Flushing Financial (US:FFIC)2024-11-05 18:25PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited consolidated financial statements including balance sheets, income, comprehensive income, equity, and cash flows Consolidated Statements of Financial Condition As of September 30, 2024, total assets increased to $9.28 billion, liabilities to $8.61 billion, and stockholders' equity slightly decreased to $666.9 million Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and due from banks | $267,643 | $172,157 | | Securities available for sale | $1,614,249 | $874,753 | | Net loans | $6,777,986 | $6,866,789 | | Total Assets | $9,280,886 | $8,537,236 | | Liabilities & Equity | | | | Total Due to depositors | $7,499,023 | $6,764,879 | | Total borrowed funds | $846,123 | $841,281 | | Total Liabilities | $8,613,995 | $7,867,399 | | Total Stockholders' Equity | $666,891 | $669,837 | Consolidated Statements of Income Q3 2024 net income rose to $8.9 million, while nine-month net income decreased to $17.9 million due to higher expenses Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $45,603 | $44,427 | $130,776 | $133,067 | | Provision for credit losses | $1,727 | $596 | $3,128 | $9,520 | | Non-interest Income | $6,277 | $3,309 | $13,577 | $15,186 | | Non-interest Expense | $38,696 | $36,388 | $117,635 | $110,654 | | Net Income | $8,906 | $7,835 | $17,912 | $20,565 | | Diluted EPS | $0.30 | $0.26 | $0.60 | $0.69 | Consolidated Statements of Comprehensive Income Comprehensive net income for Q3 2024 was $7.4 million, influenced by unrealized gains/losses, while nine-month income was $15.8 million Comprehensive Income (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $8,906 | $7,835 | $17,912 | $20,565 | | Other comprehensive income (loss) | ($1,483) | ($4,912) | ($2,148) | ($4,443) | | Comprehensive Net Income | $7,423 | $2,923 | $15,764 | $16,122 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $666.9 million due to dividends paid, partially offset by net income - Total stockholders' equity decreased by $2.9 million during the first nine months of 2024, from $669.8 million to $666.9 million10 - Key activities impacting equity included net income of $17.9 million, dividends on common stock of $19.6 million, and a net other comprehensive loss of $2.1 million for the nine months ended September 30, 20241012 Consolidated Statements of Cash Flows Net cash provided by financing activities was $739.4 million, while investing activities used $652.7 million, resulting in a $95.5 million cash increase Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from Operating Activities | $8,744 | $11,330 | | Net cash from Investing Activities | ($652,676) | ($75,221) | | Net cash from Financing Activities | $739,418 | $113,063 | | Net increase in cash | $95,486 | $49,172 | Notes to Consolidated Financial Statements Provides detailed disclosures supporting financial statements, covering presentation, estimates, and specific financial instrument details Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and nine-month 2024 financial performance, covering income, expenses, asset quality, and interest rate risk Executive Summary Q3 2024 net income was $8.9 million, with net interest margin increasing to 2.10%, while asset quality remains solid - Q3 2024 net income was $8.9 million, or $0.30 per diluted share, a significant increase from $5.3 million in Q2 2024150 - The net interest margin for Q3 2024 increased by 5 basis points to 2.10% from the previous quarter151 - Asset quality remains solid, with non-performing assets at 0.59% of total assets and an ACL to non-performing loans of 117.7% at September 30, 2024152 - The company performed a qualitative assessment of goodwill at September 30, 2024, and concluded no impairment was indicated153 Comparison of Operating Results Q3 2024 net income increased to $8.9 million, while nine-month net income decreased to $17.9 million due to higher non-interest expense Q3 2024 vs Q3 2023 Performance (in millions) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $8.9 | $7.8 | +13.7% | | Diluted EPS | $0.30 | $0.26 | +15.4% | | Net Interest Income | $45.6 | $44.4 | +2.6% | | Non-Interest Income | $6.3 | $3.3 | +89.7% | Nine Months 2024 vs 2023 Performance (in millions) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $17.9 | $20.6 | -12.9% | | Diluted EPS | $0.60 | $0.69 | -13.0% | | Provision for Credit Losses | $3.1 | $9.5 | -67.2% | | Non-Interest Expense | $117.6 | $110.7 | +6.3% | Financial Condition Total assets grew to $9.3 billion, driven by available-for-sale securities, while liabilities increased due to deposits, and equity slightly decreased - Total assets increased by $743.7 million (8.7%) to $9.28 billion, primarily due to a $739.5 million increase in available-for-sale securities179 - Total liabilities grew by $746.6 million (9.5%) to $8.61 billion, mainly from a $734.1 million increase in deposits185 - Loan originations and purchases for the first nine months of 2024 were $473.0 million, a 17.6% decrease from the prior year, as the company focused on relationship-based lending179 - Uninsured and uncollateralized deposits totaled $1.1 billion, representing 15.0% of total deposits at September 30, 2024185 Interest Rate Risk The company manages interest rate risk using simulation models and a $2.7 billion derivative portfolio to mitigate exposure to rising rates Net Portfolio Value (NPV) Sensitivity at Sep 30, 2024 | Rate Shock | % Change in NPV | | :--- | :--- | | +200 bps | (9.0)% | | +100 bps | (4.9)% | | Base | - | | -100 bps | (2.6)% | | -200 bps | (3.3)% | Net Interest Income (NII) Sensitivity at Sep 30, 2024 (12-month) | Rate Shock | % Change in NII | | :--- | :--- | | +200 bps | (7.7)% | | +100 bps | (3.5)% | | Base | - | | -100 bps | (0.4)% | | -200 bps | (1.8)% | - The company had a derivative portfolio with a notional value of $2.7 billion at September 30, 2024, designed to protect against rising interest rates208 Average Balances and Net Interest Income Analysis The tax-equivalent net interest margin decreased to 2.10% in Q3 2024 and 2.07% for the nine-month period, as cost of liabilities outpaced asset yield growth Net Interest Margin Analysis (Tax-Equivalent) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Yield on Earning Assets | 5.63% | 5.19% | 5.46% | 4.88% | | Cost of Bearing Liabilities | 4.10% | 3.52% | 3.96% | 3.16% | | Net Interest Rate Spread | 1.53% | 1.67% | 1.50% | 1.72% | | Net Interest Margin | 2.10% | 2.22% | 2.07% | 2.22% | Loans The total loan portfolio slightly decreased during the period as principal reductions and sales exceeded new originations and purchases Loan Portfolio Activity - Nine Months Ended Sep 30 (in thousands) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Mortgage Loans | | | | Beginning Balance | $5,425,586 | $5,380,935 | | Originations & Purchases | $254,549 | $322,591 | | Reductions, Sales, etc. | ($280,691) | ($315,523) | | Ending Balance | $5,399,434 | $5,387,983 | | Commercial Business Loans | | | | Beginning Balance | $1,472,723 | $1,544,823 | | Originations & Purchases | $218,494 | $251,205 | | Reductions & Charge-offs | ($283,884) | ($286,357) | | Ending Balance | $1,407,333 | $1,509,671 | Non-Performing Assets Total non-performing assets increased to $54.9 million, representing 0.59% of total assets, driven by a rise in non-accrual loans Non-Performing Assets (in thousands) | Category | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total non-performing loans | $34,261 | $25,172 | | Other non-performing assets | $20,627 | $20,981 | | Total non-performing assets | $54,888 | $46,153 | | Non-performing assets to total assets | 0.59% | 0.54% | Criticized and Classified Assets The amortized cost of Criticized and Classified assets decreased to $90.6 million, including one substandard investment security - Criticized and Classified assets decreased by $8.5 million to $90.6 million at September 30, 2024217 Allowance for Credit Losses The Allowance for Credit Losses (ACL) for loans was $40.3 million, with a provision of $3.1 million and net charge-offs of $2.9 million for the nine-month period ACL Activity - Nine Months Ended Sep 30, 2024 (in thousands) | Component | Amount | | :--- | :--- | | Beginning Balance (Loans) | $40,161 | | Provision for credit losses | $3,129 | | Net charge-offs | ($2,948) | | Ending Balance (Loans) | $40,342 | Key ACL Ratios | Ratio | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | ACL - loans to gross loans | 0.59% | 0.57% | | ACL - loans to non-performing loans | 117.75% | 225.38% | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the 'Interest Rate Risk' subsection within Management's Discussion and Analysis for market risk disclosures - The company directs readers to the 'Interest Rate Risk' section in the MD&A for quantitative and qualitative disclosures about market risk223 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2024223 - No material changes were made to the company's internal control over financial reporting during the third quarter of 2024223 PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various lawsuits, but management does not expect a material adverse effect on its financial condition - The company is a defendant in various lawsuits but does not anticipate a material adverse effect on its financial condition or operations225 Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K were reported - No material changes to risk factors were reported since the last annual report226 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock during Q3 2024, with 807,964 shares remaining available for repurchase - No shares were repurchased during the three months ended September 30, 2024227 - As of September 30, 2024, 807,964 shares were still authorized for repurchase under the company's plans227 Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None228 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable228 Item 5. Other Information The company reported no other information for this item - None228 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required certifications - Lists exhibits including certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents230231