Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Flushing Financial Corp (FFIC, Financial) achieved an expansion in both GAAP and core net interest margins, reaching levels not seen since the fourth quarter of 2022.
- The company reported a significant increase in average deposits, with a 7% year-over-year growth and a 1% quarter-over-quarter growth.
- FFIC's loan portfolio is conservatively underwritten, with over 90% secured by real estate and an average loan-to-value ratio of less than 35%.
- The company has a strong liquidity position with $4 billion of undrawn lines and resources at the end of the quarter.
- FFIC is focusing on expanding its presence in Asian markets, which represent a significant growth opportunity, with plans to open new branches in 2025.
Negative Points
- Flushing Financial Corp (FFIC) reported a GAAP loss per share of $0.29, primarily due to a non-cash goodwill impairment charge of $17.6 million.
- The yield curve inversion posed challenges, impacting the net interest margin expansion potential.
- The company experienced an uptick in non-performing loans in its multi-family portfolio, attributed to a single relationship with an LTV of about 43%.
- FFIC's office loan portfolio faced challenges due to tenant vacancies, impacting the criticized and classified loan metrics.
- The operating environment has become less favorable, with interest rate volatility making margin predictions challenging.
Q & A Highlights
Q: Can you provide some color around the expense guidance and the adjustments that offset the seasonal uptick?
A: The guidance for the rest of the year is based on 58% of the $160 million from last year. We should have a run rate similar to this quarter for subsequent quarters. Adjustments were made based on year-end accruals that needed to be adjusted as we started the new year, mostly in compensation.
Q: Could you elaborate on the uptick in non-performing loans (NPLs) in the multi-family sector and the office credit driving the criticized classified loans?
A: The multi-family loan issue involves one relationship with three loans and an LTV of about 43%. We are working with the borrower to resolve this soon. The office building loan issue arose when the largest tenant moved out, but there is activity on leasing the space. We expect resolution by the end of the second quarter.
Q: What are your thoughts on the charge-offs in the business loan category and the expected loss rate for this portfolio?
A: The charge-offs were due to individual issues, including fraud in one case and long-term credit problems in others. We remain confident in this portfolio, with allowances allocated against it, and do not foresee significant charge-offs that are not fully reserved.
Q: Can you discuss the expected margin expansion in the second quarter?
A: Due to interest rate volatility, precise margin predictions are challenging. However, we have provided components such as CD rates and loan growth limitations. The repricing of the free portfolio is a significant opportunity for net interest income increase, especially if the current rate environment remains stable.
Q: How is the Asian community managing through the tariff situation, and are there any lending concerns?
A: The community is tight-knit, with little room for significant changes or product substitution. We have no direct exposure to trade financing, and our portfolio is real estate-focused. We do not expect a major impact as our business is domestically focused.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
