Record Net Interest Income and Record Low Cost of Funds

John R. Buran, President and CEO Commentary

UNIONDALE, N.Y., April 26, 2022 (GLOBE NEWSWIRE) -- The Company reported first quarter 2022 GAAP EPS of $0.58, down 3.3% YoY, ROAA of 0.91%, and ROAE of 10.83%. For the first quarter, Core EPS of $0.61 increased, 13.0% YoY with ROAA of 0.94% and ROAE of 11.27%.

NIM Expansion QoQ; Pipeline at Record Level; Business Loans Increase. Record net interest income of $63.5 million increased 4.2% YoY and 1.3% QoQ. NIM expanded 18 bps to 3.36% YoY and 7 bps QoQ. Core NIM increased by 25 bps to 3.31% YoY and 10 bps QoQ. The increase in the NIM QoQ was primarily due to a 7 bps improvement in the cost of funds. Period end net loans, excluding PPP, were flat QoQ, with commercial business and other loans increasing 14% annualized. Loan closings, excluding PPP, were up 65% YoY, but repayment speeds remained elevated both QoQ and YoY. With the Federal Reserve increasing short-term rates, we expect refinance volume to slow in 2022. Additionally, we continue to benefit from the merger disruption in our markets as we have hired 30 people, including 12 revenue producers, over the past year from institutions involved with mergers.

Returned 84% of Earnings in 1Q22; Stable Tangible Book Value Per Share. The Company returned 84% of earning in 1Q22 through dividends and share repurchases of 360,000 shares of common stock at an average price of $23.52. Despite rising rates, book value and tangible book value per share were stable QoQ, while TCE/TA¹ was 8.05% at March 31, 2022 compared to 8.22% QoQ.

• Net interest income increased 1.3% QoQ (as funding costs declined 7 bps), and 4.2% YoY to a record $63.5 million; core net interest income expanded 2.4% QoQ and 6.8% YoY to a record $62.6 million
  
• Net interest margin FTE increased 7 bps QoQ and 18 bps YoY to 3.36%, and core net interest margin FTE increased 10 bps QoQ, and 25 bps YoY to 3.31%; Core NIM expansion QoQ was primarily driven by lower cost of funds
  
• Period end net loans, excluding PPP, were flat QoQ and up 1.2% YoY; loan closings were $329.3 million in 1Q22, down 9.2% QoQ, but up 2.0% YoY (up 64.9% excluding PPP)
  
• Average deposits, including mortgage escrow, decreased 0.8% QoQ, but increased 2.0% YoY to $6.4 billion, with core deposits comprising 86.1% of total average deposits; record average noninterest bearing deposits, up 17.0% YoY
  
• Loan pipeline increased 76.6% YoY to $663.7 million
  
• Provision for credit losses was $1.4 million in 1Q22 exceeding net charge-offs of $0.9 million
  
• NPAs decreased 5.8% QoQ and 33.7% YoY to $14.1 million; criticized and classified loans were up 3.3% QoQ to $59.5 million, representing 0.90% of loans
  
• Tangible Common Equity to Tangible Assets was 8.05% down from 8.22% in 4Q21; the change in AOCI impacted this ratio by 11 bps in 1Q22
  
• Repurchased 360,000 shares at an average price of $23.52; dividends and share repurchases were 84% of net income in 1Q22
  
  

Net interest income totaled $63.5 million in 1Q22 (an increase of 4.2% YoY, and 1.3% QoQ), compared to $62.7 million in 4Q21, $63.4 million in 3Q21, $61.0 million in 2Q21, and $60.9 million in 1Q21.

• Net interest margin, FTE (“NIM”) of 3.36% increased 18 bps YoY and 7 bps QoQ; PPP loans caused a 3 bps, 3 bps, and 2 bps positive impact on the NIM in 1Q22, 4Q21, and 3Q21, respectively, neutral impact in 2Q21, and a drag of 4 bps in 1Q21
• Prepayment penalty income from loans and securities, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $2.6 million (14 bps to the NIM) in 1Q22 compared to $3.1 million (16 bps) in 4Q21, $3.4 million (19 bps) in 3Q21, $1.9 million (10 bps) in 2Q21, and $3.3 million (17 bps) in 1Q21
• Excluding the items in the previous bullet, net interest margin was 3.22% in 1Q22 compared to 3.13% in 4Q21, 3.15% in 3Q21, 3.04% in 2Q21, and 3.01% in 1Q21, or an increase of 21 bps YoY and 9 bps QoQ
• Net PPP loan fees were $0.9 million in 1Q22, $1.2 million in 4Q21, $1.3 million in 3Q21, $1.2 million in 2Q21, and $0.5 million in 1Q21

The Company recorded a provision for credit losses of $1.4 million in 1Q22, $0.8 million in 4Q21, and $2.8 million in 1Q21 compared to a benefit for credit losses of $6.9 million in 3Q21 and $1.6 million in 2Q21.

• 1Q22 provision for credit losses exceed net charge-offs by $0.4 million
• Net charge-offs (recoveries) were $0.9 million in 1Q22 (6 bps of average loans), $(29) thousand in 4Q21 (negligible as compared to average loans), $(0.6) million in 3Q21 ((4) bps), $0.9 million in 2Q21 (5 bps), and $2.9 million in 1Q21 (17 bps)

Noninterest income (loss) was $1.3 million in 1Q22, $(0.3) million in 4Q21, $0.9 million in 3Q21, $(3.2) million in 2Q21, and $6.3 million in 1Q21.

• Noninterest income included net gains (losses) from fair value adjustments of $(1.8) million in 1Q22 or $(0.04) per share, net of tax, $(5.1) million in 4Q21 or $(0.13) per share, net of tax, $(2.3) million in 3Q21 or $(0.05) per share, net of tax, $(6.5) million or $(0.15) per share, net of tax in 2Q21, and $1.0 million or $0.02 per share, net of tax in 1Q21
• Absent all above items and other immaterial adjustments, core noninterest income was $3.1 million in 1Q22, down 33.7% YoY, and 35.8% QoQ
• Included in 4Q21 core noninterest income was a one-time $2.0 million ($0.05 per share, net of tax) dividend received on retirement plan investments
  

Noninterest expense totaled $38.8 million in 1Q22 (an increase of 1.7% YoY and flat QoQ) compared to $38.8 million in 4Q21, $36.3 million in 3Q21, $34.0 million in 2Q21, and $38.2 million in 1Q21.

• Noninterest expense includes no pre-tax merger benefits or costs for 1Q22 compared to $17 thousand pre-tax merger benefit (<$0.01 per share, net of tax) in 4Q21, $2.1 million of pre-tax merger charges ($0.05 per share, net of tax) in 3Q21, $0.5 million of pre-tax merger benefits ($(0.01) per share, net of tax) in 2Q21, and $1.0 million of pre-tax merger charges ($0.02 per share, net of tax) in 1Q21
• Excluding the above items and other immaterial adjustments, core operating expenses were $38.7 million in 1Q22, up 4.3% YoY and flat QoQ
• 1Q22 includes $4.3 million of seasonal compensation expense compared to $3.3 million a year ago
• Included in 4Q21 noninterest expense was a one-time $4.3 million ($0.11 per share, net of tax) of increased compensation and benefits for all employees due to record year of earnings in 2021 and employee performance through the pandemic.
• The efficiency ratio was 58.9% in 1Q22, 58.7% in 4Q21, 52.3% in 3Q21, 53.4% in 2Q21, and 58.6% in 1Q21
  

The provision for income taxes was $6.4 million in 1Q22 compared to $4.7 million in 4Q21, $9.4 million in 3Q21, $6.2 million in 2Q21, and $7.2 million in 1Q21.

• The effective tax rate was 26.1% in 1Q22, 20.8% in 4Q21, 27.0% in 3Q21, 24.2% in 2Q21, and 27.4% in 1Q21
• The 4Q21 effective tax rate declined due to lower levels of taxable state income and higher percentage of permanent differences
• The 2Q21 effective tax rate includes $0.8 million benefit from a state tax rate change; absent this benefit the effective tax rate would have been 27.2%
  
  

Average loans were $6.6 billion, a decrease of 1.8% YoY, but an increase of 0.3% QoQ.

• Total loan closings were $329.3 million in 1Q22, $362.7 million in 4Q21, $243.9 million in 3Q21, $324.4 million ($308.9 million excluding PPP) in 2Q21, and $322.9 million ($199.7 million excluding PPP) in 1Q21
• The loan pipeline reached a new record level of $663.7 million at March 31, 2022 was up 76.6% YoY and 54.6% QoQ
• PPP loans held at the end of each quarter totaled $43.2 million at 1Q22, $77.4 million at 4Q21, $130.8 million at 3Q21, $197.3 million at 2Q21, and $251.0 million at 1Q21; forgiven PPP loans were $34.1 million in 1Q22, $53.4 million in 4Q21, $66.5 million in 3Q21, $69.2 million in 2Q21, and $24.1 million in 1Q21; remaining unamortized net PPP fees were $1.1 million at March 31, 2022; The PPP loan program was created by the CARES Act in response to the COVID-19 pandemic
• Period end net loans, excluding PPP loans, totaled $6.5 billion, up 1.2% YoY and flat QoQ

Average Deposits totaled $6.4 billion, increasing 2.0% YoY, but down 0.8% QoQ.

• Average core deposits (non-CD deposits) increased to 86.1% of total average deposits (including escrow deposits) in 1Q22, compared to 82.5% a year ago
• Average noninterest bearing deposits increased 17.0% YoY and 2.5% QoQ and comprised 15.6% of total average deposits (including escrow deposits) in 1Q22 compared to 13.6% a year ago

Credit Quality: Nonperforming loans totaled $14.1 million in 1Q22, $14.9 million in 4Q21, $20.2 million in 3Q21, $17.6 million in 2Q21, and $21.2 million in 1Q21.

• Nonperforming assets were down 33.7% YoY and 5.8% QoQ
• Criticized and classified loans totaled $59.5 million in 1Q22 (90 bps of loans), $57.7 million in 4Q21 (87 bps of loans), $68.9 million in 3Q21 (104 bps of loans), $69.2 million at 2Q21 (103 bps), and $63.1 million at 1Q21 (94 bps)
• Criticized and classified assets are composed of criticized and classified loans, as detailed above, plus one criticized investment security totaling $21.0 million in 1Q22, 4Q21, and 3Q21, which is currently under a principal payment forbearance agreement (interest payments are received)
• Loans classified as troubled debt restructured (TDR) totaled $15.1 million in 1Q22 compared to $12.7 million in 4Q21 and $15.2 million a year ago
• Over 87% of gross loans are collateralized by real estate with an average loan-to-value ratio of <38% as of March 31, 2022
• Allowance for credit losses were 0.57% of loans at 1Q22 compared to 0.56% at 4Q21 and 0.67% a year ago
• Allowance for credit losses were 266.1% of nonperforming loans at 1Q22 compared to 248.7% at 4Q21 and 212.9% a year ago
  

Capital: Book value per common share was $22.26 at 1Q22, stable QoQ and up 7.8% from $20.65 YoY; tangible book value per common share, a non-GAAP measure, was $21.61 in 1Q22, flat with 4Q21 and up 8.1% from $19.99 at 1Q21.

• The Company paid a dividend of $0.22 per share and repurchased 360,000 shares at an average price of $23.52 in 1Q22
• As of the end of 1Q22, 488,187 shares remain subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Tangible common equity to tangible assets was 8.05% at 1Q22 compared to 8.22% at 4Q21 and 7.60% at 1Q21
• The Company and the Bank remain well capitalized under all applicable regulatory requirements
• The leverage ratio was 9.05% in 1Q22 compared to 8.98% in 4Q21 and 8.44% in 1Q21
  
  

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, April 27, 2022, at 9:30 AM (ET) to discuss the Company’s first quarter 2022 results and strategy.
• Dial-in for Live Call: 1-877-509-5836; Canada 855-669-9657
• Webcast: https://services.choruscall.com/links/ffic220427.html 
• Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658
• Replay Access Code: 5300568
• The conference call will be simultaneously webcast and archived

Second Quarter 2022 Earnings Release Date:

The Company plans to release Second Quarter 2022 financial results after the market close on July 26, 2022; followed by a conference call at 9:30 AM (ET) on July 27, 2022.

A detailed announcement will be issued prior to the second quarter’s close confirming the date and time of the earnings release.

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, an FDIC insured, New York State—chartered commercial bank that operates banking offices in Queens, Brooklyn, Manhattan, and on Long Island. The Bank has been building relationships with families, business owners, and communities since 1929. Today, it offers the products, services, and conveniences associated with large commercial banks, including a full complement of deposit, loan, equipment finance, and cash management services. Rewarding customers with personalized attention and bankers that can communicate in the languages prevalent within these multicultural markets is what makes the Bank uniquely different. As an Equal Housing Lender and leader in real estate lending, the Bank’s experienced lending teams create mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also fosters relationships with consumers nationwide through its online banking division with the iGObanking® and BankPurely® brands.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at FlushingBank.com. Flushing Financial Corporation’s earnings release and presentation slides will be available prior to the conference call at www.flushingbank.com under Investor Relations.

“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, 2021 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.

Investor Contact: Susan K. Cullen, SEVP, CFO and Treasurer, 718-961-5400

#FF

- Statistical Tables Follow -

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(1)} Ratios are presented on an annualized basis, where appropriate.
⁽²⁾ Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
⁽³⁾ Efficiency ratio, a non-GAAP measure, was calculated by dividing noninterest expense (excluding merger expense, OREO expense, prepayment penalty on borrowings, the net gain/loss from the sale of OREO and net amortization of purchase accounting adjustments) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges and net amortization of purchase accounting adjustments) and noninterest income (excluding life insurance proceeds, net gains and losses from the sale or disposition of securities, assets and fair value adjustments).
⁽⁴⁾ Calculated by dividing stockholders’ equity by shares outstanding.
⁽⁵⁾ 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”.
⁽⁶⁾ See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
⁽⁷⁾ Excludes performing nonaccrual TDR loans.