FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
Commission file number 000-24272
FLUSHING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
11-3209278
(I.R.S. Employer Identification No.)
144-51 Northern Boulevard, Flushing, New York 11354
(Address of principal executive offices)
(718) 961-5400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.01 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
__X__Yes ______No
The number of shares of the registrant's Common Stock outstanding as of October 25, 2001 was 13,612,363.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
1. Basis of Presentation
The primary business of Flushing Financial Corporation is the operation of its
wholly-owned subsidiary, Flushing Savings Bank, FSB (the "Bank"). The
consolidated financial statements presented in this Form 10-Q reflect
principally the Bank's activities.
The information furnished in these interim statements reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results for such periods of Flushing Financial Corporation and Subsidiaries (the
"Company"). Such adjustments are of a normal recurring nature, unless otherwise
disclosed in this Form 10-Q. The results of operations in the interim statements
are not necessarily indicative of the results that may be expected for the full
year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
("GAAP") have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). The interim financial
information should be read in conjunction with the Company's 2000 Annual Report
on Form 10-K.
2. Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.
3. Earnings Per Share
Basic earnings per share for the three- and nine-month periods ended September
30, 2001 and 2000 was computed by dividing net income by the total weighted
average number of common shares outstanding, including only the vested portion
of restricted stock awards. Diluted earnings per share includes the additional
dilutive effect of stock options outstanding and the unvested portion of
restricted stock awards during the respective periods. Earnings per share has
been computed based on the following:
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
4. Stock Split
On July 17, 2001, the Board of Directors of the Company declared a three-for-two
split of the Company's common stock in the form of a 50% stock dividend, payable
on August 30, 2001. Each shareholder received one additional share for every two
shares of the Company's common stock held at the record date, August 10, 2001.
Cash was paid in lieu of fractional shares. All historical share and per share
amounts reported in this Form 10-Q have been restated to reflect the
three-for-two stock split paid on August 30, 2001.
5. Recent Accounting Pronouncements
In June 2001, FASB issued SFAS No. 141, "Business Combinations", which is
effective for all business combinations initiated after June 30, 2001. The
Statement requires that all business combinations be accounted for by a single
method - the purchase method. The Statement also requires separate recognition
of intangible assets that can be identified and named as assets apart from
goodwill. The Statement further requires the disclosure of the primary reasons
for a business combination and the allocation of the purchase price paid to the
assets acquired and liabilities assumed by major balance sheet captions. This
Statement has not had an impact on the Company's financial position or results
of operations.
In June 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets",
which is effective for fiscal years beginning after December 15, 2001. The
Statement changes the approach to how goodwill and other intangible assets are
accounted for subsequent to their recognition. Goodwill and intangible assets
that have indefinite useful lives will not be amortized but rather will be
tested at least annually for impairment. Intangible assets that have finite
useful lives will be amortized over their useful lives. The Statement provides
specific guidance on testing intangible assets that will not be amortized for
impairment. During 2002, the Company will perform the required impairment test
for goodwill recorded in connection with its purchase of New York Federal
Savings Bank in 1997. As of January 1, 2002, this goodwill will have a remaining
balance of $3.9 million. Amortization expense related to goodwill was $0.3
million for the nine months ended September 30, 2001 and $0.4 million for the
year ended December 31, 2000. The effect of this test on the Company's financial
position and results of operations has not been determined.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
GENERAL
Flushing Financial Corporation, a Delaware corporation, was organized in May
1994 to serve as the holding company for Flushing Savings Bank, FSB (the
"Bank"), a federally chartered, FDIC insured savings institution, originally
organized in 1929. The Bank is a consumer-oriented savings institution and
conducts its business through ten banking offices located in Queens, Brooklyn,
Manhattan, Bronx and Nassau County. Flushing Financial Corporation's common
stock is publicly traded on the Nasdaq National Market under the symbol "FFIC".
The following discussion of financial condition and results of operations
includes the collective results of Flushing Financial Corporation and the Bank
(collectively, the "Company"), but reflects principally the Bank's activities.
The Company's principal business is attracting retail deposits from the general
public and investing those deposits, together with funds generated from
operations and borrowings, primarily in (1) origination and purchases of
one-to-four family residential mortgage loans, multi-family income-producing
property loans and commercial real estate loans; (2) mortgage loan surrogates
such as mortgage-backed securities; and (3) U.S. government and federal agency
securities, corporate fixed-income securities and other marketable securities.
To a lesser extent, the Company originates certain other loans, including
construction loans, Small Business Administration loans and other small business
loans.
The Company's results of operations depend primarily on net interest income,
which is the difference between the income earned on its interest-earning assets
and the cost of its interest-bearing liabilities. Net interest income is the
result of the Company's interest rate margin, which is the difference between
the average yield earned on interest-earning assets and the average cost of
interest-bearing liabilities, adjusted for the difference in the average balance
of interest-earning assets as compared to the average balance of
interest-bearing liabilities. The Company also generates non-interest income
from loan fees, service charges on deposit accounts, mortgage servicing fees,
late charges and other fees and net gains and losses on sales of securities and
loans. The Company's operating expenses consist principally of employee
compensation and benefits, occupancy and equipment costs, other general and
administrative expenses and income tax expense. The Company's results of
operations also can be significantly affected by its periodic provision for loan
losses and specific provision for losses on real estate owned. Such results also
are significantly affected by general economic and competitive conditions,
including changes in market interest rates, the strength of the local economy,
government policies and actions of regulatory authorities.
On July 17, 2001, the Board of Directors of the Company declared a three-for-two
split of the Company's common stock in the form of a 50% stock dividend, payable
on August 30, 2001. Each shareholder received one additional share for every two
shares of the Company's common stock held at the record date, August 10, 2001.
Cash was paid in lieu of fractional shares. All historical share and per share
amounts reported in this Form 10-Q have been restated to reflect the
three-for-two stock split paid on August 30, 2001.
Statements contained in this Quarterly Report relating to plans, strategies,
objectives, economic performance and trends and other statements that are not
descriptions of historical facts may be forward-looking statements within the
meaning of 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, the factors set forth in the preceding paragraph and
elsewhere in this Quarterly Report, and in other documents filed by the Company
with the Securities and Exchange Commission from time to time, including,
without limitation, the Company's 2000 Annual Report to Stockholders and its SEC
Report on Form 10-K for the year ended December 31, 2000. Forward-looking
statements may be identified by terms such as "may", "will", "should",
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
"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.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
General. Diluted earnings per share increased 45.0% to $0.29 for the three
months ended September 30, 2001 from $0.20 for the three months ended September
30, 2000. Net income increased $1.1 million, or 42.9%, to $3.7 million for the
three months ended September 30, 2001 from $2.6 million for the three months
ended September 30, 2000. The return on average assets for the three months
ended September 30, 2001 increased to 1.05% from 0.79% for the three months
ended September 30, 2000, while the return on average equity for the three
months ended September 30, 2001 increased to 11.34% from 8.73% for the three
months ended September 30, 2000.
The three months ended September 30, 2000 included the sale of approximately
$20.7 million of mortgage-backed securities, which resulted in an after tax loss
of $445,000. The proceeds of this sale were used to purchase $20.0 million of
Bank Owned Life Insurance ("BOLI"), which has been included in Other Assets in
the Consolidated Statements of Financial Condition. The purchase of BOLI allows
the company to recover a substantial portion of the Company's employee benefit
costs. The tax advantages of BOLI were immediately accretive to earnings, and
allowed the Company to recover this loss within one year. Excluding this loss on
sale of securities, net income for the three months ended September 30, 2000
would have been $3.0 million, or $0.24 per diluted share.
Interest Income. Total interest and dividend income increased $0.8 million, or
3.1%, to $25.6 million for the three months ended September 30, 2001 from $24.8
million for the three months ended September 30, 2000. This increase was
primarily the result of a $70.9 million increase in the average balance of
interest-earning assets for the three months ended September 30, 2001 as
compared to the three months ended September 30, 2000. The average balance of
mortgage loans, net, and interest-earning deposits increased $86.1 million and
$14.3 million, respectively, for the three months ended September 30, 2001 as
compared to the three months ended September 30, 2000. These increases were
partially offset by a $29.0 million decrease in the average balance of
mortgage-backed securities for the three months ended September 30, 2001 as
compared to the three months ended September 30, 2000. The decrease in the
average balance of mortgage-backed securities reflects the sale in the third
quarter of 2000 of lower-yielding mortgage-backed securities and the
reinvestment of $20.0 million in BOLI. The investment in BOLI is included in
Other Assets in the Consolidated Statement of Financial Condition. The yield on
interest-earning assets declined 19 basis points to 7.70% for the three months
ended September 30, 2001 from 7.89% for the three months ended September 30,
2000. This decrease is primarily due to the declining interest rate environment
experienced during the current year, as the yields on short term and adjustable
rate investments declined. These declines were partially offset by the increase
in the average balance of the higher yielding mortgage loan portfolio.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Interest Expense. Interest expense increased $0.2 million, or 1.2%, to $15.1
million for the three months ended September 30, 2001 from $14.9 million for the
three months ended September 30, 2000, primarily due to an $81.3 million
increase in the average balance of interest-bearing liabilities. This increase
was partially offset by a 27 basis point decrease in the average cost of
interest-bearing liabilities to 4.84% in the three months ended September 30,
2001 from 5.11% in the three months ended September 30, 2000. The decrease in
the cost of funds is primarily due to the declining interest rate environment
experienced during the current year, coupled with an increase in the average
balance of lower costing core deposits. This marks the third consecutive quarter
that the cost of funds has declined.
Net Interest Income. For the three months ended September 30, 2001, net interest
income increased $0.6 million, or 6.0%, to $10.5 million from $9.9 million in
the three months ended September 30, 2000. This increase in net interest income
is primarily due to an eight basis point increase in the net interest spread and
a $70.9 million increase in average interest-earning assets. Net interest income
was negatively impacted by the sale of mortgage-backed securities in the third
quarter of 2000 and the reinvestment of the proceeds in $20.0 million of BOLI.
The investment in BOLI is included in Other Assets, and the income on BOLI is
included in Other Income. The income on BOLI amounted to $0.3 million for the
quarter ended September 30, 2001. Partially as a result of the shifting of $20.0
million of assets from interest-earning assets to Other Assets, interest-earning
assets exceeded interest-bearing liabilities by $84.6 million in the quarter
ended September 30, 2001 as compared to $95.0 million in the quarter ended
September 30, 2000. As a result, despite the eight basis point increase in the
net interest spread, the net interest margin increased only one basis point to
3.17% in the 2001 third quarter from 3.16% in the comparable 2000 quarter.
Provision for Loan Losses. There was no provision for loan losses for the
three-month periods ended September 30, 2001 or 2000. The level of the allowance
for loan losses reflects the Bank's evaluation of current economic conditions,
the overall trend of non-performing loans in the loan portfolio (see "Financial
Condition - Assets"), its analysis of specific loan situations, and the size and
composition of the loan portfolio.
Non-Interest Income. Total non-interest income increased by $1.0 million to $1.3
million for the three months ended September 30, 2001 from $0.3 million for the
three months ended September 30, 2000. The increase is due to net gains on the
sale of securities and loans of $36,000 in the quarter ended September 30, 2001
as compared to net losses on the sale of securities and loans of $0.7 million in
the quarter ended September 30, 2000, the income earned on BOLI, and higher fee
income from loan fees and banking services.
Non-Interest Expense. Non-interest expense was $5.9 million for the three months
ended September 30, 2001, a decrease of $0.1 million, as compared to $6.0
million for the three months ended September 30, 2000. Management continues to
monitor expenditures resulting in efficiency ratios of 49.4% and 54.1% for the
three months ended September 30, 2001 and 2000, respectively.
Income before Income Taxes. Total income before the provision for income taxes
increased $1.7 million, or 40.6%, to $5.9 million for the three months ended
September 30, 2001 as compared to $4.2 million for the three months ended
September 30, 2000, for the reasons stated above.
Provision For Income Taxes. Income tax expense increased $0.6 million to $2.2
million for the three months ended September 30, 2001 as compared to $1.6
million for the three months ended September 30, 2000. This increase is due to
the $1.7 million increase in income before taxes.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
General. Diluted earnings per share increased 19.4% to $0.86 for the nine months
ended September 30, 2001 from $0.72 for the nine months ended September 30,
2000. Net income for the nine months ended September 30, 2001 increased $1.8
million, or 18.9%, to $11.0 million from the $9.2 million reported for the nine
months ended September 30, 2000. The return on average assets for the nine
months ended September 30, 2001 increased to 1.05% from 0.96% for the nine
months ended September 30, 2000, while the return on average equity for the nine
months ended September 30, 2001 increased to 11.37% from 10.49% for the nine
months ended September 30, 2000.
The nine months ended September 30, 2000 includes the previously mentioned loss
on sale of mortgage-backed securities, resulting in an after tax loss of
$445,000. Excluding this loss on sale of securities, net income for the nine
months ended September 30, 2000 would have been $9.7 million, or $0.75 per
diluted share.
Interest Income. Total interest and dividend income increased $3.6 million, or
5.0%, to $75.8 million for the nine months ended September 30, 2001 from $72.2
million for the nine months ended September 30, 2000. This increase was
primarily the result of a $73.8 million increase in the average balance of
interest-earning assets for the nine months ended September 30, 2001 as compared
to the nine months ended September 30, 2000. The average balance of mortgage
loans, net, and interest-earning deposits increased $96.5 million and $22.3
million, respectively, for the nine months ended September 30, 2001 as compared
to the nine months ended September 30, 2000. These increases were partially
offset by a $44.6 million decrease in the average balance of mortgage-backed
securities for the nine months ended September 30, 2001 as compared to the nine
months ended September 30, 2000. The decrease in the average balance of
mortgage-backed securities reflects the above mentioned sale in the third
quarter of 2000 of lower-yielding mortgage-backed securities and the
reinvestment of $20.0 million in BOLI. The yield on interest-earning assets
declined eight basis points to 7.78% for the nine months ended September 30,
2001 from 7.86% for the nine months ended September 30, 2000. An increase of
three basis points in the yield on mortgage loans was offset by declines in the
yield on mortgage-backed and other securities and interest-earning deposits.
Interest Expense. Interest expense increased $3.2 million, or 7.8%, to $45.2
million for the nine months ended September 30, 2001 from $42.0 million for the
nine months ended September 30, 2000. This increase was the result of a $87.3
million increase in the average balance of interest-bearing liabilities for the
nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. The weighted average cost of interest-bearing liabilities
was 4.96% for the nine months ended September 30, 2001, the same as for the nine
months ended September 30, 2000.
Net Interest Income. For the nine months ended September 30, 2001, net interest
income increased $0.4 million, or 1.2%, to $30.7 million from $30.3 million in
the nine months ended September 30, 2000. This increase in net interest income
is primarily due to a $73.8 million increase in the average balance of
interest-earning assets. Net interest income was negatively impacted by the sale
of mortgage-backed securities in the third quarter of 2000 and the reinvestment
of the proceeds in $20.0 million of BOLI. The investment in BOLI is included in
Other Assets, and the income on BOLI is included in Other Income. The income on
BOLI amounted to $1.0 million for the nine months ended September 30, 2001. The
net interest margin declined 14 basis points to 3.15% for the nine months ended
September 30, 2001 from 3.29% for the nine months ended September 30, 2000.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Provision for Loan Losses. There was no provision for loan losses for the
nine-month periods ended September 30, 2001 or 2000. The level of the allowance
for loan losses reflects the Bank's evaluation of current economic conditions,
the overall trend of non-performing loans in the loan portfolio (see "Financial
Condition - Assets"), its analysis of specific loan situations, and the size and
composition of the loan portfolio.
Non-Interest Income. Total non-interest income increased $2.3 million to $4.6
million for the nine months ended September 30, 2001 from $2.3 million for the
nine months ended September 30, 2000. The increase is due to net gains on the
sale of securities and loans of $0.3 million for the nine months ended September
30, 2001 as compared to net losses on the sale of securities and loans of $0.7
million for the nine months ended September 30, 2000, the income earned on BOLI,
and higher fee income from loan fees and banking services.
Non-Interest Expense. Non-interest expense increased by $0.2 million, or 1.0%,
to $17.9 million for the nine months ended September 30, 2001 as compared to
$17.7 million for the nine months ended September 30, 2000. Management continues
to monitor expenditures resulting in efficiency ratios of 50.7% and 52.7% for
the nine months ended September 30, 2001 and 2000, respectively.
Income before Income Taxes. Total income before the provision for income taxes
increased $2.5 million, or 17.0%, to $17.4 million for the nine months ended
September 30, 2001 as compared to $14.9 million for the nine months ended
September 30, 2000 for the reasons stated above.
Provision For Income Taxes. Income tax expense increased $0.7 million to $6.4
million for the nine months ended September 30, 2001 as compared to $5.7 million
for the nine months ended September 30, 2000. This increase is due to the $2.5
million increase in income before taxes.
FINANCIAL CONDITION
Assets. Total assets at September 30, 2001 were $1.43 billion, a $91.4 million
increase from December 31, 2000. During the nine months ended September 30,
2001, loan originations and purchases were $67.6 million for 1-4 family
residential mortgage loans, $45.1 million for multi-family real estate loans,
$50.8 million for commercial real estate loans and $4.6 million in construction
loans. During the nine months ended September 30, 2000, loan originations and
purchases were $80.8 million for 1-4 family residential mortgage loans, $46.4
million for multi-family real estate loans, $33.4 million for commercial real
estate loans and $4.5 million in construction loans. Total loans, net, increased
$81.1 million during the nine months ended September 30, 2001 to $1,067.5
million from $986.4 million at December 31, 2000.
As the Company continues to increase its loan portfolio, management continues to
adhere to the Bank's strict underwriting standards. As a result, the Company has
been able to minimize charge-offs of losses from impaired loans and maintain
asset quality. Non-performing assets were $2.6 million at September 30, 2001 as
compared to $1.7 million at December 31, 2000 and $1.4 million at September 30,
2000. Total non-performing assets as a percentage of total assets were 0.18% at
September 30, 2001 as compared to 0.12% at December 31, 2000 and 0.11% at
September 30, 2000. The ratio of allowance for loan losses to total
non-performing loans was 254% at September 30, 2001 as compared to 415% at
December 31, 2000 and 571% at September 30, 2000.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Liabilities. Total liabilities increased $84.8 million to $1.30 billion at
September 30, 2001 from $1.21 billion at December 31, 2000. Due to depositors
increased $82.7 million as certificate of deposit accounts increased $25.7
million while lower costing core deposits, primarily money market deposit
accounts, increased $57.0 million.
Equity. Total stockholders' equity increased $6.6 million to $133.3 million at
September 30, 2001 from $126.7 million at December 31, 2000. The increase is
primarily due to $11.0 million in net income for the nine months ended September
30, 2001, an improvement of $3.2 million in the net unrealized gain in the
market value of securities available for sale, and $2.3 million from the
exercise of stock options, partially offset by $8.0 million in treasury shares
purchased through the Company's stock repurchase plans and $2.8 million in cash
dividends paid during the nine month period. Quarterly dividends per share were
increased to $0.08 per share for the third quarter of 2001 from $0.07 per share
in the second quarter of 2001. Book value per share improved to $9.79 per share
at September 30, 2001 from $9.11 per share at December 31, 2000 and $8.78 at
September 30, 2000.
Under its stock repurchase program, the Company repurchased 475,000 shares for
the nine months ended September 30, 2001, leaving 17,000 shares to be
repurchased under the eighth stock repurchase program. On October 16, 2001, the
Company's Board of Directors approved the ninth stock repurchase program,
authorizing the repurchase of 700,000 shares.
Cash flow. During the nine months ended September 30, 2001, funds provided by
the Company's operating activities amounted to $13.8 million. These funds,
together with $73.8 million provided by financing activities, were utilized to
fund net investing activities of $83.4 million. The Company's primary business
objective is the origination and purchase of 1-4 family residential,
multi-family and commercial real estate loans. During the nine months ended
September 30, 2001, the net total of loan originations less loan repayments was
$80.0 million, and the total amount of real estate loans purchased was $0.9
million. The Company also invests in other securities including mortgage loan
surrogates such as mortgage-backed securities. During the nine months ended
September 30, 2001, the Company purchased a total of $113.9 million in
securities available for sale. Funds for investment were also provided by $73.5
million in maturities and prepayments of securities available for sale. The
Company also used funds of $8.0 million for treasury stock repurchases and $2.8
million in dividend payments during the nine months ended September 30, 2001.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
INTEREST RATE RISK
The consolidated statements of financial position have been prepared in
accordance with generally accepted accounting principles, which requires the
measurement of financial position and operating results in terms of historical
dollars without considering the changes in fair value of certain investments due
to changes in interest rates. Generally, the fair value of financial investments
such as loans and securities fluctuates inversely with changes in interest
rates. As a result, increases in interest rates could result in decreases in the
fair value of the Company's interest-earning assets which could adversely affect
the Company's results of operation if such assets were sold, or, in the case of
securities classified as available-for-sale, decreases in the Company's
stockholders' equity, if such securities were retained.
The Company manages the mix of interest-earning assets and interest-bearing
liabilities on a continuous basis to maximize return and adjust its exposure to
interest rate risk. On a quarterly basis, management prepares the "Earnings and
Economic Exposure to Changes In Interest Rate" report for review by the Board of
Directors, as summarized below. This report quantifies the potential changes in
net interest income and net portfolio value should interest rates go up or down
(shocked) 300 basis points, assuming the yield curves of the rate shocks will be
parallel to each other. Net portfolio value is defined as the market value of
assets net of the market value of liabilities. The market value of assets and
liabilities is determined using a discounted cash flow calculation. The net
portfolio value ratio is the ratio of the net portfolio value to the market
value of assets. All changes in income and value are measured as percentage
changes from the projected net interest income and net portfolio value at the
base interest rate scenario. The base interest rate scenario assumes interest
rates at September 30, 2001. Various estimates regarding prepayment assumptions
are made at each level of rate shock. Actual results could differ significantly
from these estimates. The Company is within the guidelines set forth by the
Board of Directors for each interest rate level.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
REGULATORY CAPITAL POSITION
Under Office of Thrift Supervision ("OTS") capital regulations, the Bank is
required to comply with each of three separate capital adequacy standards. At
September 30, 2001, the Bank exceeded each of the three OTS capital requirements
and is categorized as "well-capitalized" by the OTS under the prompt corrective
action regulations. Set forth below is a summary of the Bank's compliance with
OTS capital standards as of September 30, 2001.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCES
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income depends
upon the relative amount of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them. The following table
set forth certain information relating to the Company's Consolidated Statements
of Financial Condition and Consolidated Statements of Operations for the three
month periods ended September 30, 2001 and 2000, and reflects the average yield
on assets and average cost of liabilities for the periods indicated. Such yields
and costs are derived by dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods shown. Average balances are
derived from average daily balances. The yields include amortization of fees
which are considered adjustments to yields.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCES (continued)
The following tables set forth certain information relating to the Company's
Consolidated Statements of Financial Condition and Consolidated Statements of
Operations for the nine month periods ended September 30, 2001 and 2000, and
reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. The
yields include amortization of fees which are considered adjustments to yields.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
The following table sets forth the Company's loan originations (including the
net effect of refinancing) and the changes in the Company's portfolio of loans,
including purchases, sales and principal reductions for the periods indicated.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS
The Company reviews loans in its portfolio on a monthly basis to determine
whether any problem loans require classification in accordance with internal
policies and applicable regulatory guidelines. The following table sets forth
information regarding all non-accrual loans, loans which are 90 days or more
delinquent, and real estate owned at the dates indicated.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
The Company has established and maintains on its books an allowance for loan
losses that is designed to provide a reserve against estimated losses inherent
in the Company's overall loan portfolio. The allowance is established through a
provision for loan losses based on management's evaluation of the risk inherent
in the various components of its loan portfolio and other factors, including
historical loan loss experience, changes in the composition and volume of the
portfolio, collection policies and experience, trends in the volume of
non-accrual loans and regional and national economic conditions. The
determination of the amount of the allowance for loan losses includes estimates
that are susceptible to significant changes due to changes in appraisal values
of collateral, national and regional economic conditions and other factors. In
connection with the determination of the allowance, the market value of
collateral ordinarily is evaluated by the Company's staff appraiser; however,
the Company may from time to time obtain independent appraisals for significant
properties. Current year charge-offs, charge-off trends, new loan production and
current balance by particular loan categories are also taken into account in
determining the appropriate amount of allowance. The Board of Directors reviews
and approves the adequacy of the loan loss reserves on a quarterly basis.
The following table sets forth the activity in the Bank's allowance for loan
losses for the periods indicated.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the qualitative and quantitative disclosures about market
risk, see the information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Interest Rate Risk".
ITEM 1. LEGAL PROCEEDINGS.
The Company is a defendant in various lawsuits. Management of the Company, after
consultation with outside legal counsel, believes that the resolution of these
various matters will not result in any material adverse effect on the Company's
consolidated financial condition, results of operations and cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
On October 16, 2001, the Company's Board of Directors approved the ninth stock
repurchase program, authorizing the repurchase of 700,000 common shares, or
approximately 5% of outstanding common shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBIT.
None
b) REPORTS ON FORM 8-K.
On July 18, 2001, the Company filed Form 8-K to report that the Board of
Directors of the Company approved a three-for-two stock split in the form of a
50% stock dividend, payable on August 30, 2001, to stockholders of record as of
August 10, 2001.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAGE
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Financial Condition ....................... 1
Consolidated Statements of Operations and Comprehensive Income ....... 2
Consolidated Statements of Cash Flows ................................ 3
Consolidated Statements of Changes in Stockholders' Equity ........... 4
Notes to Consolidated Statements ..................................... 5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................ 7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ....... 20
PART II. -- OTHER INFORMATION
ITEM 1. Legal Proceedings ................................................ 20
ITEM 2. Changes in Securities and Use of Proceeds ........................ 20
ITEM 3. Defaults Upon Senior Securities .................................. 20
ITEM 4. Submission of Matters To A Vote of Security Holders .............. 20
ITEM 5. Other Information ................................................ 20
ITEM 6. Exhibits and Reports on Form 8-K ................................. 20
SIGNATURES ................................................................ 21
Consolidated Statements of Financial Condition
(Dollars in thousands, except share data) September 30, 2001 December 31, 2000
-------------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
------
Cash and due from banks $ 13,684 $ 10,235
Federal funds sold and overnight interest-earning deposits 12,500 11,758
Securities available for sale:
Mortgage-backed securities 247,146 238,626
Other securities 15,377 16,594
Loans:
1-4 Family residential mortgage loans 483,827 467,784
Multi-family mortgage loans 358,620 334,307
Commercial real estate loans 207,836 167,549
Co-operative apartment loans 6,923 8,009
Construction loans 9,645 8,304
Small Business Administration loans 3,573 2,844
Consumer and other loans 2,869 3,704
Net unamortized premiums and unearned loan fees 834 579
Allowance for loan losses (6,601) (6,721)
------------------ ------------------
Net loans 1,067,526 986,359
Interest and dividends receivable 8,029 7,724
Real estate owned, net -- 44
Bank premises and equipment, net 5,727 6,311
Federal Home Loan Bank of New York stock 25,422 24,932
Goodwill 3,997 4,272
Other assets 30,073 31,237
------------------ ------------------
Total assets $ 1,429,481 $ 1,338,092
================== ==================
LIABILITIES
-----------
Due to depositors:
Non-interest bearing $ 26,161 $ 20,913
Interest-bearing 738,638 661,145
Mortgagors' escrow deposits 13,435 7,753
Borrowed funds 503,918 508,839
Other liabilities 14,030 12,705
------------------ ------------------
Total liabilities 1,296,182 1,211,355
------------------ ------------------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock ($0.01 par value; 5,000,000 shares authorized) -- --
Common stock ($0.01 par value; 20,000,000 shares authorized; 13,852,063
and 15,991,638(1) shares issued at September 30, 2001 and December
31, 2000, respectively; 13,609,363 and 13,907,881(1) shares outstanding at
September 30, 2001 and December 31, 2000, respectively) 139 114
Additional paid-in capital 44,745 76,396
Treasury stock, at average cost (242,700 and 2,083,757 shares
at September 30, 2001 and December 31, 2000, respectively) (3,687) (31,755)
Unearned compensation (8,003) (7,781)
Retained earnings 96,996 89,896
Accumulated other comprehensive income, net of taxes 3,109 (133)
------------------ ------------------
Total stockholders' equity 133,299 126,737
------------------ ------------------
Total liabilities and stockholders' equity $ 1,429,481 $ 1,338,092
================== ==================
(1) Adjusted to reflect the three-for-two split of the Company's common stock
paid in the form of a dividend on August 30, 2001.
Consolidated Statements of Operations and Comprehensive Income
For the three months For the nine months
ended September 30, ended September 30,
-------------------------- --------------------------
(In thousands, except per share data) 2001 2000 2001 2000
--------------------------------------------------------------------------------------------------------------------------
(Unaudited)
INTEREST AND DIVIDEND INCOME
----------------------------
Interest and fees on loans $ 21,368 $ 19,795 $ 62,750 $ 56,714
Interest and dividends on securities:
Interest 3,960 4,801 11,838 14,858
Dividends 51 66 163 199
Other interest income 204 148 1,110 468
------------ ------------ ------------ ------------
Total interest and dividend income 25,583 24,810 75,861 72,239
------------ ------------ ------------ ------------
INTEREST EXPENSE
----------------
Deposits 7,507 7,077 22,424 20,209
Other interest expense 7,535 7,786 22,777 21,740
------------ ------------ ------------ ------------
Total interest expense 15,042 14,863 45,201 41,949
------------ ------------ ------------ ------------
NET INTEREST INCOME 10,541 9,947 30,660 30,290
Provision for loan losses -- -- -- --
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,541 9,947 30,660 30,290
------------ ------------ ------------ ------------
NON-INTEREST INCOME
-------------------
Other fee income 496 443 1,680 1,455
Net gain (loss) on sales of securities and loans 36 (718) 254 (682)
Other income 768 539 2,707 1,532
------------ ------------ ------------ ------------
Total non-interest income 1,300 264 4,641 2,305
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE
--------------------
Salaries and employee benefits 3,128 3,149 9,419 9,182
Occupancy and equipment 581 587 1,733 1,633
Professional services 566 569 1,647 1,740
Data processing 300 311 947 952
Depreciation and amortization 264 279 803 809
Other operating expenses 1,100 1,118 3,341 3,395
------------ ------------ ------------ ------------
Total non-interest expense 5,939 6,013 17,890 17,711
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 5,902 4,198 17,411 14,884
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES
--------------------------
Federal 1,782 1,332 5,264 4,585
State and local 402 264 1,178 1,072
------------ ------------ ------------ ------------
Total taxes 2,184 1,596 6,442 5,657
------------ ------------ ------------ ------------
NET INCOME $ 3,718 $ 2,602 $ 10,969 $ 9,227
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME, NET OF TAX
--------------------------------------
Unrealized (losses) gains on securities:
Unrealized holding gains arising during period $ 2,310 $ 1,562 $ 3,301 $ 2,075
Less: reclassification adjustments for gains(losses)
included in net income 3 446 (59) 446
------------ ------------ ------------ ------------
Net unrealized holding gains 2,313 2,008 3,242 2,521
------------ ------------ ------------ ------------
Comprehensive net income $ 6,031 $ 4,610 $ 14,211 $ 11,748
============ ============ ============ ============
Basic earnings per share (1) $0.30 $0.21 $0.89 $0.73
Diluted earnings per share (1) $0.29 $0.20 $0.86 $0.72
(1) 2000 per share information is restated to reflect the three-for-two split of
the Company's common stock paid in the form of a dividend on August 30, 2001.
Consolidated Statements of Cash Flows
For the nine months ended
September 30,
---------------------------------------
(In thousands) 2001 2000
-----------------------------------------------------------------------------------------------------------------------
(Unaudited)
OPERATING ACTIVITIES
--------------------
Net income $ 10,969 $ 9,227
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses -- --
Depreciation and amortization of bank premises and equipment 803 809
Amortization of goodwill 275 275
Net (gain) loss on sales of securities (94) 719
Net gain on sales of loans (160) (37)
Net gain on sales of real estate owned (11) (126)
Amortization of unearned premium, net of accretion of unearned discount 797 988
Amortization of deferred income (279) (539)
Deferred income tax provision 123 185
Deferred compensation 350 155
Net increase (decrease) in other assets and liabilities 45 (2,406)
Unearned compensation 973 1,123
------------------ ------------------
Net cash provided by operating activities 13,791 10,373
------------------ ------------------
INVESTING ACTIVITIES
--------------------
Purchases of bank premises and equipment (219) (1,075)
Purchases of Federal Home Loan Bank shares (490) (2,340)
Purchases of securities available for sale (113,928) (12,274)
Proceeds from sales and calls of securities available for sale 38,595 20,173
Proceeds from maturities and prepayments of securities available for sale 73,481 27,021
Net originations and repayment of loans (80,049) (85,197)
Purchases of loans (887) (15,631)
Purchase of Bank Owned Life Insurance -- (20,000)
Proceeds from sales of real estate owned 106 494
------------------ ------------------
Net cash used by investing activities (83,391) (88,829)
------------------ ------------------
FINANCING ACTIVITIES
--------------------
Net increase (decrease) in non-interest bearing deposits 5,248 (600)
Net increase in interest-bearing deposits 77,493 17,624
Net increase in mortgagors' escrow deposits 5,682 1,065
Net increase (decrease) in short-term borrowed funds (14,232) 7,202
Proceeds from long-term borrowed funds 78,000 99,900
Repayment of long-term borrowed funds (68,689) (60,239)
Purchases of treasury stock, net (6,866) (5,431)
Cash paid in lieu of fractional shares resulting from stock split (2) --
Cash dividends paid (2,843) (2,578)
------------------ ------------------
Net cash provided by financing activities 73,791 56,943
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 4,191 (21,513)
Cash and cash equivalents, beginning of period 21,993 34,934
------------------ ------------------
Cash and cash equivalents, end of period $ 26,184 $ 13,421
================== ==================
SUPPLEMENTAL CASH FLOW DISCLOSURE
---------------------------------
Interest paid $ 45,006 $ 41,129
Income taxes paid 4,892 6,189
Non-cash activities:
Loans transferred through foreclosure of a related mortgage
loan to real estate owned 47 236
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
For the nine months ended
(In thousands, except share data) September 30, 2001
---------------------------------------------------------------------------------------------------------
COMMON STOCK
------------
Balance, beginning of period $ 114
Stock dividend (4,617,270 shares; 2,120,885 shares funded from Treasury) 25
-------------------------
Balance, end of period $ 139
=========================
ADDITIONAL PAID-IN CAPITAL
--------------------------
Balance, beginning of period $ 76,396
Stock dividend (2,120,885 common shares) (33,167)
Cash paid in lieu of 127 fractional shares resulting from stock split (2)
Award of shares released from Employee Benefit Trust (3,846 common shares) 35
Restricted stock awards (77,175 common shares) 389
Options exercised (8,250 common shares) 5
Tax benefit of unearned compensation 1,089
-------------------------
Balance, end of period $ 44,745
=========================
TREASURY STOCK
--------------
Balance, beginning of period $ (31,755)
Stock dividend (2,120,885 common shares) 33,142
Purchases of common shares outstanding (474,950 common shares) (7,958)
Repurchase of restricted stock awards (22,928 common shares) (505)
Restricted stock awards (51,450 common shares) 797
Forfeiture of restricted stock awards (1,400 common shares) (26)
Options exercised (168,000 common shares) 2,618
-------------------------
Balance, end of period $ (3,687)
=========================
UNEARNED COMPENSATION
---------------------
Balance, beginning of period $ (7,781)
Restricted stock award expense 649
Restricted stock awards (77,175 common shares) (1,186)
Forfeiture of restricted stock awards (2,100 common shares) 26
Release of shares from Employee Benefit Trust (56,676 common shares) 289
-------------------------
Balance, end of period $ (8,003)
=========================
RETAINED EARNINGS
-----------------
Balance, beginning of period $ 89,896
Net income 10,969
Options exercised (203,725 common shares) (1,026)
Cash dividends declared and paid (2,843)
-------------------------
Balance, end of period $ 96,996
=========================
ACCUMULATED OTHER COMPREHENSIVE INCOME
--------------------------------------
Balance, beginning of period $ (133)
Change in net unrealized gain, net of taxes of approximately $2,798 on
securities available for sale 3,301
Less: Reclassification adjustment for gains included in net income, net of
taxes of approximately $35 (59)
-------------------------
Balance, end of period $ 3,109
=========================
Notes to Consolidated Financial Statements
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
(Amounts in thousands, except per share data) 2001 2000 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Net income $3,718 $2,602 $10,969 $9,227
Divided by:
Weighted average common shares outstanding 12,316 12,505 12,321 12,618
Weighted average common stock equivalents 566 269 484 219
Total weighted average common shares n common stock equivalents 12,882 12,774 12,805 12,837
Basic earnings per share $0.30 $0.21 $0.89 $0.73
Diluted earnings per share $0.29 $0.20 $0.86 $0.72
Dividends per share $0.08 $0.07 $0.23 $0.20
Dividend payout ratio 26.67% 33.33% 25.84% 27.40%
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Projected Percentage Change In
-------------------------------------------
Net Interest Net Portfolio
Change in Interest Rate Income Net Portfolio Value Value Ratio
-------------------------------------------------------------------------------------------
-300 Basis points 1.39% -2.86% 9.48%
-200 Basis points 1.09 -1.47 9.81
-100 Basis points 0.38 0.11 10.15
Base interest rate -- -- 10.34
+100 Basis points -2.09 -10.25 9.55
+200 Basis points -5.85 -29.13 7.81
+300 Basis points -9.83 -46.55 6.10
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands) Amount Percent of Assets
-------------------------------------------------------------------------------
Tangible Capital:
Capital level $118,541 8.39%
Requirement 21,193 1.50
Excess 97,348 6.89
Core Capital:
Capital level $118,541 8.39%
Requirement 42,385 3.00
Excess 76,156 5.39
Risk-Based Capital:
Capital level $125,142 15.71%
Requirement 63,722 8.00
Excess 61,420 7.71
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the three months ended September 30,
-----------------------------------------------------------------------------
2001 2000
------------------------------------- -------------------------------------
(Dollars in thousands) Average Interest Average Average Interest Average
Balance Yield/Cost Balance Yield/Cost
-----------------------------------------------------------------------------------------------------------------------
ASSETS
------
Interest-earning assets:
Mortgage loans, net $1,050,748 $21,222 8.08% $964,618 $19,608 8.13%
Other loans 6,753 146 8.65 7,293 187 10.26
Mortgage-backed securities 232,671 3,763 6.47 261,719 4,579 7.00
Other securities 16,410 248 6.05 16,316 288 7.06
Interest-earning deposits and
federal funds sold 22,196 204 3.68 7,933 148 7.46
------------------------------------ ------------------------------------
Total interest-earning assets 1,328,778 25,583 7.70 1,257,879 24,810 7.89
------------------------ -------------------------
Non-interest earning assets 87,173 58,900
------------ ------------
Total assets $1,415,951 $1,316,779
============ ============
LIABILITIES AND EQUITY
----------------------
Interest-bearing liabilities:
Passbook accounts $189,297 957 2.02 $188,285 979 2.08
NOW accounts 30,776 133 1.73 27,959 132 1.89
Money market accounts 83,814 746 3.56 43,572 372 3.42
Certificate of deposit accounts 417,736 5,654 5.41 391,879 5,566 5.68
Mortgagors' escrow deposits 11,940 17 0.57 11,908 28 0.94
Borrowed funds 510,600 7,535 5.90 499,280 7,786 6.24
------------------------------------- -------------------------------------
Total interest-bearing
liabilities 1,244,163 15,042 4.84 1,162,883 14,863 5.11
------------------------- -------------------------
Other liabilities 40,667 34,672
------------ ------------
Total liabilities 1,284,830 1,197,555
Equity 131,121 119,224
------------ ------------
Total liabilities and equity $1,415,951 $1,316,779
============ ============
Net interest income/Interest rate spread $10,541 2.86% $9,947 2.78%
========================= =========================
Net interest-earning assets /
Net interest margin $84,615 3.17% $94,996 3.16%
============ ============= ============ ============
Ratio of interest-earning assets to
interest-bearing liabilities 1.07X 1.08X
============= ============
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the nine months ended September 30,
-----------------------------------------------------------------------------
2001 2000
------------------------------------- -------------------------------------
(Dollars in thousands) Average Interest Average Average Interest Average
Balance Yield/Cost Balance Yield/Cost
-----------------------------------------------------------------------------------------------------------------------
ASSETS
------
Interest-earning assets:
Mortgage loans, net $1,020,475 $62,328 8.14% $923,979 $56,210 8.11%
Other loans 6,272 422 8.97 6,548 504 10.26
Mortgage-backed securities 225,642 11,214 6.63 270,261 14,194 7.00
Other securities 16,218 787 6.47 16,317 863 7.05
Interest-earning deposits and
federal funds sold 31,209 1,110 4.74 8,958 468 6.97
------------------------------------- -------------------------------------
Total interest-earning assets 1,299,816 75,861 7.78 1,226,063 72,239 7.86
------------------------- -------------------------
Non-interest earning assets 86,796 54,237
------------ ------------
Total assets $1,386,612 $1,280,300
============ ============
LIABILITIES AND EQUITY
----------------------
Interest-bearing liabilities:
Passbook accounts $187,503 2,872 2.04 $190,906 2,959 2.07
NOW accounts 30,371 418 1.84 27,649 393 1.90
Money market accounts 64,476 1,708 3.53 42,906 1,077 3.35
Certificate of deposit accounts 413,414 17,376 5.60 381,362 15,716 5.49
Mortgagors' escrow deposits 13,157 50 0.51 13,548 64 0.63
Borrowed funds 506,796 22,777 5.99 472,063 21,740 6.14
------------------------------------- -------------------------------------
Total interest-bearing
liabilities 1,215,717 45,201 4.96 1,128,434 41,949 4.96
------------------------- -------------------------
Other liabilities 42,240 34,573
------------ ------------
Total liabilities 1,257,957 1,163,007
Equity 128,655 117,293
------------ ------------
Total liabilities and equity $1,386,612 $1,280,300
============ ============
Net interest income/Interest rate spread $30,660 2.82% $30,290 2.90%
========================= =========================
Net interest-earning assets /
Net interest margin $84,099 3.15% $97,629 3.29%
============ ============= ============ ============
Ratio of interest-earning assets to
interest-bearing liabilities 1.07X 1.09X
============= ============
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Nine Months Ended
--------------------------------------
(In thousands) September 30, 2001 September 30, 2000
--------------------------------------------------------------------------------
MORTGAGE LOANS
--------------
At beginning of period $985,953 $876,984
Mortgage loans originated:
One-to-four family 66,588 65,107
Cooperative 136 185
Multi-family real estate 45,107 46,408
Commercial real estate 50,804 33,368
Construction 4,555 4,504
------------------ ------------------
Total mortgage loans originated 167,190 149,572
------------------ ------------------
Acquired loans:
Loans purchased 876 15,508
------------------ ------------------
Total acquired loans 876 15,508
------------------ ------------------
Less:
Principal and other reductions 87,121 65,498
Mortgage loan foreclosures 47 226
------------------ ------------------
At end of period $1,066,851 $976,340
================== ==================
OTHER LOANS
-----------
At beginning of period $6,548 $5,748
Other loans originated:
Small Business Administration 2,568 2,228
Small business loans 438 690
Other loans 1,232 1,461
------------------ ------------------
Total other loans originated 4,238 4,379
------------------ ------------------
Less:
Sales 1,348 767
Principal and other reductions 2,996 2,659
------------------ ------------------
At end of period $6,442 $6,701
================== ==================
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands) September 30, 2001 December 31, 2000
--------------------------------------------------------------------------------------------------------------------
Non-accrual mortgage loans $2,480 $1,492
Other non-accrual loans 123 126
-------------- --------------
Total non-accrual loans 2,603 1,618
Mortgage loans 90 days or more delinquent
and still accruing -- --
Other loans 90 days or more delinquent
and still accruing -- --
-------------- --------------
Total non-performing loans 2,603 1,618
Real estate owned (foreclosed real estate) -- 44
-------------- --------------
Total non-performing assets $2,603 $1,662
============== ==============
Non-performing loans to gross loans 0.24% 0.16%
Non-performing assets to total assets 0.18% 0.12%
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Nine Months Ended
---------------------------------------
(Dollars in thousands) September 30, 2001 September 30, 2000
-------------------------------------------------------------------------------------------
Balance at beginning of period $6,721 $6,818
Provision for loan losses -- --
Loans charged-off:
One-to-four family 1 3
Co-operative -- --
Multi-family 2 --
Commercial -- --
Construction -- --
Other 130 103
---------------- ---------------
Total loans charged-off 133 106
---------------- ---------------
Recoveries:
Mortgage loans 6 --
Other loans 7 --
---------------- ---------------
Total recoveries 13 --
---------------- ---------------
Balance at end of period $6,601 $6,712
================ ===============
Ratio of net charge-offs during the year to
average loans outstanding during the period 0.01% 0.01%
Ratio of allowance for loan losses to
loans at end of period 0.62% 0.68%
Ratio of allowance for loan losses to non-performing
assets at end of period 253.59% 475.41%
Ratio of allowance for loan losses to non-performing
loans at end of period 253.59% 570.61%
SIGNATURES
Flushing Financial Corporation,
Dated: November 1, 2001 By: /s/ Michael J. Hegarty
--------------------------- -------------------------------------
Michael J. Hegarty
President and Chief Executive Officer
Dated: November 1, 2001 By: /s/ Monica C. Passick
--------------------------- -------------------------------------
Monica C. Passick
Senior Vice President, Treasurer and
Chief Financial Officer