News Details

Flushing Financial Corporation Reports Record Full Year GAAP Diluted EPS of $2.24; 10.2% Annual Loan Growth While Credit Quality Remains Strong

Jan 31, 2017 5:00 PM

FOURTH QUARTER 20161

  • GAAP diluted EPS was $0.50, up 35.1%, and core diluted EPS was $0.40, up 2.6% QoQ
  • Net interest income was $42.4 million, up 1.5%, and net interest margin was 2.96%, up 2bps QoQ
    • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, net interest margin was 2.81%, unchanged QoQ
  • GAAP ROAE was 11.2%, compared with 9.9% and core ROAE was 9.1%, compared with 10.3% for 4Q15
  • GAAP ROAA was 1.0%, compared with 0.8% and core ROAA was 0.8%, compared with 0.9% for 4Q15
  • Raised $75.0 million of subordinated debt
  • Sold two branch buildings for a pre-tax gain of $14.2 million
  • Restructured balance sheet by prepaying $130.0 million in advances at an average cost of 2.82% and $40.0 million in repurchase agreements at an average cost of 3.45%, recording a prepayment penalty of $8.3 million

FULL YEAR 20161

  • GAAP diluted EPS was a record $2.24, up 40.9%, and core diluted EPS was $1.52, up 2.0% YoY
  • Net interest income was a record $167.1 million, up 8.2%, and net interest margin was 2.97%, down 7bps YoY
    • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, the net interest margin was 2.83%, down 5bps YoY
  • GAAP ROAE was 13.1%, compared with 9.9% and core ROAE was 8.9%, compared with 9.3% for 2015
  • GAAP ROAA was 1.1%, compared with 0.9% and core ROAA was 0.7%, compared with 0.8% for 2015
  • Sold three branch buildings for a pre-tax gain of $48.0 million

UNIONDALE, N.Y., Jan. 31, 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 fourth quarter and the year ended December 31, 2016.

John R. Buran, President and Chief Executive Officer, remarked, “The results achieved for the fourth quarter reflect the continued successful execution of our strategy to maintain net loan growth and increase net interest income by focusing on yield, as opposed to volume.  We emphasized assets with the best risk-adjusted returns, resulting in strong GAAP and core diluted EPS of $0.50 and $0.40, respectively.  We are pleased to see the beginning of a return to pricing power as the yield on originated loans and commitments in the pipeline have both increased quarter over quarter while we maintain consistently prudent underwriting standards.”

____________________________________
Core earnings and core diluted earnings per common share (“EPS”) are not Generally Accepted Accounting Principle (“GAAP”) measures.  Core earnings exclude the effects of the net gains/losses from the sale of buildings and securities and from fair value adjustments, prepayment penalties from the extinguishment of debt, and gains from life insurance proceeds.

For a reconciliation of core earnings and core diluted EPS to net income and GAAP diluted EPS, please refer to the table entitled “Reconciliation of GAAP Earnings and Core Earnings.”

“We made progress on our drive to improve operational scalability and efficiency by reconfiguring our fourth branch to our ‘tellerless’ universal banker model.  We continued to effectively manage credit risk posting another net recovery this quarter.  Also, we continued to grow core deposits as our consumer and business checking balances improved.”

Strategic Update:

The Company completed several strategic actions in this extremely productive year to position itself for profitable growth in 2017 and beyond. 

  • Obtained favorable credit ratings with a Stable outlook for both the Company (A-/K2) and the Bank (BBB+/K2), from The Kroll Bond Rating Agency and raised $75.0 million of fixed-to-floating rate subordinated debt (5.25% fixed for five years) to fund balance sheet growth and further enhance our already strong regulatory capital ratios
  • Restructured our balance sheet to further benefit as the spread between 2- and 10-year Treasury yields widens and to support net interest margin in a rising rate environment
  • Sold two branch buildings in the fourth quarter, recognizing a pre-tax gain of $14.2 million, which brings the total for 2016 to three branch buildings sold for a pre-tax gain of $48.0 million
  • Completed the renovation of two branches during 2016 to the Universal Banker model, which will result in savings in both personnel and occupancy costs, and developed plans to convert an additional three branches during 2017.  This will provide our customers with cutting-edge technology and a higher-quality experience in 8 of our 19 branches.
  • Obtained approval from the FDIC for two new full-service branches in the Flushing, Queens market, where we plan to move two of our traditional branches, as we continue to invest in technology and convert our branches to our Universal Banker model
  • Piloted an in branch program, “LISA” (Live Interactive Service Assistant), which allows customers to experience a ‘Facetime™-like’ conversation with a dedicated banker until 11 p.m., 7 days a week

The strategic plan continues to emphasize the diversified growth of multi-family, commercial real estate (“CRE”), and commercial business loans while maintaining a conservative approach to managing risk.  In the fourth quarter, $243.2 million of multi-family, CRE, and commercial business loans were originated, representing 86.1% of all originations while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield. 

Mr. Buran added, “Stress testing and portfolio management have enhanced our disciplined approach to due diligence and overall risk management of CRE concentration.  Furthermore, recently raised subordinated debt reduced our regulatory CRE concentration from 613% in 3Q16 to 545% in 4Q16.”

The Company continues to focus on maintaining strong risk management practices, including conservative underwriting standards and improving yields to achieve desired risk-adjusted returns.

  • The average interest rate obtained for fourth quarter originations was 3.81% compared to 3.74% for the linked quarter and 3.68% for the quarter ended December 31, 2015.
  • The average rate of mortgage loan applications in the pipeline totaled 4.20% at December 31, 2016 as compared to 4.05% at September 30, 2016, and 3.94% at December 31, 2015.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during the fourth quarter of 2016 had a low average loan-to-value ratio of 47.0% and an average debt coverage ratio of 203%
  • The loan-to-value ratio on real estate dependent loans as of December 31, 2016 totaled just 40.5%.
  • Stress test the regulatory CRE concentration as if a $10 billion institution and have internal stress tests validated by an independent third party
  • Actively monitor and implement regulatory recommendations surrounding the enhanced due diligence of the regulatory CRE concentration

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

Summary of Strategic Objectives

  • Increase core deposits and continue to improve funding mix
  • Increase net interest income by leveraging loan pricing opportunities
  • Enhance core earnings power by managing net interest margin and improving scalability and efficiency
  • Manage credit risk
  • Maintain well capitalized levels under all stress test scenarios

Earnings Summary:

Quarter ended December 31, 2016 (4Q16) compared to the quarters ended December 31, 2015 (4Q15) and September 30, 2016 (3Q16).

Net Interest Income

Net interest income for 4Q16 was $42.4 million, an increase of 7.4% YoY and an increase of 1.5% QoQ.

  • Average balance of total interest-earning assets of $5,717.3 million increased $432.3 million, or 8.2% YoY and $32.9 million, or 0.6% QoQ
  • Yield on interest-earning assets of 3.92% decreased five basis points YoY but increased one basis point QoQ
  • Cost of interest-bearing liabilities of 1.08% decreased two basis points YoY and decreased one basis point QoQ, driven by an improvement in our funding mix
  • Net interest margin of 2.96%, decreased two basis points YoY but increased two basis points QoQ
  • Net interest spread of 2.84%, decreased three basis points YoY but increased two basis points QoQ
  • Includes prepayment penalty income from loans and securities of $1.6 million in each of 4Q16 and 4Q15, compared with $1.5 million in 3Q16, and recovered interest from nonaccrual loans of $0.6 million, compared with $0.2 million in 4Q15 and $0.3 million in 3Q16
  • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, the yield on interest-earning assets, would have been 3.77% in 4Q16, compared with 3.83% in 4Q15 and 3.81% in 3Q16, and the net interest margin would have been 2.81% in 4Q16, compared with 2.84% in 4Q15 and 2.81% in 3Q16
  • Cost of funds of 1.01% decreased three basis points YoY and decreased two basis points QoQ

Non-interest Income

Non-interest income (excluding: net gains on sale of buildings and net gain/losses on the sale of securities) for 4Q16 was $2.1 million, a decrease of $0.1 million, or 3.9% YoY, but an increase of $0.2 million, or 11.2% QoQ.

  • Increase in fair value adjustments of $0.4 million and $0.3 million compared to 4Q15 and 3Q16, respectively

Non-interest Expense

Non-interest expense for 4Q16 was $35.4 million, an increase of $11.6 million, or 48.5% YoY, and an increase of $9.1 million, or 34.6% QoQ, largely driven by a $8.3 million non-recurring prepayment penalty.

  • The $8.3 million non-recurring penalty on the prepayment of $130.0 million in advances and $40.0 million in repurchase agreements, as part of a balance sheet restructure, is expected to improve future net interest margin
  • Salaries and benefits increased $3.2 million YoY primarily due to annual salary increases, additions in staffing and an increase in stock-based compensation and increased $1.0 million QoQ due to an increase in year-end incentive accruals from exceeding certain performance targets, and an increase in stock-based compensation costs because of an increase in the Company’s stock price
  • 4Q16 and 3Q16 include write-downs of $0.2 and $0.8 million, respectively, on one OREO property that was sold in 4Q16
  • Non-interest expense (excluding: salaries and benefits expense, prepayment penalty on borrowings and net gain/losses on sale of OREO) totaled $11.0 million, a decrease of $0.2 million, or 1.6% YoY, but an increase of $0.4 million, or 3.5% QoQ
  • The efficiency ratio increased to 59.6% in 4Q16 from 56.0% in 4Q15 and 57.4% in 3Q16

Provision for Income Taxes

The provision for income taxes for 4Q16 was $8.1 million, an increase of $2.7 million YoY and an increase of $1.5 million QoQ.

  • Income before income taxes increased by $5.3 million YoY and $5.1 million QoQ
  • Effective tax rates of 36.2% in 4Q16, 38.5% in 3Q16 and 31.9% in 4Q15 were impacted by adjustments to the percentage of income allocated to New York City for municipal income taxes

Financial Condition Summary:

Loans:

  • Net loans were $4,813.5 million reflecting an increase of 2.0% QoQ (not annualized) and 10.2% YoY as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full banking relationship
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $1,020.7 million for the year, or 90.1% of loan production
  • Loan purchases which are underwritten to the same standards as organic originations, were $186.7 million for the year, a decrease of $92.2 million YoY
  • Loan pipeline totaled $310.9 million at December 31, 2016, compared to $289.3 million at September 30, 2016 and $330.5 million at December 31, 2015
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate and one-to-four family mixed-use property mortgage loans originated during the quarter had an average loan-to-value ratio of 47.0% and an average debt coverage ratio of 203%

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

  For the three months ended
  December 31, September 30, December 31,
Loan type 2016
 2016
 2015
Mortgage loans 3.70% 3.52% 3.60%
Non-mortgage loans 4.05% 4.12% 3.88%
Total loans 3.81% 3.74% 3.68%

Credit Quality:

  • Non-performing loans totaled $21.4 million, a decrease of $4.7 million, or 17.9%, from $26.1 million at December 31, 2015
  • Classified assets totaled $44.0 million, an increase of $0.1 million, or 0.2%, from $43.9 million at December 31, 2015, primarily due to an increase in substandard taxi medallion loans, partially offset by reductions in non-performing assets
  • Loans classified as troubled debt restructured totaled $17.4 million, an increase of $7.9 million, or 83.4%, from $9.5 million at December 31, 2015, primarily due to the addition of restructured taxi medallion loans
  • Strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 39.1% average loan-to-value for non-performing loans collateralized by real estate
  • In 2016, no provision for loan losses was recorded compared with a benefit of $1.0 million recorded in the comparable prior year period
  • Net recoveries totaled $0.7 million in 2016, amid continued improvement in credit conditions
  • We anticipate continued low loss content in the loan portfolio given the average loan-to-value of 39.1% for non-performing loans collateralized by real estate using the appraised value at the time of origination

Capital Management:

  • The Company and Bank are subject to the same regulatory requirements and at December 31, 2016, both were well-capitalized under all regulatory requirements
  • For the year, stockholders’ equity increased $40.8 million, or 8.6%, to $513.9 million due to net income of $64.9 million, partially offset by a decline in other comprehensive income of $2.8 million, the declaration and payment of dividends on the Company’s common stock, and the repurchase of 403,695 shares
  • As of December 31, 2016, the Company had 495,905 shares that may be repurchased under the current authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share was $17.95 at December 31, 2016, compared to $17.90 at September 30, 2016 and $16.41 at December 31, 2015
  • Tangible book value, a non-GAAP measure, per common share was $17.40 at December 31, 2016, compared to $17.35 at September 30, 2016 and $15.86 at December 31, 2015

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. 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, 2015 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 twelve months ended
   December 31, September 30, December 31, December 31,
    2016   2016   2015   2016   2015 
          
Interest and Dividend Income          
Interest and fees on loans $49,973  $49,181  $45,859  $195,125  $178,720 
Interest and dividends on securities:          
Interest  5,866   6,173   6,461   25,141   24,827 
Dividends  121   121   118   481   473 
Other interest income  59   49   30   250   126 
Total interest and dividend income  56,019   55,524   52,468   220,997   204,146 
            
Interest Expense          
Deposits  8,760   8,520   7,740   33,350   30,336 
Other interest expense  4,908   5,291   5,312   20,561   19,390 
Total interest expense  13,668   13,811   13,052   53,911   49,726 
            
Net Interest Income  42,351   41,713   39,416   167,086   154,420 
Provision (benefit) for loan losses  -   -   664   -   (956)
Net Interest Income After Provision (Benefit) for Loan Losses 42,351   41,713   38,752   167,086   155,376 
            
Non-interest Income          
Banking services fee income  983   826   1,245   3,758   3,805 
Net (loss) gain on sale of securities  (839)  -   -   1,524   167 
Net gain on sale of loans  -   240   67   584   422 
Net gain on sale of buildings  14,204   -   -   48,018   6,537 
Net loss from fair value adjustments  (509)  (823)  (920)  (3,434)  (1,841)
Federal Home Loan Bank of New York stock dividends  794   665   514   2,664   1,969 
Gains from life insurance proceeds  2   47   -   460   - 
Bank owned life insurance  701   707   723   2,797   2,880 
Other income  90   191   516   1,165   1,780 
Total non-interest income  15,426   1,853   2,145   57,536   15,719 
            
Non-interest Expense          
Salaries and employee benefits  15,801   14,795   12,622   60,825   53,093 
Occupancy and equipment  2,550   2,576   2,415   9,848   10,206 
Professional services  1,813   1,730   2,038   7,720   7,074 
FDIC deposit insurance  613   536   859   2,993   3,236 
Data processing  1,135   939   1,046   4,364   4,471 
Depreciation and amortization  1,187   1,169   1,051   4,450   3,579 
Other real estate owned/foreclosure expense  476   273   225   1,307   942 
Prepayment penalty on borrowings  8,274   -   -   10,356   - 
Other operating expenses  3,526   4,259   3,568   16,740   15,118 
Total non-interest expense  35,375   26,277   23,824   118,603   97,719 
            
Income Before Income Taxes  22,402   17,289   17,073   106,019   73,376 
            
Provision for Income Taxes          
Federal  8,062   5,568   5,061   33,580   21,843 
State and local  54   1,087   378   7,523   5,324 
Total taxes  8,116   6,655   5,439   41,103   27,167 
            
Net Income $14,286  $10,634  $11,634  $64,916  $46,209 
            
            
Basic earnings per common share $0.50  $0.37  $0.40  $2.24  $1.59 
Diluted earnings per common share $0.50  $0.37  $0.40  $2.24  $1.59 
Dividends per common share $0.17  $0.17  $0.16  $0.68  $0.64 
            


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
 
    December 31, September 30, December 31,
     2016   2016   2015 
ASSETS      
Cash and due from banks$35,857  $47,880  $42,363 
Securities held-to-maturity:     
 Other securities 37,735   33,274   6,180 
Securities available for sale:     
 Mortgage-backed securities 516,476   545,067   668,740 
 Other securities 344,905   365,812   324,657 
Loans:      
 Multi-family residential 2,178,504   2,171,289   2,055,228 
 Commercial real estate 1,246,132   1,195,266   1,001,236 
 One-to-four family ― mixed-use property 558,502   555,691   573,043 
 One-to-four family ― residential 185,767   183,993   187,838 
 Co-operative apartments 7,418   7,494   8,285 
 Construction 11,495   11,250   7,284 
 Small Business Administration 15,198   14,339   12,194 
 Taxi medallion 18,996   20,536   20,881 
 Commercial business and other 597,122   564,972   506,622 
 Net unamortized premiums and unearned loan fees 16,559   16,447   15,368 
 Allowance for loan losses (22,229)  (21,795)  (21,535)
   Net loans 4,813,464   4,719,482   4,366,444 
Interest and dividends receivable 20,228   19,833   18,937 
Bank premises and equipment, net 26,561   26,000   25,622 
Federal Home Loan Bank of New York stock 59,173   65,185   56,066 
Bank owned life insurance 132,508   115,807   115,536 
Goodwill  16,127   16,127   16,127 
Other assets 55,453   44,788   63,962 
   Total assets$6,058,487  $5,999,255  $5,704,634 
         
LIABILITIES     
Due to depositors:     
 Non-interest bearing$333,163  $320,060  $269,469 
 Interest-bearing:     
  Certificate of deposit accounts 1,372,115   1,384,551   1,403,302 
  Savings accounts 254,283   258,058   261,748 
  Money market accounts 843,370   733,361   472,489 
  NOW accounts 1,362,484   1,296,475   1,448,695 
   Total interest-bearing deposits 3,832,252   3,672,445   3,586,234 
Mortgagors' escrow deposits 40,216   49,276   36,844 
Borrowed funds 1,266,563   1,360,515   1,271,676 
Other liabilities 72,440   84,338   67,344 
   Total liabilities 5,544,634   5,486,634   5,231,567 
         
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 December 31, 2016, September 30, 2016 and December 31, 2015; 28,632,904     
 shares, 28,632,796 shares and 28,830,558 shares outstanding at December 31, 2016,     
 September 30, 2016 and December 31, 2015, respectively) 315   315   315 
Additional paid-in capital 214,462   213,488   210,652 
Treasury stock (2,897,691 shares, 2,897,799 shares and 2,700,037 shares at     
 December 31, 2016, September 30, 2016 and December 31, 2015, respectively) (53,754)  (53,373)  (48,868)
Retained earnings 361,192   351,942   316,530 
Accumulated other comprehensive income (loss), net of taxes (8,362)  249   (5,562)
   Total stockholders' equity 513,853   512,621   473,067 
         
   Total liabilities and stockholders' equity$6,058,487  $5,999,255  $5,704,634 
         


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 twelve months ended 
  December 31, September 30, December 31, December 31, 
   2016  2016  2015  2016  2015 
Per Share Data           
Basic earnings per share $0.50 $0.37 $0.40 $2.24 $1.59 
Diluted earnings per share $0.50 $0.37 $0.40 $2.24 $1.59 
Average number of shares outstanding for:           
Basic earnings per common share computation  28,849,783  28,861,101  28,862,319  28,956,859  29,106,112 
Diluted earnings per common share computation  28,859,665  28,874,979  28,878,829  28,969,582  29,126,108 
Shares outstanding  28,632,904  28,632,796  28,830,558  28,632,904  28,830,558 
Book value per common share (1) $17.95 $17.90 $16.41 $17.95 $16.41 
Tangible book value per common share (2) $17.40 $17.35 $15.86 $17.40 $15.86 
            
Stockholders' Equity           
Stockholders' equity $513,853 $512,621 $473,067 $513,853 $473,067 
Tangible stockholders' common equity  498,115  496,901  457,346  498,115  457,346 
            
Average Balances           
Total loans, net $4,757,124 $4,686,593 $4,230,033 $4,600,682 $4,033,478 
Total interest-earning assets  5,717,298  5,684,413  5,284,978  5,626,748  5,084,179 
Total assets  6,003,125  5,976,725  5,569,011  5,913,534  5,361,144 
Total due to depositors  3,796,337  3,673,731  3,507,037  3,748,822  3,429,714 
Total interest-bearing liabilities  5,077,893  5,059,620  4,765,134  5,035,989  4,586,446 
Stockholders' equity  512,317  508,974  470,765  496,820  465,194 
            
Performance Ratios (3)           
Return on average assets  0.95% 0.71% 0.84% 1.10% 0.86%
Return on average equity  11.15  8.36  9.89  13.07  9.93 
Yield on average interest-earning assets  3.92  3.91  3.97  3.93  4.02 
Cost of average interest-bearing liabilities  1.08  1.09  1.10  1.07  1.08 
Interest rate spread during period  2.84  2.82  2.87  2.86  2.94 
Net interest margin  2.96  2.94  2.98  2.97  3.04 
Non-interest expense to average assets  2.36  1.76  1.71  2.01  1.82 
Efficiency ratio (4)  59.63  57.37  56.00  59.64  58.57 
Average interest-earning assets to average           
interest-bearing liabilities  1.13X 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 “Reconciliation of GAAP Earnings and Core Earnings”.

(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 year  At or for the year 
  ended  ended 
  December 31, 2016  December 31, 2015 
       
Selected Financial Ratios and Other Data      
       
Regulatory capital ratios (for Flushing Financial Corporation):      
Tier 1 capital $539,228   $490,919 
Common equity Tier 1 capital  506,432    462,883 
Total risk-based capital  636,457    512,454 
       
Tier 1 leverage capital (well capitalized = 5%)  9.00%   8.84%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  11.79    11.83 
Tier 1 risk-based capital (well capitalized = 8.0%)  12.56    12.55 
Total risk-based capital (well capitalized = 10.0%)  14.82    13.10 
         
Regulatory capital ratios (for Flushing Bank only):        
Tier 1 capital $607,033   $494,690 
Common equity Tier 1 capital  607,033    494,690 
Total risk-based capital  629,262    516,226 
         
Tier 1 leverage capital (well capitalized = 5%)  10.12%   8.89%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  14.12    12.62 
Tier 1 risk-based capital (well capitalized = 8.0%)  14.12    12.62 
Total risk-based capital (well capitalized = 10.0%)  14.64    13.17 
         
Capital ratios:        
Average equity to average assets  8.40%   8.68%
Equity to total assets  8.48    8.29 
Tangible stockholders' common equity to tangible assets (1)  8.24    8.04 
         
Asset quality:        
Non-accrual loans (2) $21,030   $22,817 
Non-performing loans  21,416    26,077 
Non-performing assets  21,949    31,009 
Net charge-offs/ (recoveries)  (694)   2,605 
         
Asset quality ratios:        
Non-performing loans to gross loans  0.44%   0.60%
Non-performing assets to total assets  0.36    0.54 
Allowance for loan losses to gross loans  0.46    0.49 
Allowance for loan losses to non-performing assets  101.28    69.45 
Allowance for loan losses to non-performing loans  103.80    82.58 
       
Full-service customer facilities  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 
 December 31, 2016 September 30, 2016 December 31, 2015 
 Average Yield/ Average Yield/ Average Yield/ 
 BalanceInterestCost BalanceInterestCost BalanceInterestCost 
Interest-earning Assets:            
Mortgage loans, net$4,140,511$44,2194.27%$4,093,240$43,7774.28%$3,697,169$41,1844.46%
Other loans, net 616,613 5,7543.73  593,353 5,4023.64  532,864 4,6753.51 
Total loans, net (1) 4,757,124 49,9734.20  4,686,593 49,1794.20  4,230,033 45,8594.34 
Taxable securities:            
Mortgage-backed            
 securities 514,527 3,0022.33  554,515 3,3502.42  674,103 4,2812.54 
Other securities 248,765 2,2033.54  245,477 2,1623.52  199,258 1,5013.01 
Total taxable securities 763,292 5,2052.73  799,992 5,5122.76  873,361 5,7822.65 
Tax-exempt securities: (2)            
Other securities 147,184 7822.13  148,004 7842.12  128,024 7972.49 
Total tax-exempt securities 147,184 7822.13  148,004 7842.12  128,024 7972.49 
Interest-earning deposits            
 and federal funds sold 49,698 590.47  49,824 490.39  53,560 300.22 
Total interest-earning            
 assets 5,717,298 56,0193.92  5,684,413 55,5243.91  5,284,978 52,4683.97 
Other assets 285,827    292,312    284,033   
Total assets$6,003,125   $5,976,725   $5,569,011   
             
             
Interest-bearing Liabilities:            
Deposits:            
Savings accounts$256,677 3090.48 $258,884 3060.47 $262,103 2990.46 
NOW accounts 1,370,618 2,0280.59  1,384,368 1,9790.57  1,405,933 1,7460.50 
Money market accounts 780,233 1,3150.67  601,709 9900.66  463,551 5360.46 
Certificate of deposit            
 accounts 1,388,809 5,0811.46  1,428,770 5,2131.46  1,375,450 5,1341.49 
Total due to depositors 3,796,337 8,7330.92  3,673,731 8,4880.92  3,507,037 7,7150.88 
Mortgagors' escrow            
 accounts 58,151 270.19  48,840 320.26  54,121 250.18 
Total interest-bearing            
 deposits 3,854,488 8,7600.91  3,722,571 8,5200.92  3,561,158 7,7400.87 
Borrowings 1,223,405 4,9081.60  1,337,049 5,2911.58  1,203,976 5,3121.76 
Total interest-bearing            
 liabilities 5,077,893 13,6681.08  5,059,620 13,8111.09  4,765,134 13,0521.10 
Non interest-bearing            
 demand deposits 331,232    318,188    270,651   
Other liabilities 81,683    89,943    62,461   
Total liabilities 5,490,808    5,467,751    5,098,246   
Equity 512,317    508,974    470,765   
Total liabilities and            
 equity$6,003,125   $5,976,725   $5,569,011   
             
Net interest income /            
 net interest rate spread $42,3512.84% $41,7132.82% $39,4162.87%
             
Net interest-earning assets /            
 net interest margin$639,405 2.96%$624,793 2.94%$519,844 2.98%
             
Ratio of interest-earning            
 assets to interest-bearing            
 liabilities  1.13X  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 $0.9 million, $0.9 million and $1.1 million for the three months ended December 31, 2016, September 30, 2016 and December 31, 2015, 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 year ended 
 December 31, 2016  December 31, 2015 
 Average Yield/  Average Yield/ 
 BalanceInterestCost  BalanceInterestCost 
Interest-earning Assets:         
Mortgage loans, net$4,014,734$173,4194.32% $3,524,331$161,1154.57%
Other loans, net 585,948 21,7063.70   509,147 17,6053.46 
Total loans, net (1) 4,600,682 195,1254.24   4,033,478 178,7204.43 
Taxable securities:         
Mortgage-backed         
 securities 581,505 14,2312.45   693,893 17,3092.49 
Other securities 243,567 8,2433.38   163,604 4,3982.69 
Total taxable securities 825,072 22,4742.72   857,497 21,7072.53 
Tax-exempt securities: (2)         
Other securities 142,472 3,1482.21   134,807 3,5932.67 
Total tax-exempt securities 142,472 3,1482.21   134,807 3,5932.67 
Interest-earning deposits         
 and federal funds sold 58,522 2500.43   58,397 1260.22 
Total interest-earning         
 assets 5,626,748 220,9973.93   5,084,179 204,1464.02 
Other assets 286,786     276,965   
Total assets$5,913,534    $5,361,144   
          
          
Interest-bearing Liabilities:         
Deposits:         
Savings accounts$260,948 1,2190.47  $264,891 1,1510.43 
NOW accounts 1,496,712 7,8910.53   1,432,609 6,5930.46 
Money market accounts 581,390 3,5920.62   380,595 1,5510.41 
Certificate of deposit         
 accounts 1,409,772 20,5361.46   1,351,619 20,9431.55 
Total due to depositors 3,748,822 33,2380.89   3,429,714 30,2380.88 
Mortgagors' escrow         
 accounts 56,152 1120.20   52,364 980.19 
Total interest-bearing         
 deposits 3,804,974 33,3500.88   3,482,078 30,3360.87 
Borrowings 1,231,015 20,5611.67   1,104,368 19,3901.76 
Total interest-bearing         
 liabilities 5,035,989 53,9111.07   4,586,446 49,7261.08 
Non interest-bearing         
 demand deposits 305,096     250,488   
Other liabilities 75,629     59,016   
Total liabilities 5,416,714     4,895,950   
Equity 496,820     465,194   
Total liabilities and         
 equity$5,913,534    $5,361,144   
          
Net interest income /         
 net interest rate spread $167,0862.86%  $154,4202.94%
          
Net interest-earning assets /         
 net interest margin$590,759 2.97% $497,733 3.04%
          
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 $4.2 million for each of the years ended December 31, 2016 and 2015, 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)
 
            December 2016 vs.   December 2016 vs.
    December 31, September 30, June 30, March 31, September, 2016 December 31, December 2015
(Dollars in thousands) 2016  2016  2016  2016 % Change  2015 % Change
Deposits              
Non-interest bearing$333,163 $320,060 $317,112 $280,450 4.1% $269,469 23.6%
Interest bearing:             
 Certificate of deposit             
  accounts 1,372,115  1,384,551  1,411,550  1,362,062 (0.9%)  1,403,302 (2.2%)
 Savings accounts 254,283  258,058  260,528  268,057 (1.5%)  261,748 (2.9%)
 Money market accounts 843,370  733,361  452,589  485,774 15.0%  472,489 78.5%
 NOW accounts 1,362,484  1,296,475  1,453,540  1,610,932 5.1%  1,448,695 (6.0%)
  Total interest-bearing             
   deposits 3,832,252  3,672,445  3,578,207  3,726,825 4.4%  3,586,234 6.9%
                 
   Total deposits$4,165,415 $3,992,505 $3,895,319 $4,007,275 4.3% $3,855,703 8.0%
                 
                 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Origination and Purchases

  For the three months For the year ended
  December 31, September 30, December 31, December 31,
(In thousands)  2016  2016  2015  2016  2015
Multi-family residential $77,812 $61,378 $104,622 $371,197 $373,843
Commercial real estate  77,607  68,970  157,005  322,721  452,089
One-to-four family – mixed-use property  20,242  12,618  23,390  62,735  68,295
One-to-four family – residential  7,770  3,362  6,135  24,820  40,831
Co-operative apartments  -  -  -  470  1,625
Construction  9,738  1,920  1,613  15,772  4,999
Small Business Administration  1,662  470  2,548  8,447  11,261
Commercial business and other  87,761  84,525  100,279  326,776  280,518
Total $282,592 $233,243 $395,592 $1,132,938 $1,233,461
           

Loan Composition

            December 2016 vs.   December 2016 vs.
    December 31, September 30, June 30, March 31, September 2016 December 31, December 2015
(Dollars in thousands) 2016   2016   2016   2016  % Change  2015  % Change
Loans:                
Multi-family residential$2,178,504  $2,171,289  $2,159,138  $2,039,794  0.3%  $2,055,228  6.0% 
Commercial real estate 1,246,132   1,195,266   1,146,400   1,058,028  4.3%   1,001,236  24.5% 
One-to-four family ―               
 mixed-use property 558,502   555,691   566,702   571,846  0.5%   573,043  (2.5%) 
One-to-four family ― residential 185,767   183,993   190,251   191,158  1.0%   187,838  (1.1%) 
Co-operative apartments 7,418   7,494   7,571   8,182  (1.0%)   8,285  (10.5%) 
Construction 11,495   11,250   9,899   7,472  2.2%   7,284  57.8% 
Small Business Administration 15,198   14,339   14,718   14,701  6.0%   12,194  24.6% 
Taxi medallion 18,996   20,536   20,641   20,757  (7.5%)   20,881  (9.0%) 
Commercial business and other 597,122   564,972   564,084   531,322  5.7%   506,622  17.9% 
Net unamortized premiums               
 and unearned loan fees 16,559   16,447   16,875   15,281  0.7%   15,368  7.7% 
Allowance for loan losses (22,229)  (21,795)  (22,198)  (21,993) 2.0%   (21,535) 3.2% 
   Net loans$4,813,464  $4,719,482  $4,674,081  $4,436,548  2.0%  $4,366,444  10.2% 
                   

Loan Activity

  Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
(In thousands)  2016   2016   2016   2016   2015 
Loans originated and purchased$282,592  $233,243  $387,863  $229,240  $395,592 
Principal reductions (187,780)  (183,583)  (149,308)  (152,521)  (206,125)
Loans sold  -   (3,693)  (2,310)  (5,515)  (1,164)
Loan charged-offs (370)  (541)  (101)  (147)  (2,478)
Foreclosures  (138)  -   -   (408)  (34)
Net change in deferred (fees) and costs 112   (428)  1,594   (87)  1,239 
Net change in the allowance for loan losses (434)  403   (205)  (458)  1,438 
 Total loan activity$93,982  $45,401  $237,533  $70,104  $188,468 
           


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES 
NON-PERFORMING ASSETS and NET CHARGE-OFFS 
(Unaudited) 
  
   December 31, September 30, June 30, March 31, December 31, 
(Dollars in thousands)  2016   2016   2016   2016   2015  
Loans 90 Days Or More Past Due           
 and Still Accruing:           
Multi-family residential $-  $-  $574  $792  $233  
Commercial real estate  -   1,183   320   1,083   1,183  
One-to-four family - mixed-use property  386   470   635   743   611  
One-to-four family - residential  -   -   13   13   13  
Construction  -   -   -   570   1,000  
Commercial business and other  -   -   -   -   220  
 Total  386   1,653   1,542   3,201   3,260  
             
Non-accrual Loans:           
Multi-family residential  1,837   1,649   3,162   3,518   3,561  
Commercial real estate  1,148   1,157   2,299   3,295   2,398  
One-to-four family - mixed-use property  4,025   4,534   6,005   5,519   5,952  
One-to-four family - residential  8,241   8,340   8,406   8,861   10,120  
Small business administration  1,886   2,132   185   201   218  
Taxi Medallion  3,825   3,971   196   196   -  
Commercial business and other  68   99   128   511   568  
 Total  21,030   21,882   20,381   22,101   22,817  
             
 Total Non-performing Loans  21,416   23,535   21,923   25,302   26,077  
             
Other Non-performing Assets:           
Real estate acquired through foreclosure  533   2,839   3,668   4,602   4,932  
 Total  533   2,839   3,668   4,602   4,932  
             
 Total Non-performing Assets $21,949  $26,374  $25,591  $29,904  $31,009  
             
Non-performing Assets to Total Assets  0.36%  0.44%  0.43%  0.51%  0.54% 
Allowance For Loan Losses to Non-performing Loans  103.8%  92.6%  101.3%  86.9%  82.6% 
             

Net Charge-Offs (Recoveries)

   Three Months Ended
   December 31, September 30, June 30, March 31, December 31,
(In thousands)  2016   2016   2016   2016   2015 
Multi-family residential $(103) $79  $(183) $29  $(35)
Commercial real estate  -   (11)  -   -   - 
One-to-four family – mixed-use property  (520)  24   36   (173)  18 
One-to-four family – residential  40   -   7   (299)  97 
Small Business Administration  186   317   (42)  (31)  17 
Taxi Medallion  142   -   -   -   - 
Commercial business and other  (179)  (6)  (23)  16   2,005 
Total net loan charge-offs (recoveries) $(434) $403  $(205) $(458) $2,102 
            

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common share and tangible common stockholders’ equity 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 share and tangible common stockholders’ equity are 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 Twelve Months Ended
  December 31,September 30,December 31, December 31,December 31,
   2016  2016  2015   2016  2015 
   
        
GAAP income before income taxes$22,402 $17,289 $17,073  $106,019 $73,376 
        
Net loss from fair value adjustments 509  823  920   3,434  1,841 
Net loss (gain) on sale of securities 839  -  -   (1,524) (167)
Gain from life insurance proceeds (2) (47) -   (460) - 
Net gain on sale of buildings (14,204) -  -   (48,018) (6,537)
Prepayment penalty on borrowings 8,274  -  -   10,356  - 
        
Core income before taxes 17,818  18,065  17,993   69,807  68,513 
        
Provision for income taxes for core income 6,227  6,736  5,820   25,855  25,067 
        
Core net income$11,591 $11,329 $12,173  $43,952 $43,446 
        
GAAP diluted earnings per common share$0.50 $0.37 $0.40  $2.24 $1.59 
        
Net loss from fair value adjustments, net of tax 0.01  0.03  0.02   0.07  0.03 
Net loss (gain) on sale of securities, net of tax 0.02  -  -   (0.03) - 
Gain from life insurance proceeds -  -  -   (0.02) - 
Net gain on sale of buildings, net of tax (0.29) -  -   (0.95) (0.13)
Prepayment penalty on borrowings, net of tax 0.17  -  -   0.21  - 
        
Core diluted earnings per common share*$0.40 $0.39 $0.42  $1.52 $1.49 
        
        
Core net income, as calculated above$11,591 $11,329 $12,173  $43,952 $43,446 
Average assets 6,003,125  5,976,725  5,569,011   5,913,534  5,361,144 
Average equity 512,317  508,974  470,765   496,820  465,194 
Core return on average assets** 0.77% 0.76% 0.87%  0.74% 0.81%
Core return on average equity** 9.05% 8.90% 10.34%  8.85% 9.34%
        
* 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)
 
      December 31,December 31,
(Dollars in thousands)   2016  2015 
Total Equity  $513,853 $473,067 
Less:      
 Goodwill   (16,127) (16,127)
 Intangible deferred tax liabilities   389  406 
  Tangible Stockholders' Common Equity$498,115 $457,346 
        
Total Assets  $6,058,487 $5,704,634 
Less:      
 Goodwill   (16,127) (16,127)
 Intangible deferred tax liabilities   389  406 
  Tangible Assets  $6,042,749 $5,688,913 
        
Tangible Stockholders' Common Equity to Tangible Assets 8.24% 8.04%
        


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

Source: Flushing Financial Corporation