• Equity Raise: Completed a $70 million equity raise in December 2024.
• Net Interest Margin (NIM): GAAP NIM increased 29 basis points to 2.39%; Core NIM increased 18 basis points to 2.25% in Q4 2024.
• GAAP Loss Per Share: Reported a GAAP loss per share of $1.61 in Q4 2024.
• Core Earnings Per Share: Core earnings per share of $0.14 in Q4 2024.
• Pre-Tax Loss: Incurred a $76 million pre-tax loss due to balance sheet restructuring.
• Average Deposits: Increased 8% year over year; flat quarter over quarter.
• Loan-to-Deposit Ratio: Improved to 94% from 101% a year ago.
• Cost of Deposits: Decreased by 34 basis points during the quarter.
• Total CDs: $2.7 billion or 37% of total deposits at quarter end.
• Loan Repricing: $750 million of loans due to reprice 214 basis points higher in 2025.
• Net Charge-Offs: 11 basis points for 2024.
• Non-Performing Assets to Assets: 57 basis points.
• Tangible Common Equity Ratio: Improved 82 basis points quarter over quarter to 7.82%.
• Asian Market Deposits: $1.3 billion, representing 18% of total deposits.
• Non-Interest Expense: Expected to increase 5% to 8% in 2025 from a base of $160 million.

• Warning! GuruFocus has detected 5 Warning Signs with FFIC.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Flushing Financial Corp (NASDAQ:FFIC) completed a $70 million equity raise, which allowed for balance sheet restructuring and improved net interest income.
• The company's net interest margin (NIM) expanded in the fourth quarter, with GAAP NIM increasing by 29 basis points and core NIM by 18 basis points.
• Asset quality remains stable, with a low-risk and conservative loan portfolio, and a tangible common equity ratio that improved quarter-over-quarter.
• The company has strong liquidity and capital, with $3.6 billion of undrawn lines and resources, and a low level of uninsured and uncollateralized deposits.
• FFIC is expanding its branch network, particularly in Asian markets, which presents substantial growth opportunities given the dense population and high number of small businesses in these areas.

Negative Points

• FFIC reported a GAAP loss per share of $1.61 in the fourth quarter, primarily due to a $76 million pre-tax loss from balance sheet restructuring.
• The company's book value and tangible book value per share declined by about 7% year over year due to the rate environment and capital actions.
• Non-interest expenses are expected to increase by 5% to 8% in 2025, driven by investments in new branches and the SBA team.
• The retention rate for maturing CDs was about 78%, indicating a competitive deposit market in the New York metro area.
• The company faces challenges in crossing the $10 billion threshold, with potential costs and regulatory impacts, although many costs are believed to be already incorporated.

Q & A Highlights

Q: On page 4 of the slide presentation, you mention the balance sheet restructuring is largely completed. What remains to be completed in the first quarter? A: The loan sales haven't been completed yet. We've marked the loans, but the actual cash proceeds and consummation of the sale have not occurred yet. This is expected to happen within the first quarter.

Q: Regarding branch expansion, how many branches are planned, where will they be located, and what are the cost implications for 2025? A: We plan to open two branches as part of our Asian initiative in 2025. We expect non-interest expenses to increase between 5% and 8% off the $160 million base, inclusive of these branches.

Q: Could you update us on the costs associated with crossing the $10 billion threshold and any significant Durbin impact expected? A: There is not a significant Durbin impact as we don't have a large fee base on those cards. Most costs are already baked into our expense base, with minimal additional expenses expected as we cross the $10 billion threshold.

Q: Given the changes and comments around the NIM, where can the NIM potentially get to by the end of the year? A: We expect the NIM to be in the range of 2.30% to 2.40% by the end of the year, which is slightly lower than the 2.50% target.

Q: How are you thinking about your interest rate sensitivity positioning going forward? A: We are largely neutral, allowing us to manage either upward or downward movements in interest rates without significant issues.

Q: What are your expected loan sales for the upcoming quarter, and how much production do you expect to retain from the SBA team? A: We will sell a couple of loans in the first quarter, and the SBA business will be an important part of our ongoing restructuring of the portfolio, contributing significantly in 2025.

Q: Could you provide more details on the largest NPA this quarter and the types of charge-offs within the C&I portfolio? A: The largest NPA was a loan fully reserved for in prior quarters, accounting for $4.4 million of net charge-offs. Additional information led us to believe there was a slight impairment, prompting a prudent charge.

Q: What are the drivers of the 5% to 8% expense growth for 2025? A: The drivers include increased compensation as we invest in the business, a full year of the SBA team, new branches, and regular increases. We expect positive operating leverage and an improved efficiency ratio in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.