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 the Flushing Financial Corporation's Third Quarter 2021 Earnings Conference Call. Hosting the call today are John Buran, President and Chief Executive Officer; Susan Cullen, Senior Executive Vice President, Chief Financial Officer and Treasurer; and Frank Korzekwinski, Senior Executive Vice President and Chief of Real Estate Lending. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. 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.

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

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

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

John Buran

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

address prepared remarks, our our Estate Frank questions, Real Lending Chief Following Officer, we your will with along Korzekwinski.

of our quarter We So consecutive of the EPS execution loan of net quarter our pipeline. in second and consecutive record sixth had quarter record our results. strategy resulted interest core and third income record record

benefit improved year-over-year, interest average of Our the GAAP metrics efficiency on margin, core ratio, assets, average return without profitability provisioning. reduced net on return and even equity,

we're on against focus well our We them. performing continue objectives strategic and to

loans the to risk-adjusted returns, of while first objective funds. ensure appropriately Our optimizing was cost for

during NIM increased quarter. the points rose and GAAP basis NIM XX Our XX core points basis

average quarter-over-quarter improved of X our XX% basis of bearing cost loan points deposits non-interest expanded basis to another year-over-year. basis points, X declined deposits. points yields and funds Our And XX

strong historical maintain to is objective loan second The growth.

Business were the picked Excluding was summer to record however, to quarter. but strong loans activity pipeline for quarter-over-quarter flat due had normal delays September. quarter loan we the end activity PPP, in significantly up as

a growth into excluding fourth loan and the quarter XXXX. As expecting we're PPP result, positive in

core scalability In that third we've of We're by also the objective to base. earnings Digital have I realizing and merger, future power wider costs our continued with inefficiency. enhance will the gain this been over later. improving asset to is Empire technology regard, spreading efforts fixed banking into opportunities Our traction a benefits expanding get customers.

XX a consistent over with improved underwriting. organic XX% ratio significant The manage to opportunity efficiency disciplined and and the to objective growth months. is fourth quality there Our asset next to strategic is XX

the points. net recoveries For were quarter, basis X

of levels of NPAs a reserve and low have coverage. high We level

At the book common tangible transaction. of expected several equity, one-year achieve transaction XX% increased the time the We X% Bancorp met all. we've would closing and EPS now the per year-over-year. and of announcement, mark than will estate that our loan had low remind real Slide XX%. that greater less portfolio to our course you level average than value risk is X, represents October credit estate Our remains. On of our Historically, this portfolio the exceeds of accretion, them Empire X% XX% we've share a tangible achieved anniversary in we XXth and of goals of we real note in We'll value loans.

points cost deposits XX improved year-over-year. Our of basis

targets for to we've successful and a been deposit deposits line, remains achieved loan XX%. bearing has improved to Suffolk County, we us. a we focus develop savings Empire us. ratio XXX%, achieved where The increased begun Our and XX% transaction for very business more target. And average Bottom cost non-interest our to our

having X, we significant the just our on a digital a the pandemic for much technology So and is platform are upgraded improved see later. increase industry XXXX company resilient the users Zelle a platforms users more before we banking to of months Slide stronger across banking customer year-over-year. significant. we active We approached the We continue our has online in and outlook. and additional active with recently gains impact a We in prepared XX started end changes. digital and had XX% been recognize monthly XX% mobile adopted usage increase bank and

offerings investment We This so far. technologies also early FINTOP. we're excited emerging us about made JAM at a look an in the investment allows we've very strategic and seen

much efficiencies the recall very with may a our platform. fintech you PPP experience We smooth to we program. in customer this partnered gained using help was enumerated and As improved. was integration This

expect will both Most of now next to the of additional our or Now time one we to see be we're X. looking organic. that prepared and our mergers our changes to market. level or X, significant opportunities and to deposits merger the for the business. XX $XX impact is some of transactions billion on. goes be on of what months, opportunity closed Slide result customers. benefits as for a people most XX% is participant have opportunity the growth We this $XXX yet, enhanced these announced the On billion for recently and an technology participants. as of of involved Island, the already We're eight adding Slide provide Out We'll our XX not to expand Long by recognize on to lending this in relationship of closed involve into having starting industry other service focus turn to

In merger addition opportunity of are other to future there the growth. drivers

for We loan record have a as baseline pipeline serves that a growth.

a XXXX at a commercial Recession you'll was XX% real accelerated out business low rate. in high-single high out increased and Great see were double-digit seeing Recession XXXX, estate to digits recall opening more similarities loan on loans is growth Coming coming recovering multifamily Great increased our of the the important New and this of in rate. York pandemic. between We the to activity. Asian market activity normal From growth the Commercial pace. is and

loan versus our positive I'll strategic growth we XXXX. fourth on quarter Susan So a for executed we to the details into and more turn PPP objectives. for excluding provide how now to over it see outlook

Susan Cullen

I'll begin on third Thank year-over-year. of of the non-interest XX% and comprised Average XX% deposits total bearing and average deposits from increased XX% an deposits, Average XX% you, X. in core XXXX. respectively quarter John. improvement Slide

was Core of a removes consecutive interest the the in net as We net months. with the deposits in net continue Slide the and points X during due to in interest millennial and focus interest margin outlines purchase the and average past income the increasing of Company income area. quarter, basis the core on basis points net account new points and the interest to decline is loans. cost in interest which levels quarter-over-quarter exceeded reduce optimizing accretion income mix X for ways Net basis business fair the the activity of open to was of quarter for a points deposit basis the X.XX% trends. XX XX Elmhurst improved quarter from margin despite XX record gains and also The net sixth branch was over continues to normalize XX Branch this cost quarter. quarter. look impact The funds. and closed GAAP branch value record margin accounting openings third a checking adjustments XXXX. third pre-pandemic third X.XX% to decreased

gains the and accounting net XX of point was a points basis prepayment from in net basis XX margin net accretion basis points of interest the to quarter, primarily second a fair value the On adjustments interest in purchase margin shift X.XX% XX penalty, Excluding to adjustments in third sheet quarter compared the basis X.XX%. expanded deposits the balance impact this and and of funding. the net decrease the in interest of margin due cost net

encourage start previously with net basis add own the for X.XX% For modeling of which mentioned. your interest margin X PPP points base of impact assumptions purposes, in items and includes to we positive then you

of million of a majority with XXXX. a we swaps margin the and the As swaps by $XXX Slide flat with were points, of basis any end on maturing largely quarter-over-quarter. the have be will benefit drag PPP million XX XXX with with points. the Loans a yields. are XX portfolio margin of loan basis outlines swaps repricing interest other The interest in should cost provide cost excluding of replaced future. the to These interest that $XXX forward net currently net a of rate reminder changes swaps absent the effective the

closings activity quarter-over-quarter. of current the pipeline loan John normal $XXX previously, company portfolio. business mentioned on is summer in then in The pipeline average a rate basis As commercial outlook both The reflective loan increased activity growth. increased positive and experienced commercial and increased the XX has and record delays September. for million reflects and estate weighted third-party real loan points loan of The loan

to to loans as curve yield over the of to the million $XXX approximately $X on originations quarter during The of quality mirrored our recognized forgive PPP Slide underwriting. of loans. performance. provides steepening XX has rates the XX% time. continues SBA PPP up a higher Company million loan Additionally, our and well fees. help move declined has held credit the company's disciplined historical The snapshot pandemic through accelerated the

Our underwriting a not are is conservative price and leader. we

to returning activity. to progress York make New economic normal continues in

are York quarter points of value The New released with rate remains the charge-offs to to be continues net expected outlook. in due of low to loan growth, nine-month non-performing unemployment and from than driven in XX%. third XX% basis XX loan outline recoveries coverage. points Slide company less XXXX. peak of X to the down the of solid the loss is X% the The and basis strong economic quarter real to in pre-pandemic metrics level Company for had assets level economic reserve X the of City credit However, mix Company's provisions May average just estate net period. compared X.X% portfolio Future loan a a factors. The reserves in at the on X.X% and third the by to improved and the

the XX% profile year. Empire. year-ago of The Tangible capital improved the company ratio even not comfortable basis of of which share to minimal branch target end credit we quarter by decline earnings quarter resume third Overall, the this XX total book levels repurchases. repurchased average shares payments expect and Over did XXX,XXX dividends content. Forbearances we million an comparable loans loss very of remaining continued of our our to risk XX only XX% our P&I of increased $XXX share making combination million. four $XX to include to shareholders the and through to a to value the ratios. Tangible of full Slide full during with strong did the of $XX.XX $XX.XX. per continued over as a remain deferral equity and X% just shows with at return points common price and

are to shares. as sheet, pay opportunity and unchanged and future We given the shareholders are view to profitably grow opportunistically Our repurchase yield X.X% and priced the the priorities approximate capital growth. balance dividends stock for dividend attractively

let all accretion net level Before hedges, of loan the will which XX items $X levels points Reported of the accounting impact and less quarter. turn prepayment purchase remind average the the prior penalty XXXX. call and back and timing compared be basis to points to margin in XX in per the XXXX impacted Purchase and positive million digits of John, me that accounting net quarter. Core by expected in accretion be fair mid-single continued prior totaled you basis could I net margin deployment interest liquidity. elevated than interest fourth overall quarters growth to value quarter some on mark is and of

quarter pandemic Assuming loans and improve fourth into to is XXXX. in change in normal the expenses point response $XX The growth no fourth million we operating growth quarter for starting before loan a adding PPP expect the the excluding rate.

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

John Buran

our you, Thank outlook. Slide shows XX Susan.

of the add $XX already our future. We to a deposits the merger merger gained over market, more involve staff of Island participant. all in customers and expect are on to looking activity benefit in billion We've from Long and

Additionally, loans. has holding posture CRE its already change acquirer a major on

in fourth PPP We and positive into XXXX. loan also quarter expect excluding growth

are pipelines to local growth continues record loan normalize. net to expected Core and driven more income Our by is than economy be volume at rate. levels the interest

We expect positive XXXX. loan growth into

funding the deal year within our have yields manage We've stable. the of target to loan X% tangible equity continue been and reached common Empire one We closing. costs

business conservative of operate average balance ROAA model turn LTVs, low and sheet, you cycle the that open have have a changed. look profitably with dividends ROAE look above We risk has shareholders, been over profitability not through the stock low targets, opportunistically to repurchase been We'll to our capital benefit both ratio have flexibility to Operator, the X%. capital to targets shares. on we approximate to losses. the return We the maintain an then lines and exceeding remind that and credit first with a yield. the priorities I and our credit above grow risk TCE to our basis to return dividend for everyone then X.X% without reported it up I'll questions. shareholders We've


[Operator Fitzgibbon with today from comes Mark Piper Instructions] Please And our question ahead. first go Sandler.

Mark Fitzgibbon

wish I do pipeline that First releases reserve I think are today? had, behind, the loan how strong you given where your is

Susan Cullen

loan the the reserve seize, loan current mix may rate grows, release economic I and releases portfolio predicated think upon because reserve the be the the originations factor. if will

portfolio expectation be the would reserve my grow we would the that if releases stop. So

Mark Fitzgibbon

other which the any major technology otherwise? or mentioned expenses, heard I you there whether are pipe initiatives but Okay. had And down expense then coming about Susan,

Susan Cullen

a this we about XXXX not have expenses will believe the can't is quarter first doing do modeling, quarter we into come time. No, as at But the But and their quarter that seasonal we're reminder, do play. first everybody have first already. I as talking

Mark Fitzgibbon

$X.X merger on those they the related this point? Empire, think more any of quarter. were Is great. those outstanding there to this charges are at million And Okay, or then behind all I

Susan Cullen

they're I closing fixed us, related to was asset most impairment some and behind charges the the think primarily branch. this

Mark Fitzgibbon

migrate would I million are non-accrual on of the right And when lot was this year? loans wondering of expire you I that making those the later expect to Okay. then, to deferrals interest of payments a guess, now, not deferral $XX

Susan Cullen

to No. of performing migrate the migrate when I to expect end loans, would at year. them they this

Mark Fitzgibbon

I from midst Of that would the what in your Okay. $XXX curious one mergers? guess, players last And then one coming the other on is I roughly actually. was be loan how million guess pipeline, of are much

Susan Cullen

that. Frank. over that let turn to answer Mark, I'll him

Frank Korzekwinski

institutions, has that we're can't say replacing from is coming are existing. are can much growing The would come fairly that debt as we with from markets, Obviously, naturally active, but Mark. volume deals been any so well. that's accuracy I individual Hi, how to the say as customers new doing they already I in

Many We our requirements borrowers. expanding. think Generally of experience two together, see I how enhanced result speaking, continue maybe and with relationships borrowers likely comfortable an institutions a through And existing to originated, that a that of other not our growing is are as being delay change, going is to change. are an merger going institution understanding scenario. loans come when there in processes

that picking So relationships in borrowers the up we are business seen definitely market from in have not we past. the and


next [Operator go Instructions] The Chris question with ahead. KBW. Please O'Connell comes from

Chris O'Connell

like get coming caused that because robust just here? into the just delayed you the the some Was closings expectations, fourth strong just things there there pipeline a into hoping they're was - seems talked loan did this in pushed pretty bit come any quarter, growth was quarter. out quarter the in coming I anything like about it quarter third the fourth into was guys

John Buran

into this third roll quarter. a we've larger into loans So the - seen few

we In ancillary and were, having September. addition, available with services did a to been see we through that the have into that in continued we pickup delays August being in respect

Chris O'Connell

each are And little it? what bit the - just currently categories of coming - pipeline could and those yields guys you mix a are maybe mix what on talk of about the you

John Buran

buying on half of environment banking current our out most we it is of the is and of plans. customers their as additions the operations, that have are taking renovations of a reflective about of we it like looks who or subset have. because it portfolio rate been which advantage banking of commercial And lot a - business properties business So is of get coming some

of different forward. continue quarters low with minor We've think so expectations, and yield our very four much very, very despite you'll retain or that the some notice terms I not So much going that to in over rate expect the able yield to been adjustments last very, of we environment. a

Chris O'Connell

Thank provisioning following reserve. on on the question you. in And the Mark's then, just up

could Empire remind guess - having of Just if I closed, all run that? you day us was the transaction in, CECL, with where the one

John Buran

Was it a $X.X million?

Susan Cullen

million, $X.X I It's believe.

Chris O'Connell

on loans the the to reserve like Sorry, ratio? -

Susan Cullen

off don't points my basis Chris. - That remember that top XX somewhere the of XX head, XX/XX/XXXX. like that I about at was

Chris O'Connell

it. Got Okay.

Susan Cullen

because XXXX, get get we I XXXX, up. years, adopted mess my in me, I excuse my years,

Chris O'Connell

No you. problem. Thank

one It then yield And one. minor pretty deposits kind great. Okay, of the looked just earning cash like the interest had on been holding consistently?

Susan Cullen


Chris O'Connell

there just or up any implemented like bit strategies anything? And this a quarter, was came being

Susan Cullen

Fed primarily paying, we're us as seeing. reserves the are Fed, dependent sitting No, whatever that is what is in on the is Fed so

Chris O'Connell

any seems you I'm the what it the indicating specific the a know holding the then that point? from it on guidance. And quarter go guys liability give this and guess stable more near side terms seems upward just I margin of I like little to deck, of more say term at you're And Is and lastly, relatively of in slide asset don't towards kind margin, more is on last pressures. overall like it's movement. seeing, side safe it is in relatively kind downward an that of to there bias bit But

Susan Cullen

I flattish more. just as we point, a little buyers would at do say have still it's bit this a relatively Chris,

the I as in those the susceptibility balance of pipeline And pretty we sheet. XX% to is can what And about of side But were not they reprices about our is year. we've talked continuing We there past, squeeze floors, in able our some hold given think, any yields. although the portfolio consistent. as liability have to asset the on yields. John out said,


Buran John for At this conference I'd any over questions to the closing like no there more queue, in to remarks. are back the time turn

John Buran

we been the very certainly attention. year. again. up to much. Yes, all over This has you Well us you a we hope speak stay we quarter good so, one a wrapping all for strong Bye thank look now. next sound or And forward very again, safe for your thank and once you till and very,

Susan Cullen

you. Thank


conference The presentation. for today's is attending now Thank concluded. you

may now You disconnect.