Flushing Financial ((FFIC)) has held its Q1 earnings call. Read on for the main highlights of the call.
Flushing Financial’s recent earnings call presented a balanced sentiment, reflecting both progress and ongoing challenges. The company reported notable improvements in net interest margins, liquidity, and deposit growth. However, these positive developments were counterbalanced by challenges such as a GAAP loss driven by goodwill impairment, yield curve inversion, and an increase in nonperforming loans.
Net Interest Margin Expansion
Both GAAP and core net interest margins saw expansion quarter-over-quarter, with GAAP increasing by 12 basis points to 2.51% and core NIM by 24 basis points to 2.49%. This growth indicates a positive trend in the company’s ability to manage its interest income and expenses effectively.
Improvement in Loan-to-Deposit Ratio
Flushing Financial reported an improvement in its loan-to-deposit ratio, which decreased from 94% a year ago to 87% in the current quarter. This improvement suggests a healthier balance between loans and deposits, enhancing the company’s financial stability.
Strong Liquidity and Capital Positions
The company highlighted its strong liquidity and capital positions, with $4 billion in undrawn lines and resources. Additionally, uninsured and uncollateralized deposits remain low at 16% of total deposits, underscoring a robust financial foundation.
Contractual Loan Repricing
Flushing Financial anticipates a significant impact from contractual loan repricing, with about $511 million of loans due to reprice 171 basis points higher in 2025. This repricing is expected to generate $9 million in interest income annually, contributing to future revenue growth.
Growth in Multifamily Portfolio
The multifamily portfolio, comprising 38% of gross loans, demonstrated strong credit metrics with a weighted average loan-to-value of 42% and a debt coverage ratio of 1.8x. This growth highlights the company’s strategic focus on this sector.
Deposit Growth
Average deposits increased by 7% year-over-year and about 1% quarter-over-quarter, reflecting the company’s successful efforts in attracting and retaining depositors.
GAAP Loss Per Share
The company reported a GAAP loss per share of $0.29, primarily due to a noncash, nontax-deductible goodwill impairment charge of $17.6 million. This loss underscores the challenges faced during the quarter.
Yield Curve Inversion
The return of the yield curve inversion presents challenges for net interest margin expansion, as it affects the spread between short-term and long-term interest rates.
Increase in Nonperforming Loans
An increase in nonperforming loans in the multifamily portfolio was noted, primarily due to one relationship, with an LTV of about 43%. This increase poses potential risks to the company’s credit quality.
Office Loan Challenges
The company faces challenges with two nonperforming loans in the office portfolio, exacerbated by a large tenant moving out, which could impact future earnings.
Seasonal Expense Increases
An increase of $1.6 million in seasonal expenses affected the financial results for the quarter, highlighting the impact of cyclical cost fluctuations on the company’s performance.
Forward-Looking Guidance
Looking ahead, Flushing Financial provided guidance for the first quarter of 2025, focusing on improving profitability, maintaining credit discipline, and preserving liquidity and capital. The company reported a core earnings per share of $0.23 and emphasized its commitment to stable tangible common equity at 7.79%. The anticipation of loan repricing and deposit growth are expected to drive future financial performance.
In summary, Flushing Financial’s earnings call reflected a balanced sentiment, with positive strides in net interest margins and deposit growth, countered by challenges such as goodwill impairment and nonperforming loans. The company’s forward-looking guidance indicates a strategic focus on profitability and financial stability, positioning it for potential growth in the coming quarters.