News Details

Flushing Financial Corporation Announces Second Quarter GAAP Diluted EPS of $0.44 and Record Core Diluted EPS of $0.46, Driven by Record Net Interest Income, Strong Credit Quality and Solid Loan Growth

Jul 25, 2017 5:30 PM

SECOND QUARTER 20171

  • GAAP diluted EPS was $0.44, up 4.8% QoQ but down 58.1% YoY, largely due to net gain on sale of buildings in 2Q16
  • Record core diluted EPS was $0.46, up 17.9% YoY and 15.0% QoQ
  • Record net interest income of $43.6 million, an improvement of 4.1% YoY and 0.5% QoQ
  • Net interest margin was 2.95%, unchanged QoQ
  • GAAP and core ROAE improved to 9.6% and 10.2%, compared with 9.5% and 9.1% in 1Q17
  • GAAP and core ROAA was 0.8% and 0.9%, compared with 0.8% for both in 1Q17

UNIONDALE, N.Y., July 25, 2017 (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 three and six months ended June 30, 2017.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report record core earnings for the second quarter of 2017 driven by record net interest income and our continued discipline regarding non-interest expense. Credit quality continued to improve, as our non-performing assets have decreased by over 29% since the end of 2016 and net charge-offs remain minimal. We saw tangible results from our strategy change announced in mid-2016 to focus origination efforts on higher yielding loans.  The yield on recent quarter loan production increased 19 basis points over the prior quarter and 33 basis points from the comparable quarter of 2016. For the first time since 2010, quarterly new loan yields exceed that quarter’s average yield on total interest-earning assets. Our total loan portfolio, including loans held for sale, grew 2% during the recent quarter and 5% for the first six months of 2017 while meeting our strong underwriting standards.”

“We continue to implement our strategy of enhancing operational scalability and efficiency by converting our branch network to the more cost effective Universal Banker model.  We expect to convert half of our 19 branches by the end of 2017. Although total deposits increased 8% year-over-year, deposits declined 3% quarter-over-quarter primarily caused by seasonal government deposit outflows, which we anticipate returning in the fourth quarter.”

“As a result of recent rate increases by the Federal Reserve, we have started to experience some rate pressure on liabilities. During the recent quarter, our cost of funds increased 4 basis points due to a combination of an increase in the rates we pay on some of our deposit products to stay competitive within our market and the funding mix, as seasonal government deposit outflows were replaced by slightly more expensive borrowed funds.”

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, multi-family, commercial real estate, and commercial business loan originations and purchases represented 24%, 47%, and 19%, respectively, of all originations while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield. 
  • The average interest rate obtained for second quarter originations and purchases improved to 4.04% compared to 3.85% for 1Q17 and 3.71% for 2Q16.
  • The average rate of mortgage loan applications in the pipeline totaled 4.17% at June 30, 2017, as compared to 4.20% at December 31, 2016 and 3.94% at June 30, 2016.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during the second quarter of 2017 had an increased yield of 4.19% compared to 4.01% for the previous quarter and 3.81% for the same quarter in 2016.  While the yields have been increasing, we have kept our asset quality as these loans had a low average loan-to-value ratio of 46.2% and an average debt coverage ratio of 198%.

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.”

_____________________
1 See the table entitled “Reconciliation of Non-GAAP Financial Measures.”

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:

Quarter ended June 30, 2017 (2Q17) compared to the quarters ended June 30, 2016 (2Q16) and March 31, 2017 (1Q17).

June 30, 2017 compared to March 31, 2017 (“QoQ”); June 30, 2017 compared to June 30, 2016 (“YoY”).

Net Interest Income

Net interest income for 2Q17 was $43.6 million, an increase of 4.1% YoY and 0.5% QoQ.

  • Net interest margin of 2.95%, decreased 4bps YoY but remains unchanged QoQ
  • Net interest spread of 2.83%, decreased 5bps YoY and 1bp QoQ
  • Net interest income includes prepayment penalty income from loans of $1.0 million in 2Q17 compared with $1.4 million in 2Q16 and $1.1 million in 1Q17, and recovered interest from nonaccrual loans of $0.3 million in 2Q17 compared with $0.2 million in 2Q16 and $0.5 million in 1Q17
  • Net interest income includes $0.4 million in accelerated accretion of discount upon the call of CLO securities totaling $27.5 million
  • Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets would have improved to 3.82% in 2Q17, compared with 3.81% in 2Q16 and 3.80% in 1Q17, and the net interest margin would have decreased to 2.83% in 2Q17, compared with 2.87% in 2Q16 and 2.85% in 1Q17
  • Average balance of total interest-earning assets of $5,919.0 million, increased $306.0 million, or 5.5% YoY and increased $45.2 million, or 0.8% QoQ
  • Yield on interest-earning assets of 3.94%, increased 1bp YoY and 4bps QoQ
  • Cost of interest-bearing liabilities of 1.11%, increased 6bps YoY and 5bps QoQ
  • Cost of funds of 1.05%, increased 6bps YoY and 4bps QoQ, driven by an increase in rates paid on our core deposits and short-term borrowings  

Non-interest Income

Non-interest income for 2Q17 was $1.9 million, a decrease of $35.8 million YoY and $1.7 million QoQ.

  • Non-interest income included net losses from fair value adjustments of $1.2 million in 2Q17, $1.1 million in 2Q16 and $0.4 million in 1Q17
  • 2Q16 included a gain of $33.8 million recorded from the sale of one of our properties in Flushing, Queens and a gain on the sale of securities of $2.4 million and 1Q17 included a gain from life insurance proceeds of $1.2 million
  • Absent the above items non-interest income was $3.1 million, an increase of $0.5 million YoY and $0.2 million QoQ

Non-interest Expense

Non-interest expense for 2Q17 was $26.1 million, a decrease of $2.4 million, or 8.4%, YoY and $3.5 million, or 11.8% QoQ.

  • 2Q16 included a non-recurring penalty of $2.1 million on the prepayment of $38.0 million in repurchase agreements and a write-down of $0.8 million on one OREO property. Absent these two items, non-interest expense increased $0.5 million, or 1.9% YoY, driven by increased salaries and benefits from annual salary increases and additions in staffing, partially offset by reductions in FDIC insurance expense, due to lower assessment rates, and decreased foreclosure expense due to continued improvement in asset quality
  • Lower costs associated with FDIC insurance and foreclosure expense should be sustainable
  • 1Q17 included the impact of annual grants of employee and director restricted stock unit awards totaling $3.3 million. Absent this item in 1Q17, non-interest expense decreased $0.2 million or 0.8%, primarily driven by decreased foreclosure expense
  • The efficiency ratio improved to 55.8% from 57.1% in 2Q16 and 64.0% in 1Q17

Provision for Income Taxes

The provision for income taxes in 2Q17 was $6.8 million, a decrease of $13.9 million YoY but an increase of $1.5 million QoQ.

  • Pre-tax income decreased by $31.7 million, or 61.9% YoY but increased $2.0 million, or 11.3% QoQ
  • The effective tax rates were 34.7% in 2Q17, 40.5% in 2Q16 and 30.0% in 1Q17
  • The improvement in the Company’s effective tax rate compared to 2Q16 was primarily due to a change in the accounting treatment of deductible stock compensation expense from prior years; in prior years, the tax impact of deductible stock compensation expense flowed through additional paid-in-capital and did not have an impact on the Company’s effective tax rate
  • The increase in the Company’s effective tax rate compared to 1Q17 was primarily due to the requirement that stock compensation be treated, for tax purposes, as a discrete tax item in the period the shares vest; our stock awards generally vest in the first quarter, therefore reducing 1Q17 effective tax rate
  • We anticipate the effective tax rate to approximate the 2Q17 rate for the remainder of the year

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,023.5 million reflecting an increase of 1.4% QoQ (not annualized) and 4.4% year-to-date as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $236.3 million for 2Q17, or 90.5% of loan production
  • Loan pipeline was $279.1 million at June 30, 2017, compared to $303.1 million at March 31, 2017 and $329.8 million at June 30, 2016
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of June 30, 2017 totaled 39.8%

The following table shows the 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 2017  2017  2016 
Mortgage loans 4.01% 3.78% 3.53%
Non-mortgage loans 4.13% 4.02% 4.29%
Total loans 4.04% 3.85% 3.71%
       

Credit Quality:

  • Non-performing loans totaled $15.5 million, a decrease of $6.0 million, or 27.8%, from $21.4 million at December 31, 2016
  • Classified assets totaled $44.7 million, an increase of $0.7 million, or 1.7%, from $44.0 million at December 31, 2016, primarily due to an increase in substandard taxi medallion loans, partially offset by reductions in non-performing assets
  • Loans classified as troubled debt restructured (TDR) totaled $21.4 million, an increase of $3.9 million, or 22.6%, from $17.4 million at December 31, 2016, attributable to the addition of five taxi medallion TDRs
  • 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 38.5% average loan-to-value for non-performing loans collateralized by real estate at June 30, 2017
  • No provision for loan losses was recorded in the six months ended June 30, 2017 or all of 2016 due to continued strong credit quality, with net charge-offs totaling $0.1 million for the six months ended June 30, 2017 and net recoveries of $0.7 million for all of 2016

Capital Management:

  • The Company and Bank are subject to the same regulatory requirements and at June 30, 2017, both were well capitalized under all applicable regulatory requirements
  • During six months ended June 30, 2017, stockholders’ equity increased $20.2 million, or 3.9%, to $534.1 million due to net income of $25.0 million and $1.8 million of other comprehensive income, partially offset by the declaration and payment of dividends on the Company’s common stock
  • During the six months ended June 30, 2017, the Company repurchased 10,000 treasury shares at an average cost of $27.80 per share; as of June 30, 2017, up to 485,905 shares may be repurchased under the current authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $18.54 at June 30, 2017, from $17.95 at December 31, 2016 and $17.77 at June 30, 2016
  • Tangible book value per common share, a non-GAAP measure, increased to $18.00 at June 30, 2017, from $17.40 at December 31, 2016 and $17.22 at June 30, 2016

Inaugural 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 26, 2017 at 9:30 AM (ET) to discuss the Company’s strategy and results for the second quarter of 2017
  • Dial-in for Live Call: 1-888-317-6016
  • Webcast: https://services.choruscall.com/links/ffic170726.html 
  • Dial-in for Replay: 1-877-344-7529
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on September 30, 2017

About Flushing Financial Corporation

Flushing Financial Corporation 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, and public entities by offering a full complement of deposit, loan, and cash management services through its 19 banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. 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. The Bank also operates an online banking division, iGObanking.com®, which offers competitively priced deposit products to consumers nationwide.

Additional information on 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, 2016 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”, “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,
    2017   2017   2016   2017   2016 
          
Interest and Dividend Income          
Interest and fees on loans $51,631  $50,885  $48,413  $102,516  $95,971 
Interest and dividends on securities:          
  Interest  6,432   6,095   6,510   12,527   13,102 
  Dividends  123   121   120   244   239 
Other interest income  129   153   48   282   142 
    Total interest and dividend income  58,315   57,254   55,091   115,569   109,454 
            
Interest Expense          
Deposits  9,510   8,980   8,097   18,490   16,070 
Other interest expense  5,188   4,885   5,105   10,073   10,362 
    Total interest expense  14,698   13,865   13,202   28,563   26,432 
            
Net Interest Income  43,617   43,389   41,889   87,006   83,022 
Provision for loan losses  -   -   -   -   - 
Net Interest Income After Provision for Loan Losses  43,617   43,389   41,889   87,006   83,022 
            
Non-interest Income          
Banking services fee income  1,014   874   973   1,888   1,949 
Net gain on sale of securities  -   -   2,363   -   2,363 
Net gain on sale of loans   34   210   3   244   344 
Net gain on sale of buildings  -   -   33,814   -   33,814 
Net loss from fair value adjustments  (1,159)  (378)  (1,115)  (1,537)  (2,102)
Federal Home Loan Bank of New York stock dividends  643   823   582   1,466   1,205 
Gains from life insurance proceeds  6   1,161   -   1,167   411 
Bank owned life insurance  807   795   694   1,602   1,389 
Other income  603   204   403   807   884 
    Total non-interest income  1,948   3,689   37,717   5,637   40,257 
            
Non-interest Expense          
Salaries and employee benefits  15,424   17,104   13,968   32,528   30,229 
Occupancy and equipment  2,654   2,496   2,352   5,150   4,722 
Professional services  1,919   1,996   2,027   3,915   4,177 
FDIC deposit insurance  503   326   940   829   1,844 
Data processing  1,321   1,203   1,199   2,524   2,290 
Depreciation and amortization  1,155   1,165   1,062   2,320   2,094 
Other real estate owned/foreclosure (income) expense  (96)  351   405   255   558 
Prepayment penalty on borrowings  -   -   2,082   -   2,082 
Other operating expenses  3,185   4,923   4,419   8,108   8,955 
    Total non-interest expense  26,065   29,564   28,454   55,629   56,951 
            
Income Before Income Taxes  19,500   17,514   51,152   37,014   66,328 
            
Provision for Income Taxes          
Federal  5,576   4,749   15,203   10,325   19,950 
State and local  1,199   505   5,514   1,704   6,382 
    Total taxes  6,775   5,254   20,717   12,029   26,332 
            
Net Income $12,725  $12,260  $30,435  $24,985  $39,996 
            
            
Basic earnings per common share $0.44  $0.42  $1.05  $0.86  $1.38 
Diluted earnings per common share $0.44  $0.42  $1.05  $0.86  $1.38 
Dividends per common share $0.18  $0.18  $0.17  $0.36  $0.34 
            


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
 
    June 30, March 31, December 31,
     2017   2017   2016 
ASSETS      
Cash and due from banks$48,539  $51,215  $35,857 
Securities held-to-maturity:     
 Mortgage-backed securities 7,983   -   - 
 Other securities 24,451   36,406   37,735 
Securities available for sale:     
 Mortgage-backed securities 520,012   537,905   516,476 
 Other securities 317,693   346,238   344,905 
Loans held for sale 30,565   -   - 
Loans:      
 Multi-family residential 2,243,643   2,261,946   2,178,504 
 Commercial real estate 1,349,634   1,268,770   1,246,132 
 One-to-four family ― mixed-use property 556,906   561,355   558,502 
 One-to-four family ― residential 181,213   184,201   185,767 
 Co-operative apartments 7,069   7,216   7,418 
 Construction 16,842   12,413   11,495 
 Small Business Administration 10,591   10,519   15,198 
 Taxi medallion 18,303   18,832   18,996 
 Commercial business and other 644,262   632,503   597,122 
 Net unamortized premiums and unearned loan fees 17,217   16,836   16,559 
 Allowance for loan losses (22,157)  (22,211)  (22,229)
   Net loans 5,023,523   4,952,380   4,813,464 
Interest and dividends receivable 21,439   20,602   20,228 
Bank premises and equipment, net 26,592   26,026   26,561 
Federal Home Loan Bank of New York stock 66,630   57,384   59,173 
Bank owned life insurance 130,631   129,824   132,508 
Goodwill  16,127   16,127   16,127 
Other assets 51,051   57,378   55,453 
   Total assets$6,285,236  $6,231,485  $6,058,487 
         
LIABILITIES     
Due to depositors:     
 Non-interest bearing$349,302  $344,028  $333,163 
 Interest-bearing:     
  Certificate of deposit accounts 1,332,377   1,411,819   1,372,115 
  Savings accounts 325,815   254,822   254,283 
  Money market accounts 837,565   851,129   843,370 
  NOW accounts 1,368,441   1,487,120   1,362,484 
   Total interest-bearing deposits 3,864,198   4,004,890   3,832,252 
Mortgagors' escrow deposits 41,303   61,828   40,216 
Borrowed funds  1,425,779   1,227,852   1,266,563 
Other liabilities 70,563   67,485   72,440 
   Total liabilities 5,751,145   5,706,083   5,544,634 
         
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, 2017, March 31, 2017 and December 31, 2016; 28,803,937     
 shares, 28,811,160 shares and 28,632,904 shares outstanding at June 30, 2017,     
 March 31, 2017 and December 31, 2016, respectively) 315   315   315 
Additional paid-in capital 216,447   215,501   214,462 
Treasury stock (2,726,658 shares, 2,719,435 shares and 2,897,691 shares at     
 June 30, 2017, March 31, 2017 and December 31, 2016, respectively) (51,483)  (51,224)  (53,754)
Retained earnings 375,388   367,944   361,192 
Accumulated other comprehensive loss, net of taxes (6,576)  (7,134)  (8,362)
   Total stockholders' equity 534,091   525,402   513,853 
         
   Total liabilities and stockholders' equity$6,285,236  $6,231,485  $6,058,487 
         


 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, 
   2017  2017  2016  2017  2016 
Per Share Data           
Basic earnings per share $0.44 $0.42 $1.05 $0.86 $1.38 
Diluted earnings per share $0.44 $0.42 $1.05 $0.86 $1.38 
Average number of shares outstanding for:           
  Basic earnings per common share computation  29,135,339  29,019,070  29,022,122  29,077,526  29,059,393 
  Diluted earnings per common share computation  29,135,945  29,022,745  29,034,454  29,080,182  29,072,813 
Shares outstanding  28,803,937  28,811,160  28,631,243  28,803,937  28,631,243 
Book value per common share (1) $18.54 $18.24 $17.77 $18.54 $17.77 
Tangible book value per common share (2) $18.00 $17.69 $17.22 $18.00 $17.22 
            
Stockholders' Equity           
Stockholders' equity  534,091  525,402  508,883  534,091  508,883 
Tangible stockholders' equity  518,355  509,666  493,163  518,355  493,163 
            
Average Balances           
Total loans, net $4,962,734 $4,868,048 $4,567,019 $4,915,652 $4,478,175 
Total interest-earning assets  5,918,981  5,873,799  5,612,935  5,896,514  5,551,825 
Total assets  6,218,072  6,168,848  5,897,858  6,193,596  5,836,304 
Total due to depositors  4,065,810  4,088,031  3,779,256  4,076,859  3,762,762 
Total interest-bearing liabilities  5,287,720  5,254,640  5,046,162  5,271,271  5,002,863 
Stockholders' equity  529,451  517,800  486,261  523,658  482,843 
            
Performance Ratios (3)           
Return on average assets  0.82% 0.79% 2.06% 0.81% 1.37%
Return on average equity  9.61  9.47  25.04  9.54  16.57 
Yield on average interest-earning assets  3.94  3.90  3.93  3.92  3.94 
Cost of average interest-bearing liabilities  1.11  1.06  1.05  1.08  1.06 
Interest rate spread during period  2.83  2.84  2.88  2.84  2.88 
Net interest margin  2.95  2.95  2.99  2.95  2.99 
Non-interest expense to average assets  1.68  1.92  1.93  1.80  1.95 
Efficiency ratio (4)  55.80  63.98  57.09  59.87  60.78 
Average interest-earning assets to average           
  interest-bearing liabilities  1.12X 1.12X 1.11X 1.12X 1.11X


(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, prepayment penalties from the extinguishment of debt 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, net gain and losses from the sale of securities, life insurance proceeds, and sale of buildings).


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, 2017  December 31, 2016  June 30, 2016 
          
Selected Financial Ratios and Other Data         
          
Regulatory capital ratios (for Flushing Financial Corporation):         
  Tier 1 capital $558,756  $539,228   $516,551  
  Common equity Tier 1 capital  524,830   506,432    490,015  
  Total risk-based capital  655,913   636,457    538,749  
          
  Tier 1 leverage capital (well capitalized = 5%)  9.00%  9.00%  8.80%
  Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  11.43   11.79    11.45  
  Tier 1 risk-based capital (well capitalized = 8.0%)  12.17   12.56    12.07  
  Total risk-based capital (well capitalized = 10.0%)  14.29   14.82    12.59  
          
Regulatory capital ratios (for Flushing Bank only):         
  Tier 1 capital $624,074  $607,033   $522,961  
  Common equity Tier 1 capital  624,074   607,033    522,961  
  Total risk-based capital  646,231   629,262    545,159  
          
  Tier 1 leverage capital (well capitalized = 5%)  10.04%  10.12%  8.89%
  Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  13.58   14.12    12.20  
  Tier 1 risk-based capital (well capitalized = 8.0%)  13.58   14.12    12.20  
  Total risk-based capital (well capitalized = 10.0%)  14.07   14.64    12.72  
          
Capital ratios:         
  Average equity to average assets  8.45%  8.40%  8.27%
  Equity to total assets  8.50   8.48    8.50  
  Tangible common equity to tangible assets (1)  8.27   8.24    8.26  
          
Asset quality:         
  Non-accrual loans (2) $14,130  $21,030   $20,381  
  Non-performing loans  15,459   21,416    21,923  
  Non-performing assets  15,459   21,949    25,591  
  Net charge-offs/ (recoveries)  72   (694)   (663) 
          
Asset quality ratios:         
  Non-performing loans to gross loans  0.31%  0.44%  0.47%
  Non-performing assets to total assets  0.25   0.36    0.43  
  Allowance for loan losses to gross loans  0.44   0.46    0.47  
  Allowance for loan losses to non-performing assets  143.33   101.28    86.74  
  Allowance for loan losses to non-performing loans  143.33   103.80    101.25  
          
Full-service customer facilities  19   19    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, 2017 March 31, 2017 June 30, 2016 
 Average Yield/ Average Yield/ Average Yield/ 
 BalanceInterestCost BalanceInterestCost BalanceInterestCost 
Interest-earning Assets:            
  Mortgage loans, net $4,297,697$44,8794.18%$4,213,482$44,4294.22%$3,983,615$42,9694.31%
  Other loans, net  665,037 6,7524.06  654,566 6,4563.95  583,404 5,4443.73 
     Total loans, net (1) 4,962,734 51,6314.16  4,868,048 50,8854.18  4,567,019 48,4134.24 
 Taxable securities:            
  Mortgage-backed            
   securities 532,938 3,4202.57  529,942 3,3672.54  599,247 3,7072.47 
  Other securities 217,599 2,3614.34  239,345 2,0723.46  249,956 2,1333.41 
     Total taxable securities 750,537 5,7813.08  769,287 5,4392.83  849,203 5,8402.75 
 Tax-exempt securities: (2)            
  Other securities 145,812 7742.12  146,502 7772.12  147,230 7902.15 
     Total tax-exempt securities 145,812 7742.12  146,502 7772.12  147,230 7902.15 
  Interest-earning deposits            
    and federal funds sold 59,898 1290.86  89,962 1530.68  49,483 480.39 
Total interest-earning             
  assets 5,918,981 58,3153.94  5,873,799 57,2543.90  5,612,935 55,0913.93 
Other assets 299,091    295,049    284,923   
     Total assets$6,218,072   $6,168,848   $5,897,858   
             
             
Interest-bearing Liabilities:            
  Deposits:            
     Savings accounts$279,723 3990.57 $254,255$3070.48 $265,856 3060.46 
     NOW accounts 1,517,726 2,3310.61  1,568,267 2,2070.56  1,612,704 1,9620.49 
     Money market accounts 858,066 1,6510.77  860,779 1,4990.70  483,317 6810.56 
     Certificate of deposit            
      accounts 1,410,295 5,0991.45  1,404,730 4,9401.41  1,417,379 5,1211.45 
   Total due to depositors 4,065,810 9,4800.93  4,088,031 8,9530.88  3,779,256 8,0700.85 
  Mortgagors' escrow            
      accounts 73,838 300.16  54,616 270.20  67,728 270.16 
  Total interest-bearing            
      deposits 4,139,648 9,5100.92  4,142,647 8,9800.87  3,846,984 8,0970.84 
  Borrowings 1,148,072 5,1881.81  1,111,993 4,8851.76  1,199,178 5,1051.70 
    Total interest-bearing            
      liabilities 5,287,720 14,6981.11  5,254,640 13,8651.06  5,046,162 13,2021.05 
Non interest-bearing            
  demand deposits 336,036    330,215    296,597   
Other liabilities 64,865    66,193    68,838   
  Total liabilities 5,688,621    5,651,048    5,411,597   
Equity 529,451    517,800    486,261   
  Total liabilities and            
      equity$6,218,072   $6,168,848   $5,897,858   
             
Net interest income /            
  net interest rate spread $43,6172.83% $43,3892.84% $41,8892.88%
             
Net interest-earning assets /            
  net interest margin$631,261 2.95%$619,159 2.95%$566,773 2.99%
             
Ratio of interest-earning            
  assets to interest-bearing            
  liabilities  1.12X  1.12X  1.11X


(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, $0.6 million and $1.0 million for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, 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, 2017  June 30, 2016 
 Average Yield/  Average Yield/ 
 BalanceInterestCost  BalanceInterestCost 
Interest-earning Assets:         
  Mortgage loans, net $4,255,822$89,3084.20% $3,911,470$85,4234.37%
  Other loans, net  659,830 13,2084.00   566,705 10,5483.72 
     Total loans, net (1) 4,915,652 102,5164.17   4,478,175 95,9714.29 
 Taxable securities:         
  Mortgage-backed         
     securities 531,448 6,7872.55   629,006 7,8812.51 
  Other securities 228,412 4,4333.88   239,973 3,8783.23 
      Total taxable securities 759,860 11,2202.95   868,979 11,7592.71 
 Tax-exempt securities: (2)         
  Other securities 146,155 1,5512.12   137,293 1,5822.30 
      Total tax-exempt securities 146,155 1,5512.12   137,293 1,5822.30 
  Interest-earning deposits         
      and federal funds sold 74,847 2820.75   67,378 1420.42 
Total interest-earning          
  assets 5,896,514 115,5693.92   5,551,825 109,4543.94 
Other assets 297,082     284,479   
      Total assets$6,193,596    $5,836,304   
          
          
Interest-bearing Liabilities:         
  Deposits:         
     Savings accounts$267,059 7060.53  $264,150 6040.46 
     NOW accounts 1,542,857 4,5380.59   1,617,241 3,8840.48 
     Money market accounts 859,415 3,1500.73   470,606 1,2870.55 
     Certificate of deposit         
        accounts 1,407,528 10,0391.43   1,410,765 10,2421.45 
       Total due to depositors 4,076,859 18,4330.90   3,762,762 16,0170.85 
     Mortgagors' escrow         
        accounts 64,280 570.18   58,838 530.18 
      Total interest-bearing         
        deposits 4,141,139 18,4900.89   3,821,600 16,0700.84 
   Borrowings 1,130,132 10,0731.78   1,181,263 10,3621.75 
      Total interest-bearing         
        liabilities 5,271,271 28,5631.08   5,002,863 26,4321.06 
   Non interest-bearing         
     demand deposits 333,142     285,267   
   Other liabilities 65,525     65,331   
       Total liabilities 5,669,938     5,353,461   
Equity 523,658     482,843   
       Total liabilities and         
          equity$6,193,596    $5,836,304   
          
Net interest income /         
  net interest rate spread $87,0062.84%  $83,0222.88%
          
Net interest-earning assets /         
  net interest margin$625,243 2.95% $548,962 2.99%
          
Ratio of interest-earning         
  assets to interest-bearing         
  liabilities  1.12X   1.11X


(1)Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.0 million and $2.5 million for the six months ended June 30, 2017 and 2016, 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 2017 vs.     June 2017 vs.
    June 30, March 31, December 31, December 2016 September 30, June 30, June 2016
(Dollars in thousands)2017 2017 2016 % Change 2016 2016 % Change
Deposits              
Non-interest bearing$349,302 $344,028 $333,163 4.8% $320,060 $317,112 10.2%
Interest bearing:             
 Certificate of deposit             
  accounts 1,332,377  1,411,819  1,372,115 -2.9%  1,384,551  1,411,550 -5.6%
 Savings accounts 325,815  254,822  254,283 28.1%  258,058  260,528 25.1%
 Money market accounts 837,565  851,129  843,370 -0.7%  733,361  452,589 85.1%
 NOW accounts 1,368,441  1,487,120  1,362,484 0.4%  1,296,475  1,453,540 -5.9%
  Total interest-bearing             
   deposits 3,864,198  4,004,890  3,832,252 0.8%  3,672,445  3,578,207 8.0%
                 
   Total deposits$4,213,500 $4,348,918 $4,165,415 1.2% $3,992,505 $3,895,319 8.2%


 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Origination and Purchases
 
  For the three months For the six months ended
  June 30, March 31, June 30, June 30,
(In thousands) 2017 2017 2016 2017 2016
Multi-family residential $63,469 $126,708 $162,364 $190,177 $232,007
Commercial real estate  123,559  35,732  114,007  159,291  176,144
One-to-four family – mixed-use property  13,656  18,542  11,630  32,198  29,875
One-to-four family – residential  4,860  5,920  4,195  10,780  13,688
Co-operative apartments  -  -  470  -  470
Construction  4,429  2,544  2,427  6,973  4,114
Small Business Administration  1,870  641  314  2,511  6,315
Taxi medallion  -  -  -  -  -
Commercial business and other  49,312  76,484  92,456  125,796  154,490
  Total $261,155 $266,571 $387,863 $527,726 $617,103


Loan Composition
 
          June 30, 2017 vs.     June 2017 vs.
    June 30, March 31, December 31, December 2016 September 30, June 30, June 2016
(Dollars in thousands) 2017   2017   2016  % Change  2016   2016  % Change
Loans held for investment:               
Multi-family residential$2,243,643  $2,261,946  $2,178,504  3.0%  $2,171,289  $2,159,138  3.9% 
Commercial real estate 1,349,634   1,268,770   1,246,132  8.3%   1,195,266   1,146,400  17.7% 
One-to-four family ―               
 mixed-use property 556,906   561,355   558,502  -0.3%   555,691   566,702  -1.7% 
One-to-four family ― residential 181,213   184,201   185,767  -2.5%   183,993   190,251  -4.8% 
Co-operative apartments 7,069   7,216   7,418  -4.7%   7,494   7,571  -6.6% 
Construction 16,842   12,413   11,495  46.5%   11,250   9,899  70.1% 
Small Business Administration 10,591   10,519   15,198  -30.3%   14,339   14,718  -28.0% 
Taxi medallion 18,303   18,832   18,996  -3.6%   20,536   20,641  -11.3% 
Commercial business and other 644,262   632,503   597,122  7.9%   564,972   564,084  14.2% 
Net unamortized premiums               
 and unearned loan fees 17,217   16,836   16,559  4.0%   16,447   16,875  2.0% 
Allowance for loan losses (22,157)  (22,211)  (22,229) -0.3%   (21,795)  (22,198) -0.2% 
   Net loans$5,023,523  $4,952,380  $4,813,464  4.4%  $4,719,482  $4,674,081  7.5% 


Loans Held for Investment Activity
 
  Three Months Ended
  June 30, March 31, December 31, September 30, June 30,
(In thousands)  2017   2017   2016   2016   2016 
Loans originated and purchased$261,155  $266,571  $282,592  $233,243  $387,863 
Principal reductions (143,195)  (122,897)  (187,780)  (183,583)  (149,308)
Loans transferred to held-for-sale (30,565)  -   -   -   - 
Loans sold  (16,337)  (4,874)  -   (3,693)  (2,310)
Loan charged-offs (350)  (179)  (370)  (541)  (101)
Foreclosures  -   -   (138)  -   - 
Net change in deferred (fees) and costs 381   277   112   (428)  1,594 
Net change in the allowance for loan losses 54   18   (434)  403   (205)
 Total loan activity$71,143  $138,916  $93,982  $45,401  $237,533 


 
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)  2017   2017   2016   2016   2016 
Loans 90 Days Or More Past Due          
 and Still Accruing:          
Multi-family residential $-  $-  $-  $-  $574 
Commercial real estate  -   75   -   1,183   320 
One-to-four family - mixed-use property  -   -   386   470   635 
One-to-four family - residential  -   -   -   -   13 
Construction  602   602   -   -   - 
Taxi medallion  727   -   -   -   - 
Commercial business and other  -   -   -   -   - 
 Total  1,329   677   386   1,653   1,542 
            
Non-accrual Loans:          
Multi-family residential  1,537   1,354   1,837   1,649   3,162 
Commercial real estate  1,948   1,462   1,148   1,157   2,299 
One-to-four family - mixed-use property  2,971   3,328   4,025   4,534   6,005 
One-to-four family - residential  7,616   7,847   8,241   8,340   8,406 
Small Business Administration  53   58   1,886   2,132   185 
Taxi medallion  -   3,771   3,825   3,971   196 
Commercial business and other  5   38   68   99   128 
 Total  14,130   17,858   21,030   21,882   20,381 
            
 Total Non-performing Loans  15,459   18,535   21,416   23,535   21,923 
            
Other Non-performing Assets:          
Real estate acquired through foreclosure  -   -   533   2,839   3,668 
 Total  -   -   533   2,839   3,668 
            
 Total Non-performing Assets $15,459  $18,535  $21,949  $26,374  $25,591 
            
Non-performing Assets to Total Assets  0.25%  0.30%  0.36%  0.44%  0.43%
Allowance For Loan Losses to Non-performing Loans  143.3%  119.8%  103.8%  92.6%  101.3%


Net Charge-Offs (Recoveries) 
  
   Three Months Ended 
   June 30, March 31, December 31, September 30, June 30, 
(In thousands)  2017   2017   2016   2016   2016  
Multi-family residential $(53) $(16) $(103) $79  $(183) 
Commercial real estate  4   (68)  -   (11)  -  
One-to-four family – mixed-use property  (67)  34   (520)  24   36  
One-to-four family – residential  170   -   40   -   7  
Small Business Administration  14   26   186   317   (42) 
Taxi medallion  -   54   142   -   -  
Commercial business and other  (14)  (12)  (179)  (6)  (23) 
  Total net loan charge-offs (recoveries) $54  $18  $(434) $403  $(205) 
             

Core Diluted EPS, Core ROAE, Core ROAA, 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 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,
   2017  2017  2016   2017  2016 
   
        
GAAP income before income taxes$19,500 $17,514 $51,152  $37,014 $66,328 
        
Net loss from fair value adjustments 1,159  378  1,115   1,537  2,102 
Net gain on sale of securities -  -  (2,363)  -  (2,363)
Gain from life insurance proceeds (6) (1,161) -   (1,167) (411)
Net gain on sale of buildings -  -  (33,814)  -  (33,814)
Prepayment penalty on borrowings -  -  2,082   -  2,082 
        
Core income before taxes 20,653  16,731  18,172   37,384  33,924 
        
Provision for income taxes for core income 7,129  5,020  6,851   12,149  12,892 
        
Core net income$13,524 $11,711 $11,321  $25,235 $21,032 
        
GAAP diluted earnings per common share$0.44 $0.42 $1.05  $0.86 $1.38 
        
Net (gain) loss from fair value adjustments, net of tax 0.02  0.01  0.02   0.04  0.04 
Net gain on sale of securities, net of tax -  -  (0.05)  -  (0.05)
Gain from life insurance proceeds -  (0.04) -   (0.04) (0.01)
Net gain on sale of buildings, net of tax -  -  (0.67)  -  (0.67)
Prepayment penalty on borrowings -  -  0.04   -  0.04 
        
Core diluted earnings per common share*$0.46 $0.40 $0.39  $0.87 $0.72 
        
        
Core net income, as calculated above$13,524 $11,711 $11,321  $25,235 $21,032 
Average assets 6,218,072  6,168,848  5,897,858   6,193,596  5,836,304 
Average equity 529,451  517,800  486,261   523,658  482,843 
Core return on average assets** 0.87% 0.76% 0.77%  0.81% 0.72%
Core return on average equity** 10.22% 9.05% 9.31%  9.64% 8.71%
        
*  Core diluted earnings per common share may not foot due to rounding.    
**  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)   2017  2016  2016 
Total Equity  $534,091 $513,853 $508,883 
Less:       
 Goodwill   (16,127) (16,127) (16,127)
 Intangible deferred tax liabilities   391  389  407 
  Tangible Stockholders' Common Equity$  518,355 $  498,115 $  493,163 
         
Total Assets  $6,285,236 $6,058,487 $5,986,727 
Less:       
 Goodwill   (16,127) (16,127) (16,127)
 Intangible deferred tax liabilities   391  389  407 
  Tangible Assets  $6,269,500 $6,042,749 $5,971,007 
         
Tangible Stockholders' Common Equity to Tangible Assets 8.27% 8.24% 8.26%
          
Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer                 
Flushing Financial Corporation                                                                                       
(718) 961-5400

Source: Flushing Financial Corporation