Flushing Bank CEO On The Return Of NYC Multifamily Lending

As disaster struck some of its peers, Flushing Bank slunk back, spending the past few years sorting through its loan book and focusing on preserving liquidity. 

The Queens, New York-based bank has historically focused largely on real estate lending, with a particular focus on multifamily — a sector that has troubled its competitors. But the community bank claims it hasn’t been as impacted and is now ready for its comeback.

Flushing Bank, which has a $6.7B real estate portfolio, has crept back to the table, with $174M in loan closings in the first quarter, up 34% year-over-year.

“We have always been traditionally, very conservative lenders. This type of environment works for us.” Flushing President and CEO John Buran told Bisnow. “We're ... not neglecting multifamily, not neglecting commercial real estate. We still view them as very viable, important portions of our business.”

In restructuring its balance sheet, Flushing Bank increased its liquidity from $3.7B at the beginning of 2023 to $4B this year, according to its earnings reports. It expects to further shore up reserves by selling off pieces of its book.

At the end of March, the company had $29.6M in performing multifamily loans held for sale, which includes a $2.6M write-down, according to a public filing. That’s after it held $70.1M in loans for sale at the end of 2024, with a $3.8M valuation loss recorded. Not included in those figures is an additional $200K hit that the bank took in writing down the value of performing mortgage loans.

Still, the books the bank is selling and the loan originations that are closing are just a drop in the bucket of its portfolio, which looks similar to where it was two years ago despite shrinking. As of the first quarter of this year, Flushing Bank’s portfolio was 90% real estate-based, 38% of which was tied to multifamily, according to an investor presentation. 

For comparison, two years earlier, 88% of its $6.9B portfolio was tied to real estate. Of that, multifamily, including rent-stabilized assets, made up nearly 38% of its loans, according to an investor presentation from the first quarter of 2023.

Today, the bank has $1.5B of loans tied to rent-regulated assets, a sector that has been financially tortured by the Housing Stability and Tenant Protection Act of 2019. The reforms have cut ways for landlords to increase rents, causing defaults to surge. 

Buildings that are 100% regulated make up $746M of Flushing Bank’s $1.5B multifamily portfolio. Those that are between 50% and 99% regulated consist of another $505M, according to a first-quarter investor presentation.

That’s slightly down from Q4 2024, when its rent-regulated portfolio was $1.6B, with $1.3B tied to buildings that are at least half-regulated.

As of Q1, nonperforming loans totaled $46M, up 86% year-over-year and 40% from the prior quarter, according to the bank’s earnings. Its allowance for credit losses was 0.59%, while its net loan charge-offs was 0.27%.

Still, Flushing Bank’s average loan-to-value on the real estate portfolio is less than 35%, with only $41.7M of loans — making up less than 1% of gross loans — with an LTV of 75% or more. However, that’s based on appraised value at origination, according to its first quarter presentation.

Buran said that Flushing Bank does not update appraisals unless there’s an issue such as a delinquency. He added that the average loan seasoning is eight years and that many are in the second phase of their five-year reset, indicating that borrowers have continued paying despite being tested by the market. 

“You're talking about a time frame where, arguably, valuations actually were lower than they are today,” Buran said. “In the four or five years, they may have deteriorated, but a lot of those valuations are associated with practices that anticipated rental increases. We never anticipated rental increases.”

As a result, LTVs were low upon origination, according to Buran. He added that though the bank’s policy allows loans up to 75% in LTV, in reality, they stress test the loans to ensure that borrowers will continue to pay even if interest rates increase by 200 basis points and operating expenses increase by 10% to 15%. 

“We clearly have walked away from some deals that we can consider to be overleveraged, or we thought were too aggressive, and we'll continue to do that,” Buran said. “It's been part of our process for many, many years.”

In the first quarter of this year, $63.8M of multifamily loans were scheduled to reprice or mature, according to the bank’s investor presentation. Approximately 96% of those remained with the bank and repriced with a weighted average rate of roughly 6.6%, 267 bps higher than before. 

Another $255.6M worth of loans will be repriced this year. Flushing Financial forecasts those to have an average rate of 6.4%, 213 bps higher.

Additionally, Buran said the bank has benefitted from not handing out interest-only loans for a prolonged period of time, which has since put pressure on its competitors as borrower cash flows become tighter.

“All of those types of practices are the ones that you're seeing have gotten various entities in trouble,” Buran said. “It's interesting to see that it really hasn't been the small community banking space that's been hit with the difficulties. It’s been some of the larger banks that have been stretched.”

Among those are Signature Bank, whose rent-stabilized portfolio sold for cents on the dollar after its collapse — and many buyers have since offloaded at a greater loss. Flagstar Financial, formerly known as New York Community Bancorp, has similarly purged billions of dollars of CRE debt, much of which is tied to multifamily, following its encounter with the Grim Reaper.

But that hasn’t scared Flushing Bank away from the sector.

“We do not attract clients who are short-term borrowers, who want funds on future cash flows, or who are aggressively trying to convert rent-regulated units into market rents,” the company noted in its Q1 investor presentation.

And the bank continues to lend to rent-regulated properties, Buran added.

“We have groups of borrowers who've been with us for many, many years who tend to be low leverage in their practice,” Buran said. “That fits very well with these types of environments.”