Introduction and History

Flushing Financial Corporation, the parent company of Flushing Bank, has a long and storied history of serving the financial needs of its community. Established in 1929 as a New York State-chartered mutual savings bank, the organization has evolved over the decades to become a full-service commercial bank. With a focus on multi-family residential, commercial real estate, and commercial business loans, Flushing Financial has carved out a niche for itself in the regional banking industry.

The company's roots trace back to 1929 when it was founded as the Flushing Savings Bank. Over the years, the bank has undergone several transformations, including a conversion to a stock-owned savings bank in 1995 and the subsequent formation of Flushing Financial Corporation as the holding company. Flushing Financial Corporation was organized as a Delaware corporation in May 1994, and in 1995, it completed an initial public offering with its common stock beginning to trade on the NASDAQ exchange under the symbol FFIC. This public offering helped the company raise capital to support its growth and expansion plans.

Challenges and Resilience

Throughout its history, Flushing Financial has faced the typical challenges of operating in a highly competitive banking environment, such as interest rate risk, credit risk, and regulatory changes. The company has navigated these challenges successfully by maintaining a strong risk management culture, investing in technology and talent, and providing high-quality banking services to its customers in the New York metropolitan area. Flushing Financial's long track record of stability and resilience has been a key factor in its ability to create value for shareholders over time.

The company weathered the financial crisis of 2008-2009, maintaining a conservative underwriting approach that allowed it to emerge from that challenging period in a strong competitive position. In the years following the crisis, Flushing Financial continued to execute on its strategy of prudent credit risk management and diversified asset and liability generation. This approach allowed the company to consistently generate solid financial results and steadily grow its balance sheet.

Financial Overview

As of September 30, 2024, Flushing Financial Corporation reported total assets of $9.28 billion, with a net loan portfolio of $6.78 billion and total deposits of $7.57 billion. The company's loan portfolio is predominantly comprised of multi-family residential loans (39% of gross loans), commercial real estate loans (25% of gross loans), and commercial business loans (20% of gross loans). This diversified loan mix has allowed Flushing Financial to weather various economic cycles and maintain a strong credit profile.

For the fiscal year 2023, Flushing Financial Corporation reported revenue of $201.74 million, net income of $28.66 million, operating cash flow of $34.59 million, and free cash flow of $29.10 million. In the most recent quarter (Q3 2024), the company reported revenue of $52,054,000, representing a 17.8% year-over-year increase, driven by a 44 basis point increase in yield on interest-earning assets. Net income for Q3 2024 was $8,906,000, a 13.7% increase year-over-year, attributed to higher net interest income and non-interest income, partially offset by higher non-interest expense and provision for credit losses.

The company's financial performance for the nine months ended September 30, 2024, showed net income of $17.91 million, or $0.60 per diluted share. While this represents a 12.9% decrease compared to the same period in the prior year, the company has continued to focus on improving its net interest margin and maintaining its strong credit quality. Net interest income for this period was $130.78 million, a slight decrease of 1.7% from the prior year period, with the net interest margin decreasing 15 basis points to 2.07%.

Risk Management and Credit Quality

One of the hallmarks of Flushing Financial's success has been its conservative underwriting practices and commitment to risk management. The company's non-performing assets stood at just 0.59% of total assets as of September 30, 2024, significantly lower than the industry average. This low-risk profile is a testament to the bank's disciplined approach to lending and its focus on building long-term relationships with its customers. The provision for credit losses was $3.13 million for the nine months ended September 30, 2024, down from $9.52 million in the prior year period, reflecting the company's strong credit quality management.

Funding and Liquidity

The bank's funding structure is also noteworthy, with a mix of deposits and borrowings that provides stability and flexibility. As of the third quarter of 2024, Flushing Financial reported a loan-to-deposit ratio of 90%, indicating a healthy balance between lending and deposit-gathering activities. The company has also actively managed its funding costs, with a weighted average cost of deposits of 3.84% as of September 30, 2024.

Flushing Financial maintains a strong liquidity position, with $267.64 million in cash and cash equivalents as of Q3 2024. The company has $3.9 billion in available liquidity through cash, unencumbered securities, and credit facilities. The current ratio stands at 1.10 and the quick ratio at 1.05, indicating a solid ability to meet short-term obligations. The debt-to-equity ratio was 1.32 as of Q3 2024, reflecting a balanced approach to leverage.

Business Segments and Operations

Flushing Financial Corporation operates two main business segments: Mortgage Loans and Commercial Business Loans. The Mortgage Loans segment, which includes multi-family residential, commercial real estate, one-to-four family mixed-use property, and one-to-four family residential loans, originated $202.24 million in loans during the nine months ended September 30, 2024. The largest originations came from multi-family residential ($90.30 million) and commercial real estate ($87.33 million) loans. The mortgage loan portfolio totaled $5.40 billion at the end of this period.

The Commercial Business Loans segment, comprising Small Business Administration (SBA) loans, commercial business loans, and other commercial loans, originated $140.48 million in loans during the same period. Commercial business loans accounted for the majority of these originations at $130.03 million. The commercial business loan portfolio totaled $1.41 billion as of September 30, 2024.

Flushing Financial Corporation operates primarily in the United States, with a strong presence in the New York metropolitan area. The company continues to focus on originating multi-family residential, commercial real estate, and commercial business loans while maintaining its conservative underwriting approach.

Future Outlook and Strategic Priorities

Looking ahead, Flushing Financial is well-positioned to navigate the evolving banking landscape. The company's management team has outlined four key areas of focus: increasing the net interest margin, maintaining credit discipline, preserving strong liquidity and capital, and managing expenses. These strategic priorities, combined with the bank's deep-rooted community ties and conservative approach to risk, suggest that Flushing Financial is poised to continue its steady growth and performance.

Based on recent guidance provided by the company, Flushing Financial expects its net interest margin to remain stable in the near term, with potential for expansion over time as the yield curve flattens or becomes positively sloped. The company anticipates that funding costs have likely peaked and expects to see improvement as CDs reprice lower. Non-interest income is expected to benefit from closing back-to-back swap loans and a BOLI 1035 exchange, which is projected to increase BOLI income by $4 million over the next year compared to Q3 2024 annualized levels.

In terms of expenses, Flushing Financial expects core non-interest expense growth to be in the mid-single digits for 2024. The company also anticipates an effective tax rate in the mid-20% range for the same year. These projections, along with the company's strong performance in Q3 2024 (which they noted as the best quarter in the past seven quarters), provide a generally positive outlook for Flushing Financial's near-term performance.

Conclusion

In conclusion, Flushing Financial Corporation's long history, conservative risk management, and focus on community banking have positioned the company as a reliable and trustworthy partner for its customers. The company's diverse loan portfolio, strong credit quality, and solid liquidity position provide a stable foundation for future growth. As the banking industry continues to evolve, Flushing Financial's commitment to its core values and strategic priorities should enable it to maintain its position as a respected player in the regional financial services market. With a positive outlook for key financial metrics and a clear strategy for navigating the current economic environment, Flushing Financial Corporation appears well-equipped to continue delivering value to its shareholders and customers alike.