On July 29, 2024, Flushing Financial Corp (FFIC, Financial) released its 8-K filing detailing the company's financial performance for the second quarter of 2024. Flushing Financial Corp operates as a bank holding company, providing a range of banking and financial services, including personal and business banking, lending, government banking, and card services.
Performance Overview
Flushing Financial Corp reported GAAP and Core EPS of $0.18 for Q2 2024, aligning with analyst estimates. The company's net interest income increased by 0.9% quarter-over-quarter (QoQ) to $42.8 million, despite a year-over-year (YoY) decline of 1.4%. The net interest margin (NIM) decreased slightly by 1 basis point (bp) QoQ to 2.05%, while the core NIM fell by 3 bps to 2.03%.
Key Financial Metrics
| Metric | 2Q24 | 1Q24 | 2Q23 |
|---|---|---|---|
| GAAP EPS | $0.18 | $0.12 | $0.29 |
| Core EPS | $0.18 | $0.14 | $0.26 |
| Net Interest Income | $42.8M | $42.4M | $43.4M |
| Average Total Deposits | $7.2B | $7.1B | $6.9B |
| Net Loans | $6.7B | $6.8B | $6.8B |
Financial Achievements and Challenges
Flushing Financial Corp's average total deposits increased by 4.3% YoY and 1.4% QoQ, reaching $7.2 billion. This growth in deposits is a positive indicator of customer trust and the bank's ability to attract and retain funds. However, the company faced challenges with loan originations, which were less than paydowns, leading to a slight decrease in net loans by 1.5% QoQ to $6.7 billion.
Credit quality remained strong, with nonperforming assets (NPAs) to total assets at 61 bps and criticized and classified loans to total loans at 113 bps. The provision for credit losses was $0.8 million, down from $1.4 million in Q2 2023, indicating improved credit conditions.
CEO Commentary
"Our long-term success is derived from executing against the four focus areas we outlined in 2023. For the quarter, GAAP and Core NIM declined 1 and 3 bps, respectively. As loan originations were less than paydowns, we purchased adjustable-rate securities, which led to net interest income increasing 0.9% QoQ. We anticipate the loan pipeline, which increased approximately 88% QoQ, will help to stabilize NIM, which is our first area of focus. Our second area of focus is credit quality, which remains quite strong. At the end of the quarter, we had NPAs to total assets of 61 bps, criticized and classified loans to total loans of 113 bps, and net recoveries of 1 bp. We remain confident that our strong underwriting will continue to drive toward low loss content. The third area of focus is preserving strong liquidity and capital. The Company has over $3 billion of unused lines of credit available as of June 30, 2024, and notwithstanding the normal flows of certain deposit portfolios, average deposits increased 4% YoY and 2% QoQ. Capital ratios remained strong with a leverage ratio of 8.18%. Our last area of focus is bending the expense curve. GAAP and core noninterest expense each increased 6% in the first half of the year compared to the same period a year ago. We are making investments in the business in new lending staff and branches to improve profitability over the long term and expect expense growth in 2024 will be more in line with our historical growth rate of mid-single digits. While progress will not always be in a straight line, we remain confident that adherence to these four areas of focus will favorably impact the long-term profitability of the Company." - John R. Buran, President and CEO
Income Statement Highlights
Net interest income for Q2 2024 was $42.8 million, a slight increase from $42.4 million in Q1 2024. The provision for credit losses decreased to $0.8 million from $1.4 million in Q2 2023. Noninterest income was $4.2 million, down from $5.0 million a year ago but up from $3.1 million in the previous quarter. Noninterest expense increased by 11.2% YoY to $39.0 million but decreased by 2.1% QoQ.
Balance Sheet and Cash Flow
Average loans decreased slightly to $6.7 billion, while average total deposits increased to $7.2 billion. The tangible book value per share was $22.24, down from $22.47 a year ago. The company's capital ratios remained strong, with a tangible common equity to tangible assets ratio of 7.12% and a leverage ratio of 8.18%.
Analysis
Flushing Financial Corp's performance in Q2 2024 reflects a stable financial position with strong credit quality and growing deposits. The slight decrease in net loans and the challenges in loan originations highlight areas for improvement. However, the company's focus on maintaining strong liquidity and capital, along with strategic investments in new lending staff and branches,
Explore the complete 8-K earnings release (here) from Flushing Financial Corp for further details.
