Market Overview

Flushing Financial Corporation Reports Third Quarter GAAP Diluted EPS of $0.35 and Core Diluted EPS of $0.37

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THIRD QUARTER 20171

  • GAAP diluted EPS was $0.35, down 20.5% QoQ and 5.4% YoY, largely due to pre-tax provision for losses of $3.3 million, or $0.07 diluted EPS, after-tax, primarily related to the taxi medallion portfolio
  • Core diluted EPS was $0.37, down 19.6% QoQ and 5.1% YoY
  • Net interest income was $43.0 million, an improvement of 3.2% YoY, but a reduction of 1.3% QoQ
  • Net interest margin was 2.90%, down 5bps QoQ and 4bps YoY
  • GAAP and core ROAE were 7.6% and 5.1%, compared with 9.6% and 10.2%, respectively in 2Q17
  • GAAP and core ROAA were both 0.7% for 3Q17 compared with 0.8% and 0.9%, respectively in 2Q17
  • Yield on quarterly loan originations and purchases exceeded yield on the loan portfolio, net of prepayment penalties and interest recovered from delinquent loans, for the first time since 4Q08

UNIONDALE, N.Y., Oct. 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 three and nine months ended September 30, 2017.

John R. Buran, President and Chief Executive Officer, stated, "During the third quarter of 2017, we recognized a provision for loan losses totaling $3.3 million related to our taxi medallion loan portfolio. The vast majority of loans in this portfolio are performing and over 80% of taxi medallion loans have been restructured by reducing interest rates and/or extending maturities.  The taxi medallion loan classified as non-performing is due to one loan being past its maturity date; however, the loan continues to make required payments. This is the first provision we have taken since the fourth quarter of 2015. The net effect of the provision for loan losses was a $0.07 reduction of diluted earnings per share. The provision resulted from a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio to a net carrying value of approximately $304,000 per New York City corporate medallion. At September 30, 2017, we have allocated $6.0 million of the allowance to the taxi medallion portfolio which equals 33.0% of the outstanding principal."

"For many months following the current cycle of interest rate increases, we have been able to keep our government deposit costs considerably below market rates. However, due to competitive pressures we were compelled to move these rates to match competition by a weighted average of 33 basis points.  The full impact of this increase was recorded in the recent quarter as the cost to total deposits increased 14 basis points versus the second quarter of 2017. For the fourth quarter of 2017, we expect to raise an additional $200 million in low cost government deposits to replace higher costing borrowings on our balance sheet." 

"The loan to deposit ratio improved for the quarter to 113.7% from 118.2% due to increasing branch based money market balances and the growth or our internet based eco-friendly, socially conscious, healthier lifestyle community internet brand, Bank Purely. Bank Purely had balances in excess of $80 million at quarter end. We look to further improve the loan to deposit ratio in the coming quarter as we increase business development efforts in the lucrative Flushing market consistent with the relocation and modernization of two branches."

"In order to reduce the impact of rising interest rates on the net interest margin, we continued our strategy of focusing our origination efforts on higher yielding loans. This effort provided a 21bps improvement in the yield received on loan originations and purchases in the third quarter of 2017 to 4.25%, which is 51bps greater than the yield on originated and purchased loans for the third quarter of 2016. This yield is 16bps greater than the quarterly average yield of our total loan portfolio, net of prepayment penalty and recovered interest from delinquent loans. Our total loan portfolio increased 5%, with an average LTV of 41.2% for loans secured by real estate, during the nine months ended September 30, 2017, while maintaining our strong underwriting standards. Similar to the activity noted in the third quarter of 2016, we experienced a delay in closing loans during the recent quarter. Consequently, the loan pipeline increased to $417.0 million from $279.1 million at June 30, 2017, the highest level since March 2016. Given the level of the pipeline, we are expecting strong loan growth in the fourth quarter of 2017." 

Mr. Buran continued, "We remain disciplined regarding credit quality. Credit quality improved as our non-performing assets have decreased by 37% since the end of 2016 and net charge-offs remain minimal. Additionally, total delinquencies have decreased 15% since December 31, 2016. The percentage of allowance for loan losses to gross loans has increased to 0.50% from 0.46% at December 31, 2016 while the percentage of allowance for loan losses to non-performing loans increased to 182% from 104% at the end of 2016. The LTV on our non-performing real estate loans at September 30, 2017 is 34.9%."

"We continued to convert our branch network to the more cost effective Universal Banker model and remain on track to convert half of our brick and mortar branches by the end of 2017."

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

  • In the third quarter, multi-family, commercial real estate, and commercial business loan originations and purchases represented 35%, 14%, and 38%, respectively, of all originations, which were made while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield. 
  • The average interest rate obtained for third quarter originations and purchases improved to 4.25% compared to 4.04% for 2Q17 and 3.74% for 3Q16.
  • The average rate of mortgage loan applications in the pipeline totaled 4.04% at September 30, 2017, as compared to 4.17% at June 30, 2017 and 4.05% at September 30, 2016.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 3Q17 had an increased yield of 4.86% from 4.19% for 2Q17 and 3.53% for 3Q16.  While the yields increased, we have maintained our asset quality as these loans had an average loan-to-value ratio of 41.2% and an average debt coverage ratio of 187%.

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

__________________
1 See the table entitled "Reconciliation of Non-GAAP Financial Measures."

Summary of Strategic Objectives

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

Earnings Summary:

Net Interest Income

Net interest income for 3Q17 was $43.0 million, an increase of 3.2% YoY (September 30, 2017 compared to September 30, 2016) and decrease of 1.3% QoQ (September 30, 2017 compared to June 30, 2017).

  • Net interest margin of 2.90%, decreased 4bps YoY and 5bps QoQ
  • Net interest spread of 2.77%, decreased 5bps YoY and 6bps QoQ
  • Net interest income includes prepayment penalty income from loans of $1.6 million in 3Q17 compared with $1.5 million in 3Q16 and $1.0 million in 2Q17, and recovered interest from delinquent loans of $0.3 million in each of 3Q17, 3Q16 and 2Q17
  • Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets was 3.87% in 3Q17, improved from 3.78% in 3Q16 and 3.82% in 2Q17, and the net interest margin was 2.77% in 3Q17, decreased from  2.81% in 3Q16 and 2.83% in 2Q17
  • Average balance of total interest-earning assets of $5,936.1 million, increased $251.7 million, or 4.4% YoY and increased $17.1 million, or 0.3% QoQ
  • Yield on interest-earning assets of 4.0%, increased 9bps YoY and 6bps QoQ
  • Cost of interest-bearing liabilities of 1.23%, increased 14bps YoY and 12bps QoQ
  • Cost of funds of 1.15%, increased 13bps YoY and 10bps QoQ, driven by an increase in rates paid on our government deposits and short-term borrowings resulting from the increase in the Fed Fund rate during 2017  

Provision for loan losses

Provision for loan losses for 3Q17 was $3.3 million compared to none in 3Q16 and 2Q17.

  • Provision driven by a reduction in the estimated fair value of NYC taxi medallions based on most recent sales data

Non-interest Income

Non-interest income for 3Q17 was $1.7 million, a decrease of $0.2 million, or 10.4%, YoY and $0.3 million, or 14.7%, QoQ.

  • Non-interest income included net losses from fair value adjustments of $1.3 million in 3Q17, $0.8 million in 3Q16 and $1.2 million in 2Q17
  • 3Q17 included a loss on the sale of securities of $0.2 million and a gain from insurance proceeds of $0.2 million
  • Absent the above items, non-interest income was $2.9 million, an increase of $0.3 million YoY and decrease of $0.2 million QoQ

Non-interest Expense

Non-interest expense for 3Q17 was $26.0 million, a decrease of $0.3 million, or 1.2%, YoY and $0.1 million, or 0.4% QoQ.

  • 3Q16 included a write-down of $0.8 million on one OREO property; absent this item, non-interest expense increased $0.5 million, or 2.0% YoY, driven by increased salaries and benefits from annual salary increases and additions in staffing and increased data processing costs, partially offset by decreased foreclosure expense due to continued improvement in asset quality and a reduction in FDIC insurance expense, due to lower assessment rates
  • Lower costs associated with FDIC insurance and foreclosure expense should be sustainable
  • The efficiency ratio was 56.5% in 3Q17 compared to 57.4% in 3Q16 and 55.8% in 2Q17

Provision for Income Taxes

The provision for income taxes in 3Q17 was $5.3 million, a decrease of $1.4 million, or 20.5%, YoY and $1.5 million, or 21.9%, QoQ.

  • Pre-tax income decreased by $1.8 million, or 10.5%, YoY and $4.0 million, or 20.7%, QoQ
  • The effective tax rates were 34.2% in 3Q17, 38.5% in 3Q16 and 34.7% in 2Q17
  • The improvement in the Company's effective tax rate compared to 3Q16 was primarily due to a change in the accounting treatment of deductible stock compensation expense from prior years; in prior years, the tax impact of deductible stock compensation expense flowed through additional paid-in-capital and did not have an impact on the Company's effective tax rate
  • We anticipate the effective tax rate to approximate the 3Q17 rate for the remainder of the year

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,045.1 million reflecting an increase of 0.4% QoQ (not annualized) and 4.8% year-to-date as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship while emphasizing rate over volume
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $159.3 million for 3Q17, or 87.1% of loan production
  • Loan pipeline was $417.0 million at September 30, 2017, compared to $279.1 million at June 30, 2017 and $289.3 million at September 30, 2016
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of September 30, 2017 totaled 39.4%

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

    For the three months ended
    September 30,   June 30,   September 30,
Loan type   2017     2017     2016  
Mortgage loans   4.13 %   4.01 %   3.52 %
Non-mortgage loans   4.43 %   4.13 %   4.12 %
Total loans   4.25 %   4.04 %   3.74 %
                   

Credit Quality:

  • Non-performing loans totaled $13.9 million, a decrease of $7.5 million, or 35.1%, from $21.4 million at December 31, 2016
  • Classified assets totaled $41.3 million, a decrease of $2.7 million, or 6.1%, from $44.0 million at December 31, 2016, primarily due to reductions in non-performing assets, partially offset by an increase in substandard taxi medallion loans
  • Loans classified as troubled debt restructured (TDR) totaled $22.5 million, an increase of $5.1 million, or 29.0%, from $17.4 million at December 31, 2016, attributable to the addition of nine taxi medallion TDRs
  • We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 34.9% average loan-to-value for non-performing loans collateralized by real estate at September 30, 2017
  • Provision for loan losses of $3.3 million was recorded during the nine months ended September 30, 2017, as the estimated fair value of NYC taxi medallions were lowered based on most recent sales data, while no provision for loan losses was recorded during 2016; net charge-offs totaled $0.2 million during the nine months ended September 30, 2017 compared to net recoveries of $0.7 million for all of 2016   
  • For taxi medallion loans, an allowance for loan losses is allocated in the amount by which the outstanding loan balance exceeds the estimated fair value of the taxi medallion, which allowance totaled $6.0 million at September 30, 2017

Capital Management:

  • The Company and Bank, at September 30, 2017, were both well capitalized under all applicable regulatory requirements
  • During the nine months ended September 30, 2017, stockholders' equity increased $25.8 million, or 5.0%, to $539.6 million due to net income of $35.2 million and $1.7 million of other comprehensive income, partially offset by the declaration and payment of dividends on the Company's common stock
  • During the nine months ended September 30, 2017, the Company repurchased 10,000 treasury shares at an average cost of $27.80 per share; as of September 30, 2017, up to 485,905 shares may be repurchased under the current authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $18.72 at September 30, 2017, from $17.95 at December 31, 2016
  • Tangible book value per common share, a non-GAAP measure, increased to $18.18 at September 30, 2017, from $17.40 at December 31, 2016

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, November 1, 2017 at 9:30 AM (ET) to discuss the Company's strategy and results for the third quarter of 2017
  • Dial-in for Live Call: 1-888-317-6016
  • Webcast: https://services.choruscall.com/links/ffic171101.html 
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10112013
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on December 31, 2017

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, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. As a leader in real estate lending, the Bank's experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also operates an online banking division, iGObanking.com®, which offers competitively priced deposit products to consumers nationwide.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company's website at http://www.flushingbank.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "forecasts", "potential" or "continue" or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

- Statistical Tables Follow -

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
         
    For the three months ended   For the nine months ended
    September 30,   June 30,   September 30,   September 30,
      2017       2017       2016       2017       2016  
                 
Interest and Dividend Income                    
Interest and fees on loans   $ 53,318     $ 51,631     $ 49,181     $ 155,834     $ 145,152  
Interest and dividends on securities:                    
Interest     5,850       6,432       6,173       18,377       19,275  
Dividends     30       123       121       274       360  
Other interest income     121       129       49       403       191  
Total interest and dividend income     59,319       58,315       55,524       174,888       164,978  
                     
Interest Expense                    
Deposits     10,655       9,510       8,520       29,145       24,590  
Other interest expense     5,623       5,188       5,291       15,696       15,653  
Total interest expense     16,278       14,698       13,811       44,841       40,243  
                     
Net Interest Income     43,041       43,617       41,713       130,047       124,735  
Provision for loan losses     3,266       -       -       3,266       -  
Net Interest Income After Provision for Loan Losses     39,775       43,617       41,713       126,781       124,735  
                     
Non-interest Income                    
Banking services fee income     885       1,014       826       2,773       2,775  
Net (loss) gain on sale of securities     (186 )     -       -       (186 )     2,363  
Net gain on sale of loans     152       34       240       396       584  
Net gain on sale of buildings     -       -       -       -       33,814  
Net loss from fair value adjustments     (1,297 )     (1,159 )     (823 )     (2,834 )     (2,925 )
Federal Home Loan Bank of New York stock dividends     740       643       665       2,206       1,870  
Gains from life insurance proceeds     238       6       47       1,405       458  
Bank owned life insurance     816       807       707       2,418       2,096  
Other income     313       603       191       1,120       1,075  
Total non-interest income     1,661       1,948       1,853       7,298       42,110  
                     
Non-interest Expense                    
Salaries and employee benefits     15,310       15,424       14,795       47,838       45,024  
Occupancy and equipment     2,502       2,654       2,576       7,652       7,298  
Professional services     1,763       1,919       1,730       5,678       5,907  
FDIC deposit insurance     499       503       536       1,328       2,380  
Data processing     1,349       1,321       939       3,873       3,229  
Depreciation and amortization     1,173       1,155       1,169       3,493       3,263  
Other real estate owned/foreclosure (income) expense     121       (96 )     273       376       831  
Net loss (gain) from sales of real estate owned     -       -       829       (50 )     1,726  
Prepayment penalty on borrowings     -       -       -       -       2,082  
Other operating expenses     3,249       3,185       3,430       11,407       11,488  
Total non-interest expense     25,966       26,065       26,277       81,595       83,228  
                     
Income Before Income Taxes     15,470       19,500       17,289       52,484       83,617  
                     
Provision for Income Taxes                    
Federal     4,680       5,576       5,568       15,005       25,518  
State and local     611       1,199       1,087       2,315       7,469  
Total taxes     5,291       6,775       6,655       17,320       32,987  
                     
Net Income   $ 10,179     $ 12,725     $ 10,634     $ 35,164     $ 50,630  
                     
                     
Basic earnings per common share   $ 0.35     $ 0.44     $ 0.37     $ 1.21     $ 1.75  
Diluted earnings per common share   $ 0.35     $ 0.44     $ 0.37     $ 1.21     $ 1.75  
Dividends per common share   $ 0.18     $ 0.18     $ 0.17     $ 0.54     $ 0.51  
                     


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
                 
        September 30,   June 30,   December 31,
          2017       2017       2016  
ASSETS          
Cash and due from banks $ 60,161     $ 48,539     $ 35,857  
Securities held-to-maturity:          
  Mortgage-backed securities   7,978       7,983       -  
  Other securities   22,952       24,451       37,735  
Securities available for sale:          
  Mortgage-backed securities   519,861       520,012       516,476  
  Other securities   276,698       317,693       344,905  
Loans held for sale   -       30,565       -  
Loans:          
  Multi-family residential   2,236,173       2,243,643       2,178,504  
  Commercial real estate   1,352,775       1,349,634       1,246,132  
  One-to-four family ― mixed-use property   556,723       556,906       558,502  
  One-to-four family ― residential   177,578       181,213       185,767  
  Co-operative apartments   7,035       7,069       7,418  
  Construction   15,811       16,842       11,495  
  Small Business Administration   14,485       10,591       15,198  
  Taxi medallion   18,165       18,303       18,996  
  Commercial business and other   674,706       644,262       597,122  
  Net unamortized premiums and unearned loan fees   16,925       17,217       16,559  
  Allowance for loan losses   (25,269 )     (22,157 )     (22,229 )
      Net loans   5,045,107       5,023,523       4,813,464  
Interest and dividends receivable   21,076       21,439       20,228  
Bank premises and equipment, net   28,389       26,592       26,561  
Federal Home Loan Bank of New York stock   55,228       66,630       59,173  
Bank owned life insurance   131,047       130,631       132,508  
Goodwill   16,127       16,127       16,127  
Other assets   76,758       51,051       55,453  
      Total assets $ 6,261,382     $ 6,285,236     $ 6,058,487  
                 
LIABILITIES          
Due to depositors:          
  Non-interest bearing $ 362,509     $ 349,302     $ 333,163  
  Interest-bearing:          
    Certificate of deposit accounts   1,404,555       1,332,377       1,372,115  
    Savings accounts   323,186       325,815       254,283  
    Money market accounts   991,706       837,565       843,370  
    NOW accounts   1,308,821       1,368,441       1,362,484  
      Total interest-bearing deposits   4,028,268       3,864,198       3,832,252  
Mortgagors' escrow deposits   53,671       41,303       40,216  
Borrowed funds   1,200,682       1,425,779       1,266,563  
Other liabilities   76,643       70,563       72,440  
      Total liabilities   5,721,773       5,751,145       5,544,634  
                 
STOCKHOLDERS' EQUITY          
Preferred stock (5,000,000 shares authorized; none issued)   -       -       -  
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares          
  issued at September 30, 2017, June 30, 2017 and December 31, 2016; 28,819,891          
  shares, 28,803,937 shares and 28,632,904 shares outstanding at September 30, 2017,          
  June 30, 2017 and December 31, 2016, respectively)   315       315       315  
Additional paid-in capital   216,929       216,447       214,462  
Treasury stock (2,710,704 shares, 2,726,658 shares and 2,897,691 shares at          
  September 30, 2017, June 30, 2017 and December 31, 2016, respectively)   (51,287 )     (51,483 )     (53,754 )
Retained earnings   380,316       375,388       361,192  
Accumulated other comprehensive loss, net of taxes   (6,664 )     (6,576 )     (8,362 )
      Total stockholders' equity   539,609       534,091       513,853  
                 
      Total liabilities and stockholders' equity $ 6,261,382     $ 6,285,236     $ 6,058,487  
                 


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
         
  At or for the three months ended   At or for the nine months ended  
  September 30,   June 30,   September 30,   September 30,  
    2017     2017     2016     2017     2016  
Per Share Data                    
Basic earnings per share $ 0.35   $ 0.44   $ 0.37   $ 1.21   $ 1.75  
Diluted earnings per share $ 0.35   $ 0.44   $ 0.37   $ 1.21   $ 1.75  
Average number of shares outstanding for:                    
Basic earnings per common share computation   29,119,753     29,135,339     28,861,101     29,091,756     28,992,813  
Diluted earnings per common share computation   29,120,356     29,135,945     28,874,979     29,093,723     29,006,423  
Shares outstanding   28,819,891     28,803,937     28,632,796     28,819,891     28,632,796  
Book value per common share (1) $ 18.72   $ 18.54   $ 17.90   $ 18.72   $ 17.90  
Tangible book value per common share (2) $ 18.18   $ 18.00   $ 17.35   $ 18.18   $ 17.35  
                     
Stockholders' Equity                    
Stockholders' equity   539,609     534,091     512,621     539,609     512,621  
Tangible stockholders' equity   523,873     518,355     496,901     523,873     496,901  
                     
Average Balances                    
Total loans, net $ 5,033,666   $ 4,962,734   $ 4,686,593   $ 4,955,423   $ 4,548,154  
Total interest-earning assets   5,936,129     5,918,981     5,684,413     5,909,866     5,596,342  
Total assets   6,239,321     6,218,072     5,976,725     6,209,005     5,883,453  
Total due to depositors   3,972,663     4,065,810     3,673,731     4,041,744     3,732,869  
Total interest-bearing liabilities   5,275,937     5,287,720     5,059,620     5,272,842     5,021,921  
Stockholders' equity   536,468     529,451     508,974     527,975     491,617  
                     
Performance Ratios (3)                    
Return on average assets   0.65 %   0.82 %   0.71 %   0.76 %   1.15 %
Return on average equity   7.59     9.61     8.36     8.88     13.73  
Yield on average interest-earning assets   4.00     3.94     3.91     3.95     3.93  
Cost of average interest-bearing liabilities   1.23     1.11     1.09     1.13     1.07  
Cost of funds   1.15     1.05     1.02     1.07     1.01  
Interest rate spread during period   2.77     2.83     2.82     2.82     2.86  
Net interest margin   2.90     2.95     2.94     2.93     2.97  
Non-interest expense to average assets   1.66     1.68     1.76     1.75     1.89  
Efficiency ratio (4)   56.51     55.80     57.37     58.76     59.64  
Average interest-earning assets to average                    
interest-bearing liabilities   1.13 X   1.12 X   1.12 X   1.12 X   1.11 X
                     

(1) Calculated by dividing stockholders' equity by shares outstanding.
(2) Calculated by dividing tangible stockholders' common equity, a non-GAAP measure by shares outstanding. Tangible stockholders' common equity is stockholders' equity less intangible assets (goodwill, net of deferred taxes). See "Calculation of Tangible Stockholders' Common Equity to Tangible Assets".
(3) Ratios are presented on an annualized basis, where appropriate.
(4) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense, 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 nine   At or for the year   At or for the nine
    months ended   ended   months ended
    September 30, 2017   December 31, 2016   September 30, 2016
               
Selected Financial Ratios and Other Data              
               
Regulatory capital ratios (for Flushing Financial Corporation):              
Tier 1 capital   $ 565,265     $ 539,228     $ 523,428  
Common equity Tier 1 capital     530,442       506,432       496,605  
Total risk-based capital     665,534       636,457       545,223  
               
Tier 1 leverage capital (well capitalized = 5%)     9.07 %     9.00 %     8.80 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)     11.84       11.79       11.72  
Tier 1 risk-based capital (well capitalized = 8.0%)     12.61       12.56       12.35  
Total risk-based capital (well capitalized = 10.0%)     14.85       14.82       12.87  
               
Regulatory capital ratios (for Flushing Bank only):              
Tier 1 capital   $ 629,748     $ 607,033     $ 528,168  
Common equity Tier 1 capital     629,748       607,033       528,168  
Total risk-based capital     655,017       629,262       549,963  
               
Tier 1 leverage capital (well capitalized = 5%)     10.10 %     10.12 %     8.88 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)     14.04       14.12       12.44  
Tier 1 risk-based capital (well capitalized = 8.0%)     14.04       14.12       12.44  
Total risk-based capital (well capitalized = 10.0%)     14.60       14.64       12.96  
               
Capital ratios:              
Average equity to average assets     8.50 %     8.40 %     8.36 %
Equity to total assets     8.62       8.48       8.54  
Tangible common equity to tangible assets (1)     8.39       8.24       8.30  
               
Asset quality:              
Non-accrual loans (2)   $ 12,161     $ 21,030     $ 21,882  
Non-performing loans     13,890       21,416       23,535  
Non-performing assets     13,890       21,949       26,374  
Net charge-offs/ (recoveries)     226       (694 )     (260 )
               
Asset quality ratios:              
Non-performing loans to gross loans     0.27 %     0.44 %     0.50 %
Non-performing assets to total assets     0.22       0.36       0.44  
Allowance for loan losses to gross loans     0.50       0.46       0.46  
Allowance for loan losses to non-performing assets     181.92       101.28       82.64  
Allowance for loan losses to non-performing loans     181.92       103.80       92.61  
               
Full-service customer facilities     19       19       19  
               

(1) See "Calculation of Tangible Stockholders' Common Equity to Tangible Assets".
(2) Excludes performing non-accrual TDR loans.

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
     
  For the three months ended  
  September 30, 2017   June 30, 2017   September 30, 2016  
  Average   Yield/   Average   Yield/   Average   Yield/  
  Balance Interest Cost   Balance Interest Cost   Balance Interest Cost  
Interest-earning Assets:                        
Mortgage loans, net $ 4,350,338 $ 46,121 4.24 % $ 4,297,697 $ 44,879 4.18 % $ 4,093,240 $ 43,777 4.28 %
Other loans, net   683,328   7,197 4.21     665,037   6,752 4.06     593,353   5,404 3.64  
Total loans, net (1)   5,033,666   53,318 4.24     4,962,734   51,631 4.16     4,686,593   49,181 4.20  
Taxable securities:                        
Mortgage-backed                        
securities   520,889   3,335 2.56     532,938   3,420 2.57     554,515   3,350 2.42  
Other securities   189,957   1,787 3.76     217,599   2,361 4.34     245,477   2,160 3.52  
Total taxable securities   710,846   5,122 2.88     750,537   5,781 3.08     799,992   5,510 2.76  
Tax-exempt securities: (2)                        
Other securities   142,899   758 2.12     145,812   774 2.12     148,004   784 2.12  
Total tax-exempt securities   142,899   758 2.12     145,812   774 2.12     148,004   784 2.12  
Interest-earning deposits                        
and federal funds sold   48,718   121 0.99     59,898   129 0.86     49,824   49 0.39  
Total interest-earning                        
assets   5,936,129   59,319 4.00     5,918,981   58,315 3.94     5,684,413   55,524 3.91  
Other assets   303,192         299,091         292,312      
Total assets $ 6,239,321       $ 6,218,072       $ 5,976,725      
                         
                         
Interest-bearing Liabilities:                        
Deposits:                        
Savings accounts $ 330,316   583 0.71   $ 279,723 $ 399 0.57   $ 258,884   306 0.47  
NOW accounts   1,340,228   2,468 0.74     1,517,726   2,331 0.61     1,384,368   1,979 0.57  
Money market accounts   927,067   2,337 1.01     858,066   1,651 0.77     601,709   990 0.66  
Certificate of deposit                        
accounts   1,375,052   5,218 1.52     1,410,295   5,099 1.45     1,428,770   5,213 1.46  
Total due to depositors   3,972,663   10,606 1.07     4,065,810   9,480 0.93     3,673,731   8,488 0.92  
Mortgagors' escrow                        
accounts   54,236   49 0.36     73,838   30 0.16     48,840   32 0.26  
Total interest-bearing                        
deposits   4,026,899   10,655 1.06     4,139,648   9,510 0.92     3,722,571   8,520 0.92  
Borrowings   1,249,038   5,623 1.80     1,148,072   5,188 1.81     1,337,049   5,291 1.58  
Total interest-bearing                        
liabilities   5,275,937   16,278 1.23     5,287,720   14,698 1.11     5,059,620   13,811 1.09  
Non interest-bearing                        
demand deposits   354,149         336,036         318,188      
Other liabilities   72,767         64,865         89,943      
Total liabilities   5,702,853         5,688,621         5,467,751      
Equity   536,468         529,451         508,974      
Total liabilities and                        
equity $ 6,239,321       $ 6,218,072       $ 5,976,725      
                         
Net interest income /                        
net interest rate spread   $ 43,041 2.77 %   $ 43,617 2.83 %   $ 41,713 2.82 %
                         
Net interest-earning assets /                        
net interest margin $ 660,192   2.90 % $ 631,261   2.95 % $ 624,793   2.94 %
                         
Ratio of interest-earning                        
assets to interest-bearing                        
liabilities     1.13 X     1.12 X     1.12 X
                         

(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.9 million, $0.3 million and $0.9 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
     
  For the nine months ended  
  September 30, 2017     September 30, 2016  
  Average   Yield/     Average   Yield/  
  Balance Interest Cost     Balance Interest Cost  
Interest-earning Assets:                  
Mortgage loans, net $ 4,287,674 $ 135,429 4.21 %   $ 3,972,502 $ 129,200 4.34 %
Other loans, net   667,749   20,405 4.07       575,652   15,952 3.69  
Total loans, net (1)   4,955,423   155,834 4.19       4,548,154   145,152 4.26  
Taxable securities:                  
Mortgage-backed                  
securities   527,890   10,122 2.56       603,994   11,231 2.48  
Other securities   215,453   6,220 3.85       241,821   6,038 3.33  
Total taxable securities   743,343   16,342 2.93       845,815   17,269 2.72  
Tax-exempt securities: (2)                  
Other securities   145,058   2,309 2.12       140,889   2,366 2.24  
Total tax-exempt securities   145,058   2,309 2.12       140,889   2,366 2.24  
Interest-earning deposits                  
and federal funds sold   66,042   403 0.81       61,484   191 0.41  
Total interest-earning                  
assets   5,909,866   174,888 3.95       5,596,342   164,978 3.93  
Other assets   299,139           287,111      
Total assets $ 6,209,005         $ 5,883,453      
                   
                   
Interest-bearing Liabilities:                  
Deposits:                  
Savings accounts $ 288,376   1,289 0.60     $ 262,382   910 0.46  
NOW accounts   1,474,572   7,006 0.63       1,539,050   5,863 0.51  
Money market accounts   882,213   5,487 0.83       514,626   2,277 0.59  
Certificate of deposit                  
accounts   1,396,583   15,257 1.46       1,416,811   15,455 1.45  
Total due to depositors   4,041,744   29,039 0.96       3,732,869   24,505 0.88  
Mortgagors' escrow                  
accounts   60,895   106 0.23       55,481   85 0.20  
Total interest-bearing                  
deposits   4,102,639   29,145 0.95       3,788,350   24,590 0.87  
Borrowings   1,170,203   15,696 1.79       1,233,571   15,653 1.69  
Total interest-bearing                  
liabilities   5,272,842   44,841 1.13       5,021,921   40,243 1.07  
Non interest-bearing                  
demand deposits   340,221           296,321      
Other liabilities   67,967           73,594      
Total liabilities   5,681,030           5,391,836      
Equity   527,975           491,617      
Total liabilities and                  
equity $ 6,209,005         $ 5,883,453      
                   
Net interest income /                  
net interest rate spread   $ 130,047 2.82 %     $ 124,735 2.86 %
                   
Net interest-earning assets /                  
net interest margin $ 637,024   2.93 %   $ 574,421   2.97 %
                   
Ratio of interest-earning                  
assets to interest-bearing                  
liabilities     1.12 X       1.11 X
                   

(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.9 million and $3.4 million for the nine months ended September 30, 2017 and 2016, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
                                 
                      September 2017 vs.         September 2017 vs.
        September 30, June 30,   March 31,   December 31,   December 2016   September 30,     September 2016,
(Dollars in thousands)   2017   2017     2017     2016   % Change     2016     % Change
Deposits                          
Non-interest bearing $ 362,509 $ 349,302   $ 344,028   $ 333,163   8.8 %   $ 320,060     13.3 %
Interest bearing:                          
  Certificate of deposit                          
    accounts   1,404,555   1,332,377     1,411,819     1,372,115   2.4 %     1,384,551     1.4 %
  Savings accounts   323,186   325,815     254,822     254,283   27.1 %     258,058     25.2 %
  Money market accounts   991,706   837,565     851,129     843,370   17.6 %     733,361     35.2 %
  NOW accounts   1,308,821   1,368,441     1,487,120     1,362,484   -3.9 %     1,296,475     1.0 %
    Total interest-bearing                          
      deposits   4,028,268   3,864,198     4,004,890     3,832,252   5.1 %     3,672,445     9.7 %
                                 
      Total deposits $ 4,390,777 $ 4,213,500   $ 4,348,918   $ 4,165,415   5.4 %   $ 3,992,505     10.0 %
                                               


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Originations and Purchases
         
    For the three months   For the nine months ended
    September 30,   June 30,   September 30,   September 30,
(In thousands)   2017   2017   2016   2017   2016
Multi-family residential   $ 64,551   $ 63,469   $ 61,378   $ 254,728   $ 293,385
Commercial real estate     25,385     123,559     68,970     184,676     245,114
One-to-four family – mixed-use property     13,136     13,656     12,618     45,334     42,493
One-to-four family – residential     5,843     4,860     3,362     16,623     17,050
Co-operative apartments     232     -     -     232     470
Construction     148     4,429     1,920     7,121     6,034
Small Business Administration     4,276     1,870     470     6,787     6,785
Taxi medallion     -     -     -     -     -
Commercial business and other     69,354     49,312     84,525     195,150     239,015
Total   $ 182,925   $ 261,155   $ 233,243   $ 710,651   $ 850,346
                     


Loan Composition
                               
                    September 2017 vs.         September 2017 vs.
      September 30,   June 30,   March 31,   December 31, December 2016     September 30,   September 2016
(Dollars in thousands)   2017       2017       2017       2016   % Change       2016     % Change
Loans held for investment:                          
Multi-family residential $ 2,236,173     $ 2,243,643     $ 2,261,946     $ 2,178,504   2.6 %     $ 2,171,289     3.0 %
Commercial real estate   1,352,775       1,349,634       1,268,770       1,246,132   8.6 %       1,195,266     13.2 %
One-to-four family ―                          
  mixed-use property   556,723       556,906       561,355       558,502   -0.3 %       555,691     0.2 %
One-to-four family ― residential   177,578       181,213       184,201       185,767   -4.4 %       183,993     -3.5 %
Co-operative apartments   7,035       7,069       7,216       7,418   -5.2 %       7,494     -6.1 %
Construction   15,811       16,842       12,413       11,495   37.5 %       11,250     40.5 %
Small Business Administration   14,485       10,591       10,519       15,198   -4.7 %       14,339     1.0 %
Taxi medallion   18,165       18,303       18,832       18,996   -4.4 %       20,536     -11.5 %
Commercial business and other   674,706       644,262       632,503       597,122   13.0 %       564,972     19.4 %
Net unamortized premiums                          
  and unearned loan fees   16,925       17,217       16,836       16,559   2.2 %       16,447     2.9 %
Allowance for loan losses   (25,269 )     (22,157 )     (22,211 )     (22,229 ) 13.7 %       (21,795 )   15.9 %
    Net loans $ 5,045,107     $ 5,023,523     $ 4,952,380     $ 4,813,464   4.8 %     $ 4,719,482     6.9 %
                                                       


Loans Held for Investment Activity
     
    Three Months Ended
    September, 30   June 30,   March 31,   December 31,   September 30,
(In thousands)   2017       2017       2017       2016       2016  
Loans originated and purchased $ 182,925     $ 261,155     $ 266,571     $ 282,592     $ 233,243  
Principal reductions   (155,007 )     (143,195 )     (122,897 )     (187,780 )     (183,583 )
Loans transferred to held-for-sale   -       (30,565 )     -       -       -  
Loans sold   (2,606 )     (16,337 )     (4,874 )     -       (3,693 )
Loan charged-offs   (324 )     (350 )     (179 )     (370 )     (541 )
Foreclosures   -       -       -       (138 )     -  
Net change in deferred (fees) and costs   (292 )     381       277       112       (428 )
Net change in the allowance for loan losses   (3,112 )     54       18       (434 )     403  
  Total loan activity $ 21,584     $ 71,143     $ 138,916     $ 93,982     $ 45,401  
                                         


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
                       
      September 30,   June 30,   March 31,   December 31,   September 30,
(Dollars in thousands)     2017       2017       2017       2016       2016  
Loans 90 Days Or More Past Due                    
  and Still Accruing:                    
Multi-family residential   $ 415     $ -     $ -     $ -     $ -  
Commercial real estate     38       -       75       -       1,183  
One-to-four family - mixed-use property     129       -       -       386       470  
Construction     -       602       602       -       -  
Taxi medallion     1,147       727       -       -       -  
  Total     1,729       1,329       677       386       1,653  
                       
Non-accrual Loans:                    
Multi-family residential     1,309       1,537       1,354       1,837       1,649  
Commercial real estate     1,147       1,948       1,462       1,148       1,157  
One-to-four family - mixed-use property     2,217       2,971       3,328       4,025       4,534  
One-to-four family - residential     7,434       7,616       7,847       8,241       8,340  
Small Business Administration     50       53       58       1,886       2,132  
Taxi medallion     -       -       3,771       3,825       3,971  
Commercial business and other     4       5       38       68       99  
  Total     12,161       14,130       17,858       21,030       21,882  
                       
  Total Non-performing Loans     13,890       15,459       18,535       21,416       23,535  
                       
Other Non-performing Assets:                    
Real estate acquired through foreclosure     -       -       -       533       2,839  
  Total     -       -       -       533       2,839  
                       
  Total Non-performing Assets   $ 13,890     $ 15,459     $ 18,535     $ 21,949     $ 26,374  
                       
Non-performing Assets to Total Assets     0.22 %     0.25 %     0.30 %     0.36 %     0.44 %
Allowance For Loan Losses to Non-performing Loans     181.9 %     143.3 %     119.8 %     103.8 %     92.6 %
                       


Net Charge-Offs (Recoveries)
       
      Three Months Ended
      September 30,   June 30,   March 31,   December 31,   September 30,
(In thousands)     2017       2017       2017       2016       2016  
Multi-family residential   $ 224     $ (53 )   $ (16 )   $ (103 )   $ 79  
Commercial real estate     (25 )     4       (68 )     -       (11 )
One-to-four family – mixed-use property     1       (67 )     34       (520 )     24  
One-to-four family – residential     (58 )     170       -       40       -  
Small Business Administration     (17 )     14       26       186       317  
Taxi medallion     -       -       54       142       -  
Commercial business and other     29       (14 )     (12 )     (179 )     (6 )
Total net loan charge-offs (recoveries)   $ 154     $ 54     $ 18     $ (434 )   $ 403  
                       

Core Diluted EPS, Core ROAE, Core ROAA, and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears in tabular form at the end of this release. The Company believes that these measures are useful for both investors and management to understand the effects of certain non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

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

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
         
    Three Months Ended   Nine Months Ended
    September 30, June 30, September 30,   September 30, September 30,
      2017     2017     2016       2017     2016  
     
               
GAAP income before income taxes $ 15,470   $ 19,500   $ 17,289     $ 52,484   $ 83,617  
               
Net loss from fair value adjustments   1,297     1,159     823       2,834     2,925  
Net loss (gain) on sale of securities   186     -     -       186     (2,363 )
Gain from life insurance proceeds   (238 )   (6 )   (47 )     (1,405 )   (458 )
Net gain on sale of buildings   -     -     -       -     (33,814 )
Prepayment penalty on borrowings   -     -     -       -     2,082  
               
Core income before taxes   16,715     20,653     18,065       54,099     51,989  
               
Provision for income taxes for core income   5,812     7,129     6,736       17,961     19,628  
               
Core net income $ 10,903   $ 13,524   $ 11,329     $ 36,138   $ 32,361  
               
GAAP diluted earnings per common share $ 0.35   $ 0.44   $ 0.37     $ 1.21   $ 1.75  
               
Net loss from fair value adjustments, net of tax   0.03     0.02     0.03       0.07     0.06  
Net loss (gain) on sale of securities, net of tax   -     -     -       -     (0.05 )
Gain from life insurance proceeds   (0.01 )   -     -       (0.05 )   (0.02 )
Net gain on sale of buildings, net of tax   -     -     -       -     (0.67 )
Prepayment penalty on borrowings   -     -     -       -     0.04  
               
Core diluted earnings per common share* $ 0.37   $ 0.46   $ 0.39     $ 1.24   $ 1.12  
               
               
Core net income, as calculated above $ 10,903   $ 13,524   $ 11,329     $ 36,138   $ 32,361  
Average assets   6,239,321     6,218,072     5,976,725       6,209,005     5,883,453  
Average equity   536,468     529,451     508,974       527,975     491,617  
Core return on average assets**   0.70 %   0.87 %   0.76 %     0.78 %   0.73 %
Core return on average equity**   8.13 %   10.22 %   8.90 %     9.13 %   8.78 %
               
               
               
* 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)
               
          September 30, December 31, September 30,
(Dollars in thousands)       2017     2016     2016  
Total Equity     $ 539,609   $ 513,853   $ 512,621  
Less:          
  Goodwill       (16,127 )   (16,127 )   (16,127 )
  Intangible deferred tax liabilities       391     389     407  
    Tangible Stockholders' Common Equity     $ 523,873   $ 498,115   $ 496,901  
               
Total Assets     $ 6,261,382   $ 6,058,487   $ 5,999,255  
Less:          
  Goodwill       (16,127 )   (16,127 )   (16,127 )
  Intangible deferred tax liabilities       391     389     407  
    Tangible Assets     $ 6,245,646   $ 6,042,749   $ 5,983,535  
               
Tangible Stockholders' Common Equity to Tangible Assets       8.39 %   8.24 %   8.30 %
                           

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

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