FFIC Flushing Financial Corporation

FIRST QUARTER 20191 HIGHLIGHTS

Flushing Financial Corporation (the “Company”) (Nasdaq-GS: FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the first quarter ended March 31, 2019.

John R. Buran, President and Chief Executive Officer, stated, “While quarterly results were impacted by seasonal expense increases, fair market value adjustments, and provision expense, we were pleased to see several positive trends including net interest margin stabilization, loan yield improvement, loan pipeline growth, continued growth in the C&I portfolio and deposit growth, particularly in the Flushing market.”

“The most significant of these trends was the stabilization of the net interest margin. The net interest margin was flat in 1Q19 compared to 4Q18 while core net interest margin increased three basis points during the same period.  Importantly, the pace of the increase in the cost of funds has slowed from the 26 bps increase in the cost of interest bearing liabilities between 2Q18 and 3Q18 to three basis points between 1Q19 and 4Q18. The yield on interest earning assets has increased more gradually over the same periods as a result of our strategic focus on rate over volume, resulting in easing of net interest margin pressure.”

“Another component of the net interest margin stabilization is the $2 billion of loans scheduled to upwardly reprice through 2021 an average of 96bps. We may not reprice to the full contractual rate but we will reprice somewhere between the market and the contract price as loans begin to refinance.”

“Additionally, the swap strategy remains an important component in stabilizing the net interest margin.  For 1Q19, the forward swaps totaling $442 million provided a benefit of four basis points while the loan swaps totaling $284 million provided two basis points of benefit. Our strategic focus on yield over volume in loan pricing continues to aid in stabilizing the net interest margin as the yield on loan closings increased 12bps during 1Q19 and 75bps from 1Q18. Finally, the loan pipeline improved significantly in 1Q19, growing 40% to $275 million from $197 million at December 31, 2018. The loan pipeline has an average yield of 4.80% providing for additional yield growth in the portfolio with 53% of our pipeline from adjustable rate loans at March 31, 2019.”

“Our strategy on loan growth is to move our balance sheet toward more floating rate C&I business while simultaneously focusing on yield over volume on our mortgage business. During 1Q19, our C&I loan closings totaled over $130 million, representing over 65% of our total loan closings. This performance was part of a trend that has been seen over the past four quarters. During that time period C&I loans, which are primarily adjustable rate, represented 43% of new loan closings. On the mortgage side the yield on loan closings increased 35bps in 1Q19 from 4Q18 and 99bps from 1Q18. Mortgage loan closings were down in 1Q19, primarily due to the pipeline at December 31, 2018 being lower than historical norms, particularly in commercial real estate.”

“Total deposits increased $94.2 million, or 1.9% (non-annualized) QoQ. The majority of this increase was transaction deposits, which increased 4.3% (non-annualized) QoQ. The “Win Flushing” program, which focuses on increasing our deposit market share in the Asian Community of Flushing, Queens, was the centerpiece of our retail deposits growth of $72 million QoQ. As of March 31, 2019, we have captured $175 million of deposits, exceeding our target of $160 million in deposit growth by the end of 1Q19. The program was predicated on the conversion of Flushing branches to the Universal Banker model, which allows staff to spend more time with customers, increasing sales opportunities. In the branches that have been converted, we experienced an increase of approximately 100% in transactions processed at ATMs, to almost 55% of all branch transactions, reducing our customer’s reliance on tellers. As a result, branch sales have increased over 30%, as sales per employee increased approximately 50% due to our branch staff focusing 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. As of March 31, 2019, we had 15 out of our 19 total branches operating under the Universal Banker model.” 

“Credit quality remained strong, as non-accrual and non-performing loans decreased by 3% in 1Q19. The quarter’s $0.9 million in charge-offs were mainly isolated to one commercial business loan relationship. The loan-to-value on our non-performing real estate loans at March 31, 2019 remained conservative at 33.9%.”

Mr. Buran continued, “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 1Q19 had a yield of 5.01%, an increase of 28bps from 4.73% for 4Q18 and an increase of 104bps from 3.97% for 1Q18. We maintained our asset quality as these loans had an average loan-to-value ratio of 41% and an average debt coverage ratio of 171%.
• We remain committed to our strategy of focusing on C&I loans, commercial real estate loans and multi-family. In the first quarter, loan closings represented 66%, 7%, and 14%, respectively, of all originations, which were made while maintaining conservative loan-to-value and debt coverage ratios, and increasing yield.
• Over 75% of 1Q19 loan closings were non-brokered loans.

Mr. Buran concluded, “Overall, we remain well capitalized and committed to the successful execution of our strategic objectives of managing our funding mix, emphasizing loan yields over volume, improving scalability and efficiency of our branch network and continuing to manage credit risk.”

Summary of Strategic Objectives

• Manage cost of funds and continue to improve funding mix
• Increase 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 1Q19 was $41.8 million, a decrease of $0.8 million, or 1.9% YoY (1Q19 compared to 1Q18) but an increase of $1.2 million, or 2.9% QoQ (1Q19 compared to 4Q18).

• Net interest margin of 2.57%, decreased 24bps YoY and unchanged QoQ
• Net interest spread of 2.36%, decreased 30bps YoY and increased 1bps QoQ
• Yield on average interest-earning assets of 4.29%, increased 29bps YoY and 4bps QoQ
• Cost of average interest-bearing liabilities of 1.93%, increased 59bps YoY and 3bps QoQ
• Cost of funds of 1.80%, increased 55bps YoY and 3bps QoQ, driven by increases in rates paid on deposits and short-term borrowings resulting from increases in the Fed Funds rate 
• Net interest margin stabilization in 1Q19 due to:
  • Cost of interest-bearing liabilities increasing only 3bps QoQ
  • Interest rate swaps totaling $726 million provided a benefit of 6bps to net interest margin
  • Over $2 billion of loans scheduled to upwardly reprice an average of 96bps through 2021
• Average balance of total interest-earning assets of $6,521.1 million, increased $422.4 million, or 6.9%, YoY and $156.7 million, or 2.5%, QoQ
• Net interest income includes prepayment penalty income from loans totaling $0.8 million in 1Q19 compared with $0.9 million, each in 4Q18 and 1Q18, recovered interest from delinquent loans of $0.7 million in 1Q19, compared to $0.3 million in 4Q18 and $0.2 million in 1Q18, and losses from fair value adjustments on qualifying hedges totaling $0.6 million compared to none in 4Q18 and 1Q18
• Absent all above items, the yield on interest-earning assets was 4.24% in 1Q19, an improvement of 6bps from 4Q18 and 31bps from 1Q18 and the net interest margin was 2.52% in 1Q19, which increased 3bps from 4Q18 but decreased 22bps from 1Q18

Provision for loan losses

The Company recorded a provision of $1.0 million compared to $0.4 million in 4Q18 and $0.2 million in 1Q18.

• 1Q19 includes charge-offs totaling $1.1 million from one commercial business relationship, after charge-off the remaining book balance for this relationship was $0.9 million
• Recorded net charge-offs (recoveries) of $0.9 million in 1Q19, ($0.2) million in 4Q18 and ($38,000) in 1Q18

Non-interest Income

Non-interest income for 1Q19 was $0.9 million, a decrease of $2.3 million YoY, but an increase of $1.9 million QoQ.

• Non-interest income included net losses from fair value adjustments of $2.1 million in 1Q19, $3.6 million in 4Q18,  and $0.1 million in 1Q18, losses from the sale of securities of $1.9 million in 4Q18, gains from sale of assets of $1.1 million in 4Q18 and life insurance proceeds of $43,000 in 1Q19 and $0.8 million in 1Q18
• Absent all above items, non-interest income was $3.0 million, an increase of $0.5 million, or 18.1% YoY, but a decrease of $0.4 million, 11.8% QoQ

Non-interest Expense

Non-interest expense for 1Q19 was $32.4 million, an increase of $1.1 million, or 3.6% YoY, and $6.7 million, or 25.9% QoQ.

• 1Q19 includes seasonal expenses totaling $3.0 million and a one-time expense of $0.5 million from the acceleration of employee benefits upon an officer’s death
• Salaries and benefits increased $0.7 million YoY primarily due to annual salary increases and $4.1 million QoQ
• Non-interest expense (excluding: salaries and benefits expense and director restricted stock unit expense) totaled $12.2 million in 1Q19, an increase of $0.6 million, or 5.3% YoY and $1.6 million, or 15.6% QoQ
• The ratio of non-interest expense to average assets was 1.89% in 1Q19 compared to 1.54% in 4Q18 and 1.95% in 1Q18
• The efficiency ratio was 70.4% in 1Q19 compared to 58.5% in 4Q18 and 69.3% in 1Q18

Provision for Income Taxes

The provision for income taxes in 1Q19 was $2.3 million, a decrease of $0.7 million, or 22.5% YoY but an increase of $1.2 million, or 118.6% QoQ.

• Pre-tax income decreased by $5.0 million, or 34.9% YoY and by $4.1 million, or 30.5% QoQ
• The effective tax rates were 24.5% in 1Q19, 7.8% in 4Q18 and 20.5% in 1Q18
• Both 1Q19 and 1Q18 reflects the vesting of restricted stock awards, which are treated as discrete items for tax purposes. Additionally, 4Q18 reflects the release of a previously accrued tax liability of $1.8 million
• Absent the above items, the effective tax rates were 23.8% in 1Q19, 20.9% in 4Q18 and 24.6% in 1Q18

Financial Condition Summary:

Loans:

• Net loans held for investment were $5,567.7 million reflecting an increase of 0.7% QoQ (not annualized) and 5.2% from March 31, 2018, 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
• Loan closings of multi-family, commercial real estate and commercial business loans totaled $171.5 million for 1Q19, or 86.6% of loan production
• Loan pipeline was $274.8 million at March 31, 2019, compared to $196.6 million at December 31, 2018 and $325.6 million at March 31, 2018
• The loan-to-value ratio on our portfolio of real estate dependent loans as of March 31, 2019 totaled 38.7%

The following table shows the weighted average rate received from loan closings for the periods indicated:

		For the three months ended
		March 31,			December 31,			March 31,
Loan type		2019			2018			2018
Mortgage loans		5.14	%		4.79	%		4.15	%
Non-mortgage loans		4.96	%		5.11	%		4.43	%
Total loans		5.02	%		4.90	%		4.27	%

Credit Quality:

• Non-performing assets and loans totaled $15.7 million, a decrease of $0.5 million, or 3.2%, from $16.3 million at December 31, 2018
• Classified assets totaled $39.1 million, a decrease of $7.4 million, or 15.8%, from $46.5 million at December 31, 2018, primarily due to two commercial business loan relationships totaling $6.6 million; one relationship made substantial payments and upgraded while the other relationship was written-down by $1.1 million to a remaining book value of $0.9 million
• Loans classified as troubled debt restructured (TDR) totaled $6.6 million, a decrease of $1.7 million, or 20.6%, from $8.4 million at December 31, 2018
• 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 33.9% average loan-to-value for non-performing loans collateralized by real estate
• Net charge-offs totaled $0.9 million

Capital Management:

• The Company and Bank, at March 31, 2019, were both well capitalized under all applicable regulatory requirements
• During 1Q19, stockholders’ equity increased $10.1 million, or 1.8%, to $559.6 million due to net income of $7.1 million and an improvement in the fair value of the securities portfolio, partially offset by the declaration and payment of dividends on the Company’s common stock
• During 1Q19, the Company did not repurchase any shares; as of March 31, 2019, up to 467,211 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Book value per common share increased to $19.85 at March 31, 2019, from $19.64 at December 31, 2018 and tangible book value per common share, a non-GAAP measure, increased to $19.29 at March 31, 2019, from $19.07 at December 31, 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, May 1, 2019 at 9:30 AM (ET) to discuss the Company’s strategy and results for the first quarter
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic190501.html
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10129183
• The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on May 1, 2020

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 on 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®, an 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, 2018 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 tables entitled “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Income and Net Interest Margin to Core Net Interest Income and Net Interest Margin.”

- Statistical Tables Follow - FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share data)(Unaudited)

			For the three months ended
			March 31				December 31,				March 31
				2019				2018				2018
Interest and Dividend Income
Interest and fees on loans			$	62,330			$	60,722			$	55,017
Interest and dividends on securities:
Interest				6,909				6,376				5,468
Dividends				19				18				14
Other interest income				555				317				287
Total interest and dividend income				69,813				67,433				60,786
Interest Expense
Deposits				21,469				20,174				12,110
Other interest expense				6,541				6,623				6,067
Total interest expense				28,010				26,797				18,177
Net Interest Income				41,803				40,636				42,609
Provision for loan losses				972				422				153
Net Interest Income After Provision for Loan Losses				40,831				40,214				42,456
Non-interest Income
Banking services fee income				973				1,065				948
Net loss on sale of securities				-				(1,920	)			-
Net gain (loss) on sale of loans				63				-				(263	)
Net gain on sale of assets				-				1,141				-
Net loss from fair value adjustments				(2,080	)			(3,585	)			(100	)
Federal Home Loan Bank of New York stock dividends				903				946				876
Life insurance proceeds				43				-				776
Bank owned life insurance				740				779				762
Other income				301				588				201
Total non-interest income (loss)				943				(986	)			3,200
Non-interest Expense
Salaries and employee benefits				19,166				15,094				18,455
Occupancy and equipment				2,789				2,551				2,577
Professional services				2,265				1,821				2,185
FDIC deposit insurance				485				472				500
Data processing				1,492				1,409				1,401
Depreciation and amortization				1,518				1,464				1,389
Other real estate owned/foreclosure expense (benefit)				77				(128	)			96
Other operating expenses				4,627				3,077				4,691
Total non-interest expense				32,419				25,760				31,294
Income Before Income Taxes				9,355				13,468				14,362
Provision for Income Taxes
Federal				1,943				349				2,607
State and local				344				697				343
Total taxes				2,287				1,046				2,950
Net Income			$	7,068			$	12,422			$	11,412
Basic earnings per common share			$	0.25			$	0.44			$	0.39
Diluted earnings per common share			$	0.25			$	0.44			$	0.39
Dividends per common share			$	0.21			$	0.20			$	0.20

 

 

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

				March 31,				December 31,				March 31,
					2019				2018				2018
ASSETS
Cash and due from banks				$	58,677			$	118,561			$	91,959
Securities held-to-maturity:
	Mortgage-backed securities				7,949				7,953				7,968
	Other securities				22,532				24,065				23,267
Securities available for sale:
	Mortgage-backed securities				579,185				557,953				512,781
	Other securities				266,839				264,702				216,480
Loans:
	Multi-family residential				2,256,447				2,269,048				2,286,803
	Commercial real estate				1,529,001				1,542,547				1,426,847
	One-to-four family ― mixed-use property				582,049				577,741				566,930
	One-to-four family ― residential				188,615				190,350				190,115
	Co-operative apartments				7,903				8,498				6,826
	Construction				54,933				50,600				23,887
	Small Business Administration				15,188				15,210				20,004
	Taxi medallion				3,891				4,539				6,617
	Commercial business and other				935,297				877,763				768,440
	Net unamortized premiums and unearned loan fees				15,422				15,188				16,395
	Allowance for loan losses				(21,015	)			(20,945	)			(20,542	)
			Net loans		5,567,731				5,530,539				5,292,322
Interest and dividends receivable					27,226				25,485				22,578
Bank premises and equipment, net					29,798				30,418				31,314
Federal Home Loan Bank of New York stock					51,182				57,282				54,045
Bank owned life insurance					131,794				131,788				130,653
Goodwill					16,127				16,127				16,127
Right of Use Asset					44,033				-				-
Other assets					64,377				69,303				83,277
			Total assets	$	6,867,450			$	6,834,176			$	6,482,771
LIABILITIES
Due to depositors:
		Non-interest bearing		$	401,064			$	413,747			$	377,861
		Certificate of deposit accounts			1,511,770				1,563,310				1,499,326
		Savings accounts			201,811				210,022				246,888
		Money market accounts			1,352,843				1,427,992				1,032,409
		NOW accounts			1,542,606				1,300,852				1,479,319
			Total  deposits		5,010,094				4,915,923				4,635,803
Mortgagors' escrow deposits					70,115				44,861				65,979
Borrowed funds					1,116,416				1,250,843				1,177,101
Operating Lease Liability					52,510				-				-
Other liabilities					58,756				73,085				68,581
			Total liabilities		6,307,891				6,284,712				5,947,464
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 March 31, 2019, December 31, 2018 and March 31, 2018; 28,187,184
	shares, 27,983,637 shares and 28,546,443 shares outstanding at March 31, 2019,
	December 31, 2018 and March 31, 2018, respectively)				315				315				315
Additional paid-in capital					222,859				222,720				219,115
Treasury stock (3,343,411 shares, 3,546,958 shares and 2,984,152 shares at
	March 31, 2019, December  31, 2018 and March 31, 2018, respectively)				(70,929	)			(75,146	)			(60,737	)
Retained earnings					417,856				414,327				388,568
Accumulated other comprehensive loss, net of taxes					(10,542	)			(12,752	)			(11,954	)
			Total stockholders' equity		559,559				549,464				535,307
			Total liabilities and stockholders' equity	$	6,867,450			$	6,834,176			$	6,482,771

 

 

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

		At or for the three months ended
		March 31,			December 31,			March 31,
		2019			2018			2018
Per Share Data
Basic earnings per share		$	0.25		$	0.44		$	0.39
Diluted earnings per share		$	0.25		$	0.44		$	0.39
Average number of shares outstanding for:
Basic earnings per common share computation			28,621,018			28,422,215			28,974,156
Diluted earnings per common share computation			28,621,030			28,422,517			28,974,757
Shares outstanding			28,187,184			27,983,637			28,546,443
Book value per common share (1)		$	19.85		$	19.64		$	18.75
Tangible book value per common share (2)		$	19.29		$	19.07		$	18.20
Stockholders' Equity
Stockholders' equity		$	559,559		$	549,464		$	535,307
Tangible stockholders' equity			543,722			533,627			519,471
Average Balances
Total loans, net		$	5,544,667		$	5,438,418		$	5,231,377
Total interest-earning assets			6,521,142			6,364,456			6,098,706
Total assets			6,868,140			6,681,161			6,403,396
Total due to depositors			4,598,305			4,453,200			4,176,457
Total interest-bearing liabilities			5,811,263			5,654,560			5,442,554
Stockholders' equity			552,621			541,067			529,281
Performance Ratios (3)
Return on average assets			0.41	%		0.74	%		0.71	%
Return on average equity			5.12			9.18			8.62
Yield on average interest-earning assets (4)			4.29			4.25			4.00
Cost of average interest-bearing liabilities			1.93			1.90			1.34
Cost of funds			1.80			1.77			1.25
Interest rate spread during period (4)			2.36			2.35			2.66
Net interest margin (4)			2.57			2.57			2.81
Non-interest expense to average assets			1.89			1.54			1.95
Efficiency ratio (5)			70.37			58.53			69.34
Average interest-earning assets to average
interest-bearing liabilities			1.12	X		1.13	X		1.12	X

(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)			Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
(5)			Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding accelerated employee benefits upon officers death, OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income (excluding net losses from fair value adjustments on qualifying hedges) and non-interest income (excluding net gains and losses from the sale of securities, assets and fair value adjustments and life insurance proceeds).

    

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

		At or for the three				At or for the year				At or for the three
		ended				ended				months ended
		March 31, 2019				December 31, 2018				March 31, 2018
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital		$	594,196			$	586,582			$	568,635
Common equity Tier 1 capital			552,793				546,230				531,305
Total risk-based capital			690,211				682,527				664,177
Tier 1 leverage capital (well capitalized = 5%)			8.63	%			8.74	%			8.86	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			10.90				10.98				11.17
Tier 1 risk-based capital (well capitalized = 8.0%)			11.72				11.79				11.95
Total risk-based capital (well capitalized = 10.0%)			13.61				13.72				13.96
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital		$	663,467			$	660,782			$	637,091
Common equity Tier 1 capital			663,467				660,782				637,091
Total risk-based capital			684,482				681,727				657,633
Tier 1 leverage capital (well capitalized = 5%)			9.64	%			9.85	%			9.92	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			13.08				13.28				13.39
Tier 1 risk-based capital (well capitalized = 8.0%)			13.08				13.28				13.39
Total risk-based capital (well capitalized = 10.0%)			13.49				13.70				13.82
Capital ratios:
Average equity to average assets			8.05	%			8.22	%			8.27	%
Equity to total assets			8.15				8.04				8.26
Tangible common equity to tangible assets (1)			7.94				7.83				8.03
Asset quality:
Non-accrual loans (2)		$	15,735			$	16,253			$	14,972
Non-performing loans			15,735				16,253				16,640
Non-performing assets			15,770				16,288				17,384
Net charge-offs/ (recoveries)			902				(19	)			(38	)
Asset quality ratios:
Non-performing loans to gross loans			0.28	%			0.29	%			0.31	%
Non-performing assets to total assets			0.23				0.24				0.27
Allowance for loan losses to gross loans			0.38				0.38				0.39
Allowance for loan losses to non-performing assets			133.26				128.60				118.17
Allowance for loan losses to non-performing loans			133.55				128.87				123.45
Full-service customer facilities			19				19				18

 

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

 

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

	For the three months ended
	March 31, 2019						December 31, 2018						March 31, 2018
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
	(Dollars in thousands)
Interest-earning Assets:
Mortgage loans, net	$	4,619,587	$	50,845	4.40	%	$	4,555,895	$	49,789	4.37	%	$	4,442,870	$	46,112	4.15	%
Other loans, net		925,080		11,485	4.97			882,523		10,933	4.96			788,507		8,905	4.52
Total loans, net (1) (2)		5,544,667		62,330	4.50			5,438,418		60,722	4.47			5,231,377		55,017	4.21
Taxable securities:
Mortgage-backed
securities		573,397		4,248	2.96			558,693		4,004	2.87			524,710		3,507	2.67
Other securities		241,863		2,211	3.66			184,592		1,586	3.44			131,078		1,121	3.42
Total taxable securities		815,260		6,459	3.17			743,285		5,590	3.01			655,788		4,628	2.82
Tax-exempt securities: (3)
Other securities		58,173		594	4.08			114,079		1,018	3.57			124,125		1,081	3.48
Total tax-exempt securities		58,173		594	4.08			114,079		1,018	3.57			124,125		1,081	3.48
Interest-earning deposits
and federal funds sold		103,042		555	2.15			68,674		317	1.85			87,416		287	1.31
Total interest-earning
assets		6,521,142		69,938	4.29			6,364,456		67,647	4.25			6,098,706		61,013	4.00
Other assets		346,998						316,705						304,690
Total assets	$	6,868,140					$	6,681,161					$	6,403,396
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	205,775		361	0.70		$	213,091		392	0.74		$	265,895		389	0.59
NOW accounts		1,488,859		6,031	1.62			1,312,834		4,968	1.51			1,540,465		3,148	0.82
Money market accounts		1,380,172		6,821	1.98			1,348,873		6,523	1.93			1,025,727		3,075	1.20
Certificate of deposit
accounts		1,523,499		8,203	2.15			1,578,402		8,276	2.10			1,344,370		5,463	1.63
Total due to depositors		4,598,305		21,416	1.86			4,453,200		20,159	1.81			4,176,457		12,075	1.16
Mortgagors' escrow
accounts		62,174		53	0.34			71,108		15	0.08			58,960		35	0.24
Total interest-bearing
deposits		4,660,479		21,469	1.84			4,524,308		20,174	1.78			4,235,417		12,110	1.14
Borrowings		1,150,784		6,541	2.27			1,130,252		6,623	2.34			1,207,137		6,067	2.01
Total interest-bearing
liabilities		5,811,263		28,010	1.93			5,654,560		26,797	1.90			5,442,554		18,177	1.34
Non interest-bearing
demand deposits		398,829						406,501						364,983
Other liabilities		105,427						79,033						66,578
Total liabilities		6,315,519						6,140,094						5,874,115
Equity		552,621						541,067						529,281
Total liabilities and
equity	$	6,868,140					$	6,681,161					$	6,403,396
Net interest income /
net interest rate spread (tax equivalent) (3)			$	41,928	2.36	%			$	40,850	2.35	%			$	42,836	2.66	%
Net interest-earning assets /
net interest margin (tax equivalent)	$	709,879			2.57	%	$	709,896			2.57	%	$	656,152			2.81	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.12	X					1.13	X					1.12	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 $0.5 million, $0.5 million and $0.1 million for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively.
(2)			Loan interest income includes net losses from fair value adjustments on qualifying hedges of $0.6 million, none and none for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively.
(3)			Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $125,000, $214,000 and $227,000, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESDEPOSIT COMPOSITION(Unaudited)

																March 2019 vs.						March 2019 vs.
				March 31,			December 31,			September 30,			June 30,			December 2018			March 31,			March 2018
(Dollars in thousands)				2019			2018			2018			2018			% Change			2018			% Change
Deposits
Non-interest bearing				$	401,064		$	413,747		$	398,606		$	388,467		-3.1	%		$	377,861		6.1	%
Interest bearing:
	Certificate of deposit
		accounts			1,511,770			1,563,310			1,562,962			1,452,016		-3.3	%			1,499,326		0.8	%
	Savings accounts				201,811			210,022			216,976			225,815		-3.9	%			246,888		-18.3	%
	Money market accounts				1,352,843			1,427,992			1,223,640			1,069,835		-5.3	%			1,032,409		31.0	%
	NOW accounts				1,542,606			1,300,852			1,255,464			1,422,745		18.6	%			1,479,319		4.3	%
		Total interest-bearing
			deposits		4,609,030			4,502,176			4,259,042			4,170,411		2.4	%			4,257,942		8.2	%
			Total deposits	$	5,010,094		$	4,915,923		$	4,657,648		$	4,558,878		1.9	%		$	4,635,803		8.1	%

 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESLOANS (Unaudited)

Loan Closings

			For the three months
			March 31			December 31,			March 31
	(In thousands)			2019			2018			2018
	Multi-family residential		$	27,214		$	85,095		$	81,181
	Commercial real estate			13,941			95,772			71,554
	One-to-four family – mixed-use property			16,423			28,924			16,068
	One-to-four family – residential			3,886			7,356			16,968
	Co-operative apartments			-			948			-
	Construction			5,901			8,968			14,679
	Small Business Administration			329			1,304			1,967
	Commercial business and other			130,330			116,365			139,407
	Total		$	198,024		$	344,732		$	341,824

Loan Composition

																				March 2019 vs.								March 2019 vs.
				March 31,				December 31,				September 30,				June 30,				December 2018				March 31,				March 2018
(Dollars in thousands)					2019				2018				2018				2018			% Change					2018			% Change
Loans held for investment:
Multi-family residential				$	2,256,447			$	2,269,048			$	2,235,370			$	2,247,852			-0.6	%			$	2,286,803			-1.3	%
Commercial real estate					1,529,001				1,542,547				1,460,555				1,471,894			-0.9	%				1,426,847			7.2	%
One-to-four family ―
	mixed-use property				582,049				577,741				565,302				564,474			0.7	%				566,930			2.7	%
One-to-four family ― residential					188,615				190,350				188,975				187,741			-0.9	%				190,115			-0.8	%
Co-operative apartments					7,903				8,498				7,771				7,839			-7.0	%				6,826			15.8	%
Construction					54,933				50,600				40,239				33,826			8.6	%				23,887			130.0	%
Small Business Administration					15,188				15,210				14,322				14,405			-0.1	%				20,004			-24.1	%
Taxi medallion					3,891				4,539				6,078				6,225			-14.3	%				6,617			-41.2	%
Commercial business and other					935,297				877,763				846,224				783,904			6.6	%				768,440			21.7	%
Net unamortized premiums
	and unearned loan fees				15,422				15,188				15,226				15,647			1.5	%				16,395			-5.9	%
Allowance for loan losses					(21,015	)			(20,945	)			(20,309	)			(20,220	)		0.3	%				(20,542	)		2.3	%
			Net loans	$	5,567,731			$	5,530,539			$	5,359,753			$	5,313,587			0.7	%			$	5,292,322			5.2	%

 

Net Loans Activity

		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(In thousands)			2019				2018				2018				2018				2018
Loans originated and purchased		$	198,024			$	344,732			$	308,825			$	255,410			$	341,824
Principal reductions			(158,815	)			(173,061	)			(257,902	)			(226,030	)			(202,059	)
Loans sold			(1,043	)			-				(4,027	)			(7,273	)			(2,703	)
Loan charged-offs			(1,138	)			(211	)			(220	)			(416	)			(85	)
Foreclosures			-				-				-				-				(744	)
Net change in deferred fees and costs			234				(38	)			(421	)			(748	)			(368	)
Net change in the allowance for loan losses			(70	)			(636	)			(89	)			322				(191	)
	Total loan activity	$	37,192			$	170,786			$	46,166			$	21,265			$	135,674

 

 

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

			March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)				2019				2018				2018				2018				2018
Loans 90 Days Or More Past Due
	and Still Accruing:
Commercial real estate			$	-			$	-			$	111			$	-			$	1,668
Construction				-				-				-				730				-
	Total			-				-				111				730				1,668
Non-accrual Loans:
Multi-family residential				2,009				2,410				862				2,165				2,193
Commercial real estate				1,050				1,379				1,398				1,448				1,894
One-to-four family - mixed-use property				1,305				928				795				2,157				2,396
One-to-four family - residential				5,708				6,144				6,610				6,969				7,542
Co-operative apartments				-				-				-				575				-
Construction				950				-				-				-				-
Small Business Administration				1,227				1,267				1,395				-				41
Taxi medallion(1)				1,372				613				712				743				906
Commercial business and other				2,114				3,512				761				2				-
	Total			15,735				16,253				12,533				14,059				14,972
	Total Non-performing Loans			15,735				16,253				12,644				14,789				16,640
Other Non-performing Assets:
Real estate acquired through foreclosure				-				-				-				-				638
Other asset acquired through foreclosure				35				35				35				35				106
	Total			35				35				35				35				744
	Total Non-performing Assets		$	15,770			$	16,288			$	12,679			$	14,824			$	17,384
Non-performing Assets to Total Assets				0.23	%			0.24	%			0.19	%			0.23	%			0.27	%
Allowance For Loan Losses to Non-performing Loans				133.6	%			128.9	%			160.6	%			136.7	%			123.5	%

(1)  Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $2.5 million in 1Q19, $3.9 million in 4Q18, $5.4 million in 3Q18, $5.5 million in 2Q18 and $5.7 million in 1Q18.

Net Charge-Offs (Recoveries)

			Three Months Ended
			March 31,				December 31,				September 30,				June 30,				March 31,
(In thousands)				2019				2018				2018				2018				2018
Multi-family residential			$	(13	)		$	(4	)		$	18			$	28			$	51
Commercial real estate				-				-				-				-				-
One-to-four family – mixed-use property				(85	)			(18	)			(36	)			(79	)			-
One-to-four family – residential				(4	)			(199	)			(258	)			(4	)			(107	)
Small Business Administration				(4	)			170				134				18				19
Taxi medallion				(84	)			(143	)			40				353				-
Commercial business and other				1,092				(20	)			13				6				(1	)
Total net loan charge-offs (recoveries)			$	902			$	(214	)		$	(89	)		$	322			$	(38	)

Core Diluted EPS, Core ROAE, Core ROAA, Core Net Interest Income, Core Yield on Total Loans, Core Net Interest Margin and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and 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 SUBSIDIARIESRECONCILIATION OF GAAP EARNINGS and CORE EARNINGS(Dollars in thousands, except per share data)(Unaudited) 

		Three Months Ended
		March 31,			December 31,			March 31,
			2019			2018			2018
GAAP income before income taxes		$	9,355		$	13,468		$	14,362
Net loss from fair value adjustments			2,080			3,585			100
Net loss on sale of securities			-			1,920			-
Gain from life insurance proceeds			(43	)		-			(776	)
Net gain on sale of assets			-			(1,141	)		-
Net losses from fair value adjustments on qualifying hedges			637			-			-
Accelerated employee benefits upon Officer's death			455			-			-
Core income before taxes			12,484			17,832			13,686
Provision for income taxes for core income			3,033			2,395			2,982
Core net income		$	9,451		$	15,437		$	10,704
GAAP diluted earnings per common share		$	0.25		$	0.44		$	0.39
Net loss from fair value adjustments, net of tax			0.05			0.09			-
Net loss on sale of securities, net of tax			-			0.05			-
Gain from life insurance proceeds			-			-			(0.03	)
Net gain on sale of assets, net of tax			-			(0.03	)		-
Net losses from fair value adjustments on qualifying hedges, net of tax			0.02			-			-
Accelerated employee benefits upon Officer's death, net of tax			0.01			-			-
Core diluted earnings per common share1		$	0.33		$	0.54		$	0.37
Core net income, as calculated above		$	9,451		$	15,437		$	10,704
Average assets			6,868,140			6,681,161			6,403,396
Average equity			552,621			541,067			529,281
Core return on average assets2			0.55	%		0.92	%		0.67	%
Core return on average equity2			6.84	%		11.41	%		8.09	%
(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 SUBSIDIARIESRECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGINTo CORE NET INTEREST INCOME and NET INTEREST MARGIN(Dollars in thousands)(Unaudited) 

		Three Months Ended
		March 31,			December 31,			March 31,
			2019			2018			2018
GAAP net interest income		$	41,803		$	40,636		$	42,609
Net losses from fair value adjustments on qualifying hedges			637			-			-
Core net interest income		$	42,440		$	40,636		$	42,609
GAAP interest income on total loans, net		$	62,330		$	60,722		$	55,017
Net losses from fair value adjustments on qualifying hedges			637			-			-
Prepayment penalties received on loans			(805	)		(892	)		(913	)
Net recoveries of interest from non-accrual loans			(714	)		(276	)		(166	)
Core interest income on total loans, net		$	61,448		$	59,554		$	53,938
Average total loans, net		$	5,544,667		$	5,438,418		$	5,231,377
Core yield total loans, net			4.43	%		4.38	%		4.12	%
Net interest income tax equivalent		$	41,928		$	40,850		$	42,836
Net losses from fair value adjustments on qualifying hedges			637			-			-
Prepayment penalties received on loans			(805	)		(892	)		(913	)
Net recoveries of interest from non-accrual loans			(714	)		(276	)		(166	)
Net interest income used in calculation of Core net interest margin		$	41,046		$	39,682		$	41,757
Total average interest-earning assets		$	6,521,142		$	6,364,456		$	6,098,706
Core net interest margin			2.52	%		2.49	%		2.74	%

 

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

						March 31,			December 31,			March 31,
(Dollars in thousands)							2019			2018			2018
Total Equity						$	559,559		$	549,464		$	535,307
Less:
	Goodwill						(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities						290			290			291
		Tangible Stockholders' Common Equity				$	543,722		$	533,627		$	519,471
Total Assets						$	6,867,450		$	6,834,176		$	6,482,771
Less:
	Goodwill						(16,127	)		(16,127	)		(16,127	)
	Intangible deferred tax liabilities						290			290			291
		Tangible Assets				$	6,851,613		$	6,818,339		$	6,466,935
Tangible Stockholders' Common Equity to Tangible Assets							7.94	%		7.83	%		8.03	%

Susan K. CullenSenior Executive Vice President, Treasurer and Chief Financial OfficerFlushing Financial Corporation(718) 961-5400