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Flushing Financial (FFIC)

Participants
John Buran President and Chief Executive Officer
Susan Cullen Senior Executive Vice President, Treasurer and Chief Financial Officer
Mark Fitzgibbon Piper Sandler
Manuel Navas D.A. Davidson
Chris O'Connell KBW
Call transcript
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Operator

Welcome to Flushing Financial Corporation's First Quarter 2022 Earnings Conference Call. Hosting the call today are John Buran, President and Chief Executive Officer, and Susan Colin, Senior Executive Vice President, Chief Financial Officer and Treasurer. 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.

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 of Private XXXX. Securities Act Litigation of Reform XXXX that Such statements risks, such those actual the to company's are statements, from including to materially in forth U.S. may in filings other differ the uncertainties, results contained cause and subject factors any as set with and Commission, which refer we Exchange you. Securities to

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

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

John Buran

Thank First Quarter everyone you, the to Chief our I'll Call. before today's On and strategic us Earnings discuss Officer. objectives Susan and for call, joining over ongoing Operator. Financial turning thank quarter XXXX on highlights you call Good first Colin, morning,

on affecting earnings a was of on This the basis we a quarter. us in record answer we're continues deposit and the macro $X.XX. questions. of We loan remain through impact core a we'll basis first and an as of to factors We up remarks, start deposits of Core basis the in-market The are on our low Return trends prepared our disruption of core of economy. range closings, returns of improve. executing XX.X%. Following had the results. bearing on $X.XX was economy by will the reported to the billion quarter, impact year-over-year. this return These our of and but On local record are Slide The improving translated of EPS on to were environment elevated and and some return in assets at first return the your XX good quarterly goals excluding challenging share monitor declined GAAP increasing were equity points off strategic on Loan Non-interest on XX.X%. banking and XX remain respectively. cost repayments objectives, quarter, and per various quarter. deposits and to stated merger expectation rates points the PPP, XX% mix cycle rising to Cohort. of X% for focused all the X, the XX% encouraged year-over-year macro seen XX.X% a the of rest XX industry but in our within assets equity X growth points a continued

However, pipelines was loan quarter. business and the our loan are growth commercial significant at levels record during

is Asset of company. quality hallmark this a

risk credit remained the Our solid profile and conservative. is metrics

XX of from that in and people revenue involved We we these in to the XX as continue institutions in future our hired are producers. markets are people merger invest

our disruption $X.X our on seasonal for markets. our with returns shareholders. we're strategic pleased objectives merger not Additionally, the million second is impacted generating reoccur X that Overall, I'm occurring the expenses by Slide of first-quarter in execution the was outlines that and quarter. will our in

next five XX as X business biggest the We was our closed deals During expand to of these talent opportunity will occur believe one over year-to-date. more announced deals the months, the add to more and integration quarter, progresses. and deal

significant City continues see to MSA, levels pre Slide back focused New see employment the X, in in to economy improvements, Given you leisure -pandemic this organic environment, growth we local and quite to hospitality. is On especially expect to the while York on improve can not it remain continues opportunity.

New -pandemic on markets square York positive markets above community activity The foot per continues within risen has The volumes. are and to local list our and our pre MSA business and are a housing is City levels. impact having business price median improving price index, and this improve.

Commercial production our not includes compared real been recovered, the reaching Asian has money serve, last and which quarter events refinances, pricing regarding the New discipline represents economy, drivers. two which to women's pipeline improving that XX% is satisfactions the without X, and loan in stress you XX% we've quarter. Unfortunately, and seeing see one example, rates this all-time of in Business and XX% first up at The incremental year. objectives. markets the to only of loan this execution big strength last a the its new up impact achievements the estate Pull-through remain leader. local I pipeline by continue For maintain strategic in XX% impacted galas, banking quarter of price three X% disruption, we're we is XX% quarter with of is same have any The merger want as and and in parades, elevated an high, participated about our is also PPP. year-over-year. loan strong both Slide pipelines. we pipeline repayments to this Year several the Lunar quarter honoring On quarter-over-quarter.

We to it set X product repayments Slide slow we platform. continued interest and creates the in customer recognize digital growth enhances as technology the loan improves rates increase. our shows the and of efficiencies. XXXX our satisfactions importance of experience, However, as expect

online digital product continues to digitally usage Zelle banking continue to the We're recently hours. our expanded customers enrollment. platform and dollar numerated see can close small These quickly monthly with pleased our as as We loans. growth this and by users, to rates We gain traction. high as XX originate loans banking active mobile users, active

we originated $X During quarter, million. the over

just the the originations, platform quarter's of amount is marketing early this is very While the over stages. our in X% in

more offerings key our Susan. product financial I other Colin to partnerships. will and detail now to on over explore metrics, it to FinTech continue turn We provide Susan

Susan Colin

I'll year-over-year of XX% in bearing to Thank is you, of us. X, $X XX% deposits record billion growing John. non-interest for Average deposits. on deposits comprised average Slide a priority increased bearing begin a nearly non-interest over

yields. our non-interest closer to has for the we non-maturity hike XX% stable higher for XX Our deposits teams cost accounts in non-interest first which quarter-over-quarter. quarter-over-quarter a X were XX% the Slide last points the in X% of funds more in accounts. own margin of is year-over-year. the trends. by and margin basis includes basis satisfaction cycle points interest-bearing Net mentioned from -bearing increased expect great gap X.XX%, increased XXXX of XX interest PPP mix periods. rates are increased encourage gains the quarter CDs helping payments non-interest interest to loan which were year-over-year. Core higher fair points from and borrowings record the than XX% the as These pipeline deposits excluding income, the accounts deposit funds ranging XX% margin you income money. from interest remain funds previously include basis new Core expanded, than personal points XXth, in drive XX% points has yields, prepayment our [Indiscernible] that average loan were down adjustments reduced percentage quarter-over-quarter, impact and before outlines interest quarter. with Slide rising and or had excluding over XX% of optimistic is then and before of purchase XXX% basis value to low net the accounting of The XXXX value fair cycle. The risk between from net adjustments. We net bearing pipeline time, doubled. XX those start opening accounting for takes Overall, new rates, The very accretion, non-interest products. positive gains at cost checking first the are net and what add the has totaled impact improved accelerate margin million assumptions CDs deposits, The cycle. removes which net Higher The look a by growth up to Slide quarter. XX% balance interest basis XXXX the in September interest loan and the deposit loan are conservative net year-end at increased of and income job $XX Net to XX funding, period bearing PPP, yield The rate PPP funding stable originations X The a X.XX% deposits the and quarter-over-quarter, points, record X was profile. X of and that the continues first XXXX. borrowings base income loan outlines approximately funding portfolio as a a rate doing impact of XX improved to At $XXX bearing narrow. funding betas At used the GAAP for the XX% of market between which only [Indiscernible] a last more during for slow basis difference nearly we our increased We your reporting was will the of repeat Fed loan improve and in period [Indiscernible] about prior record consist in quarter, margin in our improved March than business incremental and experienced and XX% between which points net new Loans XXXX. which to basis by adjustments. With were increased Core year-over-year. to the XXXX. of quarter-over-quarter and up of or purposes. growth last net and rates the of remodel Fed of while nearly from to X% X.XX% interest interest and we X%. significantly million. on filing costing accretion, And penalty. accounts purchase were of points reporting XX in average net refinancing

increases be margin outlook. a in increases By net lag rate to Our lagging rate ability to our cycle. deposit pace key factor will to similar a interest deposit last determining

interest gradual as Our XX income income rates net approximately the improved the to to provide the rising and in perspective basis summary, In points next The without rate net modeling equates is rate increase annual net we point income costs, for funding our deposit handle believe manage an adjustments. basis by interest positioned we interest additional over favorable risk rate any rise more would a rates million approximate to has for increase outlook $X profile environment. XX% better in interest short-term to significantly in improve better deposit year. XXX

we XX, side asset offsets some of Slide of the the to the on Turning outlined sheet. balance have we

rate have the loan cycle. to the floating largely First, previous business are increased XX% banking XX% in loans, which portfolio from of

we floating have that million of loans to rate rate. Second, $XXX swaps loan convert fixed

about loans curve level actual reprice. Third, shape on the approximately of real of higher of reprice yield of there the March. will the are the on estate that and $XXX points based basis XX curve The at million the end depend rates will loans benefit when

including higher compared interest rates approximately we next will of billion Overall, over within prepared cycle. $X Importantly, are this loans higher cycle last the handle year. XX% better to hedges, reprice to

X credit the were onto loan-to-value than to X% Slide declined strong of is portfolio first in on assets assets Non-performing of of linked Net XX% points a our we is primarily and relatively charge-offs these credit of underwriting. an loans basis XX% low-risk real only credit on and additional than long loans the $XX and has or quarter, X% quality of XX% asset LTV conservative allowance average X outlines profile or points Slide in for loans during losses less classified XX due to Moving quarter. points less first loans have quarter. increased the XX some on history loan-to-value loan the million basis The the metrics. estate average XX, portfolio were to quarter. stable credit only The and criticized more. quality, basis

chart. right continue of to mix picked loss loans comfortable profile bottom and content. in the expect reserves very As we risk it with remain Overall, minimal our credit by the the

quarter-over-quarter first Our capital loss capital quarter quarter, increased $X the book its Company as was flat Slide to XX% enough of cumulative to were and X%. our XX, absorb and other first million equity position per tangible shareholders. in on net the common ratio in and book value increase the is return. income dividend share return remained depicted repurchased the comprehensive to quarterly over tangible common per stock over value of $X.XX earnings The share

grow opportunity attractively profitably multiples the are yield, Our low unchanged The sheet, priorities to opportunistically balance repurchase as capital We'd significant second book its growth. and the value. to future to shares. stock for priced given and dividends tangible shareholders be are our X% the first pay and approximate third,

to and balance Before color income a I want turn interest margin on it the outlook. to John, Net is some net back [Indiscernible] function sheet interest I growth. of

for In penalty drivers accounting previously includes addition to we the prepayment income. key discussed, of first-quarter also purchase margin and net levels accretion, elevated net the interest results and

not loan normal expected been seasonal single-digit While is repayment rates, to during to expense growth quarter. $X the over in expense expenses million rise high has seasonal second patterns. core recur by XXXX. repayments we XXXX that impacted Non-interest still of should expect slow [Indiscernible] The includes in base high

XX%. to John. the I now tax year for it current will to over turn XX.X% approximately rate Lastly, effective back the should

John Buran

On with key XX, you, wrap up our Thank messages. Slide Susan. we

economies on recovering are capitalizing and merger local Our we're disruption. a

record is pipeline a level. loan at Our

During XXXX, from expect the markets closed, in year growth our will merger participants. hired from today improve loan we've have revenue the of producers the beginning of five the we mergers through XX

investing and repricing improved and quarter. rising versus rates record The our a mix and the are favorable business positioned low past the to for second We funding cycles, cost company swaps better is funds with in with starting in people.

rates Our net be in key determining interest control the income deposit will outlook. ability to factor a

dividend low company over to ratio. and to first open performed model that cycle it in low for value return had We've assets on the price the book approximate multiple. a the average it's credit elevated portfolio average questions. tangible equity to the and up versus a We risk our through a on have seasonal at stock expenses. well despite trades conservative goals I'll return lines in quarter, risk you has business an low X% traditionally turn the loan-to-value The with yield Operator,

Operator

and with will come from now begin Please gentlemen. Ladies answer Fitzgibbon Instructions] [Operator our and We'll you. Thank Mark session. question Sandler. go ahead. first question Our Piper

Mark Fitzgibbon

Hey, quarter. morning nice guys. and Good

Susan Cullen

Thank you, Mark.

John Buran

Thanks, Mark.

Mark Fitzgibbon

the For to that in Susan, did I be the clarify, caught you second say XQ just million just I quarter number number? $X want about should make that. to expense sure from the down

Susan Cullen

expenses have every $X the quarter. The million we is Yes. seasonal first

Mark Fitzgibbon

average you and Okay. Great. of for the rate of And that maybe what down then break if secondly, I on pipeline $XXX terms complexion, wondered like looks us loans could in million types the the like?

Susan Cullen

is a rate the is portfolio. the not the material right of X% difference. The portfolio our mix it's And very similar XXX now, approaching to There's approximately on pipeline.

John Buran

there There's structure probably a little of bit more C&I portfolio. the than in the

Mark Fitzgibbon

great. Okay,

John Buran

what terms we Similar to -- percentages. in what posted last of we've quarter

Mark Fitzgibbon

Got or is you. then since the really has the Are is. rate go closer slides you neutral? the the rates rise sensitivity that in you how thought to sensitive helpful suggesting about asset balance changed Positioning should the the cycle. And was margin I today actually that are provided sheet we and stuff core as up that last

John Buran

to been. than clearly we're neutral No, but we've asset say closer are we I can't sensitive, ever

Mark Fitzgibbon

increase confidence to then NII. you saw we as Fed some about rates so your deposit that move gives And increases? I million What Great. the $X won't comments much higher in more start Susan, the Okay. get

Susan Cullen

that liquidity will the with going forward. in market billion down a of help will increases. bearing down of of tamper mix The cost primary on the rate the and Also that's non-interest the focused we the our cost help are deposits the funds. very, funding driver, $X very tamper That's

John Buran

emphasize in And growth. end then bearing the we've -- restructured year our last of incentives at non-interest DDA to

Mark Fitzgibbon

buybacks below and the Okay. you now How balance really I I'm how other? book tangible given lastly, the do growth And you stocks attractive. one looks curious your versus weigh guess versus then just value

Susan Cullen

first a where deploy right anybody the we're grow yield priced sheet priced and several attractively going for given that now for haven't agree, trading. We that's been attractively then and that Mark, great we philosophy capital. years can we've where profitably we that to if we're capital deal the now, our really dividend our articulating very changed balance

Mark Fitzgibbon

you. Thank

Susan Cullen

Mark. you, Thank

Operator

Our ahead. Manuel please with go Davidson, next question D.A. from comes Navas

Manuel Navas

Hey, morning. good

Susan Cullen

Good morning.

John Buran

Manuel. morning, Good

Manuel Navas

you just that flat see the next seasonal rest have on for high the up current out, some Year. the mean we Does the I that still but single-digit cost guidance same I trajectory. there's coming to of to should follow levels quarters? expenses of of still the expense wanted three understand for Full growth kind

Susan Cullen

if haven't and we company No, we and year as expense basis, yet. seen do really our Company Investment -- that last core to about invest expect it with the in as starts our take base of expenses We increases -- million. the had to to expenses in start we we inflation, of expect there hold our the $XXX really be in we play

growth some expenses. the increase have We anticipating will also that we're that

Manuel Navas

Okay, the growth variable so at little a comp better loan a bit?

Susan Cullen

Yes.

John Buran

additions expenses still talent looking actively with and provide goes that we're on. and Yes, additional of data us the year will as to for course

Manuel Navas

employees the rate? the can And that new add more you details in? first We're business lines in any were are what fully about added quarter run

John Buran

much business Pretty They development individuals. board. are mostly the across

Manuel Navas

eventually, as if your in IntraFi and the avenues? decline, discuss fill pay deposits with growth on deposit the the the you of markets, can And Okay. you capabilities growth higher of or touch rates global kind commercial all gathering banking, gaps. get Perhaps capabilities of Network those deposit that Asian various internet American and the downs

John Buran

our we've been the obviously, at made there. bearing look we We our of successful non-interest funding orientation some focus on quite where in changes and terms and

the in funding as Clearly that, be we opportunities banking fair We business. our that a continue beyond do powder online and amount contributor. invest forward. use see expect varied a last make year. to of the of have going and capability improving we dry have it very Internet a we we major capability We to And side then did on of

we've our we starting back, outside loan got come a commercial strong liquidity will that. positive as growth to very, impact we begins out of And of get also from see real some billion about we're $X to feel gathering. participation banking. of very We've our and any business that deposit -- estate So dollars

flexibility. we've very in existing liquidity I situation the think a forward. to So deal great down competitive got going should the And -- with significant, activity respect of pump market any

our we're also gather in shape deposits, reasonable very funding, a good maintain of increases level think ability to gross. funding it as I and gather relates So in to

Manuel Navas

that appreciate it I think I covers now. that for

Susan Cullen

you. Thank

Operator

instructions]. [Operator you a Again would if ask question, like to

KBW. Our next with Chris question O'Connell comes from go Please ahead.

 Q

Morning.

Susan Cullen

Morning Chris.

 Q

of Was guys follow normal know the drop expense But which guidance based the back rest sharp to increase patterns, should year. is the seasonal hoping fairly in a in years? Typically you point mentioned the to to be QX. of circle FY guidance. for there substantial on the second half it's in starting Hi. I the to normal relative is pretty a flattish XX going here,

Susan Cullen

think expenses in don't in call, first this we than we so. would planning are hiring I they invest year be get the to the in higher. will half. be inflation the will the in the Yes, of say half If we're second personnel company, as the on I want higher

 Q

Okay. pipeline, converge terms in then think see of seeing around terms current will current the gave the the what of with satisfactions do the you what there. And and loans? do given you yield in color you the Got portfolio GAAP yields Great. How court it. in trends Makes sense. you're on in pipeline

John Buran

portfolio the yields increase we second, So portfolio the natural to is the tendency on. goes first real the portfolio -- prices to that talk for of the in let's talk when time start place a natural as estate about of probably well, tendency about

certain put peg we we So rates. loans to when them reify these on,

prices we'll loans year, will have We over And we this that pace. close move increase, X%. will slow loans of real reprice upward rates of a the XX% and our at as continue for to to estate course around somewhere example, that those at have reprice

in will get loans, or better market your reify the elsewhere, Now will reifying yield be those is we the Because commercial market. a better to be what to may the estate loans than be and not go get but able able real of -- out a X% margin because we of it looking for to we will at. expensive get risk

of rise. So the tendency we the have estate to natural portfolio portfolio, this real

rate In a addition, a our we've that growing C&I of due in got floating capabilities and loan to portfolio significant proportion growth. very is proportion our

that to -- upward So more yields see portfolio. we and already expect upward seen positive expect see to we've pressure -- pressure we'll on in

also the be hedged. are in areas that So indicated continues major the growth on a And is have portfolio normally portfolio of real as would estate also the the that fixed, loans those as Fed to then have we continued of our two Susan move. portion now we yield --

portion of the fixed formerly portfolio It's move. that will $XXX So over also million.

 Q

Great.

John Buran

a that got capabilities cycle. today last number of We've a lot we didn't -- years during ago upward of the we have have that cycle rate

 Q

seeing definitely. Yes, multi-family are yields on And origination coming specifically that where guys now? you

John Buran

X's mid-to-high the size up X's, All etc. into based and LTVs, of along go category. upon the High the loan, the four

Mark Fitzgibbon

then And on a of kind was guys again, missed comment Good. made go you please. it something pipeline, it Okay. could over if a I the money. you new wondering about of there. percentage I

Susan Cullen

pipeline, Sure. $XXX,XXX. the $XXX,XXX, loan of money, company, to the $XXX new in not only is on if you new with pipeline and Said have the $XX,XXX of want you X% only XX% deals full money the us Meaning the is thousand incremental is refinancing. today a our pipeline that

Mark Fitzgibbon

that. AOCI this impact Appreciate then do have Great. Okay. And the quarter? guys you

Susan Cullen

by had impact We had us. positive some security very the derivatives AOCI. to were the We offset

was This $X.X $X decline quarter, the overall million, about million.

Mark Fitzgibbon

Okay, great. Thank you.

Susan Cullen

the -- was value net Outlet about XX the decreasing book Was net resulted effect. in points. basis overall tangible

 Q

Yes.

Susan Cullen

sorry I'm PCE.

 Q

And levels Great. then could charge-offs. Okay. curious through SBA you still walk if at wondering, was obviously low lastly, and just the overall,

Susan Cullen

just was items small a charge-offs they immaterial nothing indicative SBA that There the came. portfolio. few deterioration the was of in So

 Q

Thank had. I Okay. you. Got it. That's all

Susan Cullen

Chris. you. Thank

Operator

from is please D.A. go question with Navas ahead. a Davidson, next Manuel Our follow-up

Manuel Navas

had Hey, I one more. just

what all? first-quarter you was just deposit to those touch any loans. then haven't, on the would the rates call on question. pay do any I down, at April to competition of but you driving who raise bad those pay the have kind was and of it seen it have With And kind view side, taking of start you areas you of know in actors downs

John Buran

more taken say I pricing -- part to was think we And the little a willing most place pay for associated then match. aggressive bit the downs weren't some that let's the

Susan Cullen

we've wholesale markets. anything not seen together, in some Deposit one-offs, the but

Manuel Navas

that's Okay, helpful.

insurance our With or the have just away, I loans carefully, trying for get refi other understand pricing companies like to a try on that just banks? very -ed it that. is wondering. but to I sense it

John Buran

There's up. banks and insurance picking banks. that mostly companies. it's banks Mostly But are these

Manuel Navas

Thank you. appreciate I it.

Operator

our question-and-answer to session. This remarks. the I turn would Buran like concludes conference any for back over John closing to

John Buran

Well on thank we're I look everyone. you. continuing your -- participation I the for you improving once a pleased and update And we've quarter with attention forward day, want very Have to to toward business. the thank on call. good you think again, our to the progress very, and

Operator

teleconference. today's concludes This

disconnect and may lines your thank you your now participation. we You for