Q2 2025 Flushing Financial Corp Earnings Call
Operator: quarter 2025 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. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad.
Welcome to Flushing Financial Corporation, second quarter 2025 earnings conference call.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.
Hosting the call today. Are John Bern, president and chief executive officer and Susan, colon senior, Executive Vice President, Chief Financial Officer, and Treasurer. Today's call is being recorded. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist. By pressing star, then zero on your telephone keypad.
After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad,
Operator: A copy of the earnings release and slide presentation that the company will be referencing today are available on its Investor Relations website at FlushingBank.com.
To withdraw your question. Please. Press star. Then 2
Operator: Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation 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. Securities and Exchange Commission, to which we refer you.
A copy of the earnings release and slide presentation that the company will be referencing today are available on its investor relations website at flushingbank.
Before we begin, the company would like to remind you that discussions. During this call contain forward-looking statements made under the Safe Harbor. Provisions of the US private Securities, litigation Reform, Act of 1995,
Operator: During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and for a reconciliation to GAAP, please refer to the earnings release and or the presentation.
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 US Securities and Exchange Commission to which we refer you.
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 the US. Gaap
Operator: I would now like to introduce John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and results. Thank you, operator.
Speaker Change: For information about these non-gaap measures and for a Reconciliation to Gap, please refer to the earnings release and or the presentation, I would now like to introduce John Burren, president and chief executive officer who will provide an overview of the strategy and results.
John Buran: Good morning, and thank you for joining us for our second quarter 2025 earnings conference call. We're pleased to report continued progress in our second quarter results, building upon the momentum we established in the first. Our focus on three key areas, improving profitability, maintaining credit discipline, and preserving strong liquidity and capital, continues to drive positive results and demonstrates the power of our strategic focus and the successful execution by our team. For the second quarter, the company reported gap earnings per share of $0.41 and core earnings per share of $0.32, which are increases of 128% and 78% year over year.
Speaker Change: Thank you, operator. Good morning, and thank you for joining us. For our second quarter 2025 earnings conference call.
Speaker Change: We're pleased to report continued progress in our second quarter results, building upon the momentum we established in the first quarter.
Speaker Change: Our focus on 3, key areas, improving profitability, maintaining credit discipline and preserving strong liquidity and capital continues to drive, positive results and demonstrates, the power of our strategic focus, and the successful execution by our team.
John Buran: The primary difference between the gap in core earnings are the fair value adjustments on debt and the reversal of evaluation allowance upon reclassification of loans held for sale to loans held for investment. As you can see from our financial highlights on slide 3, our performance was improved and broad-based. Both GAAP and Core Net Interest Margin expanded three basis points quarter over quarter. with GAAP Net Interest Margin reaching $254 and Core Net Interest Margin reaching $252. This marks continued improvement from our 250 range we achieved in the first quarter and considerable growth from a year ago levels in the 200 basis point range.
For the second quarter, the company reported Gap, earnings per share of 41 cents and core earnings per share of 32 cents which are increases of 128% and 78% year-over-year.
Speaker Change: In the Gap, in core earnings are the fair value adjustments on debt and the reversal of evaluation allowance. Upon reclassification of loans help or sale to loans held for investment.
Speaker Change: As you can see from our financial highlights on slide 3, our performance was improved and broad-based.
Speaker Change: Both gaap and core. Net interest margin expanded 3 basis points quarter over quarter.
Speaker Change: With gaap. Net interest margin, reaching 254
Speaker Change: And court, net interest margin reaching 2 52.
Speaker Change: This marks continued improvement from our 250 range. We achieved in the first quarter and considerable growth from a year ago levels in the 200 basis. Point range.
John Buran: Average total deposits increased 6% year-over-year and 1% quarter-over-quarter to $7.6 billion. We're particularly pleased with our non-interest bearing deposit growth, which increased 6% year-over-year and 2% quarter-over-quarter to $875 million. Our pre-provision pre-tax net revenue of $23.1 million and core PPNR of $19 million in the second quarter reached their highest levels since third and fourth quarters of 2022, respectively. Credit metrics continue to demonstrate the strength of our conservative underwriting approach. Net charge-offs totaled 15 basis points for the second quarter, compared to 27 basis points in the first quarter. non-performing assets were stable at 70 to 75 basis points quarter over quarter.
Speaker Change: Average total deposits increased 6% year-over-year and 1% quarter-over-quarter to 7.6 billion dollars.
We're particularly pleased with our non-interest-bearing. Deposit growth, which increased 6% year-over-year and 2% quarter-over-quarter to 875 million.
Speaker Change: Our pre-provision pre-tax net, revenue of 23.1 million and core ppnr of 19 million in the second quarter reached their highest levels.
Speaker Change: Since third and fourth quarters of 2022, respectively.
Of our conservative underwriting approach.
Net charge offs total 15 basis points for the second quarter compared to 27 basis points in the first quarter.
John Buran: Importantly, criticizing classified loans to total loans improved to 108 basis points down from 133 basis points in the prior quarter. The bank's commercial real estate concentration decreased to under 500% for the first time since third quarter of 2023. This strong operating performance translated directly to a stronger balance sheet. Our tangible common equity grew by 25 basis points. to 8.04%. We maintain strong liquidity with $3.6 billion of undrawn lines and resources at quarter end. These results validate our three core areas of focus, improving profitability, maintaining credit discipline, and preserving strong liquidity and capital.
Speaker Change: Non-performing assets were stable at 70 to 75 basis points, quarter over quarter.
Speaker Change: Importantly, criticizing classified loans to Total loans improved to 108 basis points down from 133, basis, points in the prior quarter.
Speaker Change: The banks commercial real estate concentration decreased to under 500% for the first time since third quarter of 2023.
Speaker Change: This strong operating performance, translated directly to a stronger balance sheet.
Our tangible common Equity grew by 25 basis points.
Speaker Change: To 8.04%.
Speaker Change: We maintain strong liquidity with 3.6 billion dollars of undrawn lines and resources at quarter end.
These results validate our 3. Core areas of focus improving profitability maintaining credit discipline.
Speaker Change: And preserving strong liquidity in capital.
John Buran: While we are proud of this progress, we remain focused on the work ahead.
Susan Cullen: I'll now turn it over to Susan to discuss our results in more detail. Thank you, John, and good morning. Our first area of focus continues to be improving profitability, and we made notable progress in the second quarter. Both GAAP and Core Net Interest Margin expanded three basis points quarter over quarter, demonstrating the continued benefit of our asset repricing strategy. Real estate loans are expected to reprice approximately 160 basis points higher through 2027, providing a significant tailwind for net interest margin expansion. We continue to see growth in our non-interest bearing deposits, which is a key focus with our revised incentive plans emphasizing the importance of this funding source.
Speaker Change: While we're proud of this progress, we remain focused on the work ahead.
Susan: And now turn it over to Susan to discuss our results in more detail, Susan.
Thank you, John, and good morning.
Our first area of focus continues to be improving profitability and we made notable progress in the second quarter.
Both gaap and coordinate. Interest margin expanded 3 basis points quarter of a quarter demonstrating the continued benefit of our asset repricing strategy.
Real estate loans are expected to repriced approximately 160 basis points, higher through 2027. Providing a significant Tailwind for net, interest margin expansion,
Susan Cullen: We are also continuing to invest in the business through people and branches to drive core business improvements. Our focus remains on improving returns on average equity over time, and we expect capital to grow as profitability improves.
Susan: We continue to see growth in our non-interest bearing deposits, which is a key focus with our revised incentive plans emphasizing the importance of this funding source.
Susan: We are also continuing to invest in the business through people of branches to drive Core Business improvements, our Focus remains on improving Returns on average, Equity over time, and we expect Capital to grow as profitability improves.
Susan Cullen: Slide 5 provides detail on our net interest margin expansion. Core Net Interest Income increased by $10.5 million year-over-year, demonstrating substantial improvement in our earning power. Key drivers of the NIM quarter record included low yields increasing 7 base points, which was largely offset by an 8 base points from swap maturity. Episodic items, which include prepayment penalties, net reversals and recovered interest from non-accrual delinquent loans, and swap termination fees, were higher in the second quarter compared to the first quarter. In the third quarter, we typically experience seasonality in our funding profile, which tends to put pressure on funding costs.
Susan: Slide 5 provides detail. On our net, interest margin expansion.
Susan: Cornet's interest income increased by 10 and a half million dollars. Year-over-year demonstrating substantial improvement in our earning power.
Susan: Key drivers of the Nim quarter record included. Low yields increasing 7 base points which was largely offset by an 8 base points from SWAP maturities.
Episodic items which include prepayment penalties net, reversals and recovered interest from non-equal delinquent, loans and swap. Termination fees were higher in the second quarter compared to the first quarter.
Susan Cullen: Longer term, we remain confident that our loan repricing should drive NIM expansion, assuming no change to the current flat yield curve. A positively sloped yield curve will drive net interest margin expansion, while a negatively sloped curve will make margin expansion much more challenging.
Susan: In the third quarter, we typically experience seasonality in our funding profile which tends to put pressure on funding costs.
Susan: Longer term. We remain confident that our loan repricing should drive Nim expansion. Assuming no change to the current flat yield curve.
Susan: A positively sloped yield Curve will drive net, interest margin expansion.
While a negatively sloped Curve will make margin expansion, much more challenging.
Susan Cullen: Our deposit franchise remains a key strength and a cornerstone of our funding profile. As seen on slide 6, average total deposits grew to $7.6 billion, up 6% year-over-year, and 1% quarter-over-quarter. Our strategic initiatives to grow core relationships are paying off. The revamped incentive plans we discussed in the previous quarters, which emphasize non-interest-bearing accounts, are delivering tangible results. Average non-interest-bearing deposits increased 6% year-over-year and 2% quarter-over-quarter. This quarter, new check-in count openings increased 21% year over year and 8% quarter over quarter. This is a powerful leading indicator of future franchise value and demonstrates our ability to attract and retain low-cost core funding.
Susan: Our deposit franchise remains a key strength and a Cornerstone of our funding profile.
As seen on slide 6 average total deposits, go to 7.6 billion dollars up 6% year-over-year and 1% quarter of a quarter.
Susan: Our strategic initiatives to grow core relationships are paying off.
Susan: The revamped incentive plans. We discussed in the previous quarters was
Susan: quarters, which emphasized non-expiring accounts are delivering tangible results.
Susan: Average of non-interest bearing deposits, increased 6% year-over-year and 2% quarter recorder.
Susan: This quarter, new, checking account openings, increased 21%, year-over-year and 8% quarter quarter.
This is a powerful leading indicator of future franchise value, and demonstrates. Our ability to attract and retain low-cost core funding.
Susan Cullen: We continue to closely watch our funding costs as the overall cost of deposits increased eight basis points to 3.1% quarter over quarter, primarily due to the funding swap. We see some opportunities to lower deposit costs over time, but the benefit is limited unless the Fed reduces rates. Total CDs are $2.5 billion, or 34% of total deposits at quarter end. Approximately $391 million in CDs with a weighted average rate of 3.93% will mature in the third quarter. Our current CD rates are 3.5% to 4.25%, and customer preference is for our 91-day and 182-day products, which have APYs of 4%.
Susan: We continue to closely, watch our funding costs as the overall cost of deposits. Increased 8, basis points, to 3.1% quarter, to quarter primarily due to the funding swaps.
Susan: We see some opportunities to lower deposit costs over time, but the benefit is limited, unless the FED reduces rates, total CDs are 2 and a half billion dollars or 34% of total deposits a quarter end.
Susan: Approximately 391 million dollars of CDs with a weighted average rate of 3.93% will mature in the third quarter.
Susan Cullen: During the second quarter, we retained about 80% of the maturing CDs with a weighted average rate reduction of 24 basis points.
Susan: During the second quarter, we retained about 80% of the maturing CDs, with a weighted average rate reduction of 24 basis points.
Susan Cullen: Slide 7 illustrates one of our most significant embedded earnings drivers, the contractual repricing of our real estate loan portfolio. For the remainder of 2025, approximately $373 million of loans are scheduled to reprice at rates 136 basis points higher than their current coupon. Through the end of 2027, $2.1 billion or about a third of the loans are scheduled to be repriced at significantly higher rates, providing substantial predictable tailwind for net interest income. Contractually and on an annualized basis, net interest income will increase $5 million from the 2025 repricing, $12 million from the 2026 repricing, and $16 million from the 2027 repricing.
Susan: Slide 7, illustrates 1 of our most significant embedded earnings drivers.
The contractual repricing of our real estate loan portfolio.
For the remainder of 2025, approximately 373, million of loans are scheduled through price at rates, 136 base points higher than their current coupon.
Susan: Through the end of 2027 2.1 billion or about a third of the loans are scheduled 3 price and significantly higher rates, providing substantial predictable Tailwind for our net interest income.
Susan Cullen: To demonstrate this point, as of March 31, 2025, $131 million of loans were due to reprice in the second quarter. We've successfully retained 92% of these loans at a weighted average rate of 6.89%, a full 154 base points higher than the prior rate. This is a testament to our strong client relationships and our disciplined pricing, and it confirms the earning powers embedded in our loan book.
Susan: Contractually and on an annualized basis, net. Interest income will increase 5 million from the 2025 rep pricing 12 million from the 2026 repricing and 16 million dollars from the 2027 repricing.
Susan: To demonstrate this point as of March, 31st, 2025 131 million of loans were due to be price and the second quarter.
We successfully retained 92% of these laws and a weighted average rate of 6.89% a full 154 base points higher than the prior rate.
This is a testament to our strong client relationships and our discipline pricing and it confirms the earning Powers embedded in our loan book.
Susan Cullen: Our second area of focus, as shown on slide 8, is maintaining credit discipline. We continue to operate with a low risk profile built on conservative loan underwriting standards and our long history of low credit loss. We have enhanced our focus on relationship pricing and are beginning to see positive results from these efforts. Slide nine illustrates our net charge off history compared to industry since 2001. Our underwriting has consistently outperformed industry averages, often by wide margins. Our conservative credit culture has been proven through many rate and economic cycles, and our commitment to this low-risk credit profile remains unwavering.
Susan: Our second area of focus is shown on. Slide 8 is maintaining credit discipline. We continue to operate with a low-risk profile built on conservative loan underwriting, standards and our long history of low credit losses.
We have enhanced our focus on relationship pricing and are beginning to see positive results from these efforts.
Susan Cullen: Our multi-family investor commercial real estate portfolios maintain strong debt coverage ratios at approximately 1.85 times. Even when we stress test these ratios for higher rates and increased operating expenses, the debt coverage ratios remain strong. In a stressed scenario with both a 200 base point rate increase and a 10% increase in operating expenses, the weighted average debt coverage ratio is approximately 1.36 times.
Slide 9 illustrates our net charge of history compared to the industry. Since 2001, our underwriting has consistently outperformed industry averages Often by wide margins. Our conservative credit culture has been proven through many rate and economic cycles and our commitment to this low-risk credit profile remains unwavering
Susan: our multi-family investor commercial real estate portfolios, maintains, strong debt coverage ratios at approximately 1.85 times.
Susan: Even when we stress test these ratios for higher rates and increased operating expenses the debt coverage, ratios remain strong.
Susan Cullen: Slide 10 demonstrates our non-current loan performance relative to the industry over more than two decades and multiple credit cycles. Flushing Financial has consistently maintained better credit quality than industry averages. Our borrowers maintain low leverage with average load devalues on our real estate portfolio of less than 35%. We have only $41 million of real estate loans with a loan-to-value of 75% or more and about a third of these loans have mortgage insurance. Our strength is rooted in the quality of our loan portfolios. And our two and a half billion dollar multifamily portfolio, as detailed on slide 11, non-performing loans were halved this quarter to just 50 basis points, down from 101 basis points in the first quarter of 2025.
Susan: And is stressed in area with both the 200 base Point rate, increase and a 10% increase. In operating expenses, the weighted average debt coverage ratio is approximately 1.36 times.
Susan: July 10, demon non-current, loan performance relative to the industry over more than 2 decades and multiple credit Cycles.
Susan: Collection, Financial has consistently maintained Better Credit quality than industry averages.
Susan: Our borrowers maintain low, leverage with average loan to values on our real estate portfolio of less than 35%.
Susan: We have only 41 million of real estate loans with loan to value of 75 or more. And about a third of these loans are have mortgage insurance.
Susan Cullen: Criticized unclassified loans in this segment improved dramatically to only 73 basis points from 116 basis points last quarter. The portfolio maintains a very strong weighted average debt coverage ratio of 1.8 times. Our regulated portfolio is $1.5 billion, and our credit quality in this portfolio is solid.
Susan: Our strength is rooted in the quality of our loan portfolios and our 2 and a half billion dollar multi-family portfolio. As detailed on slide 11 non-performing loans were Habs this quarter to just 50 basis points down from 101 basis points in the first quarter of 2025.
Susan: Criticizing classified loans in this segment approved dramatically to only 73 basis points from 116 base points, last quarter.
The portfolio maintains a very strong weighted, average debt coverage ratio of 1.8 times.
Susan Cullen: Further details are in the appendix.
Susan Cullen: There's a need for affordable housing in the New York City area. We've been lending to this market for approximately 30 years and have always focused on valuing the properties based on existing cash flows. This has resulted in debt service coverage ratios that are among the highest in the industry. Our current loan values are low as our loans generally require 30-year amortization. We have limited interest-only loans. Our underwriting models employ stress tests to amortize the loans as scheduled and then increase the rates by approximately 225 base points above the initial rate to ensure that the property's resulting net cash flow is sufficient to service a loan at higher rates of interest.
Susan: Our rent regulated portfolio is 1 and a half billion dollars. And our credit quality in this portfolio is solid for the details are in the appendix.
There's a need for affordable housing in the New York City area. We've been lending to this market for approximately 30 years and have always focused on valuing the properties based on existing cash flows. This has resulted in debt service coverage, ratios that are among the highest in industry and our current loan to values are low. As our lowest generally require 30 year amortization,
Susan Cullen: In addition, the bank requires its borrowers to submit annual income and expense statements with a current rent roll at the conclusion of each calendar year. These statements are analyzed and current debt service ratios are recalculated. Results are reported to the bank's Board of Directors Risk Committee for assessment. Lastly, the loans undergo another stress test based upon the current cash flows. This stress test reprices the loans based upon its current index plus a margin formula to each of the loans which reprice at this time with the resulting debt service coverage ratio indicate the property would support the loan balance.
We have limited interest-only loans. Our underwriting models employ stress tests and advertised loans, as scheduled and then increase the rates by approximately 225 basis points above the initial rate, to ensure that the properties resulting. Net cash flow is sufficient to service the loan at higher rates of Interest.
In addition, the bank requires its borrowers to submit annual income and expense statements with the current rent. Roll at the conclusion of each calendar year.
Susan: These statements are analyzed and current debt service ratios are recalculated.
Susan Cullen: We believe that our conservative practices have placed us in a position to better manage through these challenging times.
Susan: The results reported to the bank's board of directors risk committee for assessments. Lastly the loans undergo. Another stress test based upon the current cash flows. This stress test the loans based upon its current index plus the margin formula to determine if the loans were to re-priced at this time with the resulting debt service coverage ratio, indicate the property would support the loan balance.
Have placed this in a position to better manage through these challenging times.
Susan Cullen: Slide 12 provides peer comparison data and our current multifamily credit quality statistics. Our career size and classified multifamily loans to total multifamily loans of 73 basis points compares favorably to our peer group. 30 to 89 days past dues are only 12 basis points. non-performing loans of 50 basis points of total multifamily loans and criticized. Our multifamily allowance for credit losses to criticized and classified multifamily loans is 69%, demonstrating appropriate reserve levels. During the second quarter, $55 million of multifamily loans were scheduled to reprice and mature. Approximately 97% of these loans remain with the bank and repriced 166 base points higher to a weighted average rate of 6.56%.
Susan: Slide 12 provides peer comparison data and our current Marla Family Credit quality statistics.
Our career size and classified multifamily loans to Total multifamily loans of 73 basis points compares favorably to our peer group.
Susan: 30 to 89 days past, dues are only 12 basis points.
Non-performing loans are 50 basis. Points of ta total multifamily loans and criticized.
Susan: Our multi, family allowance for credit losses to criticize and classified multifamily loans is 69% demonstrating appropriate. Reserve levels.
Susan: During the second quarter of 55 million of multi family loans were scheduled to rep priced and mature.
Susan Cullen: With these credit metrics, we see limited risk and loss content on the horizon.
Susan: Approximately 97% of these loans are made with the bank and repriced 100 166 base points higher to a weighted average rate of 6.56%.
With these credit metrics, we see limited risk and loss content on the horizon.
Susan Cullen: Slide 13 provides an overview of our investor commercial real estate portfolio, which is 30% of gross loans. The investor commercial real estate portfolio has 33 basis points of non-performing loans and 162 basis points of criticized and classified loans.
Susan: July, 13 provides, an overview of our investor commercial real estate portfolio, which is 30% of gross loans.
Susan: The investor commercial real estate. Portfolio has 33 basis points of non-performing loans and 162 basis points of criticizing classified loans.
Susan Cullen: All the non-performing loans and career size and classified loans are in the office portfolio, which is only 3% of gross loans. These metrics provide a clear representation of our conservative investor commercial real estate portfolio.
Susan: All all the non-performing loans and criticizing classified loans are in the office portfolio which is only 3% of gross loans.
Susan: These metrics provide a clear representation of our conservative investor commercial real estate portfolio.
Susan Cullen: Finally, on slide 14, our third area of focus is preserving our strong liquidity and capital. Our liquidity position remains exceptionally strong, with approximately $4 billion in undrawn lines and resources at quarter end. Furthermore, our reliance on wholesale funding is limited with uninsured and uncollateralized deposits representing only 17% of total deposits, providing a stable and reliable funding base.
Susan: Finally, on slide 14, our third area focus is preserving our strong liquidity and capital.
Our liquidity position remains, exceptionally, strong with approximately 4 billion dollars in undrawn, lines and resources at quarter end.
Susan: Furthermore, our Reliance on wholesale funding is limited with uninsured and uncollateralized deposits representing only 17% of total deposits. Providing a stable and reliable funding base.
Susan Cullen: The company and the bank remain well capitalized, and our tangible common equity to tangible assets ratio increased by a strong 25 basis points this quarter to 8.04%. This capital increase enhances our resilience and provides us with the flexibility to continue supporting our customers and investing in our strategic initiatives.
Susan: The company in the bank remained. Well, capitalized, and our tangible common Equity to tangible assets ratio increased by a strong 25 basis points. This quarter to 8.04%
John Buran: I'll now turn it back to John. Thanks, Susan. The strong financial results Susan detailed are the direct outcome of our focused strategic execution. A key driver of our franchise growth is our deep commitment to the Asian American communities we serve. As you can see on slide 15, our focused efforts, supported by our multilingual staff, our Asian Advisory Board, and active community sponsorship, have grown our deposits in this vibrant market to $1.4 billion. This reflects a 12.4% compound annual growth rate since the second quarter of 2022. with only a 3% market share in this $45 billion market, the runway for future growth.
This Capital increase in enhances, our resilience and provides us with the flexibility to continue, supporting our customers and investing in our strategic initiatives.
Speaker Change: I'll now turn it back to John, John
John Burren: Thanks, Susan, the strong financial results. Susan detailed other direct outcome of our focused strategic execution.
A key driver of our franchise growth is our deep commitment to the Asian-American communities. We serve
as you can see on slide 15 our focused efforts supported by our multilingual staff, our Asian Advisory Board and active Community sponsorship, have grown our deposits in this vibrant Market to 1.4 billion dollars
John Burren: This reflects a 12.4% compound annual growth rate since the second quarter of 2022.
John Buran: is excellent.
John Burren: With only a 3% market share in this 45 billion dollar market. The runway for future growth.
John Burren: Is excellent.
John Buran: Turning to our outlook on slide 16, we provide some insight for the remainder of the year. We expect total assets to remain stable, with loan growth being market dependent as we remain focused on disciplined pricing and improving our overall asset and funding mix. There are several moving parts affecting the net interest marginal. First, we have $391 million of retail CDs at a weighted average rate of 3.93, maturing in the third quarter. The retention rate on June CDs was 3.69%. Second, we have $373 million of loans contractually repricing 136 basis points higher in the second half of the year, and $720 million repricing 171 basis points higher in 2026.
John Burren: Turning to our outlook on slide 16, we provide some insight for the remainder of the year.
We expect total assets to remain stable whose loan growth being Market dependent as we remain focused on disciplined pricing and improving our overall asset and funding mix.
John Burren: There are several moving Parts. Affecting the net interest margin Outlook.
John Burren: First, we have 391 million of retail CDs at a weighted average rate of 3.93 maturing in the third quarter.
The retention rate on June CDs.
John Burren: Was 3.69%.
John Burren: Second, we have 373 million of loans, contractually repricing, 136 basis points, higher.
John Burren: In the second half of the year.
And 720 million repricing 171 basis points higher.
John Buran: Third, we have deposit outflows seasonally in the third quarter with recovery in the fourth quarter. Finally, the slope and the shape of the yield curve will affect the net interest margin. Non-interest income should benefit from a healthy pipeline of about $41 million in back-to-back swap loans scheduled to close. We're maintaining our disciplined approach to expenses and have lowered our expected core non-interest expense growth. 4.5% to 5.5% for 2025 compared to the 2024 base of $159.6 million.
John Burren: In 2026.
John Burren: Third, we have deposit outflows seasonally in the third quarter with recovery in the fourth quarter.
John Burren: finally, the slope and the shape of the yield Curve will affect an energy margin
John Burren: Non-interest income should benefit from a healthy pipeline of about 41 million in back-to-back swap loans. Scheduled to close.
John Burren: We're maintaining our discipline approach to expenses and have lowered. Our expected core non-interest expense growth.
John Buran: Lastly, we're also lowering our expected effective tax rate to a range of between 24.5% and 26.5% for the remainder of 2025.
John Burren: .6 million.
John Burren: Lastly, we're also lowering our expected effective tax rate to a range of between 24.5%.
John Buran: To conclude on slide 17, our key takeaways for the quarter are clear and reinforce our strategy. First, we're successfully improving profitability, evidenced by another quarter of NIM expansion and pre-provisioned net revenue at its highest level in nearly three years. Second, we're maintaining our credit discipline. Our portfolio is 90% collateralized by real estate with an average LTV below 35%. and this quarter saw a material improvement in our criticized and classified loan levels.
John Burren: And 26.5% for the remainder of 2025.
To conclude on slide 17. Our key takeaways for the quarter are clear and reinforce our strategy.
John Burren: First we're successfully improving profitability evidence by another quarter of nimic expansion and pre-provision net revenue and its highest level in nearly 3 years.
John Burren: Second, we're maintaining our credit discipline. Our portfolio is 90% collateralized by real estate with an average LTV below 35%.
And this quarter saw a material improvement in our criticized and classified loan levels.
John Buran: Finally, we're preserving and growing our capital. Our liquidity remains robust, and our tangible common equity grew significantly to over 8%. The results this quarter demonstrate that our plan is on track and profitability is improving. We're confident in our ability to continue executing and delivering value to our shareholders.
John Burren: Finally, we're preserving and growing our capital.
John Burren: Our liquidity remains robust, and our tangible, common Equity grew significantly to over 8%
John Burren: The results, this quarter demonstrates that our plans on track and profitability is improving.
John Burren: We're confident in our ability to continue executing and delivering value to our shareholders.
Operator: Operator, I'll turn it over to you to open the lines for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
John Burren: Operator, I'll turn it over to you to open the lines for questions.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star. Then 2 at this time we will pause momentarily to assemble our roster.
Mark Fitzgibbon: And your first question comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Hey guys, good afternoon or good morning, I guess.
Speaker Change: In your first question comes from Mark Fitzgibbon with Piper Sandler, please go ahead.
John Buran: Barely morning, but good morning, Mark. First question I had is on deposits. It looked like deposits declined about $400 million. And correct me if I'm wrong, you said we'd see some more outflows in the third quarter related to seasonality, I assume, in the muni business. Are you doing some pricing changes? What kind of caused that $400 million run down this quarter? So most of it is seasonal in nature. We'll go into a period of time where we're seeing government deposits move out, and that'll take place partially through the third quarter. and then we'll pick up back again.
Mark Fitzgibbon: hey guys, good afternoon or good morning I guess, uh,
Speaker Change: Fairly morning. But good morning Mark. Yes.
Um, first question I had is on deposits. It looked like deposits declined, about 400 million and correct me if I'm wrong. You said would see some more. Outflows in the third quarter related to seasonality. I assume in the mun business. Um, what is, are you doing some pricing changes? Or, you know what, what kind of cause that 400 million dollar rundown this quarter?
Speaker Change: So most of it is a is seasonal in nature. Um we'll we'll go into a uh a period of time uh where we're seeing uh uh government deposits, move out. And uh, that'll take place through the uh through uh partially through the third quarter.
Okay, I'm going to pick up.
Speaker Change: And then then we'll pick up back again.
John Buran: Okay.
John Buran: And then I was trying to understand your interest rate sensitivity, the comments you made around the yield curve. And I was looking at page 34 with, you know, the hedges and trying to understand that. I guess what I'm wondering, if the Fed cuts rates 25 basis points and the curve steepens, you know, 25 because of that, what does that do to your market?
Speaker Change: Okay. And then I, I was trying to, um, understand your interest rate sensitivity. This the the comments you made around the yield curve, um, and I was looking at page 34 with, you know, the the hedges and trying to understand that I I guess what I'm wondering if the FED Cuts rates 25 basis points and the curve steepens, you know, 25 because of that um what does that do to your margin?
John Buran: That's good news for us. Any return to a more normal curve is positive. Okay. I mean, a couple of basic points, improvement in the margin once it ripples through. Is that fair? Yeah, it's reasonable.
Speaker Change: That's pretty, that's good news for us. Um, any um, any return to more normal curve is positive?
Speaker Change: Okay. I mean a couple of basis points Improvement in the margin, once it ripples through, or, is that fair
Speaker Change: Yeah, it's reasonable.
John Buran: And then, John, you know, there's been a lot of talk around sort of the mayoral election in New York. I guess I'm curious, you know, if we get a Mayor Mamdani, does that change your outlook at all for New York City rent-regulated multifamily lending going forward? Well, as you know, Mark, the mayor's office can't unilaterally freeze rents. All the changes in rents have to be approved by the New York State Division of Homes and Community Renewal. And over the last few years, really, other than the covid time frame, the state legislature, particularly, and the Rent Control Guidelines Board have granted renewals.
Okay.
John Burren: Um, and then John, you know, been a lot of talk around sort of the marrow election in New York. I guess. I'm curious. You know, if we, if we get a, a mayor mom Donnie, does that change your outlook at all?
John Burren: For New York City, rent regulated multifamily. Lending going forward.
John Buran: So renewals for 2025, 2024, and 2025, one-year renewals at 275, two-year renewals at five and a quarter. And you can go back into 23, where clearly there's been an understanding, certainly at the state level, that the that inflation has taken a toll on on fixed expenses. And as a result, these kind of increases are are in line. And again, the the many movement in these in these rates really has to go through the through the state. So there's a there's clearly a controller on on Mr. Mandami if he happens to be elected to the to the office.
John Buran: OK, great. And then I guess, you know, given the fact that you guys are suggesting the balance sheet's not going to grow between now and the end of the year and your capital ratios are already pretty solid with your stock trading at 58 percent of tangible book value. I'm curious, are you eager, interested and are we likely to see buybacks in the second half of the year? Probably not. We're still looking to build capital a little bit stronger. We're still a little bit below our peers. You know, our capital position priorities, excuse me, has not changed in, you know, paying the dividend, then first growing the company profitably.
These kind of increases are, um, are in line. Um, and again the, uh, the um, any movement in these in these rates, really has to go through the, through the states. So, there's a there, there's a clearly a controller on, uh, on Mr. Mandami, if he, uh, uh, happens to be elected to the, uh, uh, to the office.
Okay, great. And then, um, I guess, you know, given the fact that you guys are suggesting the balance sheets, not going to grow between now and the end of the year and your Capital ratios are already, you know, pretty solid, um, with your stock trading at 58% of tangible Book value. Um, I'm curious. Are you eager interested in or we likely to see Buybacks in the second half of the year?
John Buran: So we would like to see that first and foremost, then paying the dividend, then returning capital via repurchases. It just strikes me that at 58% of book value and it being a riskless transaction, it's pretty attractive, no? versus growth or dividends or anything else? Understood. Yes, there is. That is pretty attractive transaction. Okay.
John Burren: Probably not. We're still looking to build capital A Little Bit Stronger. We're still a little bit below our peers, you know, our our Capital position. Um, priorities excuse me, has not changed in, you know, paying the dividend then. Um, well first growing the company profitably. So we would like to see that first and foremost, uh, then paying the dividend and then returning Capital via, um, repurchases.
John Burren: It just strikes me that at 58% of Book value and it being a riskless transaction. It's pretty attractive know.
Versus growth or dividends or anything else.
John Buran: Thank you. Thank you, Mark.
That thank you Mark. Thanks Mark.
Thomas Reed: And your next question comes from Thomas Reed with Raymond James. Please go ahead. Hey guys, just one quick question from me. You know, there was a nice reduction in your expense outlook. Can you talk about maybe what drove that decrease and maybe some of your updated thoughts on the pace of SBA hiring and de novo? And so what drove the decrease was the chewing up some accruals related to incentive compensation and, you know, the tight management of expenses that we have instituted across the organization. And you had a second part there, Thomas.
Speaker Change: And your next question comes from Thomas Reid with Raymond James, please go ahead.
Thomas Reid: Hey guys, I just 1 quick question from he from me, you know, there is a nice reduction in your expense Outlook. Can you talk about maybe what drove that decrease and maybe some of your updated thoughts on the pace of SBA hiring, and denovo? Expansions
Thomas Reid: So uh what drove the decrease was the um touring up some across related to incentive compensation and you know the tight management of expenses that we have uh instituted across the organization.
Thomas Reid: And you had a second part there Thomas.
Susan Cullen: Yeah, just maybe, what are you thinking in terms of potential SBA hires and DeNovo Trans, you've talked about that. So we have two branches that we plan on opening or have opened this year. One has already opened in Jackson Heights, and our Chinatown branch has grown so nicely that was open pre-pandemic, right before the pandemic, so we've outgrown that space, so we are planning on opening a second branch in Chinatown. We continually look for new teams who will add revenue to our bottom line, so that's always on the table. Okay, great. Appreciate that. Thank you.
Thomas Reid: Yeah, just maybe uh what are you thinking in terms of uh potential SBA hires and and denovo's fans to know. You've talked about that.
Thomas Reid: CBS quarters. So we have we have 2 branches that we plan on opening opening or have opened this year. Um, 1 has already opened in Jackson Heights. And our uh Chinatown branch has grown so nicely. That was open pre-pandemic right before the pandemic, so we've outgrown that space. So we aren't planning on opening a second branch in Chinatown. Uh, we continually look for new teams who will add Revenue to our bottom line. Um so that that's always on the table.
Okay, great. Appreciate that. Thank you.
Thomas Reid: Thank you.
David Conrad: And your next question comes from David Conrad with KBW, please go ahead. A little bit of follow-up on the deposits. You gave us a lot of repricing on the CDs.
David Conrad: And your next question comes from David Conrad with KBW, please go ahead.
John Buran: I'm just curious as this ebb and flow of seasonality of government deposits, maybe your thoughts of the repricing yield going forward on the non-CD deposits. Sure. So, you know, we think we were... Clearly, the market is such that we think we've got limited opportunity to drive down the funding costs until the Fed makes its move. Much of what we've had in CDs is really the opportunity. We've taken advantage of that up until this point in time. There are, because of capital markets and our competitors in the government business, from time to time we see opportunities there to shave off a few basis points here and there.
Yeah, good morning. Um, this is a follow up on. Thank you, uh, a little bit follow up on the deposits. Um, you use a lot of kind of repricing on the CDs, just curious as this EV and flow of of seasonality of government deposits. Maybe your thoughts of the, you know, repricing kind of yields going forward, um, on the non CD deposits.
Sure. So, um, you know, we we think we were um,
John Buran: But the majority of the help on NIM going forward really is going to come from the asset side and the loan repricing. I think we'll get limited support from the liability side of the balance sheet until the Fed makes its move. Okay, got it. Thank you.
Clearly the, uh, uh, the market is such that, um, we think we've got limited opportunity to, uh, to drive down the, uh, the funding costs, um, until the FED makes its, um, until it makes its move, um, you know, much of what we've had in CDs. Is really, you know, the opportunity. Uh, we've taken advantage of that up until up until this point in time. Um, there are uh, because of, um, Capital markets and our competitors in the government business. Uh, from time to time, we see opportunities there to shave off a few basis points here and there. Um, but the, the majority of the, uh, the the majority of the help on Nim going forward, really, is going to come from the asset side and the loan repricing. I think we'll we'll get limited, uh, limited support from the, uh, liability side of the balance sheet of uh, until the FED makes its move.
Okay, got it. Thank you.
Manuel Navas: And your next question comes from Manuel Navas with D.A. Davidson. Please go ahead. Good morning, Manuel.
Manual Novice: And your next question comes from manual novice with da Davidson please go ahead.
Speaker Change: Good morning, manual.
John Buran: Yeah, this is Sharon G. on for Manuel today. Hi. I was wondering... Hello. The repricing opportunity in the loan book is pretty large, but like, what is the impact on the credit side? Like, did the loans that repriced $154 basis points higher in 2025 face any credit stress? No, we're not seeing any credit stress there. We had, you know, the loans that repriced. We kept 92% of them are current and there's 7% that are 1-29 days, but they're responsive and we're clearing that up right away. You know, the benefit of stress testing our loans at origination upwards of 200 basis points and these only repricing 166, we had an idea of how they would perform based on the stress testing done at origination.
on firm and well today, um, I was wondering
Hello. Um the repricing opportunity in the loan book is uh, pretty large. But like what is the impact on the credit side? Like did the loans that repriced 154 Basin, basis, basis points higher and 2025 faced any credit stress?
No, we're not seeing any credit stress there. Um, we had, you know, the loads that repriced. Uh, we kept 92% of them are current and there's a 7% that are 1 to 29 days, but they're responsive and, and we're clearing that up right away, you know, the benefit of stress testing our loans at origination upwards of 200 basis points and these only repricing 16 166, we had an idea of how they would perform, uh, based on the stress testing, done it. Origination
John Buran: That's great, thank you.
Speaker Change: that's great. Thank you.
Operator: Thank you.
Thank you.
John Buran: This concludes our question and answer session.
Operator: I would like to turn the conference back over to John Buran for any closing remarks. Great. Well, thank you very much for joining our call this morning and we look forward to continuing to provide the shareholders with information on our progress on our strategic plans. Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to John Burren for any closing remarks.
John Burren: Great. Well, thank you very much for, uh, for uh, joining our call, uh, the this morning and uh, we look forward to continuing to uh uh provide the shareholders with information on our uh, progress on our strategic plans. Thank you.
Operator: This concludes today's teleconference. You may now disconnect your lines, and we thank you for your participation.
Speaker Change: This concludes today's teleconference, you may now disconnect your lines and we thank you for your participation.