Flushing Financial Corporation Q1 FY2025 earnings call

• Improving profitability: GAAP and core net interest margins expanded quarter-over-quarter, with further net interest margin expansion expected as real estate loans contractually reprice higher.
• Contractual loan repricing: Real estate loans will contractually reprice higher over the coming years, expected to substantially improve income.
• Credit discipline: Low-risk loan portfolio with over 90% secured by real estate, conservative underwriting, low noncurrent loans to total loans ratio.
• Liquidity and capital: Ample liquidity with $4 billion of undrawn lines, well capitalized with tangible common equity to tangible assets at 7.79%.
• Asian markets: Approximately $1.3 billion of deposits and $738 million in loans in Asian markets, with plans to expand branch network in 2025.

The company reported a GAAP loss per share of $0.29 and core earnings per share of $0.23 for the first quarter. GAAP and core net interest margins expanded to the 2.50% range. The GAAP and core net interest margins increased 12 and 24 basis points to 2.51% and 2.49% respectively in the first quarter. A noncash, nontax-deductible goodwill impairment charge of $17.6 million or $0.51 a share impacted GAAP earnings but had no impact on tangible or regulatory capital.

• Expect further net interest margin expansion as real estate loans reprice.
• Noninterest expense expected to increase 5% to 8% in 2025 off a base of approximately $160 million.
• Effective tax rate expected to be 25% to 28% for the remainder of 2025.
• Loan growth is market dependent, with emphasis on remixing the balance sheet.

• Uncertain economic outlook and yield curve inversion pose challenges.
• Potential credit metrics softening, though management remains comfortable with underwriting.
• Seasonality in deposit products and tariff uncertainties may impact reserves.

Q: Chris O'Connell from KBW asked about expense adjustments offsetting seasonal expenses and info on multifamily, office loans, and C&I charge-offs.

A: Susan Cullen responded that the expense guide for the rest of the year is based on 5%-8% of $160 million, there's no specific reserve on the multifamily loan due to its LTV, and confidence in the C&I portfolio with allowance allocated.

Q: Mark Fitzgibbon from Piper Sandler asked about margin expansion in Q2, CD repricing, Asian community and tariffs, and NOW balances.

A: Susan Cullen discussed margin prediction challenges, CD rates ranging from 3.5%-4.25%, Asian community with no direct trade exposure, and seasonality in NOW balances.

Q: Steve Moss from Raymond James asked about SBA pipeline gain on sale and credit reserve build.

A: John Buran mentioned SBA 504 loans with 7% premiums, and Susan Cullen expected reserve build due to tariff uncertainty.