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Flushing Financial Corporation Reports Record Net Interest Income; Net Interest Margin Expansion Driven by Ability to Significantly Reduce Funding Costs

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·28 min read
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SECOND QUARTER 2020 1  HIGHLIGHTS

  • GAAP diluted EPS was $0.63, compared to ($0.05) in 1Q20 and $0.37 in 2Q19

  • Core diluted EPS was $0.36 compared to $0.19 in 1Q20 and $0.42 in 2Q19

  • Net interest margin was 2.87%, up 43bps QoQ and 42bps YoY

  • Core net interest margin was 2.85%, up 36bps QoQ and 45bps YoY

  • Record GAAP net interest income of $48.7 million, up 19.3% QoQ and 21.8% YoY

  • Record Core net interest income of $49.1 million, up 14.4% QoQ and 20.2% YoY

  • GAAP and core ROAE 13.1% and 7.4%, respectively, compared with (1.0)% and 3.8%, respectively in 1Q20

  • GAAP and core ROAA were 1.0% and 0.6%, respectively, compared with (0.1)% and 0.3%, respectively in 1Q20

  • Loan pipeline remains strong at $310.8 million

  • Provision for credit losses of $9.6 million, $0.25 after-tax per diluted common share, driven mainly by economic conditions arising from COVID-19 pandemic

  • Net charge-offs were $1.0 million, compared to $1.1 million in 1Q20

UNIONDALE, N.Y., July 21, 2020 (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 second quarter ended June 30, 2020.

John R. Buran, President and Chief Executive Officer stated, I want to thank our employees for their outstanding work during these unprecedented times. The health and welfare of our employees and customers remain our highest priority.

Mr. Buran continued, We are pleased to announce our second quarter earnings totaled $18.3 million, or $0.63 per diluted common share.  Our GAAP earnings for the quarter were positively impacted by two items. First, we executed on our strategic objective to manage our cost of funds and improve funding mix. We achieved record net interest income as a result of  the Companys quick response to the Fed decreasing interest rates in late March resulting in cost of funds decreasing 62 basis points from the previous quarter with additional opportunity to further reduce funding costs in the third quarter. Adding to the reduction of cost of funds in the second quarter, core deposits increased 7% while the net interest margin expanded 43 basis points from the previous quarter.

The second item positively affecting our GAAP net earnings was the non-cash fair value adjustment on our junior subordinated debt of $10.3 million, or $0.27 per diluted common share, after-tax, due to market conditions.

Core earnings for the quarter totaled $10.3 million, or $0.36 per diluted common share. Pre-provision pre-tax net revenue totaled $33.7 million, an increase of $28.1 million from the previous quarter. Non-performing assets at the end of the quarter were 29 basis points of total assets. Our loan portfolio is 88% collateralized by real estate with an average loan to value of less than 40%. Despite the current economic environment due to COVID-19, we have a long history and foundation built upon disciplined underwriting, good credit quality and a resilient seasoned loan portfolio with strong asset protection.

We continue to actively assist our customers during these turbulent times. As a result of COVID-19, we granted forbearances to our customers.  Originally, we granted forbearances for one to six months. In anticipation of an extended relief period, we have most recently predominately granted forbearance of principal and interest for six months. At the height of the request period, April and May 2020, COVID-19 forbearances peaked at $1.5 billion. By June 30, 2020, we reduced that number to $1.3 billion comprised of 82% real estate loans. Through July 10 th , 63% of the $146 million in loans scheduled to return to regularly scheduled payments have done so.

Additionally, we have actively participated in the SBA Paycheck Protection Program originating $93 million of these loans. We are one of nine banks in the State of New York participating in the Main Street Lending Program. We are also a proud participant in the FHLBNY Small Business Recovery Grant Program, helping our customers and communities navigate through the current environment.

During this pandemic, our customers have utilized our enhanced technology platform with new mobile banking capabilities that went live in March 2020. Mobile deposits have increased over 13% from April 2020 through June 2020. Similarly, the usage of ATMs has increased with over 75% of all transactions now completed via ATM. The number of accounts enrolling in online banking and opening new accounts online has also grown during the current quarter to 19% of retail account openings.

Given the current economic environment at the end of the quarter, we adjusted our economic forecast in our current expected credit loss (CECL) model resulting in a provision for credit losses of $9.6 million, or $0.25 per diluted share, after-tax.  Our allowance for credit losses stands at 61 basis points of gross loans and 182% of non-performing loans. As a reminder, our maximum charge-offs were only 64 basis points in the midst of the Great Recession while industry peak charge-offs were nearly 5x.

As we previously disclosed, the pending acquisition of Empire Bancorp was delayed due to the severe instability and volatility in the U.S. financial and stock markets caused by the pandemic. The Company continues to believe that the merger offers benefits to both shareholders and customers of Empire Bancorp and Flushing. We will be refraining from any additional comments at this time.

Mr. Buran concluded by saying, Overall, we made good progress in the second quarter to achieve our strategic objectives.  Importantly, the Company remains committed to building and fostering an environment of diversity and inclusion in our workforce and the communities we serve. In light of recent events, we have formed a Diversity and Inclusion Committee chaired by the EVP/Director of Human Resources, reporting directly to me. The role of this Committee is to make recommendations ensuring Flushing Financial continues to provide a safe and inclusive environment for all employees and ensure our message of inclusion is supported by our actions and participation in community organizations.

  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

  • Remain well capitalized under all stress test scenarios

Earnings Summary:

Net Interest Income

Net interest income for 2Q20 was $48.7 million, an increase of $8.7 million, or 21.8% YoY and $7.9 million, or 19.3% QoQ.

  • Net interest margin of 2.87%, increased 42bps YoY and 43bps QoQ

  • Net interest spread of 2.72%, increased 49bps YoY and 48bps QoQ

  • Yield on average interest-earning assets of 3.81%, decreased 45bps YoY and 17bps QoQ

  • Cost of average interest-bearing liabilities of 1.09%, decreased 94bpsYoY and 65bps QoQ

  • Cost of funds of 0.99%, decreased 91bps YoY and 62bps QoQ

  • Average balance of total interest-earning assets of $6,809.9 million, increased $269.7 million, or 4.1%, YoY and $90.0 million, or 1.3%, QoQ

  • Net interest income includes prepayment penalty income from loans totaling $0.7 million in 2Q20, $0.8 million in 1Q20 and $1.1 million in 2Q19; recovered interest from delinquent loans of $0.1 million in 2Q20, $0.4 million in 1Q20 and $0.5 million in 2Q19; net losses from fair value adjustments on qualifying hedges totaling $0.4 million in 2Q20, $2.1 million in 1Q20 and $0.8 million in 2Q19

  • Absent all above items noted in the preceding bullet, the net interest margin was 2.85% in 2Q20, an increase of 45bps YoY and 36bps QoQ

Provision for Credit Losses

The Company recorded a provision for credit losses of $9.6 million in 2Q20 compared to a provision of $7.2 million in 1Q20 and a provision of $1.5 million in 2Q19.

  • 2Q20 and 1Q20 provision for credit losses were primarily driven by the negative economic forecast resulting from the impact of COVID-19

  • Net charge-offs of $1.0 million in 2Q20, $1.1 million in 1Q20 and $1.0 million in 2Q19

Non-interest Income

Non-interest income for 2Q20 was $13.7 million, an increase of $11.3 million YoY, and $16.6 million QoQ.

  • Non-interest income included net gains from fair value adjustments of $10.2 million in 2Q20; net losses from fair value adjustments of $6.0 million and $2.0 million in 1Q20 and 2Q19, respectively

  • Additionally, non-interest income included life insurance proceeds totaling $0.7 million in 2Q20, net gain on sale of assets of $0.8 million and capital gain of $0.5 million, both in 2Q19

  • Absent all above items, non-interest income was $2.9 million in 2Q20, a decrease of $0.2 million, or 7.7% YoY, and $0.3 million, or 8.2% QoQ

Non-interest Expense

Non-interest expense for 2Q20 was $28.8 million, a decrease of $3.6 million, or 11.2 % QoQ, and an increase of $1.6 million or 5.9% YoY.

  • Non-interest expense improved QoQ primarily due to 1Q20 including seasonal expenses, and increased YoY primarily due to Company growth

  • Additionally, non-interest expense included merger expenses totaling $0.2 million in 2Q20 and $0.9 million in 1Q20

  • The ratio of non-interest expense to average assets was 1.60% in 2Q20 compared to 1.82% in 1Q20 and 1.58% in 2Q19

  • The efficiency ratio improved to 54.9% in 2Q20 compared to 68.2% in 1Q20 and 61.1% in 2Q19

Provision for Income Taxes

The provision for income taxes in 2Q20 was $5.8 million, compared to benefit of $0.2 million in 1Q20 and a provision of $3.3 million in 2Q19.

  • Pre-tax income increased by $10.3 million YoY and $25.7 million QoQ

  • The effective tax rates were 24.1% in 2Q20, 12.9% in 1Q20 and 23.7% in 2Q19

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,946.6 million reflecting an increase of 3.4% 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) closings totaled $93.2 million in 2Q20

  • Loan closings of commercial business loans, multi-family loans and commercial real estate totaled $126.9 million for 2Q20, or 90.3% of loan production, excluding PPP closings

  • Loan pipeline was $310.8 million at June 30, 2020, compared to $324.5 million at December 31, 2019

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

 

2020

 

 

2020

 

 

2019

 

Mortgage loans

 

 3.79

 

 3.93

 

 4.75

%

Non-mortgage loans

 

 1.99

 

 4.23

 

 5.01

%

Total loans

 

 2.62

 

 4.03

 

 4.89

%

 

 

 

 

 

 

 

 

 

 

Excluding PPP loans

 

 3.71

 

 4.03

 

 4.89

%

Credit Quality:

  • Non-performing loans totaled $20.2 million, an increase of $6.9 million, or 52.3%, from $13.3 million at December 31, 2019

  • Non-performing assets totaled $20.4 million, an increase of $6.9 million, or 51.0%, from $13.5 million at December 31, 2019

  • Classified assets totaled $25.1 million, an increase of $0.5 million, or 2.0%, from $24.6 million at December 31, 2019

  • Loans classified as troubled debt restructured (TDR) totaled $6.0 million, a decrease of $0.5 million, or 8.2%, from $6.5 million at December 31, 2019

  • 799 active COVID-19 forbearances outstanding at July 10 th for loans with a combined principal balance of $1.3 billion at the time of forbearance; total combined deferment of $36.4 million in principal, interest and escrow

  • Over 88% of our gross loans are collateralized by real estate

  • The loan-to-value ratio on our portfolio of real estate dependent loans as of June 30, 2020 totaled 38.1%

  • Net charge-offs totaled $1.0 million

Capital Management:

  • The Company and Bank, at June 30, 2020, were both well capitalized under all applicable regulatory requirements

  • Through 2Q20, stockholders equity decreased $7.8 million, or 1.3%, from December 31, 2019, to $571.9 million primarily due to unrealized losses in the fair value of securities and interest rate swaps, coupled with the declaration and payment of dividends on the Companys common stock, partially offset by net income of $16.9 million

  • During 2Q20, the Company did not repurchase any shares; as of June 30, 2020, up to 284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit

  • Book value per common share was $20.27 at June 30, 2020, compared to $20.59 at December 31, 2019

  • Tangible book value per common share, a non-GAAP measure, was $19.71 at June 30, 2020, compared to $20.02 at December 31, 2019

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 22, 2020 at 9:30 AM (ET) to discuss the Companys strategy and results for the second quarter

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

  • Webcast:  https://services.choruscall.com/links/ffic200722.html

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

  • Replay Access Code: 10138500

  • The conference call will be simultaneously webcast and archived through July 22, 2021

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 Banks 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 Companys 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 Companys 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.  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 six months ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Interest and Dividend Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

60,557

 

 

$

61,109

 

 

$

62,273

 

 

$

121,666

 

 

$

124,603

 

Interest and dividends on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

4,182

 

 

 

5,256

 

 

 

6,811

 

 

 

9,438

 

 

 

13,720

 

Dividends

 

 

11

 

 

 

15

 

 

 

19

 

 

 

26

 

 

 

38

 

Other interest income

 

 

22

 

 

 

290

 

 

 

472

 

 

 

312

 

 

 

1,027

 

Total interest and dividend income

 

 

64,772

 

 

 

66,670

 

 

 

69,575

 

 

 

131,442

 

 

 

139,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

9,971

 

 

 

18,778

 

 

 

22,827

 

 

 

28,749

 

 

 

44,296

 

Other interest expense

 

 

6,084

 

 

 

7,066

 

 

 

6,739

 

 

 

13,150

 

 

 

13,280

 

Total interest expense

 

 

16,055

 

 

 

25,844

 

 

 

29,566

 

 

 

41,899

 

 

 

57,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

48,717

 

 

 

40,826

 

 

 

40,009

 

 

 

89,543

 

 

 

81,812

 

Provision for credit losses

 

 

9,619

 

 

 

7,178

 

 

 

1,474

 

 

 

16,797

 

 

 

2,446

 

Net Interest Income After Provision for Credit Losses

 

 

39,098

 

 

 

33,648

 

 

 

38,535

 

 

 

72,746

 

 

 

79,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking services fee income

 

 

944

 

 

 

798

 

 

 

1,059

 

 

 

1,742

 

 

 

2,032

 

Net loss on sale of securities

 

 

(54

)

 

 

(37

)

 

 

(15

)

 

 

(91

)

 

 

(15

)

Net gain on sale of loans

 

 

 

 

 

42

 

 

 

114

 

 

 

42

 

 

 

177

 

Net gain on sale of assets

 

 

 

 

 

 

 

 

770

 

 

 

 

 

 

770

 

Net gain (loss) from fair value adjustments

 

 

10,205

 

 

 

(5,993

)

 

 

(1,956

)

 

 

4,212

 

 

 

(4,036

)

Federal Home Loan Bank of New York stock dividends

 

 

881

 

 

 

964

 

 

 

826

 

 

 

1,845

 

 

 

1,729

 

Life insurance proceeds

 

 

659

 

 

 

 

 

 

 

 

 

659

 

 

 

43

 

Bank owned life insurance

 

 

932

 

 

 

943

 

 

 

810

 

 

 

1,875

 

 

 

1,550

 

Other income

 

 

170

 

 

 

419

 

 

 

843

 

 

 

589

 

 

 

1,144

 

Total non-interest income (loss)

 

 

13,737

 

 

 

(2,864

)

 

 

2,451

 

 

 

10,873

 

 

 

3,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

16,184

 

 

 

18,620

 

 

 

15,668

 

 

 

34,804

 

 

 

34,834

 

Occupancy and equipment

 

 

2,827

 

 

 

2,840

 

 

 

2,742

 

 

 

5,667

 

 

 

5,531

 

Professional services

 

 

1,985

 

 

 

2,862

 

 

 

1,806

 

 

 

4,847

 

 

 

4,071

 

FDIC deposit insurance

 

 

737

 

 

 

650

 

 

 

667

 

 

 

1,387

 

 

 

1,152

 

Data processing

 

 

1,813

 

 

 

1,694

 

 

 

1,420

 

 

 

3,507

 

 

 

2,912

 

Depreciation and amortization

 

 

1,555

 

 

 

1,536

 

 

 

1,497

 

 

 

3,091

 

 

 

3,015

 

Other real estate owned/foreclosure expense (benefit)

 

 

45

 

 

 

(164

)

 

 

20

 

 

 

(119

)

 

 

97

 

Net loss from sales of real estate owned

 

 

 

 

 

31

 

 

 

 

 

 

31

 

 

 

 

Other operating expenses

 

 

3,609

 

 

 

4,311

 

 

 

3,338

 

 

 

7,920

 

 

 

7,965

 

Total non-interest expense

 

 

28,755

 

 

 

32,380

 

 

 

27,158

 

 

 

61,135

 

 

 

59,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

24,080

 

 

 

(1,596

)

 

 

13,828

 

 

 

22,484

 

 

 

23,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (Benefit) for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

4,307

 

 

 

989

 

 

 

2,981

 

 

 

5,296

 

 

 

4,924

 

State and local

 

 

1,501

 

 

 

(1,195

)

 

 

291

 

 

 

306

 

 

 

635

 

Total taxes

 

 

5,808

 

 

 

(206

)

 

 

3,272

 

 

 

5,602

 

 

 

5,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

18,272

 

 

$

(1,390

)

 

$

10,556

 

 

$

16,882

 

 

$

17,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.63

 

 

$

(0.05

)

 

$

0.37

 

 

$

0.58

 

 

$

0.61

 

Diluted earnings (loss) per common share

 

$

0.63

 

 

$

(0.05

)

 

$

0.37

 

 

$

0.58

 

 

$

0.61

 

Dividends per common share

 

$

0.21

 

 

$

0.21

 

 

$

0.21

 

 

$

0.42

 

 

$

0.42

 


 

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

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

 

2020

 

2020

 

2019

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

84,754

 

 

$

157,184

 

 

$

49,787

 

Securities held-to-maturity:

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

7,924

 

 

 

7,929

 

 

 

7,934

 

Other securities

 

 

50,078

 

 

 

50,225

 

 

 

50,954

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

442,507

 

 

 

489,556

 

 

 

523,849

 

Other securities

 

 

232,803

 

 

 

225,856

 

 

 

248,651

 

Loans:

 

 

 

 

 

 

 

 

 

Multi-family residential

 

 

2,285,555

 

 

 

2,272,343

 

 

 

2,238,591

 

Commercial real estate

 

 

1,646,085

 

 

 

1,664,934

 

 

 

1,582,008

 

One-to-four family mixed-use property

 

 

591,347

 

 

 

592,109

 

 

 

592,471

 

One-to-four family residential

 

 

184,741

 

 

 

189,774

 

 

 

188,216

 

Co-operative apartments

 

 

8,423

 

 

 

8,493

 

 

 

8,663

 

Construction

 

 

69,433

 

 

 

66,727

 

 

 

67,754

 

Small Business Administration

 

 

106,813

 

 

 

14,076

 

 

 

14,445

 

Taxi medallion

 

 

3,269

 

 

 

3,281

 

 

 

3,309

 

Commercial business and other

 

 

1,073,623

 

 

 

1,104,967

 

 

 

1,061,478

 

Net unamortized premiums and unearned loan fees

 

 

13,986

 

 

 

15,384

 

 

 

15,271

 

Allowance for loan losses

 

 

(36,710

)

 

 

(28,098

)

 

 

(21,751

)

Net loans

 

 

5,946,565

 

 

 

5,903,990

 

 

 

5,750,455

 

Interest and dividends receivable

 

 

30,219

 

 

 

25,526

 

 

 

25,722

 

Bank premises and equipment, net

 

 

27,018

 

 

 

27,899

 

 

 

28,676

 

Federal Home Loan Bank of New York stock

 

 

56,400

 

 

 

74,000

 

 

 

56,921

 

Bank owned life insurance

 

 

157,779

 

 

 

158,655

 

 

 

157,713

 

Goodwill

 

 

16,127

 

 

 

16,127

 

 

 

16,127

 

Other real estate owned, net

 

 

208

 

 

 

208

 

 

 

239

 

Right of use asset

 

 

38,303

 

 

 

39,729

 

 

 

41,254

 

Other assets

 

 

71,974

 

 

 

68,526

 

 

 

59,494

 

Total assets

 

$

7,162,659

 

 

$

7,245,410

 

 

$

7,017,776

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Due to depositors:

 

 

 

 

 

 

 

 

 

Non-interest bearing

 

$

581,881

 

 

$

489,198

 

 

$

435,072

 

Certificate of deposit accounts

 

 

1,135,977

 

 

 

1,172,381

 

 

 

1,437,890

 

Savings accounts

 

 

184,895

 

 

 

192,192

 

 

 

191,485

 

Money market accounts

 

 

1,474,880

 

 

 

1,597,109

 

 

 

1,592,011

 

NOW accounts

 

 

1,672,241

 

 

 

1,377,555

 

 

 

1,365,591

 

Total deposits

 

 

5,049,874

 

 

 

4,828,435

 

 

 

5,022,049

 

Mortgagors' escrow deposits

 

 

48,525

 

 

 

73,051

 

 

 

44,375

 

Borrowed funds

 

 

1,305,187

 

 

 

1,617,582

 

 

 

1,237,231

 

Operating lease liability

 

 

45,897

 

 

 

47,726

 

 

 

49,367

 

Other liabilities

 

 

141,255

 

 

 

128,933

 

 

 

85,082

 

Total liabilities

 

 

6,590,738

 

 

 

6,695,727

 

 

 

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; 31,530,595 shares issued at June 30, 2020, March 31, 2020 and December 31, 2019; 28,217,434 shares, 28,213,602 shares and 28,157,206 shares outstanding at June 30, 2020, March 31, 2020 and December 31, 2019, respectively)

 

 

315

 

 

 

315

 

 

 

315

 

Additional paid-in capital

 

 

226,901

 

 

 

225,893

 

 

 

226,691

 

Treasury stock (3,313,161 shares, 3,316,993 shares and 3,373,389 shares at June 30, 2020, March 31, 2020 and December 31, 2019, respectively)

 

 

(69,436

)

 

 

(69,540

)

 

 

(71,487

)

Retained earnings

 

 

437,663

 

 

 

425,455

 

 

 

433,960

 

Accumulated other comprehensive loss, net of taxes

 

 

(23,522

)

 

 

(32,440

)

 

 

(9,807

)

Total stockholders' equity

 

 

571,921

 

 

 

549,683

 

 

 

579,672

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

7,162,659

 

 

$

7,245,410

 

 

$

7,017,776

 


 

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,

 

 

 

2020

 

2020

 

2019

 

2020

 

2019

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.63

 

$

(0.05

)

 

$

0.37

 

$

0.58

 

$

0.61

 

Diluted earnings (loss) per share

 

$

0.63

 

$

(0.05

)

 

$

0.37

 

$

0.58

 

$

0.61

 

Average number of shares outstanding for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share computation

 

 

28,866,984

 

 

28,852,819

 

 

 

28,760,816

 

 

28,859,901

 

 

28,691,303

 

Diluted earnings per common share computation

 

 

28,866,984

 

 

28,852,819

 

 

 

28,760,816

 

 

28,859,901

 

 

28,691,309

 

Shares outstanding

 

 

28,217,434

 

 

28,213,602

 

 

 

28,187,922

 

 

28,217,434

 

 

28,187,922

 

Book value per common share (1)

 

$

20.27

 

$

19.48

 

 

$

20.06

 

$

20.27

 

$

20.06

 

Tangible book value per common share (2)

 

$

19.71

 

$

18.92

 

 

$

19.50

 

$

19.71

 

$

19.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

$

571,921

 

$

549,683

 

 

$

565,390

 

$

571,921

 

$

565,390

 

Tangible stockholders' equity

 

 

556,086

 

 

533,848

 

 

 

549,549

 

 

556,086

 

 

549,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans, net

 

$

5,946,412

 

$

5,794,866

 

 

$

5,565,057

 

$

5,870,640

 

$

5,554,919

 

Total interest-earning assets

 

 

6,809,835

 

 

6,719,857

 

 

 

6,540,134

 

 

6,764,846

 

 

6,530,692

 

Total assets

 

 

7,206,059

 

 

7,106,998

 

 

 

6,891,541

 

 

7,156,529

 

 

6,879,905

 

Total due to depositors

 

 

4,395,228

 

 

4,578,793

 

 

 

4,595,189

 

 

4,487,011

 

 

4,596,738

 

Total interest-bearing liabilities

 

 

5,912,774

 

 

5,951,925

 

 

 

5,825,187

 

 

5,932,350

 

 

5,818,263

 

Stockholders' equity

 

 

557,414

 

 

576,597

 

 

 

560,624

 

 

567,006

 

 

556,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Ratios (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

1.01

%

 

(0.08

)%

 

 

0.61

%

 

0.47

%

 

0.51

%

Return on average equity

 

 

13.11

 

 

(0.96

)

 

 

7.53

 

 

5.95

 

 

6.33

 

Yield on average interest-earning assets (4)

 

 

3.81

 

 

3.98

 

 

 

4.26

 

 

3.89

 

 

4.28

 

Cost of average interest-bearing liabilities

 

 

1.09

 

 

1.74

 

 

 

2.03

 

 

1.41

 

 

1.98

 

Cost of funds

 

 

0.99

 

 

1.61

 

 

 

1.90

 

 

1.30

 

 

1.85

 

Net interest rate spread during period (4)

 

 

2.72

 

 

2.24

 

 

 

2.23

 

 

2.48

 

 

2.30

 

Net interest margin (4)

 

 

2.87

 

 

2.44

 

 

 

2.45

 

 

2.66

 

 

2.51

 

Non-interest expense to average assets

 

 

1.60

 

 

1.82

 

 

 

1.58

 

 

1.71

 

 

1.73

 

Efficiency ratio (5)

 

 

54.92

 

 

68.21

 

 

 

61.06

 

 

61.16

 

 

67.36

 

Average interest-earning assets to average interest-bearing liabilities

 

 

1.15

X

 

1.13

X

 

 

1.12

X

 

1.14

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, merger expense, OREO expense 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).

 

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

 

 

 

months ended

 

ended

 

months ended

 

 

 

June 30, 2020

 

December 31, 2019

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Selected Financial Ratios and Other Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory capital ratios (for Flushing Financial Corporation):

 

 

 

 

 

 

 

 

 

 

Tier 1 capital

 

$

617,620

 

$

615,500

 

$

600,730

 

Common equity Tier 1 capital

 

 

583,238

 

 

572,651

 

 

558,848

 

Total risk-based capital

 

 

726,291

 

 

712,251

 

 

697,240

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital (well capitalized = 5%)

 

 

8.64

%

 

8.73

%

 

8.72

%

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

 

 

10.79

 

 

10.95

 

 

10.60

 

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

 

 

11.42

 

 

11.77

 

 

11.39

 

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

 

 

13.43

 

 

13.62

 

 

13.22

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory capital ratios (for Flushing Bank only):

 

 

 

 

 

 

 

 

 

 

Tier 1 capital

 

$

683,521

 

$

680,749

 

$

667,882

 

Common equity Tier 1 capital

 

 

683,521

 

 

680,749

 

 

667,882

 

Total risk-based capital

 

 

717,192

 

 

702,500

 

 

689,392

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital (well capitalized = 5%)

 

 

9.56

%

 

9.65

%

 

9.69

%

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

 

 

12.63

 

 

13.02

 

 

12.66

 

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

 

 

12.63

 

 

13.02

 

 

12.66

 

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

 

 

13.25

 

 

13.43

 

 

13.07

 

 

 

 

 

 

 

 

 

 

 

 

Capital ratios:

 

 

 

 

 

 

 

 

 

 

Average equity to average assets

 

 

7.92

%

 

8.08

%

 

8.09

%

Equity to total assets

 

 

7.98

 

 

8.26

 

 

8.14

 

Tangible common equity to tangible assets (1)

 

 

7.78

 

 

8.05

 

 

7.93

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality:

 

 

 

 

 

 

 

 

 

 

Non-accrual loans (2)

 

$

20,038

 

$

12,813

 

$

15,702

 

Non-performing loans

 

 

20,188

 

 

13,258

 

 

15,702

 

Non-performing assets

 

 

20,431

 

 

13,532

 

 

15,976

 

Net charge-offs

 

 

2,156

 

 

2,005

 

 

1,881

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality ratios:

 

 

 

 

 

 

 

 

 

 

Non-performing loans to gross loans

 

 

0.34

%

 

0.23

%

 

0.28

%

Non-performing assets to total assets

 

 

0.29

 

 

0.19

 

 

0.23

 

Allowance for loan losses to gross loans

 

 

0.61

 

 

0.38

 

 

0.38

 

Allowance for loan losses to non-performing assets

 

 

179.68

 

 

160.73

 

 

134.64

 

Allowance for loan losses to non-performing loans

 

 

181.85

 

 

164.05

 

 

136.99

 

 

 

 

 

 

 

 

 

 

 

 

Full-service customer facilities

 

 

20

 

 

20

 

 

19

 

_____________________
(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, 2020

 

 

March 31, 2020

 

 

June 30, 2019

 

 

 

Average

 

 

 

 

Yield/

 

 

Average

 

 

 

 

Yield/

 

 

Average

 

 

 

 

Yield/

 

 

 

Balance

 

Interest

 

Cost

 

 

Balance

 

Interest

 

Cost

 

 

Balance

 

Interest

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans, net

 

$

4,762,068

 

$

49,719

 

4.18

%

 

$

4,697,531

 

$

49,412

 

4.21

%

 

$

4,590,429

 

$

50,206

 

4.37

%

Other loans, net

 

 

1,184,344

 

 

10,838

 

3.66

 

 

 

1,097,335

 

 

11,697

 

4.26

 

 

 

974,628

 

 

12,067

 

4.95

 

Total loans, net (1) (2)

 

 

5,946,412

 

 

60,557

 

4.07

 

 

 

5,794,866

 

 

61,109

 

4.22

 

 

 

5,565,057

 

 

62,273

 

4.48

 

Taxable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

465,365

 

 

2,327

 

2.00

 

 

 

507,912

 

 

3,040

 

2.39

 

 

 

585,892

 

 

4,225

 

2.88

 

Other securities

 

 

243,867

 

 

1,358

 

2.23

 

 

 

243,726

 

 

1,697

 

2.79

 

 

 

242,560

 

 

2,135

 

3.52

 

Total taxable securities

 

 

709,232

 

 

3,685

 

2.08

 

 

 

751,638

 

 

4,737

 

2.52

 

 

 

828,452

 

 

6,360

 

3.07

 

Tax-exempt securities: (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other securities

 

 

60,280

 

 

643

 

4.27

 

 

 

63,535

 

 

676

 

4.26

 

 

 

56,064

 

 

595

 

4.25

 

Total tax-exempt securities

 

 

60,280

 

 

643

 

4.27

 

 

 

63,535

 

 

676

 

4.26

 

 

 

56,064

 

 

595

 

4.25

 

Interest-earning deposits and federal funds sold

 

 

93,911

 

 

22

 

0.09

 

 

 

109,818

 

 

290

 

1.06

 

 

 

90,561

 

 

472

 

2.08

 

Total interest-earning assets

 

 

6,809,835

 

 

64,907

 

3.81

 

 

 

6,719,857

 

 

66,812

 

3.98

 

 

 

6,540,134

 

 

69,700

 

4.26

 

Other assets

 

 

396,224

 

 

 

 

 

 

 

 

387,141

 

 

 

 

 

 

 

 

351,407

 

 

 

 

 

 

Total assets

 

$

7,206,059

 

 

 

 

 

 

 

$

7,106,998

 

 

 

 

 

 

 

$

6,891,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings accounts

 

$

188,587

 

 

74

 

0.16

 

 

$

194,026

 

 

281

 

0.58

 

 

$

200,349

 

 

348

 

0.69

 

NOW accounts

 

 

1,440,147

 

 

2,099

 

0.58

 

 

 

1,419,739

 

 

4,648

 

1.31

 

 

 

1,541,956

 

 

6,641

 

1.72

 

Money market accounts

 

 

1,580,652

 

 

3,208

 

0.81

 

 

 

1,697,783

 

 

7,042

 

1.66

 

 

 

1,336,526

 

 

6,974

 

2.09

 

Certificate of deposit accounts

 

 

1,185,842

 

 

4,564

 

1.54

 

 

 

1,267,245

 

 

6,767

 

2.14

 

 

 

1,516,358

 

 

8,802

 

2.32

 

Total due to depositors

 

 

4,395,228

 

 

9,945

 

0.91

 

 

 

4,578,793

 

 

18,738

 

1.64

 

 

 

4,595,189

 

 

22,765

 

1.98

 

Mortgagors' escrow accounts

 

 

87,058

 

 

26

 

0.12

 

 

 

65,503

 

 

40

 

0.24

 

 

 

83,799

 

 

62

 

0.30

 

Total interest-bearing deposits

 

 

4,482,286

 

 

9,971

 

0.89

 

 

 

4,644,296

 

 

18,778

 

1.62

 

 

 

4,678,988

 

 

22,827

 

1.95

 

Borrowings

 

 

1,430,488

 

 

6,084

 

1.70

 

 

 

1,307,629

 

 

7,066

 

2.16

 

 

 

1,146,199

 

 

6,739

 

2.35

 

Total interest-bearing liabilities

 

 

5,912,774

 

 

16,055

 

1.09

 

 

 

5,951,925

 

 

25,844

 

1.74

 

 

 

5,825,187

 

 

29,566

 

2.03

 

Non interest-bearing demand deposits

 

 

560,637

 

 

 

 

 

 

 

 

449,761

 

 

 

 

 

 

 

 

394,642

 

 

 

 

 

 

Other liabilities

 

 

175,234

 

 

 

 

 

 

 

 

128,715

 

 

 

 

 

 

 

 

111,088

 

 

 

 

 

 

Total liabilities

 

 

6,648,645

 

 

 

 

 

 

 

 

6,530,401

 

 

 

 

 

 

 

 

6,330,917

 

 

 

 

 

 

Equity

 

 

557,414

 

 

 

 

 

 

 

 

576,597

 

 

 

 

 

 

 

 

560,624

 

 

 

 

 

 

Total liabilities and equity

 

$

7,206,059

 

 

 

 

 

 

 

$

7,106,998

 

 

 

 

 

 

 

$

6,891,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

$

48,852

 

2.72

%

 

 

 

 

$

40,968

 

2.24

%

 

 

 

 

$

40,134

 

2.23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

897,061

 

 

 

 

2.87

%

 

$

767,932

 

 

 

 

2.44

%

 

$

714,947

 

 

 

 

2.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

 

 

 

 

 

 

1.15

X

 

 

 

 

 

 

 

1.13

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 $0.3 million, $0.2 million and $0.4 million for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

(2)  Loan interest income includes net losses from fair value adjustments on qualifying hedges of $0.4 million, $2.1 million and $0.8 million for the three months ended June 30, 2020, March 31, 2020 and June 30, 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.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended

 

 

 

June 30, 2020

 

 

June 30, 2019

 

 

 

Average

 

 

 

Yield/

 

 

Average

 

 

 

Yield/

 

 

 

Balance

 

Interest

 

Cost

 

 

Balance

 

Interest

 

Cost

 

Interest-earning Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans, net

 

$

4,729,800

 

$

99,131

 

 

4.19

%

 

$

4,604,928

 

$

101,051

 

4.39

%

Other loans, net

 

 

1,140,840

 

 

22,535

 

 

3.95

 

 

 

949,991

 

 

23,552

 

4.96

 

Total loans, net (1) (2)

 

 

5,870,640

 

 

121,666

 

 

4.14

 

 

 

5,554,919

 

 

124,603

 

4.49

 

Taxable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

486,638

 

 

5,367

 

 

2.21

 

 

 

579,679

 

 

8,473

 

2.92

 

Other securities

 

 

243,796

 

 

3,055

 

 

2.51

 

 

 

242,214

 

 

4,346

 

3.59

 

Total taxable securities

 

 

730,434

 

 

8,422

 

 

2.31

 

 

 

821,893

 

 

12,819

 

3.12

 

Tax-exempt securities: (3)

 

 

 

 

 

 

 

 

 

Other securities 61,908 1,319 4.26 57,113 1,189 4.16 Total tax-exempt securities 61,908 1,319 4.26 57,113 1,189 4.16 Interest-earning deposits and federal funds sold 101,864 312 0.61 96,767 1,027 2.12 Total interest-earning assets 6,764,846 131,719 3.89 6,530,692 139,638 4.28 Other assets 391,683 349,213 Total assets $7,156,529 $6,879,905 Interest-bearing Liabilities: Deposits: Savings accounts $191,307 355 0.37 $203,047 709 0.70 NOW accounts 1,429,943 6,747 0.94 1,515,554 12,672 1.67 Money market accounts 1,639,217 10,250 1.25 1,358,228 13,795 2.03 Certificate of deposit accounts 1,226,544 11,331 1.85 1,519,909 17,005 2.24 Total due to depositors 4,487,011 28,683 1.28 4,596,738 44,181 1.92 Mortgagors' escrow accounts 76,281 66 0.17 73,046 115 0.31 Total interest-bearing deposits 4,563,292 28,749 1.26 4,669,784 44,296 1.90 Borrowings 1,369,058 13,150 1.92 1,148,479 13,280 2.31 Total interest-bearing liabilities 5,932,350 41,899 1.41 5,818,263 57,576 1.98 Non interest-bearing demand deposits 505,199 396,724 Other liabilities 151,974 108,273 Total liabilities 6,589,523 6,323,260 Equity 567,006 556,645 Total liabilities and equity $7,156,529 $6,879,905 Net interest income / net interest rate spread
(tax equivalent) (3) $89,820 2.48% $82,062 2.30%Net interest-earning assets / net interest margin (tax equivalent) $832,496 2.66% $712,429 2.51%Ratio of interest-earning assets to interest-bearing liabilities 1.14X 1.12X

_____________________
(1)
Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.5 million and $0.9 million for the six months ended June 30, 2020 and June 30, 2019, respectively.
(2) Loan interest income includes net losses from fair value adjustments on qualifying hedges of $2.4 million and $1.5 million for the six months ended June 30, 2020 and June 30, 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 $0.3 million for each of the six month periods ended June 30, 2020 and 2019.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)

June 2020 vs.

June 2020 vs.

June 30,

March 31,

December 31,

December 2019

September 30,

June 30,

June 2019

(Dollars in thousands)

2020

2020

2019

% Change

2019

2019

% Change

Deposits

Non-interest bearing

$

581,881

$

489,198

$

435,072

33.7

%

$

421,786

$

413,813

40.6

%

Interest bearing:

Certificate of deposit accounts

1,135,977

1,172,381

1,437,890

(21.0

)%

1,506,376

1,544,117

(26.4

)%

Savings accounts

184,895

192,192

191,485

(3.4

)%

193,497

196,820

(6.1

)%

Money market accounts

1,474,880

1,597,109

1,592,011

(7.4

)%

1,329,156

1,302,153

13.3

%

NOW accounts

1,672,241

1,377,555

1,365,591

22.5

%

1,461,694

1,368,813

22.2

%

Total interest-bearing deposits

4,467,993

4,339,237

4,586,977

(2.6

)%

4,490,723

4,411,903

1.3

%

Total deposits

$

5,049,874

$

4,828,435

$

5,022,049

0.6

%

$

4,912,509

$

4,825,716

4.6

%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Closings

For the three months ended

For the six months ended

June 30,

March 31,

June 30,

June 30,

June 30,

(In thousands)

2020

2020

2019

2020

2019

Multi-family residential

$

59,654

$

67,318

$

55,629

$

126,972

$

82,843

Commercial real estate

8,003

99,571

42,700

107,574

56,641

One-to-four family – mixed-use property

8,117

13,455

12,885

21,572

29,308

One-to-four family – residential

2,674

8,413

7,884

11,087

11,770

Co-operative apartments

704

300

704

300

Construction

2,821

6,749

18,715

9,570

24,616

Small Business Administration (1)

93,241

57

2,255

93,298

2,584

Commercial business and other

59,287

102,448

156,029

161,735

286,359

Total

$

233,797

$

298,715

$

296,397

$

532,512

$

494,421

_____________________
(1) Includes $93.2 million of PPP closings for the three and six months ended June 30, 2020.

Loan Composition

June 2020 vs.

June 2020 vs.

June 30,

March 31,

December 31,

December 2019

September 30,

June 30,

June 2019

(Dollars in thousands)

2020

2020

2019

% Change

2019

2019

% Change

Loans held for investment:

Multi-family residential

$

2,285,555

$

2,272,343

$

2,238,591

2.1

%

$

2,232,305

$

2,263,875

1.0

%

Commercial real estate

1,646,085

1,664,934

1,582,008

4.1

%

1,559,581

1,524,693

8.0

%

One-to-four family ― mixed-use property

591,347

592,109

592,471

(0.2

)%

587,100

582,264

1.6

%

One-to-four family ― residential

184,741

189,774

188,216

(1.8

)%

184,432

184,024

0.4

%

Co-operative apartments

8,423

8,493

8,663

(2.8

)%

9,089

8,137

3.5

%

Construction

69,433

66,727

67,754

2.5

%

64,234

58,503

18.7

%

Small Business Administration (1)

106,813

14,076

14,445

639.4

%

3,982

14,511

636.1

%

Taxi medallion

3,269

3,281

3,309

(1.2

)%

3,513

3,555

(8.0

)%

Commercial business and other

1,073,623

1,104,967

1,061,478

1.1

%

1,096,164

983,573

9.2

%

Net unamortized premiums and unearned loan fees

13,986

15,384

15,271

(8.4

)%

15,363

15,278

(8.5

)%

Allowance for loan losses

(36,710

)

(28,098

)

(21,751

)

68.8

%

(22,035

)

(21,510

)

70.7

%

Net loans

$

5,946,565

$

5,903,990

$

5,750,455

3.4

%

$

5,743,728

$

5,616,903

5.9

%

_____________________
(1)
Includes $93.2 million of PPP loans at June 30, 2020.

Net Loans Activity

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands)

2020

2020

2019

2019

2019

Loans originated and purchased

$

233,797

$

298,715

$

269,736

$

398,143

$

296,397

Principal reductions

(180,182

)

(137,189

)

(255,977

)

(266,894

)

(243,263

)

Loans sold

(498

)

(7,129

)

(3,553

)

(1,970

)

Loan charge-offs

(1,030

)

(1,259

)

(95

)

(431

)

(1,114

)

Foreclosures

(239

)

Net change in deferred fees and costs

(1,398

)

113

(92

)

85

(144

)

Net change in the allowance for loan losses

(8,612

)

(6,347

)

284

(525

)

(495

)

Total loan activity

$

42,575

$

153,535

$

6,727

$

126,825

$

49,172


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

Non-Performing Assets

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2020

2020

2019

2019

2019

Loans 90 Days Or More Past Due and Still Accruing:

Multi-family residential

$

$

$

445

$

445

$

Commercial business and other

150

Total

150

445

445

Non-accrual Loans:

Multi-family residential

3,688

2,741

2,296

3,132

2,008

Commercial real estate

2,671

8

367

872

1,488

One-to-four family - mixed-use property

2,511

607

274

683

1,752

One-to-four family - residential

6,412

5,158

5,139

5,050

5,411

Small Business Administration

1,321

1,518

1,151

1,151

1,224

Taxi medallion(1)

1,757

1,761

1,641

1,352

1,361

Commercial business and other(1)

1,678

4,959

1,945

2,020

2,458

Total

20,038

16,752

12,813

14,260

15,702

Total Non-performing Loans

20,188

16,752

13,258

14,705

15,702

Other Non-performing Assets:

Real estate acquired through foreclosure

208

208

239

239

239

Other asset acquired through foreclosure

35

35

35

35

35

Total

243

243

274

274

274

Total Non-performing Assets

$

20,431

$

16,995

$

13,532

$

14,979

$

15,976

Non-performing Assets to Total Assets

0.29

%

0.23

%

0.19

%

0.21

%

0.23

%

Allowance For Loan Losses to Non-performing Loans

181.8

%

167.7

%

164.1

%

149.8

%

137.0

%

_____________________
(1)
Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $1.5 million in 2Q20, $1.5 million in 1Q20, $1.7 million in 4Q19, $2.2 million in 3Q19, and $2.2 million in 2Q19 and non-accrual performing TDR commercial business loans totaling $1.0 million in 1Q20, $1.0 million in 1Q20, $0.9 million in 4Q19 and $1.0 million in 3Q19.

Net Charge-Offs (Recoveries)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands)

2020

2020

2019

2019

2019

Multi-family residential

$

(7

)

$

(6

)

$

(14

)

$

183

$

(10

)

Commercial real estate

(30

)

(7

)

One-to-four family – mixed-use property

3

(78

)

119

(140

)

(2

)

One-to-four family – residential

(3

)

(5

)

(3

)

(3

)

110

Small Business Administration

165

(7

)

(8

)

(32

)

(16

)

Taxi medallion

(50

)

Commercial business and other

849

1,245

(98

)

150

954

Total net loan charge-offs (recoveries)

$

1,007

$

1,149

$

(34

)

$

158

$

979


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

Balances by Risk Rating (1)

Forbearances (2)

Backed by Mortgages (1)

Pass

Criticized/
Classified

Total

% of
Total
Loans

Balance

% of
Sector

Balance

% of
Total

LTV

Higher Risk Segments

Restaurants and Catering Halls

$

67,420

$

2,196

$

69,616

1.2

%

$

24,420

35.1

%

$

58,764

84.4

%

38.6

%

Hotels

172,916

172,916

2.9

114,627

66.3

162,093

93.7

53.8

Travel and Leisure

180,138

180,138

3.0

37,670

20.9

74,192

41.2

48.4

Retail Services

76,494

76,494

1.3

21,168

27.7

38,760

50.7

61.9

CRE - Shopping Center

255,192

255,192

4.3

124,958

49.0

255,192

100.0

44.4

CRE - Single Tenant

133,937

337

134,274

2.2

44,311

33.0

134,274

100.0

41.8

CRE - Strip Mall

286,131

2,050

288,181

4.8

139,344

48.4

288,181

100.0

45.1

Transportation

107,207

7,800

115,007

1.9

14,756

12.8

26,155

22.7

53.0

Contractors

184,948

1,399

186,347

3.1

16,142

8.7

121,365

65.1

51.9

Schools and Child Care

43,674

43,674

0.7

12,441

28.5

35,193

80.6

43.4

Subtotal

$

1,508,057

$

13,782

$

1,521,839

25.5

%

$

549,837

36.1

%

$

1,194,169

78.5

%

46.5

%

Lower Risk Segments

$

4,412,763

$

34,687

$

4,447,450

74.5

%

$

728,307

16.4

%

$

4,059,435

91.3

%

36.4

%

Total

$

5,920,820

$

48,469

$

5,969,289

100.0

%

$

1,278,144

21.4

%

$

5,253,604

88.0

%

38.1

%

_____________________
(1)
At June 30, 2020
(2) Represents dollar amount granted through 07/10/20


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

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2020

2020

2019

2020

2019

GAAP income (loss) before income taxes

$

24,080

$

(1,596

)

$

13,828

$

22,484

$

23,183

Net (gain) loss from fair value adjustments

(10,205

)

5,993

1,956

(4,212

)

4,036

Net loss on sale of securities

54

37

15

91

15

Life insurance proceeds

(659

)

(659

)

(43

)

Net gain on sale of assets

(770

)

(770

)

Net loss from fair value adjustments on qualifying hedges

365

2,073

818

2,438

1,455

Accelerated employee benefits upon Officer's death

455

Merger expense

194

929

1,123

Core income before taxes

13,829

7,436

15,847

21,265

28,331

Provision for income taxes for core income

3,532

1,936

3,771

5,468

6,804

Core net income

$

10,297

$

5,500

$

12,076

$

15,797

$

21,527

GAAP diluted earnings (loss) per common share

$

0.63

$

(0.05

)

$

0.37

$

0.58

$

0.61

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

(0.27

)

0.15

0.05

(0.11

)

0.10

Net loss on sale of securities, net of tax

Life insurance proceeds

(0.02

)

(0.02

)

Net gain on sale of assets, net of tax

(0.02

)

(0.02

)

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

0.01

0.05

0.02

0.06

0.04

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

0.01

Merger expense, net of tax

0.01

0.02

0.03

Core diluted earnings per common share(1)

$

0.36

$

0.19

$

0.42

$

0.55

$

0.75

Core net income, as calculated above

$

10,297

$

5,500

$

12,076

$

15,797

$

21,527

Average assets

7,206,059

7,106,998

6,891,541

7,156,529

6,879,905

Average equity

557,414

576,597

560,624

567,006

556,645

Core return on average assets(2)

0.57

%

0.31

%

0.70

%

0.44

%

0.63

%

Core return on average equity(2)

7.39

%

3.82

%

8.62

%

5.57

%

7.73

%

_____________________
(1)
Core diluted earnings per common share may not foot due to rounding.
(2) Ratios are calculated on an annualized basis.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP REVENUE and PRE-PROVISION
PRE-TAX NET REVENUE
(Dollars in thousands)
(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2020

2020

2019

2020

2019

Net interest income

$

48,717

$

40,826

$

40,009

$

89,543

$

81,812

Non-interest income (loss)

13,737

(2,864

)

2,451

10,873

3,394

Non-interest expense

(28,755

)

(32,380

)

(27,158

)

(61,135

)

(59,577

)

Pre-provision pre-tax net revenue (1)

$

33,699

$

5,582

$

15,302

$

39,281

$

25,629

_____________________
(1)
Includes non-cash net gains and (losses) from fair value adjustments totaling $9.8 million, ($8.1) million and ($2.8) million for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively and $1.8 million and ($5.5) million for the six months ended June 30, 2020 and 2019, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
To CORE NET INTEREST INCOME and NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2020

2020

2019

2020

2019

GAAP net interest income

$

48,717

$

40,826

$

40,009

$

89,543

$

81,812

Net loss from fair value adjustments on qualifying hedges

365

2,073

818

2,438

1,455

Core net interest income

$

49,082

$

42,899

$

40,827

$

91,981

$

83,267

GAAP interest income on total loans, net

$

60,557

$

61,109

$

62,273

$

121,666

$

124,603

Net loss from fair value adjustments on qualifying hedges

365

2,073

818

2,438

1,455

Prepayment penalties received on loans

(702

)

(753

)

(1,120

)

(1,455

)

(1,925

)

Net recoveries of interest from non-accrual loans

(74

)

(436

)

(519

)

(510

)

(1,233

)

Core interest income on total loans, net

$

60,146

$

61,993

$

61,452

$

122,139

$

122,900

Average total loans, net

$

5,946,412

$

5,794,866

$

5,565,057

$

5,870,640

$

5,554,919

Core yield on total loans

4.05

%

4.28

%

4.42

%

4.16

%

4.42

%

Net interest income tax equivalent

$

48,852

$

40,968

$

40,134

$

89,820

$

82,062

Net loss from fair value adjustments on qualifying hedges

365

2,073

818

2,438

1,455

Prepayment penalties received on loans and securities

(702

)

(753

)

(1,120

)

(1,455

)

(1,925

)

Net recoveries of interest from non-accrual loans

(74

)

(436

)

(519

)

(510

)

(1,233

)

Net interest income used in calculation of Core net interest margin

$

48,441

$

41,852

$

39,313

$

90,293

$

80,359

Total average interest-earning assets

$

6,809,835

$

6,719,857

$

6,540,134

$

6,764,846

$

6,530,692

Core net interest margin

2.85

%

2.49

%

2.40

%

2.67

%

2.46

%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)

June 30,

December 31,

June 30,

(Dollars in thousands)

2020

2020

2019

Total Equity

$

571,921

$

579,672

$

565,390

Less:

Goodwill

(16,127

)

(16,127

)

(16,127

)

Intangible deferred tax liabilities

292

292

286

Tangible Stockholders' Common Equity

$

556,086

$

563,837

$

549,549

Total Assets

$

7,162,659

$

7,017,776

$

6,945,634

Less:

Goodwill

(16,127

)

(16,127

)

(16,127

)

Intangible deferred tax liabilities

292

292

286

Tangible Assets

$

7,146,824

$

7,001,941

$

6,929,793

Tangible Stockholders' Common Equity to Tangible Assets

7.78

%

8.05

%

7.93

%

_____________________

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.”

Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer
Flushing Financial Corporation
(718) 961-5400