EX-99.1 2 exh_991.htm PRESS RELEASE EdgarFiling

EXHIBIT 99.1

Flushing Financial Corporation Reports 3Q18 Earnings Per Diluted Share of $0.61 an Increase of 27% From 2Q18 and 74% From 3Q17

THIRD QUARTER 20181 HIGHLIGHTS

  • GAAP diluted EPS was $0.61, up 27.1% QoQ and 74.3% YoY
  • Core diluted EPS was $0.54, up 10.2% QoQ and 45.9% YoY
  • Net interest income of $41.5 million, down 2.6% QoQ, and 3.5% YoY
  • Net interest margin was 2.71%, down 5bps QoQ and 19bps YoY
  • GAAP and core ROAE were 12.9% and 11.4%, compared with 10.5% and 10.6%, respectively in 2Q18
  • GAAP and core ROAA were 1.1% and 1.0%, respectively, compared with 0.9% for each in 2Q18
  • Tax benefit of $0.06 per diluted share due to release of previously accrued tax liability

UNIONDALE, N.Y., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq-GS: FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the third quarter ended September 30, 2018.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report earnings per diluted common share of $0.61 for the third quarter of 2018, an increase of 27% and 74% from 2Q18 and 3Q17, respectively, driven by continued strong execution of our strategic objectives and the release of previously accrued tax liability.”

“Our strategic focus of increasing net interest income through emphasizing rate over volume and reducing our liability sensitive position has resulted in net loans growth of 0.9% (non-annualized) for the third quarter. Similar to the prior quarter, we allowed $62 million of participations with another financial institution to repay, as the rates offered during the refinancing process did not meet our rate criteria. Year-to-date, we have allowed approximately $139 million of participations to repay rather than refinance at a rate below our criteria. During the quarter, approximately 70% of our new loans and 40% of our new investment securities were adjustable rate products allowing us to reduce future compression on the net interest margin as spreads are fixed. Additionally, approximately $450 million of forward swaps entered in late 2017 have provided a benefit of 1bp to the quarter’s net interest margin. We expect these swaps to continue to benefit our net interest margin as interest rates rise. These swaps coupled with the extension of the maturity of liabilities has mitigated our liability sensitive position.”  

“The yield on the loan portfolio increased 21bps from the linked quarter and 28bps from the same quarter in 2017 representing successful execution of our strategic objectives. The yield on mortgage loan originations increased 8bps from the linked quarter and 35bps from the same quarter in 2017. The yield on new loan originations decreased 8bps during the quarter primarily due to the initial rate recorded on certain adjustable rate C&I loans, which have an average rate reset of 3 months. Over the past five quarters, C&I loans represent 39% of new loan originations, which are primarily adjustable rate loans. As we have previously disclosed, we have approximately $2 billion of loans repricing through 2020, of which $127 million mortgage loans have repriced up an average of 68bps during the third quarter, further enhancing loan yields. In addition, the pipeline remains strong at $355 million with an average yield of 4.68% compared to $323 million at 4.67% in the linked quarter.”  

“Despite this good news on yields, margin pressure continued to be driven by higher cost of funds. The cost of funds increased 22bps QoQ and 48bps YoY, as the Federal Reserve increased benchmark rates by 100bps since the third quarter of 2017. The competition for deposits this quarter was most acute in the municipal government sector as the cost of NOW and money market accounts increased 39bps and 32bps, respectively. We expect continued competition for deposits and additional compression on the NIM through 2019.”

“Retail deposits increased $106 million QoQ. A prominent feature in the growth of retail deposits is the “Win Flushing” program, which focuses on increasing our deposit market share in the Asian Community of Flushing, Queens. Through the third quarter of 2018, we have captured over $100 million in deposit growth through this program and remain on pace to add $160 million in deposits by the end of 1Q19. Central to the “Win Flushing” program was the conversion of the Flushing branches to the Universal Banker model permitting staff to spend more time with customers. In the 11 branches that have been converted we have experienced an increase of over 120% in transactions processed at ATMs, to almost 60% of all branch transactions, reducing our customer’s reliance on tellers, allowing our branch staff to focus more time on sales opportunities. As previously discussed, we expect to have the remaining branches converted to the Universal Banker model by the end of 2019 and a branch in Chinatown opening in 4Q18.”   

Mr. Buran continued, “As we’ve continued to improve loan yields we have retained our focus on credit quality. Non-performing assets decreased by 30% and, total delinquencies have decreased 17% since December 31, 2017. The allowance for loan losses to gross loans was 0.38% while the allowance for loan losses to non-performing loans improved to 161% from 137% in the linked quarter. The loan-to-value ratio on our non-performing real estate loans at September 30, 2018 remains conservative at 35%. The net recoveries of $89,000 for the quarter reflect the Company’s conservative underwriting and diligence in the collection process.”

The Company retains its focus on preserving strong risk management practices, including conservative underwriting standards and improving yields to achieve improved risk-adjusted returns.

  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 3Q18 had a yield of 4.38%, an increase of 11bps from 4.27% for 2Q18 and an increase of 27bps from 4.12% for 3Q17. We have maintained our asset quality as these loans had an average loan-to-value ratio of 42% and an average debt coverage ratio of 173%.
  • We remain committed to our strategy of focusing on C&I loans, multi-family and commercial real estate loans as in the third quarter, originations and purchases represented 43%, 33%, and 12%, respectively, of all originations, which were made while maintaining conservative loan-to-value and debt coverage ratios, and increasing yield.
  • The average rate of mortgage loan applications in the pipeline totaled 4.68% at September 30, 2018 as compared to  4.04% at September 30, 2017.

Mr. Buran concluded, “Overall, we remain well capitalized and positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute on our strategic objectives.”

Summary of Strategic Objectives

  • Increase core deposits and continue to improve funding mix
  • Manage net interest income by leveraging loan pricing opportunities and portfolio mix
  • Enhance core earnings power by improving scalability and efficiency
  • Manage credit risk
  • Maintain well capitalized levels under all stress test scenarios

Earnings Summary:

Net Interest Income

Net interest income for 3Q18 was $41.5 million, a decrease of $1.5 million, or 3.5% YoY (3Q18 compared to 3Q17) and a decrease of $1.1 million, or 2.6% QoQ (3Q18 compared to 2Q18). During 3Q18 the increase in the cost of funds outpaced the increase in the yield of interest-earning assets.

  • Net interest margin of 2.71%, decreased 19bps YoY and 5bps QoQ
  • Net interest spread of 2.51%, decreased 26bps YoY and 9bps QoQ
  • Net interest income includes prepayment penalty income from loans and securities totaling $1.9 million in 3Q18 compared with $1.6 million in 3Q17 and $1.6 million in 2Q18 and recovered interest from delinquent loans of $1.1 million in 3Q18, compared to $0.3 million in 3Q17 and $0.2 million in 2Q18
  • Excluding prepayment penalty income and recovered interest from nonaccrual loans, the yield on interest-earning assets was 4.08% in 3Q18, an improvement from 3.87% in 3Q17 and 3.98% in 2Q18, and the net interest margin was 2.51% in 3Q18, which decreased from 2.77% in 3Q17 and from 2.64% in 2Q18
  • Average balance of total interest-earning assets of $6,130.4 million, increased $194.3 million, or 3.3%, YoY but decreased $50.8 million, or 0.8%, QoQ, primarily due to our opting to allow lower yielding loans to prepay rather than refinance at rates below our criteria
  • Yield on interest-earning assets of 4.27%, increased 27bps YoY and 17bps QoQ
  • Cost of interest-bearing liabilities of 1.76%, increased 53bps YoY and 26bps QoQ
  • Cost of funds of 1.63%, increased 48bps YoY and 22bps QoQ, driven by increases in rates paid on deposits and short-term borrowings resulting from the recent increases in the Fed Funds rate  

Provision for loan losses

As a result of continued strong credit quality, there was no provision recorded for 3Q18 compared to $3.3 million in 3Q17 and none in 2Q18.

Non-interest Income

Non-interest income for 3Q18 was $5.0 million, an increase of $3.3 million, or 198.3% YoY, and an increase of $1.8 million or 56.4% QoQ.

  • Non-interest income included gains from life insurance proceeds of $2.2 million in 3Q18 and $0.2 million in 3Q17 and net losses from fair value adjustments of $0.2 million in 3Q18, $1.3 million in 3Q17 and $0.3 million in 2Q18
  • Additionally, non-interest income included net gains from the sale of loans of $10,000 in 3Q18, $0.2 million in 3Q17 and $0.4 million in 2Q18
  • Absent all above items, non-interest income was $2.9 million, an increase of $0.3 million YoY, but a decrease of $0.1 million QoQ

Non-interest Expense

Non-interest expense for 3Q18 was $27.2 million, an increase of $1.3 million, or 4.9% YoY, but a decrease of $0.2 million, or 0.6% QoQ.

  • Non-interest expense increased YoY primarily due to increases in salaries and benefits, consulting, legal and depreciation expense due to the growth of the Bank, but decreased $0.2 million QoQ primarily due to reduction in foreclosure expenses
  • The efficiency ratio was 61.3% in 3Q18 compared to 56.5% in 3Q17 and 59.6% in 2Q18

Provision for Income Taxes

The provision for income taxes in 3Q18 was $1.9 million, a decrease of $3.4 million, or 63.9% YoY and a decrease of $2.6 million, or 57.5% QoQ.

  • Pre-tax income increased by $3.8 million, or 24.4% YoY and by $0.8 million, or 4.5% QoQ
  • The effective tax rates were 9.9% in 3Q18, 34.2% in 3Q17 and 24.4% in 2Q18
  • 3Q18 reflects the release of a previously accrued tax liability totaling $1.8 million
  • We anticipate the Company’s effective tax rate to increase to approximately 21% in the fourth quarter of 2018 and approximately 19% for the full year

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,359.8 million reflecting an increase of 0.9% QoQ (not annualized) and 3.9% from December 31, 2017, as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship while emphasizing rate over volume
  • During the quarter, we continued to see an increase in loan satisfactions, which we decided not to refinance, as the interest rate demanded did not fit our strategy of emphasizing rate over volume
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $274.2 million for 3Q18, or 88.8% of loan production
  • Loan pipeline was $355.2 million at September 30, 2018, compared to $417.0 million at September 30, 2017 and $322.9 million at June 30, 2018
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of September 30, 2018 totaled 38.7%

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

  For the three months ended
  September 30, June 30, September 30,
Loan type 2018  2018  2017 
Mortgage loans 4.48% 4.40% 4.13%
Non-mortgage loans 4.50% 4.90% 4.43%
Total loans 4.49% 4.57% 4.25%


Credit Quality:

  • Non-performing loans totaled $12.6 million, a decrease of $5.5 million, or 30.3%, from $18.1 million at December 31, 2017
  • Non-performing assets totaled $12.7 million, a decrease of $5.5 million, or 30.1%, from $18.1 million at December 31, 2017
  • Classified assets totaled $47.7 million, an increase of $13.8 million, or 40.5%, from $34.0 million at December 31, 2017, primarily due to nine business loan relationships being downgraded as they did not meet certain loan covenants; these loans remain current and accruing
  • Loans classified as troubled debt restructured (TDR) totaled $11.4 million, a decrease of $1.8 million, or 13.3%, from $13.2 million at December 31, 2017, primarily due to the sale of one commercial TDR in 2Q18
  • We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 35.1% average loan-to-value for non-performing loans collateralized by real estate at September 30, 2018
  • Net charge-offs totaled $0.2 million during the nine months ended September 30, 2018

Capital Management:

  • The Company and Bank, at September 30, 2018, were both well capitalized under all applicable regulatory requirements
  • During 3Q18, stockholders’ equity increased $3.7 million, or 0.7%, to $541.8 million due to net income of $17.3 million, partially offset by the declaration and payment of dividends on the Company’s common stock and repurchases of the Company’s common stock
  • During 3Q18, the Company repurchased 299,509 treasury shares at an average cost of $25.58 per share; as of September 30, 2018, up to 509,327 shares may be repurchased under the authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $19.33 at September 30, 2018, from $19.00 at June 30, 2018 and tangible book value per common share, a non-GAAP measure, increased to $18.77 at September 30, 2018, from $18.44 June 30, 2018

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Wednesday, October 24, 2018 at 9:30 AM (ET) to discuss the Company’s strategy and results for the third quarter of 2018
  • Dial-in for Live Call: 1-877-509-5836
  • Webcast: https://services.choruscall.com/links/ffic181024.html 
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10123645
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on October 24, 2019

About Flushing Financial Corporation

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

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

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

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

- Statistical Tables Follow -



FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

   For the three months ended For the nine months ended
   September 30, June 30, September 30, September 30, September 30,
   2018 2018 2017 2018 2017
            
Interest and Dividend Income          
Interest and fees on loans $59,658  $57,322  $53,318  $171,997  $155,834 
Interest and dividends on securities:          
Interest  5,562   5,616   5,850   16,646   18,377 
Dividends  18   17   30   49   274 
Other interest income  248   338   121   873   403 
Total interest and dividend income  65,486   63,293   59,319   189,565   174,888 
            
Interest Expense          
Deposits  17,425   14,788   10,655   44,323   29,145 
Other interest expense  6,540   5,865   5,623   18,472   15,696 
Total interest expense  23,965   20,653   16,278   62,795   44,841 
            
Net Interest Income  41,521   42,640   43,041   126,770   130,047 
Provision for loan losses  -   -   3,266   153   3,266 
Net Interest Income After Provision for Loan Losses  41,521   42,640   39,775   126,617   126,781 
            
Non-interest Income          
Banking services fee income  1,017   1,000   885   2,965   2,773 
Net loss on sale of securities  -   -   (186)  -   (186)
Net gain on sale of loans  10   421   152   168   396 
Net loss from fair value adjustments  (170)  (267)  (1,297)  (537)  (2,834)
Federal Home Loan Bank of New York stock dividends  873   881   740   2,630   2,206 
Gains from life insurance proceeds  2,222   -   238   2,998   1,405 
Bank owned life insurance  782   776   816   2,320   2,418 
Other income  221   357   313   779   1,120 
Total non-interest income  4,955   3,168   1,661   11,323   7,298 
            
Non-interest Expense          
Salaries and employee benefits  15,720   15,291   15,310   49,466   47,838 
Occupancy and equipment  2,475   2,476   2,502   7,528   7,652 
Professional services  1,915   2,439   1,763   6,539   5,678 
FDIC deposit insurance  596   547   499   1,643   1,328 
Data processing  1,427   1,426   1,349   4,254   3,873 
Depreciation and amortization  1,484   1,455   1,173   4,328   3,493 
Other real estate owned/foreclosure expense (benefit)  (102)  40   121   34   376 
Net gain from sales of real estate owned  -   (27)  -   (27)  (50)
Other operating expenses  3,718   3,749   3,249   12,158   11,407 
Total non-interest expense  27,233   27,396   25,966   85,923   81,595 
            
Income Before Income Taxes  19,243   18,412   15,470   52,017   52,484 
            
Provision (Benefit) for Income Taxes          
Federal  2,307   3,311   4,680   8,225   15,005 
State and local  (397)  1,178   611   1,124   2,315 
Total taxes  1,910   4,489   5,291   9,349   17,320 
            
Net Income $17,333  $13,923  $10,179  $42,668  $35,164 
            
            
Basic earnings per common share $0.61  $0.48  $0.35  $1.48  $1.21 
Diluted earnings per common share $0.61  $0.48  $0.35  $1.48  $1.21 
Dividends per common share $0.20  $0.20  $0.18  $0.60  $0.54 


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)

    September 30, June 30, December 31,
     2018   2018   2017 
ASSETS      
Cash and due from banks$  45,094  $  42,805  $  51,546 
Securities held-to-maturity:     
 Mortgage-backed securities   7,958     7,963     7,973 
 Other securities   23,207     23,130     22,913 
Securities available for sale:     
 Mortgage-backed securities   528,119     513,868     509,650 
 Other securities   232,913     214,755     228,704 
Loans:      
 Multi-family residential   2,235,370     2,247,852     2,273,595 
 Commercial real estate   1,460,555     1,471,894     1,368,112 
 One-to-four family ― mixed-use property   565,302     564,474     564,206 
 One-to-four family ― residential   188,975     187,741     180,663 
 Co-operative apartments   7,771     7,839     6,895 
 Construction   40,239     33,826     8,479 
 Small Business Administration   14,322     14,405     18,479 
 Taxi medallion   6,078     6,225     6,834 
 Commercial business and other   846,224     783,904     732,973 
 Net unamortized premiums and unearned loan fees   15,226     15,647     16,763 
 Allowance for loan losses   (20,309)    (20,220)    (20,351)
   Net loans   5,359,753     5,313,587     5,156,648 
Interest and dividends receivable   24,673     24,184     21,405 
Bank premises and equipment, net   29,929     30,658     30,836 
Federal Home Loan Bank of New York stock   54,942     57,384     60,089 
Bank owned life insurance   131,009     131,429     131,856 
Goodwill    16,127     16,127     16,127 
Other assets   85,819     91,726     61,527 
   Total assets$  6,539,543  $  6,467,616  $  6,299,274 
         
LIABILITIES     
Due to depositors:     
 Non-interest bearing$  398,606  $  388,467  $  385,269 
 Interest-bearing:     
  Certificate of deposit accounts   1,562,962     1,452,016     1,351,933 
  Savings accounts   216,976     225,815     290,280 
  Money market accounts   1,223,640     1,069,835     979,958 
  NOW accounts   1,255,464     1,422,745     1,333,232 
   Total interest-bearing deposits   4,259,042     4,170,411     3,955,403 
Mortgagors' escrow deposits   58,667     50,781     42,606 
Borrowed funds   1,197,101     1,250,732     1,309,653 
Other liabilities   84,371     69,181     73,735 
   Total liabilities   5,997,787     5,929,572     5,766,666 
         
STOCKHOLDERS' EQUITY     
Preferred stock (5,000,000 shares authorized; none issued)   -     -     - 
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares     
 issued at September 30, 2018, June  30, 2018 and December 31, 2017; 28,025,081     
 shares, 28,319,213 shares and 28,588,266 shares outstanding at September 30, 2018,     
 June  30, 2018 and December 31, 2017, respectively)   315     315     315 
Additional paid-in capital   221,622     220,432     217,906 
Treasury stock (3,505,514 shares, 3,211,382 shares and 2,942,329 shares at     
 September 30, 2018, June  30, 2018 and December 31, 2017, respectively)   (74,222)    (66,656)    (57,675)
Retained earnings   407,590     395,960     381,048 
Accumulated other comprehensive loss, net of taxes   (13,549)    (12,007)    (8,986)
   Total stockholders' equity   541,756     538,044     532,608 
         
   Total liabilities and stockholders' equity$  6,539,543  $  6,467,616  $  6,299,274 
         

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)

  At or for the three months ended At or for the nine months ended 
  September 30, June 30, September 30, September 30, September 30, 
   2018  2018  2017  2018  2017 
Per Share Data           
Basic earnings per share $  0.61 $  0.48 $  0.35 $  1.48 $  1.21 
Diluted earnings per share $  0.61 $  0.48 $  0.35 $  1.48 $  1.21 
Average number of shares outstanding for:           
Basic earnings per common share computation    28,603,543    28,844,829    29,119,753    28,806,152    29,091,756 
Diluted earnings per common share computation  28,603,948  28,845,611  29,120,356  28,806,885  29,093,723 
Shares outstanding    28,025,081    28,319,213    28,819,891    28,025,081    28,819,891 
Book value per common share (1) $  19.33 $  19.00 $  18.72 $  19.33 $  18.72 
Tangible book value per common share (2) $  18.77 $  18.44 $  18.18 $  18.77 $  18.18 
            
Stockholders' Equity           
Stockholders' equity $  541,756 $  538,044 $  539,609 $  541,756 $  539,609 
Tangible stockholders' equity    525,920    522,208    523,873    525,920    523,873 
            
Average Balances           
Total loans, net $  5,280,172 $  5,316,033 $  5,033,666 $  5,276,039 $  4,955,423 
Total interest-earning assets    6,130,422    6,181,186    5,936,129    6,136,887    5,909,866 
Total assets    6,446,540    6,484,882    6,239,321    6,445,097    6,209,005 
Total due to depositors    4,213,118    4,310,491    3,972,663    4,233,490    4,041,744 
Total interest-bearing liabilities    5,455,867    5,515,580    5,275,937    5,471,382    5,272,842 
Stockholders' equity    536,416    532,027    536,468    532,601    527,975 
            
Performance Ratios (3)           
Return on average assets    1.08%   0.86%   0.65%   0.88%   0.76%
Return on average equity    12.93    10.47    7.59    10.68    8.88 
Yield on average interest-earning assets    4.27    4.10    4.00    4.12    3.95 
Cost of average interest-bearing liabilities    1.76    1.50    1.23    1.53    1.13 
Cost of funds    1.63    1.41    1.15    1.44    1.07 
Interest rate spread during period    2.51    2.60    2.77    2.59    2.82 
Net interest margin    2.71    2.76    2.90    2.75    2.93 
Non-interest expense to average assets    1.69    1.69    1.66    1.78    1.75 
Efficiency ratio (4)    61.30    59.58    56.51    63.39    58.76 
Average interest-earning assets to average           
  interest-bearing liabilities    1.12X   1.12X   1.13X   1.12X   1.12X


(1)  Calculated by dividing stockholders’ equity by shares outstanding.
(2)  Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(3)  Ratios are presented on an annualized basis, where appropriate.
(4)  Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income and non-interest income (excluding net gains and losses from the sale of securities, fair value adjustments and life insurance proceeds).


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)

  At or for the nine  At or for the year  At or for the nine 
  months ended  ended  months ended 
  September 30, 2018  December 31, 2017  September 30, 2017 
          
Selected Financial Ratios and Other Data         
          
Regulatory capital ratios (for Flushing Financial Corporation):         
Tier 1 capital $578,034  $563,426  $565,265 
Common equity Tier 1 capital  539,306   527,727   530,442 
Total risk-based capital  673,343   658,777   665,534 
          
Tier 1 leverage capital (well capitalized = 5%)  8.92%  9.02%  9.07%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  11.07   11.59   11.84 
Tier 1 risk-based capital (well capitalized = 8.0%)  11.86   12.38   12.61 
Total risk-based capital (well capitalized = 10.0%)  13.82   14.47   14.85 
          
Regulatory capital ratios (for Flushing Bank only):         
Tier 1 capital $655,965  $631,285  $629,748 
Common equity Tier 1 capital  655,965   631,285   629,748 
Total risk-based capital  676,274   651,636   655,017 
          
Tier 1 leverage capital (well capitalized = 5%)  10.12%  10.11%  10.10%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)  13.46   13.87   14.04 
Tier 1 risk-based capital (well capitalized = 8.0%)  13.46   13.87   14.04 
Total risk-based capital (well capitalized = 10.0%)  13.88   14.31   14.60 
          
Capital ratios:         
Average equity to average assets  8.26%  8.53%  8.50%
Equity to total assets  8.28   8.46   8.62 
Tangible common equity to tangible assets (1)  8.06   8.22   8.39 
          
Asset quality:         
Non-accrual loans (2) $12,533  $15,710  $12,161 
Non-performing loans  12,644   18,134   13,890 
Non-performing assets  12,679   18,134   13,890 
Net charge-offs/ (recoveries)  195   11,739   226 
          
Asset quality ratios:         
Non-performing loans to gross loans  0.24%  0.35%  0.27%
Non-performing assets to total assets  0.19   0.29   0.22 
Allowance for loan losses to gross loans  0.38   0.39   0.50 
Allowance for loan losses to non-performing assets  160.17   112.23   181.92 
Allowance for loan losses to non-performing loans  160.62   112.23   181.92 
          
Full-service customer facilities  18   18   19 

(1)  See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(2)  Excludes performing non-accrual TDR loans.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)

 For the three months ended 
 September 30, 2018 June 30, 2018 September 30, 2017 
 Average Yield/ Average Yield/ Average Yield/ 
 BalanceInterestCost BalanceInterestCost BalanceInterestCost 
Interest-earning Assets:            
Mortgage loans, net$4,467,349$49,6124.44%$4,509,778$47,6734.23%$4,350,338$46,1214.24%
Other loans, net 812,823 10,0464.94  806,255 9,6494.79  683,328 7,1974.21 
Total loans, net (1) 5,280,172 59,6584.52  5,316,033 57,3224.31  5,033,666 53,3184.24 
Taxable securities:            
Mortgage-backed securities 542,192 3,8002.80  533,088 3,7542.82  520,889 3,3352.56 
Other securities 123,174 9283.01  122,601 1,0233.34  189,957 1,6003.37 
Total taxable securities 665,366 4,7282.84  655,689 4,7772.91  710,846 4,9352.78 
Tax-exempt securities: (2)            
Other securities 123,472 8522.76  124,058 8562.76  142,899 9452.65 
Total tax-exempt securities 123,472 8522.76  124,058 8562.76  142,899 9452.65 
Interest-earning deposits and federal funds sold 61,412 2481.62  85,406 3381.58  48,718 1210.99 
Total interest-earning assets 6,130,422 65,4864.27  6,181,186 63,2934.10  5,936,129 59,3194.00 
Other assets 316,118    303,696    303,192   
Total assets$6,446,540   $6,484,882   $6,239,321   
             
             
Interest-bearing Liabilities:            
Deposits:            
Savings accounts$219,749 3040.55 $235,564 2850.48 $330,316 5830.71 
NOW accounts 1,336,873 4,4161.32  1,444,889 3,3640.93  1,340,228 2,4680.74 
Money market accounts 1,169,130 5,1261.75  1,110,690 3,9831.43  927,067 2,3371.01 
Certificate of deposit            
accounts 1,487,366 7,4532.00  1,519,348 7,1181.87  1,375,052 5,2181.52 
Total due to depositors 4,213,118 17,2991.64  4,310,491 14,7501.37  3,972,663 10,6061.07 
Mortgagors' escrow            
accounts 57,573 1260.88  77,343 380.20  54,236 490.36 
Total interest-bearing            
deposits 4,270,691 17,4251.63  4,387,834 14,7881.35  4,026,899 10,6551.06 
Borrowings 1,185,176 6,5402.21  1,127,746 5,8652.08  1,249,038 5,6231.80 
Total interest-bearing            
liabilities 5,455,867 23,9651.76  5,515,580 20,6531.50  5,275,937 16,2781.23 
Non interest-bearing            
demand deposits 380,825    370,790    354,149   
Other liabilities 73,432    66,485    72,767   
Total liabilities 5,910,124    5,952,855    5,702,853   
Equity 536,416    532,027    536,468   
Total liabilities and            
equity$6,446,540   $6,484,882   $6,239,321   
             
Net interest income /            
net interest rate spread $41,5212.51% $42,6402.60% $43,0412.77%
             
Net interest-earning assets /            
net interest margin$674,555 2.71%$665,606 2.76%$660,192 2.90%
             
Ratio of interest-earning            
assets to interest-bearing            
liabilities  1.12X  1.12X  1.13X
             

(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, $0.3 million and $0.9 million for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively.
(2)  Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)

 For the nine months ended 
 September 30, 2018  September 30, 2017 
 Average Yield/  Average Yield/ 
 BalanceInterestCost  BalanceInterestCost 
Interest-earning Assets:         
Mortgage loans, net$4,473,422$143,3974.27% $4,287,674$135,4294.21%
Other loans, net 802,617 28,6004.75   667,749 20,4054.07 
Total loans, net (1) 5,276,039 171,9974.35   4,955,423 155,8344.19 
Taxable securities:         
Mortgage-backed         
securities 533,394 11,0612.76   527,890 10,1222.56 
Other securities 125,589 3,0723.26   215,453 5,6503.50 
Total taxable securities 658,983 14,1332.86   743,343 15,7722.83 
Tax-exempt securities: (2)         
Other securities 123,882 2,5622.76   145,058 2,8792.65 
Total tax-exempt securities 123,882 2,5622.76   145,058 2,8792.65 
Interest-earning deposits         
and federal funds sold 77,983 8731.49   66,042 4030.81 
Total interest-earning         
assets 6,136,887 189,5654.12   5,909,866 174,8883.95 
Other assets 308,210     299,139   
Total assets$6,445,097    $6,209,005   
          
          
Interest-bearing Liabilities:         
Deposits:         
Savings accounts$240,234 9780.54  $288,376 1,2890.60 
NOW accounts 1,439,997 10,9281.01   1,474,572 7,0060.63 
Money market accounts 1,102,374 12,1841.47   882,213 5,4870.83 
Certificate of deposit         
accounts 1,450,885 20,0341.84   1,396,583 15,2571.46 
Total due to depositors 4,233,490 44,1241.39   4,041,744 29,0390.96 
Mortgagors' escrow         
accounts 64,620 1990.41   60,895 1060.23 
Total interest-bearing         
deposits 4,298,110 44,3231.37   4,102,639 29,1450.95 
Borrowings 1,173,272 18,4722.10   1,170,203 15,6961.79 
Total interest-bearing         
liabilities 5,471,382 62,7951.53   5,272,842 44,8411.13 
Non interest-bearing         
demand deposits 372,257     340,221   
Other liabilities 68,857     67,967   
Total liabilities 5,912,496     5,681,030   
Equity 532,601     527,975   
Total liabilities and         
equity$6,445,097    $6,209,005   
          
Net interest income /         
net interest rate spread $126,7702.59%  $130,0472.82%
          
Net interest-earning assets /         
net interest margin$665,505 2.75% $637,024 2.93%
          
Ratio of interest-earning         
assets to interest-bearing         
liabilities  1.12X   1.12X
          

(1)  Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.6 million and $1.9 million for the nine months ended September 30, 2018 and 2017, respectively.
(2)  Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)

            September 2018 vs.   September 2018 vs. 
    September 30, June 30, March 31, December 31, December 2017 September 30, September 2017, 
(Dollars in thousands)2018 2018 2018 2017 % Change 2017 % Change 
Deposits               
Non-interest bearing$398,606 $388,467 $377,861 $385,269 3.5% $362,509 10.0% 
Interest bearing:              
 Certificate of deposit              
  accounts 1,562,962  1,452,016  1,499,326  1,351,933 15.6%  1,404,555 11.3% 
 Savings accounts 216,976  225,815  246,888  290,280 -25.3%  323,186 -32.9% 
 Money market accounts 1,223,640  1,069,835  1,032,409  979,958 24.9%  991,706 23.4% 
 NOW accounts 1,255,464  1,422,745  1,479,319  1,333,232 -5.8%  1,308,821 -4.1% 
  Total interest-bearing              
   deposits 4,259,042  4,170,411  4,257,942  3,955,403 7.7%  4,028,268 5.7% 
                  
   Total deposits$4,657,648 $4,558,878 $4,635,803 $4,340,672 7.3% $4,390,777 6.1% 

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Originations and Purchases 

  For the three months  For the nine months
  September 30, June 30, September 30,  September 30, September 30,
(In thousands) 2018 2018 2017  2018 2017
Multi-family residential $102,484 $70,972 $64,551  $254,637 $254,728
Commercial real estate  38,569  64,890  25,385   175,013  184,676
One-to-four family – mixed-use property  16,870  12,294  13,136   45,232  45,334
One-to-four family – residential  11,362  6,974  5,843   35,304  16,623
Co-operative apartments  -  1,500  232   1,500  232
Construction  6,008  9,940  148   30,627  7,121
Small Business Administration  344  228  4,276   2,539  6,787
Commercial business and other  133,188  88,612  69,354   361,207  195,150
Total $308,825 $255,410 $182,925  $906,059 $710,651


Loan Composition

            September 2018 vs.   September 2018 vs.
    September 30, June 30, March 31, December 31, December 2017 September 30, September 2017
(Dollars in thousands) 2018   2018   2018   2017  % Change 2017 % Change
Loans held for investment:               
Multi-family residential$2,235,370  $2,247,852  $2,286,803  $2,273,595  -1.7%  $2,236,173  0.0% 
Commercial real estate 1,460,555   1,471,894   1,426,847   1,368,112  6.8%   1,352,775  8.0% 
One-to-four family ―               
 mixed-use property 565,302   564,474   566,930   564,206  0.2%   556,723  1.5% 
One-to-four family ― residential 188,975   187,741   190,115   180,663  4.6%   177,578  6.4% 
Co-operative apartments 7,771   7,839   6,826   6,895  12.7%   7,035  10.5% 
Construction 40,239   33,826   23,887   8,479  374.6%   15,811  154.5% 
Small Business Administration 14,322   14,405   20,004   18,479  -22.5%   14,485  -1.1% 
Taxi medallion 6,078   6,225   6,617   6,834  -11.1%   18,165  -66.5% 
Commercial business and other 846,224   783,904   768,440   732,973  15.5%   674,706  25.4% 
Net unamortized premiums               
 and unearned loan fees 15,226   15,647   16,395   16,763  -9.2%   16,925  -10.0% 
Allowance for loan losses (20,309)  (20,220)  (20,542)  (20,351) -0.2%   (25,269) -19.6% 
   Net loans$5,359,753  $5,313,587  $5,292,322  $5,156,648  3.9%  $5,045,107  6.2% 


Net Loans Activity

  Three Months Ended
  September, 30 June 30, March 31, December 31, September, 30
(In thousands) 2018 2018 2018 2017 2017
Loans originated and purchased$308,825  $255,410  $341,824  $328,819  $182,925 
Principal reductions (257,902)  (226,030)  (202,059)  (209,400)  (155,007)
Loans sold  (4,027)  (7,273)  (2,703)  (1,018)  (2,606)
Loan charged-offs (220)  (416)  (85)  (11,616)  (324)
Foreclosures  -   -   (744)  -   - 
Net change in deferred fees and costs (421)  (748)  (368)  (162)  (292)
Net change in the allowance for loan losses (89)  322   (191)  4,918   (3,112)
 Total loan activity$46,166  $21,265  $135,674  $111,541  $21,584 


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)

   September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2018 2018 2018 2017 2017
Loans 90 Days Or More Past Due          
 and Still Accruing:          
Multi-family residential $-  $-  $-  $-  $415 
Commercial real estate  111   -   1,668   2,424   38 
One-to-four family - mixed-use property  -   -   -   -   129 
Construction  -   730   -   -   - 
Taxi medallion  -   -   -   -   1,147 
 Total  111   730   1,668   2,424   1,729 
            
Non-accrual Loans:          
Multi-family residential  862   2,165   2,193   3,598   1,309 
Commercial real estate  1,398   1,448   1,894   1,473   1,147 
One-to-four family - mixed-use property  795   2,157   2,396   1,867   2,217 
One-to-four family - residential  6,610   6,969   7,542   7,808   7,434 
Co-operative apartments  -   575   -   -   - 
Small Business Administration  1,395   -   41   46   50 
Taxi medallion(1)  712   743   906   918   - 
Commercial business and other  761   2   -   -   4 
 Total  12,533   14,059   14,972   15,710   12,161 
            
 Total Non-performing Loans  12,644   14,789   16,640   18,134   13,890 
            
Other Non-performing Assets:          
Real estate acquired through foreclosure  -   -   638   -   - 
Other asset acquired through foreclosure  35   35   106   -   - 
 Total  35   35   744   -   - 
            
 Total Non-performing Assets $12,679  $14,824  $17,384  $18,134  $13,890 
            
Non-performing Assets to Total Assets  0.19%  0.23%  0.27%  0.29%  0.22%
Allowance For Loan Losses to Non-performing Loans  160.6%  136.7%  123.5%  112.2%  181.9%
            

(1)  Not included in the above analysis are TDR taxi medallion loans totaling $5.4 million in 3Q18, $5.5 million in 2Q18, $5.7 million in 1Q18, $5.9 million in 4Q17 and $4.1 million in 3Q17.


Net Charge-Offs (Recoveries)

   Three Months Ended
   September 30, June 30, March 31, December 31, September 30,
(In thousands) 2018
 2018
 2018
 2017
 2017
Multi-family residential $18  $28  $51  $(1) $224 
Commercial real estate  -   -   -   (3)  (25)
One-to-four family – mixed-use property  (36)  (79)  -   (37)  1 
One-to-four family – residential  (258)  (4)  (107)  212   (58)
Small Business Administration  134   18   19   109   (17)
Taxi medallion  40   353   -   11,229   - 
Commercial business and other  13   6   (1)  4   29 
Total net loan charge-offs (recoveries) $(89) $322  $(38) $11,513  $154 
            

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common share and core earnings before provision and income taxes are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears in tabular form at the end of this release. The Company believes that these measures are useful for both investors and management to understand the effects of certain non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)

  Three Months Ended Nine Months Ended
  September 30,June 30,September 30, September 30,September 30,
  2018
2018
2017
 2018
2017
        
     
        
GAAP income before income taxes$19,243 $18,412 $15,470  $52,017 $52,484 
        
Net loss from fair value adjustments 170  267  1,297   537  2,834 
Net loss on sale of securities -  -  186   -  186 
Gain from life insurance proceeds (2,222) -  (238)  (2,998) (1,405)
Accelerated employee benefits upon Officer's death 149  -  -   149  - 
        
Core income before taxes 17,340  18,679  16,715   49,705  54,099 
        
Provision for income taxes for core income 2,010  4,573  5,812   9,565  17,961 
        
Core net income$15,330 $14,106 $10,903  $40,140 $36,138 
        
GAAP diluted earnings per common share$0.61 $0.48 $0.35  $1.48 $1.21 
        
Net loss from fair value adjustments, net of tax -  0.01  0.03   0.01  0.07 
Net loss on sale of securities, net of tax -  -  -   -  - 
Gain from life insurance proceeds (0.08) -  (0.01)  (0.10) (0.05)
Accelerated employee benefits upon Officer's death, net of tax -  -  -   -  - 
        
Core diluted earnings per common share1$0.54 $0.49 $0.37  $1.39 $1.24 
        
        
Core net income, as calculated above$15,330 $14,106 $10,903  $40,140 $36,138 
Average assets 6,446,540  6,484,882  6,239,321   6,445,097  6,209,005 
Average equity 536,416  532,027  536,468   532,601  527,975 
Core return on average assets2 0.95% 0.87% 0.70%  0.83% 0.78%
Core return on average equity2 11.43% 10.61% 8.13%  10.05% 9.13%
        
(1)  Core diluted earnings per common share may not foot due to rounding.     
(2)  Ratios are calculated on an annualized basis.       


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)

     September 30,December 31,September 30,
(Dollars in thousands) 2018
2017
2017
Total Equity $541,756 $532,608 $539,609 
Less:      
 Goodwill  (16,127) (16,127) (16,127)
 Intangible deferred tax liabilities  291  291  391 
  Tangible Stockholders' Common Equity$525,920 $516,772 $523,873 
        
Total Assets $6,539,543 $6,299,274 $6,261,382 
Less:      
 Goodwill  (16,127) (16,127) (16,127)
 Intangible deferred tax liabilities  291  291  391 
  Tangible Assets $6,523,707 $6,283,438 $6,245,646 
        
Tangible Stockholders' Common Equity to Tangible Assets 8.06% 8.22% 8.39%


Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer                 
Flushing Financial Corporation                                                       
(718) 961-5400