Flushing Financial Corporation Reports 4Q20 GAAP EPS of $0.11 and 2020 GAAP EPS of $1.18 4Q20 Core EPS of $0.58 and 2020 Core EPS of $1.70 Third Consecutive Quarter of Record Net Interest Income

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FOURTH QUARTER 2020 HIGHLIGHTS1

  • GAAP diluted EPS of $0.11, compared to $0.50 in 3Q20 and $0.45 in 4Q19

  • Core diluted EPS of $0.58 compared to $0.56 in 3Q20 and $0.41 in 4Q19

  • GAAP ROAA and ROAE were 0.18% and 2.27% in 4Q20 compared to 0.73% and 9.11% in 4Q19, respectively

  • Core ROAA and ROAE were 0.92% and 11.67% in 4Q20 compared to 0.67% and 8.36% in 4Q19, respectively

  • Record net interest income of $55.7 million, up 11.6% QoQ and 35.3% YoY, while core net interest income was $54.7, up 10.1% QoQ and 36.3% YoY

  • Net interest margin of 3.08%, up 8 bps QoQ and 60 bps YoY and core net interest margin of 2.97%, up 8 bps QoQ and 64 bps YoY

  • Average loans were $6.4 billion, up 8.0% QoQ and 11.3% YoY while average deposits of $4.7 billion improved 8.2% QoQ and 4.0% YoY

  • Loan pipeline remained strong at $354.6 million, up 9.3% from $324.5 million a year ago

  • Provision for credit losses (excluding Day 1 impact from Empire Bancorp transaction) of $2.0 million exceed net charge-offs of $0.6 million in 4Q20

  • NPAs of $21.1 million were down 15.0% from $24.8 million in 3Q20

  • Loans in forbearance declined 56.9% in 4Q20 and were 5.4% of total loans and only 3.2% of loans excluding interest only forbearance loans

UNIONDALE, N.Y., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (NASDAQ-GS: FFIC) the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the fourth quarter and full year ended December 31, 2020.

John R. Buran, President and Chief Executive Officer stated, “While 2020 was an unprecedented year in many ways, I am proud of how our employees continued to serve customers and help communities throughout the COVID-19 pandemic. It is through their efforts that our Company was able to persevere and post strong results. We achieved three consecutive quarters of record net interest income. We reduced loans in forbearance by 76% from their peak. We closed the Empire acquisition this quarter and within three weeks completed the conversion of all customers onto our systems. As we enter 2021 we are a stronger more resilient Company with greater scale, a better margin and improved mobile and lending capabilities through enhanced fintech relationships.”

Mr. Buran continued, “Our core NIM improvement of 8 bps during the quarter was driven by reducing cost of funds by 12 bps with a minimal decrease in the yield on interest-earning assets. While we see additional opportunities to reduce our cost of deposits with $342 million of CDs maturing in 1Q21 with a weighted average rate of 1.23% compared to a current one year CD rate of 0.55%, pricing on new loans has shifted lower. Loan growth rebounded this quarter, rising 4% year over year and 5% (annualized) from third quarter, excluding the Empire transaction. We reported fourth quarter GAAP EPS of $0.11, which included various charges from the Empire transaction, our previously announced balance sheet restructuring, and other adjustments totaling $0.47 per share. Adjusting for these items, core fourth quarter EPS was $0.58, up 42% year over year. The Empire integration is proceeding consistent with our expectations and we are on track to achieve our 20% earnings accretion target for 2021.”

“We continue to actively monitor our credit portfolio and work with our customers during these difficult times. We remain comfortable with our credit exposure given the loan to value of 38% on our real estate dependent loans and the fact that 41% of our loans on forbearance have already begun to pay interest and escrow. Loans in forbearance fell 57% to $364 million in the fourth quarter from $846 million in 3Q20 and the loans that exited forbearance are performing in line with expectations. Criticized and classified assets rose $29 million as the Empire acquisition added $15 million. We continue to actively monitor our portfolio and work with customers during these difficult times. Flushing Bank has a history of superior credit quality through many cycles and losses have never been more than 64 bps. We do not see a reason why this would change in this economic cycle.”

“We are an active participant in the second offering of the PPP program through our continued partnership with a fintech company. From January 19th through January 22, 2021, we processed 434 applications totaling $115 million. We remain committed to helping our customers in this difficult period.”

Mr. Buran concluded, “While 2020 was a challenging year for our customers, communities and employees, it also was a significant period for the Company as we upgraded our mobile banking capabilities in March, closed the Empire transaction on October 31st, and completed the systems conversion while adopting to a new work environment. I am pleased with how we performed on our strategic objectives and look forward to 2021.”

Summary of Strategic Objectives

  • Manage cost of funds and continue to improve funding mix

  • Resume historical loan growth while achieving appropriate risk adjusted returns

  • Enhance core earnings power by improving scalability and efficiency

  • Manage credit risk

  • Remain well capitalized

Earnings Summary:

Net Interest Income

Net interest income for 4Q20 was $55.7 million, an increase 35.3% YoY and 11.6% QoQ (Empire contributed $4.2 million to growth).

  • Net interest margin of 3.08%, increased 60 bps YoY and 8 bps QoQ

    • Net purchase accounting accretion was not meaningful in 4Q20 and is expected to add less than $1 million to net interest income in 1Q21

  • Yield on average interest-earning assets of 3.82%, decreased 39 bps YoY, and 2 bps QoQ

  • Cost of average interest-bearing liabilities of 0.86%, decreased 110 bps YoY and 12 bps QoQ, driven primarily by the decline in the costs of deposits to 0.47% in 4Q20, down 124 bps YoY and 10 bps QoQ

  • Average interest-earning assets of $7.2 billion, increased 8.5% in both YoY and QoQ largely from Empire

  • Prepayment penalty income from loans and securities, net recoveries of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $2.1 million (11 bps) in 4Q20, $1.7 million (11 bps) in 3Q20 and $2.4 million (15 bps) in 4Q19. Excluding these items, the net interest margin was 2.97% in 4Q20, an increase of 64 bps YoY and 8 bps QoQ

Provision for Credit Losses

The Company recorded a provision for credit losses of $3.9 million in 4Q20, compared to $2.5 million in 3Q20 and $(0.3) million in 4Q19.

  • 4Q20 provision for credit losses was driven by $1.8 million of Day 1 impact of the Empire transaction ($0.05 per share, net of tax) in addition to required provision of $2.0 million resulting from the economic environment

  • Net charge-offs of $0.6 million in 4Q20 and $0.8 million in 3Q20 were significantly below quarterly provisions for credit losses

Non-interest Income

Non-interest income for 4Q20 was $(1.2) million compared to $1.4 million in 3Q20 and $5.0 million in 4Q19.

  • Non-interest income included net gains (losses) from fair value adjustments of $(4.1) million ($(0.11) per share, net of tax) in 4Q20, $(2.2) million ($(0.06) per share, net of tax) in 3Q20 and $0.8 million ($0.02 per share, net of tax) in 4Q19, respectively

  • Losses on the sale of investment securities with a par value of $89.5 million were $0.6 million ($0.02 per share, net of tax) in 4Q20

  • Life insurance proceeds were $419,000 ($0.01 per share) in 4Q19

  • Absent all above items, non-interest income was $3.6 million in 4Q20, down 6.7% YoY and flat QoQ

Non-interest Expense

Non-interest expense for 4Q20 was $46.8 million, compared to $30.0 million in 3Q20 and $29.6 million in 4Q19.

  • 4Q20 non-interest expense includes $5.3 million pre-tax merger charges ($0.14 per share, net of tax) and $7.8 million pre-tax debt prepayment penalties ($0.20 per share, net of tax). 3Q20 non-interest expense includes $0.4 million of merger charges ($0.01 per share, net of tax) while 4Q19 includes $1.1 million of merger charges ($0.03 per share, net of tax)

  • Excluding the above items, core operating expenses were $33.5 million, up 17.4% YoY and 13.4% QoQ; Empire contributed $1.7 million

  • The ratio of core operating expense to average assets was 1.74% in 4Q20, 1.67% in 3Q20 and 1.62% in 4Q19

  • Excluding the notable items in net interest income, non-interest income and non-interest expense, the adjusted efficiency ratio was 57.6% in 4Q20 compared to 55.4% in 3Q20 and 65.0% in 4Q19

Provision for Income Taxes

The provision for income taxes was $0.4 million in 4Q20, versus $4.5 million in 3Q20 and $4.0 million in 4Q19.

  • Pre-tax income declined to $3.9 million in 4Q20 compared to $18.8 million in 3Q20 and $16.9 million in 4Q19

  • The effective tax rates were 10.8% in 4Q20, 23.9% in 3Q20, and 23.4% in 4Q19

Financial Condition Summary:

Loans:

  • Net loans held for investment were $6.7 billion reflecting an increase of 15.8% (3.9% excluding Empire) from December 31, 2019, as we continue to focus on the origination of full banking relationship loans through C&I loans, multi-family loans and commercial real estate

  • SBA Paycheck Protection Program (“PPP”) loans were $151.9 million in 4Q20 compared to $111.6 million in 3Q20, with the increase largely due to Empire

  • Loan closings of commercial business loans, multi-family loans and commercial real estate totaled $290.5 million for 4Q20, or 91.9% of loan production

  • Loan pipeline was $354.6 million at December 31, 2020, compared to $324.5 million a year ago

The following table shows the weighted average rate received from loan closings for the periods indicated:

For the three months ended

December 31,

September 30,

December 31,

Loan type

2020

2020

2019

Mortgage loans

3.47

%

3.56

%

3.97

%

Non-mortgage loans

3.37

%

2.81

%

4.68

%

Total loans

3.41

%

3.16

%

4.19

%

Excluding PPP loans

3.41

%

3.45

%

4.19

%

Credit Quality:

  • Non-performing loans totaled $21.1 million, an increase of $7.8 million ($0.6 million from Empire), or 58.9%, from $13.3 million at December 31, 2019, but down $3.7 million QoQ

  • Non-performing assets totaled $21.1 million, an increase of $7.6 million ($0.6 million from Empire), or 56.0%, from $13.5 million at December 31, 2019, but down $3.7 million QoQ

  • Criticized and classified assets totaled $71.6 million compared to $38.0 million at December 31, 2019; increase in criticized and classified assets was largely due to $14.6 million from Empire and $7.7 million from one CRE relationship

  • Loans classified as troubled debt restructured (TDR) totaled $15.7 million versus $6.5 million at December 31, 2019 primarily driven by one hotel loan

  • Active COVID-19 forbearances at December 31, 2020 totaled 134 loans with a principal balance of $364.4 million at the time of modification, a decrease from the peak of $1.5 billion; total deferment of $23.6 million in principal, interest and escrow; of the total forbearance loans, approximately 40% are making interest payments

  • Over 86% of gross loans are collateralized by real estate

  • The loan-to-value ratio on portfolio of real estate dependent loans as of December 31, 2020 totaled 38.0%

  • Allowance for credit losses were 0.67% of loans in 4Q20 compared to 0.38% a year ago; Empire had a minimal impact on this ratio

Capital Management:

  • Book value per common share was $20.11 at December 31, 2020, compared to $20.59 at December 31, 2019 and tangible book value per common share, a non-GAAP measure, was $19.45 at December 31, 2020, compared to $20.02 at December 31, 2019

  • The Company paid a dividend of $0.21 per share in 4Q20 and did not repurchase any shares in the quarter; up to 284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit

  • Tangible common equity to tangible assets was 7.52% in 4Q20 compared to 8.05% a year ago

  • The Company and the Bank remain well capitalized under all applicable regulatory requirements

  • The leverage ratio was 8.38% in 4Q20 versus 8.73% in 4Q19

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Friday, January 29, 2021 at 9:30 AM (ET) to discuss the Company’s strategy and results for the fourth quarter

  • Dial-in for Live Call: 1-877-509-5836

  • Webcast: https://services.choruscall.com/links/ffic210129.html

  • Dial-in for Replay: 1-877-344-7529

  • Replay Access Code: 10150602

  • The conference call will be simultaneously webcast and archived through January 29, 2022

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the Bank’s experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, an eco-friendly, healthier lifestyle community brand.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at http://www.flushingbank.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in other documents filed by the Company with the Securities and Exchange Commission from time to time, as well as the possibility that the proposed expected benefits of the Empire merger may not materialize in the timeframe expected or at all, or may be more costly to achieve. These proposed risks, as well as other risks associated with the transaction, are more fully discussed in the proxy statement/prospectus that is included in the registration statement on Form S-4 filed with the SEC in connection with the transaction, as amended and supplemented from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

For the three months ended

For the year ended

December 31,

September 30,

December 31,

December 31,

December 31,

2020

2020

2019

2020

2019

Interest and Dividend Income

Interest and fees on loans

$

66,120

$

60,367

$

64,316

$

248,153

$

251,744

Interest and dividends on securities:

Interest

2,813

3,525

5,528

15,776

25,535

Dividends

8

9

17

43

73

Other interest income

30

13

318

355

1,604

Total interest and dividend income

68,971

63,914

70,179

264,327

278,956

Interest Expense

Deposits

6,470

7,093

21,517

42,312

88,057

Other interest expense

6,769

6,897

7,483

26,816

28,959

Total interest expense

13,239

13,990

29,000

69,128

117,016

Net Interest Income

55,732

49,924

41,179

195,199

161,940

Provision for credit losses

3,862

2,470

(318

)

23,129

2,811

Net Interest Income After Provision for Credit Losses

51,870

47,454

41,497

172,070

159,129

Non-interest Income

Banking services fee income

1,442

1,316

844

4,500

3,723

Net loss on sale of securities

(610

)

(701

)

(15

)

Net gain on sale of loans

6

489

48

870

Net gain on sale of assets

770

Net gain (loss) from fair value adjustments

(4,129

)

(2,225

)

807

(2,142

)

(5,353

)

Federal Home Loan Bank of New York stock dividends

734

874

1,026

3,453

3,589

Life insurance proceeds

419

659

462

Bank owned life insurance

1,016

923

984

3,814

3,534

Other income

360

463

469

1,412

1,891

Total non-interest income (loss)

(1,181

)

1,351

5,038

11,043

9,471

Non-interest Expense

Salaries and employee benefits

22,089

17,335

17,470

74,228

67,765

Occupancy and equipment

3,446

3,021

2,950

12,134

11,328

Professional services

2,463

2,064

2,120

9,374

8,358

FDIC deposit insurance

562

727

306

2,676

869

Data processing

3,411

1,668

1,476

8,586

5,878

Depreciation and amortization

1,579

1,542

1,476

6,212

5,930

Other real estate owned/foreclosure expense

95

240

59

216

204

Net loss from sales of real estate owned

5

36

Prepayment Penalty on Borrowings

7,834

7,834

Other operating expenses

5,332

3,383

3,790

16,635

14,937

Total non-interest expense

46,811

29,985

29,647

137,931

115,269

Income Before Income Taxes

3,878

18,820

16,888

45,182

53,331

Provision for Income Taxes

Federal

533

3,359

3,058

9,188

10,439

State and local

(116

)

1,130

899

1,320

1,613

Total taxes

417

4,489

3,957

10,508

12,052

Net Income

$

3,461

$

14,331

$

12,931

$

34,674

$

41,279

Basic earnings per common share

$

0.11

$

0.50

$

0.45

$

1.18

$

1.44

Diluted earnings per common share

$

0.11

$

0.50

$

0.45

$

1.18

$

1.44

Dividends per common share

$

0.21

$

0.21

$

0.21

$

0.84

$

0.84


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)

December 31,

September 30,

December 31,

2020

2020

2019

ASSETS

Cash and due from banks

$

157,388

$

75,560

$

49,787

Securities held-to-maturity:

Mortgage-backed securities

7,914

7,919

7,934

Other securities

49,918

50,252

50,954

Securities available for sale:

Mortgage-backed securities

404,460

386,235

523,849

Other securities

243,514

234,721

248,651

Loans:

Multi-family residential

2,533,952

2,252,757

2,238,591

Commercial real estate

1,754,754

1,636,659

1,582,008

One-to-four family ― mixed-use property

602,981

585,159

592,471

One-to-four family ― residential

245,211

191,011

188,216

Co-operative apartments

8,051

8,132

8,663

Construction

83,322

63,567

67,754

Small Business Administration

167,376

124,649

14,445

Taxi medallion

2,757

2,317

3,309

Commercial business and other

1,303,225

1,063,429

1,061,478

Net unamortized premiums and unearned loan fees

3,045

13,718

15,271

Allowance for loan losses

(45,153

)

(38,343

)

(21,751

)

Net loans

6,659,521

5,903,055

5,750,455

Interest and dividends receivable

44,041

36,068

25,722

Bank premises and equipment, net

28,179

25,766

28,676

Federal Home Loan Bank of New York stock

43,439

57,119

56,921

Bank owned life insurance

181,710

158,701

157,713

Goodwill

17,636

16,127

16,127

Other real estate owned, net

239

Core deposit intangibles

3,172

Right of use asset

50,743

42,326

41,254

Other assets

84,759

69,207

59,494

Total assets

$

7,976,394

$

7,063,056

$

7,017,776

LIABILITIES

Due to depositors:

Non-interest bearing

$

778,672

$

607,954

$

435,072

Certificate of deposit accounts

1,138,361

1,051,644

1,437,890

Savings accounts

168,183

160,294

191,485

Money market accounts

1,682,345

1,381,552

1,592,011

NOW accounts

2,323,172

1,704,915

1,365,591

Total deposits

6,090,733

4,906,359

5,022,049

Mortgagors' escrow deposits

45,622

57,136

44,375

Borrowed funds

1,020,895

1,323,975

1,237,231

Operating lease liability

59,100

49,737

49,367

Other liabilities

141,047

139,443

85,082

Total liabilities

7,357,397

6,476,650

6,438,104

STOCKHOLDERS' EQUITY

Preferred stock (5,000,000 shares authorized; none issued)

Common stock ($0.01 par value; 100,000,000 shares authorized; 34,087,623 shares issued at December 31, 2020, and 31,530,595 shares issued each at September 30, 2020 and December 31, 2019; 30,775,854 shares, 28,218,427 shares and 28,157,206 shares outstanding at December 31, 2020, September 30, 2020 and December 31, 2019, respectively)

341

315

315

Additional paid-in capital

261,533

227,877

226,691

Treasury stock (3,311,769 shares, 3,312,168 shares and 3,373,389 shares at December 31, 2020, September 30, 2020 and December 31, 2019, respectively)

(69,400

)

(69,409

)

(71,487

)

Retained earnings

442,789

445,931

433,960

Accumulated other comprehensive loss, net of taxes

(16,266

)

(18,308

)

(9,807

)

Total stockholders' equity

618,997

586,406

579,672

Total liabilities and stockholders' equity

$

7,976,394

$

7,063,056

$

7,0...


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per sh...are data)
(Unaudited)

At or for the three months ended

At or for the year ended

December 31,

September 30,

December 31,

December 31,

December 31,

2020

2020

2019

2020

2019

Per Share Data

Basic earnings per share

$

0.11

$

0.50

$

0.45

$

1.18

$

1.44

Diluted earnings per share

$

0.11

$

0.50

$

0.45

$

1.18

$

1.44

Average number of shares outstanding for:

Basic earnings per common share computation

30,602,974

28,873,606

28,723,077

29,301,495

28,709,106

Diluted earnings per common share computation

30,602,974

28,873,606

28,723,077

29,301,495

28,709,109

Shares outstanding

30,775,854

28,218,427

28,157,206

30,775,854

28,157,206

Book value per common share (1)

$

20.11

$

20.78

$

20.59

$

20.11

$

20.59

Tangible book value per common share (2)

$

19.45

$

20.22

$

20.02

$

19.45

$

20.02

Stockholders' Equity

Stockholders' equity

$

618,997

$

586,406

$

579,672

$

618,997

$

579,672

Tangible stockholders' equity

598,476

570,571

563,837

598,476

563,837

Average Balances

Total loans, net

$

6,375,516

$

5,904,051

$

5,726,635

$

6,005,947

$

5,621,033

Total interest-earning assets

7,243,472

6,675,896

6,677,325

6,862,798

6,582,473

Total assets

7,705,407

7,083,028

7,057,094

7,276,022

6,947,881

Total due to depositors

4,708,760

4,353,560

4,527,645

4,509,206

4,535,292

Total interest-bearing liabilities

6,169,574

5,731,899

5,912,284

5,941,594

5,856,953

Stockholders' equity

609,463

576,512

567,461

580,067

561,289

Performance Ratios (3)

Return on average assets

0.18

%

0.81

%

0.73

%

0.48

%

0.59

%

Return on average equity

2.27

9.94

9.11

5.98

7.35

Yield on average interest-earning assets (4)

3.82

3.84

4.21

3.86

4.25

Cost of average interest-bearing liabilities

0.86

0.98

1.96

1.16

2.00

Cost of funds

0.77

0.89

1.83

1.06

1.87

Net interest rate spread during period (4)

2.96

2.86

2.25

2.70

2.25

Net interest margin (4)

3.08

3.00

2.48

2.85

2.47

Non-interest expense to average assets

2.43

1.69

1.68

1.90

1.66

Efficiency ratio (5)

57.56

55.37

65.00

58.69

63.89

Average interest-earning assets to average interest-bearing liabilities

1.17

X

1.16

X

1.12

X

1.16

X

1.13

X


(1) Calculated by dividing stockholders’ equity by shares outstanding.
(2) Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure, by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(3) Ratios are presented on an annualized basis, where appropriate.
(4) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
(5) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding accelerated employee benefits upon officer’s death, merger expense, OREO expense, prepayment penalty on borrowings and the net gain/loss from the sale of OREO) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges) and non-interest income (excluding life insurance proceeds, net gains and losses from the sale of securities and fair value adjustments). Additionally, it excludes purchase accounting adjustments.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)

At or for the year

At or for the year

ended

ended

December 31, 2020

December 31, 2019

Selected Financial Ratios and Other Data

Regulatory capital ratios (for Flushing Financial Corporation):

Tier 1 capital

$

662,987

$

615,500

Common equity Tier 1 capital

621,247

572,651

Total risk-based capital

794,034

712,251

Tier 1 leverage capital (well capitalized = 5%)

8.38

%

8.73

%

Common equity Tier 1 risk-based capital (well capitalized = 6.5%)

9.87

10.95

Tier 1 risk-based capital (well capitalized = 8.0%)

10.54

11.77

Total risk-based capital (well capitalized = 10.0%)

12.62

13.62

Regulatory capital ratios (for Flushing Bank only):

Tier 1 capital

$

733,010

$

680,749

Common equity Tier 1 capital

733,010

680,749

Total risk-based capital

773,807

702,500

Tier 1 leverage capital (well capitalized = 5%)

9.27

%

9.65

%

Common equity Tier 1 risk-based capital (well capitalized = 6.5%)

11.64

13.02

Tier 1 risk-based capital (well capitalized = 8.0%)

11.64

13.02

Total risk-based capital (well capitalized = 10.0%)

12.29

13.43

Capital ratios:

Average equity to average assets

7.97

%

8.08

%

Equity to total assets

7.76

8.26

Tangible common equity to tangible assets (1)

7.52

8.05

Asset quality:

Non-accrual loans (2)

$

18,325

$

12,813

Non-performing loans

21,073

13,258

Non-performing assets

21,108

13,532

Net charge-offs

3,639

2,005

Asset quality ratios:

Non-performing loans to gross loans

0.31

%

0.23

%

Non-performing assets to total assets

0.26

0.19

Allowance for loan losses to gross loans

0.67

0.38

Allowance for loan losses to non-performing assets

213.91

160.73

Allowance for loan losses to non-performing loans

214.27

164.05

Full-service customer facilities

25

20


(1) See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(2) Excludes performing non-accrual TDR loans.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)

For the three months ended

December 31, 2020

September 30, 2020

December 31, 2019

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest

Cost

Balance

Interest

Cost

Balance

Interest

Cost

Interest-earning Assets:

Mortgage loans, net

$

5,010,097

$

53,777

4.29

%

$

4,721,742

$

49,814

4.22

%

$

4,628,854

$

51,927

4.49

%

Other loans, net

1,365,419

12,343

3.62

1,182,309

10,553

3.57

1,097,781

12,389

4.51

Total loans, net (1) (2)

6,375,516

66,120

4.15

5,904,051

60,367

4.09

5,726,635

64,316

4.49

Taxable securities:

Mortgage-backed securities

413,875

1,435

1.39

413,902

1,928

1.86

555,023

3,230

2.33

Other securities

266,663

957

1.44

243,754

1,166

1.91

244,075

1,774

2.91

Total taxable securities

680,538

2,392

1.41

657,656

3,094

1.88

799,098

5,004

2.50

Tax-exempt securities: (3)

Other securities

50,768

543

4.28

51,652

557

4.31

63,825

685

4.29

Total tax-exempt securities

50,768

543

4.28

51,652

557

4.31

63,825

685

4.29

Interest-earning deposits and federal funds sold

136,650

30

0.09

62,537

13

0.08

87,767

318

1.45

Total interest-earning assets

7,243,472

69,085

3.82

6,675,896

64,031

3.84

6,677,325

70,323

4.21

Other assets

461,935

407,132

379,769

Total assets

$

7,705,407

$

7,083,028

$

7,057,094

Interest-bearing Liabilities:

Deposits:

Savings accounts

$

163,382

75

0.18

$

160,100

65

0.16

$

192,818

325

0.67

NOW accounts

1,924,840

1,320

0.27

1,625,109

1,242

0.31

1,362,151

5,227

1.53

Money market accounts

1,507,245

2,010

0.53

1,461,996

2,108

0.58

1,456,676

7,165

1.97

Certificate of deposit accounts

1,113,293

3,065

1.10

1,106,355

3,700

1.34

1,516,000

8,752

2.31

Total due to depositors

4,708,760

6,470

0.55

4,353,560

7,115

0.65

4,527,645

21,469

1.90

Mortgagors' escrow accounts

75,005

55,868

(22

)

(0.16

)

74,751

48

0.26

Total interest-bearing deposits

4,783,765

6,470

0.54

4,409,428

7,093

0.64

4,602,396

21,517

1.87

Borrowings

1,385,809

6,769

1.95

1,322,471

6,897

2.09

1,309,888

7,483

2.29

Total interest-bearing liabilities

6,169,574

13,239

0.86

5,731,899

13,990

0.98

5,912,284

29,000

1.96

Non interest-bearing demand deposits

731,170

589,674

435,241

Other liabilities

195,200

184,943

142,108

Total liabilities

7,095,944

6,506,516

6,489,633

Equity

609,463

576,512

567,461

Total liabilities and equity

$

7,705,407

$

7,083,028

$

7,057,094

Net interest income / net interest rate spread (tax equivalent) (3)

$

55,846

2.96

%

$

50,041

2.86

%

$

41,323

2.25

%

Net interest-earning assets / net interest margin (tax equivalent)

$

1,073,898

3.08

%

$

943,997

3.00

%

$

765,041

2.48

%

Ratio of interest-earning assets to interest-bearing liabilities

1.17

X

1.16

X

1.13

X


(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.9 million, $0.8 million and $0.3 million for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(2) Loan interest income includes net gains from fair value adjustments on qualifying hedges of $1.0 million, $0.2 million and $1.0 million for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.1 million in each period. Additionally, net interest income includes purchase accounting adjustments from Empire transaction for the three months ended December 31, 2020.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)

For the year ended

December 31, 2020

December 31, 2019

Average

Yield/

Average

Yield/

Balance

Interest

Cost

Balance

Interest

Cost

Interest-earning Assets:

Mortgage loans, net

$

4,798,232

$

202,722

4.22

%

$

4,609,439

$

203,440

4.41

%

Other loans, net

1,207,715

45,431

3.76

1,011,594

48,304

4.78

Total loans, net (1) (2)

6,005,947

248,153

4.13

5,621,033

251,744

4.48

Taxable securities:

Mortgage-backed securities

450,065

8,730

1.94

572,223

15,468

2.70

Other securities

249,533

5,178

2.08

243,324

8,102

3.33

Total taxable securities

699,598

13,908

1.99

815,547

23,570

2.89

Tax-exempt securities: (3)

Other securities

56,530

2,419

4.28

60,971

2,580

4.23

Total tax-exempt securities

56,530

2,419

4.28

60,971

2,580

4.23

Interest-earning deposits and federal funds sold

100,723

355

0.35

84,922

1,604

1.89

Total interest-earning assets

6,862,798

264,835

3.86

6,582,473

279,498

4.25

Other assets

413,224

365,408

Total assets

$

7,276,022

$

6,947,881

Interest-bearing Liabilities:

Deposits:

Savings accounts

$

176,443

495

0.28

$

198,374

1,378

0.69

NOW accounts

1,603,402

9,309

0.58

1,434,440

23,553

1.64

Money market accounts

1,561,496

14,368

0.92

1,370,038

27,819

2.03

Certificate of deposit accounts

1,167,865

18,096

1.55

1,532,440

35,078

2.29

Total due to depositors

4,509,206

42,268

0.94

4,535,292

87,828

1.94

Mortgagors' escrow accounts

70,829

44

0.06

70,209

229

0.33

Total interest-bearing deposits

4,580,035

42,312

0.92

4,605,501

88,057

1.91

Borrowings

1,361,559

26,816

1.97

1,251,452

28,959

2.31

Total interest-bearing liabilities

5,941,594

69,128

1.16

5,856,953

117,016

2.00

Non interest-bearing demand deposits

583,235

407,450

Other liabilities

171,126

122,189

Total liabilities

6,695,955

6,386,592

Equity

580,067

561,289

Total liabilities and equity

$

7,276,022

$

6,947,881

Net interest income / net interest rate spread
(tax equivalent) (3)

$

195,707

2.70

%

$

162,482

2.25

%

Net interest-earning assets / net interest margin (tax equivalent)

$

921,204

2.85

%

$

725,520

2.47

%

Ratio of interest-earning assets to interest-bearing liabilities

1.16

X

1.12

X

(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.3 million and $2.0 million for the year ended December 31, 2020 and 2019, respectively.
(2) Loan interest income includes net losses from fair value adjustments on qualifying hedges of $1.2 million and $1.7 million for the year ended December 31, 2020 and 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.5 million for each of the year ended December 31, 2020 and 2019. Additionally, net interest income includes purchase accounting adjustments from Empire transaction for the year ended December 31, 2020.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)

December 2020 vs.

December 2020 vs.

December 31,

September 30,

June 30,

March 31,

September 2020

December 31,

December 2019

(Dollars in thousands)

2020

2020

2020

2020

% Change

2019

% Change

Deposits

Non-interest bearing

$

778,672

$

607,954

$

581,881

$

489,198

28.1

%

$

435,072

79.0

%

Interest bearing:

Certificate of deposit accounts

1,138,361

1,051,644

1,135,977

1,172,381

8.2

%

1,437,890

(20.8

)

%

Savings accounts

168,183

160,294

184,895

192,192

4.9

%

191,485

(12.2

)

%

Money market accounts

1,682,345

1,381,552

1,474,880

1,597,109

21.8

%

1,592,011

5.7

%

NOW accounts

2,323,172

1,704,915

1,672,241

1,377,555

36.3

%

1,365,591

70.1

%

Total interest-bearing deposits

5,312,061

4,298,405

4,467,993

4,339,237

23.6

%

4,586,977

15.8

%

Total deposits

$

6,090,733

$

4,906,359

$

5,049,874

$

4,828,435

24.1

%

$

5,022,049

21.3

%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Closings

For the three months ended

For the year ended

December 31,

September 30,

December 31,

December 31,

December 31,

(In thousands)

2020

2020

2019

2020

2019

Multi-family residential

$

52,024

$

33,733

$

104,310

$

212,729

$

247,607

Commercial real estate

57,634

26,644

55,047

191,852

178,336

One-to-four family – mixed-use property

9,692

3,867

18,653

35,131

66,128

One-to-four family – residential

8,422

2,296

5,833

21,805

25,024

Co-operative apartments

704

2,117

Construction

6,869

5,420

3,542

21,859

33,919

Small Business Administration (1)

598

18,456

721

112,352

3,426

Commercial business and other

180,830

65,160

81,630

407,725

605,743

Total

$

316,069

$

155,576

$

269,736

$

1,004,157

$

1,162,300

(1) Includes $18.4 million of PPP closings for the three months ended September 30, 2020. Includes $111.6 million of PPP closings for the year ended December 31, 2020.

Loan Composition

December 2020 vs.

December 2020 vs.

December 31,

September 30,

June 30,

March 31,

September 2020

December 31,

December 2019

(Dollars in thousands)

2020

2020

2020

2020

% Change

2019

% Change

Loans held for investment:

Multi-family residential

$

2,533,952

$

2,252,757

$

2,285,555

$

2,272,343

12.5

%

$

2,238,591

13.2

%

Commercial real estate

1,754,754

1,636,659

1,646,085

1,664,934

7.2

%

1,582,008

10.9

%

One-to-four family ― mixed-use property

602,981

585,159

591,347

592,109

3.0

%

592,471

1.8

%

One-to-four family ― residential

245,211

191,011

184,741

189,774

28.4

%

188,216

30.3

%

Co-operative apartments

8,051

8,132

8,423

8,493

(1.0

)

%

8,663

(7.1

)

%

Construction

83,322

63,567

69,433

66,727

31.1

%

67,754

23.0

%

Small Business Administration (1)

167,376

124,649

106,813

14,076

34.3

%

14,445

1,058.7

%

Taxi medallion

2,757

2,317

3,269

3,281

19.0

%

3,309

(16.7

)

%

Commercial business and other

1,303,225

1,063,429

1,073,623

1,104,967

22.5

%

1,061,478

22.8

%

Net unamortized premiums and unearned loan fees (2)

3,045

13,718

13,986

15,384

(77.8

)

%

15,271

(80.1

)

%

Allowance for loan losses

(45,153

)

(38,343

)

(36,710

)

(28,098

)

17.8

%

(21,751

)

107.6

%

Net loans

$

6,659,521

$

5,903,055

$

5,946,565

$

5,903,990

12.8

%

$

5,750,455

15.8

%

(1) Includes $151.9 million, $111.6 million and $93.2 million of PPP loans at December 31, 2020 September 30, 2020 and June 30, 2020, respectively.
(2) Includes $11.3 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp.

Net Loans Activity

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2020

2020

2020

2020

2019

Loans originated and purchased

$

316,069

$

155,576

$

233,797

$

298,715

$

269,736

Loans Acquired from Empire Merger

685,404

Principal reductions

(226,772

)

(196,221

)

(180,182

)

(137,189

)

(255,977

)

Loans sold

(498

)

(7,129

)

Loan charge-offs

(752

)

(964

)

(1,030

)

(1,259

)

(95

)

Foreclosures

Net change in deferred fees and costs

(10,673

)

(268

)

(1,398

)

113

(92

)

Net change in the allowance for loan losses

(6,810

)

(1,633

)

(8,612

)

(6,347

)

284

Total loan activity

$

756,466

$

(43,510

)

$

42,575

$

153,535

$

6,727


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)

Non-Performing Assets

December 31,

September 30,

June 30,

March 31,

December 31,

(Dollars in thousands)

2020

2020

2020

2020

2019

Loans 90 Days Or More Past Due and Still Accruing:

Multi-family residential

$

201

$

$

$

$

445

Commercial real estate

2,547

Commercial business and other

150

Total

2,748

150

445

Non-accrual Loans:

Multi-family residential

2,524

2,661

3,688

2,741

2,296

Commercial real estate

1,683

2,657

2,671

8

367

One-to-four family - mixed-use property (1)

1,366

1,366

2,511

607

274

One-to-four family - residential

5,854

6,454

6,412

5,158

5,139

Small Business Administration

1,151

1,151

1,321

1,518

1,151

Taxi medallion(1)

2,317

2,218

1,757

1,761

1,641

Commercial business and other(1)

3,430

8,285

1,678

4,959

1,945

Total

18,325

24,792

20,038

16,752

12,813

Total Non-performing Loans

21,073

24,792

20,188

16,752

13,258

Other Non-performing Assets:

Real estate acquired through foreclosure

208

208

239

Other asset acquired through foreclosure

35

35

35

35

35

Total

35

35

243

243

274

Total Non-performing Assets

$

21,108

$

24,827

$

20,431

$

16,995

$

13,532

Non-performing Assets to Total Assets

0.26

%

0.35

%

0.29

%

0.23

%

0.19

%

Allowance For Loan Losses to Non-performing Loans

214.3

%

154.7

%

181.8

%

167.7

%

164.1

%


(1) Not included in the above analysis are non-accrual performing TDR one-to-four family mixed use property loans totaling $0.3 million in 4Q20 and 3Q20; non-accrual performing TDR taxi medallion loans totaling $0.4 million in 4Q20, $0.1 million in 3Q20, $1.5 million in 2Q20, $1.5 million in 1Q20, and $1.7 million in 4Q19, and non-accrual performing TDR commercial business loans totaling $2.2 million in 4Q20 and $1.0 million in 3Q20, 2Q20, 1Q20, respectively, and $0.9 million in 4Q19.

Net Charge-Offs (Recoveries)

Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2020

2020

2020

2020

2019

Multi-family residential

$

(11

)

$

(14

)

$

(7

)

$

(6

)

$

(14

)

Commercial real estate

(30

)

One-to-four family – mixed-use property

(60

)

3

(78

)

119

One-to-four family – residential

(2

)

(2

)

(3

)

(5

)

(3

)

Small Business Administration

(3

)

(47

)

165

(7

)

(8

)

Taxi medallion

124

951

Commercial business and other

538

9

849

1,245

(98

)

Total net loan charge-offs (recoveries)

$

646

$

837

$

1,007

$

1,149

$

(34

)


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FORBEARANCES DETAIL
(Dollars in thousands)
(Unaudited)

Forbearances (1)

Backed by Mortgages (1)

Balance

% of Sector

Balance

% of Forbearances

LTV

Higher Risk Segments

Restaurants and Catering Halls

$

20,300

23.8

%

$

18,850

92.9

%

33.6

%

Hotels

119,794

62.8

119,794

100.0

56.7

Travel and Leisure

38,104

20.9

33,918

89.0

36.4

Retail Services (2)

12,046

8.4

3,169

26.3

36.9

CRE - Shopping Center

7,508

3.0

7,508

100.0

60.5

CRE - Single Tenant

8,010

5.8

8,010

100.0

37.7

CRE - Strip Mall

28,390

9.8

28,390

100.0

56.8

Transportation (2)

8,736

6.0

Contractors (2)

5,198

1.5

3,353

64.5

54.2

Schools and Child Care

13,260

20.3

7,760

58.5

41.9

Subtotal

$

261,346

14.2

%

$

230,752

88.3

%

48.3

%

Lower Risk Segments

$

103,072

2.1

%

$

99,339

96.4

%

37.6

%

Total

$

364,418

5.4

%

$

330,091

90.6

%

44.5

%


(1) Represents dollar amount granted at modification
(2) Loans not backed by mortgages are collateralized by equipment


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is primarily due to the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.

Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income, Core Yield on Total Loans, Core Net Interest Margin and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2020

2020

2019

2020

2019

GAAP income before income taxes

$

3,878

$

18,820

$

16,888

$

45,182

$

53,331

Day 1, Provision for Credit Losses - Empire transaction

1,818

1,818

Net (gain) loss from fair value adjustments

4,129

2,225

(807

)

2,142

5,353

Net loss on sale of securities

610

701

15

Life insurance proceeds

(419

)

(659

)

(462

)

Net gain on sale of assets

(770

)

Net (gain) loss from fair value adjustments on qualifying hedges

(1,023

)

(230

)

(1,039

)

1,185

1,678

Accelerated employee benefits upon Officer's death

455

Prepayment Penalty on Borrowings

7,834

7,834

Net amortization of purchase accounting adjustments

80

80

Merger expense

5,349

422

1,080

6,894

1,590

Core income before taxes

22,675

21,237

15,703

65,177

61,190

Provision for income taxes for core income

4,891

5,069

3,841

15,428

13,957

Core net income

$

17,784

$

16,168

$

11,862

$

49,749

$

47,233

GAAP diluted earnings per common share

$

0.11

$

0.50

$

0.45

$

1.18

$

1.44

Day 1, Provision for Credit Losses - Empire transaction, net of tax

0.05

0.05

Net (gain) loss from fair value adjustments, net of tax

0.11

0.06

(0.02

)

0.06

0.14

Net loss on sale of securities, net of tax

0.02

0.02

Life insurance proceeds

(0.01

)

(0.02

)

(0.02

)

Net gain on sale of assets, net of tax

(0.02

)

Net (gain) loss from fair value adjustments on qualifying hedges, net of tax

(0.03

)

(0.01

)

(0.03

)

0.03

0.05

Accelerated employee benefits upon Officer's death, net of tax

0.01

Prepayment Penalty on Borrowings, net of tax

0.20

0.20

Net amortization of purchase accounting adjustments, net of tax

Merger expense, net of tax

0.14

0.01

0.03

0.18

0.04

Core diluted earnings per common share(1)

$

0.58

$

0.56

$

0.41

$

1.70

$

1.65

Core net income, as calculated above

$

17,784

$

16,168

$

11,862

$

49,749

$

47,233

Average assets

7,705,407

7,083,028

7,057,094

7,276,022

6,947,881

Average equity

609,463

576,512

567,461

580,067

561,289

Core return on average assets(2)

0.92