John, Flushing Financial is a New York-based regional bank. We've been hearing a lot about the regional banks in the past year. The first thing I wanna find out is, what does higher for longer in terms of interest rates mean for you?
So it's less of a problem than it was in the early part of the year because we've made our balance sheet basically neutral to interest rates. So if interest rates rise or interest rates fall, we don't see much changes in terms of our income. So we can kind of play both sides of that activity, and that's something we put in place just really by end of 2023 into 2024.
The big worry we keep hearing about in terms of the regional banks, some of the smaller banks, is commercial real estate, liability. How big a problem is that?
So I think what you hear and what you see in the press is interesting because it really focuses in on things that a bank like Flushing doesn't get involved in. So when you look at our portfolio, about 89% of the entire loan portfolio is real estate, real estate-based. But our average loan size is only $2.3-$2.5 million. We've got a loan-to-value that is average of about 38% or so, and we have debt coverage ratios of 1.8 times. So we have a great deal of strength in that portfolio. We've always operated as a low-risk, very well underwritten portfolio, and that's what we'll continue to do.
What are some of your other strengths? Because last year, when all these worries broke out about the regional banks, you heard a lot of the money center banks saying, "You know, we're gonna gobble them up," or, "You know, you're safer here with us." Can you talk about the strengths when it comes to regional banks like Flushing?
Sure. The major strength... And look, those big banks are formidable, but the major strength of a bank like Flushing is we can focus in very, very, carefully on sub-markets and sub-categories of the business. So for example, where we operate in Flushing, high Chinese and Korean population, we've been able to focus in on that group to aid not only in terms of our consumer business, but also our business banking, because those customers are highly entrepreneurial as well. I spent over 20 years with large money center banks, and I know that they have to appeal to everyone. A bank like ours doesn't have to appeal to everyone. We could divide it up into sub-markets and be very, very effective, and that's been our strategy.
So you can offer a more personal touch. You can know your customer better 'cause you're on the ground as compared to a money center bank. That said, a lot of banking is now done online through fintech and through apps and through the web. So, how does this affect Flushing?
So our focus for the next few years is to continue to build up our branch system while we also restructure our portfolio in terms of funding. So in order to do that, we wanna be fast followers to the major trends that are happening in the technology field. So for example, at the beginning of the pandemic, we had totally revamped our entire online banking operation. So we modernized it, and as a result, we found so many opportunities coming out of that. We're now porting that online banking operation into the branch system so that our branch-based customers can gain the benefit of the online environment.
You are closer to the customer, so I want to find out, how is the economy? I know you're a regional bank. You're here in New York, but how are they doing? What's going on in terms of loan growth?
So the economy has been pretty stable in New York. And I think for us, bank like ours, we feel it's going to get better in the second half of the year for several reasons. First off, less pressure on the deposit side of the business because the Fed looks like it has at least stopped and may actually turn around. But secondly, a lot of the major banks have pulled back in the commercial real estate business, and we look at that as a major opportunity for us to either grow additional volume or to get pricing power that we haven't had in a while.
So I think that that movement backward from some of the larger competitors, some of which are no longer here, others have had very, very prominent issues that that have been spoken about, all of that has moved those major competitors away from the market and allowed a bank like ours to thrive.
All right. Well, thanks, John, for coming out and talking about it.
Great, Greg. Thank you.