Q1 2023 Flushing Financial Corporation Earnings Call
Welcome to Flushing Financial Corporation first quarter 2023 earnings Conference call.
Hosting the call today are John Buran, President and Chief Executive Officer.
You can call it exactly.
Exactly by President and Chief Financial Officer and Treasurer.
Today's call is being recorded.
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Right.
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A copy of the earnings press release, a slide presentation that the company will be referencing today.
Our available on its Investor Relations website at Flushing Bank Dotcom.
Before we begin the company would like to remind you that discussion during this call contain forward looking statements made under the safe Harbor.
The U S Private Securities Litigation Reform Act of 1995, such statements are subject to that.
Uncertainties and other factors that 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 yep.
During this call references will be made to non-GAAP financial measures are supplemental measures took new NSX operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U S. GAAP.
For information on these non-GAAP measures for a reconciliation to GAAP. Please refer to the earnings release or at.
The presentation I'd now like to introduce John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and resolved.
Thank you operator, good morning, and thank you for joining us for our first quarter 2023 earnings call.
Following my prepared remarks, Susan will review the financial trends and we will then answer any questions.
The company reported first quarter twenty-three gap E. P. S 17 cents and core E. P. S at 10 cents a.
Quarterly results were impacted by net interest margin compression and a charge off of a previously identified credit placed on non accrual in the second quarter 2022.
We were disappointed with these results.
And we've implemented an action plan to enhance the resilience of our business model and improve future profitability.
First we're taking significant steps to move the balance sheet to more interest rate risk neutral.
<unk> already achieved 40% of our goal.
Second we are increasing our focus on risk adjusted returns and overall profitability. While this will take some time, we're encouraged by the results seen so far.
Third we're looking to expand our client base and build loyalty by emphasizing our brand of customer service and deep community relationships, while capitalizing on the recent market disruptions.
Our bankers are seeing more activity in gathering both loans and deposits.
Yeah.
Fourth we are tightening up on expenses.
We've taken actions to reduce noninterest expense growth and we will continue to focus on reducing discretionary expenses.
Fifth we are preparing for the next credit cycle.
We are focusing more on recession proof industries and will continue to take early actions on weaker credits.
Sixth we will continue to focus on our strong liquidity and capital.
Deposits are up for the quarter.
And we have $3 $7 billion of available liquidity.
Overall, we expect these decisive actions to result in an improved earnings profile overtime.
These actions are.
Along with our strong liquidity will also allow us to continue our long track record of dividend payments into the future.
Please turn to slide four.
The actions we are taking will also allow us to advance our four areas of focus for long term success.
We incurred $9 $2 million loss on a business participation, which was placed on nonaccrual in the second quarter of 2020 two.
This domestic borrower has a customer who has shipped products to Russia that were canceled due to sanctions.
The credit protection for the shippers receivables that was in place became more questionable during the quarter.
So we decided to charge offs alone.
Absent this isolated credits.
We would've recorded small net recoveries for the quarter.
Credit quality is one of the foundational pillars of the bank.
Our loan portfolio overall comprises low risk loans to stable borrowers.
Over 88% of the loan portfolio is secured by real estate with an average loan to value of less than 37%.
Current debt service coverage ratio has improved.
Two 1.9 times.
Midtown Manhattan office space.
<unk>.
Is only 110th of a percent of the loan portfolio.
Interest rate risk is another priority that I outlined our actions on the previous slide.
Well I also touched on liquidity on the previous slide I want to highlight the liquidity is strong.
We increased deposits by nearly $250 million during the quarter.
Our liquidity is over three times, the uninsured and uncollateralized deposits.
Customer experience and our ties to the communities are also key to our success.
Due to a major competitor signature bank, leaving the market <unk>.
Additional opportunities are emerging particularly with shared relationships.
We are also expanding our Asian banking franchise and see nice deposit growth there.
Our digital engagement is strong and growing.
These areas of focus will position the company towards Stan the short term macro turmoil well rebuilding our foundation for long term success.
Slide five highlights our performance for the quarter.
Average deposits increased 6% year over year and 2% during the quarter.
A positive metric for Flushing financial given the current banking environment.
Our uninsured and uncollateralized deposits are only 16% of total deposits.
Analysts have noted that were one of the strongest versus peers.
We expect a similar or better position this quarter.
The cost of deposits reached 2.29% and the overall cost of funds was 2.47%.
As we indicated last quarter loan growth is expected to be challenging.
Loans were flat quarter over quarter.
While loan closings were lower than recent quarters yields increased to over 7% in the loan pipeline increased 6% quarter over quarter.
We expect the market disruptions will provide opportunities for loans, especially given the absence of a major competitor.
Yeah.
Core loan yields expanded 17 basis points during the quarter due to higher rates repricing of.
Of the real estate loans, and new loans coming on at rates above the portfolio yield.
Nonperforming assets declined, 21% and criticized and classified assets decreased quarter over quarter.
Additionally, delinquencies, which were already low declined 16 basis points during the quarter.
We continue to realize strong growth in digital engagement by leveraging our technology platform.
In fact in the first quarter, we originated approximately $7 million of loan commitments through our digital platform.
We also expanded our relationships with Fintech players as we are partnered to offer customers assistance with filing and processing employee retention tax credit refunds.
Earnings from this partnership will be realized once the customer receives a refund.
To date with pleased with the activity.
As outlined previously we put in place several steps to improve overall earnings performance.
The market believes the fed is nearing the end of its increasing cycle, which implies margin improvement on the horizon for us.
Additionally, there are opportunities due to the market disruption and the absence of a major competitor.
Slide six presents our liquidity profile.
We have $3 $7 billion of available liquidity from a variety of sources, including federal home loan Bank. The Federal Reserve Bank cash on hand, and Unpledged Securities <unk>.
Additionally, we have relationships with inter find network and others to offer customers greater FDIC insurance versus the 250000 dollar minimum.
We are working to expand borrowing capacity from existing relationships by pledging different types of collateral.
Deposit flows over the course of the quarter, which similar to past trends.
Uninsured and uncollateralized deposits totaled about 16% of total deposits.
Our available liquidity is over three times, the amount of uninsured and uncollateralized deposits.
We have a high degree of comfort.
And the stability of funding due to deposit stability and available liquidity.
Our loan portfolio as outlined on slide seven.
As you can see 65% of the loan portfolio was concentrated in multifamily and investor commercial real estate.
Our overall office portfolio is about 4% of loans.
With Midtown Manhattan office space exposure.
At 110th of 1% of net loans.
In general the real estate portfolio has strong sponsor support and excellent credit performance.
Overall, we remain very comfortable with the quality of our loan portfolio due to an average loan to value of less than 37% and a debt service coverage ratio of 1.9 times for the multifamily in investor commercial real estate portfolios.
Yeah.
Slide eight.
Provides a detail on our Asian markets.
About a third of our branches are in Asian markets, where we have $1 $2 billion of deposits and 810 million of loans.
These deposits are 18% of total deposits and we have only 3% market share so there's plenty of opportunity.
Our approach to this market as supported by our staff that speaks many different languages are Asian Advisory Board and support of cultural activities.
This market continues to be an important opportunity for us.
Slide nine depicts the growth in our digital banking platforms.
We continue to see high growth rates and monthly mobile deposit users users with active online banking status and digital banking enrollment.
Based upon data from our service provider for 2020. Two we had above median enrollment growth and top quartile performance for active users annual growth and mobile remote deposit capture annual growth compared to the 26 banks in our peer group.
Of assets of five to 10 billion.
The numerator platform, which digitally originates small dollar loans as quickly as 48 hours continues to grow.
We originated approximately $7 million of commitments in the first quarter.
These commitments have an average rate greater than the overall portfolio rate.
We continue to explore other fintech product offerings and partnerships.
Yeah.
Slide 10.
First quarter has several important events to highlight.
As pictured our employees participated in the lunar new year parade, which has great visibility to our Asian markets.
We were involved in other community events, including Manhattan neighborhood network ribbon cutting.
And providing scholarships for N Y C kids rise.
Our new Hauppauge branch in a major long Island Industrial Park opened during the quarter.
And we expect Bensonhurst, which extends our Asian business to open later this year.
Participating in these types of initiatives builds on our already strong ties with our local communities, which is a key differentiator for our business, enabling us to drive customer loyalty.
I will now turn it over to Susan to provide more detail on our key financial metrics Susan.
Thank you John I'll begin on slide 11.
Deposit growth has been a challenge for the industry as the fed raises rates and recent bank failures tightening financial conditions.
Despite this backdrop, we were able to increase average total deposits, 2% during the quarter and 6% year over year.
As expected balance growth was driven by C D, which help extend our funding to better match the duration of the assets.
Well growing noninterest bearing deposits is a priority for us and it has become more challenging given the higher rate environment.
Average non interest bearing deposits declined both quarter over quarter and year over year.
All of our checking account openings increased 30% year over year.
The recent market disruption has provided opportunities to attract more deposits and customers.
The increase in the deposit base assisted in lowering the loan to deposit ratio to 102% from 107% at the end of the year in.
In terms of mix about half of our deposits are from consumers and the other half are from business and government.
I also want to note that we have seasonality in certain segments of our deposit base and the summer months are generally lower than the rest of the year.
On slide 12 outlines our loan portfolio and the yields that.
Net loans increased 5% year over year, but were down less than 1% quarter over quarter.
Loan closings were lower than the recent run rate, but the yield on the closings was over 7% for the quarter.
Core loan yield increased 17 basis points during the quarter and for the second consecutive quarter yields on loan closings exceeded the yields on the satisfactions.
13 basis points.
Prepayment penalty income declined to $610000 in the quarter from $1.2 million in the fourth quarter and $1.6 million from a year ago.
There's been some disruption in the market as a major major competitor has exited contributing to the increased activity, resulting in loan pipeline that increased 6% during the quarter.
Slide 13 provides more detail on the contractual repricing the loan portfolio.
Approximately $1 $1 billion or 16% great prices with each fed move.
And the first quarter approximately $272 million of real estate loans repriced upwards of 193 basis points to $6 60 per cent.
For the remainder of 'twenty twenty-three another $660 million as did reprice at a rate of 184 basis points higher than the current yield.
Another $765 million or 11% of laws will reprice in 'twenty 'twenty four with a similar amount in 2020 five.
These values are based on the underlying index values as of March 31st 2023, and did not consider any future rate moves.
This repricing is what should drive net interest margin expansion once the funding costs stabilize.
Slide 14 outlines the net interest income and margin trends.
The GAAP net interest margin declined 43 basis points to two 7% during the quarter.
As we stated previously we expect the NIM will continue to compress as long as the fed raises rates.
After a lag we expect the NIM would begin to expand as the pressure on funding costs ease and loans continue to reprice higher.
Of course, if the fed cuts rates, our funding costs should reprice lower faster than the declines on the asset yields.
Turning to slide 15, one of our goals for 2023 is to significantly move towards more interest rate neutral.
The Gulf of the balance sheet is to match the duration of our assets more closely which is approximately three or four years and the duration of our funding was about one to two years.
The asset swaps convert fixed rate assets up 3.17% into floating rate assets of $5, six 2% and they affect the funding swap stuff from 4.84% to 255%.
We added some swaps late in the quarter. So the full benefit has not been realized in the run rate and the forward funding swaps will reprice lower during the year.
We expect to continue to monitor market opportunities to take additional actions if warranted to help close the duration gap.
Slide 16 shows there's another bunch that the swaps portfolio as it serves as well as mitigate for changes in interest rates that flow through a O C. I.
The change in the value of the swap portfolio is generally the inverse of the change in the value of the available for sale Securities.
As you can see this has been our history and has helped to keep our tangible capital ratio stable versus others, that's experienced more pressure from the rising rate environment.
Slide 17 outlines our high quality and liquid investment security portfolio.
The overall investment security portfolio is $886 million or just over 10% of assets.
Our securities portfolio is mostly classified as available for sale. So the value is largely reflected in our tangible capital.
About 53% of the portfolio is floating rate, which includes the 200 million dollar a fair of ice swap added during the quarter.
Security yields increased 44 basis points quarter over quarter to 31, 5%.
Moving on to net charge offs on slide 18, we have a long history of solid credit quality as a result of our low risk credit profile and conservative underwriting.
Net charge offs were 54 basis points of the core which primarily relates to the one business credit John mentioned earlier.
Absent this credit we would've reported a small net recoveries for the quarter.
During the quarter, we provided additional provisioning to fully reserved for previously identified $4 million line of credit.
Historically losses has been well below the industry due to our low risk credit profile and conservative underwriting.
We expect limited loss content in our loan portfolio, if there's an economic downturn given the greater than 88% of the portfolio is secured by real estate with an average loan to value less than 337%.
Additionally, the weighted average debt coverage ratio was one nine times and over 1.15 times of stress scenario.
Stress scenario consists of a 200 basis point increase in the rate of 10% increase in operating expenses expenses for multifamily and investor commercial real estate loans.
These factors contribute to our expectation of low loss loan loss content within the portfolio.
Slide 19 shows our credit metrics that are trending in the right direction with declines in nonperforming assets lower criticized and classified assets and increases in the non performing loan coverage ratio.
Our long allowance for credit losses as presented by the mountain segment in the bottom right chart.
The higher risk portfolios have reserves greater than 1% of that portfolio.
Overall, the allowance for credit losses to loan ratio decreased two basis points to 56 basis points during the quarter.
Spike with significant charge off this quarter, we made very comfortable with our credit risk profile.
Our capital position as shown on slide 20 book value and tangible book value per share increased year over year. We took advantage of the stock price trading below tangible book value to repurchase approximately 160000 shares during the quarter.
Tangible common equity ratio decreased nine basis points quarter over quarter to 7.73%.
Our regulatory capital ratios are strong overall, we view our capital base is a strength and a vital component of our conservative balance sheet.
Before I turn it over to John Let me provide some color on our revised outlook.
As a reminder, we do not provide guidance. So this discussion is meant to provide a high level perspective on our performance in the current environment.
We expect loan growth to remain challenging given the high rate environment and our increased emphasis on risk adjusted returns.
We have a liability sensitive balance sheet, we are taking more actions to shift the portfolio towards neutral.
As John mentioned, we achieved approximately 40% of the skull during the first quarter.
With that said the NIM is likely to continue to compress as long as that is raising rates at this point, we expect the fed to increase by 25 basis points in may the <unk>.
Core NIM in March was 2.17% and the lack of loan growth, there's no pressure to fund the balance sheet growth at high rates.
Given these assumptions, we believe the modest NIM compression going forward has the potential to be significantly lower than seen in prior quarters.
Overall, the longer term, we expect the NIM will benefit from a contractual repricing of the loan portfolio.
Last quarter, we mentioned that knowledge interest expense was expected to increase by low double digit percentage points.
Given the actions we've taken to improve the outlook. We are now expecting 2023 expenses to remain flattish versus 2022.
As a reminder, we had $4 $1 million of seasonal expenses in the first quarter that are not expected to repeat at $1.7 million benefit related to employee retention tax credit refunds.
Lastly, the effective tax rate should approximate 24% to 26% for 'twenty two 'twenty three.
I'll now turn it back over to you John .
Thank you Susan.
On slide 21, I'll wrap up with our key messages.
Also in the first quarter were below our expectations.
And we have implemented an action plan in areas of focus to help improve profitability in the short and medium term.
And build on our foundation for long term success.
We're looking to position the balance sheet to become more neutral to changes in interest rates.
We will continue to take advantage of market opportunities, including a major competitor, leaving the market, which should provide opportunities for loans and deposits.
Our liquidity and capital are strong.
We remain comfortable with the low risk loan portfolio, that's criticized and classified assets and delinquencies.
Proved.
While the environment is challenging we expect the decisive actions, we're taking to improve the overall performance and allow us to continue our long and consistent track record of dividend payments.
Operator, I'll turn it over to you to open the lines for questions.
Thank you.
We'll now begin the question and answer session.
Can I ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the key.
Sure John Your question. Please press Star then two.
At this time, we will pause momentarily to assemble IRA.
Yeah.
Yeah.
Our first question comes from Mark.
With Piper Sandler. Please go ahead.
John Susan Good morning.
Good morning.
First question I had for you I wondered how much more in C&I loan participations you you all have in and maybe what your largest C&I participations or how.
How large.
It's it's first of all as minimal most of what we do is is in market and our real estate based as you know.
The largest is probably this this loan.
I think so I think that's right.
Hello.
Engage in it when we get into a participation Mark waiver you underwrite the loan to our own conservative underwriting standards before we agreed to participate in the credit.
Yeah I just wanted to emphasize this is a very unusual set of circumstances, where.
Now involved in a war and a and a sanction of that is clearly not typical of what we do on a day to day basis, So highly unusual.
But in total roughly what are the CNI participations.
They're like thereabout less right around 5% of the other portfolio.
5% of total loans or 5% of C&I loans total loans excuse me, 5% of total loans.
Okay.
Secondly, you you had talked about in the past, having a target TCE ratio of around 8% I I guess I'm curious if that's still your target and N. B. If it is should we assume that buybacks will slow or cease in coming quarters since you're you're below that.
We will probably slow down buyback buyback activity, but we're obviously.
You're always alert for what's going on in the in the market I would say that our 8% we've are viewed as being a more intermediate term goal.
Okay, and then Susan just following up on your margin comments, it assuming that we sort of follow the forward curve and given the balance sheet changes that you're making.
Where do you think the margin sort of bottoms out what roughly what level.
Well, we ended March with yeah for the month, Oh, no I'm about to 17.
But that does not include the full run rate of about $350 million worth of swaps we put on.
Everything else being equal Mark I think you maybe.
Maybe a couple of more basis points down from where we are but yeah. I think the fed is mostly finished raising rates at least I hope they are closer to the engine will be getting and I think that the majority of the NIM compression is baked in but theres still potential.
Potential a little bit more to go.
I would also add that that in the last quarter or so there's been very very intense competition associated with two players in the market that were trying to get out of the crypto exposure one of which is no longer I'm no longer out there. So.
I think we'll see a little bit less intensity in terms of the deposit competition. These are direct competitors of ours.
Okay, and then given your comments about the fed being close to the end and we've already got rates up 475 basis points.
It strikes me that this is an odd time to be changing your liability sensitive position you know wouldn't it be arguably the worst time to be coming less.
Liability sensitive.
So when you look at our balance sheet as Susan mentioned, we've got a we've got assets that that reprice quite a bit more slowly than the than the liabilities. So we think over time, we need to bring those things more into more into alignment certainly we're going to be cognos.
And what's happening on a day to day basis, as we move toward a more intermediate term goal, but we do want to have a more balanced our balance sheet, a more safe interest rate risk position.
And as you know we don't.
None of us know where rates are going to go they certainly can go down shortly and.
They they they could clearly go up again, if inflation rears its head again.
But the hedging is very very valuable to us one of the other positive aspects of our hedging strategy is that it has protected us from an a OCI perspective as well.
So all in all we think there's a there's been great benefit with our hedging strategy that now has about a $1.1617 billion worth of protection in place.
Thank you.
Thanks Mark.
Yeah.
Our next question comes from Chris O'connell with <unk>. Please go ahead.
Okay.
Hey, good morning.
Mike.
Following up on one of the last questions Uh Huh.
If I heard right did you say only two basis points give or take.
Of margin conversion expected beyond.
C 17, namely March now.
No not to say that I wouldn't put a quantity on it Chris.
There's some moving parts as we talked about that John mentioned that the less they are.
Lessening of competition, but there's no rate moves still to occur ease of feds it closer to the end than the beginning but I think theres still some compression to come in our NIM, but it won't be as great as what we've seen in the past.
Got it and how how.
How late in the quarter were the the hedges and the derivatives are put on.
The second half of the second half of March really.
So they only have a couple of weeks baked in.
Okay great.
And I was just hoping you could provide.
You know a little bit more color.
Two you know the overall expense plan.
Taking a look at and.
What areas you're looking to keep.
Expenses more contained versus previously.
Perhaps if there's any further opportunities that you'd be looking at as you get further on into the year into 2024.
So Oh go ahead John .
I mean, there's a series that there was a series of initiatives that we will either that we've either canceled or Roe or delayed to a later date.
You know clearly all of our compensation structures or associated with with performance. So that would be you know that would be impacted we're reducing marketing expenses, we reduced compensation expenses.
There's a whole variety of more discretionary expenses that we're able to.
To reduce without really.
Disrupting the are the core of the business, we do have a very valuable franchise that you know.
We're looking ahead to 2024 and making sure that we have a really good position to take advantage of a better Oh, a better environment.
Yeah.
Got it.
Thanks, and then.
Just starting on the credit commentary.
The I believe you said there is $4 million.
Specific reserves this quarter for a line of credit.
Is that fully reserved for.
Yes, not at this point there was a little bit of provision taken in prior quarters, but it is now fully up.
Yeah, as a specific allowance associated with it for the full $4 million.
Okay got it.
And I know you guys said you were taking a closer look at our kind of overall credit quality and risk parameters going forward just.
Maybe any details as to you know what specifically you're looking at it.
Any kind of color you can give there.
You know, obviously, we where we're very focused on I'm looking at reshaped recession proof.
<unk> industries.
And you know maintaining a.
Maintaining our traditional our traditional strong standards with respect to real estate, which we live.
Very very comfortable with.
You know I think it's mostly in the area of anticipating possible recessions and staying away from industries that are travel discretionary spending industries. We don't have any exposure to consumer we have very very limited exposure to Midtown.
Manhattan office space less than 110th of 1%. So in general we're in you know we're in very good shape in that regard, but theres always little nuances that take places is associated with what's going on in the market on a day to day basis.
Great and then last one for me just switching back to the balance sheet. I think you mentioned you know a little bit of a seasonality in the deposits are for for the summer periods. If you could just go over and remind us as to what that seasonality is and you know maybe you know.
Obviously, a difficult environment, but you know what type of moves kind of you're expecting there for the for the next couple of quarters that'd be great.
So theres seasonality in our government banking portfolio Chris.
Yeah. They are lot of places to get the money then they it flows back out so that's the summer months or just a low period for us historically.
Because of the government funding.
Yeah any green.
Quantitative.
Qualifiers is still you know what the typical impact is as far as outflows.
I want to say I would have to go back and look to be sure, but it seems to me that last year for the second quarter, our loan to deposit ratio was probably the highest it was all of last year. So I would have that same expectation this quarter.
Okay.
Alright, thanks, Thanks for taking my questions.
Thanks, Chris.
Yeah.
Okay.
Our next question comes from Manuel Nava Clipboard Davidson. Please go ahead.
Hey, good morning, So if this morning.
And if.
If the fed pauses as kind of.
<unk> and there's a lag before year NIM starts to benefit how fast or how quickly could dig them benefit when it does start to move up on a pause.
We expect within a couple of quarters that we can we.
We can start to see the NIM.
Start to recover historically, it's been about two quarters.
So we would you know we don't see any reason why that like history would not repeat itself.
To give you some context.
Is this speed gonna be similar to the past or or can we put out like five to 10 basis points or what would be after those two quarters in the third quarter, how fast could that rise.
It's it depends it depends on what it stops and what we have repricing on the loan side, but it's not going to be a sharp V up it's going to be a longer slope.
Let us back up on the NIM side.
Okay did.
Any of your actions slow that slope.
Moving to neutral.
Adding hedges.
Or are you trying to thread the needle where you could still have that same.
Slow recovery of men with your current hedge hygiene actions, so that that slope that we're talking about.
In the absence of a reduction in the fed's rates is really dependent upon the movement of our contractual.
Loan repricing.
If you're talking about this the fed reducing.
Reducing rates and the end of the quarter.
Our liability sensitivity would override any.
Any type of a hedging strategy that we put in place over that time period.
So we would we would expect.
In a in an environment, where the fed reduced rates.
We would expect that the margin improvement would accelerate.
Okay and.
So it'll be that slower movement.
I'm, sorry, I'm sorry.
No no I was just wondering because there is tradeoffs to southern reactions I'm just trying to identify if there was any.
Loss.
M <unk>.
Potential recovery down the road and if there's any way to quantify it like NIM recovery down the road.
If rates are reduced so nothing no nothing that we're doing should impact our ability to recover the contractual repricing of the loan portfolio.
Okay.
On the other hand, if the.
Some of the funding swaps that we put in place.
Good somewhat mute the ability to gain from the.
Repricing downward that the fed might take however.
Given the degree of liability sensitivity that liability sensitivity, even today far outweighs.
The and would give a much more significant benefit than any hedging strategy that we put in place. So the net net would be a positive for us.
So Meanwhile, if we looked at like the funding swaps.
We are you know the underlying is at 484, and we're paying $2 55. So the fed would have to drop rates 230 basis points. If my math is correct before we had any detriment to our earning stream for that for that specific hedge either.
Okay. So you're right. There are trade there are trade offs, but when we put the song with very carefully evaluate.
And various rate scenarios, what would happen with the various actions were taken.
Okay. That's I.
I appreciate that that's good.
Cause the shift topic, a little bit.
Is the line of credit that has come up in questions is that the where that 9% reserve on $23 million in SBA loans sit.
It's not any color on on that high reserve portion for that portfolio.
Yeah no. It is not in that that portfolio has a high reserve ratio because of the amount of losses. We have historically had in that before we there was an older program. We were in and the losses are encapsulated isn't there and it's still bleeding. If you will through the through the seasonal calculation.
Got it okay.
And then.
Our SBA portfolio are by the way, it's very small.
Yeah. It was very small and you'd fully reserved there. It's just it's just sitting there.
Alright.
And then my last question is.
Is there any any.
Ability to time some of the signature benefits your pipeline is already going up on the loan side.
It seems like you believe that deposit competition might come down a bit on the other on.
Pricing side, and then there's there's talent out there.
And I'm thinking about it the right way.
Those three dimensions and kind of can you speak to the timing of those three dimensions for the signature basket.
So I don't think we can really talk specifically about the timing, but we are seeing activity in all three of those dimensions.
At this time.
Yeah.
Yeah.
Hi, Thank you I appreciate that.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to John Buran for any closing remarks.
Well. Thank you everybody for joining us today on our first quarter 2023 earnings call. We appreciate your continued support of Flushing Financial Corporation, and we look forward to talking to you next quarter. Thank you again.
Got you.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.