THIRD QUARTER 2018¹ HIGHLIGHTS

• GAAP diluted EPS was $0.61, up 27.1% QoQ and 74.3% YoY
• Core diluted EPS was $0.54, up 10.2% QoQ and 45.9% YoY
• Net interest income of $41.5 million, down 2.6% QoQ, and 3.5% YoY
• Net interest margin was 2.71%, down 5bps QoQ and 19bps YoY
• GAAP and core ROAE were 12.9% and 11.4%, compared with 10.5% and 10.6%, respectively in 2Q18
• GAAP and core ROAA were 1.1% and 1.0%, respectively, compared with 0.9% for each in 2Q18
• Tax benefit of $0.06 per diluted share due to release of previously accrued tax liability

UNIONDALE, N.Y., Oct. 23, 2018 (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 third quarter ended September 30, 2018.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report earnings per diluted common share of $0.61 for the third quarter of 2018, an increase of 27% and 74% from 2Q18 and 3Q17, respectively, driven by continued strong execution of our strategic objectives and the release of previously accrued tax liability.”

“Our strategic focus of increasing net interest income through emphasizing rate over volume and reducing our liability sensitive position has resulted in net loans growth of 0.9% (non-annualized) for the third quarter. Similar to the prior quarter, we allowed $62 million of participations with another financial institution to repay, as the rates offered during the refinancing process did not meet our rate criteria. Year-to-date, we have allowed approximately $139 million of participations to repay rather than refinance at a rate below our criteria. During the quarter, approximately 70% of our new loans and 40% of our new investment securities were adjustable rate products allowing us to reduce future compression on the net interest margin as spreads are fixed. Additionally, approximately $450 million of forward swaps entered in late 2017 have provided a benefit of 1bp to the quarter’s net interest margin. We expect these swaps to continue to benefit our net interest margin as interest rates rise. These swaps coupled with the extension of the maturity of liabilities has mitigated our liability sensitive position.”  

“The yield on the loan portfolio increased 21bps from the linked quarter and 28bps from the same quarter in 2017 representing successful execution of our strategic objectives. The yield on mortgage loan originations increased 8bps from the linked quarter and 35bps from the same quarter in 2017. The yield on new loan originations decreased 8bps during the quarter primarily due to the initial rate recorded on certain adjustable rate C&I loans, which have an average rate reset of 3 months. Over the past five quarters, C&I loans represent 39% of new loan originations, which are primarily adjustable rate loans. As we have previously disclosed, we have approximately $2 billion of loans repricing through 2020, of which $127 million mortgage loans have repriced up an average of 68bps during the third quarter, further enhancing loan yields. In addition, the pipeline remains strong at $355 million with an average yield of 4.68% compared to $323 million at 4.67% in the linked quarter.”  

“Despite this good news on yields, margin pressure continued to be driven by higher cost of funds. The cost of funds increased 22bps QoQ and 48bps YoY, as the Federal Reserve increased benchmark rates by 100bps since the third quarter of 2017. The competition for deposits this quarter was most acute in the municipal government sector as the cost of NOW and money market accounts increased 39bps and 32bps, respectively. We expect continued competition for deposits and additional compression on the NIM through 2019.”

“Retail deposits increased $106 million QoQ. A prominent feature in the growth of retail deposits is the “Win Flushing” program, which focuses on increasing our deposit market share in the Asian Community of Flushing, Queens. Through the third quarter of 2018, we have captured over $100 million in deposit growth through this program and remain on pace to add $160 million in deposits by the end of 1Q19. Central to the “Win Flushing” program was the conversion of the Flushing branches to the Universal Banker model permitting staff to spend more time with customers. In the 11 branches that have been converted we have experienced an increase of over 120% in transactions processed at ATMs, to almost 60% of all branch transactions, reducing our customer’s reliance on tellers, allowing our branch staff to focus more time on sales opportunities. As previously discussed, we expect to have the remaining branches converted to the Universal Banker model by the end of 2019 and a branch in Chinatown opening in 4Q18.”   

Mr. Buran continued, “As we’ve continued to improve loan yields we have retained our focus on credit quality. Non-performing assets decreased by 30% and, total delinquencies have decreased 17% 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 improved to 161% from 137% in the linked quarter. The loan-to-value ratio on our non-performing real estate loans at September 30, 2018 remains conservative at 35%. The net recoveries of $89,000 for the quarter reflect the Company’s conservative underwriting and diligence in the collection process.”

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

• Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 3Q18 had a yield of 4.38%, an increase of 11bps from 4.27% for 2Q18 and an increase of 27bps from 4.12% for 3Q17. We have maintained our asset quality as these loans had an average loan-to-value ratio of 42% and an average debt coverage ratio of 173%.
• We remain committed to our strategy of focusing on C&I loans, multi-family and commercial real estate loans as in the third quarter, originations and purchases represented 43%, 33%, and 12%, respectively, of all originations, which were made while maintaining conservative loan-to-value and debt coverage ratios, and increasing yield.
• The average rate of mortgage loan applications in the pipeline totaled 4.68% at September 30, 2018 as compared to  4.04% at September 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
• Manage 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 3Q18 was $41.5 million, a decrease of $1.5 million, or 3.5% YoY (3Q18 compared to 3Q17) and a decrease of $1.1 million, or 2.6% QoQ (3Q18 compared to 2Q18). During 3Q18 the increase in the cost of funds outpaced the increase in the yield of interest-earning assets.

• Net interest margin of 2.71%, decreased 19bps YoY and 5bps QoQ
• Net interest spread of 2.51%, decreased 26bps YoY and 9bps QoQ
• Net interest income includes prepayment penalty income from loans and securities totaling $1.9 million in 3Q18 compared with $1.6 million in 3Q17 and $1.6 million in 2Q18 and recovered interest from delinquent loans of $1.1 million in 3Q18, compared to $0.3 million in 3Q17 and $0.2 million in 2Q18
• Excluding prepayment penalty income and recovered interest from nonaccrual loans, the yield on interest-earning assets was 4.08% in 3Q18, an improvement from 3.87% in 3Q17 and 3.98% in 2Q18, and the net interest margin was 2.51% in 3Q18, which decreased from 2.77% in 3Q17 and from 2.64% in 2Q18
• Average balance of total interest-earning assets of $6,130.4 million, increased $194.3 million, or 3.3%, YoY but decreased $50.8 million, or 0.8%, QoQ, primarily due to our opting to allow lower yielding loans to prepay rather than refinance at rates below our criteria
• Yield on interest-earning assets of 4.27%, increased 27bps YoY and 17bps QoQ
• Cost of interest-bearing liabilities of 1.76%, increased 53bps YoY and 26bps QoQ
• Cost of funds of 1.63%, increased 48bps YoY and 22bps QoQ, driven by increases in rates paid on 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 3Q18 compared to $3.3 million in 3Q17 and none in 2Q18.

Non-interest Income

Non-interest income for 3Q18 was $5.0 million, an increase of $3.3 million, or 198.3% YoY, and an increase of $1.8 million or 56.4% QoQ.

• Non-interest income included gains from life insurance proceeds of $2.2 million in 3Q18 and $0.2 million in 3Q17 and net losses from fair value adjustments of $0.2 million in 3Q18, $1.3 million in 3Q17 and $0.3 million in 2Q18
• Additionally, non-interest income included net gains from the sale of loans of $10,000 in 3Q18, $0.2 million in 3Q17 and $0.4 million in 2Q18
• Absent all above items, non-interest income was $2.9 million, an increase of $0.3 million YoY, but a decrease of $0.1 million QoQ

Non-interest Expense

Non-interest expense for 3Q18 was $27.2 million, an increase of $1.3 million, or 4.9% YoY, but a decrease of $0.2 million, or 0.6% QoQ.

• Non-interest expense increased YoY primarily due to increases in salaries and benefits, consulting, legal and depreciation expense due to the growth of the Bank, but decreased $0.2 million QoQ primarily due to reduction in foreclosure expenses
• The efficiency ratio was 61.3% in 3Q18 compared to 56.5% in 3Q17 and 59.6% in 2Q18

Provision for Income Taxes

The provision for income taxes in 3Q18 was $1.9 million, a decrease of $3.4 million, or 63.9% YoY and a decrease of $2.6 million, or 57.5% QoQ.

• Pre-tax income increased by $3.8 million, or 24.4% YoY and by $0.8 million, or 4.5% QoQ
• The effective tax rates were 9.9% in 3Q18, 34.2% in 3Q17 and 24.4% in 2Q18
• 3Q18 reflects the release of a previously accrued tax liability totaling $1.8 million
• We anticipate the Company’s effective tax rate to increase to approximately 21% in the fourth quarter of 2018 and approximately 19% for the full year

Financial Condition Summary:

Loans:

• Net loans held for investment were $5,359.8 million reflecting an increase of 0.9% QoQ (not annualized) and 3.9% 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 continued to see 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 $274.2 million for 3Q18, or 88.8% of loan production
• Loan pipeline was $355.2 million at September 30, 2018, compared to $417.0 million at September 30, 2017 and $322.9 million at June 30, 2018
• The loan-to-value ratio on our portfolio of real estate dependent loans as of September 30, 2018 totaled 38.7%

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

		For the three months ended
		September 30,			June 30,			September 30,
Loan type		2018			2018			2017
Mortgage loans		4.48	%		4.40	%		4.13	%
Non-mortgage loans		4.50	%		4.90	%		4.43	%
Total loans		4.49	%		4.57	%		4.25	%

Credit Quality:

• Non-performing loans totaled $12.6 million, a decrease of $5.5 million, or 30.3%, from $18.1 million at December 31, 2017
• Non-performing assets totaled $12.7 million, a decrease of $5.5 million, or 30.1%, from $18.1 million at December 31, 2017
• Classified assets totaled $47.7 million, an increase of $13.8 million, or 40.5%, from $34.0 million at December 31, 2017, primarily due to nine 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 $11.4 million, a decrease of $1.8 million, or 13.3%, from $13.2 million at December 31, 2017, primarily due to the sale of one commercial TDR in 2Q18
• 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 September 30, 2018
• Net charge-offs totaled $0.2 million during the nine months ended September 30, 2018

Capital Management:

• The Company and Bank, at September 30, 2018, were both well capitalized under all applicable regulatory requirements
• During 3Q18, stockholders’ equity increased $3.7 million, or 0.7%, to $541.8 million due to net income of $17.3 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 3Q18, the Company repurchased 299,509 treasury shares at an average cost of $25.58 per share; as of September 30, 2018, up to 509,327 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 $19.33 at September 30, 2018, from $19.00 at June 30, 2018 and tangible book value per common share, a non-GAAP measure, increased to $18.77 at September 30, 2018, from $18.44 June 30, 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, October 24, 2018 at 9:30 AM (ET) to discuss the Company’s strategy and results for the third quarter of 2018
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic181024.html 
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10123645
• The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on October 24, 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 nine months ended
			September 30,				June 30,				September 30,				September 30,				September 30,
			2018				2018				2017				2018				2017
Interest and Dividend Income
Interest and fees on loans			$	59,658			$	57,322			$	53,318			$	171,997			$	155,834
Interest and dividends on securities:
Interest				5,562				5,616				5,850				16,646				18,377
Dividends				18				17				30				49				274
Other interest income				248				338				121				873				403
Total interest and dividend income				65,486				63,293				59,319				189,565				174,888
Interest Expense
Deposits				17,425				14,788				10,655				44,323				29,145
Other interest expense				6,540				5,865				5,623				18,472				15,696
Total interest expense				23,965				20,653				16,278				62,795				44,841
Net Interest Income				41,521				42,640				43,041				126,770				130,047
Provision for loan losses				-				-				3,266				153				3,266
Net Interest Income After Provision for Loan Losses				41,521				42,640				39,775				126,617				126,781
Non-interest Income
Banking services fee income				1,017				1,000				885				2,965				2,773
Net loss on sale of securities				-				-				(186	)			-				(186	)
Net gain on sale of loans				10				421				152				168				396
Net loss from fair value adjustments				(170	)			(267	)			(1,297	)			(537	)			(2,834	)
Federal Home Loan Bank of New York stock dividends				873				881				740				2,630				2,206
Gains from life insurance proceeds				2,222				-				238				2,998				1,405
Bank owned life insurance				782				776				816				2,320				2,418
Other income				221				357				313				779				1,120
Total non-interest income				4,955				3,168				1,661				11,323				7,298
Non-interest Expense
Salaries and employee benefits				15,720				15,291				15,310				49,466				47,838
Occupancy and equipment				2,475				2,476				2,502				7,528				7,652
Professional services				1,915				2,439				1,763				6,539				5,678
FDIC deposit insurance				596				547				499				1,643				1,328
Data processing				1,427				1,426				1,349				4,254				3,873
Depreciation and amortization				1,484				1,455				1,173				4,328				3,493
Other real estate owned/foreclosure expense (benefit)				(102	)			40				121				34				376
Net gain from sales of real estate owned				-				(27	)			-				(27	)			(50	)
Other operating expenses				3,718				3,749				3,249				12,158				11,407
Total non-interest expense				27,233				27,396				25,966				85,923				81,595
Income Before Income Taxes				19,243				18,412				15,470				52,017				52,484
Provision (Benefit) for Income Taxes
Federal				2,307				3,311				4,680				8,225				15,005
State and local				(397	)			1,178				611				1,124				2,315
Total taxes				1,910				4,489				5,291				9,349				17,320
Net Income			$	17,333			$	13,923			$	10,179			$	42,668			$	35,164
Basic earnings per common share			$	0.61			$	0.48			$	0.35			$	1.48			$	1.21
Diluted earnings per common share			$	0.61			$	0.48			$	0.35			$	1.48			$	1.21
Dividends per common share			$	0.20			$	0.20			$	0.18			$	0.60			$	0.54

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

				September 30,				June 30,				December 31,
				2018				2018				2017
ASSETS
Cash and due from banks				$	45,094			$	42,805			$	51,546
Securities held-to-maturity:
	Mortgage-backed securities				7,958				7,963				7,973
	Other securities				23,207				23,130				22,913
Securities available for sale:
	Mortgage-backed securities				528,119				513,868				509,650
	Other securities				232,913				214,755				228,704
Loans:
	Multi-family residential				2,235,370				2,247,852				2,273,595
	Commercial real estate				1,460,555				1,471,894				1,368,112
	One-to-four family ― mixed-use property				565,302				564,474				564,206
	One-to-four family ― residential				188,975				187,741				180,663
	Co-operative apartments				7,771				7,839				6,895
	Construction				40,239				33,826				8,479
	Small Business Administration				14,322				14,405				18,479
	Taxi medallion				6,078				6,225				6,834
	Commercial business and other				846,224				783,904				732,973
	Net unamortized premiums and unearned loan fees				15,226				15,647				16,763
	Allowance for loan losses				(20,309	)			(20,220	)			(20,351	)
			Net loans		5,359,753				5,313,587				5,156,648
Interest and dividends receivable					24,673				24,184				21,405
Bank premises and equipment, net					29,929				30,658				30,836
Federal Home Loan Bank of New York stock					54,942				57,384				60,089
Bank owned life insurance					131,009				131,429				131,856
Goodwill					16,127				16,127				16,127
Other assets					85,819				91,726				61,527
			Total assets	$	6,539,543			$	6,467,616			$	6,299,274
LIABILITIES
Due to depositors:
	Non-interest bearing			$	398,606			$	388,467			$	385,269
	Interest-bearing:
		Certificate of deposit accounts			1,562,962				1,452,016				1,351,933
		Savings accounts			216,976				225,815				290,280
		Money market accounts			1,223,640				1,069,835				979,958
		NOW accounts			1,255,464				1,422,745				1,333,232
			Total interest-bearing deposits		4,259,042				4,170,411				3,955,403
Mortgagors' escrow deposits					58,667				50,781				42,606
Borrowed funds					1,197,101				1,250,732				1,309,653
Other liabilities					84,371				69,181				73,735
			Total liabilities		5,997,787				5,929,572				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 September 30, 2018, June  30, 2018 and December 31, 2017; 28,025,081
	shares, 28,319,213 shares and 28,588,266 shares outstanding at September 30, 2018,
	June  30, 2018 and December 31, 2017, respectively)				315				315				315
Additional paid-in capital					221,622				220,432				217,906
Treasury stock (3,505,514 shares, 3,211,382 shares and 2,942,329 shares at
	September 30, 2018, June  30, 2018 and December 31, 2017, respectively)				(74,222	)			(66,656	)			(57,675	)
Retained earnings					407,590				395,960				381,048
Accumulated other comprehensive loss, net of taxes					(13,549	)			(12,007	)			(8,986	)
			Total stockholders' equity		541,756				538,044				532,608
			Total liabilities and stockholders' equity	$	6,539,543			$	6,467,616			$	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 nine months ended
		September 30,			June 30,			September 30,			September 30,			September 30,
		2018			2018			2017			2018			2017
Per Share Data
Basic earnings per share		$	0.61		$	0.48		$	0.35		$	1.48		$	1.21
Diluted earnings per share		$	0.61		$	0.48		$	0.35		$	1.48		$	1.21
Average number of shares outstanding for:
Basic earnings per common share computation			28,603,543			28,844,829			29,119,753			28,806,152			29,091,756
Diluted earnings per common share computation			28,603,948			28,845,611			29,120,356			28,806,885			29,093,723
Shares outstanding			28,025,081			28,319,213			28,819,891			28,025,081			28,819,891
Book value per common share (1)		$	19.33		$	19.00		$	18.72		$	19.33		$	18.72
Tangible book value per common share (2)		$	18.77		$	18.44		$	18.18		$	18.77		$	18.18
Stockholders' Equity
Stockholders' equity		$	541,756		$	538,044		$	539,609		$	541,756		$	539,609
Tangible stockholders' equity			525,920			522,208			523,873			525,920			523,873
Average Balances
Total loans, net		$	5,280,172		$	5,316,033		$	5,033,666		$	5,276,039		$	4,955,423
Total interest-earning assets			6,130,422			6,181,186			5,936,129			6,136,887			5,909,866
Total assets			6,446,540			6,484,882			6,239,321			6,445,097			6,209,005
Total due to depositors			4,213,118			4,310,491			3,972,663			4,233,490			4,041,744
Total interest-bearing liabilities			5,455,867			5,515,580			5,275,937			5,471,382			5,272,842
Stockholders' equity			536,416			532,027			536,468			532,601			527,975
Performance Ratios (3)
Return on average assets			1.08	%		0.86	%		0.65	%		0.88	%		0.76	%
Return on average equity			12.93			10.47			7.59			10.68			8.88
Yield on average interest-earning assets			4.27			4.10			4.00			4.12			3.95
Cost of average interest-bearing liabilities			1.76			1.50			1.23			1.53			1.13
Cost of funds			1.63			1.41			1.15			1.44			1.07
Interest rate spread during period			2.51			2.60			2.77			2.59			2.82
Net interest margin			2.71			2.76			2.90			2.75			2.93
Non-interest expense to average assets			1.69			1.69			1.66			1.78			1.75
Efficiency ratio (4)			61.30			59.58			56.51			63.39			58.76
Average interest-earning assets to average
interest-bearing liabilities			1.12	X		1.12	X		1.13	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 the sale of securities, fair value adjustments and life insurance proceeds).

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

		At or for the nine				At or for the year				At or for the nine
		months ended				ended				months ended
		September 30, 2018				December 31, 2017				September 30, 2017
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital		$	578,034			$	563,426			$	565,265
Common equity Tier 1 capital			539,306				527,727				530,442
Total risk-based capital			673,343				658,777				665,534
Tier 1 leverage capital (well capitalized = 5%)			8.92	%			9.02	%			9.07	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			11.07				11.59				11.84
Tier 1 risk-based capital (well capitalized = 8.0%)			11.86				12.38				12.61
Total risk-based capital (well capitalized = 10.0%)			13.82				14.47				14.85
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital		$	655,965			$	631,285			$	629,748
Common equity Tier 1 capital			655,965				631,285				629,748
Total risk-based capital			676,274				651,636				655,017
Tier 1 leverage capital (well capitalized = 5%)			10.12	%			10.11	%			10.10	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			13.46				13.87				14.04
Tier 1 risk-based capital (well capitalized = 8.0%)			13.46				13.87				14.04
Total risk-based capital (well capitalized = 10.0%)			13.88				14.31				14.60
Capital ratios:
Average equity to average assets			8.26	%			8.53	%			8.50	%
Equity to total assets			8.28				8.46				8.62
Tangible common equity to tangible assets (1)			8.06				8.22				8.39
Asset quality:
Non-accrual loans (2)		$	12,533			$	15,710			$	12,161
Non-performing loans			12,644				18,134				13,890
Non-performing assets			12,679				18,134				13,890
Net charge-offs/ (recoveries)			195				11,739				226
Asset quality ratios:
Non-performing loans to gross loans			0.24	%			0.35	%			0.27	%
Non-performing assets to total assets			0.19				0.29				0.22
Allowance for loan losses to gross loans			0.38				0.39				0.50
Allowance for loan losses to non-performing assets			160.17				112.23				181.92
Allowance for loan losses to non-performing loans			160.62				112.23				181.92
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
	September 30, 2018						June 30, 2018						September 30, 2017
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,467,349	$	49,612	4.44	%	$	4,509,778	$	47,673	4.23	%	$	4,350,338	$	46,121	4.24	%
Other loans, net		812,823		10,046	4.94			806,255		9,649	4.79			683,328		7,197	4.21
Total loans, net (1)		5,280,172		59,658	4.52			5,316,033		57,322	4.31			5,033,666		53,318	4.24
Taxable securities:
Mortgage-backed securities		542,192		3,800	2.80			533,088		3,754	2.82			520,889		3,335	2.56
Other securities		123,174		928	3.01			122,601		1,023	3.34			189,957		1,600	3.37
Total taxable securities		665,366		4,728	2.84			655,689		4,777	2.91			710,846		4,935	2.78
Tax-exempt securities: (2)
Other securities		123,472		852	2.76			124,058		856	2.76			142,899		945	2.65
Total tax-exempt securities		123,472		852	2.76			124,058		856	2.76			142,899		945	2.65
Interest-earning deposits and federal funds sold		61,412		248	1.62			85,406		338	1.58			48,718		121	0.99
Total interest-earning assets		6,130,422		65,486	4.27			6,181,186		63,293	4.10			5,936,129		59,319	4.00
Other assets		316,118						303,696						303,192
Total assets	$	6,446,540					$	6,484,882					$	6,239,321
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	219,749		304	0.55		$	235,564		285	0.48		$	330,316		583	0.71
NOW accounts		1,336,873		4,416	1.32			1,444,889		3,364	0.93			1,340,228		2,468	0.74
Money market accounts		1,169,130		5,126	1.75			1,110,690		3,983	1.43			927,067		2,337	1.01
Certificate of deposit
accounts		1,487,366		7,453	2.00			1,519,348		7,118	1.87			1,375,052		5,218	1.52
Total due to depositors		4,213,118		17,299	1.64			4,310,491		14,750	1.37			3,972,663		10,606	1.07
Mortgagors' escrow
accounts		57,573		126	0.88			77,343		38	0.20			54,236		49	0.36
Total interest-bearing
deposits		4,270,691		17,425	1.63			4,387,834		14,788	1.35			4,026,899		10,655	1.06
Borrowings		1,185,176		6,540	2.21			1,127,746		5,865	2.08			1,249,038		5,623	1.80
Total interest-bearing
liabilities		5,455,867		23,965	1.76			5,515,580		20,653	1.50			5,275,937		16,278	1.23
Non interest-bearing
demand deposits		380,825						370,790						354,149
Other liabilities		73,432						66,485						72,767
Total liabilities		5,910,124						5,952,855						5,702,853
Equity		536,416						532,027						536,468
Total liabilities and
equity	$	6,446,540					$	6,484,882					$	6,239,321
Net interest income /
net interest rate spread			$	41,521	2.51	%			$	42,640	2.60	%			$	43,041	2.77	%
Net interest-earning assets /
net interest margin	$	674,555			2.71	%	$	665,606			2.76	%	$	660,192			2.90	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.12	X					1.12	X					1.13	X

(1)  Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.2 million, $0.3 million and $0.9 million for the three months ended September 30, 2018, June 30, 2018 and September 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 nine months ended
	September 30, 2018							September 30, 2017
	Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,473,422	$	143,397	4.27	%		$	4,287,674	$	135,429	4.21	%
Other loans, net		802,617		28,600	4.75				667,749		20,405	4.07
Total loans, net (1)		5,276,039		171,997	4.35				4,955,423		155,834	4.19
Taxable securities:
Mortgage-backed
securities		533,394		11,061	2.76				527,890		10,122	2.56
Other securities		125,589		3,072	3.26				215,453		5,650	3.50
Total taxable securities		658,983		14,133	2.86				743,343		15,772	2.83
Tax-exempt securities: (2)
Other securities		123,882		2,562	2.76				145,058		2,879	2.65
Total tax-exempt securities		123,882		2,562	2.76				145,058		2,879	2.65
Interest-earning deposits
and federal funds sold		77,983		873	1.49				66,042		403	0.81
Total interest-earning
assets		6,136,887		189,565	4.12				5,909,866		174,888	3.95
Other assets		308,210							299,139
Total assets	$	6,445,097						$	6,209,005
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	240,234		978	0.54			$	288,376		1,289	0.60
NOW accounts		1,439,997		10,928	1.01				1,474,572		7,006	0.63
Money market accounts		1,102,374		12,184	1.47				882,213		5,487	0.83
Certificate of deposit
accounts		1,450,885		20,034	1.84				1,396,583		15,257	1.46
Total due to depositors		4,233,490		44,124	1.39				4,041,744		29,039	0.96
Mortgagors' escrow
accounts		64,620		199	0.41				60,895		106	0.23
Total interest-bearing
deposits		4,298,110		44,323	1.37				4,102,639		29,145	0.95
Borrowings		1,173,272		18,472	2.10				1,170,203		15,696	1.79
Total interest-bearing
liabilities		5,471,382		62,795	1.53				5,272,842		44,841	1.13
Non interest-bearing
demand deposits		372,257							340,221
Other liabilities		68,857							67,967
Total liabilities		5,912,496							5,681,030
Equity		532,601							527,975
Total liabilities and
equity	$	6,445,097						$	6,209,005
Net interest income /
net interest rate spread			$	126,770	2.59	%				$	130,047	2.82	%
Net interest-earning assets /
net interest margin	$	665,505			2.75	%		$	637,024			2.93	%
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 $1.6 million and $1.9 million for the nine months ended September 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)

																September 2018 vs.						September 2018 vs.
				September 30,			June 30,			March 31,			December 31,			December 2017			September 30,			September 2017,
(Dollars in thousands)				2018			2018			2018			2017			% Change			2017			% Change
Deposits
Non-interest bearing				$	398,606		$	388,467		$	377,861		$	385,269		3.5	%		$	362,509		10.0	%
Interest bearing:
	Certificate of deposit
		accounts			1,562,962			1,452,016			1,499,326			1,351,933		15.6	%			1,404,555		11.3	%
	Savings accounts				216,976			225,815			246,888			290,280		-25.3	%			323,186		-32.9	%
	Money market accounts				1,223,640			1,069,835			1,032,409			979,958		24.9	%			991,706		23.4	%
	NOW accounts				1,255,464			1,422,745			1,479,319			1,333,232		-5.8	%			1,308,821		-4.1	%
		Total interest-bearing
			deposits		4,259,042			4,170,411			4,257,942			3,955,403		7.7	%			4,028,268		5.7	%
			Total deposits	$	4,657,648		$	4,558,878		$	4,635,803		$	4,340,672		7.3	%		$	4,390,777		6.1	%

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Originations and Purchases 

		For the three months										For the nine months
		September 30,			June 30,			September 30,				September 30,			September 30,
(In thousands)		2018			2018			2017				2018			2017
Multi-family residential		$	102,484		$	70,972		$	64,551			$	254,637		$	254,728
Commercial real estate			38,569			64,890			25,385				175,013			184,676
One-to-four family – mixed-use property			16,870			12,294			13,136				45,232			45,334
One-to-four family – residential			11,362			6,974			5,843				35,304			16,623
Co-operative apartments			-			1,500			232				1,500			232
Construction			6,008			9,940			148				30,627			7,121
Small Business Administration			344			228			4,276				2,539			6,787
Commercial business and other			133,188			88,612			69,354				361,207			195,150
Total		$	308,825		$	255,410		$	182,925			$	906,059		$	710,651

Loan Composition

																				September 2018 vs.								September 2018 vs.
				September 30,				June 30,				March 31,				December 31,				December 2017				September 30,				September 2017
(Dollars in thousands)				2018				2018				2018				2017				% Change				2017				% Change
Loans held for investment:
Multi-family residential				$	2,235,370			$	2,247,852			$	2,286,803			$	2,273,595			-1.7	%			$	2,236,173			0.0	%
Commercial real estate					1,460,555				1,471,894				1,426,847				1,368,112			6.8	%				1,352,775			8.0	%
One-to-four family ―
	mixed-use property				565,302				564,474				566,930				564,206			0.2	%				556,723			1.5	%
One-to-four family ― residential					188,975				187,741				190,115				180,663			4.6	%				177,578			6.4	%
Co-operative apartments					7,771				7,839				6,826				6,895			12.7	%				7,035			10.5	%
Construction					40,239				33,826				23,887				8,479			374.6	%				15,811			154.5	%
Small Business Administration					14,322				14,405				20,004				18,479			-22.5	%				14,485			-1.1	%
Taxi medallion					6,078				6,225				6,617				6,834			-11.1	%				18,165			-66.5	%
Commercial business and other					846,224				783,904				768,440				732,973			15.5	%				674,706			25.4	%
Net unamortized premiums
	and unearned loan fees				15,226				15,647				16,395				16,763			-9.2	%				16,925			-10.0	%
Allowance for loan losses					(20,309	)			(20,220	)			(20,542	)			(20,351	)		-0.2	%				(25,269	)		-19.6	%
			Net loans	$	5,359,753			$	5,313,587			$	5,292,322			$	5,156,648			3.9	%			$	5,045,107			6.2	%

Net Loans Activity

		Three Months Ended
		September, 30				June 30,				March 31,				December 31,				September, 30
(In thousands)		2018				2018				2018				2017				2017
Loans originated and purchased		$	308,825			$	255,410			$	341,824			$	328,819			$	182,925
Principal reductions			(257,902	)			(226,030	)			(202,059	)			(209,400	)			(155,007	)
Loans sold			(4,027	)			(7,273	)			(2,703	)			(1,018	)			(2,606	)
Loan charged-offs			(220	)			(416	)			(85	)			(11,616	)			(324	)
Foreclosures			-				-				(744	)			-				-
Net change in deferred fees and costs			(421	)			(748	)			(368	)			(162	)			(292	)
Net change in the allowance for loan losses			(89	)			322				(191	)			4,918				(3,112	)
	Total loan activity	$	46,166			$	21,265			$	135,674			$	111,541			$	21,584

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

			September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands)			2018				2018				2018				2017				2017
Loans 90 Days Or More Past Due
	and Still Accruing:
Multi-family residential			$	-			$	-			$	-			$	-			$	415
Commercial real estate				111				-				1,668				2,424				38
One-to-four family - mixed-use property				-				-				-				-				129
Construction				-				730				-				-				-
Taxi medallion				-				-				-				-				1,147
	Total			111				730				1,668				2,424				1,729
Non-accrual Loans:
Multi-family residential				862				2,165				2,193				3,598				1,309
Commercial real estate				1,398				1,448				1,894				1,473				1,147
One-to-four family - mixed-use property				795				2,157				2,396				1,867				2,217
One-to-four family - residential				6,610				6,969				7,542				7,808				7,434
Co-operative apartments				-				575				-				-				-
Small Business Administration				1,395				-				41				46				50
Taxi medallion(1)				712				743				906				918				-
Commercial business and other				761				2				-				-				4
	Total			12,533				14,059				14,972				15,710				12,161
	Total Non-performing Loans			12,644				14,789				16,640				18,134				13,890
Other Non-performing Assets:
Real estate acquired through foreclosure				-				-				638				-				-
Other asset acquired through foreclosure				35				35				106				-				-
	Total			35				35				744				-				-
	Total Non-performing Assets		$	12,679			$	14,824			$	17,384			$	18,134			$	13,890
Non-performing Assets to Total Assets				0.19	%			0.23	%			0.27	%			0.29	%			0.22	%
Allowance For Loan Losses to Non-performing Loans				160.6	%			136.7	%			123.5	%			112.2	%			181.9	%

⁽¹⁾  Not included in the above analysis are TDR taxi medallion loans totaling $5.4 million in 3Q18, $5.5 million in 2Q18, $5.7 million in 1Q18, $5.9 million in 4Q17 and $4.1 million in 3Q17.

Net Charge-Offs (Recoveries)

			Three Months Ended
			September 30,				June 30,				March 31,				December 31,				September 30,
(In thousands)			2018				2018				2018				2017				2017
Multi-family residential			$	18			$	28			$	51			$	(1	)		$	224
Commercial real estate				-				-				-				(3	)			(25	)
One-to-four family – mixed-use property				(36	)			(79	)			-				(37	)			1
One-to-four family – residential				(258	)			(4	)			(107	)			212				(58	)
Small Business Administration				134				18				19				109				(17	)
Taxi medallion				40				353				-				11,229				-
Commercial business and other				13				6				(1	)			4				29
Total net loan charge-offs (recoveries)			$	(89	)		$	322			$	(38	)		$	11,513			$	154

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										Nine Months Ended
		September 30,			June 30,			September 30,				September 30,			September 30,
		2018			2018			2017				2018			2017
GAAP income before income taxes		$	19,243		$	18,412		$	15,470			$	52,017		$	52,484
Net loss from fair value adjustments			170			267			1,297				537			2,834
Net loss on sale of securities			-			-			186				-			186
Gain from life insurance proceeds			(2,222	)		-			(238	)			(2,998	)		(1,405	)
Accelerated employee benefits upon Officer's death			149			-			-				149			-
Core income before taxes			17,340			18,679			16,715				49,705			54,099
Provision for income taxes for core income			2,010			4,573			5,812				9,565			17,961
Core net income		$	15,330		$	14,106		$	10,903			$	40,140		$	36,138
GAAP diluted earnings per common share		$	0.61		$	0.48		$	0.35			$	1.48		$	1.21
Net loss from fair value adjustments, net of tax			-			0.01			0.03				0.01			0.07
Net loss on sale of securities, net of tax			-			-			-				-			-
Gain from life insurance proceeds			(0.08	)		-			(0.01	)			(0.10	)		(0.05	)
Accelerated employee benefits upon Officer's death, net of tax			-			-			-				-			-
Core diluted earnings per common share1		$	0.54		$	0.49		$	0.37			$	1.39		$	1.24
Core net income, as calculated above		$	15,330		$	14,106		$	10,903			$	40,140		$	36,138
Average assets			6,446,540			6,484,882			6,239,321				6,445,097			6,209,005
Average equity			536,416			532,027			536,468				532,601			527,975
Core return on average assets2			0.95	%		0.87	%		0.70	%			0.83	%		0.78	%
Core return on average equity2			11.43	%		10.61	%		8.13	%			10.05	%		9.13	%
(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)

					September 30,			December 31,			September 30,
(Dollars in thousands)					2018			2017			2017
Total Equity					$	541,756		$	532,608		$	539,609
Less:
	Goodwill					(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities					291			291			391
		Tangible Stockholders' Common Equity			$	525,920		$	516,772		$	523,873
Total Assets					$	6,539,543		$	6,299,274		$	6,261,382
Less:
	Goodwill					(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities					291			291			391
		Tangible Assets			$	6,523,707		$	6,283,438		$	6,245,646
Tangible Stockholders' Common Equity to Tangible Assets						8.06	%		8.22	%		8.39	%

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