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Flushing Financial Corporation Reports Record Quarterly C&I Loan Closings, Loan Pipeline Increased to $424 Million at Quarter End

SECOND QUARTER 20191 HIGHLIGHTS

  • GAAP diluted EPS was $0.37, up 48.0% QoQ and down 22.9% YoY
  • Core diluted EPS was $0.42, up 27.3% QoQ and down 14.3% YoY
  • Record C&I closings totaled $158.3 million
  • Loan closings increased 50% QoQ
  • Loan pipeline totaled $423.9 million, largest since 1Q16
  • Net interest margin was 2.45%, down 12bps QoQ and 32bps YoY
  • Core net interest margin was 2.40%, down 12bps QoQ and 26bps YoY
  • GAAP net interest income of $40.0 million, down 4.3% QoQ and 6.2% YoY
  • Core net interest income of $40.8 million, down 3.8% QoQ and 4.3% YoY
  • GAAP and core ROAE were 7.5% and 8.6%, respectively, compared with 5.1% and 6.8%, respectively in 1Q19
  • GAAP and core ROAA were 0.6% and 0.7%, respectively, compared with 0.4% and 0.6%, respectively in 1Q19
  • Provision for loan losses of $1.5 million, or $0.04 after-tax per diluted common share, driven mainly by charge-offs of one commercial business loan relationships and growth in the C&I portfolio

UNIONDALE, N.Y., July 23, 2019 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the second quarter ended June 30, 2019.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report quarterly earnings growth as diluted earnings per share rose 48% from 1Q19, while core earnings rose 27%. Both results were down from 2Q18, as net interest margin pressure returned, driven by the inversion of the yield curve, coupled with increased competitive pressure on our deposit business.”

“During the quarter, we experienced more robust loan growth as closings increased 50% from 1Q19. Total loan closings for the quarter amounted to $296 million. In addition, the loan pipeline increased over 50% to $424 million during the same period, our largest pipeline since the first quarter of 2016. The mortgage pipeline has an average yield of 4.63%, which is 21bps greater than the 2Q19 core yield of total loans. Due to the size of the pipeline and our strong track record of closing loans in the pipeline, we anticipate loan growth will accelerate in the second half of 2019, resulting in full year loan growth in the mid-single digit range.”

“We continued to diversify the loan portfolio during the quarter, as we produced record C&I closings of $158 million, representing 53% of 2Q19 loan closings. These loans are generally floating rate loans and represented 18% of total loans at June 30, 2019, compared to 15% at June 30, 2018. We also recognized improved closing levels for our mortgage loans as they increased $71 million QoQ.”

“The net interest margin compressed 12bps QoQ, with both sides of the balance sheet contributing to the compression. We continue to experience pricing pressure due to the inverted yield curve at the pricing point for our loan tenor. In the past, we have articulated our strategy of focusing on rate over volume. During 2Q19, we modified our position and rates due to market conditions. The increase in the cost of funds was primarily driven by pricing pressure on our retail and municipal deposits, as competition from traditional bank and non-bank competitors remains very strong. Although the rates paid on retail and municipal deposits have increased, they remain less expensive than alternative funding sources, including wholesale funding. Given an inverted yield curve, we continue to proactively mitigate the NIM compression through the closing of C&I floating rate loans and our swap strategy. In June 2019, we entered into an additional $100 million of swaps on borrowings bringing total swaps on borrowings to $542 million at the end of 2Q19. Our long-term goal is to move towards being more interest rate neutral which allows us to perform better in all interest rate environments.”

Mr. Buran continued, “We remain focused on preserving strong risk management practices, including conservative underwriting standards and improving yields to achieve improved risk-adjusted returns. We continue to focus on increasing the amount of direct loan business, as approximately 63% of 2Q19 loan closings were non-brokered loans.”

  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 2Q19 had a yield of 4.60%, which is above our core yield of total loans for the same period, a decrease of 41bps from 5.01% for 1Q19 and an increase of 33bps from 4.27% for 2Q18. As noted, the decrease in the yield of 2Q19 originations was due to the inverted yield curve. We maintained our asset quality as these loans had an average loan-to-value ratio of 38% and an average debt coverage ratio of 192%.
  • We remain committed to our strategy of focusing on C&I loans, commercial real estate loans and multi-family. In the 2Q19, these loan closings represented 53%, 14%, and 19%, respectively, of all originations, which were made while maintaining conservative loan-to-value and debt coverage ratios.

Mr. Buran concluded, “Overall, we remain well capitalized and well positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute our strategic objectives.”

Summary of Strategic Objectives

  • Manage cost of funds and continue to improve funding mix
  • Increase interest income by leveraging loan pricing opportunities and portfolio mix
  • Enhance core earnings power by improving scalability and efficiency
  • Manage credit risk
  • Maintain well capitalized levels under all stress test scenarios

Earnings Summary:

Net Interest Income

Net interest income for 2Q19 was $40.0 million, a decrease of $2.6 million, or 6.1% YoY (2Q19 compared to 2Q18) and $1.8 million, or 4.3% QoQ (2Q19 compared to 1Q19).

  • Net interest margin of 2.45%, decreased 32bps YoY and 12bps QoQ
  • Net interest spread of 2.23%, decreased 38bps YoY and 13bps QoQ
  • Yield on average interest-earning assets of 4.26%, increased 15bps YoY but decreased 3bps QoQ
  • Cost of average interest-bearing liabilities of 2.03%, increased 53bps YoY and 10bps QoQ
  • Cost of funds of 1.90%, increased 50bps YoY and 10bps QoQ, driven by increases in rates paid on deposits and short-term borrowings resulting from increases in the Fed Funds rate 
  • Average balance of total interest-earning assets of $6,540.1 million, increased $358.9 million, or 5.8%, YoY and $19.0 million, or 0.3%, QoQ
  • Net interest income includes prepayment penalty income from loans and securities totaling $1.1 million in 2Q19, $0.8 million in 1Q19 and $1.6 million in 2Q18; recovered interest from delinquent loans of $0.5 million in 2Q19, $0.7 million in 1Q19 and $0.2 million in 2Q18; and losses from fair value adjustments on qualifying hedges totaling $0.8 million in 2Q19, $0.6 million in 1Q19 and none in 2Q18
  • Absent all above items noted in the preceding bullet, the yield on interest-earning assets was 4.21% in 2Q19, a decrease of 3bps from 1Q19 and 22bps from 2Q18 and the net interest margin was 2.40% in 2Q19, which decreased 12bps from 1Q19 and 26bps from 2Q18

Provision for loan losses

The Company recorded a provision of $1.5 million compared to $1.0 million in 1Q19 and none in 2Q18.

  • 2Q19 includes charge-offs from one commercial business loan relationship, after charge-off the remaining book balance for this relationship was $0.2 million, equaling the value of the underlying collateral
  • Recorded net charge-offs of $1.0 million in 2Q19, $0.9 million in 1Q19, and $0.3 million in 2Q18

Non-interest Income

Non-interest income for 2Q19 was $2.5 million, a decrease of $0.7 million YoY, but an increase of $1.5 million QoQ

  • Non-interest income included net gain on sale of assets of $0.8 million in 2Q19, net gain on sale of loans of $0.1 million in each of 2Q19 and 1Q19 and $0.4 million in 2Q18
  • Additionally, non-interest income included net losses from fair value adjustments of $2.0 million in 2Q19, $2.1 million in 1Q19, and $0.3 million in 2Q18
  • Absent all above items, non-interest income was $3.5 million, an increase of $0.5 million, or 16.9%, YoY, and $0.6 million, or 19.0%, QoQ, resulting primarily from a capital gain of $0.5 million recorded in 2Q19 from the redemption of $1.2 million in assets held in a rabbi trust

Non-interest Expense

Non-interest expense for 2Q19 was $27.2 million, a decrease of $0.2 million, or 0.9% YoY, and $5.3 million, or 16.2% QoQ.

  • Non-interest expense improved QoQ, primarily due to 1Q19 including seasonal and one-time expenses
  • The ratio of non-interest expense to average assets improved to 1.58% in 2Q19 compared to 1.89% in 1Q19 and 1.69% in 2Q18
  • The efficiency ratio was 61.1% in 2Q19 compared to 70.4% in 1Q19 and 59.6% in 2Q18

Provision for Income Taxes

The provision for income taxes in 2Q19 was $3.3 million, a decrease of $1.2 million, or 27.1% YoY but an increase of $1.0 million, or 43.1% QoQ.

  • Pre-tax income decreased by $4.6 million, or 24.9% YoY but increased by $4.5 million, or 47.8% QoQ
  • The effective tax rates were 23.7% in 2Q19, 24.5% in 1Q19 and 24.4% in 2Q18

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,616.9 million reflecting an increase of 0.9% QoQ (not annualized) and 5.7% from June 30, 2018, as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship
  • Loan closings of multi-family, commercial real estate and commercial business loans totaled $254.4 million for 2Q19, or 85.8% of loan production
  • Loan pipeline was $423.9 million at June 30, 2019, compared to $274.8 million at March 31, 2019 and $322.9 million at June 30, 2018
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of June 30, 2019 totaled 38.4%

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

  For the three months ended
  June 30,   March 31,   June 30,
Loan type 2019   2019   2018
Mortgage loans 4.75%   5.14%   4.40%
Non-mortgage loans 5.01%   4.96%   4.90%
Total loans 4.89%   5.02%   4.57%
           

Credit Quality:

  • Non-performing loans totaled $15.7 million, a decrease of $0.6 million, or 3.4%, from $16.3 million at December 31, 2018
  • Non-performing assets totaled $16.0 million, a decrease of $0.3 million, or 1.9%, from $16.3 million at December 31, 2018
  • Classified assets totaled $31.9 million, a decrease of $14.6 million, or 31.4%, from $46.5 million at December 31, 2018
  • Loans classified as troubled debt restructured (TDR) totaled $6.3 million, a decrease of $2.1 million, or 24.8%, from $8.4 million at December 31, 2018
  • We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 35.4% average loan-to-value for non-performing loans collateralized by real estate
  • Net charge-offs totaled $1.9 million during the six months ended June 30, 2019

Capital Management:

  • The Company and Bank, at June 30, 2019, were both well capitalized under all applicable regulatory requirements
  • Through 2Q19, stockholders’ equity increased $15.9 million, or 2.9%, to $565.4 million due to net income of $17.6 million and an improvement in the fair value of the securities portfolio, partially offset by the declaration and payment of dividends on the Company’s common stock
  • During 2Q19, the Company did not repurchase any shares; as of June 30, 2019, up to 467,211 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $20.06 at June 30, 2019, from $19.64 at December 31, 2018 and tangible book value per common share, a non-GAAP measure, increased to $19.50 at June 30, 2019, from $19.07 at December 31, 2018

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 Wednesday, July 24, 2019 at 9:30 AM (ET) to discuss the Company’s strategy and results for the second quarter
  • Dial-in for Live Call: 1-877-509-5836
  • Webcast: https://services.choruscall.com/links/ffic190724.html
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10129655
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on July 24, 2020

About Flushing Financial Corporation

Flushing Financial Corporation (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, 2018 and in other documents filed by the Company with the Securities and Exchange Commission 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.

1 See the tables entitled “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Income and Net Interest Margin to Core Net Interest Income and Net Interest Margin.”

- 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 six months ended
    June 30,   March 31   June 30,   June 30,   June 30,
      2019       2019       2018       2019       2018  
                     
Interest and Dividend Income                    
Interest and fees on loans   $  62,273     $  62,330     $  57,322     $  124,603     $  112,339  
Interest and dividends on securities:                    
  Interest      6,811        6,909        5,616        13,720        11,084  
  Dividends      19        19        17        38        31  
Other interest income      472        555        338        1,027        625  
  Total interest and dividend income      69,575        69,813        63,293        139,388        124,079  
                     
Interest Expense                    
Deposits      22,827        21,469        14,788        44,296        26,898  
Other interest expense      6,739        6,541        5,865        13,280        11,932  
  Total interest expense      29,566        28,010        20,653        57,576        38,830  
                     
Net Interest Income      40,009        41,803        42,640        81,812        85,249  
Provision for loan losses      1,474        972        -         2,446        153  
Net Interest Income After Provision for Loan Losses      38,535        40,831        42,640        79,366        85,096  
                     
Non-interest Income                    
Banking services fee income      1,059        973        1,000        2,032        1,948  
Net loss on sale of securities      (15 )      -         -         (15 )      -   
Net gain on sale of loans      114        63        421        177        158  
Net gain on sale of assets      770        -         -         770        -   
Net loss from fair value adjustments      (1,956 )      (2,080 )      (267 )      (4,036 )      (367 )
Federal Home Loan Bank of New York stock dividends      826        903        881        1,729        1,757  
Life insurance proceeds      -         43        -         43        776  
Bank owned life insurance      810        740        776        1,550        1,538  
Other income      843        301        357        1,144        558  
  Total non-interest income      2,451        943        3,168        3,394        6,368  
                     
Non-interest Expense                    
Salaries and employee benefits      15,668        19,166        15,291        34,834        33,746  
Occupancy and equipment      2,742        2,789        2,476        5,531        5,053  
Professional services      1,806        2,265        2,439        4,071        4,624  
FDIC deposit insurance      667        485        547        1,152        1,047  
Data processing      1,420        1,492        1,426        2,912        2,827  
Depreciation and amortization      1,497        1,518        1,455        3,015        2,844  
Other real estate owned/foreclosure expense      20        77        40        97        136  
Net gain from sales of real estate owned      -         -         (27 )      -         (27 )
Other operating expenses      3,338        4,627        3,749        7,965        8,440  
  Total non-interest expense      27,158        32,419        27,396        59,577        58,690  
                     
Income Before Income Taxes      13,828        9,355        18,412        23,183        32,774  
                     
Provision for Income Taxes                    
Federal      2,981        1,943        3,311        4,924        5,918  
State and local      291        344        1,178        635        1,521  
  Total taxes      3,272        2,287        4,489        5,559        7,439  
                     
Net Income   $  10,556     $  7,068     $  13,923     $  17,624     $  25,335  
                     
                     
Basic earnings per common share   $  0.37     $  0.25     $  0.48     $  0.61     $  0.88  
Diluted earnings per common share   $  0.37     $  0.25     $  0.48     $  0.61     $  0.88  
Dividends per common share   $  0.21     $  0.21     $  0.20     $  0.42     $  0.40  
                     
                     

 

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

        June 30,   March 31,   December 31,
          2019       2019       2018  
ASSETS            
Cash and due from banks $ 56,484     $ 58,677     $ 118,561  
Securities held-to-maturity:          
  Mortgage-backed securities   7,944       7,949       7,953  
  Other securities   52,242       22,532       24,065  
Securities available for sale:          
  Mortgage-backed securities   554,481       579,185       557,953  
  Other securities   254,172       266,839       264,702  
Loans:          
  Multi-family residential   2,263,875       2,256,447       2,269,048  
  Commercial real estate   1,524,693       1,529,001       1,542,547  
  One-to-four family ― mixed-use property   582,264       582,049       577,741  
  One-to-four family ― residential   184,024       188,615       190,350  
  Co-operative apartments   8,137       7,903       8,498  
  Construction   58,503       54,933       50,600  
  Small Business Administration   14,511       15,188       15,210  
  Taxi medallion   3,555       3,891       4,539  
  Commercial business and other   983,573       935,297       877,763  
  Net unamortized premiums and unearned loan fees   15,278       15,422       15,188  
  Allowance for loan losses   (21,510 )     (21,015 )     (20,945 )
      Net loans   5,616,903       5,567,731       5,530,539  
Interest and dividends receivable   26,552       27,226       25,485  
Bank premises and equipment, net   28,623       29,798       30,418  
Federal Home Loan Bank of New York stock   63,029       51,182       57,282  
Bank owned life insurance   157,604       131,794       131,788  
Goodwill   16,127       16,127       16,127  
Other real estate owned, net   239       -       -  
Right of Use Asset   42,557       44,033       -  
Other assets   68,677       64,377       69,303  
      Total assets $ 6,945,634     $ 6,867,450     $ 6,834,176  
                 
LIABILITIES          
Due to depositors:          
    Non-interest bearing $ 413,813     $ 401,064     $ 413,747  
    Certificate of deposit accounts   1,544,117       1,511,770       1,563,310  
    Savings accounts   196,820       201,811       210,022  
    Money market accounts   1,302,153       1,352,843       1,427,992  
    NOW accounts   1,368,813       1,542,606       1,300,852  
      Total  deposits   4,825,716       5,010,094       4,915,923  
Mortgagors' escrow deposits   52,201       70,115       44,861  
Borrowed funds   1,371,890       1,116,416       1,250,843  
Operating Lease Liability   50,898       52,510       -  
Other liabilities   79,539       58,756       73,085  
      Total liabilities   6,380,244       6,307,891       6,284,712  
                 
STOCKHOLDERS' EQUITY          
Preferred stock (5,000,000 shares authorized; none issued)   -       -       -  
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares          
  issued at June 30, 2019, March 31, 2019 and December 31, 2018; 28,187,922          
  shares, 28,187,184 shares and 27,983,637 shares outstanding at June 30, 2019,          
  March 31, 2019 and December 31, 2018, respectively)   315       315       315  
Additional paid-in capital   224,231       222,859       222,720  
Treasury stock (3,342,673 shares, 3,343,411 shares and 3,546,958  shares at          
  June 30, 2019, March 31, 2019 and December 31, 2018, respectively)   (70,913 )     (70,929 )     (75,146 )
Retained earnings   422,373       417,856       414,327  
Accumulated other comprehensive loss, net of taxes   (10,616 )     (10,542 )     (12,752 )
      Total stockholders' equity   565,390       559,559       549,464  
                 
      Total liabilities and stockholders' equity $ 6,945,634     $ 6,867,450     $ 6,834,176  
                 
                 

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

  At or for the three months ended   At or for the six months ended  
  June 30,   March 31,   June 30,   June 30,   June 30,  
   2019   2019   2018   2019   2018  
Per Share Data                    
Basic earnings per share $ 0.37   $ 0.25   $ 0.48   $ 0.61   $ 0.88  
Diluted earnings per share $ 0.37   $ 0.25   $ 0.48   $ 0.61   $ 0.88  
Average number of shares outstanding for:                    
Basic earnings per common share computation   28,760,816     28,621,018     28,844,829     28,691,303     28,909,135  
Diluted earnings per common share computation   28,760,816     28,621,030     28,845,611     28,691,309     28,910,034  
Shares outstanding   28,187,922     28,187,184     28,319,213     28,187,922     28,319,213  
Book value per common share (1) $ 20.06   $ 19.85   $ 19.00   $ 20.06   $ 19.00  
Tangible book value per common share (2) $ 19.50   $ 19.29   $ 18.44   $ 19.50   $ 18.44  
                     
Stockholders' Equity                    
Stockholders' equity $ 565,390   $ 559,559   $ 538,044   $ 565,390   $ 538,044  
Tangible stockholders' equity   549,549     543,722     522,208     549,549     522,208  
                     
Average Balances                    
Total loans, net $ 5,565,057   $ 5,544,667   $ 5,316,033   $ 5,554,919   $ 5,273,939  
Total interest-earning assets   6,540,134     6,521,142     6,181,186     6,530,692     6,140,173  
Total assets   6,891,541     6,868,140     6,484,882     6,879,905     6,444,364  
Total due to depositors   4,595,189     4,598,305     4,310,461     4,596,738     4,243,844  
Total interest-bearing liabilities   5,825,187     5,811,263     5,515,580     5,818,263     5,479,268  
Stockholders' equity   560,624     552,621     532,027     556,645     530,662  
                     
Performance Ratios (3)                    
Return on average assets   0.61 %   0.41 %   0.86 %   0.51 %   0.79 %
Return on average equity   7.53     5.12     10.47     6.33     9.55  
Yield on average interest-earning assets (4)   4.26     4.29     4.11     4.28     4.06  
Cost of average interest-bearing liabilities   2.03     1.93     1.50     1.98     1.42  
Cost of funds   1.90     1.80     1.40     1.85     1.33  
Interest rate spread during period (4)   2.23     2.36     2.61     2.30     2.64  
Net interest margin (4)   2.45     2.57     2.77     2.51     2.79  
Non-interest expense to average assets   1.58     1.89     1.69     1.73     1.82  
Efficiency ratio (5)   61.06     70.37     59.58     67.36     64.41  
Average interest-earning assets to average                    
interest-bearing liabilities   1.12 X   1.12 X   1.12 X   1.12 X   1.12 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 officers death, OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income (excluding net losses from fair value adjustments on qualifying hedges) and non-interest income (excluding net gains and losses from the sale of securities, assets and fair value adjustments and life insurance proceeds).
   
   

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

  At or for the six     At or for the year     At or for the six  
  ended     ended     months ended  
  June 30, 2019     December 31, 2018     June 30, 2018  
                 
Selected Financial Ratios and Other Data                
                 
Regulatory capital ratios (for Flushing Financial Corporation):                
Tier 1 capital $ 600,730     $ 586,582       $ 572,189  
Common equity Tier 1 capital   558,848       546,230         534,036  
Total risk-based capital   697,240       682,527         667,409  
                 
Tier 1 leverage capital (well capitalized = 5%)   8.72 %     8.74  %       8.79 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)   10.60       10.98         11.07  
Tier 1 risk-based capital (well capitalized = 8.0%)   11.39       11.79         11.87  
Total risk-based capital (well capitalized = 10.0%)   13.22       13.72         13.84  
                 
Regulatory capital ratios (for Flushing Bank only):                
Tier 1 capital $ 667,882     $ 660,782       $ 644,880  
Common equity Tier 1 capital   667,882       660,782         644,880  
Total risk-based capital   689,392       681,727         665,100  
                 
Tier 1 leverage capital (well capitalized = 5%)   9.69 %     9.85  %       9.90 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)   12.66       13.28         13.37  
Tier 1 risk-based capital (well capitalized = 8.0%)   12.66       13.28         13.37  
Total risk-based capital (well capitalized = 10.0%)   13.07       13.70         13.79  
                 
Capital ratios:                
Average equity to average assets   8.09 %     8.22  %       8.23 %
Equity to total assets   8.14       8.04         8.32  
Tangible common equity to tangible assets (1)   7.93       7.83         8.09  
                 
Asset quality:                
Non-accrual loans (2) $ 15,702     $ 16,253       $ 14,059  
Non-performing loans   15,702       16,253         14,789  
Non-performing assets   15,976       16,288         14,824  
Net charge-offs/ (recoveries)   1,881       (19 )       284  
                 
Asset quality ratios:                
Non-performing loans to gross loans   0.28 %     0.29  %       0.28 %
Non-performing assets to total assets   0.23       0.24         0.23  
Allowance for loan losses to gross loans   0.38       0.38         0.38  
Allowance for loan losses to non-performing assets   134.64       128.60         136.40  
Allowance for loan losses to non-performing loans   136.99       128.87         136.72  
                 
Full-service customer facilities   19       19         18  
                 
(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  
  June 30, 2019   March 31, 2019   June 30, 2018  
  Average   Yield/   Average   Yield/   Average   Yield/  
  Balance Interest Cost   Balance Interest Cost   Balance Interest Cost  
  (Dollars in thousands)  
Interest-earning Assets:                        
Mortgage loans, net $ 4,590,429 $ 50,206 4.37 % $ 4,619,587 $ 50,845 4.40 % $ 4,509,778 $ 47,673 4.23 %
Other loans, net   974,628   12,067 4.95     925,080   11,485 4.97     806,255   9,649 4.79  
Total loans, net (1) (2)   5,565,057   62,273 4.48     5,544,667   62,330 4.50     5,316,033   57,322 4.31  
Taxable securities:                        
Mortgage-backed                        
securities   585,892   4,225 2.88     573,397   4,248 2.96     533,088   3,754 2.82  
Other securities   242,560   2,135 3.52     241,863   2,211 3.66     122,601   1,023 3.34  
Total taxable securities   828,452   6,360 3.07     815,260   6,459 3.17     655,689   4,777 2.91  
Tax-exempt securities: (3)                        
Other securities   56,064   595 4.25     58,173   594 4.08     124,058   1,084 3.50  
Total tax-exempt securities   56,064   595 4.25     58,173   594 4.08     124,058   1,084 3.50  
Interest-earning deposits                        
and federal funds sold   90,561   472 2.08     103,042   555 2.15     85,406   338 1.58  
Total interest-earning                        
assets   6,540,134   69,700 4.26     6,521,142   69,938 4.29     6,181,186   63,521 4.11  
Other assets   351,407         346,998         303,696      
Total assets $ 6,891,541       $ 6,868,140       $ 6,484,882      
                         
                         
Interest-bearing Liabilities:                        
Deposits:                        
Savings accounts $ 200,349   348 0.69   $ 205,775   361 0.70   $ 235,564   285 0.48  
NOW accounts   1,541,956   6,641 1.72     1,488,859   6,031 1.62     1,444,889   3,364 0.93  
Money market accounts   1,336,526   6,974 2.09     1,380,172   6,821 1.98     1,110,690   3,983 1.43  
Certificate of deposit                        
accounts   1,516,358   8,802 2.32     1,523,499   8,203 2.15     1,519,348   7,118 1.87  
Total due to depositors   4,595,189   22,765 1.98     4,598,305   21,416 1.86     4,310,491   14,750 1.37  
Mortgagors' escrow                        
accounts   83,799   62 0.30     62,174   53 0.34     77,343   38 0.20  
Total interest-bearing                        
deposits   4,678,988   22,827 1.95     4,660,479   21,469 1.84     4,387,834   14,788 1.35  
Borrowings   1,146,199   6,739 2.35     1,150,784   6,541 2.27     1,127,746   5,865 2.08  
Total interest-bearing                        
liabilities   5,825,187   29,566 2.03     5,811,263   28,010 1.93     5,515,580   20,653 1.50  
Non interest-bearing                        
demand deposits   394,642         398,829         370,790      
Other liabilities   111,088         105,427         66,485      
Total liabilities   6,330,917         6,315,519         5,952,855      
Equity   560,624         552,621         532,027      
Total liabilities and                        
equity $ 6,891,541       $ 6,868,140       $ 6,484,882      
                         
Net interest income /                        
net interest rate spread (tax equivalent) (3)   $ 40,134 2.23 %   $ 41,928 2.36 %   $ 42,868 2.61 %
                         
Net interest-earning assets /                        
net interest margin (tax equivalent) $ 714,947   2.45 % $ 709,879   2.57 % $ 665,606   2.77 %
                         
Ratio of interest-earning                        
assets to interest-bearing                        
liabilities     1.12 X     1.12 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 $0.4 million, $0.5 million and $0.3 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.
(2) Loan interest income includes net losses from fair value adjustments on qualifying hedges of $0.8 m...