Market Overview

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



  • 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:


  • 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: 
  • 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,®, 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

"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 -

(Dollars in thousands, except per share data)
    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    
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