Flushing Financial (US:FFIC)2024-10-25 19:42Financial Data and Key Metrics Changes - The company recorded GAAP earnings per share of $0.30 and core earnings of $0.26, marking the best quarter in the past seven [5] - Net interest income increased by 6.6% quarter-over-quarter, with the net interest margin (NIM) increasing by five basis points [5][13] - The cost of deposits increased by 17 basis points in the quarter, but it is believed to have peaked in July [12][13] Business Line Data and Key Metrics Changes - The net interest margin compressed in July but expanded month-over-month in both August and September [6] - Non-performing assets to total assets stood at 59 basis points, with a low level of criticized classified loans at 100 basis points [6][9] - The average loan-to-value in the real estate portfolio is less than 36%, indicating a well-collateralized loan portfolio [6] Market Data and Key Metrics Changes - Average deposits increased by 9% year-over-year and 4% quarter-over-quarter [12] - The Asian markets account for about a third of the branches, with approximately $1.3 billion of deposits and $744 million of loans [17] - The company holds a 3% market share in a $40 billion market, indicating substantial room for growth [17] Company Strategy and Development Direction - The company aims to increase the net interest margin and reduce volatility, maintain credit discipline, preserve strong liquidity and capital, and bend the expense curve [5][6][20] - The strategic decision to invest in the business includes adding personnel and branches to improve long-term profitability [20] - The company is focused on community involvement to strengthen ties with the customer base, which is seen as a key part of the strategy [18] Management's Comments on Operating Environment and Future Outlook - The operating environment is improving but remains challenging, with expectations for the net interest margin to improve over time as the yield curve flattens [4][19] - Management is optimistic about the long-term outlook and believes that beneficial items from the quarter are not expected to repeat [6][20] - The company expects stable loan balances and a continued emphasis on improving the funding mix [19] Other Important Information - The company sold approximately $50 million in investment securities at the end of the quarter [20] - The effective tax rate for 2024 is expected to be in the mid-20s [20] - The company has a low risk balance sheet with years of conservative underwriting, resulting in favorable credit losses and non-performing assets compared to the industry [12] Q&A Session Summary Question: Inquiry about the $50 million securities sold - The securities sold were adjustable rate CLOs with minimal gain as loan growth increased [22] Question: Clarification on the margin improvement since July - The September margin was reported at 228 basis points, but excluding a large recovery, it would have been 210 basis points [23] Question: Charge-off details for the quarter - The charge-off was related to a C&I loan that had been fully reserved in prior quarters [24] Question: Future margin expectations with potential Fed cuts - The company anticipates that a positively sloped yield curve could increase net interest income significantly over the next two years [25] Question: Target for return on tangible common equity (ROTCE) - The company aims for a target ROTCE of 10%, which would require a margin of approximately 270 basis points [29] Question: Update on office non-performing loans - The non-performing loan has a low loan-to-value ratio and is expected to be resolved with no loss [34] Question: Outlook for multifamily loans and upcoming maturities - The company is actively managing potential delinquencies and is confident in the performance of its multifamily loans [38] Question: Sensitivity of near-term NIM guidance to Fed cuts - The company indicated that various factors, including competitive pressures, would influence NIM guidance [40]