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Flushing Financial Corporation Reports 3Q21 GAAP EPS of $0.81 and Record Core EPS of $0.88

Oct 26, 2021 5:30 PM

John R. Buran, President and CEO Commentary

UNIONDALE, N.Y., Oct. 26, 2021 (GLOBE NEWSWIRE) -- The Company reported third quarter 2021 GAAP EPS of $0.81, up 62.0% YoY, ROAA of 1.26% and ROAE of 15.42%. For the period, Core EPS of $0.88 increased 57.1% YoY with ROAA of 1.38% and ROAE of 16.88%. The strong results were from the successful implementation of our business strategy resulting in the sixth consecutive quarter of record net interest income, a record loan pipeline, and the second consecutive quarter of record core earnings.

“Loans, excluding SBA Payment Protection Program (“PPP”), were flat QoQ but increased 12% YoY. The Company’s loan pipeline increased 35% YoY and 23% QoQ to record levels as the metro New York City economy continues to normalize. Additionally, there have been eight announced or recently closed bank mergers in the Long Island market. The market has $328 billion of deposits and 18% or $60 billion involve a merger participant. As a leading community bank in this market, Flushing Bank is poised to benefit from merger disruption. The combination of an improving economy, broad based and record loan pipelines, and merger disruption should lead to positive loan growth into 2022.”

- John R. Buran, President and CEO

Sixth Consecutive Quarter of Record Net Interest Income; Favorable Outlook. Net interest income of $63.4 million increased 27% YoY and 4% QoQ. NIM expanded 20 bps to 3.34% from 3.14% in 2Q21, while Core NIM increased by 13 bps to 3.27% during the same period. NIM expansion was the result of cost of funds declining 4 bps, while asset yields increased 15 bps, with 8 bps due to the change in hedge fair values, increased purchase accounting accretion, and net prepayment penalty income. The funding mix improved with core deposits totaling 84% of average deposits and average borrowings declined 37% YoY. Weighted average rate on loan closings (ex PPP) rose 13 bps QoQ and the steeper yield curve should have a positive impact on net interest income over time.

Capital Target Achieved; Share Repurchase Activity Resumes. Following the closing of the Empire acquisition approximately one year ago, the Company announced the goal of a TCE ratio of 8% or better by the end of 2021. This target was achieved during 3Q21 even as the Company repurchased 285,643 shares of common stock at an average price of $22.42 per share. Our capital priorities remain to 1) profitabily grow the balance sheet, 2) return dividends to shareholders, and 3) opportunistically repurchase shares.

Key Financial Metrics1
            
  3Q21  2Q21 1Q21 4Q20 3Q20
GAAP:           
EPS $0.81   $0.61 $0.60 $0.11 $0.50
ROAA (%)  1.26    0.93  0.93  0.18  0.81
ROAE (%)  15.42    11.95  12.29  2.27  9.94
NIM FTE (%)  3.34    3.14  3.18  3.08  3.00
Core:           
EPS $0.88   $0.73 $0.54 $0.58 $0.56
ROAA (%)  1.38    1.11  0.83  0.92  0.91
ROAE (%)  16.88    14.27  10.96  11.67  11.22
Core NIM FTE (%)  3.27    3.14  3.06  3.03  2.98
Efficiency Ratio (%)  52.3    53.4  58.6  57.6  55.4
Credit Quality:           
NPAs/Loans&REO (%)  0.31    0.26  0.31  0.31  0.42
LLRs/Loans (%)  0.55    0.64  0.67  0.67  0.65
LLRs/NPLs (%)  179.86    242.55  212.87  214.27  154.66
NCOs/Avg Loans (%)  (0.04)   0.05  0.17  0.04  0.06
Balance Sheet:           
Avg Loans ($B) $6.6   $6.7 $6.7 $6.4 $5.9
Avg Dep ($B) $6.4   $6.5 $6.3 $5.5 $5.0
Book Value/Share $21.78   $21.16 $20.65 $20.11 $20.78
Tangible BV/Share $21.13   $20.51 $19.99 $19.45 $20.22
TCE/TA (%)  8.04    7.80  7.60  7.52  8.10
            

1 See “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Margin to Core and Base Net Interest Income and Net Interest Margin.”

3Q21 Highlights
  • Record net interest income up 3.8% QoQ and 26.9% YoY to $63.4 million, due to a decrease in funding costs and an increase in asset yields from an increase in hedge fair values, purchase accounting accretion, and net prepayment penalty income; core net interest income was up 1.5% QoQ and 24.9% YoY to $62.1 million
  • Net interest margin FTE increased 20 bps QoQ and 34 bps YoY to 3.34%, and core net interest margin FTE was up 13 bps QoQ and 29 bps YoY to 3.27%; Core NIM expansion QoQ primarily was due to an improvement in funding costs and a change in balance sheet mix
  • Period end loans, excluding PPP, were flat QoQ but increased 11.6% YoY; loan closings were $243.9 million in 3Q21, down 24.8% QoQ but up 56.8% YoY  
  • Average deposits declined 1.6% QoQ, but increased 28.2% YoY to $6.4 billion, with core deposits 84% of total average deposits
  • Loan pipeline increased 34.7% YoY to a record $530.7 million
  • Benefit for credit losses was $6.9 million due to a better economic outlook, strong LTVs, and improving credit metrics; net recoveries were $0.6 million or 4 bps of average loans in 3Q21
  • NPAs increased 14.9% QoQ to $20.2 million, but down 18.6% YoY; criticized and classified assets were down 0.4% QoQ to $68.9 million (representing 1.04% of loans)
  • Tangible Common Equity to Tangible Assets improved to 8.04% from 7.80% in 2Q21
  • Repurchased 285,643 shares at an average price of $22.42; dividends and share repurchases were 51.2% of net income in 3Q21
Income Statement Highlights
              Y/Y Q/Q
($000s, except EPS)  3Q21  2Q21 1Q21 4Q20 3Q20 Change Change
                 
Net Interest Income  $63,364   $61,039  $60,892 $55,732  $49,924 26.9%  3.8% 
(Benefit) Provision for Credit Losses   (6,927)   (1,598)  2,820  3,862   2,470 (380.4) 333.5 
Non-interest Income (Loss)   866    (3,210)  6,311  (1,181)  1,351 (35.9) (127.0)
Non-interest Expense   36,345    34,011   38,159  46,811   29,985 21.2  6.9 
Income Before Income Taxes   34,812    25,416   26,224  3,878   18,820 85.0  37.0 
Provision for Income Taxes   9,399    6,158   7,185  417   4,489 109.4  52.6 
Net Income  $25,413   $19,258  $19,039 $3,461  $14,331 77.3  32.0 
Diluted EPS  $0.81   $0.61  $0.60 $0.11  $0.50 62.0  32.8 
Avg. Diluted Shares (000s)   31,567    31,677   31,604  30,603   28,874 9.3  (0.3)
                 
Core Net Income1  $27,829   $22,994  $16,973 $17,784  $16,168 72.1  21.0 
Core EPS1  $0.88   $0.73  $0.54 $0.58  $0.56 57.1  20.5 

1 See Reconciliation of GAAP Earnings and Core Earnings

Net interest income totaled $63.4 million in 3Q21 (an increase of 26.9% YoY and 3.8% QoQ), $61.0 million in 2Q21, $60.9 million in 1Q21, $55.7 million in 4Q20, and $49.9 million in 3Q20.

  • Net interest margin, FTE (“NIM”) of 3.34%, increased 34 bps YoY and 20 bps QoQ; PPP loans caused a 2 bps positive impact on the NIM in 3Q21, neutral impact in 2Q21, and a drag of 4 bps in 1Q21, 3 bps in 4Q20, and 2 bps in 3Q20
  • Prepayment penalty income from loans and securities, net reversals and recoveries of interest from non-accrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $3.4 million or 19 bps to the NIM compared to $1.9 million (10 bps) in 2Q21, $3.3 million (17 bps) in 1Q21, $2.1 million (11 bps) in 4Q20, and $1.7 million (11 bps) in 3Q20, respectively
  • Excluding the items in the previous bullet, net interest margin was 3.15% in 3Q21 compared to 3.04% in 2Q21, 3.01% in 1Q21, 2.97% in 4Q20, and 2.89% in 3Q20, or an increase of 26 bps YoY and 11 bps QoQ
  • Net PPP loan fees were $1.3 million in 3Q21, $1.2 million in 2Q21, $0.5 million in 1Q21, $0.4 million in 4Q20, and $0.2 million in 3Q20

The Company recorded a benefit for credit losses of $6.9 million in 3Q21 compared to $1.6 million in 2Q21, and provisions for credit losses of $2.8 million in 1Q21, $3.9 million in 4Q20, and $2.5 million in 3Q20.

  • 3Q21 benefit for credit losses ($0.16 per share, net of tax) was driven by the improving economic outlook supported by the low LTVs in the real estate portfolio and low inherent risk in the total portfolio
  • Net charge-offs (recoveries) were $(0.6) million in 3Q21 ((4) bps of average loans), $0.9 million in 2Q21 (5 bps), $2.9 million in 1Q21 (17 bps), $0.6 million in 4Q20 (4 bps), and $0.8 million in 3Q20 (6 bps)

Non-interest income (loss) was $0.9 million in 3Q21, $(3.2) million in 2Q21, $6.3 million in 1Q21, $(1.2) million in 4Q20 and $1.4 million in in 3Q20.

  • Non-interest income included net gains (losses) from fair value adjustments of $(2.3) million in 3Q21 $(0.05) per share, net of tax, $(6.5) million $(0.15) per share, net of tax in 2Q21, $1.0 million $0.02 per share, net of tax in 1Q21, $(4.1) million $(0.11) per share, net of tax in 4Q20, and $(2.2) million $(0.06) per share, net of tax in 3Q20
  • Absent all above items and other immaterial adjustments, core non-interest income was $3.2 million in 3Q21, down 11.5% YoY, and 1.6% QoQ

Non-interest expense totaled $36.3 million in 3Q21 (an increase of 21.2% YoY and 6.9% QoQ), compared to $34.0 million in 2Q21, $38.2 million in 1Q21, $46.8 million in 4Q20, and $30.0 million in 3Q20.

  • 3Q21 non-interest expense includes $2.1 million of pre-tax merger charges ($0.05 per share, net of tax)
  • 2Q21 non-interest expense includes $0.5 million of pre-tax merger benefits primarily related to a refund received from a data processing vendor ($(0.01) per share, net of tax)
  • 1Q21 non-interest expense includes $1.0 million of pre-tax merger charges ($0.02 per share, net of tax); 1Q21 includes $3.3 million of seasonal compensation expense
  • 4Q20 non-interest expense includes $5.3 million pre-tax merger charges ($0.14 per share, net of tax) and $7.8 million pre-tax debt prepayment penalties ($0.20 per share, net of tax)
  • 3Q20 non-interest expense includes merger charges of $0.4 million ($0.01 per share, net of tax)
  • Excluding the above items and other immaterial adjustments, core operating expenses were $34.1 million in 3Q21, up 15.4% YoY, but down 0.7% QoQ
  • The efficiency ratio was 52.3% in 3Q21, 53.4% in 2Q21, 58.6% in 1Q21, 57.6% in 4Q20, and 55.4% in 3Q20

The provision for income taxes was $9.4 million in 3Q21, compared to $6.2 million in 2Q21, $7.2 million in 1Q21, $0.4 million in 4Q20, and $4.5 million in 3Q20.

  • The effective tax rate was 27.0% in 3Q21, 24.2% in 2Q21, 27.4% in 1Q21, 10.8% in 4Q20, and 23.9% in 3Q20
  • 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%
Balance Sheet, Credit Quality, and Capital Highlights
             Y/Y Q/Q
($000s, except per share data) 3Q21  2Q21 1Q21 4Q20 3Q20 Change Change
Average Loans And Deposits               
Loans $6,633  $6,687 $6,700 $6,376 $5,904 12.3%  (0.8)%
Deposits  6,408   6,511  6,285  5,515  4,999 28.2  (1.6)
                
Credit Quality               
Nonperforming Loans $20,217  $17,592 $21,186 $21,073 $24,792 (18.5)% 14.9% 
Nonperforming Assets  20,217   17,592  21,221  21,108  24,827 (18.6) 14.9 
Criticized and Classified Assets  68,913   69,161  63,130  71,691  42,181 63.4  (0.4)
Allowance for Credit Losses/Loans (%)  0.55   0.64  0.67  0.67  0.65 (10)bps (9)bps
                
Capital               
Book Value/Share $21.78  $21.16 $20.65 $20.11 $20.78 4.8%  2.9% 
Tangible Book Value/Share  21.13   20.51  19.99  19.45  20.22 4.5  3.0 
Tang. Common Equity/Tang. Assets (%)  8.04   7.80  7.60  7.52  8.10 (6)bps 24bps 
Leverage Ratio (%)  8.83   8.50  8.44  8.38  9.03 (20) 33 

Average loans were $6.6 billion, an increase of 12.4% YoY, but a decline of 0.8% QoQ.

  • Total loan closings were $243.9 million in 3Q21, $324.4 million in 2Q21, $322.9 million in 1Q21, $316.0 million in 4Q20, and $155.6 million in 3Q20
  • The loan pipeline increased to a record $530.7 million at September 30, 2021, up 34.7% YoY and 22.7% QoQ
  • PPP loans were $130.8 million at 3Q21, $197.3 million at 2Q21, $251.0 million at 1Q21, $151.9 million at 4Q20, and $111.6 million at 3Q20; forgiven PPP loans were $66.5 million in 3Q21, $69.2 million in 2Q21 and $24.1 million in 1Q21; unamortized net PPP fees were $3.2 million at September 30, 2021
  • Period end loans, excluding PPP loans, totaled $6.5 billion, up 11.6% YoY and flat QoQ

Average Deposits totaled $6.4 billion, increasing 28.2% YoY, but down 1.6% QoQ.

  • Average core deposits (non-CD deposits) increased to 83.8% of total average deposits (including escrow deposits) in 3Q21, compared to 77.9% a year ago
  • Average non-interest bearing deposits increased 58.3% YoY and 1.1% QoQ and comprised 14.6% of total average deposits (including escrow deposits) in 3Q21 compared to 11.8% a year ago

Credit Quality; Non-performing loans totaled $20.2 million in 3Q21, $17.6 million in 2Q21, $21.2 million in 1Q21, $21.1 million in 4Q20 and $24.8 million in 3Q20.

  • Non-performing assets totaled $20.2 million, down 18.6% YoY, but up 14.9% QoQ
  • Criticized and classified assets totaled $68.9 million in 3Q21 (104 bps of loans), $69.2 million at 2Q21 (103 bps), $63.1 million at 1Q21 (94 bps), $71.7 million at 4Q20 (107 bps), and $42.2 million at 3Q20 (71 bps)
  • Loans classified as troubled debt restructured (TDR) totaled $13.1 million compared to $15.5 million in 2Q21 and $5.1 million a year ago
  • Active COVID-19 forbearances totaled 38 loans with a principal balance of $162.0 million at September 30, 2021, with $121.8 million making interest payments and only $40.2 million (0.6% of loans) with full payment deferrals; over 57% of the forbearances are scheduled to exit forbearance by year end 2021
  • Over 87% of gross loans are collateralized by real estate and these loans have an average loan-to-value ratio of <38% as of September 30, 2021
  • Allowance for credit losses were 0.55% of loans at 3Q21 compared to 0.64% at 2Q21 and 0.65% a year ago
  • Allowance for credit losses were 179.9% of nonperforming loans at 3Q21 compared to 154.7% a year ago

Capital; Book value per common share increased to $21.78 at 3Q21 compared to $21.16 at 2Q21, $20.65 at 1Q21, $20.11 at 4Q20, and $20.78 at 3Q20; tangible book value per common share, a non-GAAP measure, was $21.13 at 3Q21, $20.51 at 2Q21, $19.99 at 1Q21, $19.45 in 4Q20, and $20.22 in 3Q20.

  • The Company paid a dividend of $0.21 per share in 3Q21
  • 285,643 shares were repurchased at an average price of $22.42 in 3Q21
  • As of the end of 3Q21, 999,163 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 8.04% at 3Q21 compared to 8.10% a year ago
  • The Company and the Bank remain well capitalized under all applicable regulatory requirements
  • The leverage ratio was 8.83% in 3Q21 versus 9.03% in 3Q20
Conference Call Information And Fourth Quarter Earnings Release Date

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 27, 2021, at 9:30 AM (ET) to discuss the Company’s third quarter 2021 results and strategy.
  • Dial-in for Live Call: 1-877-509-5836; Canada 855-669-9657
  • Webcast: https://services.choruscall.com/links/ffic211027.html
  • Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658
  • Replay Access Code: 10151674
  • The conference call will be simultaneously webcast and archived through October 27, 2022

Fourth Quarter 2021 Earnings Release Date:

The Company plans to release Fourth Quarter 2021 and full year 2021 financial results after the market close on January 27, 2022; followed by a conference call at 9:30 AM (ET) on January 28, 2022.

A detailed announcement will be issued prior to the fourth 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®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the 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®, an 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. 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, 2020 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

Tag: FF

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)

  At or for the three months ended  At or for the nine months ended 
  September 30,  June 30, March 31, December 31, September 30,   September 30,  September 30,  
(Dollars in thousands, except per share data)    2021 2021 2021 2020 2020  2021    2020    
Performance Ratios (1)                            
Return on average assets  1.26%  0.93%    0.93%    0.18%    0.81%     1.04%   0.58%
Return on average equity  15.42   11.95   12.29   2.27   9.94    13.24  7.30 
Yield on average interest-earning assets (2)  3.84   3.69   3.77   3.82   3.84    3.77  3.88 
Cost of average interest-bearing liabilities  0.61   0.66   0.69   0.86   0.98    0.65  1.27 
Cost of funds  0.53   0.57   0.61   0.77   0.89    0.57  1.16 
Net interest rate spread during period (2)  3.23   3.03   3.08   2.96   2.86    3.12  2.61 
Net interest margin (2)  3.34   3.14   3.18   3.08   3.00    3.22  2.77 
Non-interest expense to average assets  1.80   1.65   1.87   2.43   1.69    1.77  1.70 
Efficiency ratio (3)  52.28   53.38   58.58   57.56   55.37    54.72  59.12 
Average interest-earning assets to average interest-bearing liabilities  1.21X   1.19X  1.18X  1.17X  1.16X   1.19X 1.15X
                            
Average Balances                           
Total loans, net $6,633,301  $6,686,888  $6,700,476  $6,375,516  $5,904,051   $6,673,309 $5,881,858 
Total interest-earning assets  7,608,317   7,790,174   7,667,217   7,243,472   6,675,896    7,688,354  6,734,979 
Total assets  8,072,918   8,263,553   8,147,714   7,705,407   7,083,028    8,161,121  7,131,850 
Total due to depositors  5,406,423   5,495,936   5,363,647   4,708,760   4,353,560    5,422,158  4,442,202 
Total interest-bearing liabilities  6,310,859   6,532,891   6,477,871   6,169,574   5,731,899    6,439,928  5,865,045 
Stockholders' equity  659,288   644,690   619,647   609,463   576,512    641,354  570,198 
                            
Per Share Data                                 
Book value per common share (4) $21.78  $21.16  $20.65  $20.11  $20.78   $21.78 $20.78 
Tangible book value per common share (5) $21.13  $20.51  $19.99  $19.45  $20.22   $21.13 $20.22 
                            
Stockholders' Equity                                 
Stockholders' equity $668,096  $655,167  $639,201  $618,997  $586,406   $668,096 $586,406 
Tangible stockholders' equity  648,039   634,959   618,839   598,476   570,571    648,039  570,571 
                            
Consolidated Regulatory Capital Ratios                                  
Tier 1 capital $711,276  $697,591  $679,343  $662,987  $630,380   $711,276 $630,380 
Common equity Tier 1 capital  661,340   649,367   636,071   621,247   593,344    661,340  593,344 
Total risk-based capital  832,255   823,494   806,922   794,034   740,499    832,255  740,499 
Risk Weighted Assets  6,194,207   6,344,076   6,281,136   6,287,598   5,381,938    6,194,207  5,381,938 
                            
Tier 1 leverage capital
(well capitalized = 5%)		  8.83%   8.50%    8.44%    8.38%    9.03%     8.83%   9.03%  
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  10.68   10.24   10.13   9.88   11.02    10.68  11.02 
Tier 1 risk-based capital
(well capitalized = 8.0%)		  11.48   11.00   10.82   10.54   11.71    11.48  11.71 
Total risk-based capital
(well capitalized = 10.0%)		  13.44   12.98   12.85   12.63   13.76    13.44  13.76 
                            
Capital Ratios                                  
Average equity to average assets  8.17%   7.80%    7.61%    7.91%    8.14%     7.86%   8.00%  
Equity to total assets  8.27   8.03   7.83   7.76   8.30    8.27  8.30 
Tangible common equity to tangible assets (6)  8.04   7.80   7.60   7.52   8.10    8.04  8.10 
                            
Asset Quality                                  
Non-accrual loans (7) $18,292  $17,391  $18,604  $18,325  $24,792   $18,292 $24,792 
Non-performing loans  20,217   17,592   21,186   21,073   24,792    20,217  24,792 
Non-performing assets  20,217   17,592   21,221   21,108   24,827    20,217  24,827 
Net charge-offs (recoveries)  (619)  902   2,865   646   837    3,148  2,993 
                            
Asset Quality Ratios                                  
Non-performing loans to gross loans  0.31%   0.26%    0.31%    0.31%    0.42%     0.31%   0.42%  
Non-performing assets to total assets  0.25   0.22   0.26   0.26   0.35    0.25  0.35 
Allowance for loan losses to gross loans  0.55   0.64   0.67   0.67   0.65    0.55  0.65 
Allowance for loan losses to
non-performing assets		  179.86   242.55   212.52   213.91   154.44    179.86  154.44 
Allowance for loan losses to
non-performing loans		  179.86   242.55   212.87   214.27   154.66    179.86  154.66 
Net charge-offs (recoveries) to average loans  (0.04)  0.05   0.17   0.04   0.06    0.06  0.07 
                            
Full-service customer facilities  24   25   25   25   20    24  20 

(See footnotes on next page)

(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 non-interest 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 non-interest 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 non-accrual TDR loans.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 For the three months ended  For the nine months ended
 September 30,  June 30, March 31, December 31, September 30,   September 30,  September 30, 
(In thousands, except per share data)2021 2021 2021 2020 2020  2021 2020
Interest and Dividend Income                      
Interest and fees on loans$69,198  $67,999  $69,021  $66,120  $60,367   $206,218  $182,033 
Interest and dividends on securities:                     
Interest 3,706   3,685   3,072   2,813   3,525    10,463   12,963 
Dividends 7   7   8   8   9    22   35 
Other interest income 42   51   36   30   13    129   325 
Total interest and dividend income 72,953   71,742   72,137   68,971   63,914    216,832   195,356 
                      
Interest Expense                     
Deposits 4,705   5,539   6,105   6,470   7,093    16,349   35,842 
Other interest expense 4,884   5,164   5,140   6,769   6,897    15,188   20,047 
Total interest expense 9,589   10,703   11,245   13,239   13,990    31,537   55,889 
                      
Net Interest Income 63,364   61,039   60,892   55,732   49,924    185,295   139,467 
(Benefit) provision for credit losses (6,927)  (1,598)  2,820   3,862   2,470    (5,705)  19,267 
Net Interest Income After
(Benefit) Provision for Credit Losses		 70,291   62,637   58,072   51,870   47,454    191,000   120,200 
                      
Non-interest Income (Loss)                     
Banking services fee income 865   1,233   2,725   1,442   1,316    4,823   3,058 
Net gain (loss) on sale of securities (10)  123   —   (610)  —    113   (91)
Net gain on sale of loans 131   127   31   6   —    289   42 
Net gain on disposition of assets —   —   621   —   —    621   — 
Net gain (loss) from fair value adjustments (2,289)  (6,548)  982   (4,129)  (2,225)   (7,855)  1,987 
Federal Home Loan Bank
of New York stock dividends		 491   500   689   734   874    1,680   2,719 
Life insurance proceeds —   —   —   —   —    —   659 
Bank owned life insurance 1,015   1,009   997   1,016   923    3,021   2,798 
Other income 663   346   266   360   463    1,275   1,052 
Total non-interest income (loss) 866   (3,210)  6,311   (1,181)  1,351    3,967   12,224 
                      
Non-interest Expense                     
Salaries and employee benefits 20,544   19,879   22,664   22,089   17,335    63,087   52,139 
Occupancy and equipment 3,534   3,522   3,367   3,446   3,021    10,423   8,688 
Professional services 1,899   1,988   2,400   2,463   2,064    6,287   6,911 
FDIC deposit insurance 618   729   1,213   562   727    2,560   2,114 
Data processing 1,759   1,419   2,109   3,411   1,668    5,287   5,175 
Depreciation and amortization 1,627   1,638   1,639   1,579   1,542    4,904   4,633 
Other real estate owned/foreclosure
(recoveries) expense		 182   22   (10)  95   240    194   121 
Prepayment penalty on borrowings —   —   —   7,834   —    —   — 
Other operating expenses 6,182   4,814   4,777   5,332   3,388    15,773   11,339 
Total non-interest expense 36,345   34,011   38,159   46,811   29,985    108,515   91,120 
                      
Income Before Income Taxes 34,812   25,416   26,224   3,878   18,820    86,452   41,304 
                      
Provision (benefit) for Income Taxes                     
Federal 6,410   4,857   5,071   533   3,359    16,338   8,655 
State and local 2,989   1,301   2,114   (116)  1,130    6,404   1,436 
Total taxes 9,399   6,158   7,185   417   4,489    22,742   10,091 
                      
Net Income$25,413  $19,258  $19,039  $3,461  $14,331   $63,710  $31,213 
                      
Basic earnings per common share$0.81  $0.61  $0.60  $0.11  $0.50   $2.02  $1.08 
Diluted earnings per common share$0.81  $0.61  $0.60  $0.11  $0.50   $2.02  $1.08 
Dividends per common share$0.21  $0.21  $0.21  $0.21  $0.21   $0.63  $0.63 
                      
Basic average shares 31,567   31,677   31,604   30,603   28,874    31,616   28,865 
Diluted average shares 31,567   31,677   31,604   30,603   28,874    31,616   28,865 


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

                
  September 30,     June 30,    March 31,    December 31,    September 30, 
(Dollars in thousands) 2021 2021 2021 2020 2020
ASSETS                    
Cash and due from banks $178,598  $145,971  $174,420  $157,388  $75,560 
Securities held-to-maturity:               
Mortgage-backed securities  7,899   7,904   7,909   7,914   7,919 
Other securities  49,989   49,986   49,912   49,918   50,252 
Securities available for sale:               
Mortgage-backed securities  584,145   596,661   518,781   404,460   386,235 
Other securities  212,654   224,784   242,440   243,514   234,721 
Loans  6,630,354   6,718,806   6,745,316   6,704,674   5,941,398 
Allowance for loan losses  (36,363)  (42,670)  (45,099)  (45,153)  (38,343)
Net loans  6,593,991   6,676,136   6,700,217   6,659,521   5,903,055 
Interest and dividends receivable  40,912   43,803   44,941   44,041   36,068 
Bank premises and equipment, net  24,018   26,438   27,498   28,179   25,766 
Federal Home Loan Bank of New York stock  36,158   41,630   41,498   43,439   57,119 
Bank owned life insurance  184,730   183,715   182,707   181,710   158,701 
Goodwill  17,636   17,636   17,636   17,636   16,127 
Core deposit intangibles  2,708   2,859   3,013   3,172   — 
Right of use asset  50,155   51,972   53,802   50,743   42,326 
Other assets  93,741   89,850   94,410   84,759   69,207 
Total assets $8,077,334  $8,159,345  $8,159,184  $7,976,394  $7,063,056 
                
LIABILITIES                    
Deposits $6,421,391  $6,298,790  $6,326,577  $6,090,733  $4,906,359 
Mortgagors' escrow deposits  67,207   58,230   74,348   45,622   57,136 
Borrowed funds  752,925   971,827   948,920   1,020,895   1,323,975 
Operating lease liability  54,239   56,151   58,080   59,100   49,737 
Other liabilities  113,476   119,180   112,058   141,047   139,443 
Total liabilities  7,409,238   7,504,178   7,519,983   7,357,397   6,476,650 
                
STOCKHOLDERS' EQUITY                    
Preferred stock (5,000,000 shares authorized; none issued)  —   —   —   —   — 
Common stock ($0.01 par value; 100,000,000 shares authorized)  341   341   341   341   315 
Additional paid-in capital  262,009   260,958   260,019   261,533   227,877 
Treasury stock  (71,738)  (65,335)  (65,479)  (69,400)  (69,409)
Retained earnings  486,418   467,620   455,023   442,789   445,931 
Accumulated other comprehensive loss, net of taxes  (8,934)  (8,417)  (10,703)  (16,266)  (18,308)
Total stockholders' equity  668,096   655,167   639,201   618,997   586,406 
                
Total liabilities and stockholders' equity $8,077,334  $8,159,345  $8,159,184  $7,976,394  $7,063,056 
                
(In thousands)               
Issued shares  34,088   34,088   34,088   34,088   31,531 
Outstanding shares  30,676   30,962   30,954   30,776   28,218 
Treasury shares  3,412   3,126   3,133   3,312   3,312 

  

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited)

  For the three months ended  For the nine months ended
  September 30,  June 30, March 31, December 31, September 30,   September 30,  September 30, 
(In thousands) 2021 2021 2021 2020 2020  2021 2020
Interest-earning Assets:                             
Mortgage loans, net $5,158,213 $5,130,400 $5,155,975 $5,010,097 $4,721,742  $5,148,204 $4,727,094
Other loans, net  1,475,088  1,556,488  1,544,501  1,365,419  1,182,309   1,525,105  1,154,764
Total loans, net  6,633,301  6,686,888  6,700,476  6,375,516  5,904,051   6,673,309  5,881,858
Taxable securities:                             
Mortgage-backed securities  590,732  578,134  433,917  413,875  413,902   534,836  462,216
Other securities  217,763  232,020  300,828  266,663  243,754   249,899  243,782
Total taxable securities  808,495  810,154  734,745  680,538  657,656   784,735  705,998
Tax-exempt securities:                             
Other securities  50,832  50,830  50,828  50,768  51,652   50,830  58,464
Total tax-exempt securities  50,832  50,830  50,828  50,768  51,652   50,830  58,464
Interest-earning deposits and federal funds sold  115,689  242,302  181,168  136,650  62,537   179,480  88,659
Total interest-earning assets  7,608,317  7,790,174  7,667,217  7,243,472  6,675,896   7,688,354  6,734,979
Other assets  464,601  473,379  480,497  461,935  407,132   472,767  396,871
Total assets $8,072,918 $8,263,553 $8,147,714 $7,705,407 $7,083,028  $8,161,121 $7,131,850
                       
Interest-bearing Liabilities:                             
Deposits:                             
Savings accounts $153,120 $153,113 $170,079 $163,382 $160,100  $158,708 $180,829
NOW accounts  2,107,866  2,255,581  2,185,384  1,924,840  1,625,109   2,182,660  1,495,473
Money market accounts  2,107,473  2,043,257  1,905,543  1,507,245  1,461,996   2,019,497  1,579,712
Certificate of deposit accounts  1,037,964  1,043,985  1,102,641  1,113,293  1,106,355   1,061,293  1,186,188
Total due to depositors  5,406,423  5,495,936  5,363,647  4,708,760  4,353,560   5,422,158  4,442,202
Mortgagors' escrow accounts  68,562  91,545  65,372  75,005  55,868   75,171  69,427
Total interest-bearing deposits  5,474,985  5,587,481  5,429,019  4,783,765  4,409,428   5,497,329  4,511,629
Borrowings  835,874  945,410  1,048,852  1,385,809  1,322,471   942,599  1,353,416
Total interest-bearing liabilities  6,310,859  6,532,891  6,477,871  6,169,574  5,731,899   6,439,928  5,865,045
Non interest-bearing demand deposits  933,443  923,220  856,052  731,170  589,674   904,522  533,563
Other liabilities  169,328  162,752  194,144  195,200  184,943   175,317  163,044
Total liabilities  7,413,630  7,618,863  7,528,067  7,095,944  6,506,516   7,519,767  6,561,652
Equity  659,288  644,690  619,647  609,463  576,512   641,354  570,198
Total liabilities and equity $8,072,918 $8,263,553 $8,147,714 $7,705,407 $7,083,028  $8,161,121 $7,131,850
                       
Net interest-earning assets $1,297,458 $1,257,283 $1,189,346 $1,073,898 $943,997  $1,248,426 $869,934


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST INCOME AND NET INTEREST MARGIN
(Unaudited)

                           
  For the three months ended  For the nine months ended
  September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020  2021 2020
Interest Income:                          
Mortgage loans, net $55,114  $52,987  $55,219  $53,777  $49,814   $163,320  $148,945 
Other loans, net  14,084   15,012   13,802   12,343   10,553    42,898   33,088 
Total loans, net  69,198   67,999   69,021   66,120   60,367    206,218   182,033 
Taxable securities:                          
Mortgage-backed securities  2,279   2,233   1,698   1,435   1,928    6,210   7,295 
Other securities  1,008   1,037   963   957   1,166    3,008   4,221 
Total taxable securities  3,287   3,270   2,661   2,392   3,094    9,218   11,516 
Tax-exempt securities:                          
Other securities  539   535   530   543   557    1,604   1,876 
Total tax-exempt securities  539   535   530   543   557    1,604   1,876 
Interest-earning deposits and federal funds sold  42   51   36   30   13    129   325 
Total interest-earning assets  73,066   71,855   72,248   69,085   64,031    217,169   195,750 
Interest Expense:                          
Deposits:                          
Savings accounts $61  $66  $75  $75  $65   $202  $420 
NOW accounts  1,227   1,499   1,706   1,320   1,242    4,432   7,989 
Money market accounts  1,683   2,060   2,100   2,010   2,108    5,843   12,358 
Certificate of deposit accounts  1,734   1,913   2,222   3,065   3,700    5,869   15,031 
Total due to depositors  4,705   5,538   6,103   6,470   7,115    16,346   35,798 
Mortgagors' escrow accounts  —   1   2   —   (22)   3   44 
Total interest-bearing deposits  4,705   5,539   6,105   6,470   7,093    16,349   35,842 
Borrowings  4,884   5,164   5,140   6,769   6,897    15,188   20,047 
Total interest-bearing liabilities  9,589   10,703   11,245   13,239   13,990    31,537   55,889 
Net interest income- tax equivalent $63,477  $61,152  $61,003  $55,846  $50,041   $185,632  $139,861 
Included in net interest income above:                          
Prepayment penalties received on loans and securities and net of reversals and recovered interest from non-accrual loans $2,136  $2,046  $948  $1,093  $1,518   $5,130  $3,483 
Net gains/(losses) from fair value adjustments on qualifying hedges included in loan interest income  194   (664)  1,427   1,023   230    957   (2,208)
Purchase accounting adjustments  1,100   565   922   11   —    2,587   — 
Interest-earning Assets Yields:                          
Mortgage loans, net  4.27%  4.13%  4.28%  4.29%  4.22%   4.23%  4.20%
Other loans, net  3.82   3.86   3.57   3.62   3.57    3.75   3.82 
Total loans, net  4.17   4.07   4.12   4.15   4.09    4.12   4.13 
Taxable securities:                          
Mortgage-backed securities  1.54   1.54   1.57   1.39   1.86    1.55   2.10 
Other securities  1.85   1.79   1.28   1.44   1.91    1.60   2.31 
Total taxable securities  1.63   1.61   1.45   1.41   1.88    1.57   2.17 
Tax-exempt securities: (1)                          
Other securities  4.24   4.21   4.17   4.28   4.31    4.21   4.28 
Total tax-exempt securities  4.24   4.21   4.17   4.28   4.31    4.21   4.28 
Interest-earning deposits and federal funds sold  0.15   0.08   0.08   0.09   0.08    0.10   0.49 
Total interest-earning assets  3.84%  3.69%  3.77%  3.82%  3.84%   3.77%  3.88%
Interest-bearing Liabilities Yields:                          
Deposits:                          
Savings accounts  0.16%  0.17%  0.18%  0.18%  0.16%   0.17%  0.31%
NOW accounts  0.23   0.27   0.31   0.27   0.31    0.27   0.71 
Money market accounts  0.32   0.40   0.44   0.53   0.58    0.39   1.04 
Certificate of deposit accounts  0.67   0.73   0.81   1.10   1.34    0.74   1.69 
Total due to depositors  0.35   0.40   0.46   0.55   0.65    0.40   1.07 
Mortgagors' escrow accounts  —   —   0.01   —   (0.16)   0.01   0.08 
Total interest-bearing deposits  0.34   0.40   0.45   0.54   0.64    0.40   1.06 
Borrowings  2.34   2.18   1.96   1.95   2.09    2.15   1.97 
Total interest-bearing liabilities  0.61%  0.66%  0.69%  0.86%  0.98%   0.65%  1.27%
                           
Net interest rate spread (tax equivalent)  3.23%  3.03%  3.08%  2.96%  2.86%   3.12%  2.61%
Net interest margin (tax equivalent)  3.34%  3.14%  3.18%  3.08%  3.00%   3.22%  2.77%
Ratio of interest-earning assets to interest-bearing liabilities  1.21X  1.19X  1.18X  1.17X  1.16X   1.19X  1.15X


(1) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT and LOAN COMPOSITION
(Unaudited)

Deposit Composition

                    
                 September 2021 vs. September 2021 vs.
  September 30, June 30, March 31, December 31, September 30, June 2021 September 2020
(Dollars in thousands) 2021 2021 2021 2020 2020 % Change % Change
Non-interest bearing $941,259 $945,491 $917,189 $778,672 $607,954 (0.4)% 54.8%
Interest bearing:                   
Certificate of deposit accounts  1,040,098  1,020,615  1,070,595  1,138,361  1,051,644 1.9  (1.1)
Savings accounts  152,306  152,931  170,272  168,183  160,294 (0.4) (5.0)
Money market accounts  2,152,085  2,057,188  1,990,656  1,682,345  1,381,552 4.6  55.8 
NOW accounts  2,135,643  2,122,565  2,177,865  2,323,172  1,704,915 0.6  25.3 
Total interest-bearing deposits  5,480,132  5,353,299  5,409,388  5,312,061  4,298,405 2.4  27.5 
Total deposits $6,421,391 $6,298,790 $6,326,577 $6,090,733 $4,906,359 1.9% 30.9%



Loan Composition

                    
                 September 2021 vs. September 2021 vs.
  September 30, June 30, March 31, December 31, September 30, June 2021 September 2020
(Dollars in thousands) 2021
 2021
 2021
 2020
 2020
 % Change % Change
Multifamily residential $2,498,980  $2,542,010  $2,525,967  $2,533,952  $2,252,757  (1.7)% 10.9%
Commercial real estate  1,745,855   1,726,895   1,721,702   1,754,754   1,636,659  1.1  6.7 
One-to-four family ― mixed-use property  579,100   582,211   595,431   602,981   585,159  (0.5) (1.0)
One-to-four family ― residential  280,343   288,652   239,391   245,211   191,011  (2.9) 46.8 
Co-operative apartments  7,804   7,883   7,965   8,051   8,132  (1.0) (4.0)
Construction  71,464   62,802   61,528   83,322   63,567  13.8  12.4 
Mortgage Loans  5,183,546   5,210,453   5,151,984   5,228,271   4,737,285  (0.5) 9.4 
                    
Small Business Administration (1)  148,855   215,158   267,120   167,376   124,649  (30.8) 19.4 
Taxi medallion  —   —   —   2,757   2,317  —  (100.0)
Commercial business and other  1,294,688   1,291,526   1,326,657   1,303,225   1,063,429  0.2  21.7 
Non-mortgage loans  1,443,543   1,506,684   1,593,777   1,473,358   1,190,395  (4.2) 21.3 
                    
Net unamortized premiums and unearned loan fees (2)  3,265   1,669   (445)  3,045   13,718  95.6  (76.2)
Allowance for loan losses  (36,363)  (42,670)  (45,099)  (45,153)  (38,343) (14.8) (5.2)
Net loans $6,593,991  $6,676,136  $6,700,217  $6,659,521  $5,903,055  (1.2)% 11.7%
                    

(1) Includes $130.8 million, $197.3 million, $251.0 million, $151.9 million and $111.6 million of PPP loans at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively.

(2) Includes $8.6 million, $9.7 million, $10.5 million, and $11.3 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, respectively.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOAN CLOSINGS and RATES
(Unaudited)

Loan Closings

                       
  For the three months ended  For the nine months ended
  September 30, June 30, March 31, December 31, September 30,   September 30, September 30,
(In thousands) 2021 2021 2021 2020 2020  2021 2020
Multifamily residential $41,850 $66,913 $58,553 $52,024 $33,733  $167,316 $160,705
Commercial real estate  48,447  37,963  17,156  57,634  26,644   103,566  134,218
One-to-four family – mixed-use property  12,823  7,135  8,712  9,692  3,867   28,670  25,439
One-to-four family – residential  2,761  59,494  3,131  8,422  2,296   65,386  13,383
Co-operative apartments  —  —  —  —  —   —  704
Construction  8,687  5,281  7,123  6,869  5,420   21,091  14,990
Mortgage Loans  114,568  176,786  94,675  134,641  71,960   386,029  349,439
                       
Small Business Administration (1)  415  17,585  125,093  598  18,456   143,093  111,754
Commercial business and other  128,946  130,036  103,118  180,787  65,160   362,100  226,895
Non-mortgage Loans  129,361  147,621  228,211  181,385  83,616   505,193  338,649
                       
Total Closings $243,929 $324,407 $322,886 $316,026 $155,576  $891,222 $688,088

(1) Includes $15.5 million, $123.2 million and $18.4 million of PPP closings for the three months ended June 30, 2021, March 31, 2021, and September 30, 2020, respectively.


Weighted Average Rate on Loan Closings

                
  For the three months ended
  September 30, June 30, March 31, December 31, September 30,
Loan type 2021 2021 2021 2020 2020
Mortgage loans 3.80% 3.53% 3.47% 3.47% 3.56%
Non-mortgage loans 3.49  3.23  2.26  3.37  2.81 
Total loans 3.64% 3.39% 2.62% 3.41% 3.16%
                
Excluding PPP loans 3.64% 3.51% 3.62% 3.41% 3.45%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ASSET QUALITY
(Unaudited)


Allowance for Loan Losses

                        
  For the three months ended  For the nine months ended
  September 30, June 30, March 31, December 31, September 30,  September 30,  September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020  2021  2020
Allowance for loan losses                       
Beginning balances $42,670  $45,099  $45,153  $38,343  $36,710    45,153    21,751 
Adoption of Current Expected Credit Losses  —   —   —   —   —    —    379 
                        
Net loan charge-off (recoveries):                       
Multifamily residential  —   —   33   (11)  (14)  $33   $(27)
Commercial real estate  —   —   64   —   —    64    — 
One-to-four family – mixed-use property  (123)  3   19   —   (60)   (101)   (135)
One-to-four family – residential  (147)  (2)  (5)  (2)  (2)   (154)   (10)
Small Business Administration  (8)  (9)  (10)  (3)  (47)   (27)   111 
Taxi medallion  (1,235)  (222)  2,758   124   951    1,301    951 
Commercial business and other  894   1,132   6   538   9    2,032    2,103 
Total  (619)  902   2,865   646   837    3,148    2,993 
                        
(Benefit) provision for loan losses  (6,926)  (1,527)  2,811   3,357   2,470    (5,642)   19,206 
Allowance recorded at the time of Acquisition  —   —   —   4,099   —    —    — 
                        
Ending balance $36,363  $42,670  $45,099  $45,153  $38,343   $36,363   $38,343 
                        
Gross charge-offs $1,019  $1,186  $2,922  $752  $964   $5,127   $3,253 
Gross recoveries  1,638   284   57   106   127    1,979    260 
                        
Allowance for loan losses to gross loans  0.55%  0.64%  0.67%  0.67%  0.65%   0.55%   0.65%
Net loan charge-offs (recoveries) to average loans  (0.04)  0.05   0.17   0.04   0.06    0.06    0.07 


Non-Performing Assets

  September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020
Loans 90 Days Or More Past Due and Still Accruing:                    
Multifamily residential $—  $201  $201  $201  $— 
Commercial real estate  —   —   —   2,547   — 
Construction  873   —   2,381   —   — 
Commercial business and other  1,052   —   —   —   — 
Total  1,925   201   2,582   2,748   — 
                     
Non-accrual Loans:                    
Multifamily residential  4,192   4,669   4,338   2,524   2,661 
Commercial real estate  613   8   8   1,683   2,657 
One-to-four family - mixed-use property (1)  2,204   2,309   2,355   1,366   1,366 
One-to-four family - residential  7,807   6,940   7,335   5,854   6,454 
Small Business Administration  976   976   1,151   1,151   1,151 
Taxi medallion(1)  —   —   —   2,317   2,218 
Commercial business and other(1)  2,500   2,489   3,417   3,430   8,285 
Total  18,292   17,391   18,604   18,325   24,792 
                     
Total Non-performing Loans (NPLs)  20,217   17,592   21,186   21,073   24,792 
                     
Other Non-performing Assets:                    
Other asset acquired through foreclosure  —   —   35   35   35 
Total  —   —   35   35   35 
                     
Total Non-performing Assets $20,217  $17,592  $21,221  $21,108  $24,827 
                     
Non-performing Assets to Total Assets  0.25%  0.22%  0.26%  0.26%  0.35%
Allowance For Loan Losses to NPLs  179.9%  242.6%  212.9%  214.3%  154.7%


(1) Not included in the above analysis are non-accrual performing TDR one-to-four family mixed use property loans totaling $0.3 million each in 3Q21, 2Q21, 1Q21, 4Q20, and 3Q20; non-accrual performing TDR taxi medallion loans totaling $0.4 million in 4Q20 and $0.1 million in 3Q20, and non-accrual performing TDR commercial business loans totaling $2.2 million each in 2Q21, 1Q21, and 4Q20, and $1.0 million in 3Q20.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.

Core Net Income, Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income FTE, Core Net Interest Margin FTE, Base Net Interest Income FTE, Base Net Interest Margin FTE, Core Interest Income and Yield on Total Loans, Base Interest Income and Yield on Total Loans, Core Non-interest Income, Core Non-interest Expense and Tangible Book Value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Unaudited)

                       
  For the three months ended  For the nine months ended
(Dollars in thousands,  September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
except per share data) 2021 2021 2021 2020 2020  2021 2020
                       
GAAP income before income taxes $34,812  $25,416  $26,224  $3,878  $18,820   $86,452  $41,304 
                       
Day 1, Provision for Credit Losses - Empire transaction (Provision for credit losses)  —   —   —   1,818   —    —   — 
Net (gain) loss from fair value adjustments (Non-interest income (loss))  2,289   6,548   (982)  4,129   2,225    7,855   (1,987)
Net (gain) loss on sale of securities
(Non-interest income (loss))		  10   (123)  —   610   —    (113)  91 
Life insurance proceeds
(Non-interest income (loss))		  —   —   —   —   —    —   (659)
Net gain on disposition of assets
(Non-interest income (loss))		  —   —   (621)  —   —    (621)  — 
Net (gain) loss from fair value adjustments on qualifying hedges
(Interest and fees on loans)		  (194)  664   (1,427)  (1,023)  (230)   (957)  2,208 
Prepayment penalty on borrowings
(Non-interest expense)		  —   —   —   7,834   —    —   — 
Net amortization of purchase accounting adjustments (Various)  (958)  (418)  (789)  80   —    (2,165)  — 
Merger (benefit) expense (Various)  2,096   (490)  973   5,349   422    2,579   1,545 
                       
Core income before taxes  38,055   31,597   23,378   22,675   21,237    93,030   42,502 
                       
Provision for income taxes for core income  10,226   8,603   6,405   4,891   5,069    25,234   10,537 
                       
Core net income $27,829  $22,994  $16,973  $17,784  $16,168   $67,796  $31,965 
                       
GAAP diluted earnings per common share $0.81  $0.61  $0.60  $0.11  $0.50   $2.02  $1.08 
Day 1, Provision for Credit Losses - Empire transaction, net of tax  —   —   —   0.05   —    —   — 
Net (gain) loss from fair value adjustments, net of tax  0.05   0.15   (0.02)  0.11   0.06    0.18   (0.05)
Net loss on sale of securities, net of tax  —   —   —   0.02   —    —   — 
Life insurance proceeds  —   —   —   —   —    —   (0.02)
Net gain on disposition of assets, net of tax  —   —   (0.01)  —   —    (0.01)  — 
Net (gain) loss from fair value adjustments on qualifying hedges, net of tax  —   0.02   (0.03)  (0.03)  (0.01)   (0.02)  0.06 
Prepayment penalty on borrowings, net of tax  —   —   —   0.20   —    —   — 
Net amortization of purchase accounting adjustments, net of tax  (0.02)  (0.01)  (0.02)  —   —    (0.05)  — 
Merger (benefit) expense, net of tax  0.05   (0.01)  0.02   0.14   0.01    0.06   0.04 
NYS tax change  —   (0.02)  —   —   —    (0.02)  — 
                       
Core diluted earnings per common share(1) $0.88  $0.73  $0.54  $0.58  $0.56   $2.14  $1.11 
                       
                       
Core net income, as calculated above $27,829  $22,994  $16,973  $17,784  $16,168   $67,796  $31,965 
Average assets  8,072,918   8,263,553   8,147,714   7,705,407   7,083,028    8,161,121   7,131,850 
Average equity  659,288   644,690   619,647   609,463   576,512    641,354   570,198 
Core return on average assets(2)  1.38%  1.11%  0.83%  0.92%  0.91%   1.11%  0.60%
Core return on average equity(2)  16.88%  14.27%  10.96%  11.67%  11.22%   14.09%  7.47%


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


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

                       
  For the three months ended  For the nine months ended
  September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020  2021 2020
                       
GAAP Net interest income $63,364  $61,039  $60,892  $55,732  $49,924   $185,295  $139,467 
Net (gain) loss from fair value adjustments on qualifying hedges  (194)  664   (1,427)  (1,023)  (230)   (957)  2,208 
Net amortization of purchase accounting adjustments  (1,100)  (565)  (922)  (11)  —    (2,587)  — 
Core Net interest income $62,070  $61,138  $58,543  $54,698  $49,694   $181,751  $141,675 
                       
GAAP Non-interest income (loss) $866  $(3,210) $6,311  $(1,181) $1,351   $3,967  $12,224 
Net (gain) loss from fair value adjustments  2,289   6,548   (982)  4,129   2,225    7,855   (1,987)
Net loss on sale of securities  10   (123)  —   610   —    (113)  91 
Life insurance proceeds  —   —   —   —   —    —   (659)
Net gain on sale of assets  —   —   (621)  —   —    (621)  — 
Core Non-interest income $3,165  $3,215  $4,708  $3,558  $3,576   $11,088  $9,669 
                       
GAAP Non-interest expense $36,345  $34,011  $38,159  $46,811  $29,985   $108,515  $91,120 
Prepayment penalty on borrowings  —   —   —   (7,834)  —    —   — 
Net amortization of purchase accounting adjustments  (142)  (147)  (133)  (91)  —    (422)  — 
Merger (benefit) expense  (2,096)  490   (973)  (5,349)  (422)   (2,579)  (1,545)
Core Non-interest expense $34,107  $34,354  $37,053  $33,537  $29,563   $105,514  $89,575 
                       
Net interest income $63,364  $61,039  $60,892  $55,732  $49,924   $185,295  $139,467 
Non-interest income (loss)  866   (3,210)  6,311   (1,181)  1,351    3,967   12,224 
Non-interest expense  (36,345)  (34,011)  (38,159)  (46,811)  (29,985)   (108,515)  (91,120)
Pre-provision pre-tax net revenue $27,885  $23,818  $29,044  $7,740  $21,290   $80,747  $60,571 
                       
Core:                      
Net interest income $62,070  $61,138  $58,543  $54,698  $49,694   $181,751  $141,675 
Non-interest income  3,165   3,215   4,708   3,558   3,576    11,088   9,669 
Non-interest expense  (34,107)  (34,354)  (37,053)  (33,537)  (29,563)   (105,514)  (89,575)
Pre-provision pre-tax net revenue $31,128  $29,999  $26,198  $24,719  $23,707   $87,325  $61,769 
Efficiency Ratio  52.3%  53.4%  58.6%  57.6%  55.4%   54.7%  59.1%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
to CORE and BASE NET INTEREST INCOME
(Unaudited)

                       
  For the three months ended  For the nine months ended
  September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020  2021 2020
GAAP net interest income $63,364  $61,039  $60,892  $55,732  $49,924   $185,295  $139,467 
Net (gain) loss from fair value adjustments on qualifying hedges  (194)  664   (1,427)  (1,023)  (230)   (957)  2,208 
Net amortization of purchase accounting adjustments  (1,100)  (565)  (922)  (11)  —    (2,587)  — 
Tax equivalent adjustment  113   113   111   114   117    337   394 
Core net interest income FTE $62,183  $61,251  $58,654  $54,812  $49,811   $182,088  $142,069 
Prepayment penalties received on loans and securities, net of reversals and recoveries of interest from non-accrual loans  (2,136)  (2,046)  (948)  (1,093)  (1,518)   (5,130)  (3,483)
Base net interest income FTE $60,047  $59,205  $57,706  $53,719  $48,293   $176,958  $138,586 
                       
Total average interest-earning assets (1) $7,616,332  $7,799,176  $7,676,833  $7,245,147  $6,675,896   $7,697,229  $6,734,979 
Core net interest margin FTE  3.27%  3.14%  3.06%  3.03%  2.98%   3.15%  2.81%
Base net interest margin FTE  3.15%  3.04%  3.01%  2.97%  2.89%   3.07%  2.74%
                       
GAAP interest income on total loans, net $69,198  $67,999  $69,021  $66,120  $60,367   $206,218  $182,033 
Net (gain) loss from fair value adjustments on qualifying hedges  (194)  664   (1,427)  (1,023)  (230)   (957)  2,208 
Net amortization of purchase accounting adjustments  (1,126)  (624)  (728)  (356)  —    (2,478)  — 
Core interest income on total loans, net $67,878  $68,039  $66,866  $64,741  $60,137   $202,783  $184,241 
Prepayment penalties received on loans, net of reversals and recoveries of interest from non-accrual loans  (2,135)  (2,046)  (947)  (1,093)  (1,443)   (5,128)  (3,408)
Base interest income on total loans, net $65,743  $65,993  $65,919  $63,648  $58,694   $197,655  $180,833 
                       
Average total loans, net (1) $6,642,434  $6,697,103  $6,711,446  $6,379,429  $5,904,051   $6,683,412  $5,881,858 
Core yield on total loans  4.09%  4.06%  3.99%  4.06%  4.07%   4.05%  4.18%
Base yield on total loans  3.96%  3.94%  3.93%  3.99%  3.98%   3.94%  4.10%


(1) Excludes purchase accounting average balances for three months ended September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020.


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

                
  September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2021 2021 2021 2020 2020
Total Equity $668,096  $655,167  $639,201  $618,997  $586,406 
Less:               
Goodwill  (17,636)  (17,636)  (17,636)  (17,636)  (16,127)
Core deposit Intangibles  (2,708)  (2,859)  (3,013)  (3,172)  — 
Intangible deferred tax liabilities  287   287   287   287   292 
Tangible Stockholders' Common Equity $648,039  $634,959  $618,839  $598,476  $570,571 
                
Total Assets $8,077,334  $8,159,345  $8,159,184  $7,976,394  $7,063,056 
Less:               
Goodwill  (17,636)  (17,636)  (17,636)  (17,636)  (16,127)
Core deposit Intangibles  (2,708)  (2,859)  (3,013)  (3,172)  — 
Intangible deferred tax liabilities  287   287   287   287   292 
Tangible Assets $8,057,277  $8,139,137  $8,138,822  $7,955,873  $7,047,221 
                
Tangible Stockholders' Common Equity to Tangible Assets  8.04%  7.80%  7.60%  7.52%  8.10%
                

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Source: Flushing Financial Corporation

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