FLUSHING SAVINGS BANK, FSB
401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

FINANCIAL STATEMENTS

As of December 31, 2001 and 2000 and
for the year ended December 31, 2001
and Supplemental Schedule

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Index

                                                                         Page(s)

Report of Independent Accountants                                             2

Financial statements:
      Statements of net assets available for plan benefits
         as of December 31, 2001 and 2000                                     3
      Statements of changes in net assets available for benefits
         for the year ended December 31, 2001                                 4

      Notes to financial statements                                       5 - 8

Supplemental schedule*:
      Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
         as of December 31, 2001                                              9

* Other schedules requiredby 29 CFR 2520.103-9 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 ('ERISA') have been omitted because they are not applicable.

PricewaterhouseCoopers

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York NY 10036
Telephone (646) 471 4000
Facsimile (813) 286 6000

Report of Independent Accountants

To the Directors' Examining Committee and
Benefits Committee of Flushing Financial Corporation

In our opinion, the accompanying statements of net assets available for plan benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Flushing Savings Bank, FSB 401(k) Savings Plan in RSI Retirement Trust (the “Plan”) at December 31, 2001 and 2000, and the changes in net assets available for benefits for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of Assets Held for Investment Purposes is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP
October 4, 2002

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Statements of Net Assets Available for Plan Benefits

As of December 31, 2001 and 2000

                                                December 31,     December 31,
                                                    2001            2000
                                             ----------------- -----------------


Assets:


     Investments at fair value (Note 3)            $5,751,582        $5,120,565
     Participant loans                                166,499           164,345
                                             ----------------- -----------------

        Total assets                                5,918,081         5,284,910
                                             ----------------- -----------------


Liabilities:

  Benefits payable                                        327               332
  Other liabilities                                        --            15,648
                                             ----------------- -----------------

        Total liabilities                                 327            15,980
                                             ----------------- -----------------

          Net Assets Available
              for Plan Benefits                    $5,917,754        $5,268,930
                                             ----------------- -----------------

The accompanying notes are an integral part of these financial statements.

3

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Statement of Changes in Net Assets Available for Plan Benefits

For the year ended December 31, 2001

Additions:

         Net appreciation in the fair value of investment                                             $  463,189

         Contributions:
         Employer, net of forfeitures                                                                    140,942
         Participants                                                                                    346,094
                                                                                                 ----------------

         Total additions                                                                                 950,225

Deductions:

         Distributions to participants                                                                   301,074
         Benefits payable                                                                                    327
                                                                                                 ----------------

         Net increase in Net Assets Available for Plan Benefits                                          648,824

         Net Assets Available for Plan Benefits - December 31, 2000                                    5,268,930
                                                                                                 ----------------

         Net Assets Available for Plan Benefits - December 31, 2001                                   $5,917,754
                                                                                                 ----------------

The accompanying notes are an integral part of these financial statements.

4

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Notes to Financial Statements

1. Description of Plan:

The following description of Flushing Savings Bank, FSB 401(k) Savings Plan in RSI Retirement Trust (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

            a. General:

The Plan is a tax-deferred savings plan which began on September 1, 1987, and covers all salaried employees of Flushing Savings Bank, FSB (the “Bank”) who have completed one year of service and are twenty-one years of age or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

            b. Contributions:

Participant contributions can be no less than 2% nor greater than 10% of their base compensation for each plan year and cannot exceed $10,500 annually for the plan year ended December 31, 2001 adjusted as prescribed under the Internal Revenue Code. The Bank will match 50% of each participant’s basic contributions up to a maximum of 3% of the participant’s base compensation. Of the 50% match, one half of the match will be invested into the Flushing Financial Corporation Common Stock Fund. The remaining half of the match will be invested into corresponding participant directed investment accounts. Currently, contributions to the Plan are not subject to Federal, state, or local income taxes until withdrawn from the Plan. Participant forfeitures serve to reduce the contribution due from the Bank. Participant’s may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans.

            c. Participant accounts:

Each participant’s account is credited with the participant’s contributions and the Bank’s matching contributions. The plan assets are segregated into eight investment accounts: Core Equity Fund, Emerging Growth Equity Fund, Value Equity Fund, Intermediate-Term Bond Fund, Actively Managed Bond Fund, Short-Term Investment Fund, Retirement System Group Common Stock and Flushing Financial Corporation Common Stock Fund. The assets of the Flushing Financial Corporation Common Stock Fund are held by HSBC Bank USA. The other plan assets are held by the RSI Retirement Trust.

Certain assets are not allocated to the above investment accounts. Those unallocated amounts represent contributions pending allocation to the designed investment accounts. In accordance with the provisions of the Plan, net assets are to be valued from time to time, but not less often than monthly, and the increase or decrease in such value since the last valuation date is allocated among the participants’ accounts so as to preserve each participant’s beneficial interest in the Plan.

            d. Vesting:

Participants are immediately 100 percent vested in their salary deferral contributions plus earnings thereon. Vesting of employer contributions on behalf of each participant is based on continuous years of service. A participant is 100 percent vested after six years of credited service. At December 31, 2001, forfeited nonvested accounts totaled $805, which will be used to reduce future employer contributions.

Continued

5

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Notes to Financial Statements, continued

            e. Investment options:

Upon enrollment in the Plan, a participant may direct employee contributions in one percent increments into the eight investment accounts. Thereafter, a participant may direct investment changes in their accounts not more than once per calendar quarter.

            f. Payment of benefits:

Upon termination of service, a participant is entitled to receive a lump sum or, in certain circumstances, quarterly, semi-annual, or annual installments, equal to the value of his or her account to the extent such funds are vested.

            g. Voting rights:

With respect to the Flushing Financial Corporation Common Stock Fund, each participant is entitled to exercise voting rights attributable to the shares allocated to his or her account and is notified by the Trustee prior to the time that such rights are to be exercised. With respect to shares of stock credited to participant accounts as to which the Trustee did not receive timely voting instructions and shares of stock not credited to participant’s account, the Trustee shall vote all such shares of stock in the same proportion as were voted shares as to which participants provided timely instructions. The shares held in the Retirement System Group Common Stock Fund are voted at the discretion of the Plan Sponsor. For the other stock funds, the shares are voted at the discretion of the Plan Trustee.

            h. Loans to participants:

Loans are made available to all participants on a uniform and nondiscriminatory basis. All loans must be adequately collateralized and amortized over a period not to exceed five years unless the loan is to purchase the principle residence of a participant, in which case, the term cannot exceed ten years. Loans must bear a reasonable rate of interest (currently prime rounded to the nearest one quarter of one percent). Loans are limited by the Internal Revenue Code Section 72(p) and may not exceed the lesser of (i) 50% of the net value of a participant’s vested account balance or (ii) $50,000 reduced by the largest outstanding loan balance in the Plan during the preceding 12 months. At December 31, 2001, outstanding loans bore interest rates in the range of 5.5% to 9.5%.

2. Summary of Significant Accounting Policies:

            a. Investment Valuation:

The Plan’s investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices which represent the net asset value of shares held by the Plan at year-end. Loan receivable from participants are valued at cost, which approximates fair value.

The Plan presents in the statement of changes in net assets available for plan benefits the net appreciation (depreciation) in the fair value of its funds and common stock, which consists of the realized gains or losses, unrealized appreciation (depreciation) and dividend or interest income on securities held by those funds. Dividend and interest income on investments held by the funds are reinvested by each fund.

Continued

6

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Notes to Financial Statements, continued

            b. Expenses:

The ordinary administrative expenses of the Plan, including compensation of the Trustee and other administrative expenses of the Trustee, are paid from the Plan unless paid by the Bank at its discretion. For the year ended December 31, 2001, the Bank elected to pay the expenses of the Plan.

            c. Other:

Interest income on loans is recorded as earned on an accrual basis.

            d. Payment of benefits:

Benefit payments to participants are recorded upon distribution.

            e. Estimates:

The preparation of the Plan’s financial statements in conformity with generally accepted accounting principles requires the Plan Administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements, the changes in net assets available for benefits during the period, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

            f. Risks and uncertainties:

The Plan invests in six RSI Retirement Trust Funds, one equity fund, which contains an HSBC Bank short-term investment fund, and one equity security. These investments are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities in which these funds may invest, and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported in the Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits.

3. Investments

The following presents investments that represent five percent or more of the Plan’s net assets.

                                                                                       December 31,         December 31,
                                                                                             2001                 2000
                                                                                       -----------------    -----------------

             Core Equity Fund, 14,182.822 and 14,669.699 shares, respectively                $1,260,711           $1,585,501
             Emerging Growth Equity Fund, 5,898.374 and 6,190.777
                shares, respectively                                                            525,191              670,461
             Value Equity Fund, 7,509.716 and 7,700.862 shares, respectively                    633,895              705,322
             Short Term Investment Fund, 14,816.939 and 12,885.213 shares,
                Respectively                                                                    385,389              322,001
             Flushing Financial Corporation Common Stock Fund, 144,065
                and 87,297 shares, respectively                                               2,564,357            1,577,191

Continued

7

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Notes to Financial Statements, continued

During 2001, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $463,189 as follows:

            Flushing Financial Corporation Common Stock Fund          $ 861,102
            Value Equity Fund                                          (53,022)
            Short-term Investment Fund                                   17,266
            Actively Managed Bond Fund                                   15,834
            Intermediate-term Bond Fund                                   6,612
            Retirement System Group Inc. Common Stock                        26
            Emerging Growth Equity Fund                                (113,041)
            Core Equity Fund                                           (271,588)
                                                               -----------------
            Total appreciation                                         $463,189
                                                               -----------------

4. Plan Termination:

Although it has not expressed any intent to do so, the Bank specifically reserves the right, at any time, to terminate the Plan or to amend, in whole or in part, any or all of the provisions of the Plan, subject to the provisions of ERISA and approval of the Directors. In the event of termination or partial termination of the Plan or upon complete discontinuance of contributions under the Plan, the accounts of each affected participant shall become 100% vested and fully distributable, in accordance with the Internal Revenue Code and all income tax regulations promulgated thereunder.

5. Federal Tax Status:

The Internal Revenue Service has determined and informed the Company by a signed letter dated April 12, 2002 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. The Plan has not been amended since receiving the determination letter.

6. Related-Party Transactions

Plan investments are shares of mutual funds managed by RSI Retirement Trust, which is also the Trustee of the Plan.

8

FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST

Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes

As of December 31, 2001

    Number of                                                                                               Market
     Units or                                                                                             Value Per
      Shares                Description of Investment               Cost*          Fair Value             Unit/Share
- -------------------    -------------------------------------    ---------------    ----------------    -----------------

        14,182.822     Core Equity Fund                              $ 711,836         $ 1,260,711               $88.89

         5,898.374     Emerging Growth Equity Fund                     474,347             525,191                89.04

         7,509.716     Value Equity Fund                               571,114             633,895                84.41

        14,816.939     Short-Term Investment Fund                      384,944             385,389                26.01

         4,164.031     Actively Managed Bond Fund                      183,634             189,172                45.43

         2,427.373     Intermediate-Term Bond Fund                      96,537              98,648                40.64

           417.386     Retirement System Group, Inc.                     2,049               2,475                 5.93

        --             Loans to participants**                         166,499             166,499                   --

       144,065.000     Flushing Financial Corporation                1,212,210           2,656,101                17.80
                            Stock Fund***
                                                                ---------------    ----------------
                                      Total                        $ 3,803,170         $ 5,918,081
                                                                ---------------    ----------------

* Represents the Plan's percentage of each fund's historical cost.

**Loans bear a rate of interest of prime rounded to the nearest one quarter of one percent. Interest rate range of 5.5% to 9.5% for all outstanding loans to participants as of December 31, 2001

*** Flushing Financial Corporation Stock Fund includes $91,744 in cash equivalents. All of the funds shown above are managed by RSI Retirement Trust and the common stock represents ownership in Retirement System Group Inc. and Flushing Financial Corporation

9

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