Q3 2024 Flushing Financial Corp Earnings Call
Operator: © BF-WATCH TV 2021 Welcome to Flushing Financial Corporation's third quarter 2024 earnings conference call.
Welcome to Flushing financial Corporation's third quarter 2024 earnings conference call.
Operator: 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. If you would like to join the Q&A, please press star, then 1. If you require an operator's assistance, please press star then zero.
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.
Speaker Change: If you would like to join the Q&A. Please press Star then one.
Speaker Change: If you require operator assistance. Please press Star then zero.
Operator: 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 contained forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigations Reform Act of 1995. Such statements are subject to risks, uncertainties, and other factors that may 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.
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 Flushing Bank Dotcom.
Speaker Change: Before we begin the company would like to remind you that discussions during this call contain forward looking statements made under the safe Harbor provision provisions of the U S. Private Securities Litigations Reform Act of 1995 such.
Speaker Change: Such statements are subject to risks uncertainties and other factors that may 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: Securities and Exchange Commission, to which we refer 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.
Speaker Change: During this call all references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance.
Speaker Change: These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared prepared and presented in accordance with U S. GAAP for.
Operator: For information about these non-GAAP measures and for reconciliation to GAAP, please refer to the earnings release and or the presentation.
Speaker Change: For information about these non-GAAP measures and for a reconciliation to GAAP. Please refer to the earnings release and or the presentation.
John Buran: I would now like to introduce John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and resources.
Speaker Change: I would now like to introduce John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and results.
John Buran: Thank you, Operator.
John Buran: Thank you operator, good morning, and thank you for joining us for our third quarter 2024 earnings call.
John Buran: Good morning, and thank you for joining us for our third quarter 2024 earnings call. The operating environment in the third quarter was improved but remained challenging. We're encouraged by the recent 50 basis points reduction by the Fed as we hope this leads to the yield curve at least flattening, potentially regaining a positive slope. There'll be challenges and unknowns in managing the net interest margin in this environment, including the impact of deposit pricing by competitors, how lower rates will influence loan demand, and the timing and pace of Fed cuts. However, we believe the environment will improve over time, and this will ultimately be positively reflected in our net interest margin.
John Buran: The operating environment in the third quarter was improved but remain challenging.
John Buran: But the recent 50 basis points reduction by the fed as we hope this leads to the yield curve at least flattening potentially regaining a positive slope.
There'll be challenges and unknowns and managing the net interest margin in this environment, including the impact of deposit pricing by competitors, how lower rates will influence loan demand and the timing and pace of fed cuts.
John Buran: However, we believe the environment will improve over time and this will ultimately.
John Buran: Be positively reflected in our net interest margin.
John Buran: For the third quarter, the company recorded gap earnings per share of $0.30 and core earnings of $0.26, which is the best quarter in the past seven. There are several items to call out from the quarter. We had higher than normal net interest recoveries on nonaccrual and delinquent loans, which added five basis points to the net interest margin, and about $0.03 per share in the quarter. Gap in core earnings per share included an additional $0.05 per insurance recoveries, discrete income tax items, and other events that are not expected to repeat.
Speaker Change: So the third quarter. The company recorded GAAP earnings per share of 30 cents and core earnings of 26 cents, which is the best quarter in the past seven.
Speaker Change: There are several items to call out from the quarter.
Speaker Change: We had higher than normal net interest recoveries on nonaccrual and delinquent loans, which added five basis points to the net interest margin and about three cents per share in the quarter GAAP and core earnings per share, including additional five cents for insurance recoveries discrete income.
Speaker Change: Items and other events that are not expected to repeat.
John Buran: We outlined our four areas of focus in the past. Our first objective is to increase the NEM and reduce its volatility. Net interest income increased 6.6 percent quarter over quarter as the net interest margin increased five basis points. During the quarter, NIM compressed in July but then expanded month over month in both August and September. We continue to focus on the NIMH, and while expansion may not always be in a straight line, we believe the general direction should be positive. as the yield curve flattens or becomes positively sloped.
Speaker Change: We outlined our four areas of focus in the past our first objective is to increase the NIM and reduces volatility.
Speaker Change: Net interest income increased six 6% quarter over quarter as the net interest margin increased five basis points.
Speaker Change: During the quarter NIM compressed in July, but then expanded month over month in both August and September.
Speaker Change: We continue to focus on the NIM and while expansion may not always be in a straight line. We believe the general direction should be positive.
Speaker Change: As the yield curve flattens or becomes positively sloped.
John Buran: The second objective is to maintain our credit discipline. Flushing Bank has a long history of low risk credit profile due to our conservative underwriting and strong portfolio management. Overall credit metrics remain solid with 59 basis points of non-performing assets, 100 basis points of criticizing classified loans, and 6 basis points of net charge off year-to-date. Our loan portfolio remains well-collateralized as the average loan-to-value in the real estate portfolio is less than 36 percent, and the debt coverage ratios are 1.9 times for our multifamily and investor commercial real estate. Our exposure to Manhattan office buildings is about a half a percent of gross loans.
Speaker Change: The second objective is to maintain our credit discipline Flushing Bank has a long history of low risk credit profile due to our conservative underwriting and strong portfolio management.
Overall credit metrics remain solid with 59 basis points in nonperforming assets 100 basis points of criticized and classified loans and six basis points of net charge offs year to date.
Speaker Change: Our loan portfolio remains well collateralized as the average loan to value on the real estate portfolio is less than 36% and the debt coverage ratios of one nine times for our multifamily and investor commercial real estate.
Speaker Change: Our exposure to Manhattan office buildings is about a half a percent of gross loans.
John Buran: Our third objective is to preserve our strong liquidity and capital. Our available liquidity was $3.9 billion as of September 30th, and our level of uninsured and uncollateralized deposits remains low at 15% of total deposits. Our capital ratios remain solid.
Speaker Change: Our third objective is to preserve our strong liquidity and capital our available liquidity was $3 9 billion as of September 30 days and our level of uninsured and uncollateralized deposits remains low at 15% of total deposits.
Speaker Change: Our capital ratios remain solid.
John Buran: The fourth objective is to bend the expense curve. Non-interest expense growth year-to-date was about 6% as we took advantage of market opportunities to invest in the business to improve profitability over the long term, including bringing on an SBA team and a staff for new growth. We still expect overall expense growth in 2024 to be in line with our historical averages mid-single digits.
Speaker Change: The fourth objective is to bend the expense card noninterest expense growth year to date was about 6% as we took advantage of market opportunities to invest in the business to improve profitability over the long term, including bringing on an SBA team and staff for new growth.
Speaker Change: We still expect overall expense growth in 2024 to be in line with our historical averages mid single digits.
John Buran: Overall, while there's some beneficial items that are not expected to repeat in the quarter, we're encouraged by the outlook over the long term and are building a foundation to achieve our long-term goals and improve overall profitability.
Speaker Change: Overall, while there is some beneficial items that are not expected to repeat in the quarter were encouraged by the outlook over the long term and are building a foundation to achieve our long term goals and improve overall profitability.
John Buran: Slide four demonstrates Flushing's credit performance versus the industry. Our underwriting has outperformed over time, often by a wide margin. Our 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 chart on the left. We expect our net charge-offs to remain well below industry levels. For the first nine months of 2024, we had net charge-offs of six basis points. A level of non-current loans to total loans is also favorable compared to the industry.
Speaker Change: Slide four demonstrates flushing as credit performance versus the industry. Our underwriting has outperformed over time, often by a wide margin.
Speaker Change: Sure better credit culture has been proven in many rate and economic cycles, and our commitment to our low risk credit profile is unwavering.
Speaker Change: The results of our low risk credit profile as shown by the charge off history chart on the left we expect our net charge offs to remain well below industry levels for the first nine months in 2024, we had net charge offs.
Speaker Change: Six basis points.
Speaker Change: Our level of non current loans to total loans was also favorable compared to the industry.
John Buran: In a stress scenario consisting of a 200 basis point increase in rates and a 10% increase in operating expenses, our loan portfolio has a debt coverage ratio of 1.3 times. Given this, we're expecting minimal loss within this portfolio.
Speaker Change: In a stress scenario consisting of a 200 basis point increase in rates and a 10% increase in operating expenses. Our loan portfolio has a debt coverage ratio of 1.3 times given this we're expecting minimal loss within this portfolio.
John Buran: Slide five depicts additional credit metrics that result from our conservative risk culture. Non-performing assets to assets total 59 basis points with loan to values at 55%. Our level of criticized and classified assets improved quarter over quarter and we expect them to remain well below peer levels again this quarter. 30- to 89-day past dues are 43 basis points of loans, indicating a low level of potential future losses. Our allowance for credit losses is presented by loan segment in the bottom right chart and the ratio to overall loans total 59 basis points. These items in the aggregate keep us very confident that our low-risk credit profile performs well over time.
Speaker Change: Slide five depicts additional credit metrics that result from our conservative risk culture nonperforming assets to assets total AR totaled 59 basis points with loan to values at 55%.
Our level of criticized and classified assets improved quarter over quarter, and we expect them to remain well below peer levels again this quarter.
30 to 89 day past dues are 43 basis points of loans, indicating a low level of potential future losses.
Speaker Change: Our allowance for credit losses as presented by loan segment in the bottom right chart.
Speaker Change: And the ratio to overall loans totaled 59 basis points.
These items in the aggregate keep us very confident that our low risk credit profile, we performs well over time.
Speaker Change: Yeah.
John Buran: Slide six outlines credit metrics at a more granular level for key portfolios. Our multifamily portfolio comprises 39% of gross loans and has strong credit metrics such as a weighted average loan-to-value of 44% and a weighted average debt coverage ratio of 1.9 times. Non-performing loans in this portfolio are only 33 basis points down from 52 basis points in the prior quarter. and criticized and classified loans are only 55 basis points of loans down from 67 basis points in the prior quarter. Average loan size is $1.2 million in this $2.6 billion portfolio. Investor commercial real estate loans, excluding the Office Cree portfolio, total 25 percent of gross loans and have similar credit metrics as our multifamily loans with zero non-performing loans and zero criticized and classified loans.
Speaker Change: Slide six outlines credit metrics at a more granular level for key portfolios. Our multifamily portfolio comprises 39% of gross loans and has strong credit metrics such as a weighted average loan to value of 44% and a weighted average debt coverage ratio of one point.
Speaker Change: Nine times non.
Speaker Change: Nonperforming loans in this portfolio are only 33 basis points down from 52 basis points in the prior quarter.
Speaker Change: And criticized and classified loans are only 55 basis points of loans down from 67 basis points in the prior quarter.
Average loan size is $1 2 million in this 2.6 billion dollar portfolio.
Investor commercial real estate loans, excluding the office creep portfolio totaled 25% of gross loans and have similar credit metrics as our multifamily loans with zero nonperforming loans and zero criticized and classified loans.
John Buran: Our exposure to office loans and Manhattan office buildings is small, at less than 4%, and about half a percent to gross loans respectively. There is one non-performing loan in the office portfolio, which we expect will be resolved shortly with no loss. These metrics provide a clear representation of our conservative and strong credit culture that has and continues to perform very well over time.
Speaker Change: Our exposure to office loans, and Manhattan office buildings with small at less than 4% and about half a percent to gross loans respectively.
Speaker Change: There's one nonperforming loan in the office portfolio, which we expect will be resolved shortly with no loss.
Speaker Change: These metrics provide a clear representation of our conservative and strong credit culture that has and continues to perform very well over time.
John Buran: Slide 7 provides further context on the risk in our multifamily portfolio and a comparison versus peers. As of June 30, 2024, our Criticizing Classified Multifamily Loans were only 67 basis points, the fourth best in the peer group. At the end of the third quarter, this ratio improved to 55 basis points. Multifamily reserves to criticized and classified multifamily loans were 61 percent, which was the fifth best in the peer group in the second quarter. And this ratio improved to 70 percent. in the third quarter. 30 to 89 day past dues in our multifamily loan portfolio were 52 basis points.
Speaker Change: Slide seven provides further context on the risk in our multifamily portfolio and a comparison versus peers.
Speaker Change: As of June 32024, our criticized and classified multifamily loans were only 67 basis points. The fourth best in the peer group.
Speaker Change: At the end of the third quarter this ratio improved to 55 basis points.
Speaker Change: Multifamily reserves to criticized and classified multifamily loans were 61%.
Which was the fifth best in the peer group in the second quarter and this ratio improved to 70%.
Speaker Change: In the third quarter.
Speaker Change: 30 to 89 day past dues in our multifamily loan portfolio were 52 basis points.
John Buran: With these credit metrics, we see limited risk and loss. on the horizon.
With these credit metrics, we see limited risk and loss on.
Speaker Change: On the horizon.
John Buran: Slide 8 summarizes our overview on credit policy. We have a low-risk balance sheet and years of conservative underwriting that have served the company well, with credit losses and non-performing assets favorable to the industry. Our multifamily investor commercial real estate portfolios are well underwritten. and are prepared for higher rates based upon our stress tests at origination. We had one office loan moved to non-accrual this quarter, but we expect this loan will be resolved shortly with no loss to principal. non-performing assets and criticized and classified loans in Group Quarter over Quarter and our 30 to 89-day delinquencies remain low.
Speaker Change: Slide eight summarizes our overview on credit quality.
Speaker Change: We have a low risk balance sheet and years of conservative underwriting that has served the company well with credit losses, and nonperforming assets favorable to the industry.
Speaker Change: Yeah.
Speaker Change: Our multifamily investor commercial real estate portfolios are well underwritten.
Speaker Change: And are prepared for higher rates based upon our stress tests at origination.
Speaker Change: We had one office loans moved to nonaccrual this quarter, but we expect this loan will be resolved shortly with no loss of principal.
Nonperforming assets and criticized and classified loans and group quarter over quarter in our 30 to 89 day delinquencies remain low.
John Buran: We remain confident in our low-risk credit profile.
Speaker Change: We remain confident in our low risk credit profile.
Susan Cullen: I'll now turn it over to Susan to provide more detail on our financial metrics.
Speaker Change: Now I'll turn it over to Susan to provide more detail on our financial metrics.
Susan Cullen: Susan. Thank you. Thank you, John. I will begin on slide 9, which provides more detail on our deposits. Average deposits increased 9% year-over-year and 4% quarter-over-quarter. Average non-interest bearing deposits were 11% of total average deposits compared to 12.5% a year ago. Our loan-to-deposit ratio has improved to 90% from 103% a year ago. The cost of deposits increased by 17 basis points in the quarter compared to 11 basis points in the second quarter and 17 basis points in the first quarter of 2024. We believe the cost of deposits has likely peaked in July as we've seen the cost of deposits decrease month over month for both August and September.
Speaker Change: Susan.
Susan: Thank you John I will begin on slide nine which provides more detail on our deposits.
Average deposits increased 9% year over year, and 4% quarter over quarter.
Susan: Average noninterest bearing deposits were 11% of total average deposits compared to 12, 5% a year ago.
Susan: Although these deposit ratio has improved to 90% from 102% a year ago.
The parcel deposits increased by 17 basis points in the quarter compared to 11 basis points in the second quarter and 17 basis points in the first quarter of 2024.
Susan: We believe the cost of deposits is likely peaked in July and so you've seen the cost of deposits decreased month over month for both August and September.
Susan Cullen: Slide 10 outlines the net interest income and margin trends. The GAF and CORE net interest margin increased five and four basis points to 2.1% and 2.07% respectively. Interest recoveries on delinquent loans are larger than in previous quarters, and this added about five base points to both GAAP and CORE net interest margins. On a monthly basis, the net interest margin bottomed out in July and expanded in both August and September. with 50 basis points cut by the Fed, funding costs, floating rate assets, and swaps also moved lower. We lowered rates by 50 basis points on $1.8 billion of non-maturity deposits on October 1st.
Slide 10 outlines the net interest income and margin trends.
Susan: The GAAP and core net interest margin increased by four basis points to two 1% and 2.07% respectively.
Susan: Interest recoveries and delinquent loans are larger than in previous quarters, and this added about five basis points, both GAAP and core net interest margin.
Susan: On a monthly basis, the net interest margin bottomed out in July and expanded in both August and September.
Speaker Change: What did the 50 basis point cut by the fed funding path floating rate assets and swaps also moved lower.
Speaker Change: We lowered rates by 50 basis points of $1 billion of non maturity deposits on October 1st week.
Susan Cullen: We still have the tailwind of new loan production that has higher yields than the existing portfolio and the natural repricing of the loan portfolio over the next several years. Based on our modeling, our net interest margin was flat for a 25-base point cut in rates and a 33% beta on interest bearing deposits. if we are able to generate a higher interest bearing deposit data on that interest margin with benefits. Our net interest margin is a daily pull.
Speaker Change: We still have the tailwind of new loan production that has higher yields than the existing portfolio and the natural repricing of the loan portfolio over the next several years.
Speaker Change: Based on our modeling our net interest margin flat, but 25 basis point cut in rates and a 38% beta on interest bearing deposits.
Speaker Change: If we're able to generate a higher interest bearing deposit beta on that and just much of a benefit.
Our net interest margin is a daily focus.
Susan Cullen: Slide 11 provides more detail on our CD portfolio. Total CDs are nearly $3 billion, or 30% of total deposits at the quarter's end. About $1.5 billion of retail CDs are expected to mature over the next year at a weighted average rate of 4.64%, which compares to current rates of 3.75% to 4.75%. we see a significant opportunity to reprice these CDs lower as they mature.
Speaker Change: Slide 11 provides more detail on our C D portfolio.
Speaker Change: So I don't see days or nearly $3 billion or 30% of total deposits at the corner scent.
Speaker Change: About $1 $5 billion of retail fees are expected to mature over the next year at a weighted average rate of 4.64%, which compares to current rates of three point something 5% to 475%.
Speaker Change: We see significant opportunity to reprice D C. It is lower as they mature.
Susan Cullen: Slide 12 provides more detail on the contractual repricing of the loan portfolio. Approximately $1.3 billion, or 19% of gross loans, are repriced to a short-term index. Our interest rate hedge position increases this percentage to 26%. For the remainder of 2024, $226 million of loans are due to reprice 185 basis points higher than the current coupon rate. In 2025, approximately $775 million of loans are scheduled to reprice upwards of 159 basis points. These rates are based on the underlying index value of September 30th. This loan repricing should help drive net interest margin expansion once funding costs stabilize or decline.
Speaker Change: Slide 12 provides more detail on the contractual repricing of the loan portfolio, approximately $1.3 billion or 19% of gross loans reprice to a short term index.
Speaker Change: Interest rate hedge position increases as a percentage to 26%.
Speaker Change: For the remainder of 'twenty 'twenty, four $226 million of loans repriced 185 basis points higher than the current coupon rate.
Speaker Change: In 2025, approximately 75 million of loans are scheduled to reprice upwards of 159 basis points. These rates are based on the underlying index value at September 30th.
Speaker Change: It's not like pricing should help drive net interest margin expansion once funding cost stabilized or declined.
Susan Cullen: Slide 13 outlines how we are thinking about our net interest margin. In the short term, funding costs should benefit from CD repricing and the pricing actions we took on October 1st. Our real estate loans should continue to reprice higher over time. These items will serve as potential offsets to the floating rate assets and the interest rate swaps that will contractually price lower with every Fed move. Near term, the net interest margin is likely to remain stable, but longer term we should see improvement. A flattening to a steepening of the yield curve should positively benefit net interest income.
Speaker Change: Slide 13 outlines how we're thinking about our net interest margin.
Speaker Change: And the short term funding costs should benefit from CD repricing and the pricing actions, we took on October 1st.
Speaker Change: Our real estate loans continue to reprice higher overtime. These items all service potential offsets the floating rate assets and the interest rate swaps that will contractually priced lower with every fed move.
Speaker Change: Near term that are entered net interest margins likely likely to remain stable, but longer term, we should see improvement.
Speaker Change: I think to a steepening of the yield curve should positively benefit net interest income.
Susan Cullen: while expecting them to expand over time, it could be bumpy quarter to quarter.
Speaker Change: Well, we expect the NIM to expand overtime, it can be bumpy quarter to quarter.
Susan Cullen: Our capital position is shown on slide 14. Book value and tangible book value per share were stable year over year and quarter over quarter. The leverage ratio is approximately 8%, while the tangible common equity ratio remains about 7%. Overall, we view our capital base as a source of strength and a vital component of our conservative balance sheet.
Speaker Change: Our capital position is shown on slide 14 book value and tangible book value per share was stable year over year and quarter over quarter. The leverage ratio was approximately 8% tangible common equity ratio remains about 7%.
Speaker Change: Overall, we view our capital base as a source of strength and a vital component of our conservative balance sheet.
Susan Cullen: Slide 15 provides detail on our Asian markets, which account for about a third of our branches. We have approximately $1.3 billion of deposits and $744 million of loans in these markets. These deposits are 17% of total deposits, and while we have only a 3% market share of this $40 billion market, implying there is substantial room for growth. Our approach to this market is supported by our multilingual staff, our Asian Advisory Board, and support of cultural activities through participation and corporate sponsorship. This market with its dense population and high number of small businesses continue to be an important opportunity for us and one that we believe will drive our success over time.
Speaker Change: Slide 15 provides detail on our Asian markets, which account for about a third of our branches we have.
Approximately $1.3 billion of deposits and $744 million of allowance in these markets.
Speaker Change: These deposits are 17% of total deposits and while we have only a 3% market share of its 40 billion dollar market.
Speaker Change: And there is substantial room for growth.
Speaker Change: Our purchase market supported by our multi lingual staff, our Asian Advisory Board and so part of the cultural activities still participation and corporate sponsorships.
Speaker Change: This is a market with its dense population and high number of small businesses continue to be an important opportunity for us and one that we believe will survive our success over time.
Susan Cullen: On slide 16, you can see the community involvement is a key part of our strategy. During the third quarter, we participated in numerous local events to strengthen our ties to our customer base. In particular, we were an active participant in the Flushing Meadows Drag and Boat Festival. Our teams participated and did well in the races and our booth in the park was a big hit as you can see from the lines at the top left picture. Participating in these types of initiatives has served us as a great way to further integrate ourselves with our local communities while driving customer loyalty.
On Slide 16, you can see the community involvement is key part of our strategy.
Speaker Change: During the third quarter, we participated in numerous local events to strengthen our ties to our customer base.
Speaker Change: In particular, we were an active participant in the Flushing Meadows Dragon Boat Festival RK.
Speaker Change: Our teams participated and did well in the basin and the park was a big hit as you can see the lines at the top left fixture.
Participating in these types of initiatives have served us as a great way to further integrate ourselves.
Speaker Change: The communities, while driving customer loyalty.
Susan Cullen: Slide 17 provides our high-level perspective on performance in the current environment. We continue to expect stable loan balances and a continued emphasis on improving the funding mix. The net interest margin, excluding the five basis points of delinquent loan recoveries, is expected to be relatively stable in the quarter, meaning few basis points movement depending on the competitive environment and the pace of loan originations. We expect that funding costs have peaked. When a curve flattens or regains a positive slope, this should benefit the net interest margin over time. Non-interest income should be aided by the closing of back-to-back swap loans in the pipeline and the benefits of a bulleted 1035 exchange.
Speaker Change: Slide 17 provides a high level perspective on performance in the current environment. We continue to expect stable loan balances and a continued emphasis on improving the funding mix.
Speaker Change: Net interest margin, excluding five basis points, a delinquent loan recoveries is expected to be relatively stable in the quarter, meaning few basis points, depending on the competitive environment and the pace of loan originations.
Speaker Change: We expect the funding cost of peak.
Speaker Change: When the curve flattens or against a positive positive slope. This should benefit the net interest margin over time.
Speaker Change: Noninterest income should be aided by the close of the bats back swap loans in the pipeline and the benefits of a bull at 10 35 exchange.
Susan Cullen: After the exchange is completed, BOLI income is expected to increase an incremental $4 million over the next year as compared to the annualized third quarter 2024 levels, and the increase can be lumpy quarter to quarter.
Speaker Change: After the exchanges completed bully income is expected to increase an incremental $4 million over the next year as compared to the annualized third quarter 2024 levels and the increase can be lumpy quarter to quarter.
Susan Cullen: As John mentioned previously, we have made the strategic decision to invest in the business by adding people and branches. While year-over-year core non-interest expense growth was slightly elevated this quarter, we expect core non-interest expense to increase mid-single digits in 2024. While quarterly tax rates can fluctuate, we expect the mid-20s effective tax rate for 2024.
Speaker Change: As John mentioned previously we have made the strategic decision to invest in the business by adding people in branches.
Speaker Change: Year over year core non interest expense growth was slightly elevated this quarter, we expect core non interest expense increased mid single digits in 2024.
Speaker Change: While quarterly tax rates can fluctuate we expect the mid twenty's effective tax rate for 2024.
Susan Cullen: Lastly, we sold approximately 50 million investment securities after quarter end.
Speaker Change: Lastly, we sold approximately 15 million of investments curious after call that I will turn now turn it back over to you John.
John Buran: I'll now turn it back over to you, John.
John Buran: Thank you, Sue.
Thank you Susan.
John Buran: I'll conclude with our key takeaways. We're pleased with our quarterly results and the emerging trends. Our near-term priorities remain on our four areas of focus to help build a strong foundation for improved long-term profitability. The net interest margin should begin to expand as the yield curve flattens and becomes positively sloped. While we expect improvement over time, it may not always be linear. There's no change in our credit discipline or resulting low-risk credit profile. Capital and Liquidity are strong. We're mindful of expenses, but we'll continue to invest in the franchise to improve the long-term profitability and value.
John Buran: I'll conclude with our key takeaways, we're pleased with our quarterly results and the emerging trends our near term priorities remain on our four areas of focus to help build a strong foundation for improved long term profitability.
John Buran: <unk> margin should begin to expand as the yield curve flattens and becomes positively sloped, while we expect improvement over time, it may not always be linear.
John Buran: There's no change in our credit discipline, or resulting low risk credit profile.
John Buran: Capital and liquidity to go strong.
John Buran: We're mindful of expenses, but it will continue to invest in the franchise to improve the long term profitability and value the.
John Buran: The rate environment is still a challenge, but we're controlling what we can control and setting the foundation for a better future.
John Buran: The rate environment is still a challenge, but we're controlling what we can control and setting the foundation for a better future.
Operator: Operator, I'll turn it over to you to open the lines of communications for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone key. If using a speakerphone, please pick up your handset before pressing the... To withdraw from the question queue, please press star then 2.
Operator, I'll turn it over to you to open the lines of communications for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Ask the question you May Press Star then one on your telephone keypad.
Speaker Change: It's using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw from the question queue. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Steve Moss: Our first question will come from Steve Moss with Raymond James. You may now go ahead.
Speaker Change: Our first question will come from Steve Moss with Raymond James You May now go ahead.
Steve Moss: Good morning. Good morning, Steve. Good morning. Morning.
Steve Moss: Hi, good morning.
Speaker Change: Good morning, Steve.
Good morning, maybe just starting with Susan there I think I heard you at the end of your commentary say $50 million of Securities were sold at the end of the quarter.
Steve Moss: Maybe just starting with Susan there. I think I heard you at the end of your commentary say 50 million of securities were sold at the end of the quarter. Not sure exactly, like a little bit of a static on the line, but just, you know, curious if that was and if there's a coupon that you could give us.
Steve Moss: Im not sure exactly like a little bit of a static on the line, but just.
Steve Moss: Curious if that was and if there's a coupon at that you could give us.
Susan Cullen: They were some of the adjustable rate CLOs that were sold with the minimal gain as the loan growth grew, we shed those assets.
Speaker Change: They were somebody adjustable rate loans that were sold with the now that the minimal minimal gain as the loan growth really shed those assets.
Steve Moss: Okay.
Steve Moss: Got you.
Steve Moss: And in terms of the, you know, the margin here, I hear you guys, it's been improving here since July.
Speaker Change: And in terms of the you know the margin here I hear you guys its been improving here since.
Susan Cullen: I'm just kind of curious, you know, what was the September margin? I hear you on roughly stable, but just kind of curious as to where you were in September before the 50-base point cut and deposit. It was $228,000, but some of that was associated with that large recovery. So bringing it down, X that recovery on that delinquent loan, the September NIM would have been $210,000.
Steve Moss: July.
Speaker Change: Just kind of curious you know what was the September margin here.
Speaker Change: I hear you on roughly stable, but just kind of curious.
Speaker Change: Where you were in September before the 50 basis point cut in deposits.
Speaker Change: Those two 'twenty was 228, but some of that was associated with that.
Speaker Change: With that large large recoveries, so, bringing bringing it down X X that recovery on that loan.
Speaker Change: The September and then would've been 210.
Speaker Change: Okay.
Susan Cullen: And with the lower pricing on October 1st for deposits, you know, Curious to see how, you know, what your sense of the positive reaction has been and, you know, do you think you can keep like 100% type of beta if we get a few more cuts here in the short So we already repriced $1.8 billion of non-maturity deposits, 50 basis points lower on October 1st. And we also feel we've got an opportunity on the CD side as those attending to roll off not quite 5, but close to 5. And the indications that we have so far, we've got a 475 out there for 91 days, and we have a 4% for one year.
And with the lower pricing on October 1st for deposits.
Curious to see how you know what your sense of deposit of reaction has been and you know do you think you can keep like 100% type of beta if we get a few more cuts here in the short term.
Speaker Change: So are we already repriced $1 $8 billion of non maturity deposits 50 basis points lower on October one.
Speaker Change: And we also feel we've got an opportunity on the on the CD side as those those attending to roll off.
I'm not quite five but close to close to five and.
Speaker Change: The indications that we have so far we've got a 475 out there for 91 days and we have a 4% four one year and what we're seeing but.
Susan Cullen: And what we're seeing at the end of September, there was more of a focus on people going for the one year 4% rather than the shorter term 475. So we're expecting to see some pickup out of that as well.
Speaker Change: But at the end of the at the end of September there was more of a more of a focus on people going for the one year, 4% rather than the the shorter term a 475, so we're expecting to see some pick up out of that as well.
Susan Cullen: Okay, great. And then one more for me here just on the On the charge-off for the quarter, just curious if you could give us color around, you know, what drove that charge-off and anything. That was a C&I loan, a business banking loan that we had fully reserved for our prior quarters.
Speaker Change: Okay, Great and then.
Speaker Change: One more for me here just on the Oh.
Speaker Change: On the charge off for the quarter, just curious if you give us color around what drove that charge off.
Speaker Change: Anything.
Speaker Change: Special about it that was a well that was a or C&I loan or business banking loan that.
Speaker Change: We had fully reserved for in prior quarters it.
Susan Cullen: We just reserved for it and the information came to us that it was time to charge it off. but it was fully prevented for in previous periods.
Speaker Change: We just reserve part and the information came to us that it was time to trying to charge it off.
Okay, it's been fully provided for in previous periods.
Steve Moss: Okay, appreciate that. And maybe just one, one more going back to the margin here, you know, said The, you know, more dovish here than it was a quarter ago, and just kind of curious if you guys could give us a sense as to where, you know, your margin could shake out if we get, you know, another 150 base points type cut. So three, three and a quarter, three and a half type fed funds rate by the fourth quarter of 2025.
Okay, I appreciate that and maybe just one.
Speaker Change: One more going back to the margin here you know.
Speaker Change: But you know more dovish than it was.
Speaker Change: Quarter ago, and just kind of curious if you guys could give us a sense as to where you know your margin could shake out if we get another 150 basis points type cuts of three three in quarter, three and a half type a fed.
Speaker Change: Fed funds rate by the fourth quarter of 2025.
Speaker Change: Yeah.
Any sense around how you would think about it or is it really more of a 26 and then with the swaps before we see more margin expansion.
John Buran: Any sense around how you would think about it, or is it really more of a 26 event with the swaps before we see more margin? So the NIMS should benefit from a positively sloped yield curve or even a yield curve that gets a little flatter than it is today. So our interest rate modeling indicates that the steepening of the curve by 200 basis points from the September 30th levels would increase net interest income by about $4 million in the first year and about $20 million in the second year. But that's including, remember, a static balance sheet.
Speaker Change: So the NIM should benefit from any of her from a positively sloped yield curve or even or even a a yield curve that gets a little flatter than it than it is today. So our interest rate modeling indicates that the steepening of the curve by 200 basis.
Speaker Change: <unk> from the September 30th levels would increase net interest income by about $4 million in the first year and about $20 million in the second year.
But that's including remember a static balance sheet are obviously loan growth at higher rates would add to that add to that.
John Buran: Obviously loan growth at higher rates would add to that margin accretion.
Speaker Change: Margin accretion.
Steve Moss: Okay, great.
Speaker Change: Okay great.
Steve Moss: Really appreciate that color there. Thank you very much.
Speaker Change: Really appreciate that color there. Thank you very much.
Steve Moss: Thank you, Steve.
Speaker Change: Thank you Steve Thanks Lee.
Mark Fitzgibbon: Our next question will come from Mark Fitzgibbon with Piper Sand.
Our next question will come from Mark Fitzgibbon with Piper Sandler.
Mark Fitzgibbon: You may now go ahead.
Speaker Change: You May now go ahead.
Mark Fitzgibbon: Hey guys, good morning. Hi, I want to follow up on Steve's question, because I think it's a good one. Where do you think, in that ideal environment, with the yield curve being really steep, where can the margin theoretically So, we would like to get back to about the 3% margin mark, but that's obviously going to take some time and a little bit of assistance from the Shape of the Curve. And I guess sort of dovetailing into that, you know, I guess I'm curious where you think the company can operate through the cycle from a return on tangible common equity basis.
Mark Fitzgibbon: Hey, guys good morning.
Speaker Change: Joining the call.
Mark Fitzgibbon: Hi, I wanted to follow up on Steve's question, because I think it's a good one where where do you think in that ideal environment with the yield curve being really steep can where can the margin theoretically get to.
Speaker Change: So we would like to get back to that 3% margin a mark, but that's obviously going to take some time and in a little bit.
Speaker Change: Assistance from them from the shape of the curve.
Okay.
Speaker Change: And I guess sort of dovetailing into that you know I guess I'm curious, where you think the company can operate through the cycle from a return on tangible common equity basis.
John Buran: You know, I know you had said this was the best quarter in the last seven, and it translated into sort of a 3% ROTCE. Where do you think is a reasonable expectation for investors for the ROTCE over the cycle, maybe an average over the cycle for the company? So, um... Our target is 10%. We'd like to get to that level. We think that's a possible level. Okay, but by my quick math, your margin would need to be sort of 270 to get to a double-digit ROTCE. So that's a long way from here. That's, you know, 60 basis points up from here.
Speaker Change: You had said this was the best quarter in the last seven and it translated into sort of a 3% of our R. A T C E.
Speaker Change: Where.
Speaker Change: Do you think is a reasonable expectation for investors for the euro TCE over the cycle, maybe an average over the cycle for the company.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: Our target is.
Speaker Change: 10%, we'd like to get to that level, we think that's a possible level.
Speaker Change: Okay.
Speaker Change: By my quick math your margin would need to be sort of $2 70 to get to a double digit R. O T. C. E. So that's a long way from here, that's 60 basis points up from here.
Mark Fitzgibbon: And for most of the cycle, you'll be well below that.
Speaker Change: And for most of the cycle, you'll be well below that.
John Buran: is, I guess I'm just wondering, is the model built in such a way that that's feasible to be able to generate double-digit ROTCs over time? Well, we certainly feel that we've got a lot of pickup to be coming from the change in the change in rates that we're anticipating, you know, going into into 2025. And we did hit that that level in 21 and 22 as well. Okay.
Speaker Change: I guess I'm. Just wondering is is the is the model built in such a way that that's feasible to be able to generate double digit R. O T CS overtime.
Speaker Change: Well, we certainly feel that we we've got a lot of of pickup to be coming from the change in our the change in rates.
Speaker Change: We're anticipating.
Speaker Change: Going into a into 2025, and we did hit that that level in 'twenty, one and 'twenty two as well.
Speaker Change: Yeah.
Susan Cullen: And then secondly, I wondered, Susan, if you could share with us the average rate on the 429 million of CDs that you booked in the third quarter. I know there was some data that was sort of in a range of, I think, 375 to 475 for a bunch of deposits, but specifically on the CDs. I was curious. So they were around four and a quarter, the 375 to 475 is the current rates that we're offering. And as John said, the 475 relates to a 91-day special that's not very popular. Most of our customers are going to the one-year 4% CD.
Speaker Change: Okay, and then secondly, I wonder if you could share with us the average rate on the 429 million of Cds that you booked in the third quarter. I know there was some data that was sort of in a range of I think $3 75 to 475 for a bunch of deposits, but specifically on the Cds I was curious.
Speaker Change: So they were around four and acquire today.
Speaker Change: 75 to 475 is the current rates that we're offering.
Speaker Change: And as John said before 75 relates to the 91 day special that's not very popular most of our customers are going to the one year, 4% C D.
Mark Fitzgibbon: Okay, great.
Speaker Change: Okay, Great and then last question.
Mark Fitzgibbon: And then last question, do you all have a target for CRE concentration? It just feels like everybody in the industry is trying to bring that down. Do you guys have a goal in mind, and how long do you think it will take you to get to that goal? No, we don't. You know, we think we're pretty comfortable where we sit at this point in time.
Do you all have a target for CRE concentration.
Speaker Change: She feels like everybody in the industry is trying to bring that down do you guys have a goal in mind and how long do you think it'll take you to get to that goal.
Speaker Change: But no we don't.
Speaker Change: We think we're pretty comfortable where we sit at this point in time.
Mark Fitzgibbon: Thank you. Thanks, Mark.
Speaker Change: Thank you.
Steve Moss: Thanks Mark.
Speaker Change: Yeah.
Christopher O'Connell: Our next question will come from Christopher O'Connell with KBW. You may now go ahead.
Speaker Change: Our next question will come from Christopher O'connell with K B W.
Speaker Change: Oh go ahead.
Christopher O'Connell: Hey, good morning Chris. Maybe you could just describe, you know, I appreciate the color that you guys gave on the office non-performer this quarter. But just, you know, a little bit more details around kind of, you know, the size of the credit and what happened there and what the, you know, what gives you guys confidence in the resolution here. That credit has been around for a while. It has a pretty low LTV. The building itself has been marketed and with very good indications on the price, which will result in a full recovery for us. He's worked with well-known, or the borrower's working with well-known real estate developers who have...
Speaker Change: Hey, good morning, Chris Hey, Chris.
Susan.
<unk>.
Christopher O'Connell: Maybe you could just describe it you don't appreciate the color that you guys gave on on the office non performer this quarter.
Speaker Change: Well, just you know a little bit more details around this.
Speaker Change: The size of the credit.
Speaker Change: And what happened there and what the what.
What gives you guys confidence in the resolution here.
Speaker Change: Yeah.
Speaker Change: That credit has been around for a while it has a.
Speaker Change: Pretty low L. T V. The building itself is has been marketed and with very good indications on the on the price, which will result in a full recovery for us.
Speaker Change: He he's worked with well known or the borrowers working with well known real estate developers who have.
John Buran: have validated that price and have an interest in the resolution. It's all full.
Speaker Change: Validated validated that price and have an interest in a resolution.
Speaker Change: Yeah.
Got it.
Speaker Change: That's helpful and then on the.
Christopher O'Connell: And then on the... On the fee side, if I heard you right, it seems like, you know, you guys are going to going to get $4 million of BOLI benefit. That's not, you know, you know, that's a kind of like 4 million coming in over the course of a single year. That's not 4 million, you know, perpetually in the run rate, correct? It is $4 million over the next year incremental to the third quarter 2024 run rate. That's it. Okay. That's it. Yep. But as the money gets invested, it's going to come in blumpy. Yep, thank you.
Speaker Change: On the fee side, if I heard you right. It seems like you guys are good.
Speaker Change: Can it get.
Speaker Change: $4 million.
Speaker Change: Boley benefit.
Speaker Change: Scott you know.
That's a kind of like a $4 million coming in over the course of a single year, that's not 4 million perpetually in the run rate correct.
Speaker Change: It's $4 million over the next year incremental to the third quarter 2024 run rate.
Speaker Change: So is that okay.
Speaker Change: Yeah.
But yes, no I got it.
Speaker Change: It is the money gets invested it's gonna come in lumpy.
Speaker Change: Yep, Thank you about a million water.
Christopher O'Connell: Got it. Thank you.
Got it thank you.
Christopher O'Connell: And then on the expenses, You know, I appreciate, you know, I understand the guy bid single digit for this year. I mean, it implies, you know, a decent step up here from, you know, 3Q to 4Q, you know, to get there.
Speaker Change: And then on the expenses.
Sure.
Speaker Change: You know I appreciate you know I understand the guide mid single digit for this year.
Speaker Change: It implies a deal.
Speaker Change: Step up here from <unk> to.
Speaker Change: To get there and I'm just wondering if that for Q number is going to be a good baseline.
Christopher O'Connell: And I'm just wondering if that 4Q number is going to be a good baseline, you know, as we kind of go into 2025, or if there's, you know, one-time type of investments or kinds of, you know, transitional, you know, costs that may fall out as we go into 2025 off of the Q4 number. So, we're looking to invest in the company more, so there will be more personnel cost as we bring on branches. The fourth quarter has some of the new branches online, but doesn't have everything, you know, all the new branches that were. planning on doing.
Speaker Change: Kind of go into 2025 or if there is.
Speaker Change: One time type of investments or kind of a.
Speaker Change: Transitional.
Speaker Change: Costs that that May fall out as we go into 2025 off of the Q4 number.
Speaker Change: So what we're looking to invest in that and that and the company more so there will be more personnel cost as we bring on branches. The fourth quarter has some of the new branches online but.
Speaker Change: Doesn't have everything all the new branches that were.
Speaker Change: Planning on doing.
Susan Cullen: So remember also, we brought on staff, you know, mid-year as well that, you know, the full-year effect of that staff will appear in 2025.
Speaker Change: So I remember also we brought on we brought on staff mid year as well that are that are you know the full year effect of the sample will appear in 2025.
Speaker Change: Yeah.
Speaker Change: Understood.
Speaker Change: Yeah.
Christopher O'Connell: And then, um... you know, maybe just kind of, you know, general qualitative, you know, update on the outlook for multifamily and, you know, how you guys view, you know, the 96 million and the 358 million maturing in, you know, Q4 in 2025, you know, NPLs were down a bit in that bucket this quarter. And, you know, there's a little pick up in the 30 to 89, just, you know, what you're seeing from from those repricing and maturities as they come in from a cash flow perspective. Yes, so even though the 30 to 89 is up, really when you break that down, the 60 to 89 bucket is actually only two basis points, and it's down.
Speaker Change: And then.
Speaker Change: You know, maybe just kind of.
Speaker Change: General qualitative.
Speaker Change: No update on the outlook for multifamily.
Speaker Change: And <unk>.
How you guys view, the 96 million in the $358 million maturing in Q4, and 2025 I thought npls were.
Speaker Change: We're down a bit in that bucket this quarter.
Speaker Change: And there's a little pick up in the 30 to 89, just what youre seeing from from those repricing of maturities as they come in from a cash flow perspective.
Speaker Change: Well, yes, so even though there's a 38.
Speaker Change: 30 to 89 is up really when you when you break that down.
Speaker Change: The 60 to 89 bucket is actually only two basis points.
Speaker Change: And it's down so you know we're not seeing the late stage delinquency are flowing through.
John Buran: So we're not seeing the late stage delinquency flowing through. We may see a little bit earlier stage, but we're very, very proactive in taking those situations well in hand and managing them to a successful conclusion.
Speaker Change: They see a little bit earlier stage, but we're very very active and proactive in taking our you know take he knows those situations.
Speaker Change: <unk>, well in hand, and I'm, managing managing them to a successful conclusion.
Speaker Change: Great.
Christopher O'Connell: Thank you. That's all I have.
Speaker Change: Thank you Latoya.
Christopher O'Connell: Thanks, Chris.
Chris: Thanks, Chris that interest.
Manuel Navas: Our final question will come from Manuel Navas with D.A. Davidson.
Speaker Change: Our final question will come from Manwell novice with D. A davidson.
Manuel Navas: You may now go ahead. Good morning Manuel. Good morning.
Speaker Change: You May now go ahead.
Speaker Change: Hey, good morning, the near term.
Speaker Change: Good morning, good morning.
Manuel Navas: The near-term NIMS stable guidance, how much could it change? If the pace of cuts shift, if we go 25-50, what's kind of the sensitivity around that? near-term value.
Speaker Change: The near term NIM stable stable guidance, how much could it change.
Speaker Change: The pace of cuts shift if if we go twenty-five 50, what's kind of the sensitivity around that.
Speaker Change: Near term guidance.
John Buran: Well, I think there's a lot of variables there, including the competitive situation that we're dealing with and the preferences that are taking place in the customer's mind. So, you know, I think As John said, the competitive would drive our CD repricing, our other transactions. Is that a parallel shift or a non-parallel shift for the loan repricing? There's a lot of variables that we've talked about in our NIM discussion that would give rise to different scenarios depending on the assumptions you want to make.
Speaker Change: Well I think there's you know there's a lot of variables there, including the competitive situation that are you know that we're dealing with and you know the preferences preferences that are taking place in the in the customers' mind. So you know I think.
Speaker Change: You really have to yeah. It is.
Speaker Change: So the competitive what would drive our CD repricing or other transactions.
Speaker Change: Is that a parallel shift or non parallel shift before the loan repricing yeah. There. There's a lot of variables that we have talked about it.
Speaker Change: And in our NIM discussion that would give rise to different scenarios, depending on the assumptions you want to make.
John Buran: So the really major takeaway is that the steepening of the curve by 200 basis points would increase our net interest income, as I said earlier, by $4 million and $20 million in the second year. And then you layer on top of that the additional loans, because that's a static balance sheet number. You layer on top of that additional loans that are all coming in at a higher rate. In addition, of course, we have about $1 billion between the end of this year and into 2025 that is going to loans that are contractually going to reprice upward.
Speaker Change: So you know the.
Speaker Change: The major do we really get a major takeaway is is that the steepening of the curve by 200 basis points.
Speaker Change: <unk> will increase our net interest income as I said earlier by $4 million in and a $20 million in the second and the second year and then you layer on top of that.
Speaker Change: The the additional loans because that's a static balance sheet number you lay on layer on top of that additional loans that are coming that are all coming in at a higher rate.
Speaker Change: In addition of course, we have about $1 billion between the end of this year and into 2025 that is going to.
Speaker Change: Loans that are contractually going to reprice upward, let's ballpark, it's somewhere around 165 basis points or so.
John Buran: Let's ballpark it somewhere around 165 basis points or so.
Speaker Change: Yeah.
John Buran: So there's a lot of moving parts here, and certainly the initiation of a reducing cycle, a reduction cycle by the Fed is all very positive for us. It's positive for us from our funding situation, as we mentioned earlier. Clearly, it looks like it will not cause us too much of a problem on the loan side. Loans will continue to come on board at higher rates, higher than portfolio rates. And of course, the other effect is that credit problems, repricing issues that may have been anticipated on the commercial real estate side are less likely to happen as a result of less pressure on the interest rate side.
So there's a lot of a lot of moving parts here, you know and and you know certainly the the initiation of the of our reducing cycle reduction cycle by the by the fed is.
Speaker Change: It's all very positive for us is positive for us from our our funding situation. As we are you know as we mentioned earlier clearly clearly you know it looks like it will it will not.
Speaker Change: Cause us too much of a problem on the loan side won't loans will continue to come.
Speaker Change: Come on board it at higher rates higher than portfolio rates and and of course, you know the other effect is that the debt credit credit problems repricing.
Speaker Change: Issues that may have been anticipated on on the commercial real estate side and not growing or are less likely to happen as a result of a less pressure on the interest rate side.
John Buran: There seems to be less near-term repricing risk, but the reprices that have occurred what has been the experience so far in terms of credit stress? And what is your appetite? that, like, how, what is your effort to keep those loans or push them out in any form? The loans that we priced in 23 and 24 have been performing. I don't think we've had anything that's, you know, materially affected our delinquencies or non-performing in any way, shape, or form. You know, remember, we stress test our loans at origination, upwards, chalk them upwards 200 basis points and increase the net operating expenses as we underwrite the loans.
Speaker Change: There's there seems to be less near term repricing risk, but but the re prices that have occurred.
Speaker Change: What has been the experience so far in terms of credit stress.
Speaker Change: And what is.
Speaker Change: Is your appetite to keep.
That like how what is your appetite to keep those loans or push them out.
Speaker Change: And any sense.
Speaker Change: That repriced in the 'twenty three 'twenty four.
Speaker Change: Been performing.
Speaker Change: Performing I don't think we've had anything that's you know materially affected our delinquencies are nonperforming is in any way shape or form.
When are we stress test our loans at origination upwards chakram upwards of 200 basis points, an increase to net operating expenses as we underwrite the loans. So we anticipate credit yeah that scenario, which is kind of all came to fruition.
John Buran: So we anticipate credit, you know, that scenario, which is kind of what came to fruition. Those loans have all performed as indicated.
Speaker Change: So as long as they've outperformed as as as indicated.
Manuel Navas: Competition is interesting. It's probably driving some deposit competition. What are you seeing so far in the market on the deposit side? And there's a large competitor today putting multifamily at 1.9% reserve. the implications for you from that and how has that impacted?
Speaker Change: Our competition is it's interesting.
Speaker Change: It's it's probably driving some some deposit competition what are you seeing so far in the market on the deposit side.
Speaker Change: And there's a large competitor.
Speaker Change: They put in multifamily at one 9% reserves.
Speaker Change: Just thoughts on that.
Speaker Change: The implications for you from that and.
Speaker Change: How is that impacting growth.
John Buran: A couple questions. You know, as you've gone on the past few years, you've... I think over the past 12 months or so or maybe a little bit less than that, maybe nine months, you've seen that the issues associated with that competitor are its own issues and really bear certainly little relationship to Flushing. And I think most of the market, it's appeared to have little impact. I think the major upside of that is that there's a large competitor that is basically out of that market, out of that commercial real estate market, which should benefit Flushing on a go-forward basis.
Speaker Change: So a couple of questions.
Speaker Change: While the past few years.
Speaker Change: Over the past.
Speaker Change: 12 months or so or.
Speaker Change: Maybe a little bit less than that maybe nine months, you've seen that the issues associated with that competitor or its own issues and really bear.
Speaker Change: Certainly little relationship to two Flushing and.
Speaker Change: Thank you.
Speaker Change: Most of the market it's appear to.
Speaker Change: Had little up a little little impact.
Speaker Change: Yeah, I think that's the major the major upside of that is that there's a large competitor that has basically out of this out of that market like commercial our commercial real estate market, which should which should benefit flushing on a go forward basis.
John Buran: Do you have, has the deposit cost declined in October? You know, he did October 1st. It's been a couple of weeks. Has there been any pushback to this point? Very, very little. Great. Very little to none.
Speaker Change: Do you have.
Speaker Change: Has the deposit cost decline in October.
Speaker Change: He did October one it's been a couple of weeks has there been any pushback at this point.
Speaker Change: Very very little.
Speaker Change: Great very little to none.
Speaker Change: Alright, and then is there any reason that only half was repricing that just kind of like public funds smaller accounts relationship basis, just just kind of trying to understand.
John Buran: And then is there any reason that only half was repriced? Is that just kind of like public funds? Smaller accounts, relationship basis, just kind of trying to understand. why he pushed it out there. That was the half that we thought we could reprice. at the time. So we continue to evaluate the other transaction accounts and price those down as well.
Speaker Change: Why are you pushed it out to the house.
Speaker Change: That was the half that we thought we could reprice.
Speaker Change:
Speaker Change: At the time.
So we continue to evaluate the other transaction accounts and price those down as well.
Speaker Change: Okay.
Manuel Navas: I thank you for the call. Thank you.
Speaker Change: Thank you for the column.
Speaker Change: Thank you.
Operator: This concludes our question and answer session.
Speaker Change: 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: I would like to turn the conference back over to John Buran for any closing remarks. Well thank you very much. We're very, very pleased with the quarter and we thank you very much for your attention on the call. Of course, we're always available to answer any questions that you might have on the follow-up. Thank you again. Have a good weekend. Bye now.
John Buran: Well. Thank you very much well we are we're very very pleased with the quarter and we thank you very much for your for your attention on the call I'm of course, we're always available to answer any any questions that you might have on the follow up thank.
Speaker Change: Thank you again.
Speaker Change: Weekend Bye now.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.