Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Flushing Financial Corp (FFIC, Financial) recorded its best quarter in the past seven, with GAAP earnings per share of $0.30 and core earnings of $0.26.
- Net interest income increased by 6.6% quarter-over-quarter, with a 5 basis point increase in net interest margin.
- The company maintains a strong credit profile with low-risk metrics, including a non-performing assets ratio of 59 basis points and a well-collateralized loan portfolio.
- FFIC has a solid liquidity position with $3.9 billion available as of September 30, and a low level of uninsured and uncollateralized deposits at 15% of total deposits.
- The company is actively investing in growth opportunities, including the addition of an SBA team and new branches, which are expected to improve long-term profitability.
Negative Points
- The operating environment remains challenging, with uncertainties around deposit pricing and loan demand due to fluctuating interest rates.
- Non-interest expense growth was about 6% year-to-date, slightly elevated due to investments in business growth.
- The cost of deposits increased by 17 basis points in the quarter, indicating pressure on funding costs.
- The net interest margin is expected to remain stable in the short term, with potential volatility due to competitive pressures and interest rate changes.
- There is a reliance on non-recurring items such as insurance recoveries and discrete tax items, which contributed to earnings but are not expected to repeat.
Q & A Highlights
Q: Could you provide details on the $50 million of securities sold at the end of the quarter?
A: Susan Cullen, CFO, explained that they were adjustable rate CLOs sold with a minimal gain as the loan growth increased, prompting the sale of these assets.
Q: What was the net interest margin (NIM) for September, and how did the deposit repricing on October 1 affect it?
A: John Buran, CEO, stated that the September NIM was 2.28%, but excluding a large recovery, it would have been 2.10%. They repriced $1.8 billion of non-maturity deposits 50 basis points lower on October 1, expecting some pickup from this action.
Q: Can you provide more information on the charge-off for the quarter?
A: Susan Cullen, CFO, mentioned it was a C&I loan that had been fully reserved in prior quarters, and the decision to charge it off was based on new information.
Q: What is the outlook for the net interest margin if the Fed cuts rates by 150 basis points by the fourth quarter of 2025?
A: John Buran, CEO, indicated that a positively sloped yield curve or a flatter curve than today would benefit the NIM. Their interest rate modeling suggests a steepening of the curve by 200 basis points could increase net interest income by about $4 million in the first year and $20 million in the second year.
Q: What is the company's target for return on tangible common equity (ROTCE) through the cycle?
A: John Buran, CEO, stated their target is 10%, which they believe is achievable, noting they reached this level in 2021 and 2022.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
