Flushing Financial Q4 2024 Earnings Report

Flushing Financial EPS Results

• Actual EPS: $0.14
• Consensus EPS: $0.21
• Beat/Miss: Missed by -$0.07
• One Year Ago EPS: N/A

Flushing Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $45.96 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Flushing Financial Announcement Details

• Quarter: Q4 2024
• Date: 1/28/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 9:30AM ET

Flushing Financial (NASDAQ:FFIC) operates as the bank holding company for Flushing Bank that provides banking products and services primarily to consumers, businesses, and governmental units. It offers various deposit products, including checking and savings accounts, money market accounts, non-interest bearing demand accounts, NOW accounts, and certificates of deposit. The company also provides mortgage loans secured by multi-family residential, commercial real estate, one-to-four family mixed-use property, one-to-four family residential property, and commercial business loans; construction loans; small business administration loans and other small business loans; mortgage loan surrogates, such as mortgage-backed securities; and consumer loans, including overdraft lines of credit, as well as the United States government securities, corporate fixed-income securities, and other marketable securities. It operates full-service banking offices in Queens, Nassau, Suffolk, Kings, and New York counties, New York; and an internet branch under the iGObanking and BankPurely brands. Flushing Financial Corporation was founded in 1929 and is based in Uniondale, New York.

Flushing Financial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Welcome to Flushing Financial Corporation's 4th Quarter and Full Year 2024 Operating Results Conference Call. Hosting the call today are John Buran, President and Chief Executive Officer and Susan Cullen, Senior Executive Vice President, Chief Financial Officer and Treasurer. Today's call is being recorded. After today's presentation, there will be an opportunity to ask 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 this call contain certain forward looking statements made under the Safe Harbor provisions of the U.

[Operator]

S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may result could cause actual results to differ materially from those contained in any such statements, including as set forth in the company's filings with the U. S. Securities and Exchange Commission to which we refer you.

[Operator]

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

[Operator]

I would now like to turn the conference over to John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and results.

[John Buran, President and CEO at Flushing Financial]

Thank you, operator. Good morning, and thank you for joining us for our Q4 and full year 2024 operating results conference call. And we want to say a special thank you for our Asian customers who are celebrating Lunar New Year. The Q4 and 2024 were important milestones for the company. In December, we completed a $70,000,000 equity raise that allowed the company to restructure the balance sheet and to build on the momentum created in net interest income in the second half of twenty twenty four.

[John Buran, President and CEO at Flushing Financial]

As we indicated last quarter, funding costs peaked in the middle of the third quarter with sequential NIM expansion. These trends continued in the Q4 with GAAP NIM increasing 29 basis points and core NIM up 18 basis points. The balance sheet restructuring should increase core NIM by 10 to 15 basis points in the Q1. After a difficult couple of years battling higher rates and an inverted yield curve, the operating environment is improving. Our asset quality remains stable and our tangible common equity ratio improved quarter over quarter.

[John Buran, President and CEO at Flushing Financial]

For the Q4, the company reported a GAAP loss per share of $1.61 compared to core earnings per share of $0.14 The balance sheet restructuring incurred a $76,000,000 pre tax loss or $1.74 per share after tax. The capital raise and balance sheet restructuring has positioned the company to significantly improve profitability and strengthen the balance sheet. On slide 4, we discuss our first area of focus, which is to increase the NIM and reduce volatility. Our GAAP and core NIM expanded quarter over quarter as funding costs declined 34 basis points, while interest earning assets declined only 3 basis points. We benefited both from our real estate loans repricing higher and our funding cost repricing lower.

[John Buran, President and CEO at Flushing Financial]

Our average non interest bearing deposits increased quarter over quarter to aid NIM. In addition, actions to reduce our interest rate risk profile helped as well. We're seeing continued demand for our back to back swap offerings. We feel good about the progress achieved so far and we recognize there's more work to be done. I'll turn it over to Susan to provide some more details on our net interest margin and asset quality.

[John Buran, President and CEO at Flushing Financial]

Susan?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Thank you, John. Slide 5 outlines the net interest income and margin trends. The GAAP and core net interest margin increased 29 and 18 basis points to 2.39% and 2.25%, respectively, in the 4th quarter. Liability repricing is a driver of the improvement. We are encouraged about the direction of the net interest margin given the more positive environment in our strategic actions.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

The slope of the yield curve has turned positive, and this will have an expansionary impact on our net interest margin in the future. Our interest rate risk modeling shows 100 basis point positive slope in the yield curve with the short end declining would benefit net interest income by about $2,000,000 in the 1st year and $12,000,000 in the 2nd year. The balance sheet restructuring is also expected to have a 10 basis point to 15 basis point improvement in the core net interest margin in the Q1. We are laser focused on improving our non interest bearing deposits by assessing customer relationships and revamping incentive plans. Slide 6 provides more detail on our deposits.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Average deposits increased 8% year over year and were flat quarter over quarter. Average non interest bearing deposits stabilized in the second half of twenty twenty four and were 12% of total average deposits compared to 13% a year ago. The loan to deposit ratio improved to 94% from 101% a year ago. The cost of deposits decreased by 34 basis points during the quarter, and we continue to seek opportunities to lower deposit rates in the future. Our deposit betas were favorable during the quarter as interest bearing deposit betas were 51% as rates declined compared to 57% when rates increased over the past cycle.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

We continue to focus on shifting the deposit mix and reducing the overall cost. Slide 7 provides more detail on our CD portfolio. Total CDs are $2,700,000,000 or 37 percent of total deposits at quarter end. Approximately $800,000,000 of CDs, the weighted average rate of 4.59 percent will mature in the Q1. Current CD rates are 3.5% to 4.25%.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Our customers' preference is for the 91 day product, which has an APY of 4.25% followed by a 1 year CD of the 3.85% rate. During the Q4, we retained about 78% of the maturing CDs with a weighted average rate reduction of 88 basis points. We see a significant opportunity to reprice CDs lower as they mature. Slide 8 provides more detail on the contractual repricing of the loan portfolio. For 2025, about $750,000,000 of loans are due to reprice to 214 basis points higher than the current coupon rate using the December 31, 2024 index.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

A similar amount is due to reprice in 2026, with the last sizable portion repricing in 2027, where nearly $1,000,000,000 of loans due to reprice about 200 basis points higher. The repricing in 2025 through 2027 is largely based on the 5 year Federal Home Loan Bank of New York advance rate plus the spread. At December 31, 2023, there were over $300,000,000 of multifamily loans that were scheduled to reprice approximately 200 basis points higher. During 2024, about 81 percent of these loans were repriced and remained at the bank. These loans were priced 2 25 basis points higher to a weighted average rate of 6.65%.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

This loan repricing should aid in driving net interest margin expansion. Slide 9 provides detail on the balance sheet restructuring. Since all the details are on the slide, I'll provide some high level comments. We sold low yielding securities and replaced them with yields about 3 70 basis points higher. The related swap in the securities was terminated.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

We restructured higher cost of Federal Home Loan Bank advances and saved approximately 30 basis points on the yield. Lastly, we moved about $74,000,000 of low yielding loans to held for sale and the related mark on sale was only due to interest rates as there was no credit mark. These actions will enhance our earnings profile by increasing the net interest margin 10 basis points to 15 basis points and strengthen the balance sheet for 2025. Slide 10 highlights our second area of focus, which is maintaining credit discipline. As we have discussed over the last several quarters, we have a low risk and conservative loan portfolio.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Over 90% of the loan portfolio is secured by real estate with an average loan to value of less than 35%. The multifamily and commercial real estate portfolios, which comprise about 2 thirds of the loans, have a weighted average debt service coverage ratio of 1.8 times. Our net charge offs and non current loans have a long history of outperforming the industry. Slide 11 provides context on these trends. The charts compare the company's credit performance versus the industry.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Our underwriting has outperformed over time, often by a wide margin. Conservative credit culture has been proven in many rate and economic cycles and our commitment to our low risk credit profile is unwavering. The results of our low risk credit profile are shown by the charge off history on the chart on the left. We expect our net charge offs to remain well below industry levels. For 2024, we had net charge offs of 11 basis points.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

In the Q4, net charge offs were primarily related to loans that were fully reserved in previous quarters. Our level of non current loans, total loans, is also favorable compared to the industry. In a stress scenario consisting of a 200 basis point increase in the rates and a 10% increase in operating expenses, our portfolio has a debt coverage ratio of 1.3x. Given this, we are expecting minimal loss content within the loan portfolio. Additional credit metrics are shown on Slide 12 and demonstrate our conservative risk culture.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Non performing assets to assets totaled 57 basis points with loan to values at 57%. During the Q4, we allocated approximately $3,000,000 of reserves to our largest non performing asset based on updated information. Our level of criticized and classified assets remains low and well below our peers. 30 to 89 day past dues are 48 basis points of loans, indicating a low level of potential future losses. The quarter over quarter increase in delinquencies primarily relates to real estate loans with a weighted average debt coverage ratio of 2.4 times and a loan to value of 41%.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Our allowance for credit losses is presented by loan segment at the bottom right chart, and the ratio to overall loans totaled 60 basis points. All of these items keep us very confident that our low risk credit profile performs well over time. Slide 13 outlines credit metrics at a more granular level for key portfolios. Our multifamily portfolio comprises 38% of gross loans and have strong credit metrics, such as a weighted average loan to value of 43% and a weighted average debt coverage ratio of 1.8 times. Non performing loans in this portfolio are only 44 basis points and criticized and classified are only 102 basis points of loans.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

The average loan size is $1,200,000 in this $2,500,000,000 portfolio. Investor commercial real estate loans, excluding the Office of CRE, totaled 26% of gross loans and have similar portfolio metrics as our multifamily loans with 0 nonperforming loans and 0 criticized and classified loans. Our exposure to office loans is small, less than 4% of gross loans. There is 1 non performing loan in the office portfolio, which we expect to be resolved shortly. These metrics provide a clear representation of our conservative and strong credit culture that has and continues to perform well over time.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Slide 14 provides further context on the risk in our multifamily portfolio and in comparison to peers. As of September 30, 2024, our career size and classified multifamily loans were only 60 basis points, the 3rd lowest in the peer group. At the end of the 4th quarter, this ratio was 102 basis points. The increase was primarily for 1 relationship consisting of 3 loans with a combined loan to value of 47%, with payments expected by the end of the quarter to bring the relationship current. Multifamily reserves criticized and classified multifamily loans were 71%, which was the 5th highest in the peer group in the 3rd quarter, and this ratio was 51% in the 4th quarter.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

These loans have an estimated loan to value of approximately 41%. 30 to 89 day past dues in our multifamily portfolio are 86 basis points. Over 98% of loans, which repriced in 2024 by over 200 basis points, are current with only 34 basis points 90 days or more delinquent. This is a testament to our borrowers and our conservative underwriting standards. With these credit metrics, we see limited risk and loss content on the horizon.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

I'll now turn it back over to John.

[John Buran, President and CEO at Flushing Financial]

Thanks, Susan. On Slide 15, we highlight our 3rd area of focus, which is preserving strong liquidity and capital. We have $3,600,000,000 of undrawn lines and resources, and our level of uninsured and uncollateralized deposits is low. Our regulatory capital ratios are strong and the tangible common equity ratio improved quarter over quarter. Our capital position is shown on Slide 16.

[John Buran, President and CEO at Flushing Financial]

Book value and tangible book value per share declined about 7% year over year due to the rate environment and our capital actions. The leverage ratio improved to over 8%, while tangible common equity increased 82 basis points quarter over quarter to 7.82%. Our capital priorities have not changed. Reinvest in the business first, then pay cash dividends, then repurchase stock. Overall, we view our capital base as a source of strength and a vital component of our conservative balance sheet.

[John Buran, President and CEO at Flushing Financial]

Slide 17 provides detail on our Asian markets, which account for about a third of our branches. We have approximately 1 point $3,000,000,000 of deposits and $749,000,000 of loans in these markets. These deposits are 18% of total deposits and we have only a 3% market share of this $40,000,000,000 market implying there's substantial room for growth. About a third of our branches are in Asian markets and we expect to expand this network in 2025. This market with its dense population, high number of small businesses continues to be an important opportunity for us and one that we believe will drive our success in the future.

[John Buran, President and CEO at Flushing Financial]

Our approach to this market is supported by our multilingual staff, our Asian Advisory Board and our participation and sponsorship of cultural activities. On Slide 18, you can see community involvement is a key part of our strategy. During the Q4, we participated in numerous local events to strengthen our ties to our customer base. We were an active participant in the Forest Hills Syosset Woodbury Street Fairs, Flushing BID and Ganesh Hutsav, Bell Rose. Participating in these types of initiatives has served as a fantastic way to further integrate ourselves with our local communities while driving customer loyalty.

[John Buran, President and CEO at Flushing Financial]

Slide 19 outlines the operating environment and our new business initiatives for 2025. The operating environment has improved significantly. The spread between the 5 year FHLB advance and the 3 months SOFA rates turned positive after spending much of the past year negative. This spread is a good indicator of how our net interest margin will trend in the future. We see continued opportunities to reduce our funding costs and our real estate loan portfolio should reprice higher over the next 3 years.

[John Buran, President and CEO at Flushing Financial]

With our focus on remixing the balance sheet, the company should experience NIM expansion. We're equally excited about our new business initiatives. We're laser focused on increasing demand deposits and we have several initiatives underway to achieve this goal including new branches, expanding customer relationships and enhanced relationship pricing. Additionally, another significant business initiative is building out our SBA team. We expanded the team in the spring of 2024 and have plans for future growth.

[John Buran, President and CEO at Flushing Financial]

During the Q1, we expect to close on our 1st round of SBA loan sales. To sum up, the operating environment has turned more favorable and we continue to invest in the business to drive future profitability. Slide 20 provides a high level perspective on performance in the current environment. We continue to expect slight loan growth, but stable assets. There will be a continued emphasis on improving the mix of interest earning assets and interest bearing liabilities.

[John Buran, President and CEO at Flushing Financial]

The core net interest margin is expected to expand during 2025 with a 10 to 15 basis point improvement from the balance sheet restructuring. Additionally, there should be benefits from CD and loan repricing. Non interest income should be aided by the closing of back to back swap loans in the pipeline and the benefits of a BOLI 1035 exchange. Non interest expense is expected to increase approximately 5% to 8% in 2025 off a base of $160,000,000 as we continue to invest in the business by adding people and branches. 1st quarter seasonal expenses are expected to be approximately $2,000,000 While quarterly tax rates can fluctuate, we expect a 25% to 28 percent effective tax rate for 2025.

[John Buran, President and CEO at Flushing Financial]

On slide 21, I'll conclude with our key takeaways. We enjoyed some progress in our areas of focus in 2024 as the net interest margin began to expand, our asset quality remains solid, liquidity and capital are strong and core operating expenses were within our mid single digit target while making investments in the business. Given the progress, we're shifting our 2025 focus to preserving strong liquidity and capital, maintaining credit discipline and improving profitability. The operating environment is improving as the yield curve has a positive slope compared to significantly inverted for most of 2024. We have opportunities to lower deposit rates, add loans with attractive spreads and remix the balance sheet.

[John Buran, President and CEO at Flushing Financial]

We look forward to a brighter 2025. Operator, I'll turn it over to you to open the lines for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin our question and answer session. Our first question comes from the line of Mark Fitzgibbon with Piper Sandler. Please go ahead.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Hey, guys. Good morning.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Good morning, Mark.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

A quick question. First, on Page 4 of the slide presentation, you say the balance sheet restructuring is largely completed. I guess I'm curious what's left to be completed in the Q1?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

The loan sales haven't been completed yet. We've taken the loans, we've marked them, but the actual cash proceeds and the consummation of the sales have occurred yet.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay. And so you think those will happen soon or?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Very soon, within the in the first quarter. Sorry, I'm a little tongue tied, within the Q1.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

There's no issues with the sales. It's just the timing. It's taken a little bit longer than we expected.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay. And then in your comments, John, and also in the slide deck, I noticed you talk about branch expansion. I guess I'm curious, how many branches, where those might be and sort of what the implications for costs might be in 2025?

[John Buran, President and CEO at Flushing Financial]

Sure. It's 2 branches. We did, of course, open up a branch in Suffolk County at the end of the year. So we expect that to the growth there to accelerate. And then we have 2 branches that will both be in our part of our Asian initiative that will happen during the 2025.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay. And any idea what the impact on expenses will be this year?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

We expect our non interest expenses to increase between 5% 8% off the $160,000,000 base inclusive of those branches.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Got you. Yes, I saw that guidance, but I just want to make sure that incorporated. Okay, great. And then could you update us on sort of the cost associated with crossing the $10,000,000,000 threshold and how far along you might be in terms of preparation and if there's any sort of significant Durbin impact expected?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

There's not a significant Durbin impact. We don't have a big fee based on those cards. We believe a lot of the costs are already baked in. We have the Chief Risk Officer who's been on board for well, before I started, so over 10 years. We did the stress testing that's required.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

We have the three lines of defense that are required. There may be some tweaking of expenses as we cross $10,000,000,000 but for the most part, we believe the costs are already baked into our base, expense base.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay. Would it be critically important to do an acquisition to sort of grow over the $10,000,000,000 threshold or do you feel like you could do it organically and or how are you thinking about It

[John Buran, President and CEO at Flushing Financial]

will be preferred. It would clearly be preferred.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Preferred to what?

[John Buran, President and CEO at Flushing Financial]

Preferred to organic.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Got you. Okay. And then last question I had, given the changes and your comments around the NIM, I guess I'm assuming the Fed doesn't cut a lot this year, maybe one rate cut is assumed, I think, in the forward market. But where can the NIM potentially get to by the end of the year? Can it get up close to $250,000,000 Is that a reasonable bogey, Susan?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

From your lips to God's ears, but I think that's probably a little aggressive, Mark. I think we're probably closer to the $230,000,000 to $240,000,000 range.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay, great. Thank you.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Thank you, Mark.

[Operator]

Our next question comes from Steve Moss with Raymond James. Please go ahead.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Good morning, Steve.

[John Buran, President and CEO at Flushing Financial]

Hello, Steve.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Good morning. Maybe just following

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

up here on the margin, just kind of curious how you guys are thinking about your interest rate sensitivity positioning going forward here. Do you become I guess the swaps that you have remaining become shorter in duration, more liability sensitive or just kind of how you think about managing that and maybe just managing the balance sheet mix?

[John Buran, President and CEO at Flushing Financial]

So we're largely neutral. So we think we can manage either movements up or movements down without significant issues.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay. Got it. And then in terms of just the John, you talked about in your prepared remarks, shifting the mix of loans a little bit, I think. Just kind of curious how do you think about your loan composition here over the next 12 to 24 months? And I'm just curious around the SBA team that you've brought on.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

What are your expected loan sales for the upcoming quarter? And maybe how much production you could be retaining there?

[John Buran, President and CEO at Flushing Financial]

So the SBA business obviously will be an important part of our ongoing restructuring of the portfolio. We will have a couple of loans that we will sell in the Q1. So we're already beginning to generate activity there. I think a lot of what we're going to see is going to be dependent upon where the market is. But given the fact that we have not been aggressive in the SBA area, we think it will contribute significantly for 2025.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay, great. And then in terms of just on the credit front this quarter, Susan, I apologize if I missed your prepared remarks there. Just color around the largest NPA this quarter you guys added $2,600,000 of reserves to. And just curious about that. And also, what were the types of charge offs within the C and I portfolio?

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Just kind of curious if it was 1 or 2 loans or multiple loans?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

The biggest one was one loan that we fully reserved for in prior quarters. It was about $4,400,000 of the debt charge offs. The other piece was just some additional information we received, some market color that made us believe that there was a little there's a slight impairment in that bond and we decided it was prudent and right to take that charge.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay. Got it. And then in terms of just the expense

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

growth guide through this quarter, just kind of

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

this upcoming year, I'm sorry, just kind of curious what are the how you guys are thinking about the drivers of the 5% to 8% expense growth for 25?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

I'm sorry, drivers for 2020. Drivers for 2020. Yes. It's the, could be increased in compensation as we make investments in the business. We'll have the full year of the SBA, the full year of a couple of branches that we've brought on in 2024, plus we'll have the 2 branches in 2025, regular increases, and we expect to have a positive operating leverage and improved efficiency ratio in 2025.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay, great. I appreciate all the color. I'll step back here. Thanks.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Thanks, Steve.

[John Buran, President and CEO at Flushing Financial]

Thank you.

[Operator]

Our next question comes from Manuel Nolos with D. A. Davidson. Please go ahead.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Good morning.

[John Buran, President and CEO at Flushing Financial]

Good morning, Manuel.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Do you have some spot deposit pricing as of the end of the year?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

At the end of the year, excluding our non maturity deposits, we're about $325 between $325,000,000 $330,000,000

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

And I know CDs are the larger driver and you have great disclosure on that. So there's still a little bit of other account deposit cost cuts coming in the Q1 from December Fed

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

cut?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

If the Fed cuts, yes, we'll cut. As we said in our prepared remarks that on the way up, we had a 57 beta and on the way down so far we're at 51. And as the Fed continues to cut, we'll continue to take advantage of those situations where we can reduce our funding costs. They came down over 30 basis points quarter over quarter.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Okay. Is I saw that the retention on CDs is about 78%. Is there any pickup in competition? Is that just based on your own current needs as well? Like just kind of was that a is that a notable decrease in retention?

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

No, that's what we've historically run somewhere in that ballpark. So competition for deposits in the New York Metro market is always tough. So that unfortunately has not abated.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Got it. And is the shift in the profitability target for the year kind of just an update there? Is that going to show up in a different type of loan mix going forward?

[John Buran, President and CEO at Flushing Financial]

Yes. I think the change in the loan mix, of course, will be somewhat gradual. We've got a big balance sheet. So I don't expect dramatic changes going forward. But we are cognizant of our CRE concentration and working toward limiting growth in that.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Okay. But you are seeing opportunities in CRE as well, correct?

[John Buran, President and CEO at Flushing Financial]

Yes. So I think what we'll see there is a transition from, let's say, less transactional business and more relationship business. That will be the focus in the CRE portfolio for 2025.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Thank you. I appreciate the commentary.

[Susan Cullen, Senior EVP, Treasurer & CFO at Flushing Financial]

Thank you.

[John Buran, President and CEO at Flushing Financial]

Thank you.

[Operator]

Seeing that there are no more questions in the queue, this concludes our question and answer session. I would like to turn the conference back over to John Buran for any closing remarks.

[John Buran, President and CEO at Flushing Financial]

Thank you. Thank you all for attending. And once again, we look forward to a much improved 2025. Thank you.

[Operator]

This concludes today's teleconference. You may now disconnect your lines and we thank you for your participation.

Participants

Executives

• John Buran, President and CEO
• Susan Cullen, Senior EVP, Treasurer & CFO

Analysts

• Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies
• Steve Moss, Director - Banking & Arlington at Raymond James Financial
• Manuel Navas, Senior Research Analyst at D.A. Davidson