SECOND QUARTER 2018¹ HIGHLIGHTS

• GAAP diluted EPS was $0.48, up 23.1% QoQ and 9.1% YoY
• Core diluted EPS was $0.49, up 32.4% QoQ and 6.5% YoY
• Net interest income of $42.6 million was relatively unchanged QoQ, but down 2.2% YoY
• Net interest margin was 2.76%, down 3bps QoQ and 19bps YoY
• GAAP and core ROAE were 10.5% and 10.6%, compared with 8.6% and 8.1%, respectively in 1Q18
• GAAP and core ROAA were both 0.9%, compared with 0.7% in 1Q18

UNIONDALE, N.Y., July 24, 2018 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq:FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the second quarter ended June 30, 2018.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report earnings per diluted common share of $0.48 for the second quarter of 2018, an increase of 23.1% and 9.1% from 1Q18 and 2Q17, respectively. Furthermore, ROAE increased to 10.5% for 2Q18 from 8.6% and 9.6% in 1Q18 and 2Q17, respectively.”

“For the past year, we have articulated our strategic objective of emphasizing rate over volume regarding loan originations. To that end, we decided to allow over $70 million of participations with another financial institution to prepay as the rates being offered through the refinancing process did not meet our lending criteria. Consequently, during the quarter ended June 30, 2018, our loan growth was 0.4%. We believe emphasizing rate over volume is a long-term winning strategy and we are beginning to see tangible results as the average yield in the loan portfolio has risen 10bps over the prior quarter. This was driven by the yield on new loans in the second quarter exceeding the quarterly average loan portfolio yield by 26bps and the yield of total interest earning assets by 47bps. Newly booked loans in 2Q18 had a yield of 4.57% showing an increase of 30bps from the prior quarter.”  

“The move toward improved loan yields was further enhanced this quarter as $116 million of mortgage loans repriced from 4.41% to 5.37%. We look for this yield improving trend to continue as we have close to $2 billion in loans repricing through 2020.”  

“Despite this good news on yields, deposit pressures outstripped the gains on the loan side as margin pressure continued. The cost of funds increased 14bps QoQ and 36bps YoY. However, the combination of improved loan yields and mitigation strategies that we put in place on the liability side of the balance sheet have decelerated the pace of margin compression from 11bps in 1Q18 to 3bps this quarter.”

“While we remain liability sensitive we have been taking proactive steps to provide further support to our margin and mitigate the impact of future rate increases by extending the maturity on our liabilities and as previously announced entered into forward interest rate swaps totaling $442 million of which $250 million has been funded as of June 30, 2018.”

“We reduced brokered deposits by $164 million partially offsetting them with core growth in our retail operations totaling $89 million. One of the contributing factors to this was our “Win Flushing” program, which focuses on the Asian community, where we are on pace to add $160 million in deposits by the end of 1Q19.”

“As we look forward to continuing our focus on stabilizing, then improving margins, we have additionally focused on bringing in more variable rate C&I loans. Over the last five quarters C&I lending has represented 35% of new loan originations.”

Mr. Buran continued, “As we’ve continued to improve loan yields we have retained our focus on credit quality. Non-performing assets decreased by 18% and, total delinquencies have decreased 3% since December 31, 2017. The allowance for loan losses to gross loans was 0.38% while the allowance for loan losses to non-performing loans increased to 137% from 123% in the linked quarter. The loan-to-value on our non-performing real estate loans at June 30, 2018 remains conservative at 35.1%. The net charge-offs of $322,000 for the quarter reflect the change in the fair value of Chicago taxi medallions from $60,000 to $25,000 per medallion, based upon recent sales transactions. Currently, the Chicago taxi medallion portfolio totals $0.2 million. Our exposure to taxi medallion loans in Chicago and NYC totals $6.2 million, which is 0.12% of total loans.”

“We remain committed to converting our branches to the Universal Banker model. In the 11 branches that have been converted we have experienced an increase of 24% in transactions processed at an ATM, reducing our customers' reliance on tellers, allowing our branch staff to focus more time on sales opportunities.”

The Company retains its focus on preserving strong risk management practices, including conservative underwriting standards and improving yields to achieve improved risk-adjusted returns.

• In the second quarter, commercial business, multi-family and commercial real estate loan originations and purchases represented 35%, 28%, and 25%, respectively, of all originations, which were made while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield.
• Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 2Q18 had a yield of 4.27%, an increase of 30bps from 3.97% for 1Q18 and an increase of 8bps from 4.19% for 2Q17. We have maintained our asset quality as these loans had an average loan-to-value ratio of 46.3% and an average debt coverage ratio of 186%.
• The average interest rate obtained for 2Q18 new loans totaled 4.57%, an increase of 30bps compared to 4.27% for 1Q18 and of 53bps compared to 4.04% for 2Q17.
• The average rate of mortgage loan applications in the pipeline totaled 4.67% at June 30, 2018, as compared to 4.41% at March 31, 2018 and 4.17% at June 30, 2017.

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

Summary of Strategic Objectives

• Increase core deposits and continue to improve funding mix
• Increase net 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 2Q18 was $42.6 million, a decrease of $1.0 million, or 2.2% YoY (2Q18 compared to 2Q17) but relatively unchanged QoQ (2Q18 compared to 1Q18). During 2Q18 the increase in the cost of funds outpaced the increase in the yield of interest-earning assets.

• Net interest margin of 2.76%, decreased 19bps YoY and 3bps QoQ
• Net interest spread of 2.60%, decreased 23bps YoY and 5bps QoQ
• Net interest income includes prepayment penalty income from loans and securities totaling $1.6 million in 2Q18 compared with $1.0 million in 2Q17 and $0.9 million in 1Q18, accelerated accretion of discount upon call of CLO securities of none in 2Q18 and 1Q18 and $0.4 million in 2Q17 and recovered interest from delinquent loans of $0.2 million in 2Q18, compared to $0.3 million in 2Q17 and $0.2 million in 1Q18
• Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets was 3.98% in 2Q18, an improvement from 3.82% in 2Q17 and 3.91% in 1Q18, and the net interest margin was 2.64% in 2Q18, which decreased from 2.83% in 2Q17 and from 2.72% in 1Q18
• Average balance of total interest-earning assets of $6,181.2 million, increased $262.2 million, or 4.4%, YoY and $82.5 million, or 1.4%, QoQ
• Yield on interest-earning assets of 4.10%, increased 16bps YoY and 11bps QoQ
• Cost of interest-bearing liabilities of 1.50%, increased 39bps YoY and 16bps QoQ
• Cost of funds of 1.41%, increased 36bps YoY and 14bps QoQ, driven by increases in rates paid on certificates of deposit, government deposits and short-term borrowings resulting from the recent increases in the Fed Funds rate 

Provision for loan losses
As a result of continued strong credit quality, there was no provision recorded for 2Q18 and 2Q17 compared to $0.2 million in 1Q18.

Non-interest Income
Non-interest income for 2Q18 was $3.2 million, an increase of $1.2 million, or 62.6% YoY, and unchanged QoQ.

• Non-interest income included net gains from the sale of loans of $0.4 million in 2Q18, primarily from the sale of $5.3 million in SBA loans, compared to net losses from the sale of loans of $0.3 million in 1Q18 and net gains of $34,000 in 2Q17
• Additionally, non-interest income included net losses from fair value adjustments of $0.3 million in 2Q18, $0.1 million in 1Q18 and $1.2 million in 2Q17 and gains from life insurance proceeds of $0.8 million in 1Q18 and $6,000 in 2Q17
• Absent all above items, non-interest income was $3.0 million, a decrease of $0.1 million YoY, but an increase of $0.2 million QoQ

Non-interest Expense
Non-interest expense for 2Q18 was $27.4 million, an increase of $1.3 million, or 5.1% YoY, but a decrease of $3.9 million, or 12.5% QoQ.

• Non-interest expense increased $1.3 million YoY primarily due to increases in consulting, legal and depreciation expense due to the growth of the Bank, but decreased $3.9 million QoQ due to 1Q18 including the impact of annual grants of employees and directors restricted stock unit awards
• The efficiency ratio was 59.6% in 2Q18 compared to 55.8% in 2Q17 and 69.3% in 1Q18

Provision for Income Taxes
The provision for income taxes in 2Q18 was $4.5 million, a decrease of $2.3 million, or 33.7% YoY, but an increase of $1.5 million, or 52.2% QoQ.

• Pre-tax income decreased by $1.1 million, or 5.6% YoY but increased $4.1 million, or 28.2% QoQ
• The effective tax rates were 24.4% in 2Q18, 34.7% in 2Q17 and 20.5% in 1Q18

Financial Condition Summary:

Loans:

• Net loans held for investment were $5,313.6 million reflecting an increase of 0.4% QoQ (not annualized) and 3.0% from December 31, 2017, as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship while emphasizing rate over volume
• During the quarter, we saw an increase in loan satisfactions, which we decided not to refinance, as the interest rate demanded did not fit our strategy of emphasizing rate over volume.
• Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $224.5 million for 2Q18, or 87.9% of loan production
• Loan pipeline was $322.9 million at June 30, 2018, compared to $325.6 million at March 31, 2018 and $279.1 million at June 30, 2017
• The loan-to-value ratio on our portfolio of real estate dependent loans as of June 30, 2018 totaled 38.9%

The following table shows the weighted average rate received from loan originations and purchases for the periods indicated:

		For the three months ended
		June 30,			March 31,			June 30,
Loan type		2018			2018			2017
Mortgage loans		4.40	%		4.15	%		4.01	%
Non-mortgage loans		4.90	%		4.43	%		4.13	%
Total loans		4.57	%		4.27	%		4.04	%

Credit Quality:

• Non-performing loans totaled $14.8 million, a decrease of $3.3 million, or 18.4%, from $18.1 million at December 31, 2017
• Non-performing assets totaled $14.8 million, a decrease of $3.3 million, or 18.3%, from $18.1 million at December 31, 2017
• Classified assets totaled $44.2 million, an increase of $10.2 million, or 30.0%, from $34.0 million at December 31, 2017, primarily due to six business loan relationships being downgraded as they did not meet certain loan covenants; these loans remain current and accruing
• Loans classified as troubled debt restructured (TDR) totaled $10.6 million, a decrease of $2.6 million, or 19.6%, from $13.2 million at December 31, 2017, primarily due to the sale of one commercial TDR in 1Q18
• 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 35.1% average loan-to-value for non-performing loans collateralized by real estate at June 30, 2018
• Net charge-offs totaled $0.3 million during the six months ended June 30, 2018

Capital Management:

• The Company and Bank, at June 30, 2018, were both well capitalized under all applicable regulatory requirements
• During 2Q18, stockholders’ equity increased $2.7 million, or 0.5%, to $538.0 million due to net income of $13.9 million, partially offset by the declaration and payment of dividends on the Company’s common stock and repurchases of the Company’s common stock
• During 2Q18, the Company repurchased 227,581 treasury shares at an average cost of $26.04 per share; as of June 30, 2018, up to 808,836 shares may be repurchased under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Book value per common share increased to $19.00 at June 30, 2018, from $18.75 at March 31, 2018 and tangible book value per common share, a non-GAAP measure, increased to $18.44 at June 30, 2018, from $18.20 March 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 25, 2018 at 9:30 AM (ET) to discuss the Company’s strategy and results for the second quarter of 2018
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic180725.html 
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10120867
• The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on July 25, 2019

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 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^®, our 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, 2017 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 table entitled “Reconciliation of Non-GAAP Financial Measures.”

 

- 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,
			2018				2018				2017				2018				2017
Interest and Dividend Income
Interest and fees on loans		$	57,322			$	55,017			$	51,631			$	112,339			$	102,516
Interest and dividends on securities:
Interest			5,616				5,468				6,432				11,084				12,527
Dividends			17				14				123				31				244
Other interest income			338				287				129				625				282
Total interest and dividend income			63,293				60,786				58,315				124,079				115,569
Interest Expense
Deposits			14,788				12,110				9,510				26,898				18,490
Other interest expense			5,865				6,067				5,188				11,932				10,073
Total interest expense			20,653				18,177				14,698				38,830				28,563
Net Interest Income			42,640				42,609				43,617				85,249				87,006
Provision for loan losses			-				153				-				153				-
Net Interest Income After Provision for Loan Losses			42,640				42,456				43,617				85,096				87,006
Non-interest Income
Banking services fee income			1,000				948				1,014				1,948				1,888
Net gain (loss) on sale of loans			421				(263	)			34				158				244
Net loss from fair value adjustments			(267	)			(100	)			(1,159	)			(367	)			(1,537	)
Federal Home Loan Bank of New York stock dividends			881				876				643				1,757				1,466
Gains from life insurance proceeds			-				776				6				776				1,167
Bank owned life insurance			776				762				807				1,538				1,602
Other income			357				201				603				558				807
Total non-interest income			3,168				3,200				1,948				6,368				5,637
Non-interest Expense
Salaries and employee benefits			15,291				18,455				15,424				33,746				32,528
Occupancy and equipment			2,476				2,577				2,654				5,053				5,150
Professional services			2,439				2,185				1,919				4,624				3,915
FDIC deposit insurance			547				500				503				1,047				829
Data processing			1,426				1,401				1,321				2,827				2,524
Depreciation and amortization			1,455				1,389				1,155				2,844				2,320
Other real estate owned/foreclosure expense			40				96				(96	)			136				255
Net gain from sales of real estate owned			(27	)			-				-				(27	)			-
Other operating expenses			3,749				4,691				3,185				8,440				8,108
Total non-interest expense			27,396				31,294				26,065				58,690				55,629
Income Before Income Taxes			18,412				14,362				19,500				32,774				37,014
Provision for Income Taxes
Federal			3,311				2,607				5,576				5,918				10,325
State and local			1,178				343				1,199				1,521				1,704
Total taxes			4,489				2,950				6,775				7,439				12,029
Net Income		$	13,923			$	11,412			$	12,725			$	25,335			$	24,985
Basic earnings per common share		$	0.48			$	0.39			$	0.44			$	0.88			$	0.86
Diluted earnings per common share		$	0.48			$	0.39			$	0.44			$	0.88			$	0.86
Dividends per common share		$	0.20			$	0.20			$	0.18			$	0.40			$	0.36

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
				June 30,				March 31,				December 31,
					2018				2018				2017
ASSETS
Cash and due from banks				$	42,805			$	91,959			$	51,546
Securities held-to-maturity:
	Mortgage-backed securities				7,963				7,968				7,973
	Other securities				23,130				23,267				22,913
Securities available for sale:
	Mortgage-backed securities				513,868				512,781				509,650
	Other securities				214,755				216,480				228,704
Loans:
	Multi-family residential				2,247,852				2,286,803				2,273,595
	Commercial real estate				1,471,894				1,426,847				1,368,112
	One-to-four family ― mixed-use property				564,474				566,930				564,206
	One-to-four family ― residential				187,741				190,115				180,663
	Co-operative apartments				7,839				6,826				6,895
	Construction				33,826				23,887				8,479
	Small Business Administration				14,405				20,004				18,479
	Taxi medallion				6,225				6,617				6,834
	Commercial business and other				783,904				768,440				732,973
	Net unamortized premiums and unearned loan fees				15,647				16,395				16,763
	Allowance for loan losses				(20,220	)			(20,542	)			(20,351	)
			Net loans		5,313,587				5,292,322				5,156,648
Interest and dividends receivable					24,184				22,578				21,405
Bank premises and equipment, net					30,658				31,314				30,836
Federal Home Loan Bank of New York stock					57,384				54,045				60,089
Bank owned life insurance					131,429				130,653				131,856
Goodwill					16,127				16,127				16,127
Other assets					91,726				83,277				61,527
			Total assets	$	6,467,616			$	6,482,771			$	6,299,274
LIABILITIES
Due to depositors:
	Non-interest bearing			$	388,467			$	377,861			$	385,269
	Interest-bearing:
		Certificate of deposit accounts			1,452,016				1,499,326				1,351,933
		Savings accounts			225,815				246,888				290,280
		Money market accounts			1,069,835				1,032,409				979,958
		NOW accounts			1,422,745				1,479,319				1,333,232
			Total interest-bearing deposits		4,170,411				4,257,942				3,955,403
Mortgagors' escrow deposits					50,781				65,979				42,606
Borrowed funds					1,250,732				1,177,101				1,309,653
Other liabilities					69,181				68,581				73,735
			Total liabilities		5,929,572				5,947,464				5,766,666
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, 2018, March  31, 2018 and December 31, 2017; 28,319,213
	shares, 28,546,443 shares and 28,588,266 shares outstanding at June 30, 2018,
	March  31, 2018 and December 31, 2017, respectively)				315				315				315
Additional paid-in capital					220,432				219,115				217,906
Treasury stock (3,211,382 shares, 2,984,152 shares and 2,942,329 shares at
	June 30, 2018, March  31, 2018 and December 31, 2017, respectively)				(66,656	)			(60,737	)			(57,675	)
Retained earnings					395,960				387,793				381,048
Accumulated other comprehensive loss, net of taxes					(12,007	)			(11,179	)			(8,986	)
			Total stockholders' equity		538,044				535,307				532,608
			Total liabilities and stockholders' equity	$	6,467,616			$	6,482,771			$	6,299,274

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,
		2018			2018			2017			2018			2017
Per Share Data
Basic earnings per share	$	0.48		$	0.39		$	0.44		$	0.88		$	0.86
Diluted earnings per share	$	0.48		$	0.39		$	0.44		$	0.88		$	0.86
Average number of shares outstanding for:
Basic earnings per common share computation		28,844,829			28,974,156			29,135,339			28,909,135			29,077,526
Diluted earnings per common share computation		28,845,611			28,974,757			29,135,945			28,910,034			29,080,182
Shares outstanding		28,319,213			28,546,443			28,803,937			28,319,213			28,803,937
Book value per common share (1)	$	19.00		$	18.75		$	18.54		$	19.00		$	18.54
Tangible book value per common share (2)	$	18.44		$	18.20		$	18.00		$	18.44		$	18.00
Stockholders' Equity
Stockholders' equity	$	538,044		$	535,307		$	534,091		$	538,044		$	534,091
Tangible stockholders' equity		522,208			519,471			518,355			522,208			518,355
Average Balances
Total loans, net	$	5,316,033		$	5,231,377		$	4,962,734		$	5,273,939		$	4,915,652
Total interest-earning assets		6,181,186			6,098,706			5,918,981			6,140,173			5,896,514
Total assets		6,484,882			6,403,396			6,218,072			6,444,364			6,193,596
Total due to depositors		4,310,491			4,176,457			4,065,810			4,243,844			4,076,859
Total interest-bearing liabilities		5,515,580			5,442,554			5,287,720			5,479,268			5,271,271
Stockholders' equity		532,027			529,281			529,451			530,662			523,658
Performance Ratios (3)
Return on average assets		0.86	%		0.71	%		0.82	%		0.79	%		0.81	%
Return on average equity		10.47			8.62			9.61			9.55			9.54
Yield on average interest-earning assets		4.10			3.99			3.94			4.04			3.92
Cost of average interest-bearing liabilities		1.50			1.34			1.11			1.42			1.08
Cost of funds		1.41			1.27			1.05			1.34			1.03
Interest rate spread during period		2.60			2.65			2.83			2.62			2.84
Net interest margin		2.76			2.79			2.95			2.78			2.95
Non-interest expense to average assets		1.69			1.95			1.68			1.82			1.80
Efficiency ratio (4)		59.58			69.34			55.80			64.41			59.87
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. Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income and non-interest income (excluding net gains and losses from 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
		months ended				ended				months ended
		June 30, 2018				December 31, 2017				June 30, 2017
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital		$	572,189			$	563,426			$	558,756
Common equity Tier 1 capital			534,036				527,727				524,830
Total risk-based capital			667,409				658,777				655,913
Tier 1 leverage capital (well capitalized = 5%)			8.79	%			9.02	%			9.00	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			11.07				11.59				11.43
Tier 1 risk-based capital (well capitalized = 8.0%)			11.87				12.38				12.17
Total risk-based capital (well capitalized = 10.0%)			13.84				14.47				14.29
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital		$	644,880			$	631,285			$	624,074
Common equity Tier 1 capital			644,880				631,285				624,074
Total risk-based capital			665,100				651,636				646,231
Tier 1 leverage capital (well capitalized = 5%)			9.90	%			10.11	%			10.04	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			13.37				13.87				13.58
Tier 1 risk-based capital (well capitalized = 8.0%)			13.37				13.87				13.58
Total risk-based capital (well capitalized = 10.0%)			13.79				14.31				14.07
Capital ratios:
Average equity to average assets			8.23	%			8.53	%			8.45	%
Equity to total assets			8.32				8.46				8.50
Tangible common equity to tangible assets (1)			8.09				8.22				8.27
Asset quality:
Non-accrual loans (2)		$	14,059			$	15,710			$	14,130
Non-performing loans			14,789				18,134				15,459
Non-performing assets			14,824				18,134				15,459
Net charge-offs/ (recoveries)			284				11,739				72
Asset quality ratios:
Non-performing loans to gross loans			0.28	%			0.35	%			0.31	%
Non-performing assets to total assets			0.23				0.29				0.25
Allowance for loan losses to gross loans			0.38				0.39				0.44
Allowance for loan losses to non-performing assets			136.40				112.23				143.33
Allowance for loan losses to non-performing loans			136.72				112.23				143.33
Full-service customer facilities			18				18				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, 2018						March 31, 2018						June 30, 2017
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,509,778	$	47,673	4.23	%	$	4,442,870	$	46,112	4.15	%	$	4,297,697	$	44,879	4.18	%
Other loans, net		806,255		9,649	4.79			788,507		8,905	4.52			665,037		6,752	4.06
Total loans, net (1)		5,316,033		57,322	4.31			5,231,377		55,017	4.21			4,962,734		51,631	4.16
Taxable securities:
Mortgage-backed
securities		533,088		3,754	2.82			524,710		3,507	2.67			532,938		3,418	2.57
Other securities		122,601		1,023	3.34			131,078		1,121	3.42			217,599		2,171	3.99
Total taxable securities		655,689		4,777	2.91			655,788		4,628	2.82			750,537		5,589	2.98
Tax-exempt securities: (2)
Other securities		124,058		856	2.76			124,125		854	2.75			145,812		966	2.65
Total tax-exempt securities		124,058		856	2.76			124,125		854	2.75			145,812		966	2.65
Interest-earning deposits
and federal funds sold		85,406		338	1.58			87,416		287	1.31			59,898		129	0.86
Total interest-earning
assets		6,181,186		63,293	4.10			6,098,706		60,786	3.99			5,918,981		58,315	3.94
Other assets		303,696						304,690						299,091
Total assets	$	6,484,882					$	6,403,396					$	6,218,072
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	235,564		285	0.48		$	265,895		389	0.59		$	279,723		399	0.57
NOW accounts		1,444,889		3,364	0.93			1,540,465		3,148	0.82			1,517,726		2,331	0.61
Money market accounts		1,110,690		3,983	1.43			1,025,727		3,075	1.20			858,066		1,651	0.77
Certificate of deposit
accounts		1,519,348		7,118	1.87			1,344,370		5,463	1.63			1,410,295		5,099	1.45
Total due to depositors		4,310,491		14,750	1.37			4,176,457		12,075	1.16			4,065,810		9,480	0.93
Mortgagors' escrow
accounts		77,343		38	0.20			58,960		35	0.24			73,838		30	0.16
Total interest-bearing deposits		4,387,834		14,788	1.35			4,235,417		12,110	1.14			4,139,648		9,510	0.92
Borrowings		1,127,746		5,865	2.08			1,207,137		6,067	2.01			1,148,072		5,188	1.81
Total interest-bearing
liabilities		5,515,580		20,653	1.50			5,442,554		18,177	1.34			5,287,720		14,698	1.11
Non interest-bearing
demand deposits		370,790						364,983						336,036
Other liabilities		66,485						66,578						64,865
Total liabilities		5,952,855						5,874,115						5,688,621
Equity		532,027						529,281						529,451
Total liabilities and equity	$	6,484,882					$	6,403,396					$	6,218,072
Net interest income /
net interest rate spread			$	42,640	2.60	%			$	42,609	2.65	%			$	43,617	2.83	%
Net interest-earning assets /
net interest margin	$	665,606			2.76	%	$	656,152			2.79	%	$	631,261			2.95	%
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 $0.3 million, $0.1 million and $0.3 million for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
2. Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
	For the six months ended
	June 30, 2018							June 30, 2017
	Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,476,509	$	93,785	4.19	%		$	4,255,822	$	89,308	4.20	%
Other loans, net		797,430		18,554	4.65				659,830		13,208	4.00
Total loans, net (1)		5,273,939		112,339	4.26				4,915,652		102,516	4.17
Taxable securities:
Mortgage-backed
securities		528,922		7,261	2.75				531,448		6,784	2.55
Other securities		126,816		2,144	3.38				228,412		4,053	3.55
Total taxable securities		655,738		9,405	2.87				759,860		10,837	2.85
Tax-exempt securities: (2)
Other securities		124,091		1,710	2.76				146,155		1,934	2.65
Total tax-exempt securities		124,091		1,710	2.76				146,155		1,934	2.65
Interest-earning deposits
and federal funds sold		86,405		625	1.45				74,847		282	0.75
Total interest-earning
assets		6,140,173		124,079	4.04				5,896,514		115,569	3.92
Other assets		304,191							297,082
Total assets	$	6,444,364						$	6,193,596
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	250,646		674	0.54			$	267,059		706	0.53
NOW accounts		1,492,413		6,512	0.87				1,542,857		4,538	0.59
Money market accounts		1,068,443		7,058	1.32				859,415		3,150	0.73
Certificate of deposit
accounts		1,432,342		12,581	1.76				1,407,528		10,039	1.43
Total due to depositors		4,243,844		26,825	1.26				4,076,859		18,433	0.90
Mortgagors' escrow
accounts		68,202		73	0.21				64,280		57	0.18
Total interest-bearing
deposits		4,312,046		26,898	1.25				4,141,139		18,490	0.89
Borrowings		1,167,222		11,932	2.04				1,130,132		10,073	1.78
Total interest-bearing
liabilities		5,479,268		38,830	1.42				5,271,271		28,563	1.08
Non interest-bearing
demand deposits		367,903							333,142
Other liabilities		66,531							65,525
Total liabilities		5,913,702							5,669,938
Equity		530,662							523,658
Total liabilities and
equity	$	6,444,364						$	6,193,596
Net interest income /
net interest rate spread			$	85,249	2.62	%				$	87,006	2.84	%
Net interest-earning assets /
net interest margin	$	660,905			2.78	%		$	625,243			2.95	%
Ratio of interest-earning
assets to interest-bearing
liabilities					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 and $1.0 million for the six months ended June 30, 2018 and 2017, respectively.
2. Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
													June 2018 vs.									June 2018 vs.
				June 30,			March 31,			December 31,			December 2017			September 30,			June 30,			June 2017,
(Dollars in thousands)					2018			2018			2017		% Change				2017			2017		% Change
Deposits
Non-interest bearing				$	388,467		$	377,861		$	385,269		0.8	%		$	362,509		$	349,302		11.2	%
Interest bearing:
	Certificate of deposit
		accounts			1,452,016			1,499,326			1,351,933		7.4	%			1,404,555			1,332,377		9.0	%
	Savings accounts				225,815			246,888			290,280		-22.2	%			323,186			325,815		-30.7	%
	Money market accounts				1,069,835			1,032,409			979,958		9.2	%			991,706			837,565		27.7	%
	NOW accounts				1,422,745			1,479,319			1,333,232		6.7	%			1,308,821			1,368,441		4.0	%
		Total interest-bearing
			deposits		4,170,411			4,257,942			3,955,403		5.4	%			4,028,268			3,864,198		7.9	%
			Total deposits	$	4,558,878		$	4,635,803		$	4,340,672		5.0	%		$	4,390,777		$	4,213,500		8.2	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Originations and Purchases
		For the three months										For the six months
		June 30,			March 31,			June 30,				June 30,			June 30,
(In thousands)			2018			2018			2017				2018			2017
Multi-family residential		$	70,972		$	81,181		$	63,469			$	152,153		$	190,177
Commercial real estate			64,890			71,554			123,559				136,444			159,291
One-to-four family – mixed-use property			12,294			16,068			13,656				28,362			32,198
One-to-four family – residential			6,974			16,968			4,860				23,942			10,780
Co-operative apartments			1,500			-			-				1,500			-
Construction			9,940			14,679			4,429				24,619			6,973
Small Business Administration			228			1,967			1,870				2,195			2,511
Commercial business and other			88,612			139,407			49,312				228,019			125,796
Total		$	255,410		$	341,824		$	261,155			$	597,234		$	527,726

 

Loan Composition

																June 2018 vs.												June 2018 vs.
				June 30,				March 31,				December 31,				December 2017				September 30,				June 30,				June 2017
(Dollars in thousands)					2018				2018				2017			% Change					2017				2017			% Change
Loans held for investment:
Multi-family residential				$	2,247,852			$	2,286,803			$	2,273,595			-1.1	%			$	2,236,173			$	2,243,643			0.2	%
Commercial real estate					1,471,894				1,426,847				1,368,112			7.6	%				1,352,775				1,349,634			9.1	%
One-to-four family ―
	mixed-use property				564,474				566,930				564,206			0.0	%				556,723				556,906			1.4	%
One-to-four family ― residential					187,741				190,115				180,663			3.9	%				177,578				181,213			3.6	%
Co-operative apartments					7,839				6,826				6,895			13.7	%				7,035				7,069			10.9	%
Construction					33,826				23,887				8,479			298.9	%				15,811				16,842			100.8	%
Small Business Administration					14,405				20,004				18,479			-22.0	%				14,485				10,591			36.0	%
Taxi medallion					6,225				6,617				6,834			-8.9	%				18,165				18,303			-66.0	%
Commercial business and other					783,904				768,440				732,973			6.9	%				674,706				644,262			21.7	%
Net unamortized premiums
	and unearned loan fees				15,647				16,395				16,763			-6.7	%				16,925				17,217			-9.1	%
Allowance for loan losses					(20,220	)			(20,542	)			(20,351	)		-0.6	%				(25,269	)			(22,157	)		-8.7	%
			Net loans	$	5,313,587			$	5,292,322			$	5,156,648			3.0	%			$	5,045,107			$	5,023,523			5.8	%

 

Net Loans Activity

		Three Months Ended
		June 30,				March 31,				December 31,				September, 30				June 30,
(In thousands)			2018				2018				2017				2017				2017
Loans originated and purchased		$	255,410			$	341,824			$	328,819			$	182,925			$	261,155
Principal reductions			(226,030	)			(202,059	)			(209,400	)			(155,007	)			(143,195	)
Loans transferred to held-for-sale			-				-				-				-				(30,565	)
Loans sold			(7,273	)			(2,703	)			(1,018	)			(2,606	)			(16,337	)
Loan charged-offs			(416	)			(85	)			(11,616	)			(324	)			(350	)
Foreclosures			-				(744	)			-				-				-
Net change in deferred (fees) and costs			(748	)			(368	)			(162	)			(292	)			381
Net change in the allowance for loan losses			322				(191	)			4,918				(3,112	)			54
	Total loan activity	$	21,265			$	135,674			$	111,541			$	21,584			$	71,143

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
			June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)				2018				2018				2017				2017				2017
Loans 90 Days Or More Past Due
	and Still Accruing:
Multi-family residential			$	-			$	-			$	-			$	415			$	-
Commercial real estate				-				1,668				2,424				38				-
One-to-four family - mixed-use property				-				-				-				129				-
Construction				730				-				-				-				602
Taxi medallion				-				-				-				1,147				727
	Total			730				1,668				2,424				1,729				1,329
Non-accrual Loans:
Multi-family residential				2,165				2,193				3,598				1,309				1,537
Commercial real estate				1,448				1,894				1,473				1,147				1,948
One-to-four family - mixed-use property				2,157				2,396				1,867				2,217				2,971
One-to-four family - residential				6,969				7,542				7,808				7,434				7,616
Co-operative apartments				575				-				-				-				-
Small Business Administration				-				41				46				50				53
Taxi medallion(1)				743				906				918				-				-
Commercial business and other				2				-				-				4				5
	Total			14,059				14,972				15,710				12,161				14,130
	Total Non-performing Loans			14,789				16,640				18,134				13,890				15,459
Other Non-performing Assets:
Real estate acquired through foreclosure				-				638				-				-				-
Other asset acquired through foreclosure				35				106				-				-				-
	Total			35				744				-				-				-
	Total Non-performing Assets		$	14,824			$	17,384			$	18,134			$	13,890			$	15,459
Non-performing Assets to Total Assets				0.23	%			0.27	%			0.29	%			0.22	%			0.25	%
Allowance For Loan Losses to Non-performing Loans				136.7	%			123.5	%			112.2	%			181.9	%			143.3	%

⁽¹⁾  Not included in the above analysis are troubled debt restructured taxi medallion loans totaling $5.5 million in 2Q18, $5.7 million in 1Q18, $5.9 million in 4Q17, $4.1 million in 3Q17 and $3.4 million in 2Q17.

 

Net Charge-Offs (Recoveries)

			Three Months Ended
			June 30,				March 31,				December 31,				September 30,				June 30,
(In thousands)				2018				2018				2017				2017				2017
Multi-family residential			$	28			$	51			$	(1	)		$	224			$	(53	)
Commercial real estate				-				-				(3	)			(25	)			4
One-to-four family – mixed-use property				(79	)			-				(37	)			1				(67	)
One-to-four family – residential				(4	)			(107	)			212				(58	)			170
Small Business Administration				18				19				109				(17	)			14
Taxi medallion				353				-				11,229				-				-
Commercial business and other				6				(1	)			4				29				(14	)
Total net loan charge-offs (recoveries)			$	322			$	(38	)		$	11,513			$	154			$	54

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common share and core earnings before provision and income taxes are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears in tabular form at the end of this release. The Company believes that these measures are useful for both investors and management to understand the effects of certain 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,
			2018			2018			2017				2018			2017
GAAP income before income taxes		$	18,412		$	14,362		$	19,500			$	32,774		$	37,014
Net loss from fair value adjustments			267			100			1,159				367			1,537
Gain from life insurance proceeds			-			(776	)		(6	)			(776	)		(1,167	)
Core income before taxes			18,679			13,686			20,653				32,365			37,384
Provision for income taxes for core income			4,573			2,982			7,129				7,555			12,149
Core net income		$	14,106		$	10,704		$	13,524			$	24,810		$	25,235
GAAP diluted earnings per common share		$	0.48		$	0.39		$	0.44			$	0.88		$	0.86
Net loss from fair value adjustments, net of tax			0.01			-			0.02				0.01			0.04
Gain from life insurance proceeds			-			(0.03	)		-				(0.03	)		(0.04	)
Core diluted earnings per common share1		$	0.49		$	0.37		$	0.46			$	0.86		$	0.87
Core net income, as calculated above		$	14,106		$	10,704		$	13,524			$	24,810		$	25,235
Average assets			6,484,882			6,403,396			6,218,072				6,444,364			6,193,596
Average equity			532,027			529,281			529,451				530,662			523,658
Core return on average assets2			0.87	%		0.67	%		0.87	%			0.77	%		0.81	%
Core return on average equity2			10.61	%		8.09	%		10.22	%			9.35	%		9.64	%
(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
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)
						June 30,			December 31,			June 30,
(Dollars in thousands)							2018			2017			2017
Total Equity						$	538,044		$	532,608		$	534,091
Less:
	Goodwill						(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities						291			291			391
		Tangible Stockholders' Common Equity				$	522,208		$	516,772		$	518,355
Total Assets						$	6,467,616		$	6,299,274		$	6,285,236
Less:
	Goodwill						(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities						291			291			391
		Tangible Assets				$	6,451,780		$	6,283,438		$	6,269,500
Tangible Stockholders' Common Equity to Tangible Assets							8.09	%		8.22	%		8.27	%