June 30, 2025, increased by **$10.4 million** to **$53.2 million**, up from **$42.8 million** in 2024[11](index=11&type=chunk) - Non-interest income for the three months ended June 30, 2025, increased by **$6.1 million** to **$10.3 million**, up from **$4.2 million** in 2024[11](index=11&type=chunk) - A goodwill impairment charge of **$17.6 million** was recorded for the six months ended June 30, 2025[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive net income for the three months ended June 30, 2025, was **$10.2 million**, but for the six months, the company reported a comprehensive net loss of **$4.0 million** due to unrealized losses on cash flow hedges Comprehensive Net Income (Loss) | Period | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Three months ended June 30 | $10,244 | $1,822 | | Six months ended June 30 | $(3,991) | $8,341 | - Net unrealized losses on cash flow hedges, net of taxes, amounted to **$(11.2 million)** for the six months ended June 30, 2025[13](index=13&type=chunk) - Change in net unrealized gains on securities available for sale, net of taxes, was **$3.0 million** for the six months ended June 30, 2025[13](index=13&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity decreased by **$18.2 million** to **$706.4 million** at June 30, 2025, primarily due to dividend payments and other comprehensive losses Stockholders' Equity | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $706,377 | | December 31, 2024 | $724,539 | - Dividends on common stock totaled **$(7.6 million)** for the three months ended June 30, 2025, and **$(15.1 million)** for the six months ended June 30, 2025[15](index=15&type=chunk)[19](index=19&type=chunk) - Other comprehensive income (loss) for the six months ended June 30, 2025, was **$(8.4 million)**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, operating activities generated **$32.6 million**, investing activities provided **$185.7 million**, while financing activities used **$220.8 million**, resulting in a net decrease of **$2.5 million** in cash Net Cash Flow by Activity (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Operating Activities | $32,629 | $3,341 | | Investing Activities | $185,718 | $(569,305) | | Financing Activities | $(220,798) | $550,720 | - Net decrease in cash and cash equivalents was **$2.5 million** for the six months ended June 30, 2025[19](index=19&type=chunk) - Cash, cash equivalents, and restricted cash at June 30, 2025, totaled **$150.1 million**[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, financial instrument valuations, loan portfolio, regulatory capital, and other significant financial information [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC regulations for interim financial statements, including Flushing Financial Corporation and its subsidiaries - The Company's primary business is the operation of its wholly owned subsidiary, Flushing Bank[21](index=21&type=chunk) - Consolidated entities include Flushing Financial Corporation, Flushing Bank, Flushing Service Corporation, and FSB Properties Inc[22](index=22&type=chunk) - Statements are prepared in conformity with GAAP and SEC Form 10-Q instructions, with condensed or omitted information[23](index=23&type=chunk)[24](index=24&type=chunk) [Note 2. Use of Estimates](index=11&type=section&id=Note%202.%20Use%20of%20Estimates) Management makes estimates for the allowance for credit losses, deferred tax assets, and fair value of financial instruments, with goodwill impairment being a significant estimate in prior periods - Key estimates include the allowance for credit losses, valuation allowance of deferred tax assets, and fair value of financial instruments[26](index=26&type=chunk) - Goodwill impairment was a significant estimate for reporting periods preceding March 31, 2025[26](index=26&type=chunk) [Note 3. Earnings Per Share](index=12&type=section&id=Note%203.%20Earnings%20Per%20Share) Basic and diluted EPS for the three months ended June 30, 2025, was **$0.41**, up from **$0.18** in 2024, but for the six months, it was **$0.12**, down from **$0.30** in 2024 Basic and Diluted EPS (Three Months Ended June 30) | Year | EPS | | :--- | :--- | | 2025 | $0.41 | | 2024 | $0.18 | Basic and Diluted EPS (Six Months Ended June 30) | Year | EPS | | :--- | :--- | | 2025 | $0.12 | | 2024 | $0.30 | Dividend Payout Ratio | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | 53.7% | 122.2% | | Six months ended June 30 | 366.7% | 146.7% | [Note 4. Securities](index=12&type=section&id=Note%204.%20Securities) The securities portfolio totaled **$1.39 billion** at June 30, 2025, with gross unrealized losses of **$7.6 million** and an allowance for credit losses of **$3.1 million** for one municipal security Securities Held-to-Maturity (June 30, 2025) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Municipals | $43,360 | $37,940 | | FNMA | $7,826 | $7,146 | | **Total** | **$51,186** | **$45,086** | Securities Available for Sale (June 30, 2025) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Total other securities | $570,937 | $563,031 | | Total mortgage-backed securities | $825,880 | $828,756 | | **Total** | **$1,396,817** | **$1,391,787** | - An allowance for credit losses of **$3.1 million** was recorded for one municipal security at June 30, 2025, due to an identified credit loss[35](index=35&type=chunk)[42](index=42&type=chunk) - The Company holds **$10 million** of corporate debt from a New York-based bank holding company rated B1, which is on a watch list but not considered credit-related[36](index=36&type=chunk) [Note 5. Loans](index=18&type=section&id=Note%205.%20Loans) The loan portfolio, net of fees and costs, totaled **$6.71 billion** at June 30, 2025, with ACL increasing to **$41.2 million** and non-accrual loans significantly rising to **$51.0 million** Loan Composition (June 30, 2025) | Loan Type | Amount (in thousands) | | :--- | :--- | | Multi-family residential | $2,487,610 | | Commercial real estate | $1,987,523 | | Commercial business and other | $1,407,792 | | One-to-four family — mixed-use property | $493,846 | | One-to-four family — residential | $258,608 | | Construction | $46,798 | | Small Business Administration | $15,473 | | **Total loans, net of fees and costs** | **$6,709,601** | Allowance for Credit Losses (ACL) - Loans | Date | Amount (in thousands) | % of Gross Loans | % of Non-Performing Loans | | :--- | :--- | :--- | :--- | | June 30, 2025 | $41,247 | 0.62% | 83.8% | | December 31, 2024 | $40,152 | 0.60% | 120.5% | - Non-accrual loans increased from **$34.0 million** at December 31, 2024, to **$51.0 million** at June 30, 2025[55](index=55&type=chunk) - A provision for credit losses on loans of **$3.8 million** was recorded for the three months ended June 30, 2025, primarily due to increased reserves on Business Banking loans and charge-offs on Multi-Family residential loans[50](index=50&type=chunk) [Note 6. Loans held for sale](index=29&type=section&id=Note%206.%20Loans%20held%20for%20sale) Loans held for sale decreased to **zero** at June 30, 2025, from **$70.1 million** at December 31, 2024, largely due to reclassification and a **$2.6 million** net gain on sale - Loans held for sale decreased from **$70.1 million** at December 31, 2024, to **zero** at June 30, 2025[72](index=72&type=chunk) - **$32.1 million** of loans classified as held for sale were transferred back to held for investment during the three months ended June 30, 2025[72](index=72&type=chunk) - A net gain on sale of **$2.6 million** was recorded from the reversal of a previously recorded valuation allowance upon the reclassification of loans[72](index=72&type=chunk)[77](index=77&type=chunk) [Note 7. Leases](index=31&type=section&id=Note%207.%20Leases) The Company has 32 operating leases, with ROU assets of **$49.8 million** and liabilities of **$50.1 million** at June 30, 2025, and total lease cost of **$2.7 million** for the three months ended June 30, 2025 Lease Information (June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Operating lease ROU assets | $49,759 | | Operating lease liabilities | $50,102 | | Weighted-average remaining lease term | 7.0 years | | Weighted average discount rate | 4.2% | Total Lease Cost | Period | Amount (in thousands) | | :--- | :--- | | Three months ended June 30, 2025 | $2,683 | | Six months ended June 30, 2025 | $5,375 | - The Company extended the term of its corporate headquarters operating lease by **3 years** during the three months ended June 30, 2025[79](index=79&type=chunk) [Note 8. Stock-Based Compensation](index=34&type=section&id=Note%208.%20Stock-Based%20Compensation) The 2024 Omnibus Incentive Plan authorizes **974,000 shares** for equity awards, with stock-based compensation costs of **$0.8 million** for the three months ended June 30, 2025, and **$6.5 million** in unrecognized compensation cost - The 2024 Omnibus Incentive Plan authorizes the issuance of up to **974,000 shares** for stock options, stock appreciation rights, restricted stock awards, RSUs, PRSUs, and other stock-based awards[86](index=86&type=chunk) Stock-Based Compensation Costs (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $800 | $300 | | Six months ended June 30 | $1,300 | $1,300 | - As of June 30, 2025, there was **$6.5 million** of total unrecognized compensation cost related to RSU and PRSU awards, expected to be recognized over a weighted-average period of **2.1 years**[91](index=91&type=chunk) [Note 9. Pension and Other Postretirement Benefit Plans](index=37&type=section&id=Note%209.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) For the three months ended June 30, 2025, net employee pension benefit was **$(74) thousand**, net outside director pension benefit was **$(11) thousand**, and net other postretirement expense was **$105 thousand** Net Expense for Pension and Other Postretirement Benefit Plans (Three Months Ended June 30, 2025, in thousands) | Plan | Net Benefit (Expense) | | :--- | :--- | | Employee Pension Plan | $(74) | | Outside Director Pension Plan | $(11) | | Other Postretirement Benefit Plans | $105 | - The Company expects to contribute **$0.1 million** to the outside director pension plan and **$0.3 million** to other postretirement benefit plans during 2025, with no expected contribution to the employee pension plan[98](index=98&type=chunk) [Note 10. Fair Value of Financial Instruments](index=38&type=section&id=Note%2010.%20Fair%20Value%20of%20Financial%20Instruments) The Company measures certain financial assets and liabilities at fair value, with a net gain of **$1.7 million** from fair value adjustments for the three months ended June 30, 2025, and impaired loans totaling **$26.3 million** Net Gain (Loss) from Fair Value Adjustments (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $1,656 | $57 | | Six months ended June 30 | $1,504 | $(777) | - Fair value measurements are categorized into Level 1 (quoted market prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - Impaired loans carried at fair value on a non-recurring basis totaled **$26.3 million** at June 30, 2025[115](index=115&type=chunk) - Junior subordinated debentures, valued under Level 3, had a fair value of **$47.6 million** at June 30, 2025, with effective yields as significant unobservable inputs[114](index=114&type=chunk) [Note 11. Derivative Financial Instruments](index=46&type=section&id=Note%2011.%20Derivative%20Financial%20Instruments) The Company uses interest rate swaps and floor options to manage interest rate risk, with a total notional value of approximately **$2.6 billion** at June 30, 2025, and a **$4.8 million** effect on net income for the three months ended June 30, 2025 - Derivative financial instruments include interest rate swaps and interest rate floor options[124](index=124&type=chunk) - Derivatives are used to mitigate exposure to rising interest rates on fixed-rate loans, facilitate customer risk management, mitigate exposure to rising rates on short-term advances/brokered deposits, and mitigate exposure to decreasing rates on adjustable-rate loans[124](index=124&type=chunk) Notional Amount of Derivatives (June 30, 2025, in thousands) | Category | Notional Amount (Assets) | Notional Amount (Liabilities) | | :--- | :--- | :--- | | Cash flow hedges | $305,000 | $520,750 | | Fair value hedges | $437,002 | $275,000 | | Non hedge | $523,193 | $523,193 | | **Total** | **$1,265,195** | **$1,318,943** | Effect of Derivative Instruments on Net Income (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $4,824 | $11,284 | | Six months ended June 30 | $11,301 | $22,682 | [Note 12. Accumulated Other Comprehensive Income (Loss)](index=51&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) AOCI was **$(1.3 million)** at June 30, 2025, with a net current period other comprehensive loss of **$(8.4 million)** for the six months, primarily due to unrealized losses on cash flow hedges - The ending balance of Accumulated Other Comprehensive Income (Loss), net of tax, was **$(1.3 million)** at June 30, 2025[138](index=138&type=chunk)[140](index=140&type=chunk) - Net current period other comprehensive income (loss), net of tax, for the six months ended June 30, 2025, was **$(8.4 million)**[140](index=140&type=chunk) - Unrealized losses on cash flow hedges (net of tax) were **$(11.2 million)** for the six months ended June 30, 2025[140](index=140&type=chunk) - Unrealized gains on available for sale securities (net of tax) were **$3.0 million** for the six months ended June 30, 2025[140](index=140&type=chunk) [Note 13. Regulatory Capital](index=57&type=section&id=Note%2013.%20Regulatory%20Capital) Both Flushing Bank and Flushing Financial Corporation remain 'well-capitalized' as of June 30, 2025, exceeding all regulatory capital requirements, with the Capital Conservation Buffer for the Bank at **5.74%** and the Company at **5.10%** - The Bank and Company are categorized as 'well-capitalized' under prompt corrective action regulations[145](index=145&type=chunk)[149](index=149&type=chunk) Bank Capital Levels (June 30, 2025) | Capital Ratio | Capital Level | Requirement to be Well-Capitalized | Excess | | :--- | :--- | :--- | :--- | | Tier I (leverage) capital | 9.82% | 5.00% | 4.82% | | Common Equity Tier I risk-based capital | 13.11% | 6.50% | 6.61% | | Tier I risk-based capital | 13.11% | 8.00% | 5.11% | | Total risk-based capital | 13.74% | 10.00% | 3.74% | Company Capital Levels (June 30, 2025) | Capital Ratio | Capital Level | Requirement to be Well-Capitalized | Excess | | :--- | :--- | :--- | :--- | | Tier I (leverage) capital | 8.31% | 5.00% | 3.31% | | Common Equity Tier I risk-based capital | 10.41% | 6.50% | 3.91% | | Tier I risk-based capital | 11.10% | 8.00% | 3.10% | | Total risk-based capital | 14.57% | 10.00% | 4.57% | Capital Conservation Buffer (CCB) | Entity | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Bank | 5.74% | 5.11% | | Company | 5.10% | 4.82% | [Note 14. Segment Reporting](index=58&type=section&id=Note%2014.%20Segment%20Reporting) The Company operates as a single reportable segment, a community bank, with performance evaluated based on net income, return on assets, and return on equity - The Company operates as a single reportable segment: a community bank[151](index=151&type=chunk) - The CODM uses net income (loss), return on average assets, and return on average equity to evaluate performance[152](index=152&type=chunk) Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $14,203 thousand | $5,322 thousand | | Diluted earnings (loss) per common share | $0.41 | $0.18 | | Return on average assets | 0.64% | 0.24% | | Return on average equity | 8.00% | 3.19% | [Note 15. New Authoritative Accounting Pronouncements](index=59&type=section&id=Note%2015.%20New%20Authoritative%20Accounting%20Pronouncements) The Company adopted ASU No. 2023-09 on January 1, 2025, impacting disclosures, and is evaluating ASU No. 2024-03, effective for annual periods beginning after December 15, 2026 - ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' was adopted on January 1, 2025, affecting disclosures only[156](index=156&type=chunk) - ASU No. 2024-03, 'Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures,' is pending adoption, effective for annual periods beginning after December 15, 2026[157](index=157&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial performance and condition, highlighting increased net income for the three months ended June 30, 2025, but a decrease for the six-month period due to a goodwill impairment charge [Executive Summary](index=61&type=section&id=Executive%20Summary) Flushing Financial Corporation reported a substantial increase in net income to **$14.2 million** for the three months ended June 30, 2025, driven by a **49 basis point** increase in net interest margin to **2.54%**, maintaining a well-capitalized status - Net income for the three months ended June 30, 2025, was **$14.2 million**, an increase of **166.9%** from **$5.3 million** in the prior year[167](index=167&type=chunk) - The net interest margin increased **49 basis points** to **2.54%** for the three months ended June 30, 2025[168](index=168&type=chunk) - Approximately **90%** of the loan portfolio is collateralized by real estate, with an average loan to value of less than **35%** at origination[169](index=169&type=chunk) Asset Quality Ratios (June 30, 2025) | Metric | Ratio | | :--- | :--- | | Allowance for credit losses (ACL) to gross loans | 0.62% | | ACL to non-performing loans | 83.8% | | Non-performing assets to total assets | 0.75% | [Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024](index=64&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) Net income increased by **166.9%** to **$14.2 million**, with diluted EPS rising to **$0.41**, driven by a **24.4%** increase in net interest income and a **143.8%** increase in non-interest income Operating Data Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net interest income (loss) | $53,209 | $42,776 | | Provision (benefit) for credit losses | $4,194 | $809 | | Non-interest income (loss) | $10,277 | $4,216 | | Net income (loss) | $14,203 | $5,322 | | Diluted earnings (loss) per common share | $0.41 | $0.18 | - Interest and dividend income increased by **3.7%** to **$117.4 million**, with the yield on interest-earning assets rising **16 basis points** to **5.59%**[173](index=173&type=chunk) - Interest expense decreased by **8.9%** to **$64.2 million**, as the average cost of interest-bearing liabilities declined **37 basis points** to **3.58%**[174](index=174&type=chunk) - The increase in net gain on sale of loans was driven by the reversal of a previously recorded valuation allowance upon the reclassification of loans held for sale to loans held for investment[177](index=177&type=chunk) [Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024](index=67&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Net income decreased by **51.1%** to **$4.4 million**, primarily due to a **$17.6 million** non-cash goodwill impairment charge, despite a **24.7%** increase in net interest income Operating Data Highlights (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net interest income (loss) | $106,198 | $85,173 | | Provision (benefit) for credit losses | $8,512 | $1,401 | | Non-interest income (loss) | $15,351 | $7,300 | | Net income (loss) | $4,407 | $9,006 | | Diluted earnings (loss) per common share | $0.12 | $0.30 | - The primary reason for the decrease in net income was a **$17.6 million** non-cash, non-tax deductible goodwill impairment charge[182](index=182&type=chunk)[188](index=188&type=chunk) - Interest and dividend income increased by **5.0%** to **$233.9 million**, with the yield on interest-earning assets rising **18 basis points** to **5.55%**[183](index=183&type=chunk) - Interest expense decreased by **7.1%** to **$127.7 million**, due to a **35 basis point** decrease in the average cost of interest-bearing liabilities to **3.54%**[184](index=184&type=chunk) - The effective tax rate for the six months ended June 30, 2025, was **66.1%**, up from **25.8%** in 2024, primarily due to the non-tax deductible goodwill impairment and income tax audit settlements[190](index=190&type=chunk) [Financial Condition](index=70&type=section&id=Financial%20Condition) Total assets decreased by **2.9%** to **$8.78 billion**, while loan originations increased by **30.2%**, and non-performing assets rose by **28.9%** to **$66.1 million** - Total assets at June 30, 2025, were **$8.78 billion**, a decrease of **$262.4 million (2.9%)** from December 31, 2024[192](index=192&type=chunk) - Available for sale securities decreased by **$106.1 million (7.1%)** to **$1.39 billion**[192](index=192&type=chunk) - Loan originations and purchases for the six months ended June 30, 2025, were **$333.3 million**, an increase of **30.2%** from **$255.9 million** in 2024[192](index=192&type=chunk)[193](index=193&type=chunk) - Non-performing assets totaled **$66.1 million** at June 30, 2025, an increase of **$14.8 million (28.9%)** from December 31, 2024[196](index=196&type=chunk) - The ratio of ACL – loans to total non-performing loans was **83.8%** at June 30, 2025, compared to **120.5%** at December 31, 2024[196](index=196&type=chunk) [Liabilities](index=71&type=section&id=Liabilities) Total liabilities decreased by **2.9%** to **$8.07 billion**, with deposits increasing by **1.3%** to **$7.22 billion**, while borrowed funds significantly decreased by **34.5%** - Total liabilities were **$8.07 billion** at June 30, 2025, a decrease of **$244.3 million (2.9%)** from December 31, 2024[199](index=199&type=chunk) - Due to depositors increased by **$95.1 million (1.3%)** to **$7.22 billion**, primarily from a **$320.1 million** increase in NOW accounts[199](index=199&type=chunk) - Borrowed funds decreased by **$315.9 million (34.5%)** during the six months ended June 30, 2025[199](index=199&type=chunk) - Uninsured deposits totaled **$2.5 billion (34.7% of deposits)**, with **$1.2 billion** being uninsured and uncollateralized at June 30, 2025[199](index=199&type=chunk) - Brokered deposits decreased by **$129.7 million (9.8%)** to **$1.19 billion** at June 30, 2025[200](index=200&type=chunk) [Equity](index=72&type=section&id=Equity) Total stockholders' equity decreased by **2.5%** to **$706.4 million** at June 30, 2025, due to **$15.1 million** in dividends and an **$8.4 million** decrease in other comprehensive income, with book value per common share decreasing to **$20.91** - Total stockholders' equity was **$706.4 million** at June 30, 2025, a decrease of **$18.2 million (2.5%)** from December 31, 2024[201](index=201&type=chunk) - Dividends paid on common stock totaled **$15.1 million ($0.44 per common share)** for the six months ended June 30, 2025[201](index=201&type=chunk) - Book value per common share was **$20.91** at June 30, 2025, down from **$21.53** at December 31, 2024[201](index=201&type=chunk) [Liquidity](index=72&type=section&id=Liquidity) The Company maintains strong liquidity with **$3.6 billion** in combined available liquidity at June 30, 2025, from internal and external sources, and cash and cash equivalents totaling **$150.1 million** - Total available liquidity was **$3.59 billion** at June 30, 2025[203](index=203&type=chunk) Available Liquidity by Source (June 30, 2025, in millions) | Source | Net Availability | | :--- | :--- | | Unencumbered Securities | $767.4 | | Federal Home Loan Bank | $679.8 | | Federal Reserve Bank | $1,616.2 | | Other Banks | $457.0 | - Cash and cash equivalents totaled **$150.1 million** at June 30, 2025, with **$20.6 million** being restricted cash[203](index=203&type=chunk) [Interest Rate Risk](index=73&type=section&id=Interest%20Rate%20Risk) The Company manages interest rate risk through ALCO and Board ALCO, remaining within Board-set guidelines for net portfolio value and net interest income changes under various rate shock scenarios, supported by a **$2.6 billion** derivative portfolio - Interest rate risk is assessed and managed by the Asset/Liability Management Committee (ALCO) and the Investment Committee of the Board of Directors (Board ALCO)[205](index=205&type=chunk) Projected Percentage Change in Net Portfolio Value (June 30, 2025) | Change in Interest Rate | Projected % Change | | :--- | :--- | | -200 Basis points | 6.0% | | -100 Basis points | 2.7% | | +100 Basis points | (5.4)% | | +200 Basis points | (11.5)% | Projected Percentage Change in Net Interest Income (June 30, 2025) | Change in Interest Rate | Projected % Change | | :--- | :--- | | -200 Basis points | -% | | -100 Basis points | (0.4)% | | +100 Basis points | (3.8)% | | +200 Basis points | (8.5)% | - At June 30, 2025, the Company had a derivative portfolio with a notional value totaling **$2.6 billion**, designed to provide protection against rising interest rates[217](index=217&type=chunk) [Average Balances](index=77&type=section&id=Average%20Balances) For the three months ended June 30, 2025, average interest-earning assets were **$8.4 billion** with a yield of **5.59%**, resulting in **$53.3 million** net interest income and a **2.54%** net interest margin Average Balances and Yields/Costs (Three Months Ended June 30, 2025, in thousands) | Metric | Average Balance | Interest/Cost | Yield/Cost | | :--- | :--- | :--- | :--- | | Total interest-earning assets | $8,402,582 | $117,498 | 5.59% | | Total interest-bearing liabilities | $7,176,399 | $64,193 | 3.58% | | Net interest income | - | $53,305 | - | | Net interest margin | $1,226,183 | - | 2.54% | Average Balances and Yields/Costs (Six Months Ended June 30, 2025, in thousands) | Metric | Average Balance | Interest/Cost | Yield/Cost | | :--- | :--- | :--- | :--- | | Total interest-earning assets | $8,435,565 | $234,130 | 5.55% | | Total interest-bearing liabilities | $7,218,514 | $127,740 | 3.54% | | Net interest income (tax equivalent) | - | $106,390 | - | | Net interest margin (tax equivalent) | $1,217,051 | - | 2.52% | [Loans Held for Investment](index=79&type=section&id=Loans%20Held%20for%20Investment) For the six months ended June 30, 2025, mortgage loan originations increased to **$121.3 million**, commercial business loan originations reached **$134.6 million**, with total mortgage loans held for investment at **$5.27 billion** Mortgage Loans Held for Investment Activity (Six Months Ended June 30, 2025, in thousands) | Activity | Amount | | :--- | :--- | | At beginning of period | $5,316,249 | | Mortgage loans originated | $121,272 | | Mortgage loans purchased | $35,148 | | Principal reductions | $(212,866) | | Mortgage loan sales | $(18,374) | | **At end of period** | **$5,274,385** | Commercial Business Loans Held for Investment Activity (Six Months Ended June 30, 2025, in thousands) | Activity | Amount | | :--- | :--- | | At beginning of period | $1,421,527 | | Commercial business and other loans originated | $134,615 | | Commercial business loans purchased | $42,217 | | Principal reductions | $(163,190) | | **At end of period** | **$1,423,265** | [Non-Performing Assets](index=80&type=section&id=Non-Performing%20Assets) Total non-performing assets increased by **28.9%** to **$66.1 million** at June 30, 2025, primarily due to an increase in non-accrual mortgage and commercial real estate loans, resulting in a **0.75%** non-performing assets to total assets ratio Non-Performing Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total non-accrual loans | $49,247 | $33,318 | | Available for sale securities | $16,878 | $18,000 | | **Total non-performing assets** | **$66,125** | **$51,318** | - Non-performing loans to gross loans increased to **0.74%** at June 30, 2025, from **0.49%** at December 31, 2024[225](index=225&type=chunk) - Non-performing assets to total assets increased to **0.75%** at June 30, 2025, from **0.57%** at December 31, 2024[225](index=225&type=chunk) [Criticized and Classified Assets](index=80&type=section&id=Criticized%20and%20Classified%20Assets) The amortized cost of Criticized and Classified assets decreased slightly by **$1.3 million** to **$90.6 million** at June 30, 2025, with loans designated based on credit quality assessments - The amortized cost of Criticized and Classified assets was **$90.6 million** at June 30, 2025, a decrease of **$1.3 million** from **$91.9 million** at December 31, 2024[226](index=226&type=chunk) - Loans are designated as 'Special Mention,' 'Substandard,' 'Doubtful,' or 'Loss' based on credit risk[61](index=61&type=chunk) - Consumer mortgage loans in formal foreclosure proceedings totaled **$2.5 million** at June 30, 2025[227](index=227&type=chunk) [Allowance for Credit Losses](index=81&type=section&id=Allowance%20for%20Credit%20Losses) The total Allowance for Credit Losses (ACL) increased to **$45.6 million** at June 30, 2025, driven by an **$8.1 million** provision for credit losses on loans, partially offset by **$7.0 million** in net charge-offs Allowance for Credit Losses (Six Months Ended June 30, 2025, in thousands) | Category | Amount | | :--- | :--- | | Balance at beginning of period | $40,152 | | Loans- provision (benefit) | $8,071 | | Loans- charge-off (net of recoveries) | $(6,976) | | **Allowance for credit losses - loans** | **$41,247** | | **Total Allowance for credit losses** | **$45,644** | - The ratio of ACL - loans to gross loans was **0.62%** at June 30, 2025[229](index=229&type=chunk) - The ratio of ACL - loans to non-accrual loans was **83.76%** at June 30, 2025[229](index=229&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk' for detailed market risk disclosures - For market risk disclosures, refer to the 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk' section[230](index=230&type=chunk) [ITEM 4. Controls and Procedures](index=83&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the period - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[230](index=230&type=chunk) - No material changes in internal control over financial reporting occurred during the period[230](index=230&type=chunk) [PART II — OTHER INFORMATION](index=84&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults, mine safety disclosures, other information, and exhibits [ITEM 1. Legal Proceedings](index=84&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is a defendant in various lawsuits, but management believes these will not have a material adverse effect on its financial condition or results - The Company is a defendant in various lawsuits[232](index=232&type=chunk) - Management believes the resolution of these matters will not result in any material adverse effect on the Company's financial condition, results of operations, and cash flows[232](index=232&type=chunk) [ITEM 1A. Risk Factors](index=84&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[233](index=233&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=84&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not repurchase any common stock during the three months ended June 30, 2025, with **807,964 shares** remaining authorized for repurchase under programs with no expiration - The Company did not repurchase any shares of common stock during the three months ended June 30, 2025[234](index=234&type=chunk) - As of June 30, 2025, **807,964 shares** remained to be repurchased under currently authorized stock repurchase programs[234](index=234&type=chunk) - The stock repurchase authorizations have no expiration or maximum dollar amount[234](index=234&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=84&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[235](index=235&type=chunk) [ITEM 4. Mine Safety Disclosures](index=84&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[236](index=236&type=chunk) [ITEM 5. Other Information](index=84&type=section&id=ITEM%205.%20Other%20Information) No other information is reported under this item - None[237](index=237&type=chunk) [ITEM 6. Exhibits](index=85&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, indentures, new severance policies, and Sarbanes-Oxley Act certifications - Exhibits include Certificate of Incorporation, Amended and Restated By-Laws, and Indentures[239](index=239&type=chunk)[242](index=242&type=chunk) - New policies filed include the Flushing Bank Specified Officer Change in Control Severance Policy and the Employee Severance Compensation Plan for Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents, both effective July 2025[239](index=239&type=chunk)[240](index=240&type=chunk)[242](index=242&type=chunk)[244](index=244&type=chunk) - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 by the CEO and CFO are included[239](index=239&type=chunk)[242](index=242&type=chunk) [SIGNATURES](index=89&type=section&id=SIGNATURES) The report was signed by John R. Buran, President and CEO, and Susan K. Cullen, Senior EVP, Treasurer, and CFO, on August 7, 2025 - The report is signed by John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer[247](index=247&type=chunk) - The report was dated August 7, 2025[247](index=247&type=chunk)

Core Financial Performance - The company reported a GAAP EPS of $0.41 for Q2 2025, marking a significant increase of 12,878% from Q2 2024, primarily due to fair value adjustments on debt and the reversal of a valuation allowance [2][11][18] - Core EPS also rose to $0.32, reflecting broad-based profitability improvements [3][11] - The GAAP net interest margin reached 2.54%, with a core net interest margin of 2.52%, both showing a quarter-over-quarter increase of 3 basis points [3][11][18] Deposit Growth and Composition - Average total deposits increased to $7.6 billion, up 6% year-over-year and 1% quarter-over-quarter [4][11][19] - Non-interest-bearing deposits grew to $875 million, representing a 6% year-over-year and 2% quarter-over-quarter increase [4][19] - The deposit mix remained stable, with uninsured and uncollateralized deposits accounting for only 17% of total deposits, reducing funding risk [8][36] Credit Quality and Risk Management - Pre-provision, pretax net revenue reached $23.1 million, the highest since 2022, with core PPNR at $19 million [5][11][20] - Net charge-offs were stable at 15 basis points, and non-performing assets remained at 75 basis points quarter-over-quarter [5][20] - Criticized and classified loans improved to 108 basis points from 133 basis points in the previous quarter, indicating enhanced credit quality [5][11][21] Loan Repricing and Future Income - The company identified $373 million of loans scheduled to reprice at rates 136 basis points higher by year-end 2025, with $2.1 billion set to reprice through 2027, providing a projected net interest income tailwind [6][27][39] - Multifamily loan retention was strong at 92%, with an average rate increase of 154 basis points [6][29] Strategic Initiatives and Market Focus - The company is focusing on core deposit growth in the Asian American community, with deposits in this segment reaching $1.4 billion and a compound annual growth rate of 12.4% since Q2 2022 [9][38] - Plans for branch expansion include a new location in Jackson Heights and a second branch in Chinatown [9][51] Expense Management and Guidance - The expected core non-interest expense growth for 2025 has been lowered to 4.5%-5.5% over a base of $159.6 million, attributed to reductions in incentive accruals and strict cost control [8][40][50] - The projected effective tax rate for the remainder of 2025 is between 24.5% and 26.5% [8][40]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.41 and core earnings per share of $0.32, representing an increase of 12878% year over year [5] - GAAP net interest margin expanded by three basis points quarter over quarter to 2.54%, while core net interest margin also increased by three basis points to 2.52% [6] - Average total deposits increased by 6% year over year and 1% quarter over quarter to $7.6 billion [6] - Pre-provision pre-tax net revenue reached $23.1 million, the highest level since 2022 [6] - Tangible common equity grew by 25 basis points to 8.04% [8] Business Line Data and Key Metrics Changes - Core net interest income increased by $10.5 million year over year, driven by loan yields increasing by seven basis points [10] - Non-interest bearing deposits grew by 6% year over year and 2% quarter over quarter [12] - New checking account openings increased by 21% year over year and 8% quarter over quarter, indicating strong customer acquisition [12] Market Data and Key Metrics Changes - The bank's commercial real estate concentration decreased to under 500% for the first time since Q3 2023 [7] - Non-performing loans in the multifamily portfolio halved to 50 basis points, down from 101 basis points in the previous quarter [19] - Criticized and classified loans in the multifamily segment improved to 73 basis points from 116 basis points [19] Company Strategy and Development Direction - The company focuses on improving profitability, maintaining credit discipline, and preserving strong liquidity and capital [8] - The asset repricing strategy is expected to drive net interest margin expansion, with real estate loans projected to reprice approximately 160 basis points higher through 2027 [9] - The company is committed to serving the Asian American communities, with deposits in this market growing to $1.4 billion, reflecting a 12.4% compound annual growth rate since Q2 2022 [26] Management's Comments on Operating Environment and Future Outlook - Management expects total assets to remain stable, with loan growth being market-dependent [27] - The company anticipates some seasonal deposit outflows in Q3 but expects recovery in Q4 [27] - The effective tax rate is expected to be lowered to a range of 24.5% to 26.5% for the remainder of 2025 [28] Other Important Information - The company maintains a strong liquidity position with approximately $4 billion of undrawn lines and resources at quarter end [25] - The reliance on wholesale funding is limited, with uninsured and uncollateralized deposits representing only 17% of total deposits [25] Q&A Session Summary Question: What caused the $400 million decline in deposits? - Management indicated that the decline was mostly seasonal, related to government deposits moving out, and expected a recovery later in the year [34][35] Question: What would happen to margins if the Fed cuts rates? - A return to a more normal yield curve would be positive for the company, potentially leading to a couple of basis points improvement in margins [38][39] Question: Will there be buybacks in the second half of the year? - Management stated that they are focused on building capital stronger before considering buybacks, prioritizing profitable growth and dividends [44] Question: What drove the decrease in expense outlook? - The decrease was attributed to managing expenses tightly and some accruals related to incentive compensation [50] Question: What is the outlook for non-CD deposit repricing? - Management noted limited opportunities to reduce funding costs until the Fed makes a move, with most support for net interest margin expected from asset-side loan repricing [56]

Financial Performance - GAAP NIM increased 3 bps QoQ to 2.54%[6] - Core NIM expands 3 bps QoQ to 2.52%[6] - Average total deposits increased 5.7% YoY and 0.6% QoQ to $7.6 billion[6] - Core NII FTE increased by $10.5 million YoY[11] - PPNR of $23.1 million in 2Q25 at highest level since 3Q22[6] Asset Quality - Net charge-offs totaled 15 bps for 2Q25, less than 1 bp of net recoveries in 2Q24, and 27 bps in 1Q25[6] - NPAs to assets of 75 bps at 2Q25 compared to 61 bps at 2Q24 and 71 bps at 1Q25[6] - Criticized and Classified loan to total loans of 108 bps, down from 113 in 2Q24 and 133 in 1Q25[6] Capital and Liquidity - Tangible common equity ratio of 8.04%, up 25 bps QoQ[6] - Liquidity remains strong with $3.6 billion of undrawn lines and resources at quarter end[6] - Asian Communities – Total Loans $740.6 million and Deposits $1.36 billion[39] Loan Portfolio - Multifamily portfolio size is $2.5 billion with NPLs/Loans at 50 bps[29] - Investor CRE portfolio size is $2.0 billion with NPLs/Loans at 33 bps[33]