10-Q 1 sept05-10q.htm FFIC 09/05 10-Q Flushing Financial Corporation September 2005 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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, 2005

 

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.)

 

1979 Marcus Avenue, Suite E140, Lake Success, New York 11042

(Address of principal executive offices)

 

(718) 961-5400

(Registrant's telephone number, including area code)

 

 

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

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). X Yes No

 

The number of shares of the registrant’s Common Stock outstanding as of October 31, 2005 was 19,328,008.

 

 


 

 

TABLE OF CONTENTS

 

 

PAGE

PART I — FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

Consolidated Statements of Financial Condition..............................................................

1

Consolidated Statements of Income 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 ..............................................................................................

 

9

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk........................

22

ITEM 4. Controls and Procedures.....................................................................................

22

PART II — OTHER INFORMATION

 

ITEM 1. Legal Proceedings.................................................................................................

22

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds..........................

22

ITEM 3. Defaults Upon Senior Securities..........................................................................

23

ITEM 4. Submission of Matters to a Vote of Security Holders.......................................

23

ITEM 5. Other Information...............................................................................................

23

ITEM 6. Exhibits..................................................................................................................

24

SIGNATURES......................................................................................................................

25

 

 

 

 

 

 

 

 

 

 

i

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Financial Condition

(Unaudited)

 

 

 

September 30,

 

December 31,

(Dollars in thousands, except per share data)

 

2005

 

2004


ASSETS

 

 

 

 

Cash and due from banks

$

17,431

$

14,661

Securities available for sale:

 

 

 

 

Mortgage-backed securities

 

321,812

 

395,629

Other securities

 

38,430

 

40,116

Loans:

 

 

 

 

Multi-family residential

 

767,289

 

646,922

Commercial real estate

 

388,184

 

334,048

One-to-four family – mixed-use property

 

450,400

 

332,805

One-to-four family – residential

 

139,373

 

151,737

Co-operative apartments

 

2,241

 

3,132

Construction

 

51,648

 

31,460

Small Business Administration

 

7,756

 

5,633

Commercial business and other

 

18,402

 

12,505

Net unamortized premiums and unearned loan fees

 

7,629

 

4,798

Allowance for loan losses

 

(6,459)

 

(6,533)

Net loans

 

1,826,463

 

1,516,507

Interest and dividends receivable

 

10,092

 

8,868

Bank premises and equipment, net

 

7,277

 

7,558

Federal Home Loan Bank of New York stock

 

30,960

 

22,261

Bank owned life insurance

 

26,251

 

25,399

Goodwill

 

3,905

 

3,905

Other assets

 

23,409

 

23,140

Total assets

$

2,306,030

$

2,058,044


LIABILITIES

 

 

 

 

Due to depositors:

 

 

 

 

Non-interest bearing

$

56,150

$

49,540

Interest-bearing:

 

 

 

 

Certificate of deposit accounts

 

767,573

 

703,314

Passbook savings accounts

 

263,454

 

216,772

Money market accounts

 

203,961

 

258,235

NOW accounts

 

40,335

 

48,463

Total interest-bearing deposits

 

1,275,323

 

1,226,784

Mortgagors' escrow deposits

 

27,052

 

16,473

Borrowed funds

 

758,717

 

584,736

Other liabilities

 

17,366

 

19,858

Total liabilities

 

2,134,608

 

1,897,391


STOCKHOLDERS' EQUITY

 

 

 

 

Preferred stock ($0.01 par value; 5,000,000 shares

 

 

 

 

authorized; none issued)

 

-

 

-

Common stock ($0.01 par value; 40,000,000 shares

 

 

 

 

authorized; 19,456,696 shares issued at September 30,

 

 

 

 

2005 and December 31, 2004; 19,336,708 shares

 

 

 

 

and 19,232,248 shares outstanding at September 30,

 

 

 

 

2005 and December 31, 2004, respectively)

 

195

 

195

Additional paid-in capital

 

38,307

 

37,187

Treasury stock (119,988 shares and 224,448 shares at

 

 

 

 

September 30, 2005 and December 31, 2004, respectively)

 

(2,116)

 

(3,893)

Unearned compensation

 

(4,401)

 

(5,117)

Retained earnings

 

143,719

 

133,290

Accumulated other comprehensive loss, net of taxes

 

(4,282)

 

(1,009)

Total stockholders' equity

 

171,422

 

160,653

Total liabilities and stockholders' equity

$

2,306,030

$

2,058,044

 

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

-1-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

 

 

 

For the three months

 

For the nine months

 

 

ended September 30,

 

ended September 30,

(Dollars in thousands, except per share data)

 

2005

 

2004

 

2005

 

2004

Interest and dividend income

 

 

 

 

 

 

 

 

Interest and fees on loans

$

30,102

$

25,077

$

84,603

$

72,923

Interest and dividends on securities:

 

 

 

 

 

 

 

 

Interest

 

3,888

 

4,800

 

12,410

 

15,385

Dividends

 

82

 

84

 

244

 

256

Other interest income

 

26

 

61

 

43

 

124

Total interest and dividend income

 

34,098

 

30,022

 

97,300

 

88,688

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

Deposits

 

8,873

 

7,247

 

24,644

 

21,194

Other interest expense

 

8,086

 

5,903

 

21,482

 

17,350

Total interest expense

 

16,959

 

13,150

 

46,126

 

38,544

Net interest income

 

17,139

 

16,872

 

51,174

 

50,144

Provision for loan losses

 

-

 

-

 

-

 

-

Net interest income after provision for loan losses

 

17,139

 

16,872

 

51,174

 

50,144

 

 

 

 

 

 

 

 

 

Non-interest income

 

 

 

 

 

 

 

 

Loan fee income

 

484

 

533

 

1,621

 

1,547

Banking services fee income

 

350

 

378

 

1,086

 

1,206

Net gain on sale of loans held for sale

 

400

 

47

 

542

 

227

Net gain on sale of loans

 

-

 

-

 

19

 

-

Net gain (loss) on sale of securities

 

-

 

5

 

-

 

(11)

Federal Home Loan Bank of New York stock dividends

 

336

 

125

 

768

 

314

Bank owned life insurance

 

288

 

294

 

852

 

874

Other income

 

231

 

146

 

577

 

462

Total non-interest income

 

2,089

 

1,528

 

5,465

 

4,619

 

 

 

 

 

 

 

 

 

Non-interest expense

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,384

 

4,114

 

13,075

 

13,620

Occupancy and equipment

 

996

 

931

 

2,970

 

2,575

Professional services

 

1,441

 

791

 

3,220

 

2,491

Data processing

 

563

 

465

 

1,632

 

1,468

Depreciation and amortization

 

379

 

371

 

1,180

 

1,096

Other operating expenses

 

1,670

 

1,470

 

5,319

 

4,690

Total non-interest expense

 

9,433

 

8,142

 

27,396

 

25,940

Income before income taxes

 

9,795

 

10,258

 

29,243

 

28,823

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

Federal

 

3,020

 

2,969

 

9,005

 

8,580

State and local

 

800

 

1,032

 

2,400

 

2,661

Total taxes

 

3,820

 

4,001

 

11,405

 

11,241

Net income

$

5,975

$

6,257

$

17,838

$

17,582

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

Unrealized (losses) gains on securities:

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

$

(2,487)

$

3,613

$

(3,273)

$

(1,505)

Less: reclassification adjustments for (gains)losses included in income

-

 

(3)

 

-

 

6

Net unrealized holding gains (losses)

 

(2,487)

 

3,610

 

(3,273)

 

(1,499)

Comprehensive net income

$

3,488

$

9,867

$

14,565

$

16,083

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.34

$

0.36

$

1.02

$

1.01

Diluted earnings per share

$

0.33

$

0.35

$

0.99

$

0.97

Dividends per share

$

0.10

$

0.09

$

0.30

$

0.26

 

 

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

 

-2-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the nine months

 

 

ended September 30,

(In thousands)

 

2005

 

2004

OPERATING ACTIVITIES

 

 

 

 

Net income

$

17,838

$

17,582

Adjustments to reconcile net income to net cash provided by

 

 

 

 

operating activities:

 

 

 

 

Depreciation and amortization of bank premises and equipment

 

1,180

 

1,096

Net gain on sale of loans held for sale

 

(542)

 

(227)

Net gain on sales of loans

 

(19)

 

-

Net loss on sale of securities

 

-

 

11

Amortization of unearned premium, net of accretion of unearned discount

 

1,309

 

1,610

Deferred income tax expense (benefit)

 

1,938

 

(189)

Deferred compensation

 

(2,554)

 

1,138

Origination of loans held for sale

 

(6,141)

 

(4,962)

Proceeds from sale of loans originated for sale

 

6,667

 

5,189

Net decrease in other assets and liabilities

 

(64)

 

(773)

Unearned compensation

 

755

 

2,396

Net cash provided by operating activities

 

20,367

 

22,871

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchases of bank premises and equipment

 

(899)

 

(1,902)

(Purchases) redemptions of Federal Home Loan Bank of New York shares

 

(8,699)

 

2,701

Purchases of securities available for sale

 

(511)

 

(102,186)

Proceeds from sales and calls of securities available for sale

 

30

 

78,822

Proceeds from maturities and prepayments of securities available for sale

 

69,274

 

95,794

Proceeds from sale of non-performing loans

 

3,088

 

1,980

Net originations and repayment of loans

 

(314,087)

 

(193,582)

Proceeds from sale of loans

 

1,030

 

-

Net cash used by investing activities

 

(250,774)

 

(118,373)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Net increase in non-interest bearing deposits

 

6,610

 

7,582

Net increase in interest-bearing deposits

 

48,539

 

99,726

Net increase in mortgagors' escrow deposits

 

10,579

 

9,438

Net proceeds (repayment)of short-term borrowed funds

 

4,000

 

(25,000)

Proceeds from long-term borrowed funds

 

190,000

 

110,000

Repayment of long-term borrowed funds

 

(20,019)

 

(89,018)

Purchases of treasury stock

 

(2,900)

 

(8,360)

Proceeds from issuance of common stock upon exercise of stock options

 

1,622

 

2,484

Cash dividends paid

 

(5,254)

 

(4,554)

Net cash provided by financing activities

 

233,177

 

102,298

Net decrease in cash and cash equivalents

 

2,770

 

6,796

Cash and cash equivalents, beginning of period

 

14,661

 

20,300

Cash and cash equivalents, end of period

$

17,431

$

27,096

 

 

 

 

 

SUPPLEMENTAL CASH FLOW DISCLOSURE

 

 

 

 

Interest paid

$

44,984

$

38,417

Income taxes paid

 

10,433

 

8,835

Non-cash activities:

 

 

 

 

Securities purchased not yet settled

 

-

 

2,800

 

 

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

 

-3-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

 

 

 

For the nine months ended

(Dollars in thousands, except per share data)

 

September 30, 2005

 

 

 

Common Stock

 

 

Balance, beginning of period

$

195

No activity

 

-

Balance, end of period

$

195

 

 

 

Additional Paid-In Capital

 

 

Balance, beginning of period

$

37,187

Award of shares released from Employee Benefit Trust (3,968 common shares)

 

56

Forfeiture of restricted stock awards (1,350 common shares)

 

(2)

Tax benefit from compensation expense in excess of that recognized for

 

 

financial reporting purposes

 

1,066

Balance, end of period

$

38,307

 

 

 

Treasury Stock

 

 

Balance, beginning of period

$

(3,893)

Purchases of common shares outstanding (133,000 common shares)

 

(2,384)

Repurchase of restricted stock awards to satisfy tax obligations

 

 

(28,495 common shares)

 

(516)

Forfeiture of restricted stock awards (1,350 common shares)

 

(15)

Issuance upon exercise of stock options (198,324 common shares)

 

3,479

Shares issued upon vesting of restricted stock unit awards (68,981 common shares)

1,213

Balance, end of period

$

(2,116)

 

 

 

Unearned Compensation

 

 

Balance, beginning of period

$

(5,117)

Restricted stock award expense

 

177

Forfeiture of restricted stock awards (1,350 common shares)

 

17

Release of shares from Employee Benefit Trust (153,429 common shares)

 

522

Balance, end of period

$

(4,401)

 

 

 

Retained Earnings

 

 

Balance, beginning of period

$

133,290

Net income

 

17,838

Cash dividends declared and paid

 

(5,254)

Stock options exercised (198,324 common shares)

 

(1,857)

Shares issued upon vesting of restricted stock unit awards (68,981 common shares)

(298)

Balance, end of period

$

143,719

 

 

 

Accumulated Other Comprehensive Income

 

 

Balance, beginning of period

$

(1,009)

Change in net unrealized loss, net of taxes of approximately $2,429, on

 

 

securities available for sale

 

(3,273)

Balance, end of period

$

(4,282)

 

 

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

-4-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

 

1.

Basis of Presentation

The primary business of Flushing Financial Corporation (the “Holding Company”) is the operation of its wholly-owned subsidiary, Flushing Savings Bank, FSB (the “Bank”). The consolidated financial statements presented in this Form 10-Q include the collective results of the Holding Company and the Bank, but 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 principles in the United States of America (“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 2004 Annual Report on Form 10-K.

 

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

 

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, 2005 and 2004 was computed by dividing net income by the total weighted average number of common shares outstanding, including only the vested portion of restricted stock and restricted stock unit awards. Diluted earnings per share includes the additional dilutive effect of stock options outstanding and the unvested portion of restricted stock and restricted stock unit awards during the period. Earnings per share have been computed based on the following:

 

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

September 30,

 

 

 

September 30,

 

(In thousands, except per share data)

 

2005

 

 

2004

 

 

 

2005

 

 

2004

 

Net income

$

5,975

 

$

6,257

 

 

$

17,838

 

$

17,582

 

Divided by:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

17,581

 

 

17,458

 

 

 

17,516

 

 

17,424

 

Weighted average common stock equivalents

 

453

 

 

593

 

 

 

475

 

 

673

 

Total weighted average common shares and

 

 

 

 

 

 

 

 

 

 

 

 

 

common stock equivalents

 

18,034

 

 

18,051

 

 

 

17,991

 

 

18,097

 

Basic earnings per share

$

0.34

 

$

0.36

 

 

$

1.02

 

$

1.01

 

Diluted earnings per share

$

0.33

 

$

0.35

 

 

$

0.99

 

$

0.97

 

Dividends per share

$

0.10

 

$

0.09

 

 

$

0.30

 

$

0.26

 

Dividend payout ratio

 

29.41

%

 

25.00

%

 

 

29.41

%

 

25.74

%

 

-5-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Common stock equivalents that are antidilutive are not included in the computation of diluted earnings per share. Options to purchase 159,475 shares at an average exercise price of $18.34 were not included in the computation of diluted earnings per share for the three- and nine-month periods ended September 30, 2005. Unvested restricted stock and restricted stock unit awards totaling 96,024 shares at an average market price on date of grant of $18.27, were not included in the computation of diluted earnings per share for the three and nine months ended September 30, 2005. There were no common stock equivalents that were considered antidilutive for the three- and nine-month periods ended September 30, 2004.

 

 

4.

Stock Compensation Plans

 

As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company has chosen to apply APB Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations in accounting for option grants under its 1996 Stock Option Incentive Plan and 2005 Omnibus Incentive Plan. Accordingly, no compensation expense has been recognized for options granted under the Company’s stock option plans. Compensation expense is recognized in the financial statements primarily for restricted stock and restricted stock unit awards. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to all stock-based employee compensation. However, the present impact of SFAS No. 123 may not be representative of the effect on income in future periods because the options generally vest over several years and additional option grants may be made each year. As discussed in Note 5 below, the Company will begin recording an expense in the financial statements in the quarter ending March 31, 2006 for stock options granted.

 

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

(Dollars in thousands, except share data)

 

2005

 

2004

 

 

2005

 

2004

Net income, as reported

$

5,975

$

6,257

 

$

17,838

$

17,582

Add: Stock-based employee compensation expense included in

 

 

 

 

 

 

 

 

 

reported net income, net of related tax effects

 

206

 

139

 

 

741

 

1,158

Deduct: Total stock-based employee compensation expense

 

 

 

 

 

 

 

 

 

determined under fair value based method for all awards,

 

 

 

 

 

 

 

 

 

net of related tax effects

 

(445)

 

(306)

 

 

(1,180)

 

(2,798)

Pro forma net income

$

5,736

$

6,090

 

$

17,399

$

15,942

Basic earnings per share:

 

 

 

 

 

 

 

 

 

As reported

$

0.34

$

0.36

 

$

1.02

$

1.01

Pro forma

$

0.33

$

0.35

 

$

0.99

$

0.91

Diluted earnings per share

 

 

 

 

 

 

 

 

 

As reported

$

0.33

$

0.35

 

$

0.99

$

0.97

Pro forma

$

0.32

$

0.34

 

$

0.97

$

0.88

 

There were no stock option grants awarded in the three-month periods ended September 30, 2005 and 2004.There were stock option grants of 123,725 shares of common stock, at an average exercise price of $17.88, and 201,700 shares of common stock, at an average exercise price of $17.36, granted in the nine-month periods ended September 30, 2005 and 2004, respectively.

 

There were restricted stock unit awards of 3,525 shares, at an average market price on date of grant of $18.60, granted in the three-month period ended September 30, 2005. There was no restricted stock unit awards in the three- month period ended September 30, 2004. There were restricted stock unit grants of 125,200 shares, at an average market price on date of grant of $17.67, and 73,783 shares, at an average market price on date of grant of $16.95, granted in the nine-month periods ended September 30, 2005 and 2004, respectively.

 

-6-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The 2005 Omnibus Incentive Plan, approved at the annual stockholders’ meeting, increased annual grants to each non-employee director to 3,600 restricted stock units, while eliminating grants of stock options for non-employee directors. Prior to the approval of the 2005 Omnibus Incentive Plan, non-employee directors were annually granted 1,687 restricted stock unit awards and 14,850 stock options. This change is expected to provide an expense benefit in future years when we will be required to expense stock option grants.

 

The nine-month period ended September 30, 2005 includes a charge to earnings on an after-tax basis of $0.4 million or $0.02 per diluted share for restricted stock unit awards granted in 2005. The nine-month period ended September 30, 2004, includes a charge to earnings on an after-tax basis of $0.2 million or $0.01 per diluted share for restricted stock unit awards granted in 2004. The nine month period ended September 30, 2004 includes, in addition to the previously mentioned charge, a charge to earnings (recorded during the three months ended March 31, 2004), on an after tax basis, of $0.5 million or $0.03 per diluted share, related to an adjustment of compensation expense for certain restricted stock awards made in prior periods. These charges reflect that certain participants under these plans reached, or were close to reaching, retirement eligibility, at which time such awards fully vest. These amounts are included above in stock-based compensation expense.

 

In addition, the nine-month period ended September 30, 2004 includes, in the deduction for stock-based compensation determined under fair value method, a net after tax charge of $0.4 million, or $0.02 per diluted share, related to certain stock option grants awarded in June 2004. The nine-month period ended September 30, 2004 includes, in the deduction for stock-based compensation determined under the fair value method, in addition to the previously mentioned deduction, a net after tax deduction of $0.8 million, or $0.04 per diluted share, related to an adjustment of compensation expense using the fair value method for stock option grants awarded during prior periods. These deductions reflect that certain participants under these plans reached, or were close to reaching, retirement eligibility, at which time such awards fully vest. For each of the three- and nine-month periods ended September 30, 2005, there was no significant net after tax impact from awards granted in these periods.

 

5. Recent Accounting Pronouncements

 

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” This statement revises FASB Statement No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees” and its related implementation guidance. This statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees. It requires that a public entity measure the cost of employee services received in exchange for an award of an equity instrument based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. The requisite service period is usually the vesting period. The provisions of this statement are effective for the first interim or annual reporting period that begins after June 15, 2005. On April 12, 2005, the U.S. Securities and Exchange Commission issued a release which changed the implementation date to the beginning of the next fiscal year after June 15, 2005. The effect on future earnings as a result of the adoption of this statement will primarily be dependent on the level of future grants of stock options awarded by the Company. While management is unable to determine the actual effect the adoption of this statement will have on its diluted earnings per share, management estimates that the effect on annual diluted earnings per share will be in the range of $0.03 to $0.04 per diluted share.

 

 

 

 

-7-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

 

6.

Pension and Other Postretirement Benefit Plans

 

The following table sets forth the components of net expense for the pension and other postretirement benefit plans.

 

 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

September 30,

(In thousands)

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Employee Pension Plan:

 

 

 

 

 

 

 

 

Service cost

$

146

$

156

$

438

$

466

Interest cost

 

211

 

197

 

633

 

591

Amortization of unrecognized loss

 

40

 

20

 

120

 

61

Amortization of past service liability

 

-

 

(4)

 

-

 

(10)

Expected return on plan assets

 

(309)

 

(292)

 

(927)

 

(875)

Net employee pension expense

$

88

$

77

$

264

$

233

 

 

 

 

 

 

 

 

 

Outside Director Pension Plan:

 

 

 

 

 

 

 

 

Service cost

$

21

$

19

$

63

$

56

Interest cost

 

18

 

12

 

54

 

37

Amortization of unrecognized loss

 

3

 

4

 

9

 

11

Amortization of past service liability

 

37

 

35

 

111

 

106

Net outside director pension expense

$

79

$

70

$

237

$

210

 

 

 

 

 

 

 

 

 

Other Postretirement Benefit Plans:

 

 

 

 

 

 

 

 

Service cost

$

39

$

41

$

117

$

124

Interest cost

 

62

 

54

 

186

 

164

Amortization of unrecognized loss

 

16

 

13

 

48

 

38

Amortization of past service liability

 

(9)

 

(33)

 

(27)

 

(98)

Net other postretirement benefit expense

$

108

$

75

$

324

$

228

 

 

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2004 that it expects to contribute $0.9 million, $0.1 million and $0.2 million to the Employee Pension Plan, Outside Director Pension Plan and Other Post Retirement Benefit Plans, respectively, during the year ended December 31, 2005. As of September 30, 2005, the Company has contributed $976,000 to the Employee Pension Plan, $110,000 to the Outside Director Pension Plan and $110,000 to the Other Postretirement Benefit Plans, for the year ending December 31, 2005. The contribution to the Employee Pension Plan exceeded management’s original estimate. Management does not expect to make additional contributions to the Employee Pension Plan during 2005. As of September 30, 2005, the Company has not revised its expected contributions for the year ending December 31, 2005 for the other two plans.

 

 

 

 

 

 

 

 

-8-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

GENERAL

 

Flushing Financial Corporation, a Delaware corporation (the “Holding Company”), 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 and Nassau County. In the fourth quarter of 2005, the Bank will consolidate two branch offices located in Nassau County. The Bank also plans to open a new branch office in early 2006. 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 the Holding Company 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 (focusing on mixed-use properties - properties that contain both residential dwelling units and commercial units), multi-family residential and commercial real estate mortgage 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. The Company also originates certain other loans, including construction loans, Small Business Administration loans and other small business and consumer 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 and other fees, income earned on Bank Owned Life Insurance, dividends on Federal Home Loan Bank of NY (“FHLB-NY”) stock and net gains 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. However, the Company has not recorded a provision for possible loan losses since 1999. 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.

 

Statements contained in this Quarterly Report relating to plans, strategies, objectives, 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 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 Annual Report on Form 10-K for the year ended December 31, 2004. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

 

 

-9-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2005 AND 2004

 

General. Diluted earnings per share decreased $0.02 or 5.7% to $0.33 for the three months ended September 30, 2005 from $0.35 for the three months ended September 30, 2004. Net income declined $0.3 million, or 4.5%, to $6.0 million for the three months ended September 30, 2005 from $6.3 million for the three months ended September 30, 2004. The third quarter of 2005 includes a charge to earnings of $0.5 million, $0.3 million on an after-tax basis or $0.02 per diluted share, for expenses incurred in connection with the Company’s negotiations to acquire another financial institution. The negotiations were terminated after several months, as the parties were unable to come to an agreement on terms. The return on average assets was 1.06% for the three months ended September 30, 2005, as compared to 1.25% for the three months ended September 30, 2004, while the return on average equity was 14.23% for the three months ended September 30, 2005 and 16.57% for the three months ended September 30, 2004.

 

Interest Income. Total interest and dividend income increased $4.1 million, or 13.6%, to $34.1 million for the three months ended September 30, 2005 from $30.0 million for the three months ended September 30, 2004. The increase in interest income is primarily attributed to the growth in the average balance of interest-earning assets, which increased $246.5 million to $2,160.8 million. The yield on interest-earning assets increased four basis points to 6.31% for the three months ended September 30, 2005 from 6.27% in the three months ended September 30, 2004, which is primarily due to the increase of $358.7 million in the average balance of the loan portfolio to $1,775.6 million, combined with a $95.5 million and $16.8 million decrease in the average balances of the lower-yielding securities portfolio and interest earning deposits and federal funds sold, respectively. However, the yield on the mortgage loan portfolio decreased 31 basis points from the three months ended September 30, 2004 to 6.78% for the three months ended September 30, 2005. This decline reflects the effect of the high refinancing activity that had occurred during the previous three years. The Bank’s existing borrowers had been refinancing their higher costing mortgage loans at the then current lower rates, which has resulted in a decrease in the yield of the mortgage portfolio. This decrease has been partially offset by prepayment penalties that have been collected. In an effort to increase the yield on interest-earning assets, we have shifted funds from the lower-yielding securities portfolio to the higher-yielding mortgage loan portfolio. We continued our focus on the origination of multi-family residential, commercial real estate, and one-to-four family mixed-use property mortgage loans, which allowed us to maintain a higher yield on our loan portfolio than we would have otherwise achieved.

 

Interest Expense. Interest expense increased $3.8 million, or 29.0%, to $17.0 million for the three months ended September 30, 2005 from $13.2 million for the three months ended September 30, 2004, due primarily to the increase of $234.9 million in the average balance of interest-bearing liabilities. This was combined with a 41 basis point increase in the cost of interest-bearing liabilities to 3.35% for the three months ended September 30, 2005 from 2.94% for the three months ended September 30, 2004. The average balance of certificates of deposit increased $82.3 million, while the average balance of borrowed funds increased $151.4 million. In addition, there was a decline in the combined average balances of lower-costing passbook, money market and NOW accounts totaling $6.1 million. The cost of due to depositors and borrowed funds each increased by 36 basis points for the three months ended September 30, 2005 compared to the three months ended September 30, 2004. The increase in the cost of funds is attributed to the increase in the rates for due to depositors and average balances of higher costing certificates of deposit and borrowed funds.

 

Net Interest Income. For the three months ended September 30, 2005, net interest income increased $0.3 million, or 1.6%, to $17.1 million from $16.9 million for the three months ended September 30, 2004. The increase in net interest income is attributed to the growth in the average balance of interest-earning assets, which increased $246.5 million to $2.16 billion, while the net interest spread declined 37 basis points to 2.96% for the quarter ended September 30, 2005, as compared to 3.33% in the same period in 2004. The net interest margin decreased 36 basis points to 3.17% for the three months ended September 30, 2005 from 3.53% for the three months ended September 30, 2004. Excluding prepayment penalty income, the net interest margin would have been 2.95% and 3.21% for the three-month periods ended September 30, 2005 and 2004, respectively.

 

-10-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

Provision for Loan Losses. There was no provision for loan losses for either of the three-month periods ended September 30, 2005 and 2004. In assessing the adequacy of the Company's allowance for loan losses, management considers the Company's historical loss experience, recent trends in losses, collection policies and collection experience, trends in the volume of non-performing loans, changes in the composition and volume of the gross loan portfolio, and local and national economic conditions. In recent years, the Bank has seen a significant improvement in its loss experience. By adherence to its strict underwriting standards the Bank has been able to minimize net losses from impaired loans with net charges offs of $76,000 and $1,000 for the three months ended September 30, 2005 and 2004, respectively. There has also been an improvement in local economic conditions and real estate values in recent years. As a result of these improvements, and despite the growth in the loan portfolio, primarily in multi-family residential, commercial real estate, and one-to-four family mixed-use property mortgage loans, no provision for loan losses was deemed necessary for either of the three-month periods ended September 30, 2005 and 2004.

 

Non-Interest Income. Non-interest income increased $0.6 million, or 36.7%, to $2.1 million for the three months ended September 30, 2005 from $1.5 million for the three months ended September 30, 2004. This was attributed to an increase of $0.4 million in gains on the sale of loans held for sale and $0.2 million in dividends received on FHLB-NY stock.

 

Non-Interest Expense. Non-interest expense was $9.4 million for the three months ended September 30, 2005, an increase of $1.3 million, or 15.9%, from $8.1 million for the three months ended September 30, 2004. The increase from the prior year period is primarily attributed to increases of: $0.3 million in employee salary and benefit expenses; $0.1 million in board of director fees due to the increase in the size of the board of directors and the number of meetings; $0.1 million in advertising costs for campaigns to attract new deposits, $0.1 million in audit and exam fees due to increased compliance requirements of the Sarbanes-Oxley Act and $0.5 million for the previously mentioned expenses incurred in connection with the Company’s terminated negotiations to acquire another financial institution. Management continues to monitor expenditures resulting in efficiency ratios of 49.1 percent and 44.3 percent for three-month periods ended September 30, 2005 and 2004, respectively.

 

Income before Income Taxes. Income before the provision for income taxes decreased $0.5 million, or 4.5%, to $9.8 million for the three months ended September 30, 2005 from $10.3 million for the three months ended September 30, 2004, for the reasons discussed above.

 

Provision for Income Taxes. Income tax expense decreased $0.2 million to $3.8 million for the three months ended September 30, 2005 compared to $4.0 million for the three months ended September 30, 2004. This decrease was due to lower income before income taxes in the three-month period ending September 30, 2005 versus the three- month period ending September 30, 2004. The effective tax rate was 39.0% for each of the three-month periods ended September 30, 2005 and 2004.

 

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2005 AND 2004

 

General. Diluted earnings per share increased 2.1% to $0.99 for the nine months ended September 30, 2005 from $0.97 for the nine months ended September 30, 2004. Net income for the nine months ended September 30, 2005 increased $0.3 million, or 1.5%, to $17.8 million from the $17.6 million reported for the nine months ended September 30, 2004. This increase is primarily the result of the 2004 adjustment of compensation expense for certain of the Company's restricted stock awards and supplemental retirement benefits. This adjustment, which related to prior periods, was a charge to earnings in the first quarter of 2004 of $1.1 million, $0.7 million on an after-tax basis or $0.04 per diluted share. Offsetting this reduction in expenses is a charge in the third quarter of 2005 of $0.5 million, $0.3 million on an after-tax basis or $0.02 per diluted share, for expenses incurred in connection with the Company’s negotiations to acquire another financial institution. The negotiations were terminated after several months, as the parties were unable to come to an agreement on terms. The return on average assets for the nine months ended September 30, 2005 was 1.10%, as compared to 1.18% for the nine months ended September 30, 2004, while the return on average equity for the nine months ended September 30, 2005 was 14.57% compared to 15.67% for the nine months ended September 30, 2004.

 

-11-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

Interest Income. Total interest and dividend income increased $8.6 million, or 9.7%, to $97.3 million for the nine months ended September 30, 2005 from $88.7 million for the nine months ended September 30, 2004. The increase in interest income is primarily attributed to the growth in the average balance of interest-earning assets, which increased $178.8 million to $2,071.1 million. The yield on interest-earning assets was 6.26% for the nine months ended September 30, 2005 and 6.25% for the similar 2004 period. This was due to an increase of $305.6 million in the average balance of the higher-yielding loan portfolio to $1,664.4 million for the nine months ended September 30, 2005 from $1,358.8 million for the nine months ended September 30, 2004, combined with a decline of $111.9 million and $14.9 million in the average balances of the lower-yielding securities portfolio and interest earning deposits and federal funds sold, respectively. The yield on the mortgage loan portfolio declined 38 basis points to 6.78% for the nine months ended September 30, 2005 from 7.16% for the nine months ended September 30, 2004. This decline reflects the effect of the high refinancing activity that had occurred during the previous three years. The Bank’s existing borrowers had been refinancing their higher costing mortgage loans at the current lower rates, which has resulted in a decrease in the yield on the mortgage portfolio. This decrease has been partially offset by prepayment penalties that have been collected. In an effort to increase the yield on interest-earning assets, we have shifted funds from the lower-yielding securities portfolio into the higher-yielding mortgage loan portfolio. We continued our focus on the origination of multi-family residential, commercial real estate, and one-to-four family mixed-use property mortgage loans, which allowed us to maintain a higher yield on our loan portfolio than we would have otherwise achieved.

 

Interest Expense. Interest expense increased $7.6 million, or 19.7%, to $46.1 million for the nine months ended September 30, 2005 from $38.5 million for the nine months ended September 30, 2004, primarily due to an increase of $162.5 million in the average balance of interest-bearing liabilities. This was combined with a 28 basis point rise in the cost of interest-bearing liabilities to 3.17% for the nine months ended September 30, 2005 from 2.89% for the nine months ended September 30, 2004. The average balance of certificates of deposit increased $97.5 million, while the average balance of borrowed funds increased $87.0 million. In addition, there was a decline in the combined average balances of lower-costing passbook, money market and NOW accounts totaling $29.2 million. The cost of due to depositors’ increased 24 basis points and borrowed funds increased 30 basis points in the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004. The increase in the cost of funds is primarily attributed to the increase in the average balances of higher costing certificates of deposit and borrowed funds.

 

Net Interest Income. For the nine months ended September 30, 2005, net interest income increased $1.0 million, or 2.1%, to $51.2 million from $50.1 million for the nine months ended September 30, 2004. The increase in net interest income is attributed to the growth in the average balance of interest-earning assets which increased $178.8 million to $2.07 billion, while the net interest spread declined 27 basis points to 3.09% for the nine months ended September 30, 2005, as compared to 3.36% in the same period in 2004. The net interest margin also decreased 24 basis points to 3.29% for the nine months ended September 30, 2005 from 3.53% for the nine months ended September 30, 2004. Excluding prepayment penalty income, the net interest margin would have been 3.10% and 3.29% for the nine-month periods ended September 30, 2005 and 2004, respectively.

 

Provision for Loan Losses. There was no provision for loan losses for either of the nine-month periods ended September 30, 2005 and 2004. In assessing the adequacy of the Company's allowance for loan losses, management considers the Company's historical loss experience, recent trends in losses, collection policies and collection experience, trends in the volume of non-performing loans, changes in the composition and volume of the gross loan portfolio, and local and national economic conditions. In recent years, the Bank has seen a significant improvement in its loss experience. By adherence to its strict underwriting standards, the Bank has been able to minimize net losses from impaired loans. The Bank had net charge-offs of $74,000 and $7,000 for the nine months ended September 30, 2005 and 2004, respectively. There has also been an improvement in local economic conditions and real estate values in recent years. As a result of these improvements, and despite the growth in the loan portfolio, primarily in multi-family residential, commercial, and one-to-four family mixed-use property mortgage loans, no provision for loan losses was deemed necessary for either of the nine-month periods ended September 30, 2005 and 2004.

 

-12-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

Non-Interest Income. Non-interest income increased $0.8 million to $5.5 million for the nine months ended September 30, 2005, as compared to $4.6 million for same period in 2004. This increase was primarily attributed to an increase of $0.3 million in gains on the sale of loans originated for sale and $0.5 million in dividends received on FHLB-NY stock.

 

Non-Interest Expense. Non-interest expense was $27.4 million for the nine months ended September 30, 2005, an increase of $1.5 million, or 5.6 percent, from $25.9 million for the nine months ended September 30, 2004. The increase from the prior year period is attributed to increases of: $0.4 million in occupancy and equipment and $0.1 million in depreciation primarily due to the relocation of the Bank’s headquarters in the third quarter of 2004; $0.3 million in audit and exam fees related to increased compliance requirements due to the Sarbanes-Oxley Act; $0.5 million for the previously mentioned expenses incurred in connection with the Company’s terminated negotiations to acquire another financial institution; $0.1 million in advertising costs for campaigns to attract new deposits; $0.4 million in employee salary and benefit expenses; $0.3 million for the cost of certain restricted stock unit awards granted in the current period as the participants have no risk of forfeiture; and $0.3 million in board of director fees due to the increase in the size of the board of directors and the number of meetings. The increased cost of restricted stock units in the current period compared to the prior period is due to the increased level of awards to non-employee directors. The 2005 Omnibus Incentive Plan, approved at the annual stockholders meeting, increased annual grants to each non-employee director to 3,600 restricted stock units, while eliminating grants of stock options for non-employee directors. This will provide an expense benefit in future years when we will be required to expense stock option grants. These increases were offset by decreases in salaries and employee benefits and other operating expenses of $0.9 million and $0.2 million, respectively, due to the 2004 adjustment to amortization of compensation expense for certain of the Company’s restricted stock awards and supplemental retirement benefits. Management continues to monitor expenditures resulting in efficiency ratios of 48.4 percent and 47.4 percent for nine-month periods ended September 30, 2005 and 2004, respectively.

 

Income before Income Taxes. Income before the provision for income taxes increased $0.4 million, or 1.5%, to $29.2 million for the nine months ended September 30, 2005 as compared to $28.8 million for the nine months ended September 30, 2004, for the reasons discussed above.

 

Provision For Income Taxes. Income tax expense was $11.4 million for the nine months ended September 30, 2005 an increase of $0.2 million, or 1.5%, compared to $11.2 million for the nine months ended September 30, 2004. This increase is due to the $0.4 million increase in income before income taxes. The effective tax rate was 39.0% for each of the nine-month periods ended September 30, 2005 and 2004.

 

 

 

 

 

 

 

 

 

 

 

-13-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

FINANCIAL CONDITION

 

Assets. Total assets at September 30, 2005 were $2.31 billion, a $248.0 million increase from December 31, 2004. Total loans, net increased $310.0 million during the nine months ended September 30, 2005 to $1.83 billion from $1.52 billion at December 31, 2004. At September 30, 2005, loans in process totaled $189.5 million.

 

The following table shows loan originations and purchases for the period indicated.

 

 

 

For the three months

 

For the nine months

 

 

ended September 30,

 

ended September 30,

(In thousands)

 

2005

 

2004

 

2005

 

2004

Multi-family residential

$

49,183

$

58,053

$

186,027

$

158,058

Commercial real estate

 

24,246

 

22,436

 

80,743

 

71,384

One-to-four family – mixed-use property

 

56,569

 

36,454

 

150,367

 

104,186

One-to-four family – residential

 

3,309

 

6,501

 

10,733

 

14,743

Construction

 

18,997

 

8,846

 

35,351

 

19,163

Co-operative apartments

 

-

 

75

 

-

 

302

Commercial business and other loans

 

7,744

 

3,894

 

20,460

 

11,916

Total

$

160,048

$

136,259

$

483,681

$

379,752

 

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 $2.0 million at September 30, 2005 compared to $0.9 million at December 31, 2004 and $4.5 million at September 30, 2004. Total non-performing assets as a percentage of total assets were 0.09% at September 30, 2005 compared to 0.04% at December 31, 2004 and 0.22% at September 30, 2004. The ratio of allowance for loan losses to total non-performing loans was 318% at September 30, 2005 compared to 717% at December 31, 2004 and 146% at September 30, 2004.

 

During the nine months ended September 30, 2005, mortgage-backed securities decreased $73.8 million to $321.8 million, while other securities decreased $1.7 million to $38.4 million. As funds became available from principal reductions on the securities portfolio during the first nine months of 2005, they have been reinvested in higher yielding loans. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities.

 

Liabilities. Total liabilities increased $237.2 million to $2.13 billion at September 30, 2005 from $1.90 billion at December 31, 2004. During the nine months ended September 30, 2005, due to depositors increased $55.1 million to $1.33 billion, primarily as a result of increased marketing to attract deposits in this highly competitive market. Certificate of deposit accounts increased $64.3 million, while lower-costing deposits decreased by a net amount of $9.1 million. Borrowed funds increased $174.0 million during the nine months ended September 30, 2005 to partially fund the growth in the loan portfolio. Mortgagors’ escrow deposits increased $10.6 million during the nine months ended September 30, 2005.

 

Equity. Total stockholders’ equity increased $10.8 million to $171.4 million at September 30, 2005, from $160.7 million at December 31, 2004. Net income of $17.8 million for the nine months ended September 30, 2005 was partially offset by $2.4 million in treasury shares purchased through the Company’s stock repurchase program, a net after tax decrease of $3.3 million on the market value of securities available for sale, and $5.3 million of cash dividends paid. The exercise of stock options increased stockholders’ equity by $2.5 million, including the income tax benefit realized by the Company upon the exercise of the options. Book value per share was $8.87 at September 30, 2005 compared to $8.35 per share at December 31, 2004 and $8.16 per share at September 30, 2004.

 

 

-14-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

Under its current stock repurchase program, the Company repurchased 133,000 shares during the nine months ended September 30, 2005, at a total cost of $2.4 million, or an average of $17.93 per share. At September 30, 2005, 786,350 shares remain to be repurchased under the current stock repurchase program. Through September 30, 2005, the Company had repurchased approximately 47% of the common shares issued in connection with the Company’s initial public offering at a cost of $111.6 million.

 

Cash flow. During the nine months ended September 30, 2005, funds provided by the Company's operating activities amounted to $20.4 million. These funds, together with $233.2 million provided by financing activities, were utilized to fund net investing activities of $250.8 million. The Company's primary business objective is the origination and purchase of one-to-four family (primarily mixed-use properties), multi-family residential and commercial real estate mortgage loans. During the nine months ended September 30, 2005, the net total of loan originations less loan repayments was $314.1 million. Net borrowings of $174.0 million and $55.1 million of customer deposits were used to fund this activity. Funds were also provided by $69.3 million in maturities and prepayments of securities available for sale. Additional funds of $1.6 million were provided through the exercise of stock options. The Company also used funds of $2.9 million for treasury stock repurchases and $5.3 million for dividend payments during the nine months ended September 30, 2005.

 

INTEREST RATE RISK

 

The consolidated statements of financial position have been prepared in accordance with generally accepted accounting principles in the United States of America, which require 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, 2005. 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.

 

Projected Percentage Change In

 

 

 

Net Interest

Net Portfolio

Net Portfolio

Change in Interest Rate

Income

Value

Value Ratio

-300 Basis points

-0.54

%

4.63

%

9.77

%

-200 Basis points

1.76

 

4.63

 

9.92

 

-100 Basis points

2.46

 

4.20

 

10.03

 

Base interest rate

0.00

 

0.00

 

9.81

 

+100 Basis points

-2.63

 

-6.50

 

9.37

 

+200 Basis points

-4.94

 

-14.05

 

8.81

 

+300 Basis points

-7.87

 

-23.24

 

8.07

 

 

 

 

-15-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

 

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, 2005, 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, 2005.

 

(Dollars in thousands)

 

Amount

 

Percent of Assets

 

 

 

 

 

 

 

Tangible Capital:

 

 

 

 

 

Capital level

$

161,241

 

7.02

%

Requirement

 

34,469

 

1.50

 

Excess

 

126,772

 

5.52

 

 

 

 

 

 

 

Leverage and Core Capital:

 

 

 

 

 

Capital level

$

161,241

 

7.02

%

Requirement

 

68,937

 

3.00

 

Excess

 

92,304

 

4.02

 

 

 

 

 

 

 

Risk-Based Capital:

 

 

 

 

 

Capital level

$

167,701

 

12.00

%

Requirement

 

111,778

 

8.00

 

Excess

 

55,923

 

4.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-16-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

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 sets 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, 2005 and 2004, 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.

 

 

 

For the three months ended September 30,

 

 

 

 

 

2005

 

 

2004

 

 

 

 

Average

 

 

Yield/

 

 

Average

 

 

Yield/

 

 

 

 

Balance

 

Interest

Cost

 

 

Balance

 

Interest

Cost

 

 

Assets

 

(Dollars in thousands)

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans, net (1)

$

1,751,355

$

29,701

6.78

%

$

1,402,672

$

24,868

7.09

%

 

Other loans, net (1)

 

24,283

 

401

6.61

 

 

14,225

 

209

5.88

 

 

Total loans, net

 

1,775,638

 

30,102

6.78

 

 

1,416,897

 

25,077

7.08

 

 

Mortgage-backed securities

 

342,765

 

3,595

4.20

 

 

432,856

 

4,507

4.16

 

 

Other securities

 

38,990

 

375

3.85

 

 

44,390

 

377

3.40

 

 

Total securities

 

381,755

 

3,970

4.16

 

 

477,246

 

4,884

4.09

 

 

Interest-earning deposits and

 

 

 

 

 

 

 

 

 

 

 

 

 

federal funds sold

 

3,410

 

26

3.05

 

 

20,179

 

61

1.21

 

 

Total interest-earning assets

 

2,160,803

 

34,098

6.31

 

 

1,914,322

 

30,022

6.27

 

 

Other assets

 

102,126

 

 

 

 

 

93,082

 

 

 

 

 

Total assets

$

2,262,929

 

 

 

 

$

2,007,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Passbook accounts

$

252,874

 

677

1.07

 

$

219,083

 

275

0.50

 

 

NOW accounts

 

41,713

 

53

0.51

 

 

43,839

 

54

0.49

 

 

Money market accounts

 

224,860

 

1,387

2.47

 

 

262,651

 

1,093

1.66

 

 

Certificate of deposit accounts

 

744,351

 

6,741

3.62

 

 

662,088

 

5,812

3.51

 

 

Total due to depositors

 

1,263,798

 

8,858

2.80

 

 

1,187,661

 

7,234

2.44

 

 

Mortgagors' escrow accounts

 

25,410

 

15

0.24

 

 

18,062

 

13

0.29

 

 

Total deposits

 

1,289,208

 

8,873

2.75

 

 

1,205,723

 

7,247

2.40

 

 

Borrowed funds

 

736,947

 

8,086

4.39

 

 

585,560

 

5,903

4.03

 

 

Total interest-bearing liabilities

 

2,026,155

 

16,959

3.35

 

 

1,791,283

 

13,150

2.94

 

 

Non interest-bearing deposits

 

52,499

 

 

 

 

 

46,616

 

 

 

 

 

Other liabilities

 

16,265

 

 

 

 

 

18,484

 

 

 

 

 

Total liabilities

 

2,094,919

 

 

 

 

 

1,856,383

 

 

 

 

 

Equity

 

168,010

 

 

 

 

 

151,021

 

 

 

 

 

Total liabilities and equity

$

2,262,929

 

 

 

 

$

2,007,404

 

 

 

 

 

Net interest income /

 

 

 

 

 

 

 

 

 

 

 

 

 

net interest rate spread

 

 

$

17,139

2.96

%

 

 

$

16,872

3.33

%

 

Net interest-earning assets /

 

 

 

 

 

 

 

 

 

 

 

 

 

net interest margin

$

134,648

 

 

3.17

%

$

123,039

 

 

3.53

%

 

Ratio of interest-earning assets to

 

 

 

 

 

 

 

 

 

 

 

 

 

interest-bearing liabilities

 

 

 

 

1.07

X

 

 

 

 

1.07

X

 

 

(1)

Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.2 million and $1.6 million for each of the three-month periods ended September 30, 2005 and 2004, respectively.

 

-17-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

AVERAGE BALANCES (continued)

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 sets 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, 2005 and 2004, 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.

 

 

For the nine months ended September 30,

 

2005

 

 

2004

 

Average

 

Yield/

 

 

Average

 

Yield/

 

 

Balance

 

Interest

Cost

 

 

Balance

 

Interest

Cost

 

Assets

 

(Dollars in thousands)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans, net (2)

$

1,642,390

$

83,555

6.78

%

$

1,347,379

$

72,401

7.16

%

Other loans, net (2)

 

22,023

 

1,048

6.34

 

 

11,436

 

522

6.09

 

Total loans, net

 

1,664,413

 

84,603

6.78

 

 

1,358,815

 

72,923

7.16

 

Mortgage-backed securities

 

365,121

 

11,563

4.22

 

 

459,637

 

14,210

4.12

 

Other securities

 

39,337

 

1,091

3.70

 

 

56,755

 

1,431

3.36

 

Total securities

 

404,458

 

12,654

4.17

 

 

516,392

 

15,641

4.04

 

Interest-earning deposits and

 

 

 

 

 

 

 

 

 

 

 

 

federal funds sold

 

2,192

 

43

2.62

 

 

17,092

 

124

0.97

 

Total interest-earning assets

 

2,071,063

 

97,300

6.26

 

 

1,892,299

 

88,688

6.25

 

Other assets

 

100,304

 

 

 

 

 

95,605

 

 

 

 

Total assets

$

2,171,367

 

 

 

 

$

1,987,904

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Passbook accounts

$

230,889

 

1,287

0.74

 

$

218,828

 

819

0.50

 

NOW accounts

 

44,230

 

165

0.50

 

 

43,340

 

162

0.50

 

Money market accounts

 

241,780

 

4,021

2.22

 

 

283,922

 

3,869

1.82

 

Certificate of deposit accounts

 

722,746

 

19,129

3.53

 

 

625,219

 

16,307

3.48

 

Total due to depositors

 

1,239,645

 

24,602

2.65

 

 

1,171,309

 

21,157

2.41

 

Mortgagors' escrow accounts

 

26,617

 

42

0.21

 

 

19,494

 

37

0.25

 

Total deposits

 

1,266,262

 

24,644

2.59

 

 

1,190,803

 

21,194

2.37

 

Borrowed funds

 

671,881

 

21,482

4.26

 

 

584,833

 

17,350

3.96

 

Total interest-bearing liabilities

 

1,938,143

 

46,126

3.17

 

 

1,775,636

 

38,544

2.89

 

Non interest-bearing deposits

 

51,574

 

 

 

 

 

44,317

 

 

 

 

Other liabilities

 

18,356

 

 

 

 

 

18,372

 

 

 

 

Total liabilities

 

2,008,073

 

 

 

 

 

1,838,325

 

 

 

 

Equity

 

163,294

 

 

 

 

 

149,579

 

 

 

 

Total liabilities and equity

$

2,171,367

 

 

 

 

$

1,987,904

 

 

 

 

 

Net interest income /

 

 

 

 

 

 

 

 

 

 

 

 

net interest rate spread

 

 

$

51,174

3.09

%

 

 

$

50,144

3.36

%

 

Net interest-earning assets /

 

 

 

 

 

 

 

 

 

 

 

 

net interest margin

$

132,920

 

 

3.29

%

$

116,663

 

 

3.53

%

 

Ratio of interest-earning assets to

 

 

 

 

 

 

 

 

 

 

 

 

interest-bearing liabilities

 

 

 

 

1.07

X

 

 

 

 

1.07

X

 

(2)

Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $3.1 million and $3.8 million for each of the nine-month periods ended September 30, 2005 and 2004, respectively.

 

 

-18-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

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.

 

 

For the nine months ended September 30,

(In thousands)

 

2005

 

2004


Mortgage Loans

 

 

 

 

 

 

 

 

 

At beginning of period

$

1,500,104

$

1,264,219

 

 

 

 

 

Mortgage loan originated:

 

 

 

 

Multi-family residential

 

186,027

 

158,058

Commercial real estate

 

80,743

 

71,384

One-to-four family – mixed-use property

 

150,367

 

104,186

One-to-four family – residential

 

10,733

 

14,743

Construction

 

35,351

 

19,163

Co-operative apartments

 

-

 

302

Total mortgage loans originated

 

463,221

 

367,836

 

 

 

 

 

Less:

 

 

 

 

Principal and other reductions

 

160,072

 

177,149

Sales

 

4,118

 

5,424

Mortgage loan foreclosures

 

-

 

-

 

 

 

 

 

At end of period

$

1,799,135

$

1,449,482

 

 

 

 

 

Commercial Business and Other Loans

 

 

 

 

 

 

 

 

 

At beginning of period

$

18,138

$

9,825

 

 

 

 

 

Other loans originated:

 

 

 

 

Small Business Administration

 

9,818

 

2,788

Small business

 

9,761

 

7,313

Other

 

881

 

1,815

Total other loans originated

 

20,460

 

11,916

 

 

 

 

 

Less:

 

 

 

 

Principal and other reductions

 

6,299

 

6,622

Sales

 

6,141

 

1,518

 

 

 

 

 

At end of period

$

26,158

$

13,601

 

 

 

 

 

-19-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

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.

 

 

(Dollars in thousands)

 

September 30, 2005

 

 

December 31, 2004

 

 

 

 

 

 

 

 

 

 

Non-accrual mortgage loans

$

1,704

 

$

659

 

Other non-accrual loans

325

 

 

252

 

 

 

Total non-accrual loans

 

2,029

 

 

911

 

 

 

 

 

 

 

 

 

 

Mortgage loans 90 days or more delinquent

 

 

and still accruing

 

-

 

 

-

 

Other loans 90 days or more delinquent

 

 

and still accruing

 

-

 

 

-

 

 

 

Total non-performing loans

 

2,029

 

 

911

 

 

 

 

 

 

 

 

 

 

Real estate owned (foreclosed real estate)

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Total non-performing assets

$

2,029

 

$

911

 

 

 

 

 

 

 

 

 

 

Non-performing loans to gross loans

0.11

%

 

0.06

%

Non-performing loans to total assets

0.09

%

 

0.04

%

 

 

 

 

 

 

 

 

 

 

-20-

 

 


 

PART I – FINANCIAL INFORMATION

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

 

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 allowance for loan losses on a quarterly basis.

 

The following table sets forth the activity in the Bank's allowance for loan losses for the periods indicated.

 

 

 

For the nine months ended September 30,

 

(Dollars in thousands)

 

2005

 

 

2004

 


Balance at beginning of period

$

6,533

 

$

6,553

 

 

 

 

 

 

 

 

Provision for loan losses

 

-

 

 

-

 

 

 

 

 

 

 

 

Loans charged-off:

 

 

 

 

 

 

Multi-family residential

 

-

 

 

-

 

Commercial real estate

 

-

 

 

-

 

One-to-four family – mixed-use property

 

-

 

 

-

 

One-to-four family – residential

 

-

 

 

-

 

Construction

 

-

 

 

-

 

Co-operative apartments

 

-

 

 

-

 

Commercial business and other loans

 

(89)

 

 

(9)

 

Total loans charged-off

 

(89)

 

 

(9)

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

Mortgage loans

 

3

 

 

2

 

Other loans

 

12

 

 

-

 

Total recoveries

 

15

 

 

2

 

 

 

 

 

 

 

 

Net charge-offs

 

(74)

 

 

(7)

 

Balance at end of period

$

6,459

 

$

6,546

 

 

 

 

 

 

 

 

Ratio of net charge-offs during the period to

 

 

 

 

 

 

average loans outstanding during the period

 

-

%

 

-

%

Ratio of allowance for loan losses to loans at end of period

0.35

%

 

0.45

%

Ratio of allowance for loan losses to non-performing

 

 

 

 

 

 

assets at end of period

 

318.27

%

 

145.76

%

Ratio of allowance for loan losses to non-performing

 

 

 

 

 

 

loans at end of period

 

318.27

%

 

145.76

%

 

 

 

-21-

 

 


 

PART I – FINANCIAL INFORMATION

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 4.

CONTROLS AND PROCEDURES

 

The Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2005, the design and operation of these disclosure controls and procedures were effective. During the period covered by this Quarterly Report, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

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.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

The following table sets forth information regarding the shares of common stock repurchased by the Company during the quarter ended September 30, 2005.

 

 

 

 

 

 

 

Maximum

 

 

 

 

 

Total Number of

 

Number of

 

Total

 

 

 

Shares Purchased

 

Shares That May

 

Number

 

 

 

as Part of Publicly

 

Yet Be Purchased

 

of Shares

 

Average Price

 

Announced Plans

 

Under the Plans

Period

Purchased

 

Paid per Share

 

or Programs

 

or Programs

July 1 to July 31, 2005

1,958

$

18.99

 

-

 

786,350

August 1 to August 31, 2005

-

 

-

 

-

 

786,350

September 1 to September 30, 2005

-

 

-

 

-

 

786,350

Total

1,958

$

18.99

 

-

 

 

 

The current common stock repurchase program was approved by the Company’s Board of Directors on August 17, 2004 and authorized the repurchase of 1,000,000 common shares. The repurchase program does not have an expiration date or a maximum dollar amount that may be paid to repurchase the common shares.

 

Amounts shown in the above column titled “Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs” do not reflect shares which may be repurchased from employees to satisfy tax withholding obligations under equity compensation plans. During the quarter ended September 30, 2005, the Company purchased 1,958 common shares from employees, at an average cost of $18.99, to satisfy tax obligations due from the employees upon vesting of restricted stock awards.

 

 

-22-

 

 


 

PART II – OTHER INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

 

 

 

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.

 

Not applicable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-23-

 

 


 

PART II – OTHER INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

 

 

ITEM 6.

EXHIBITS.

 

 

Exhibit No.

Description

 

3.1

Certificate of Incorporation of Flushing Financial Corporation (1)

 

3.2

Certificate of Amendment of Certificate of Incorporation of Flushing Financial
Corporation (3)

 

3.3

Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)

 

3.4

By-Laws of Flushing Financial Corporation (1)

 

4.1

Rights Agreement, dated as of September 17, 1996, between Flushing Financial Corporation and State Street Bank and Trust Company, as Rights Agent (2)

 

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer

 

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer

 

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer

 

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer

 

 

 

(1) Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1,

 

Registration No. 33-96488.

(2) Incorporated by reference to Exhibits filed with Form 8-K filed September 30, 1996.

(3) Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002.

(4) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended

 

September 30, 2002.

 

 

 

 

 

-24-

 

 


 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

SIGNATURES

 

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.

 

 

 

Flushing Financial Corporation,

 

 

 

Dated: November 4, 2005

By: /s/ John R. Buran

 

John R. Buran

 

President and Chief Executive Officer

 

 

 

Dated: November 4, 2005

By: /s/ David W. Fry

 

David W. Fry

 

Senior Vice President, Treasurer and

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-25-

 

 


 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

EXHIBIT INDEX

 

 

Exhibit No.

Description

 

3.1

Certificate of Incorporation of Flushing Financial Corporation (1)

 

3.2

Certificate of Amendment of Certificate of Incorporation of Flushing Financial
Corporation (3)

 

3.3

Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)

 

3.4

By-Laws of Flushing Financial Corporation (1)

 

4.1

Rights Agreement, dated as of September 17, 1996, between Flushing Financial Corporation and State Street Bank and Trust Company, as Rights Agent (2)

 

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer

 

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer

 

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer

 

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer

 

 

 

(1) Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1,

 

Registration No. 33-96488.

(2) Incorporated by reference to Exhibits filed with Form 8-K filed September 30, 1996.

(3) Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002.

(4) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended

 

September 30, 2002.

 

 

 

 

 

 

 

 

-26-