FLUSHING FINANCIAL CORP Q4 FY2023 earnings call

• Restated 2023 quarters due to reserving $7 million for employee retention tax credit uncertainty.
• Q4 2023 GAAP EPS was $0.27 and core EPS was $0.25; full year GAAP EPS was $0.96 and core EPS was $0.83.
• Interest rate risk position moved closer to neutral, reducing earnings volatility.
• Focus areas include increasing NIM and reducing volatility, maintaining credit discipline, preserving liquidity and capital, and bending the expense curve.
• Asian markets account for a third of branches, with over $1.3 billion of deposits and $759 million of loans, 19% of total deposits.
• Community involvement through local events like ribbon-cutting ceremonies and participation in Trunk or Treat.
• Digital banking platforms show double-digit growth in mobile deposit users, online banking, and digital banking enrollment.

The GAAP net interest margin expanded seven basis points to 2.29% during the fourth quarter, while the core net interest margin increased 18 basis points to 2.31%. Average deposits increased 3% year-over-year and 1% quarter-over-quarter. Non-interest bearing deposits grew in the second half of 2023. The loan portfolio is 89% secured by real estate, with high quality multifamily and investor commercial real estate loans comprising 67% of the total portfolio. There is minimal exposure to Manhattan office buildings, with the total office portfolio approximately $257 million.

• No specific numerical guidance, but noted that every 25 basis point reduction in rates would impact net interest income by approximately $1.4 million on an annualized basis assuming no deposit rate lag.
• Seasonal expenses in the first quarter are expected to be about $2 million versus over $4 million in Q1 2023, with subsequent quarters seeing a drop-off.
• Expect a mid-20s effective tax rate for 2024.

• Uncertainty in government programs related to employee retention tax credit.
• Office market softness and banks pulling back in commercial real estate.
• Potential pressure on net interest margin from CD repricing if not managed effectively.

Q: Clarification on margin start level and compression, reducing liability sensitivity, restatement impact, credit concerns A: John Buran stated the core margin was around 215 in Q1 with potential compression due to CD repricing exceeding loan repricing initially, and they are comfortable being neutral on liability sensitivity. Susan Cullen confirmed the restatement put the issue behind and John Buran noted seeing banks pulling back in commercial real estate.

Q: CD and money market deposit growth, back-to-back loan swaps, NII impact of rate cuts, swap maturities, expense cadence A: Susan Cullen mentioned money market deposit growth resumed with average yield ticking up, back-to-back loan swaps are affected by market uncertainties, a 25 basis point rate cut impacts NII by $1.4 million, and seasonal expenses in Q1 2024 are expected to be about $2 million.

Q: Pre-payment penalties, CD rates, swap maturities, buyback appetite A: Susan Cullen said pre-payments are normalized to $500,000 to $750,000, CD rates are around 5 to 5.50%, there are $325 million of swap maturities in 2025, and they continue with capital plans including buybacks after profitable investment and dividends.