Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10. Income Taxes

Flushing Financial Corporation files consolidated Federal and combined New York State and New York City income tax returns with its subsidiaries, with the exception of the trusts, which file separate Federal income tax returns as trusts, and FPFC, which files a separate Federal income tax return as a real estate investment trust. The Company remains subject to examination for its Federal and New York State income tax returns for the years ending on or after December 31, 2010 and for its New York City income tax returns for years ending on or after December 31, 2011. During the three years ended December 31, 2013, the Company did not recognize any material amounts of interest or penalties on income taxes.

The Company’s annual tax liability for New York State and New York City was the greater of a tax based on “entire net income,” “alternative entire net income,” “taxable assets” or a minimum tax.  For the years ended December 31, 2013, 2012 and 2011, the Company’s state and city tax were based on “entire net income.”

Income tax provisions are summarized as follows for the years ended December 31:

	2013			2012			2011
	(In thousands)
Federal:
Current	$	17,808		$	17,330		$	17,314
Deferred		(464	)		(590	)		435
Total federal tax provision		17,344			16,740			17,749
State and Local:
Current		5,828			5,321			5,470
Deferred		(216	)		(214	)		250
Total state and local tax provision		5,612			5,107			5,720
Total income tax provision	$	22,956		$	21,847		$	23,469

The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 37.8%, 38.9% and 39.9% for the years ended December 31, 2013, 2012 and 2011, respectively. The effective rates differ from the statutory federal income tax rate as follows for the years ended December 31:

	2013					2012					2011
	(Dollars in thousands)
Taxes at federal statutory rate	$	21,248		35.0	%	$	19,662		35.0	%	$	20,586		35.0	%
Increase (reduction) in taxes resulting from:
State and local income tax, net of Federal income tax benefit		3,648		6.0			3,320		5.9			3,718		6.3
Other		(1,940	)	(3.2	)		(1,135	)	(2.0	)		(835	)	(1.4	)
Taxes at effective rate	$	22,956		37.8	%	$	21,847		38.9	%	$	23,469		39.9	%

The components of the income taxes attributable to income from operations and changes in equity are as follows for the years ended December 31:

	2013			2012			2011
	(In thousands)
Income from operations	$	22,956		$	21,847		$	23,469
Equity:
Change in fair value of securities available for sale		(21,309	)		5,577			8,398
Current year actuarial gains (losses) of postretirement plans		2,527			(340	)		(1,932	)
Amortization of net actuarial losses and prior service credits		521			436			223
Compensation expense for tax purposes in (excess) or less than that recognized for financial reporting purposes		(443	)		303			(292	)
Total income taxes	$	4,252		$	27,823		$	29,866

The components of the net deferred tax assets (liabilities) are as follows at December 31:

	2013		2012
	(In thousands)
Deferred tax asset:
Postretirement benefits	$	4,880	$	4,114
Allowance for loan losses		13,895		13,592
Stock based compensation		2,322		2,373
Depreciation		1,400		1,212
Unrealized loss on securities available for sale		6,612		-
Fair value adjustment on financial assets carried at fair value		2,470		3,152
Other-than-temporary impairment charges		1,584		2,700
Adjustment required to recognize funded status of postretirement pension plans		2,218		5,266
Other		2,336		1,991
Deferred tax asset		37,717		34,400
Deferred tax liability:
Core deposit intangibles		-		205
Valuation differences resulting from acquired assets and liabilities		2,805		2,849
Fair value adjustment on financial liabilities carried at fair value		14,910		15,781
Unrealized gains on securities available for sale		-		14,697
Other		1,898		1,705
Deferred tax liability		19,613		35,237
Net deferred tax (liability) asset included in other (liabilities) assets	$	18,104	$	(837	)

The Company has recorded a deferred tax asset of $37.7 million. This represents the anticipated net federal, state and local tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported taxable income for federal, state, and local tax purposes in each of the past three years. In management’s opinion, in view of the Company’s previous, current and projected future earnings trend, the probability that some of the Company’s $19.6 million deferred tax liability can be used to offset a portion of the deferred tax asset, as well as certain tax planning strategies, it is more likely than not that the deferred tax asset will be fully realized.  Accordingly, no valuation allowance was deemed necessary for the deferred tax asset at December 31, 2013 and 2012.

The Company does not have uncertain tax positions that are deemed material. The Company’s policy is to recognize interest and penalties on income taxes in operating expenses. During the three years ended December 31, 2013, the Company did not recognize any material amounts of interest or penalties on income taxes.