Market Overview

Flushing Financial Corporation Reports 2Q18 Earnings per Diluted Share of $0.48 an Increase of 23% From 1Q18 Driven by Strong ROAE of 10.5%; Yield on Loan Originations Increased 30 Basis Points From 1Q18

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SECOND QUARTER 20181 HIGHLIGHTS

  • GAAP diluted EPS was $0.48, up 23.1% QoQ and 9.1% YoY
  • Core diluted EPS was $0.49, up 32.4% QoQ and 6.5% YoY
  • Net interest income of $42.6 million was relatively unchanged QoQ, but down 2.2% YoY
  • Net interest margin was 2.76%, down 3bps QoQ and 19bps YoY
  • GAAP and core ROAE were 10.5% and 10.6%, compared with 8.6% and 8.1%, respectively in 1Q18
  • GAAP and core ROAA were both 0.9%, compared with 0.7% in 1Q18

UNIONDALE, N.Y., July 24, 2018 (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 second quarter ended June 30, 2018.

John R. Buran, President and Chief Executive Officer, stated, "We are pleased to report earnings per diluted common share of $0.48 for the second quarter of 2018, an increase of 23.1% and 9.1% from 1Q18 and 2Q17, respectively. Furthermore, ROAE increased to 10.5% for 2Q18 from 8.6% and 9.6% in 1Q18 and 2Q17, respectively."

"For the past year, we have articulated our strategic objective of emphasizing rate over volume regarding loan originations. To that end, we decided to allow over $70 million of participations with another financial institution to prepay as the rates being offered through the refinancing process did not meet our lending criteria. Consequently, during the quarter ended June 30, 2018, our loan growth was 0.4%. We believe emphasizing rate over volume is a long-term winning strategy and we are beginning to see tangible results as the average yield in the loan portfolio has risen 10bps over the prior quarter. This was driven by the yield on new loans in the second quarter exceeding the quarterly average loan portfolio yield by 26bps and the yield of total interest earning assets by 47bps. Newly booked loans in 2Q18 had a yield of 4.57% showing an increase of 30bps from the prior quarter."  

"The move toward improved loan yields was further enhanced this quarter as $116 million of mortgage loans repriced from 4.41% to 5.37%. We look for this yield improving trend to continue as we have close to $2 billion in loans repricing through 2020."  

"Despite this good news on yields, deposit pressures outstripped the gains on the loan side as margin pressure continued. The cost of funds increased 14bps QoQ and 36bps YoY. However, the combination of improved loan yields and mitigation strategies that we put in place on the liability side of the balance sheet have decelerated the pace of margin compression from 11bps in 1Q18 to 3bps this quarter."

"While we remain liability sensitive we have been taking proactive steps to provide further support to our margin and mitigate the impact of future rate increases by extending the maturity on our liabilities and as previously announced entered into forward interest rate swaps totaling $442 million of which $250 million has been funded as of June 30, 2018."

"We reduced brokered deposits by $164 million partially offsetting them with core growth in our retail operations totaling $89 million. One of the contributing factors to this was our "Win Flushing" program, which focuses on the Asian community, where we are on pace to add $160 million in deposits by the end of 1Q19."

"As we look forward to continuing our focus on stabilizing, then improving margins, we have additionally focused on bringing in more variable rate C&I loans. Over the last five quarters C&I lending has represented 35% of new loan originations."

Mr. Buran continued, "As we've continued to improve loan yields we have retained our focus on credit quality. Non-performing assets decreased by 18% and, total delinquencies have decreased 3% since December 31, 2017. The allowance for loan losses to gross loans was 0.38% while the allowance for loan losses to non-performing loans increased to 137% from 123% in the linked quarter. The loan-to-value on our non-performing real estate loans at June 30, 2018 remains conservative at 35.1%. The net charge-offs of $322,000 for the quarter reflect the change in the fair value of Chicago taxi medallions from $60,000 to $25,000 per medallion, based upon recent sales transactions. Currently, the Chicago taxi medallion portfolio totals $0.2 million. Our exposure to taxi medallion loans in Chicago and NYC totals $6.2 million, which is 0.12% of total loans."

"We remain committed to converting our branches to the Universal Banker model. In the 11 branches that have been converted we have experienced an increase of 24% in transactions processed at an ATM, reducing our customers' reliance on tellers, allowing our branch staff to focus more time on sales opportunities."

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 second quarter, commercial business, multi-family and commercial real estate loan originations and purchases represented 35%, 28%, and 25%, respectively, of all originations, which were made while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 2Q18 had a yield of 4.27%, an increase of 30bps from 3.97% for 1Q18 and an increase of 8bps from 4.19% for 2Q17. We have maintained our asset quality as these loans had an average loan-to-value ratio of 46.3% and an average debt coverage ratio of 186%.
  • The average interest rate obtained for 2Q18 new loans totaled 4.57%, an increase of 30bps compared to 4.27% for 1Q18 and of 53bps compared to 4.04% for 2Q17.
  • The average rate of mortgage loan applications in the pipeline totaled 4.67% at June 30, 2018, as compared to 4.41% at March 31, 2018 and 4.17% at June 30, 2017.

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."

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 2Q18 was $42.6 million, a decrease of $1.0 million, or 2.2% YoY (2Q18 compared to 2Q17) but relatively unchanged QoQ (2Q18 compared to 1Q18). During 2Q18 the increase in the cost of funds outpaced the increase in the yield of interest-earning assets.

  • Net interest margin of 2.76%, decreased 19bps YoY and 3bps QoQ
  • Net interest spread of 2.60%, decreased 23bps YoY and 5bps QoQ
  • Net interest income includes prepayment penalty income from loans and securities totaling $1.6 million in 2Q18 compared with $1.0 million in 2Q17 and $0.9 million in 1Q18, accelerated accretion of discount upon call of CLO securities of none in 2Q18 and 1Q18 and $0.4 million in 2Q17 and recovered interest from delinquent loans of $0.2 million in 2Q18, compared to $0.3 million in 2Q17 and $0.2 million in 1Q18
  • Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets was 3.98% in 2Q18, an improvement from 3.82% in 2Q17 and 3.91% in 1Q18, and the net interest margin was 2.64% in 2Q18, which decreased from 2.83% in 2Q17 and from 2.72% in 1Q18
  • Average balance of total interest-earning assets of $6,181.2 million, increased $262.2 million, or 4.4%, YoY and $82.5 million, or 1.4%, QoQ
  • Yield on interest-earning assets of 4.10%, increased 16bps YoY and 11bps QoQ
  • Cost of interest-bearing liabilities of 1.50%, increased 39bps YoY and 16bps QoQ
  • Cost of funds of 1.41%, increased 36bps YoY and 14bps QoQ, driven by increases in rates paid on certificates of deposit, government deposits and short-term borrowings resulting from the recent increases in the Fed Funds rate 

Provision for loan losses
As a result of continued strong credit quality, there was no provision recorded for 2Q18 and 2Q17 compared to $0.2 million in 1Q18.

Non-interest Income
Non-interest income for 2Q18 was $3.2 million, an increase of $1.2 million, or 62.6% YoY, and unchanged QoQ.

  • Non-interest income included net gains from the sale of loans of $0.4 million in 2Q18, primarily from the sale of $5.3 million in SBA loans, compared to net losses from the sale of loans of $0.3 million in 1Q18 and net gains of $34,000 in 2Q17
  • Additionally, non-interest income included net losses from fair value adjustments of $0.3 million in 2Q18, $0.1 million in 1Q18 and $1.2 million in 2Q17 and gains from life insurance proceeds of $0.8 million in 1Q18 and $6,000 in 2Q17
  • Absent all above items, non-interest income was $3.0 million, a decrease of $0.1 million YoY, but an increase of $0.2 million QoQ

Non-interest Expense
Non-interest expense for 2Q18 was $27.4 million, an increase of $1.3 million, or 5.1% YoY, but a decrease of $3.9 million, or 12.5% QoQ.

  • Non-interest expense increased $1.3 million YoY primarily due to increases in consulting, legal and depreciation expense due to the growth of the Bank, but decreased $3.9 million QoQ due to 1Q18 including the impact of annual grants of employees and directors restricted stock unit awards
  • The efficiency ratio was 59.6% in 2Q18 compared to 55.8% in 2Q17 and 69.3% in 1Q18

Provision for Income Taxes
The provision for income taxes in 2Q18 was $4.5 million, a decrease of $2.3 million, or 33.7% YoY, but an increase of $1.5 million, or 52.2% QoQ.

  • Pre-tax income decreased by $1.1 million, or 5.6% YoY but increased $4.1 million, or 28.2% QoQ
  • The effective tax rates were 24.4% in 2Q18, 34.7% in 2Q17 and 20.5% in 1Q18

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,313.6 million reflecting an increase of 0.4% QoQ (not annualized) and 3.0% from December 31, 2017, 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
  • During the quarter, we saw an increase in loan satisfactions, which we decided not to refinance, as the interest rate demanded did not fit our strategy of emphasizing rate over volume.
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $224.5 million for 2Q18, or 87.9% of loan production
  • Loan pipeline was $322.9 million at June 30, 2018, compared to $325.6 million at March 31, 2018 and $279.1 million at June 30, 2017
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of June 30, 2018 totaled 38.9%

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

    For the three months ended
    June 30,   March 31,   June 30,
Loan type   2018   2018   2017
Mortgage loans 4.40 %   4.15 %   4.01 %
Non-mortgage loans 4.90 %   4.43 %   4.13 %
Total loans 4.57 %   4.27 %   4.04 %

Credit Quality:

  • Non-performing loans totaled $14.8 million, a decrease of $3.3 million, or 18.4%, from $18.1 million at December 31, 2017
  • Non-performing assets totaled $14.8 million, a decrease of $3.3 million, or 18.3%, from $18.1 million at December 31, 2017
  • Classified assets totaled $44.2 million, an increase of $10.2 million, or 30.0%, from $34.0 million at December 31, 2017, primarily due to six business loan relationships being downgraded as they did not meet certain loan covenants; these loans remain current and accruing
  • Loans classified as troubled debt restructured (TDR) totaled $10.6 million, a decrease of $2.6 million, or 19.6%, from $13.2 million at December 31, 2017, primarily due to the sale of one commercial TDR in 1Q18
  • 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 35.1% average loan-to-value for non-performing loans collateralized by real estate at June 30, 2018
  • Net charge-offs totaled $0.3 million during the six months ended June 30, 2018

Capital Management:

  • The Company and Bank, at June 30, 2018, were both well capitalized under all applicable regulatory requirements
  • During 2Q18, stockholders' equity increased $2.7 million, or 0.5%, to $538.0 million due to net income of $13.9 million, partially offset by the declaration and payment of dividends on the Company's common stock and repurchases of the Company's common stock
  • During 2Q18, the Company repurchased 227,581 treasury shares at an average cost of $26.04 per share; as of June 30, 2018, up to 808,836 shares may be repurchased under the authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $19.00 at June 30, 2018, from $18.75 at March 31, 2018 and tangible book value per common share, a non-GAAP measure, increased to $18.44 at June 30, 2018, from $18.20 March 31, 2018

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, July 25, 2018 at 9:30 AM (ET) to discuss the Company's strategy and results for the second quarter of 2018
  • Dial-in for Live Call: 1-877-509-5836
  • Webcast: https://services.choruscall.com/links/ffic180725.html 
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10120867
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on July 25, 2019

About Flushing Financial Corporation

Flushing Financial Corporation (NASDAQ:FFIC) is the holding company for Flushing Bank®, a New York State—chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and Long Island. As a leader in real estate lending, the Bank's experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, our eco-friendly, healthier lifestyle community brand.

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

"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, 2017 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "forecasts", "goals", "potential" or "continue" or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

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

 

- 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 six months ended  
    June 30,   March 31,   June 30,   June 30,   June 30,  
      2018       2018       2017       2018       2017    
                       
Interest and Dividend Income                      
Interest and fees on loans   $   57,322     $   55,017     $   51,631     $   112,339     $   102,516    
Interest and dividends on securities:                      
  Interest       5,616         5,468         6,432         11,084         12,527    
  Dividends       17         14         123         31         244    
Other interest income       338         287         129         625         282    
      Total interest and dividend income       63,293         60,786         58,315         124,079         115,569    
                       
Interest Expense                      
Deposits       14,788         12,110         9,510         26,898         18,490    
Other interest expense       5,865         6,067         5,188         11,932         10,073    
      Total interest expense       20,653         18,177         14,698         38,830         28,563    
                       
Net Interest Income       42,640         42,609         43,617         85,249         87,006    
Provision for loan losses       -          153         -          153         -     
Net Interest Income After Provision for Loan Losses       42,640         42,456         43,617         85,096         87,006    
                       
Non-interest Income                      
Banking services fee income       1,000         948         1,014         1,948         1,888    
Net gain (loss) on sale of loans        421         (263 )       34         158         244    
Net loss from fair value adjustments       (267 )       (100 )       (1,159 )       (367 )       (1,537 )  
Federal Home Loan Bank of New York stock dividends       881         876         643         1,757         1,466    
Gains from life insurance proceeds       -          776         6         776         1,167    
Bank owned life insurance       776         762         807         1,538         1,602    
Other income       357         201         603         558         807    
      Total non-interest income       3,168         3,200         1,948         6,368         5,637    
                       
Non-interest Expense                      
Salaries and employee benefits       15,291         18,455         15,424         33,746         32,528    
Occupancy and equipment       2,476         2,577         2,654         5,053         5,150    
Professional services       2,439         2,185         1,919         4,624         3,915    
FDIC deposit insurance       547         500         503         1,047         829    
Data processing       1,426         1,401         1,321         2,827         2,524    
Depreciation and amortization       1,455         1,389         1,155         2,844         2,320    
Other real estate owned/foreclosure expense       40         96         (96 )       136         255    
Net gain from sales of real estate owned       (27 )       -          -          (27 )       -     
Other operating expenses       3,749         4,691         3,185         8,440         8,108    
      Total non-interest expense       27,396         31,294         26,065         58,690         55,629    
                       
Income Before Income Taxes       18,412         14,362         19,500         32,774         37,014    
                       
Provision for Income Taxes                      
Federal       3,311         2,607         5,576         5,918         10,325    
State and local       1,178         343         1,199         1,521         1,704    
      Total taxes       4,489         2,950         6,775         7,439         12,029    
                       
Net Income   $   13,923     $   11,412     $   12,725     $   25,335     $   24,985    
                       
                       
Basic earnings per common share   $   0.48     $   0.39     $   0.44     $   0.88     $   0.86    
Diluted earnings per common share   $   0.48     $   0.39     $   0.44     $   0.88     $   0.86    
Dividends per common share   $   0.20     $   0.20     $   0.18     $   0.40     $   0.36    
                       


 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
 
        June 30,   March 31,   December 31,
          2018       2018       2017  
ASSETS            
Cash and due from banks $   42,805     $   91,959     $   51,546  
Securities held-to-maturity:          
  Mortgage-backed securities     7,963         7,968         7,973  
  Other securities     23,130         23,267         22,913  
Securities available for sale:          
  Mortgage-backed securities     513,868         512,781         509,650  
  Other securities     214,755         216,480         228,704  
Loans:            
  Multi-family residential     2,247,852         2,286,803         2,273,595  
  Commercial real estate     1,471,894         1,426,847         1,368,112  
  One-to-four family ― mixed-use property     564,474         566,930         564,206  
  One-to-four family ― residential     187,741         190,115         180,663  
  Co-operative apartments     7,839         6,826         6,895  
  Construction     33,826         23,887         8,479  
  Small Business Administration     14,405         20,004         18,479  
  Taxi medallion     6,225         6,617         6,834  
  Commercial business and other     783,904         768,440         732,973  
  Net unamortized premiums and unearned loan fees     15,647         16,395         16,763  
  Allowance for loan losses     (20,220 )       (20,542 )       (20,351 )
      Net loans     5,313,587         5,292,322         5,156,648  
Interest and dividends receivable     24,184         22,578         21,405  
Bank premises and equipment, net     30,658         31,314         30,836  
Federal Home Loan Bank of New York stock     57,384         54,045         60,089  
Bank owned life insurance     131,429         130,653         131,856  
Goodwill       16,127         16,127         16,127  
Other assets     91,726         83,277         61,527  
      Total assets $   6,467,616     $   6,482,771     $   6,299,274  
                 
LIABILITIES          
Due to depositors:          
  Non-interest bearing $   388,467     $   377,861     $   385,269  
  Interest-bearing:          
    Certificate of deposit accounts     1,452,016         1,499,326         1,351,933  
    Savings accounts     225,815         246,888         290,280  
    Money market accounts     1,069,835         1,032,409         979,958  
    NOW accounts     1,422,745         1,479,319         1,333,232  
      Total interest-bearing deposits     4,170,411         4,257,942         3,955,403  
Mortgagors' escrow deposits     50,781         65,979         42,606  
Borrowed funds      1,250,732         1,177,101         1,309,653  
Other liabilities     69,181         68,581         73,735  
      Total liabilities     5,929,572         5,947,464         5,766,666  
                 
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 June 30, 2018, March  31, 2018 and December 31, 2017; 28,319,213          
  shares, 28,546,443 shares and 28,588,266 shares outstanding at June 30, 2018,           
  March  31, 2018 and December 31, 2017, respectively)     315         315         315  
Additional paid-in capital     220,432         219,115         217,906  
Treasury stock (3,211,382 shares, 2,984,152 shares and 2,942,329 shares at          
  June 30, 2018, March  31, 2018 and December 31, 2017, respectively)     (66,656 )       (60,737 )       (57,675 )
Retained earnings     395,960         387,793         381,048  
Accumulated other comprehensive loss, net of taxes     (12,007 )       (11,179 )       (8,986 )
      Total stockholders' equity     538,044         535,307         532,608  
                 
      Total liabilities and stockholders' equity $   6,467,616     $   6,482,771     $   6,299,274  
                 


   
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 six months ended  
  June 30,   March 31,   June 30,   June 30,   June 30,  
    2018     2018     2017     2018     2017  
Per Share Data                    
Basic earnings per share $   0.48   $   0.39   $   0.44   $   0.88   $   0.86  
Diluted earnings per share $   0.48   $   0.39   $   0.44   $   0.88   $   0.86  
Average number of shares outstanding for:                    
  Basic earnings per common share computation     28,844,829       28,974,156       29,135,339       28,909,135       29,077,526  
  Diluted earnings per common share computation     28,845,611       28,974,757       29,135,945       28,910,034       29,080,182  
Shares outstanding     28,319,213       28,546,443       28,803,937       28,319,213       28,803,937  
Book value per common share (1) $   19.00   $   18.75   $   18.54   $   19.00   $   18.54  
Tangible book value per common share (2) $   18.44   $   18.20   $   18.00   $   18.44   $   18.00  
                     
Stockholders' Equity                    
Stockholders' equity $   538,044   $   535,307   $   534,091   $   538,044   $   534,091  
Tangible stockholders' equity     522,208       519,471       518,355       522,208       518,355  
                     
Average Balances                    
Total loans, net $   5,316,033   $   5,231,377   $   4,962,734   $   5,273,939   $   4,915,652  
Total interest-earning assets     6,181,186       6,098,706       5,918,981       6,140,173       5,896,514  
Total assets     6,484,882       6,403,396       6,218,072       6,444,364       6,193,596  
Total due to depositors     4,310,491       4,176,457       4,065,810       4,243,844       4,076,859  
Total interest-bearing liabilities     5,515,580       5,442,554       5,287,720       5,479,268       5,271,271  
Stockholders' equity     532,027       529,281       529,451       530,662       523,658  
                     
Performance Ratios (3)                    
Return on average assets     0.86 %     0.71 %     0.82 %     0.79 %     0.81 %
Return on average equity     10.47       8.62       9.61       9.55       9.54  
Yield on average interest-earning assets     4.10       3.99       3.94       4.04       3.92  
Cost of average interest-bearing liabilities     1.50       1.34       1.11       1.42       1.08  
Cost of funds     1.41       1.27       1.05       1.34       1.03  
Interest rate spread during period     2.60       2.65       2.83       2.62       2.84  
Net interest margin     2.76       2.79       2.95       2.78       2.95  
Non-interest expense to average assets     1.69       1.95       1.68       1.82       1.80  
Efficiency ratio (4)     59.58       69.34       55.80       64.41       59.87  
Average interest-earning assets to average                    
  interest-bearing liabilities     1.12 X     1.12 X     1.12 X     1.12 X     1.12 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 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 and life insurance proceeds).

 

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
 
    At or for the six     At or for the year     At or for the six  
    months ended     ended     months ended  
    June 30, 2018     December 31, 2017     June 30, 2017  
                   
Selected Financial Ratios and Other Data                  
                   
Regulatory capital ratios (for Flushing Financial Corporation):                  
  Tier 1 capital   $   572,189     $   563,426     $   558,756  
  Common equity Tier 1 capital       534,036         527,727         524,830  
  Total risk-based capital       667,409         658,777         655,913  
                   
  Tier 1 leverage capital (well capitalized = 5%)       8.79 %       9.02 %       9.00 %
  Common equity Tier 1 risk-based capital (well capitalized = 6.5%)       11.07         11.59         11.43  
  Tier 1 risk-based capital (well capitalized = 8.0%)       11.87         12.38         12.17  
  Total risk-based capital (well capitalized = 10.0%)       13.84         14.47         14.29  
                   
Regulatory capital ratios (for Flushing Bank only):                  
  Tier 1 capital   $   644,880     $   631,285     $   624,074  
  Common equity Tier 1 capital       644,880         631,285         624,074  
  Total risk-based capital       665,100         651,636         646,231  
                   
  Tier 1 leverage capital (well capitalized = 5%)       9.90 %       10.11 %       10.04 %
  Common equity Tier 1 risk-based capital (well capitalized = 6.5%)       13.37         13.87         13.58  
  Tier 1 risk-based capital (well capitalized = 8.0%)       13.37         13.87         13.58  
  Total risk-based capital (well capitalized = 10.0%)       13.79         14.31         14.07  
                   
Capital ratios:                  
  Average equity to average assets       8.23 %       8.53 %       8.45 %
  Equity to total assets       8.32         8.46         8.50  
  Tangible common equity to tangible assets (1)       8.09         8.22         8.27  
                   
Asset quality:                  
  Non-accrual loans (2)   $   14,059     $   15,710     $   14,130  
  Non-performing loans       14,789         18,134         15,459  
  Non-performing assets       14,824         18,134         15,459  
  Net charge-offs/ (recoveries)       284         11,739         72  
                   
Asset quality ratios:                  
  Non-performing loans to gross loans       0.28 %       0.35 %       0.31 %
  Non-performing assets to total assets       0.23         0.29         0.25  
  Allowance for loan losses to gross loans       0.38         0.39         0.44  
  Allowance for loan losses to non-performing assets       136.40         112.23         143.33  
  Allowance for loan losses to non-performing loans       136.72         112.23         143.33  
                   
Full-service customer facilities       18         18         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  
  June 30, 2018   March 31, 2018   June 30, 2017  
  Average   Yield/   Average   Yield/   Average   Yield/  
  Balance Interest Cost   Balance Interest Cost   Balance Interest Cost  
Interest-earning Assets:                        
  Mortgage loans, net  $   4,509,778 $   47,673   4.23 % $   4,442,870 $   46,112   4.15 % $   4,297,697 $   44,879   4.18 %
  Other loans, net      806,255     9,649   4.79       788,507     8,905   4.52       665,037     6,752   4.06  
    Total loans, net (1)     5,316,033     57,322   4.31       5,231,377     55,017   4.21       4,962,734     51,631   4.16  
 Taxable securities:                        
  Mortgage-backed                        
  securities     533,088     3,754   2.82       524,710     3,507   2.67       532,938     3,418   2.57  
  Other securities     122,601     1,023   3.34       131,078     1,121   3.42       217,599     2,171   3.99  
    Total taxable securities     655,689     4,777   2.91       655,788     4,628   2.82       750,537     5,589   2.98  
 Tax-exempt securities: (2)                        
  Other securities     124,058     856   2.76       124,125     854   2.75       145,812     966   2.65  
    Total tax-exempt securities     124,058     856   2.76       124,125     854   2.75       145,812     966   2.65  
  Interest-earning deposits                        
  and federal funds sold     85,406     338   1.58       87,416     287   1.31       59,898     129   0.86  
Total interest-earning                         
  assets     6,181,186     63,293   4.10       6,098,706     60,786   3.99       5,918,981     58,315   3.94  
Other assets     303,696           304,690           299,091      
    Total assets $   6,484,882       $   6,403,396       $   6,218,072      
                         
                         
Interest-bearing Liabilities:                        
  Deposits:                        
    Savings accounts $   235,564     285   0.48   $   265,895     389   0.59   $   279,723     399   0.57  
    NOW accounts     1,444,889     3,364   0.93       1,540,465     3,148   0.82       1,517,726     2,331   0.61  
    Money market accounts     1,110,690     3,983   1.43       1,025,727     3,075   1.20       858,066     1,651   0.77  
    Certificate of deposit                        
     accounts     1,519,348     7,118   1.87       1,344,370     5,463   1.63       1,410,295     5,099   1.45  
       Total due to depositors     4,310,491     14,750   1.37       4,176,457     12,075   1.16       4,065,810     9,480   0.93  
    Mortgagors' escrow                        
     accounts     77,343     38   0.20       58,960     35   0.24       73,838     30   0.16  
       Total interest-bearing deposits     4,387,834     14,788   1.35       4,235,417     12,110   1.14       4,139,648     9,510   0.92  
  Borrowings     1,127,746     5,865   2.08       1,207,137     6,067   2.01       1,148,072     5,188   1.81  
       Total interest-bearing                        
         liabilities     5,515,580     20,653   1.50       5,442,554     18,177   1.34       5,287,720     14,698   1.11  
Non interest-bearing                        
  demand deposits     370,790           364,983           336,036      
Other liabilities     66,485           66,578           64,865      
       Total liabilities     5,952,855           5,874,115           5,688,621      
Equity     532,027           529,281           529,451      
       Total liabilities and equity $   6,484,882       $   6,403,396       $   6,218,072      
                         
Net interest income /                        
  net interest rate spread   $   42,640   2.60 %   $   42,609   2.65 %   $   43,617   2.83 %
                         
Net interest-earning assets /                        
  net interest margin $   665,606     2.76 % $   656,152     2.79 % $   631,261     2.95 %
                         
Ratio of interest-earning                        
  assets to interest-bearing                        
  liabilities       1.12 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 $0.3 million, $0.1 million and $0.3 million for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, 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 six months ended  
  June 30, 2018     June 30, 2017  
  Average   Yield/     Average   Yield/  
  Balance Interest Cost     Balance Interest Cost  
Interest-earning Assets:                  
  Mortgage loans, net  $   4,476,509 $   93,785   4.19 %   $   4,255,822 $   89,308   4.20 %
  Other loans, net      797,430     18,554   4.65         659,830     13,208   4.00  
     Total loans, net (1)     5,273,939     112,339   4.26         4,915,652     102,516   4.17  
 Taxable securities:                  
  Mortgage-backed                  
  securities     528,922     7,261   2.75         531,448     6,784   2.55  
  Other securities     126,816     2,144   3.38         228,412     4,053   3.55  
     Total taxable securities     655,738     9,405   2.87         759,860     10,837   2.85  
 Tax-exempt securities: (2)                  
  Other securities     124,091     1,710   2.76         146,155     1,934   2.65  
     Total tax-exempt securities     124,091     1,710   2.76         146,155     1,934   2.65  
  Interest-earning deposits                  
  and federal funds sold     86,405     625   1.45         74,847     282   0.75  
Total interest-earning                   
  assets     6,140,173     124,079   4.04         5,896,514     115,569   3.92  
Other assets     304,191             297,082      
     Total assets $   6,444,364         $   6,193,596      
                   
                   
Interest-bearing Liabilities:                  
  Deposits:                  
    Savings accounts $   250,646     674   0.54     $   267,059     706   0.53  
    NOW accounts     1,492,413     6,512   0.87         1,542,857     4,538   0.59  
    Money market accounts     1,068,443     7,058   1.32         859,415     3,150   0.73  
    Certificate of deposit                  
     accounts     1,432,342     12,581   1.76         1,407,528     10,039   1.43  
       Total due to depositors     4,243,844     26,825   1.26         4,076,859     18,433   0.90  
    Mortgagors' escrow                  
     accounts     68,202     73   0.21         64,280     57   0.18  
       Total interest-bearing                  
        deposits     4,312,046     26,898   1.25         4,141,139     18,490   0.89  
  Borrowings     1,167,222     11,932   2.04         1,130,132     10,073   1.78  
       Total interest-bearing                  
        liabilities     5,479,268     38,830   1.42         5,271,271     28,563   1.08  
Non interest-bearing                  
  demand deposits     367,903             333,142      
Other liabilities     66,531             65,525      
       Total liabilities     5,913,702             5,669,938      
Equity     530,662             523,658      
       Total liabilities and                  
        equity $   6,444,364         $   6,193,596      
                   
Net interest income /                  
  net interest rate spread   $   85,249   2.62 %     $   87,006   2.84 %
                   
Net interest-earning assets /                  
  net interest margin $   660,905     2.78 %   $   625,243     2.95 %
                   
Ratio of interest-earning                  
  assets to interest-bearing                  
  liabilities       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 $0.4 million and $1.0 million for the six months ended June 30, 2018 and 2017, 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)
 
                    June 2018 vs.           June 2018 vs.  
        June 30,   March 31,   December 31,   December 2017   September 30,   June 30,   June 2017,  
(Dollars in thousands)   2018     2018     2017   % Change     2017     2017   % Change  
Deposits                              
Non-interest bearing $   388,467   $   377,861   $   385,269   0.8 %   $   362,509   $   349,302   11.2 %  
Interest bearing:                            
  Certificate of deposit                            
    accounts     1,452,016       1,499,326       1,351,933   7.4 %       1,404,555       1,332,377   9.0 %  
  Savings accounts     225,815       246,888       290,280   -22.2 %       323,186       325,815   -30.7 %  
  Money market accounts     1,069,835       1,032,409       979,958   9.2 %       991,706       837,565   27.7 %  
  NOW accounts     1,422,745       1,479,319       1,333,232   6.7 %       1,308,821       1,368,441   4.0 %  
    Total interest-bearing                            
      deposits     4,170,411       4,257,942       3,955,403   5.4 %       4,028,268       3,864,198   7.9 %  
                                   
      Total deposits $   4,558,878   $   4,635,803   $   4,340,672   5.0 %   $   4,390,777   $   4,213,500   8.2 %  


 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Originations and Purchases
 
    For the three months     For the six months
    June 30,   March 31,   June 30,     June 30,   June 30,
(In thousands)     2018     2018     2017       2018     2017
Multi-family residential   $   70,972   $   81,181   $   63,469     $   152,153   $   190,177
Commercial real estate       64,890       71,554       123,559         136,444       159,291
One-to-four family – mixed-use property       12,294       16,068       13,656         28,362       32,198
One-to-four family – residential       6,974       16,968       4,860         23,942       10,780
Co-operative apartments       1,500       -        -          1,500       - 
Construction       9,940       14,679       4,429         24,619       6,973
Small Business Administration       228       1,967       1,870         2,195       2,511
Commercial business and other       88,612       139,407       49,312         228,019       125,796
  Total   $   255,410   $   341,824   $   261,155     $   597,234   $   527,726
                       

 

Loan Composition

                    June 2018 vs.           June 2018 vs.
        June 30,   March 31,   December 31,   December 2017   September 30,   June 30,   June 2017
(Dollars in thousands)   2018       2018       2017     % Change     2017       2017     % Change
Loans held for investment:                              
Multi-family residential $   2,247,852     $   2,286,803     $   2,273,595     -1.1 %     $   2,236,173     $   2,243,643     0.2 %  
Commercial real estate     1,471,894         1,426,847         1,368,112     7.6 %         1,352,775         1,349,634     9.1 %  
One-to-four family ―                              
  mixed-use property     564,474         566,930         564,206     0.0 %         556,723         556,906     1.4 %  
One-to-four family ― residential     187,741         190,115         180,663     3.9 %         177,578         181,213     3.6 %  
Co-operative apartments     7,839         6,826         6,895     13.7 %         7,035         7,069     10.9 %  
Construction     33,826         23,887         8,479     298.9 %         15,811         16,842     100.8 %  
Small Business Administration     14,405         20,004         18,479     -22.0 %         14,485         10,591     36.0 %  
Taxi medallion     6,225         6,617         6,834     -8.9 %         18,165         18,303     -66.0 %  
Commercial business and other     783,904         768,440         732,973     6.9 %         674,706         644,262     21.7 %  
Net unamortized premiums                              
  and unearned loan fees     15,647         16,395         16,763     -6.7 %         16,925         17,217     -9.1 %  
Allowance for loan losses     (20,220 )       (20,542 )       (20,351 )   -0.6 %         (25,269 )       (22,157 )   -8.7 %  
      Net loans $   5,313,587     $   5,292,322     $   5,156,648     3.0 %     $   5,045,107     $   5,023,523     5.8 %  

 

Net Loans Activity

    Three Months Ended  
    June 30,   March 31,   December 31,   September, 30   June 30,  
(In thousands)     2018       2018       2017       2017       2017    
Loans originated and purchased $   255,410     $   341,824     $   328,819     $   182,925     $   261,155    
Principal reductions     (226,030 )       (202,059 )       (209,400 )       (155,007 )       (143,195 )  
Loans transferred to held-for-sale     -          -          -          -          (30,565 )  
Loans sold       (7,273 )       (2,703 )       (1,018 )       (2,606 )       (16,337 )  
Loan charged-offs     (416 )       (85 )       (11,616 )       (324 )       (350 )  
Foreclosures       -          (744 )       -          -          -     
Net change in deferred (fees) and costs     (748 )       (368 )       (162 )       (292 )       381    
Net change in the allowance for loan losses     322         (191 )       4,918         (3,112 )       54    
  Total loan activity $   21,265     $   135,674     $   111,541     $   21,584     $   71,143    

 

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
 
      June 30,   March 31,   December 31,   September 30,   June 30,
(Dollars in thousands)     2018       2018       2017       2017       2017  
Loans 90 Days Or More Past Due                    
  and Still Accruing:                    
Multi-family residential   $   -     $   -     $   -     $   415     $   -  
Commercial real estate       -         1,668         2,424         38         -  
One-to-four family - mixed-use property       -         -         -         129         -  
Construction       730         -         -         -         602  
Taxi medallion       -         -         -         1,147         727  
  Total       730         1,668         2,424         1,729         1,329  
                       
Non-accrual Loans:                    
Multi-family residential       2,165         2,193         3,598         1,309         1,537  
Commercial real estate       1,448         1,894         1,473         1,147         1,948  
One-to-four family - mixed-use property       2,157         2,396         1,867         2,217         2,971  
One-to-four family - residential       6,969         7,542         7,808         7,434         7,616  
Co-operative apartments       575         -         -         -         -  
Small Business Administration       -         41         46         50         53  
Taxi medallion(1)       743         906         918         -         -  
Commercial business and other       2         -         -         4         5  
  Total       14,059         14,972         15,710         12,161         14,130  
                       
  Total Non-performing Loans       14,789         16,640         18,134         13,890         15,459  
                       
Other Non-performing Assets:                    
Real estate acquired through foreclosure       -         638         -         -         -  
Other asset acquired through foreclosure       35         106         -         -         -  
  Total       35         744         -         -         -  
                       
  Total Non-performing Assets   $   14,824     $   17,384     $   18,134     $   13,890     $   15,459  
                       
Non-performing Assets to Total Assets     0.23 %     0.27 %     0.29 %     0.22 %     0.25 %
Allowance For Loan Losses to Non-performing Loans     136.7 %     123.5 %     112.2 %     181.9 %     143.3 %
                       

(1)  Not included in the above analysis are troubled debt restructured taxi medallion loans totaling $5.5 million in 2Q18, $5.7 million in 1Q18, $5.9 million in 4Q17, $4.1 million in 3Q17 and $3.4 million in 2Q17.

 

Net Charge-Offs (Recoveries)

      Three Months Ended  
      June 30,   March 31,   December 31,   September 30,   June 30,  
(In thousands)     2018       2018       2017       2017       2017    
Multi-family residential   $   28     $   51     $   (1 )   $   224     $   (53 )  
Commercial real estate       -         -         (3 )       (25 )       4    
One-to-four family – mixed-use property       (79 )       -         (37 )       1         (67 )  
One-to-four family – residential       (4 )       (107 )       212         (58 )       170    
Small Business Administration       18         19         109         (17 )       14    
Taxi medallion       353         -         11,229         -         -    
Commercial business and other       6         (1 )       4         29         (14 )  
  Total net loan charge-offs (recoveries)   $   322     $   (38 )   $   11,513     $   154     $   54    
                         

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common share and core earnings before provision and income taxes 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   Six Months Ended
    June 30, March 31, June 30,   June 30, June 30,
      2018     2018     2017       2018     2017  
         
               
GAAP income before income taxes $   18,412   $   14,362   $   19,500     $   32,774   $   37,014  
               
Net loss from fair value adjustments     267       100       1,159         367       1,537  
Gain from life insurance proceeds     -       (776 )     (6 )       (776 )     (1,167 )
               
Core income before taxes     18,679       13,686       20,653         32,365       37,384  
               
Provision for income taxes for core income     4,573       2,982       7,129         7,555       12,149  
               
Core net income $   14,106   $   10,704   $   13,524     $   24,810   $   25,235  
               
GAAP diluted earnings per common share $   0.48   $   0.39   $   0.44     $   0.88   $   0.86  
               
Net loss from fair value adjustments, net of tax     0.01       -        0.02         0.01       0.04  
Gain from life insurance proceeds     -        (0.03 )     -          (0.03 )     (0.04 )
               
Core diluted earnings per common share1 $   0.49   $   0.37   $   0.46     $   0.86   $   0.87  
               
               
Core net income, as calculated above $   14,106   $   10,704   $   13,524     $   24,810   $   25,235  
Average assets     6,484,882       6,403,396       6,218,072         6,444,364       6,193,596  
Average equity     532,027       529,281       529,451         530,662       523,658  
Core return on average assets2   0.87 %   0.67 %   0.87 %     0.77 %   0.81 %
Core return on average equity2   10.61 %   8.09 %   10.22 %     9.35 %   9.64 %
               
               
(1)  Core diluted earnings per common share may not foot due to rounding. 
(2)  Ratios are calculated on an annualized basis. 
               

 

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS'
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)
 
            June 30, December 31, June 30,
(Dollars in thousands)       2018     2017     2017  
Total Equity     $   538,044   $   532,608   $   534,091  
Less:              
  Goodwill         (16,127 )     (16,127 )     (16,127 )
  Intangible deferred tax liabilities         291       291       391  
    Tangible Stockholders' Common Equity $   522,208   $   516,772   $   518,355  
                 
Total Assets     $   6,467,616   $   6,299,274   $   6,285,236  
Less:              
  Goodwill         (16,127 )     (16,127 )     (16,127 )
  Intangible deferred tax liabilities         291       291       391  
    Tangible Assets     $   6,451,780   $   6,283,438   $   6,269,500  
                 
Tangible Stockholders' Common Equity to Tangible Assets   8.09 %   8.22 %   8.27 %

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