Flushing Financial (US:FFIC)2023-04-26 18:03Financial Data and Key Metrics Changes - The company reported a GAAP EPS of $0.17 and core EPS of $0.10 for Q1 2023, impacted by net interest margin compression and a charge-off of a previously identified credit [43][44] - Average total deposits increased by 2% during the quarter and 6% year-over-year, with a loan to deposit ratio decreasing to 102% from 107% [26][46] - The net interest margin (NIM) declined by 43 basis points to 2.7% during the quarter, with expectations of continued compression as long as the Fed raises rates [29][62] Business Line Data and Key Metrics Changes - The loan portfolio saw a 5% year-over-year increase but was down less than 1% quarter-over-quarter, with loan closings lower than recent run rates [27][46] - Core loan yields increased by 17 basis points during the quarter, with yields on loan closings exceeding those on satisfactions by 113 basis points [27][46] - Non-performing assets declined by 21%, and delinquencies decreased by 16 basis points during the quarter [46][50] Market Data and Key Metrics Changes - The company has $1.2 billion of deposits and $810 million of loans in Asian markets, representing 18% of total deposits with only 3% market share, indicating significant growth opportunities [23] - The digital banking platform continues to grow, with high growth rates in mobile deposit users and digital banking enrollment [24][46] Company Strategy and Development Direction - The company aims to move towards a more interest rate risk-neutral balance sheet, having achieved 40% of this goal [43][62] - Focus on risk-adjusted returns and profitability, with an emphasis on recession-proof industries and tightening discretionary expenses [43][44] - The company is expanding its client base and enhancing customer service to capitalize on market disruptions [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with current results but is optimistic about future profitability due to decisive actions taken [43][44] - The expectation is that the NIM will begin to expand once funding costs stabilize and loans continue to reprice higher [29][62] - The company remains comfortable with its low-risk loan portfolio, with over 88% secured by real estate and a debt service coverage ratio of 1.9 times [45][49] Other Important Information - The company has $3.7 billion of available liquidity, which is over three times the amount of uninsured and uncollateralized deposits [21][46] - The investment security portfolio is valued at $886 million, with 53% classified as floating rate [33] Q&A Session Summary Question: How much more in C&I loan participations do you have? - Management confirmed they re-underwrite loans to conservative standards before participation [1] Question: Is the target TCE ratio still around 8%? - Management indicated that buybacks may slow or cease as they are currently below that target [2][89] Question: Where do you think the margin bottoms out? - Management noted intense competition in the market but expects less intensity moving forward [3] Question: What specific areas are being looked at for credit quality? - Management is focused on recession-proof industries and maintaining strong standards in real estate [75] Question: What is the expected impact of the Fed's rate changes on NIM? - Management expects NIM to benefit from contractual repricing of the loan portfolio once the Fed pauses rate increases [98][100]