Flushing Financial (FFIC)

John Buran President and CEO
Susan Cullen Senior EVP, Treasurer and CFO
Frank Korzekwinski Senior EVP and Chief Real Estate Lending Officer
Mark Fitzgibbon Piper Sandler
Chris O'Connell KBW
Call transcript
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Welcome to Flushing Financial Corporations' Second Quarter 2021 Earnings Conference Call. Hosting, the call today are John Buran, President and Chief Executive Officer; Susan Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer; and Frank Korzekwinski, Senior Executive Vice President and Chief of Real Estate Lending. Today's call is being recorded. [Operator Instructions] A copy of the earnings press release and slide presentation that the company will be referencing today are available on its Investor Relations website at flushingbank.com.

Before we begin, the Company would like to remind you that discussions during the call contain forward-looking statements made under the safe harbor provisions of the U.S. Act Reform Litigation Securities of XXXX. Private set are that may statements those U.S. in including subject with Company's differ to factors other contained as statements, such and uncertainties, any in cause the from the filings risks, materially Such forth actual to results Exchange and which you. we Securities refer to Commission,

considered will as made are non-GAAP and These substitute financial measures financial operating this financial and assess as supplemental During information performance. or be with presented call, measures intended in to for the in be not references a the review to isolation measures to prepared GAAP. U.S. non-GAAP accordance

Buran, For please and who Officer provide measures refer non-GAAP the ahead. Chief and an GAAP, earnings will the strategy overview the go reconciliation John release Please and/or to like information and President about to now results. presentation. Executive for these I'd of a introduce to

John Buran

call. for to will detail joining quarter strategic financial Thank Susan of thank our you highlights over quarter turning you, for objectives to provide earnings Cullen, today's CFO, on morning performance. And and before operator. the our second everyone. the second On call us our call, Good XXXX greater discuss I

remarks, than the the of again challenge. the were to how at year. end well opportunity last XXXX, the In Chief home We is it we that and Frank Company we us pre-pandemic at case brought forth of social your respond we the once much Following the strong business, brought our lives. has but affected work Lending It stay pandemic emerge and with Korzekwinski. challenges, distancing, banking Financial, show, team has and Flushing also brought entertainment. our brought our masks, address In from prepared has It along stronger Real a It days questions forth the goes forth will how vaccines, saying Officer, it's Estate the without of pandemic, dark opportunities. our adversity has management personal and to

We have sheet. balance a bigger

height As acquisition assets. pandemic, we our making us completed of the billion, in National $X Bank, of the during Empire larger

have year We were of this a power. per a first are $X.XX. of per all for share share more already XXXX, for half $X.XX. earnings the Earnings Earnings

net today, than at We better of have interest XXXX. a end margin the

throughout strong minimal credit history, As our with has charge-offs. remained

We Board have a increase with ratio, low and loan-to-deposit and in opening take of tangible New up ago. an value, share opportunity this strong better our strength better better months York has recently efficiency than and authorized prospects of a price ratio, dividend. the a economic a improving Company, repurchase the book to few Recognizing the attractive just higher advantage

Slide to X. Turning

GAAP strategic The On and objectives of XXXX reported quarter its second and region outlines them. City recovery. as important targets and and ratios We strong X% and GAAP $X.XX return how Core we the well boost the and slide York results our on points equity exceeded tangible which a objectives basis, to were of basis average of period performed assets respectively. core EPS average The we XX points $X.XX. the our X.X%. This XXX helped through-the-cycle both started XX% and basis XX% respectively. Record against equity, strategic on total executed quarter of for was ratio second an these economic common XX%, our New EPS on return

risk-adjusted costs to while ensure loans is optimizing of appropriate for objective returns funds. first The the

quarter was quarter record Second fifth our of interest net consecutive income.

deposits. represent XX% Core of X quarter-over-quarter, and to X basis declined rose deposits year-over-year, improved points. XX% non-interest NIM NIM, Average basis to rise GAAP bearing average continue points While and now

significantly, despite value National sales income net in our recovering dilution. acquisition full the improved, take would X.X upon book that recover and in XXXX Bank, With August we book years in cost that interest as less to estimated than months operating of X the tangible pandemic of tangible the accelerated announcement Empire We value had improved environment.

loans, increased PPP, from approximately XX% annualized and The second X% growth. approximately maintain is quarter. historical objective to the long first year-over-year Period excluding strong end

million. pipeline increased year-over-year loan Our XX% to $XXX

We expect half the PPP customers over couple quarters. PPP, assisted to this process in XXXX. of loan We excluding in the the next growth, of accelerate expect continue forgiveness and second to

enhance The by third power and objective earnings is efficiency. core improving scalability to

term we expect doubled the transactions position in have and in just lower credit record Empire earnings and of been core was earnings core size and which important due believe announced costs year-over-year. scale industry I more recognize in We mentioned, Company, of had we're There related banking merger. quality and the a improvement the organic. capitalize market disruption. will growth our the M&A our intermediate is largely benefits in in we merger given share be than to of we of As $X.XX, on the any per strength several to The realizing

make to of increased the in with losses as core without both the I'll in XX% loans more digital quarter. is our performance and remain We of company. equity X% Susan core continue level assets and ratio through-the-cycle is estate release also XX% quality by quarter, strategic the quarter. XXX% Net targets credit for allowance were charge-offs on the of average underwriting. ask real hallmark and the over this details. exceeded Despite non-performing A loan-to-value respectively. asset Even remaining for return in this loans. will as quarter, was X average the evidenced return disciplined equity on while credit loan and in quarter, We Strong always basis low the real with for coverage losses this to points the against risk provision now average return of assets, comfortable Overall strong, in detail XX%. the and Susan? provide Non-performing portfolio we're of collateralized has basis credit objectives a assets on and average banking, Susan only only improvement reduction our manage quality very The declined a strategic estate portfolio. linked of XX owned. points shortly. objective final consistent strides to been

Susan Cullen

you, John. Slide I'll Thank on X. begin

quarter margin XXXX. XX strategic X net interest ensure deposits costs year. average move while outlines improvement a The quarter deposits, cost the and Slide basis of excluding to the is from falling first growth basis XX%. in optimizing lower, points XX% ago. past X in And to non-interest year-over-year, second and bearing core the of year for returns the comprise over an funds. continue loans Empire, XX% Average of increased deposits from points trends. income and approximate appropriate Total objective deposits grew Average XX% deposits average XX% of risk-adjusted

purchase first will are and parts, consecutive net Our net interest Overall reversals average was loans of in previously start which the margin. decline modeling interest for and then when accounting a your in net net base loans interest interest has and shortly. margin interest quarter, assumptions add nonaccrual moving you the PPP and loans quarter. clear, the items purposes, the record I adjustments. interest base income fees, own for the fair To net margin analysis includes compared items, net fifth net the make from effects of and mentioned. the for margin the plus amortization detail with income recoveries Base despite value of removed net to these interest to adjustments slight the prepayment the including encourage penalties in We

was basis Base of However, of X income in deposits XX prepayment funds, improves. net yielded second margin basis points decline interest and and was $XXX as fed rose funds we X XX% improvement points by during long net fees penalty, the points quarter, points, the interest margin an net quarter, which of PPP average core million short-term quarter. sequentially. X X.XX% growth by achieved the basis increase in to points, first the basis X average This only in basis but the included Interest-earning to compared expect

other These As largely reminder, the XXX swaps interest X to with of effective will a historical of strong points $XXX of swaps down replaced have end points. the of XXXX. to XX basis that by absent pull swaps of Slide a The objective growth. interest provide cost we discusses rate the maintaining strategic net should benefit, loan mature the any interest swaps, net of cost be million that the which margin. margin, the basis repricing majority million $XXX to changes

year on of satisfactions, loans quarter a to As the decreased basis quarter yield end total on Period previous nearly in and stick quarter, loan the Loan of X This second improved million. low half in in loan utilization yields X% second and at from loan during X this should underwriting fees second approximately from $XXX a XX PPP $X of increased Base in chose XXXX. growth increased bolsters end the the our confidence loans associated PPP but million portfolio. X% standards. line to during declined narrowed excluding challenging annualized the in quarter-over-quarter, the ago. the the with accelerate PPP forgiveness. non-PPP previously pipelines The X% PPP quarter the loans, point details spread mentioned, to disciplined the the that points growth quarter Slide second between remained our was pricing XX% quarter. and quarter originations We loans in second negative. the year-over-year. PPP load than basis but and grew less due yield

loan net $XX total Xth, with PPP million did recognized process X million were second the Total a $X.X deferred of was first from basis second drag income in margin net the PPP quarter, at PPP second total in the July quarter of end. quarter. interest $XXX,XXX in forgiveness, points another in $XX the on fees disclosed we impact the million in As the first. but quarter up, quarter not

forgiveness rise scalability digital remainder XX% continue loans. and SBA users core of such metrics XXXX power and banking take X approve year-over-year. enrollment banking XXXX We the can shows to to through XX the earnings digital increase and with objective of days possibly by XX% monthly efficiency, enhancing expect into as the to in mobile a active Slide improve in strategic improving to continue up the

franchise. additional than months, we from we model, XXXX. objectives earnings years planning confident and invest in remain the was the enhancement savings finalized. back X when the cost XX% deal meeting Tangible better achieved in transaction value Empire accretion significantly The acquisition been the are X.X in the earn and our book has We technology is in as achieving

did While meet transactions hurdles. M&A's would our we enter timing is not not of any financial unpredictable, that

markets been several underwriting. our has organic. our for M&A the be asset of largely strategic disciplined objective, foresee to disruption. Slide there to has will which quality growth in Additionally, XX are is manage poised fourth we announcements which consistently advantage We with take

improvement, during slightly the City economy improved reopens, With still to expected the loss and methodology is be the release levels. for The strength but returning economic factors Future the gaining in growth, York is are the quarter, provisions reserve factors. national and loan reserving rate drove to the driven New are unemployment this workers mix As local by economic our above improved, this as loan partially office. has quarter.

is and strong ratio charge-offs year-over-year. the after deal, again which real during quarter-over-quarter at was at record and our the points remain underwriting of X%, of some nonperforming Empire we tangible Only assets to loan-to-value loans. is of exposure on our or X leverage only on Slide nearly only was We year the Our minimal but very June The those ago both of now months XX%. Nonperforming X% real common about and a level. quarter. with quarter. continue credit loans coverage making excluding talk loss ratio loans capital payments. the track nonperforming the weighted On with the of XX%, content. display the to XXXX, XX, strengthened The during is more. credit outlines The basis the loan-to-value as over XX, were balances on quarter Slide XX% approximately XXX% are average portfolio low and estate remains equity risk a average quality X and ratio level consistent profile loans, our and ratios, XX The loan-to-value of declined the assets closing there comfortable minimal core net interest-only this the expect exceeds, estate statistics. average strong improved

increase to existing has has mentioned million dollar Board no authorized X program. As changed. strategy authorization repurchase an John limit. The surrounding have time of earlier, or shares the the This buybacks not Directors of

authorization the per end repurchase stock of at approximately of yield the using consider stock priced, will the $XX.XX, We intangible We dividend Both quarter. second given share to view X% the $XX.XX book opportunistically. increased and attractively respectively, value

let overall John, will the of interest growth to the turn margin Core be remind PPP forgiveness, that call the quarter. by level impacted I Before impact of items me excess the and could you back deployment timing and of net some liquidity. loan third

unused space. branch the opportunistic in loan $X you in business office quarterly before starting expect quarter expenses second to million on and million of accelerate response, to expenses remain below for PPP the share a we XXXX. Assuming suggest growth. while quarter, we operating a we other the repurchases, normal intend expected $XX half be to close accretion no to the increase mind accounting point in considerations. Purchase in per as to as as We are change pandemic growth, Similar Nonrecurring quarter. last excluding is a start -- keeping adding third loans, expected

XX.X%. that, year the should turn of for I'll approximate John. to With to over XX% rate tax effective Our XXXX back it full

John Buran

Susan. our Slide On provide XX, you, Thank we outlook.

PPP, in to target. and our and forgiveness be of rise as the X% near from will economy PPP accelerate PPP liquidity. fully XXXX redeployment growth pipeline. Core will equity half short-term the common fund loan second benefit we Tangible the and and We loan continues excluding expect interest of forgiveness local net is growth, a loan to income headwind. reopens, our

We increased will share remain repurchase opportunistic with authorization. our

up a properly believe losses in a approximate XX%-plus industry. demonstrated is our now that X% valuation. is average are company and cycles We our have a and our second the have stock both quarter, of return With Especially goals X% will over goals you. view, turn the in to business credit equity and stock yield. a plus and dividend over model We many well our were with I'll assets attractively Operator, the on remain, and we low-risk average pre-pandemic, it we're than questions. In Through-the-cycle below now exceeded that, priced. business the we model on with reflected stronger our reserve return open we without release. it to these low-risk


[Operator Fitzgibbon Instructions] Our question from Mark comes Sandler. first Piper of

Mark Fitzgibbon

quick fees that real in that or I'm line? question. fees fees a clarification couple a because services from just curious, were bit quarters. last Susan, lower is Banking were swap the of down swap

Susan Cullen

Yes, they are.

Mark Fitzgibbon

are? They

Susan Cullen

It was driving that, yes.

Mark Fitzgibbon

That was what it. drive

them? how secondly, that of there then Most the of deferrals And $XXX Great. Okay. much mature out guys you million have loan this year? of

Susan Cullen

them, year. coming of do. coming vast The the or mature quarter them of Most within Yes. the majority

Mark Fitzgibbon

to of Okay. help Great. in, And coming then, that things impact a down the quarters. detail Can all Susan, bottom of to you that gave affect on NIM in us say margin the a likely are sort line lot XQ? you kind of distill

Susan Cullen

that Well, I there prepayment our be to to ball a would, our what I know swaps come if through. have marks I just could, will are crystal Mark, don't flow-through how penalties on the going or but

we is I NIM start items. talk So that our to NIM, base better think if probably about all that's core those that, of even net a our spot of or

Mark Fitzgibbon


little of be core bit NIM, think pressure? And under a will the so you

Susan Cullen

Yes, yes, we do.

reprice had the in that And a And we assets -- quarter. points past to saw, basis have much a holding costs but we talked had. going to are we're as we've about only greater as As as decrease not you opportunity this liabilities liabilities. opportunity had their reprice the to in we've X the own, we

Mark Fitzgibbon

kind enhancements. tech a of what stages Okay. in initiative? at, is timing looking say And what And or of major you're to you're means, of on slide products deck that the cost Slide looking I of that lastly, the curious I'm X add? services kinds early you this maybe then we're guess what

John Buran

some possibly that to working where we of job in So, a loans. terms efficiencies good continue growth order have additional some I think course, looking PPP in clearly, vendor past with to expand of utilization with smart efficiency get part online offerings. provide are And We're the the have, revamped emerging order lending. that respect of year, some we our banking a into in been companies mobile things with lastly, FINTOP -- relationship and group We, by base. and there reduction, were JAM to the totally let's terms insights to that those of our our respect those our of in on services to did to of the to we're are emerging that number -- some banks say, in focused with expect base. in customer see doing out of working we then friction technologies of customer And very of have

that gain out to benefit as some of well. expect we So

lot that going of some a different expect there's So of time. on we stages, reap out various over things at benefits to and


from O'Connell next Our KBW. come of will Chris Instructions] [Operator question

Chris O'Connell

hoping the impact. for just on question NIM quick was one I clarification PPP

I on for have at quarter, but X guys you said said the times, you then was basis there NIM XQ release, might point NIM one in point of impact couple no earnings think it a a was impact the 'XX. this

clarification little of a bit that. Just on

Susan Cullen

It's -- the some I the between yield there's on the PPP versus impact. NIM think loans confusion

increase because overall quarter material did yield are no on but a those our NIM. did income, the is XXXX, versus small first numbers the the in There effect of effect they NIM. the on not have So so interest

Chris O'Connell

And it. quite of loan the then second mean, be the seems I far to up as half a and The bit robust the pipeline for year-over-year. is outlook Great. the as growth, year. quarter-over-quarter Got

rebounded basis. bit of I little the Just from hoping loans where -- in did that from? second CNI color But see the And it seeing you're you a period like to utilizations coming kind that as down on of get a quarter. presentation to sounds growth line were

So of if or what post line were XQ? just the was that the utilizations change maybe coming

Susan Cullen

growth, be will of ex to they every dollar impact we're our our with loans. very but But strong are strong, headwind where pipeline, Remember, talking our forgiveness yielding average expect loans, QX, are on replace NIM PPP pull-through or those utilizations with line is a The post much so a they loan we we'll that be a given PPP Those historical the fight better have loan to So we mostly PPP forward. loans. against. X.X% are. going

Chris O'Connell

the there level are pretty what it. securities mix be yields new Maybe book? cash was kind that that solid you're a the out on Got and it securities this just looked going quarter. shift forward And like will the shift book of the quantifying past the of playing mix what on of into

Susan Cullen

optimism over need year we our liquidity with securities the the of very expect, for So given is we comfortable growth and redeploy book. our excess to second into don't liquidity that would the loan the our it other reasons. half book securities where We're

So with the stay that's where we liquidity. would

Chris O'Connell

reserve on quarter. Okay. just all where Got around. do bottom the much headed And book do How Or clean this that much lastly, overall loans? from -- the a is are today? guys it. a guys you understanding trends reserve can very how I to positive be And quality the in run you that overall, direction credit seem down the think it guess, on in room you have with anymore like where

Susan Cullen

depend that All our delta come into variant have our play. Chris, going mix, me, if to whether COVID environment, considerations. those we tail items factor excuse all will economic the on -- into loan that the will Well, headwind, from another have we're

very the be. could very lowest a what comfortable underwrite to to conservatively. prediction want to as go We're number make we we with where are. I would continue wouldn't to We

Chris O'Connell

And guess one, it. I if one Got just Okay. could. I final

or far aggressive, would about and going aggressive are increase, appetite? take that for authorization tangible levels? less that where drivers as dynamics, the regards capital bit buyback a you And that book forward. little versus to what the talk the with you get of as pricing just as or maybe Can more far value As

John Buran

this dividend stretch to by the terms think see or well been particularly getting we performing any stock, very our not company very at the all just did recently, we yield, us the better I is nice year But has very, some trading would out in tangible stock to shares also performance those And given confident stock price look, imagination, with than see. time of certainly feel factors pre-pandemic, grabbing coming a are past some of book. of And better, above We we it grab low the a over a level, throughout that the strong the growth the additional go all that very have and felt we quite very, given Well, period of that for slightly is that the market aligned fact so. did economic much return them. of out if that. stars strong


I further remarks. to John are questions the like turn over There and back at Buran to time, no would conference for this closing

John Buran

much, very you your thank all operator. Thank Well, for you attention.

very, pleased future I that As the very quarter the and the for -- I think pleased we're the said with the prospects earlier, Company. with for

attention, for again and your everyone you stay thank safe. So

Susan Cullen

Thank you.

John Buran



Thank The for today's conference may and has presentation, now disconnect. now you concluded. you attending