Flushing Financial Corporation Q4 FY2024 earnings call

Key Areas of Focus - Increase NIM and reduce volatility: GAAP and core NIM expanded with funding costs declining and interest earning assets stable. Benefited from loans repricing higher and funding costs repricing lower. Actions to reduce interest rate risk profile were effective. - Maintain credit discipline: Asset quality remained stable, tangible common equity ratio improved. Loan portfolio has low risk profile with high loan-to-value coverage and strong debt service coverage. Net charge-offs and non-current loans outperformed industry. - Preserve strong liquidity and capital: $3.6 billion of undrawn lines and resources, low uninsured/uncollateralized deposits. Regulatory capital ratios strong. - Asian markets: About a third of branches, ~$1.3 billion deposits and $749 million loans, 18% of total deposits, with room for growth. - Community involvement: Participated in local events to strengthen customer ties.

In the fourth quarter, GAAP and core net interest margin (NIM) expanded. GAAP NIM was 2.39% and core NIM was 2.25%, with funding costs declining 34 basis points while interest earning assets declined only 3 basis points. Average non-interest bearing deposits increased quarter-over-quarter. The loan-to-deposit ratio improved to 94% from 101% a year ago. Total CDs were $2.7 billion (37% of total deposits) at quarter-end, with ~$800 million maturing in Q1 2025 having a weighted average rate reduction. About $750 million of loans were due to reprice 214 basis points higher in 2025, similar amounts in 2026, and nearly $1 billion in 2027 due to reprice ~200 basis points higher.

• Core NIM expected to expand in 2025 with 10-15 basis point improvement from balance sheet restructuring. - Non-interest expense expected to increase 5%-8% in 2025 off $160 million base. - Effective tax rate expected 25%-28% in 2025. - Anticipated NIM range for 2025 closer to 2.30%-2.40% vs. potential higher aggressive targets.

• Interest rate fluctuations could impact NIM. - Competition for deposits in New York metro market is tough. - Economic cycles could affect asset quality.

Q: Mark Fitzgibbon asked about branch expansion impact on expenses, cost of crossing $10B threshold, and NIM outlook.

A: John Buran and Susan Cullen responded that non-interest expenses expected to increase 5%-8%, no significant Durbin impact expected, and NIM likely in 2.30%-2.40% range.

Q: Steve Moss inquired about interest rate sensitivity positioning and loan mix, including SBA loans.

A: John Buran stated they are largely neutral on interest rate sensitivity, SBA business will contribute significantly in 2025 with loans to be sold in Q1.

Q: Manuel Navas asked about deposit pricing, CD retention, and loan mix.

A: Susan Cullen mentioned deposit pricing between 325-330 excluding non-maturity deposits, CD retention historically around 78% due to competition, and focus on transition to relationship business in CRE portfolio