The accompanying notes are an integral part of these consolidated financial statements
.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
1.
Basis of Presentation
The primary business of Flushing Financial Corporation (the “Holding Company”), a Delaware corporation, is the operation of its wholly owned subsidiary, Flushing Bank (the “Bank”).
The unaudited consolidated financial statements presented in this Quarterly Report on Form
10
-Q (“Quarterly Report”) include the collective results of the Holding Company and its direct and indirect wholly-owned subsidiaries, including the Bank, Flushing Preferred Funding Corporation, Flushing Service Corporation, and FSB Properties Inc., which are collectively herein referred to as “we,” “us,” “our” and the “Company.”
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts. The Trusts are
not
included in the Company’s consolidated financial statements, as the Company would
not
absorb the losses of the Trusts if any losses were to occur.
The accompanying unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such presented periods of the Company. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report. All inter-company balances and transactions have been eliminated in consolidation. The results of operations in the interim statements are
not
necessarily indicative of the results that
may
be expected for the full year.
The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Quarterly Report on Form
10
-Q and Article
10,
Rule
10
-
01
of Regulation S-
X
for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated interim financial information should be read in conjunction with the Company’s Annual Report on Form
10
-K for the year ended
December 31, 2018.
When necessary, certain reclassifications were made to prior-year amounts to conform to the current-year presentation.
2.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for loan losses (“ALLL”), the evaluation of goodwill for impairment, the review of the need for a valuation allowance of the Company’s deferred tax assets, the fair value of financial instruments and the evaluation of other-than-temporary impairment (“OTTI”) on securities. Actual results could differ from these estimates.
3.
Earnings Per Share
Earnings per common share have been computed based on the following:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Net income, as reported
|
|
$
|
10,556
|
|
|
$
|
13,923
|
|
|
$
|
17,624
|
|
|
$
|
25,335
|
|
|
Divided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
28,761
|
|
|
|
28,845
|
|
|
|
28,691
|
|
|
|
28,909
|
|
|
Weighted average common stock equivalents
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
Total weighted average common shares outstanding and common stock equivalents
|
|
|
28,761
|
|
|
|
28,846
|
|
|
|
28,691
|
|
|
|
28,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.37
|
|
|
$
|
0.48
|
|
|
$
|
0.61
|
|
|
$
|
0.88
|
|
|
Diluted earnings per common share
(1)
|
|
$
|
0.37
|
|
|
$
|
0.48
|
|
|
$
|
0.61
|
|
|
$
|
0.88
|
|
|
Dividend payout ratio
|
|
|
56.8
|
%
|
|
|
41.7
|
%
|
|
|
68.9
|
%
|
|
|
45.5
|
%
|
|
|
(
1
)
|
For the
three
and
six
months ended
June 30, 2019
and
2018,
there were no common stock equivalents that were anti-dilutive.
|
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
4.
Securities
The Company did
no
t
hold any trading securities at
June 30, 2019
and
December 31, 2018.
Securities available for sale are recorded at fair value. Securities held-to-maturity are recorded at amortized cost.
The following table summarizes the Company’s portfolio of securities held-to-maturity at
June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
|
|
(In thousands)
|
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
|
$
|
52,242
|
|
|
$
|
54,131
|
|
|
$
|
1,889
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
52,242
|
|
|
|
54,131
|
|
|
|
1,889
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
7,944
|
|
|
|
8,038
|
|
|
|
94
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities
|
|
|
7,944
|
|
|
|
8,038
|
|
|
|
94
|
|
|
|
-
|
|
|
Total
|
|
$
|
60,186
|
|
|
$
|
62,169
|
|
|
$
|
1,983
|
|
|
$
|
-
|
|
The following table summarizes the Company’s portfolio of securities held-to-maturity at
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
|
|
(In thousands)
|
|
|
Securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
|
$
|
24,065
|
|
|
$
|
22,508
|
|
|
$
|
-
|
|
|
$
|
1,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
24,065
|
|
|
|
22,508
|
|
|
|
-
|
|
|
|
1,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
7,953
|
|
|
|
7,366
|
|
|
|
-
|
|
|
|
587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities
|
|
|
7,953
|
|
|
|
7,366
|
|
|
|
-
|
|
|
|
587
|
|
|
Total
|
|
$
|
32,018
|
|
|
$
|
29,874
|
|
|
$
|
-
|
|
|
$
|
2,144
|
|
- 7 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s portfolio of securities available for sale at
June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
|
|
(In thousands)
|
|
|
Corporate
|
|
$
|
130,000
|
|
|
$
|
122,036
|
|
|
$
|
-
|
|
|
$
|
7,964
|
|
|
Municipals
|
|
|
18,908
|
|
|
|
19,141
|
|
|
|
233
|
|
|
|
-
|
|
|
Mutual funds
|
|
|
12,042
|
|
|
|
12,042
|
|
|
|
-
|
|
|
|
-
|
|
|
Collateralized loan obligations
|
|
|
100,324
|
|
|
|
99,650
|
|
|
|
60
|
|
|
|
734
|
|
|
Other
|
|
|
1,303
|
|
|
|
1,303
|
|
|
|
-
|
|
|
|
-
|
|
|
Total other securities
|
|
|
262,577
|
|
|
|
254,172
|
|
|
|
293
|
|
|
|
8,698
|
|
|
REMIC and CMO
|
|
|
370,689
|
|
|
|
372,761
|
|
|
|
3,181
|
|
|
|
1,109
|
|
|
GNMA
|
|
|
734
|
|
|
|
790
|
|
|
|
56
|
|
|
|
-
|
|
|
FNMA
|
|
|
96,445
|
|
|
|
96,445
|
|
|
|
572
|
|
|
|
572
|
|
|
FHLMC
|
|
|
83,731
|
|
|
|
84,485
|
|
|
|
1,012
|
|
|
|
258
|
|
|
Total mortgage-backed securities
|
|
|
551,599
|
|
|
|
554,481
|
|
|
|
4,821
|
|
|
|
1,939
|
|
|
Total securities available for sale
|
|
$
|
814,176
|
|
|
$
|
808,653
|
|
|
$
|
5,114
|
|
|
$
|
10,637
|
|
The following table summarizes the Company’s portfolio of securities available for sale at
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Losses
|
|
|
|
|
(In thousands)
|
|
|
Corporate
|
|
$
|
130,000
|
|
|
$
|
118,535
|
|
|
$
|
-
|
|
|
$
|
11,465
|
|
|
Municipals
|
|
|
46,231
|
|
|
|
46,574
|
|
|
|
343
|
|
|
|
-
|
|
|
Mutual funds
|
|
|
11,586
|
|
|
|
11,586
|
|
|
|
-
|
|
|
|
-
|
|
|
Collateralized loan obligations
|
|
|
88,396
|
|
|
|
86,751
|
|
|
|
-
|
|
|
|
1,645
|
|
|
Other
|
|
|
1,256
|
|
|
|
1,256
|
|
|
|
-
|
|
|
|
-
|
|
|
Total other securities
|
|
|
277,469
|
|
|
|
264,702
|
|
|
|
343
|
|
|
|
13,110
|
|
|
REMIC and CMO
|
|
|
382,632
|
|
|
|
376,340
|
|
|
|
885
|
|
|
|
7,177
|
|
|
GNMA
|
|
|
785
|
|
|
|
826
|
|
|
|
41
|
|
|
|
-
|
|
|
FNMA
|
|
|
94,069
|
|
|
|
91,693
|
|
|
|
72
|
|
|
|
2,448
|
|
|
FHLMC
|
|
|
90,377
|
|
|
|
89,094
|
|
|
|
113
|
|
|
|
1,396
|
|
|
Total mortgage-backed securities
|
|
|
567,863
|
|
|
|
557,953
|
|
|
|
1,111
|
|
|
|
11,021
|
|
|
Total securities available for sale
|
|
$
|
845,332
|
|
|
$
|
822,655
|
|
|
$
|
1,454
|
|
|
$
|
24,131
|
|
We did
no
t
hold any private issue CMO’s that are collateralized by commercial real estate mortgages at
June 30, 2019
and
December 31, 2018.
The corporate securities held by the Company at
June 30, 2019
and
December 31, 2018
are issued by U.S. banking institutions.
- 8 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at
June 30, 2019,
by contractual maturity. Expected maturities
may
differ from contractual maturities because borrowers
may
have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
Amortized
|
|
|
|
|
|
|
Securities held-to-maturity:
|
|
Cost
|
|
|
Fair Value
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
1,180
|
|
|
$
|
1,180
|
|
|
Due after ten years
|
|
|
51,062
|
|
|
|
52,951
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
52,242
|
|
|
|
54,131
|
|
|
Mortgage-backed securities
|
|
|
7,944
|
|
|
|
8,038
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
60,186
|
|
|
$
|
62,169
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Securities available for sale:
|
|
Cost
|
|
|
Fair Value
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
$
|
10,000
|
|
|
$
|
9,683
|
|
|
Due after five years through ten years
|
|
|
137,910
|
|
|
|
130,259
|
|
|
Due after ten years
|
|
|
102,625
|
|
|
|
102,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
250,535
|
|
|
|
242,130
|
|
|
Mutual funds
|
|
|
12,042
|
|
|
|
12,042
|
|
|
Mortgage-backed securities
|
|
|
551,599
|
|
|
|
554,481
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
814,176
|
|
|
$
|
808,653
|
|
- 9 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:
|
|
|
At June 30, 2019
|
|
|
|
|
Total
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
Count
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
16
|
|
|
$
|
122,036
|
|
|
$
|
7,964
|
|
|
$
|
19,720
|
|
|
$
|
280
|
|
|
$
|
102,316
|
|
|
$
|
7,684
|
|
|
CLO
|
|
|
10
|
|
|
|
80,046
|
|
|
|
734
|
|
|
|
80,046
|
|
|
|
734
|
|
|
|
-
|
|
|
|
-
|
|
|
Total other securities
|
|
|
26
|
|
|
|
202,082
|
|
|
|
8,698
|
|
|
|
99,766
|
|
|
|
1,014
|
|
|
|
102,316
|
|
|
|
7,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REMIC and CMO
|
|
|
19
|
|
|
|
126,261
|
|
|
|
1,109
|
|
|
|
38,059
|
|
|
|
95
|
|
|
|
88,202
|
|
|
|
1,014
|
|
|
FNMA
|
|
|
5
|
|
|
|
60,396
|
|
|
|
572
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,396
|
|
|
|
572
|
|
|
FHLMC
|
|
|
2
|
|
|
|
40,398
|
|
|
|
258
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,398
|
|
|
|
258
|
|
|
Total mortgage-backed securities
|
|
|
26
|
|
|
|
227,055
|
|
|
|
1,939
|
|
|
|
38,059
|
|
|
|
95
|
|
|
|
188,996
|
|
|
|
1,844
|
|
|
Total
|
|
|
52
|
|
|
$
|
429,137
|
|
|
$
|
10,637
|
|
|
$
|
137,825
|
|
|
$
|
1,109
|
|
|
$
|
291,312
|
|
|
$
|
9,528
|
|
|
|
|
At December 31, 2018
|
|
|
|
|
Total
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
Count
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
|
(Dollars in thousands)
|
|
|
Held-to-maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
|
|
1
|
|
|
$
|
19,940
|
|
|
$
|
1,557
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,940
|
|
|
$
|
1,557
|
|
|
Total other securities
|
|
|
1
|
|
|
|
19,940
|
|
|
|
1,557
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,940
|
|
|
|
1,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
|
1
|
|
|
|
7,366
|
|
|
|
587
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,366
|
|
|
|
587
|
|
|
Total mortgage-backed securities
|
|
|
1
|
|
|
|
7,366
|
|
|
|
587
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,366
|
|
|
|
587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held-to-maturity
|
|
|
2
|
|
|
$
|
27,306
|
|
|
$
|
2,144
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,306
|
|
|
$
|
2,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
16
|
|
|
$
|
118,535
|
|
|
$
|
11,465
|
|
|
$
|
19,113
|
|
|
$
|
888
|
|
|
$
|
99,422
|
|
|
$
|
10,577
|
|
|
Municipals
|
|
|
3
|
|
|
|
4,220
|
|
|
|
-
|
|
|
|
4,220
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
CLO
|
|
|
11
|
|
|
|
86,752
|
|
|
|
1,645
|
|
|
|
86,752
|
|
|
|
1,645
|
|
|
|
-
|
|
|
|
-
|
|
|
Total other securities
|
|
|
30
|
|
|
|
209,507
|
|
|
|
13,110
|
|
|
|
110,085
|
|
|
|
2,533
|
|
|
|
99,422
|
|
|
|
10,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REMIC and CMO
|
|
|
39
|
|
|
|
243,756
|
|
|
|
7,177
|
|
|
|
17,308
|
|
|
|
200
|
|
|
|
226,448
|
|
|
|
6,977
|
|
|
GNMA
|
|
|
1
|
|
|
|
51
|
|
|
|
-
|
|
|
|
51
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
FNMA
|
|
|
14
|
|
|
|
85,046
|
|
|
|
2,448
|
|
|
|
6,372
|
|
|
|
17
|
|
|
|
78,674
|
|
|
|
2,431
|
|
|
FHLMC
|
|
|
3
|
|
|
|
51,288
|
|
|
|
1,396
|
|
|
|
10,116
|
|
|
|
95
|
|
|
|
41,172
|
|
|
|
1,301
|
|
|
Total mortgage-backed securities
|
|
|
57
|
|
|
|
380,141
|
|
|
|
11,021
|
|
|
|
33,847
|
|
|
|
312
|
|
|
|
346,294
|
|
|
|
10,709
|
|
|
Total securities available for sale
|
|
|
87
|
|
|
$
|
589,648
|
|
|
$
|
24,131
|
|
|
$
|
143,932
|
|
|
$
|
2,845
|
|
|
$
|
445,716
|
|
|
$
|
21,286
|
|
- 10 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
OTTI losses on impaired securities must be fully recognized in earnings if an investor has the intent to sell the debt security or if it is more likely than
not
that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does
not
expect to sell a debt security in an unrealized loss position, the investor must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss has occurred, only the amount of impairment associated with the credit loss is recognized in earnings in the Consolidated Statements of Income. Amounts relating to factors other than credit losses are recorded in accumulated other comprehensive loss (“AOCL”) within Stockholders’ Equity. Unrealized losses on available for sale securities, that are deemed to be temporary, are recorded in AOCL, net of tax.
The Company reviewed each investment that had an unrealized loss at
June 30, 2019
and
December 31, 2018.
The unrealized losses in held-to-maturity municipal securities at
December 31, 2018
were caused by illiquidity in the market and movements in interest rates. The unrealized losses in held-to-maturity FNMA securities at
December 31, 2018
were caused by movements in interest rates. The unrealized losses in securities available for sale at
June 30, 2019
and
December 31, 2018
were caused by movements in interest rates.
It is
not
anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms. The Company does
not
have the intent to sell these securities and it is more likely than
not
the Company will
not
be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations,
none
of which the Company believes would cause the sale of the securities. Therefore, the Company did
not
consider these investments to be other-than-temporarily impaired at
June 30, 2019
and
December 31, 2018.
Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold $26.4 million in mortgage-backed securities during the three and six months ended
June 30, 2019.
The Company did
not
sell any securities during the three and six months ended
June 30, 2018.
The following table represents the gross gains and gross losses realized from the sale of securities available for sale for the periods indicated:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
Gross gains from the sale of securities
|
|
$
|
423
|
|
|
$
|
-
|
|
|
$
|
423
|
|
|
$
|
-
|
|
|
Gross losses from the sale of securities
|
|
|
(438
|
)
|
|
|
-
|
|
|
|
(438
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses from the sale of securities
|
|
$
|
(15
|
)
|
|
$
|
-
|
|
|
$
|
(15
|
)
|
|
$
|
-
|
|
5.
Loans
Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.
Interest on loans is recognized on the accrual basis. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of
90
days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than
90
days delinquent. Payments received on non-accrual loans that do
not
bring the loan to less than
90
days delinquent are recorded on a cash basis. Payments can also be applied
first
as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur.
- 11 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due
90
days or more, are classified as non-accrual unless the loan is well secured and there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Prior to a real estate secured loan becoming
90
days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.
A loan is considered impaired when, based upon current information, the Company believes it is probable that it will be unable to collect all amounts due, both principal and interest, in accordance with the original terms of the loan. Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or, as a practical expedient, the fair value of the collateral if the loan is collateral dependent. All non-accrual loans are considered impaired.
The Company maintains an allowance for loan losses at an amount, which, in management’s judgment, is adequate to absorb probable estimated losses inherent in the loan portfolio. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectability of loans. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available. An unallocated component
may
at times be maintained to cover uncertainties that could affect management's estimate of probable losses. When necessary an unallocated component of the allowance will reflect the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. The allowance is established through charges to earnings in the form of a provision for loan losses based on management’s evaluation of the risk inherent in the various components of the loan portfolio and other factors, including historical loan loss experience (which is updated quarterly), current economic conditions, delinquency and non-accrual trends, classified loan levels, risk in the portfolio and volumes and trends in loan types, recent trends in charge-offs, changes in underwriting standards, experience, ability and depth of the Company’s lenders, collection policies and experience, internal loan review function and other external factors. When a loan or a portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.
The determination of the amount of the allowance for loan losses includes estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and local economic conditions and other factors. We review our loan portfolio by separate categories with similar risk and collateral characteristics. During the
three
months ended
June 30, 2019,
we changed our methodology for reviewing our loan portfolio, to further segregate the commercial business and other portfolio into
two
separate categories. The decision to separate was based on the risk characteristics and loss history being different between the
two
categories. The impact of this change in methodology reduced the ALLL by approximately $0.4 million from what would have been recorded if we did
not
change our methodology. Impaired loans are segregated and reviewed separately.
The Company reviews each impaired loan on an individual basis to determine if either a charge-off or a valuation allowance needs to be allocated to the loan. The Company does
not
charge-off or allocate a valuation allowance to loans for which management has concluded the current value of the underlying collateral will allow for recovery of the loan balance through the sale of the loan or by foreclosure and sale of the property.
The Company considers fair value of collateral dependent loans to be
85%
of the appraised or internally estimated value of the property. The
85%
is based on the actual net proceeds the Bank has received from the sale of other real estate owned (“OREO”) as a percentage of OREO’s appraised value. For collateral dependent taxi medallion loans, the Company considers fair value to be the value of the underlying medallion based upon the most recently reported arm’s length sales transaction. When there is
no
recent sale activity, the fair value is calculated using capitalization rates. For both collateral dependent mortgage loans and taxi medallion loans, the amount by which the loan’s book value exceeds fair value is charged-off.
The Company evaluates the underlying collateral through a
third
party appraisal, or when a
third
party appraisal is
not
available, the Company will use an internal evaluation. The internal evaluations are prepared using an income approach or a sales approach. The income approach is used for income producing properties and uses current revenues less operating expenses to determine the net cash flow of the property. Once the net cash flow is determined, the value of the property is calculated using an appropriate capitalization rate for the property. The sales approach uses comparable sales prices in the market. When an internal evaluation is used, we place greater reliance on the income approach to value the collateral.
The Company
may
restructure a loan to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. This restructure
may
include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as Troubled Debt Restructured (“TDR”).
- 12 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. All loans classified as TDR are considered impaired, however TDR loans which have been current for
six
consecutive months at the time they are restructured as TDR remain on accrual status and are
not
included as part of non-performing loans. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-accrual performing TDR loans until they have made timely payments for
six
consecutive months. These restructurings have
not
included a reduction of principal balance.
The allocation of a portion of the allowance for loan losses for a performing TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate, or for a non-performing TDR loan which is collateral dependent, the fair value of the collateral. At
June 30, 2019,
there were no commitments to lend additional funds to borrowers whose loans were modified to a TDR. The modification of loans to a TDR did
not
have a significant effect on our operating results, nor did it require a significant allocation of the allowance for loan losses.
There were no loan modifications as TDR during
three
and
six
months ended
June 30, 2019
and
2018.
The following table shows our recorded investment for loans classified as TDR that are performing according to their restructured terms at the periods indicated:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
Number
|
|
|
Recorded
|
|
|
Number
|
|
|
Recorded
|
|
|
(Dollars in thousands)
|
|
of contracts
|
|
|
investment
|
|
|
of contracts
|
|
|
investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
7
|
|
|
$
|
1,894
|
|
|
|
7
|
|
|
$
|
1,916
|
|
|
One-to-four family - mixed-use property
|
|
|
5
|
|
|
|
1,660
|
|
|
|
5
|
|
|
|
1,692
|
|
|
One-to-four family - residential
|
|
|
3
|
|
|
|
542
|
|
|
|
3
|
|
|
|
552
|
|
|
Taxi medallion
(1)
|
|
|
8
|
|
|
|
2,193
|
|
|
|
15
|
|
|
|
3,926
|
|
|
Commercial business and other
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
279
|
|
|
Total performing troubled debt restructured
|
|
|
23
|
|
|
$
|
6,289
|
|
|
|
31
|
|
|
$
|
8,365
|
|
|
|
(
1
)
|
Taxi medallion loans in the table above continue to pay as agreed, however the company records interest received on a cash basis.
|
During the
three
and
six
months ended
June 30, 2019
and
2018,
there were no defaults of TDR loans within
12
months of their modification date. During the
six
months ended
June 30, 2018,
we sold one commercial real estate TDR loan totaling $1.8 million, for a loss of $0.3 million and foreclosed on one taxi medallion TDR loan of $35,000, which is included in “Other Assets”.
The following table shows our recorded investment for loans classified as TDR that are
not
performing according to their restructured terms at the periods indicated:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
Number
|
|
|
Recorded
|
|
|
Number
|
|
|
Recorded
|
|
|
(Dollars in thousands)
|
|
of contracts
|
|
|
investment
|
|
|
of contracts
|
|
|
investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
1
|
|
|
$
|
391
|
|
|
|
1
|
|
|
$
|
388
|
|
|
Taxi medallion
|
|
|
3
|
|
|
|
766
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial business and other
|
|
|
2
|
|
|
|
408
|
|
|
|
1
|
|
|
|
1,397
|
|
|
Total troubled debt restructurings that subsequently defaulted
|
|
|
6
|
|
|
$
|
1,565
|
|
|
|
2
|
|
|
$
|
1,785
|
|
- 13 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our non-performing loans at the periods indicated:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual mortgage loans:
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
2,008
|
|
|
$
|
2,410
|
|
|
Commercial real estate
|
|
|
1,488
|
|
|
|
1,379
|
|
|
One-to-four family - mixed-use property
|
|
|
1,752
|
|
|
|
928
|
|
|
One-to-four family - residential
|
|
|
5,411
|
|
|
|
6,144
|
|
|
Total
|
|
|
10,659
|
|
|
|
10,861
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
1,224
|
|
|
|
1,267
|
|
|
Taxi medallion
|
|
|
1,361
|
|
|
|
613
|
|
|
Commercial business and other
|
|
|
2,458
|
|
|
|
3,512
|
|
|
Total
|
|
|
5,043
|
|
|
|
5,392
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans
|
|
|
15,702
|
|
|
|
16,253
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans
|
|
$
|
15,702
|
|
|
$
|
16,253
|
|
The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the periods indicated:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
Interest income that would have been recognized had the loans performed in accordance with their original terms
|
|
$
|
415
|
|
|
$
|
390
|
|
|
$
|
809
|
|
|
$
|
798
|
|
|
Less: Interest income included in the results of operations
|
|
|
123
|
|
|
|
156
|
|
|
|
241
|
|
|
|
315
|
|
|
Total foregone interest
|
|
$
|
292
|
|
|
$
|
234
|
|
|
$
|
568
|
|
|
$
|
483
|
|
- 14 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show by delinquency an analysis of our recorded investment in loans at the periods indicated:
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
than
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
1,466
|
|
|
$
|
346
|
|
|
$
|
2,008
|
|
|
$
|
3,820
|
|
|
$
|
2,260,055
|
|
|
$
|
2,263,875
|
|
|
Commercial real estate
|
|
|
3,341
|
|
|
|
-
|
|
|
|
1,488
|
|
|
|
4,829
|
|
|
|
1,519,864
|
|
|
|
1,524,693
|
|
|
One-to-four family - mixed-use property
|
|
|
986
|
|
|
|
72
|
|
|
|
1,474
|
|
|
|
2,532
|
|
|
|
579,732
|
|
|
|
582,264
|
|
|
One-to-four family - residential
|
|
|
945
|
|
|
|
508
|
|
|
|
5,411
|
|
|
|
6,864
|
|
|
|
177,160
|
|
|
|
184,024
|
|
|
Co-operative apartments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,137
|
|
|
|
8,137
|
|
|
Construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,503
|
|
|
|
58,503
|
|
|
Small Business Administration
|
|
|
-
|
|
|
|
-
|
|
|
|
1,224
|
|
|
|
1,224
|
|
|
|
13,287
|
|
|
|
14,511
|
|
|
Taxi medallion
|
|
|
-
|
|
|
|
-
|
|
|
|
766
|
|
|
|
766
|
|
|
|
2,789
|
|
|
|
3,555
|
|
|
Commercial business and other
|
|
|
3,252
|
|
|
|
-
|
|
|
|
2,458
|
|
|
|
5,710
|
|
|
|
977,863
|
|
|
|
983,573
|
|
|
Total
|
|
$
|
9,990
|
|
|
$
|
926
|
|
|
$
|
14,829
|
|
|
$
|
25,745
|
|
|
$
|
5,597,390
|
|
|
$
|
5,623,135
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
than
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Total Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
1,887
|
|
|
$
|
339
|
|
|
$
|
2,410
|
|
|
$
|
4,636
|
|
|
$
|
2,264,412
|
|
|
$
|
2,269,048
|
|
|
Commercial real estate
|
|
|
379
|
|
|
|
-
|
|
|
|
1,379
|
|
|
|
1,758
|
|
|
|
1,540,789
|
|
|
|
1,542,547
|
|
|
One-to-four family - mixed-use property
|
|
|
1,003
|
|
|
|
322
|
|
|
|
928
|
|
|
|
2,253
|
|
|
|
575,488
|
|
|
|
577,741
|
|
|
One-to-four family - residential
|
|
|
1,564
|
|
|
|
-
|
|
|
|
6,144
|
|
|
|
7,708
|
|
|
|
182,642
|
|
|
|
190,350
|
|
|
Co-operative apartments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,498
|
|
|
|
8,498
|
|
|
Construction loans
|
|
|
-
|
|
|
|
730
|
|
|
|
-
|
|
|
|
730
|
|
|
|
49,870
|
|
|
|
50,600
|
|
|
Small Business Administration
|
|
|
774
|
|
|
|
68
|
|
|
|
1,267
|
|
|
|
2,109
|
|
|
|
13,101
|
|
|
|
15,210
|
|
|
Taxi medallion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,539
|
|
|
|
4,539
|
|
|
Commercial business and other
|
|
|
1,306
|
|
|
|
281
|
|
|
|
2,216
|
|
|
|
3,803
|
|
|
|
873,960
|
|
|
|
877,763
|
|
|
Total
|
|
$
|
6,913
|
|
|
$
|
1,740
|
|
|
$
|
14,344
|
|
|
$
|
22,997
|
|
|
$
|
5,513,299
|
|
|
$
|
5,536,296
|
|
- 15 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the activity in the allowance for loan losses for the
three
month periods indicated:
|
June 30, 2019
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family - residential
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,493
|
|
|
$
|
4,278
|
|
|
$
|
1,791
|
|
|
$
|
731
|
|
|
$
|
351
|
|
|
$
|
409
|
|
|
$
|
-
|
|
|
$
|
7,962
|
|
|
$
|
21,015
|
|
|
Charge-off's
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(113
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
(1,114
|
)
|
|
Recoveries
|
|
|
11
|
|
|
|
7
|
|
|
|
2
|
|
|
|
3
|
|
|
|
-
|
|
|
|
16
|
|
|
|
50
|
|
|
|
46
|
|
|
|
135
|
|
|
Provision (Benefit)
|
|
|
3
|
|
|
|
(20
|
)
|
|
|
(7
|
)
|
|
|
125
|
|
|
|
30
|
|
|
|
(43
|
)
|
|
|
(50
|
)
|
|
|
1,436
|
|
|
|
1,474
|
|
|
Ending balance
|
|
$
|
5,506
|
|
|
$
|
4,265
|
|
|
$
|
1,786
|
|
|
$
|
746
|
|
|
$
|
381
|
|
|
$
|
382
|
|
|
$
|
-
|
|
|
$
|
8,444
|
|
|
$
|
21,510
|
|
|
June 30, 2018
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family - residential
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,750
|
|
|
$
|
4,602
|
|
|
$
|
2,470
|
|
|
$
|
1,041
|
|
|
$
|
191
|
|
|
$
|
675
|
|
|
$
|
-
|
|
|
$
|
5,813
|
|
|
$
|
-
|
|
|
$
|
20,542
|
|
|
Charge-off's
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(27
|
)
|
|
|
(353
|
)
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(416
|
)
|
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
79
|
|
|
|
4
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
94
|
|
|
Provision (Benefit)
|
|
|
(184
|
)
|
|
|
124
|
|
|
|
(252
|
)
|
|
|
(42
|
)
|
|
|
73
|
|
|
|
(108
|
)
|
|
|
353
|
|
|
|
25
|
|
|
|
11
|
|
|
|
-
|
|
|
Ending balance
|
|
$
|
5,538
|
|
|
$
|
4,726
|
|
|
$
|
2,297
|
|
|
$
|
1,003
|
|
|
$
|
264
|
|
|
$
|
549
|
|
|
$
|
-
|
|
|
$
|
5,832
|
|
|
$
|
11
|
|
|
$
|
20,220
|
|
- 16 -
The following tables show the activity in the allowance for loan losses for the
six
month periods indicated:
|
June 30, 2019
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family - residential
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,676
|
|
|
$
|
4,315
|
|
|
$
|
1,867
|
|
|
$
|
749
|
|
|
$
|
329
|
|
|
$
|
418
|
|
|
$
|
-
|
|
|
$
|
7,591
|
|
|
$
|
20,945
|
|
|
Charge-off's
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(113
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,137
|
)
|
|
|
(2,252
|
)
|
|
Recoveries
|
|
|
24
|
|
|
|
7
|
|
|
|
88
|
|
|
|
7
|
|
|
|
-
|
|
|
|
20
|
|
|
|
134
|
|
|
|
91
|
|
|
|
371
|
|
|
Provision (Benefit)
|
|
|
(193
|
)
|
|
|
(57
|
)
|
|
|
(168
|
)
|
|
|
103
|
|
|
|
52
|
|
|
|
(56
|
)
|
|
|
(134
|
)
|
|
|
2,899
|
|
|
|
2,446
|
|
|
Ending balance
|
|
$
|
5,506
|
|
|
$
|
4,265
|
|
|
$
|
1,786
|
|
|
$
|
746
|
|
|
$
|
381
|
|
|
$
|
382
|
|
|
$
|
-
|
|
|
$
|
8,444
|
|
|
$
|
21,510
|
|
|
June 30, 2018
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family - residential
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,823
|
|
|
$
|
4,643
|
|
|
$
|
2,545
|
|
|
$
|
1,082
|
|
|
$
|
68
|
|
|
$
|
669
|
|
|
$
|
-
|
|
|
$
|
5,521
|
|
|
$
|
-
|
|
|
$
|
20,351
|
|
|
Charge-off's
|
|
|
(81
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(52
|
)
|
|
|
(353
|
)
|
|
|
(14
|
)
|
|
|
-
|
|
|
|
(501
|
)
|
|
Recoveries
|
|
|
2
|
|
|
|
-
|
|
|
|
79
|
|
|
|
112
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
217
|
|
|
Provision (Benefit)
|
|
|
(206
|
)
|
|
|
83
|
|
|
|
(327
|
)
|
|
|
(190
|
)
|
|
|
196
|
|
|
|
(83
|
)
|
|
|
353
|
|
|
|
316
|
|
|
|
11
|
|
|
|
153
|
|
|
Ending balance
|
|
$
|
5,538
|
|
|
$
|
4,726
|
|
|
$
|
2,297
|
|
|
$
|
1,003
|
|
|
$
|
264
|
|
|
$
|
549
|
|
|
$
|
-
|
|
|
$
|
5,832
|
|
|
$
|
11
|
|
|
$
|
20,220
|
|
- 17 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the manner in which loans were evaluated for impairment at the periods indicated:
|
June 30, 2019
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family- residential
|
|
|
Co-operative apartments
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
2,263,875
|
|
|
$
|
1,524,693
|
|
|
$
|
582,264
|
|
|
$
|
184,024
|
|
|
$
|
8,137
|
|
|
$
|
58,503
|
|
|
$
|
14,511
|
|
|
$
|
3,555
|
|
|
$
|
983,573
|
|
|
$
|
5,623,135
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
4,119
|
|
|
$
|
1,555
|
|
|
$
|
3,430
|
|
|
$
|
6,150
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,224
|
|
|
$
|
3,555
|
|
|
$
|
2,458
|
|
|
$
|
22,491
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
2,259,756
|
|
|
$
|
1,523,138
|
|
|
$
|
578,834
|
|
|
$
|
177,874
|
|
|
$
|
8,137
|
|
|
$
|
58,503
|
|
|
$
|
13,287
|
|
|
$
|
-
|
|
|
$
|
981,115
|
|
|
$
|
5,600,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
49
|
|
|
$
|
49
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
178
|
|
|
$
|
372
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
5,410
|
|
|
$
|
4,265
|
|
|
$
|
1,737
|
|
|
$
|
697
|
|
|
$
|
-
|
|
|
$
|
381
|
|
|
$
|
382
|
|
|
$
|
-
|
|
|
$
|
8,266
|
|
|
$
|
21,138
|
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Multi-family residential
|
|
|
Commercial real estate
|
|
|
One-to-four family - mixed-use property
|
|
|
One-to-four family- residential
|
|
|
Co-operative apartments
|
|
|
Construction loans
|
|
|
Small Business Administration
|
|
|
Taxi medallion
|
|
|
Commercial business and other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
2,269,048
|
|
|
$
|
1,542,547
|
|
|
$
|
577,741
|
|
|
$
|
190,350
|
|
|
$
|
8,498
|
|
|
$
|
50,600
|
|
|
$
|
15,210
|
|
|
$
|
4,539
|
|
|
$
|
877,763
|
|
|
$
|
5,536,296
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
4,500
|
|
|
$
|
1,435
|
|
|
$
|
3,098
|
|
|
$
|
6,889
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,267
|
|
|
$
|
4,539
|
|
|
$
|
3,791
|
|
|
$
|
25,519
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
2,264,548
|
|
|
$
|
1,541,112
|
|
|
$
|
574,643
|
|
|
$
|
183,461
|
|
|
$
|
8,498
|
|
|
$
|
50,600
|
|
|
$
|
13,943
|
|
|
$
|
-
|
|
|
$
|
873,972
|
|
|
$
|
5,510,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
100
|
|
|
$
|
-
|
|
|
$
|
143
|
|
|
$
|
51
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
866
|
|
|
$
|
1,160
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
5,576
|
|
|
$
|
4,315
|
|
|
$
|
1,724
|
|
|
$
|
698
|
|
|
$
|
-
|
|
|
$
|
329
|
|
|
$
|
418
|
|
|
$
|
-
|
|
|
$
|
6,725
|
|
|
$
|
19,785
|
|
- 18 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for impaired loans at the periods indicated:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
2,856
|
|
|
$
|
3,199
|
|
|
$
|
-
|
|
|
$
|
3,225
|
|
|
$
|
3,568
|
|
|
$
|
-
|
|
|
Commercial real estate
|
|
|
1,555
|
|
|
|
1,555
|
|
|
|
-
|
|
|
|
1,435
|
|
|
|
1,435
|
|
|
|
-
|
|
|
One-to-four family mixed-use property
|
|
|
2,433
|
|
|
|
2,574
|
|
|
|
-
|
|
|
|
1,913
|
|
|
|
2,113
|
|
|
|
-
|
|
|
One-to-four family residential
|
|
|
5,759
|
|
|
|
5,926
|
|
|
|
-
|
|
|
|
6,490
|
|
|
|
6,643
|
|
|
|
-
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
1,224
|
|
|
|
1,494
|
|
|
|
-
|
|
|
|
1,267
|
|
|
|
1,609
|
|
|
|
-
|
|
|
Taxi medallion
|
|
|
3,555
|
|
|
|
9,772
|
|
|
|
-
|
|
|
|
4,539
|
|
|
|
12,788
|
|
|
|
-
|
|
|
Commercial business and other
|
|
|
1,804
|
|
|
|
3,924
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with no related allowance recorded
|
|
|
19,186
|
|
|
|
28,444
|
|
|
|
-
|
|
|
|
18,869
|
|
|
|
28,156
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
1,263
|
|
|
|
1,263
|
|
|
|
96
|
|
|
|
1,275
|
|
|
|
1,275
|
|
|
|
100
|
|
|
One-to-four family mixed-use property
|
|
|
997
|
|
|
|
997
|
|
|
|
49
|
|
|
|
1,185
|
|
|
|
1,185
|
|
|
|
143
|
|
|
One-to-four family residential
|
|
|
391
|
|
|
|
391
|
|
|
|
49
|
|
|
|
399
|
|
|
|
399
|
|
|
|
51
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business and other
|
|
|
654
|
|
|
|
654
|
|
|
|
178
|
|
|
|
3,791
|
|
|
|
3,791
|
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with an allowance recorded
|
|
|
3,305
|
|
|
|
3,305
|
|
|
|
372
|
|
|
|
6,650
|
|
|
|
6,650
|
|
|
|
1,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
$
|
15,254
|
|
|
$
|
15,905
|
|
|
$
|
194
|
|
|
$
|
15,922
|
|
|
$
|
16,618
|
|
|
$
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-mortgage loans
|
|
$
|
7,237
|
|
|
$
|
15,844
|
|
|
$
|
178
|
|
|
$
|
9,597
|
|
|
$
|
18,188
|
|
|
$
|
866
|
|
- 19 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our average recorded investment and interest income recognized for impaired loans for the
three
months ended:
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
2,846
|
|
|
$
|
9
|
|
|
$
|
4,431
|
|
|
$
|
16
|
|
|
Commercial real estate
|
|
|
1,326
|
|
|
|
15
|
|
|
|
5,847
|
|
|
|
52
|
|
|
One-to-four family mixed-use property
|
|
|
2,208
|
|
|
|
17
|
|
|
|
4,397
|
|
|
|
39
|
|
|
One-to-four family residential
|
|
|
5,914
|
|
|
|
2
|
|
|
|
8,382
|
|
|
|
10
|
|
|
Construction
|
|
|
475
|
|
|
|
-
|
|
|
|
365
|
|
|
|
10
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
1,226
|
|
|
|
-
|
|
|
|
74
|
|
|
|
1
|
|
|
Taxi medallion
|
|
|
3,723
|
|
|
|
48
|
|
|
|
6,421
|
|
|
|
86
|
|
|
Commercial business and other
|
|
|
1,513
|
|
|
|
-
|
|
|
|
7,954
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with no related allowance recorded
|
|
|
19,231
|
|
|
|
91
|
|
|
|
37,871
|
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
1,266
|
|
|
|
18
|
|
|
|
2,203
|
|
|
|
30
|
|
|
One-to-four family mixed-use property
|
|
|
1,001
|
|
|
|
10
|
|
|
|
1,212
|
|
|
|
15
|
|
|
One-to-four family residential
|
|
|
393
|
|
|
|
4
|
|
|
|
409
|
|
|
|
4
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business and other
|
|
|
773
|
|
|
|
-
|
|
|
|
318
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with an allowance recorded
|
|
|
3,433
|
|
|
|
32
|
|
|
|
4,142
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
$
|
15,429
|
|
|
$
|
75
|
|
|
$
|
27,246
|
|
|
$
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-mortgage loans
|
|
$
|
7,235
|
|
|
$
|
48
|
|
|
$
|
14,767
|
|
|
$
|
399
|
|
- 20 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our average recorded investment and interest income recognized for impaired loans for the
six
months ended:
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
`
|
|
|
Interest
|
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
2,972
|
|
|
$
|
18
|
|
|
$
|
4,651
|
|
|
$
|
36
|
|
|
Commercial real estate
|
|
|
1,362
|
|
|
|
15
|
|
|
|
6,266
|
|
|
|
126
|
|
|
One-to-four family mixed-use property
|
|
|
2,110
|
|
|
|
34
|
|
|
|
4,337
|
|
|
|
80
|
|
|
One-to-four family residential
|
|
|
6,106
|
|
|
|
4
|
|
|
|
8,678
|
|
|
|
25
|
|
|
Construction
|
|
|
317
|
|
|
|
-
|
|
|
|
243
|
|
|
|
10
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
1,239
|
|
|
|
-
|
|
|
|
95
|
|
|
|
2
|
|
|
Taxi medallion
|
|
|
3,995
|
|
|
|
106
|
|
|
|
6,559
|
|
|
|
168
|
|
|
Commercial business and other
|
|
|
1,009
|
|
|
|
-
|
|
|
|
5,407
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with no related allowance recorded
|
|
|
19,110
|
|
|
|
177
|
|
|
|
36,236
|
|
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
1,269
|
|
|
|
36
|
|
|
|
2,208
|
|
|
|
59
|
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
662
|
|
|
|
-
|
|
|
One-to-four family mixed-use property
|
|
|
1,062
|
|
|
|
20
|
|
|
|
1,217
|
|
|
|
24
|
|
|
One-to-four family residential
|
|
|
395
|
|
|
|
8
|
|
|
|
411
|
|
|
|
8
|
|
|
Non-mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business and other
|
|
|
1,779
|
|
|
|
-
|
|
|
|
328
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with an allowance recorded
|
|
|
4,505
|
|
|
|
64
|
|
|
|
4,826
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
$
|
15,593
|
|
|
$
|
135
|
|
|
$
|
28,673
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-mortgage loans
|
|
$
|
8,022
|
|
|
$
|
106
|
|
|
$
|
12,389
|
|
|
$
|
489
|
|
In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does
not
fall within
one
of the previous mentioned categories then the loan would be considered “Pass.” Loans that are non-accrual are designated as Substandard, Doubtful or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that
may
jeopardize the orderly liquidation of the debt. We designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does
not
hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for Loan Losses. We designate a loan as Special Mention if the asset does
not
warrant classification within
one
of the other classifications, but does contain a potential weakness that deserves closer attention.
- 21 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the recorded investment in loans designated as Criticized or Classified at the periods indicated:
|
|
|
June 30, 2019
|
|
|
(In thousands)
|
|
Special Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
1,290
|
|
|
$
|
2,225
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,515
|
|
|
Commercial real estate
|
|
|
371
|
|
|
|
1,555
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,926
|
|
|
One-to-four family - mixed-use property
|
|
|
912
|
|
|
|
2,122
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,034
|
|
|
One-to-four family - residential
|
|
|
726
|
|
|
|
5,921
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,647
|
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Small Business Administration
|
|
|
56
|
|
|
|
114
|
|
|
|
-
|
|
|
|
-
|
|
|
|
170
|
|
|
Taxi medallion
|
|
|
-
|
|
|
|
3,555
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,555
|
|
|
Commercial business and other
|
|
|
6,856
|
|
|
|
15,262
|
|
|
|
879
|
|
|
|
-
|
|
|
|
22,997
|
|
|
Total loans
|
|
$
|
10,211
|
|
|
$
|
30,754
|
|
|
$
|
879
|
|
|
$
|
-
|
|
|
$
|
41,844
|
|
|
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Special Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
$
|
2,498
|
|
|
$
|
4,166
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,664
|
|
|
Commercial real estate
|
|
|
381
|
|
|
|
4,051
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,432
|
|
|
One-to-four family - mixed-use property
|
|
|
1,199
|
|
|
|
2,034
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,233
|
|
|
One-to-four family - residential
|
|
|
557
|
|
|
|
6,665
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,222
|
|
|
Construction
|
|
|
730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
730
|
|
|
Small Business Administration
|
|
|
481
|
|
|
|
139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
|
Taxi medallion
|
|
|
-
|
|
|
|
4,539
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,539
|
|
|
Commercial business and other
|
|
|
730
|
|
|
|
21,348
|
|
|
|
3,512
|
|
|
|
-
|
|
|
|
25,590
|
|
|
Total loans
|
|
$
|
6,576
|
|
|
$
|
42,942
|
|
|
$
|
3,512
|
|
|
$
|
-
|
|
|
$
|
53,030
|
|
Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) amounted to $84.3 million and $233.2 million, respectively, at
June 30, 2019.
6.
Loans held for sale
Loans held for sale are carried at the lower of cost or estimated fair value. At
June 30, 2019
and
December 31, 2018,
the Bank did
no
t
have any loans held for sale.
The Company has implemented a strategy of selling certain delinquent and non-performing loans. Once the Company has decided to sell a loan, the sale usually closes in a short period of time, generally within the same quarter. Loans designated held for sale are reclassified from loans held for investment to loans held for sale. Terms of sale include cash due upon the closing of the sale,
no
contingencies or recourse to the Company and servicing is released to the buyer. Additionally, at times the Company
may
sell participating interests in performing loans.
- 22 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show loans sold during the period indicated:
|
|
|
For the three months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Loans sold
|
|
|
Proceeds
|
|
|
Net gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
3
|
|
|
$
|
2,069
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3
|
|
|
$
|
2,069
|
|
|
$
|
114
|
|
|
|
|
For the three months ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Loans sold
|
|
|
Proceeds
|
|
|
Net gain
|
|
|
Delinquent and non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
2
|
|
|
$
|
2,065
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
2,065
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
9
|
|
|
$
|
5,671
|
|
|
$
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9
|
|
|
$
|
5,671
|
|
|
$
|
393
|
|
|
|
|
For the six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Recoveries
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Loans sold
|
|
|
Proceeds
|
|
|
(Charge-offs)
|
|
|
Net gain
|
|
|
Delinquent and non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential
|
|
|
2
|
|
|
$
|
765
|
|
|
$
|
-
|
|
|
$
|
63
|
|
|
One-to-four family - mixed-use property
|
|
|
1
|
|
|
|
405
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3
|
|
|
$
|
1,170
|
|
|
$
|
(1
|
)
|
|
$
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
3
|
|
|
$
|
2,069
|
|
|
$
|
-
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3
|
|
|
$
|
2,069
|
|
|
$
|
-
|
|
|
$
|
114
|
|
- 23 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
For the six months ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Loans sold
|
|
|
Proceeds
|
|
|
Net gain (loss)
|
|
|
Delinquent and non-performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family - residential
|
|
|
3
|
|
|
$
|
964
|
|
|
$
|
-
|
|
|
Commercial real estate
|
|
|
3
|
|
|
|
3,565
|
|
|
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6
|
|
|
$
|
4,529
|
|
|
$
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business Administration
|
|
|
9
|
|
|
$
|
5,671
|
|
|
$
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9
|
|
|
$
|
5,671
|
|
|
$
|
393
|
|
7.
Other Real Estate Owned
OREO are included in other assets on the Company’s Consolidated Statements of Financial Condition. The following table shows changes in OREO during the periods indicated:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
-
|
|
|
$
|
638
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Acquisitions
|
|
|
239
|
|
|
|
-
|
|
|
|
239
|
|
|
|
638
|
|
|
Sales
|
|
|
-
|
|
|
|
(638
|
)
|
|
|
-
|
|
|
|
(638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
239
|
|
|
$
|
-
|
|
|
$
|
239
|
|
|
$
|
-
|
|
The following table shows the gross gains, gross losses and write-downs of OREO reported in the Consolidated Statements of Income during the periods indicated:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross gains
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
-
|
|
|
$
|
27
|
|
Included within net loans as of
June 30, 2019
and
December 31, 2018
was a recorded investment of $7.1 million and $7.2 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
- 24 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
8
.
Leases
The Company has 19 operating leases for branches and office spaces, nine operating leases for vehicles, and two operating leases for equipment. Our leases have remaining lease terms ranging from 1 month to 13 years,
none
of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.
The Company has elected the short-term lease recognition exemption such that the Company will
not
recognize right-of-use assets or lease liabilities for leases with a term of less than
12
months from the commencement date. The Company has one agreement that qualifies as a short-term lease with expense totaling $34,000 and $68,000 for the
three
and
six
months ended
June 30, 2019,
respectively, included in Professional services on the Consolidated Statements of Income. The Company has $0.2 million and $0.4 million in variable lease payments, which include insurance and real estate tax expenses for the
three
and
six
months ended
June 30, 2019,
respectively. At
June 30, 2019,
the weighted-average remaining lease term for our operating leases is 8 years and the weighted average discount rate is 3.8%. At
June 30, 2019,
there were
no
significant leases entered into but
not
yet commenced. Our lease agreements do
not
contain any residual value guarantees.
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
(Dollars in thousands)
|
|
June 30, 2019
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease ROU assets
|
|
$
|
42,557
|
|
|
$
|
42,557
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
$
|
50,898
|
|
|
$
|
50,898
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Cost
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
1,893
|
|
|
$
|
3,785
|
|
|
Short-term lease cost
|
|
|
34
|
|
|
|
68
|
|
|
Variable lease cost
|
|
|
244
|
|
|
|
423
|
|
|
Total lease cost
|
|
$
|
2,171
|
|
|
$
|
4,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
2,025
|
|
|
$
|
4,050
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
21
|
|
|
$
|
42
|
|
|
Weighted-average remaining lease term-operating leases (in years)
|
|
8.0
|
|
|
8.0
|
|
|
Weighted average discount rate-operating leases
|
|
|
3.8
|
%
|
|
|
3.8
|
%
|
- 25 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows:
|
|
|
Minimum Rental
|
|
|
|
|
(In thousands)
|
|
|
Years ended December 31:
|
|
|
|
|
|
2019
|
|
$
|
3,700
|
|
|
2020
|
|
|
8,259
|
|
|
2021
|
|
|
7,508
|
|
|
2022
|
|
|
7,093
|
|
|
2023
|
|
|
7,229
|
|
|
Thereafter
|
|
|
25,490
|
|
|
Total minimum payments required
|
|
|
59,279
|
|
|
Less: implied interest
|
|
|
8,381
|
|
|
Total lease obligations
|
|
$
|
50,898
|
|
Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-cancelable operating lease agreements expire through
2032.
9
. Stock-Based Compensation
On
January 31, 2019,
the Board of Directors approved a
2019
long-term incentive compensation program for certain Company executive officers that includes grants of performance-based restricted stock units (“PRSUs”) in addition to time-based restricted stock units (“RSU”). Under the terms of the PRSU Agreement, the number of PRSUs that
may
be earned depends on the extent to which performance goals for the award are achieved over a 3-year performance period, as determined by the Compensation Committee of the Board. The number of PRSUs that
may
be earned ranges from
0%
to
150%
of the target award, with no PRSUs earned for below threshold-level performance, 50% of PRSUs earned for threshold-level performance, 100% of PRSUs earned for target-level performance, and 150% of PRSUs earned for maximum-level performance.
For the
three
months ended
June 30, 2019
and
2018,
the Company’s net income, as reported, included $1.4 million and $1.2 million, respectively, of stock-based compensation costs and $0.3 million and $0.3 million of income tax benefits, respectively, related to the stock-based compensation plans in each of the periods. For the
six
months ended
June 30, 2019
and
2018,
the Company’s net income, as reported, includes $5.4 million and $4.6 million, respectively, of stock-based compensation costs and $1.3 million and $1.0 million of income tax benefits, respectively, related to the stock-based compensation plans in each of the periods. During the
six
months ended
June 30, 2019,
the Company granted 263,574 and 57,870 in RSU awards and PRSU awards, respectively. During the
three
months ended
June 30, 2019,
the Company did
not
grant any RSU or PRSU awards. During the
three
and
six
months ended
June 30, 2018,
the Company granted 5,600 and 280,590 RSU awards, respectively. The Company has
no
t
granted stock options since
2009
and at
June 30, 2019,
had none outstanding.
The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight-line method.
- 26 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s RSU and PRSU awards at or for the
six
months ended
June 30, 2019:
|
|
|
RSU Awards
|
|
|
PRSU Awards
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2018
|
|
|
502,658
|
|
|
$
|
24.93
|
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
|
263,574
|
|
|
|
22.38
|
|
|
|
57,870
|
|
|
|
22.38
|
|
|
Vested
|
|
|
(259,329
|
)
|
|
|
23.24
|
|
|
|
(27,110
|
)
|
|
|
22.38
|
|
|
Forfeited
|
|
|
(21,545
|
)
|
|
|
24.81
|
|
|
|
-
|
|
|
|
-
|
|
|
Non-vested at June 30, 2019
|
|
|
485,358
|
|
|
$
|
24.45
|
|
|
|
30,760
|
|
|
$
|
22.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested but unissued at June 30, 2019
|
|
|
218,778
|
|
|
$
|
24.64
|
|
|
|
21,310
|
|
|
$
|
22.38
|
|
As of
June 30, 2019,
there was $10.0 million of total unrecognized compensation cost related to RSU and PRSU awards granted. That cost is expected to be recognized over a weighted-average period of 3.6 years. The total fair value of awards vested for the
three
months ended
June 30, 2019
and
2018
was $0.2 million and $28,000, respectively. The total fair value of awards vested for the
six
months ended
June 30, 2019
and
2018
was $6.2 million and $6.7 million, respectively. The vested but unissued RSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have
no
risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates.
Phantom Stock Plan:
The Company maintains a non-qualified phantom stock plan as a supplement to its profit sharing plan for officers who have achieved the designated level and completed 1 year of service. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.
The following table summarizes the Phantom Stock Plan at or for the
six
months ended
June 30, 2019:
|
Phantom Stock Plan
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
99,313
|
|
|
$
|
21.53
|
|
|
Granted
|
|
|
9,175
|
|
|
|
22.15
|
|
|
Distributions
|
|
|
(1,012
|
)
|
|
|
22.00
|
|
|
Outstanding at June 30, 2019
|
|
|
107,476
|
|
|
$
|
22.20
|
|
|
Vested at June 30, 2019
|
|
|
106,929
|
|
|
$
|
22.20
|
|
The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of $0.1 million and ($0.1) for the
three
months ended
June 30, 2019
and
2018,
respectively. The total fair value of the distributions from the Phantom Stock Plan was less than $1,000 for each of the
three
months ended
June 30, 2019
and
2018,
respectively.
The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of $0.1 million and ($0.1) million for the
six
months ended
June 30, 2019
and
2018,
respectively. The total fair value of the distributions from the Phantom Stock Plan was $22,000 and $1,000 for the
six
months ended
June 30, 2019
and
2018,
respectively.
- 27 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
10
. Pension and Other Postretirement Benefit Plans
The following table sets forth information regarding the components of net expense for the pension and other postretirement benefit plans.
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Pension Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
199
|
|
|
$
|
195
|
|
|
$
|
398
|
|
|
$
|
390
|
|
|
Amortization of unrecognized loss
|
|
|
66
|
|
|
|
156
|
|
|
|
133
|
|
|
|
311
|
|
|
Expected return on plan assets
|
|
|
(272
|
)
|
|
|
(363
|
)
|
|
|
(544
|
)
|
|
|
(726
|
)
|
|
Net employee pension benefit
|
|
$
|
(7
|
)
|
|
$
|
(12
|
)
|
|
$
|
(13
|
)
|
|
$
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outside Director Pension Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
Interest cost
|
|
|
21
|
|
|
|
20
|
|
|
|
42
|
|
|
|
40
|
|
|
Amortization of unrecognized gain
|
|
|
(35
|
)
|
|
|
(23
|
)
|
|
|
(70
|
)
|
|
|
(46
|
)
|
|
Amortization of past service liability
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
6
|
|
|
Net outside director pension (benefit) expense
|
|
$
|
(4
|
)
|
|
$
|
11
|
|
|
$
|
(8
|
)
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefit Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
70
|
|
|
$
|
88
|
|
|
$
|
140
|
|
|
$
|
176
|
|
|
Interest cost
|
|
|
85
|
|
|
|
77
|
|
|
|
170
|
|
|
|
154
|
|
|
Amortization of past service credit
|
|
|
(20
|
)
|
|
|
(12
|
)
|
|
|
(42
|
)
|
|
|
(25
|
)
|
|
Net other postretirement expense
|
|
$
|
135
|
|
|
$
|
153
|
|
|
$
|
268
|
|
|
$
|
305
|
|
The Company previously disclosed in its Consolidated Financial Statements for the year ended
December 31, 2018
that it expects to contribute
$0.3
million to each of the Outside Director Pension Plan (the “Outside Director Pension Plan”) and the other postretirement benefit plans (the “Other Postretirement Benefit Plans”), during the year ending
December 31, 2019.
The Company does
not
expect to make a contribution to the Employee Pension Plan (the “Employee Pension Plan”). As of
June 30, 2019,
the Company had contributed $72,000 to the Outside Director Pension Plan and $37,000 in contributions were made to the Other Postretirement Benefit Plans. As of
June 30, 2019,
the Company has
no
t
revised its expected contributions for the year ending
December 31, 2019.
1
1
.
Fair Value of Financial Instruments
The Company carries certain financial assets and financial liabilities at fair value in accordance with GAAP which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. At
June 30, 2019,
the Company carried financial assets and financial liabilities under the fair value option with fair values of $14.2 million and $43.4 million, respectively. At
December 31, 2018,
the Company carried financial assets and financial liabilities under the fair value option with fair values of $13.8 million and $41.8 million, respectively. The Company did
not
elect to carry any additional financial assets or financial liabilities under the fair value option during the
three
and
six
months ended
June 30, 2019
and
2018.
- 28 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the financial assets and financial liabilities reported at fair value under the fair value option, and the changes in fair value included in the Consolidated Statement of Income – Net gain (loss) from fair value adjustments, at or for the periods ended as indicated:
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Changes in Fair Values For Items Measured at Fair Value
|
|
|
|
|
Measurements
|
|
|
Measurements
|
|
|
Pursuant to Election of the Fair Value Option
|
|
|
|
|
at June 30,
|
|
|
at December 31,
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
848
|
|
|
$
|
967
|
|
|
$
|
1
|
|
|
$
|
-
|
|
|
$
|
2
|
|
|
$
|
(11
|
)
|
|
Other securities
|
|
|
13,346
|
|
|
|
12,843
|
|
|
|
184
|
|
|
|
(62
|
)
|
|
|
363
|
|
|
|
(200
|
)
|
|
Borrowed funds
|
|
|
43,414
|
|
|
|
41,849
|
|
|
|
(544
|
)
|
|
|
(867
|
)
|
|
|
(1,754
|
)
|
|
|
(2,548
|
)
|
|
Net loss from fair value adjustments
(1)(2)
|
|
|
|
|
|
|
|
|
|
$
|
(359
|
)
|
|
$
|
(929
|
)
|
|
$
|
(1,389
|
)
|
|
$
|
(2,759
|
)
|
|
|
(
1
)
|
The net loss from fair value adjustments presented in the above table does
not
include net (losses) gains of ($1.6) million and $0.7 million for the
three
months ended
June 30, 2019
and
2018,
respectively, from the change in the fair value of interest rate swaps.
|
|
|
(
2
)
|
The net loss from fair value adjustments presented in the above table does
not
include net (losses) gains of ($2.6) million and $2.4 million for the
six
months ended
June 30, 2019
and
2018,
respectively, from the change in the fair value of interest rate swaps.
|
Included in the fair value of the financial assets and financial liabilities selected for the fair value option is the accrued interest receivable or payable for the related instrument. The Company reports as interest income or interest expense in the Consolidated Statement of Income, the interest receivable or payable on the financial instruments selected for the fair value option at their respective contractual rates.
The borrowed funds had a contractual principal amount of $61.9 million at both
June 30, 2019
and
December 31, 2018.
The fair value of borrowed funds includes accrued interest payable of
$0.2
million at both
June 30, 2019
and
December 31, 2018,
respectively.
The Company generally holds its earning assets, other than securities available for sale, to maturity and settles its liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market information. These estimates do
not
reflect any premium or discount that could result from offering for sale at
one
time the Company’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and prepayments, fair value estimates change and these amounts
may
not
necessarily be realized in an immediate sale.
Disclosure of fair value does
not
require fair value information for items that do
not
meet the definition of a financial instrument or certain other financial instruments specifically excluded from its requirements. These items include core deposit intangibles and other customer relationships, premises and equipment, leases, income taxes and equity.
Further, fair value disclosure does
not
attempt to value future income or business. These items
may
be material and accordingly, the fair value information presented does
not
purport to represent, nor should it be construed to represent, the underlying “market” or franchise value of the Company.
Financial assets and financial liabilities reported at fair value are required to be measured based on either: (
1
) quoted prices in active markets for identical financial instruments (Level
1
); (
2
) significant other observable inputs (Level
2
); or (
3
) significant unobservable inputs (Level
3
).
A description of the methods and significant assumptions utilized in estimating the fair value of the Company’s assets and liabilities that are carried at fair value on a recurring basis are as follows:
Level
1
– where quoted market prices are available in an active market. At
June 30, 2019
and
December 31, 2018,
Level
1
included
one
mutual fund.
Level
2
– when quoted market prices are
not
available, fair value is estimated using quoted market prices for similar financial instruments and adjusted for differences between the quoted instrument and the instrument being valued. Fair value can also be estimated by using pricing models, or discounted cash flows. Pricing models primarily use market-based or independently sourced market parameters as inputs, including, but
not
limited to, yield curves, interest rates, equity or debt prices and credit spreads. In addition to observable market information, models also incorporate maturity and cash flow assumptions. At
June 30, 2019
and
December 31, 2018,
Level
2
included mortgage related securities, corporate debt, municipals and interest rate swaps.
- 29 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Level
3
– when there is limited activity or less transparency around inputs to the valuation, financial instruments are classified as Level
3.
At
June 30, 2019
and
December 31, 2018,
Level
3
included trust preferred securities owned and junior subordinated debentures issued by the Company.
The methods described above
may
produce fair values that
may
not
be indicative of net realizable value or reflective of future fair values. While the Company believes, its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies, assumptions and models to determine fair value of certain financial instruments could produce different estimates of fair value at the reporting date.
The following table sets forth the assets and liabilities that are carried at fair value on a recurring basis and their respective category in the fair value hierarchy at
June 30, 2019
and
December 31, 2018:
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active Markets
|
|
|
Significant Other
|
|
|
Significant Other
|
|
|
|
|
|
|
|
|
|
|
|
|
for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
Total carried at fair value
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
on a recurring basis
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed Securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
554,481
|
|
|
$
|
557,953
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
554,481
|
|
|
$
|
557,953
|
|
|
Other securities
|
|
|
12,042
|
|
|
|
11,586
|
|
|
|
240,827
|
|
|
|
251,860
|
|
|
|
1,303
|
|
|
|
1,256
|
|
|
|
254,172
|
|
|
|
264,702
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
-
|
|
|
|
1,635
|
|
|
|
15,961
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,635
|
|
|
|
15,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,042
|
|
|
$
|
11,586
|
|
|
$
|
796,943
|
|
|
$
|
825,774
|
|
|
$
|
1,303
|
|
|
$
|
1,256
|
|
|
$
|
810,288
|
|
|
$
|
838,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,414
|
|
|
$
|
41,849
|
|
|
$
|
43,414
|
|
|
$
|
41,849
|
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
-
|
|
|
|
20,147
|
|
|
|
2,239
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,147
|
|
|
|
2,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,147
|
|
|
$
|
2,239
|
|
|
$
|
43,414
|
|
|
$
|
41,849
|
|
|
$
|
63,561
|
|
|
$
|
44,088
|
|
The following tables sets forth the Company's assets and liabilities that are carried at fair value on a recurring basis, classified within Level
3
of the valuation hierarchy for the periods indicated:
|
|
|
For the three months ended
|
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
Trust preferred
|
|
|
Junior subordinated
|
|
|
Trust preferred
|
|
|
Junior subordinated
|
|
|
|
|
securities
|
|
|
debentures
|
|
|
securities
|
|
|
debentures
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,289
|
|
|
$
|
42,941
|
|
|
$
|
1,162
|
|
|
$
|
38,692
|
|
|
Net gain from fair value adjustment of financial assets
(1)
|
|
|
15
|
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
Net loss from fair value adjustment of financial liabilities
(1)
|
|
|
-
|
|
|
|
543
|
|
|
|
-
|
|
|
|
867
|
|
|
Increase (decrease) in accrued interest receivable
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
Increase (decrease) in accrued interest payable
|
|
|
-
|
|
|
|
(21
|
)
|
|
|
-
|
|
|
|
26
|
|
|
Change in unrealized gains included in other comprehensive income
|
|
|
-
|
|
|
|
(49
|
)
|
|
|
-
|
|
|
|
(19
|
)
|
|
Ending balance
|
|
$
|
1,303
|
|
|
$
|
43,414
|
|
|
$
|
1,188
|
|
|
$
|
39,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains held at period end
|
|
$
|
-
|
|
|
$
|
1,425
|
|
|
$
|
-
|
|
|
$
|
1,248
|
|
- 30 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
For the six months ended
|
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
Trust preferred
|
|
|
Junior subordinated
|
|
|
Trust preferred
|
|
|
Junior subordinated
|
|
|
|
|
securities
|
|
|
debentures
|
|
|
securities
|
|
|
debentures
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,256
|
|
|
$
|
41,849
|
|
|
$
|
1,110
|
|
|
$
|
36,986
|
|
|
Net gain from fair value adjustment of financial assets
(1)
|
|
|
47
|
|
|
|
-
|
|
|
|
77
|
|
|
|
-
|
|
|
Net loss from fair value adjustment of financial liabilities
(1)
|
|
|
-
|
|
|
|
1,753
|
|
|
|
-
|
|
|
|
2,548
|
|
|
Increase in accrued interest receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
Increase (decrease) in accrued interest payable
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
51
|
|
|
Change in unrealized gains included in other comprehensive income
|
|
|
-
|
|
|
|
(177
|
)
|
|
|
-
|
|
|
|
(19
|
)
|
|
Ending balance
|
|
$
|
1,303
|
|
|
$
|
43,414
|
|
|
$
|
1,188
|
|
|
$
|
39,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains held at period end
|
|
$
|
-
|
|
|
$
|
1,425
|
|
|
$
|
-
|
|
|
$
|
1,248
|
|
|
|
(
1
)
|
Totals in the table above are presented in the Consolidated Statement of Income under net gains (losses) from fair value adjustments.
|
During the
three
and
six
months ended
June 30, 2019
and
2018,
there were
no
transfers between Levels
1,
2
and
3.
The following tables present the quantitative information about recurring Level
3
fair value of financial instruments and the fair value measurements at the periods indicated:
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Valuation Technique
|
Unobservable Input
|
|
Range
|
|
|
Weighted Average
|
|
|
|
(Dollars in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
$
|
1,303
|
|
Discounted cash flows
|
Discount rate
|
|
|
n/a
|
|
|
|
4.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debentures
|
|
$
|
43,414
|
|
Discounted cash flows
|
Discount rate
|
|
|
n/a
|
|
|
|
4.4%
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Valuation Technique
|
Unobservable Input
|
|
Range
|
|
|
Weighted Average
|
|
|
|
(Dollars in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
$
|
1,256
|
|
Discounted cash flows
|
Discount rate
|
|
|
n/a
|
|
|
|
4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debentures
|
|
$
|
41,849
|
|
Discounted cash flows
|
Discount rate
|
|
|
n/a
|
|
|
|
4.9%
|
The significant unobservable inputs used in the fair value measurement of the Company’s trust preferred securities and junior subordinated debentures valued under Level
3
at
June 30, 2019
and
December 31, 2018,
are the effective yields used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a significantly lower or higher fair value measurement.
- 31 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a non-recurring basis and their respective category in the fair value hierarchy at
June 30, 2019
and
December 31, 2018:
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active Markets
|
|
|
Significant Other
|
|
|
Significant Other
|
|
|
|
|
|
|
|
|
|
|
|
|
for Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
Total carried at fair value
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
on a non-recurring basis
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,458
|
|
|
$
|
4,111
|
|
|
$
|
1,458
|
|
|
$
|
4,111
|
|
|
Other repossesed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
239
|
|
|
|
35
|
|
|
|
239
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,697
|
|
|
$
|
4,146
|
|
|
$
|
1,697
|
|
|
$
|
4,146
|
|
The following tables present the qualitative information about non-recurring Level
3
fair value of financial instruments and the fair value measurements at the periods indicated:
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Valuation Technique
|
Unobservable Input
|
|
Range
|
|
Weighted Average
|
|
|
|
(Dollars in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
896
|
|
Sales approach
|
Reduction for planned expedited disposal
|
|
|
46.6% to 89.8%
|
|
|
59.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
562
|
|
Blended income and sales approach
|
Adjustment to sales comparison value to reconcile differences between comparable sales
|
|
|
-15.0% to 15.0%
|
|
|
-3.2%
|
|
|
|
|
|
|
|
Capitalization rate
|
|
|
9.0% to 9.5%
|
|
|
9.2%
|
|
|
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
15.0%
|
|
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
239
|
|
Sales approach
|
Adjustment to sales comparison value to reconcile differences between comparable sales
|
|
|
0.5% to 12.5%
|
|
|
6.5%
|
|
|
|
At December 31, 2018
|
|
|
|
Fair Value
|
|
Valuation Technique
|
Unobservable Input
|
|
Range
|
|
Weighted Average
|
|
|
|
(Dollars in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
204
|
|
Income approach
|
Capitalization rate
|
|
|
8.5%
|
|
|
8.5%
|
|
|
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
15.0%
|
|
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
2,724
|
|
Sales approach
|
Adjustment to sales comparison value to reconcile differences between comparable sales
|
|
|
0.0%
|
|
|
0.0%
|
|
|
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
-36.5% to 15.0%
|
|
|
10.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
1,183
|
|
Blended income and sales approach
|
Adjustment to sales comparison value to reconcile differences between comparable sales
|
|
|
-30.0% to 10.0%
|
|
|
-7.8%
|
|
|
|
|
|
|
|
Capitalization rate
|
|
|
7.4% to 9.8%
|
|
|
8.7%
|
|
|
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
15.0%
|
|
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other repossesed assets
|
|
$
|
35
|
|
Sales approach
|
Reduction for planned expediated disposal
|
|
|
0.0%
|
|
|
0.0%
|
- 32 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company did
no
t
have any liabilities that were carried at fair value on a non-recurring basis at
June 30, 2019
and
December 31, 2018.
The methods and assumptions used to estimate fair value at
June 30, 2019
and
December 31, 2018
are as follows:
Securities:
The fair values of securities are contained in Note
4
(“Securities”) of the Notes to Consolidated Financial Statements. Fair value is based upon quoted market prices, where available. If a quoted market price is
not
available, fair value is estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and the instrument being valued. When there is limited activity or less transparency around inputs to the valuation, securities are valued using discounted cash flows.
Impaired Loans:
For non-accruing loans, fair value is generally estimated by discounting management’s estimate of future cash flows with a discount rate commensurate with the risk associated with such assets or, for collateral dependent loans, 85% of the appraised or internally estimated value of the property, except for taxi medallion loans. The fair value of the underlying collateral of taxi medallion loans is the most recent reported arm’s length transaction. When there is
no
recent sale activity, the fair value is calculated using capitalization rates. See Note
5
(“Loans”) of the Notes to the Consolidated Financial Statements.
Junior Subordinated Debentures:
The fair value of the junior subordinated debentures was developed using a credit spread based on the subordinated debt issued by the Company adjusting for differences in the junior subordinated debt’s credit rating, liquidity and time to maturity. The unrealized net gain/loss attributable to changes in our own credit risk was determined by adjusting the fair value as determined in the proceeding sentence by the average rate of default on debt instruments with a similar debt rating as our junior subordinated debentures, with the difference from the original calculation and this calculation resulting in the instrument-specific unrealized gain/loss.
Interest Rate Swaps:
The fair value of interest rate swaps is based upon broker quotes.
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth the carrying amounts and estimated fair values of selected financial instruments based on the assumptions described above used by the Company in estimating fair value at the periods indicated:
|
|
|
June 30, 2019
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
56,484
|
|
|
$
|
56,484
|
|
|
$
|
56,484
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
7,944
|
|
|
|
8,038
|
|
|
|
-
|
|
|
|
8,038
|
|
|
|
-
|
|
|
Other securities
|
|
|
52,242
|
|
|
|
54,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,131
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
554,481
|
|
|
|
554,481
|
|
|
|
-
|
|
|
|
554,481
|
|
|
|
-
|
|
|
Other securities
|
|
|
254,172
|
|
|
|
254,172
|
|
|
|
12,042
|
|
|
|
240,827
|
|
|
|
1,303
|
|
|
Loans
|
|
|
5,638,413
|
|
|
|
5,625,107
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,625,107
|
|
|
FHLB-NY stock
|
|
|
63,029
|
|
|
|
63,029
|
|
|
|
-
|
|
|
|
63,029
|
|
|
|
-
|
|
|
Accrued interest receivable
|
|
|
26,552
|
|
|
|
26,563
|
|
|
|
34
|
|
|
|
3,055
|
|
|
|
23,474
|
|
|
Interest rate swaps
|
|
|
1,635
|
|
|
|
1,635
|
|
|
|
-
|
|
|
|
1,635
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
4,877,917
|
|
|
$
|
4,882,473
|
|
|
$
|
3,333,800
|
|
|
$
|
1,548,673
|
|
|
$
|
-
|
|
|
Borrowings
|
|
|
1,371,890
|
|
|
|
1,371,479
|
|
|
|
-
|
|
|
|
1,328,065
|
|
|
|
43,414
|
|
|
Accrued interest payable
|
|
|
7,106
|
|
|
|
7,106
|
|
|
|
-
|
|
|
|
7,106
|
|
|
|
-
|
|
|
Interest rate swaps
|
|
|
20,147
|
|
|
|
20,147
|
|
|
|
-
|
|
|
|
20,147
|
|
|
|
-
|
|
- 34 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
December 31, 2018
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
118,561
|
|
|
$
|
118,561
|
|
|
$
|
118,561
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
7,953
|
|
|
|
7,366
|
|
|
|
-
|
|
|
|
7,366
|
|
|
|
-
|
|
|
Other securities
|
|
|
24,065
|
|
|
|
22,508
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,508
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
557,953
|
|
|
|
557,953
|
|
|
|
-
|
|
|
|
557,953
|
|
|
|
-
|
|
|
Other securities
|
|
|
264,702
|
|
|
|
264,702
|
|
|
|
11,586
|
|
|
|
251,860
|
|
|
|
1,256
|
|
|
Loans
|
|
|
5,551,484
|
|
|
|
5,496,266
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,496,266
|
|
|
FHLB-NY stock
|
|
|
57,282
|
|
|
|
57,282
|
|
|
|
-
|
|
|
|
57,282
|
|
|
|
-
|
|
|
Accrued interest receivable
|
|
|
25,485
|
|
|
|
25,485
|
|
|
|
54
|
|
|
|
2,756
|
|
|
|
22,675
|
|
|
Interest rate swaps
|
|
|
15,961
|
|
|
|
15,961
|
|
|
|
-
|
|
|
|
15,961
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
4,960,784
|
|
|
$
|
4,955,077
|
|
|
$
|
3,397,474
|
|
|
$
|
1,557,603
|
|
|
$
|
-
|
|
|
Borrowings
|
|
|
1,250,843
|
|
|
|
1,241,745
|
|
|
|
-
|
|
|
|
1,199,896
|
|
|
|
41,849
|
|
|
Accrued interest payable
|
|
|
5,890
|
|
|
|
5,890
|
|
|
|
-
|
|
|
|
5,890
|
|
|
|
-
|
|
|
Interest rate swaps
|
|
|
2,239
|
|
|
|
2,239
|
|
|
|
-
|
|
|
|
2,239
|
|
|
|
-
|
|
1
2
. Derivative Financial Instruments
At
June 30, 2019
and
December 31, 2018,
the Company’s derivative financial instruments consist of interest rate swaps. The Company’s interest rate swaps are used for
three
purposes:
1
) to mitigate the Company’s exposure to rising interest rates on a portion ($18.0 million) of its floating rate junior subordinated debentures that have a contractual value of $61.9 million, at
June 30, 2019
and
December 31, 2018;
2
) to mitigate the Company’s exposure to rising interest rates on certain fixed rate loans totaling $282.2 million and $286.1 million at
June 30, 2019
and
December 31, 2018,
respectively; and
3
) to mitigate exposure to rising interest rates on certain short-term advances totaling $541.5 million and $441.5 million at
June 30, 2019
and
December 31, 2018,
respectively.
At
June 30, 2019
and
December 31, 2018,
we held derivatives designated as cash flow hedges, fair value hedges and certain derivatives
not
designated as hedges.
The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of Other Assets for derivatives with positive fair values and Other Liabilities for derivatives with negative fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or
not
it qualifies and has been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.
At
June 30, 2019
and
December 31, 2018,
derivatives with a combined notional amount of
$36.3
million were
not
designated as hedges. At
June 30, 2019
and
December 31, 2018,
derivatives with a combined notional amount of $263.9 million and $267.8 million, respectively, were designated as fair value hedges. At
June 30, 2019
and
December 31, 2018,
derivatives with a combined notional amount of $541.5 million and $441.5 million, respectively, were designated as cash flow hedges.
For cash flow hedges, the effective portion of changes in the fair value of the derivative is reported in AOCL, net of tax. Amounts in AOCL are reclassified into earnings in the same period during which the hedged forecasted transaction effects earnings. During the
three
months ended
June 30, 2019
and
2018,
$0.6 million and $0.3 million, respectively, were reclassified from accumulated other comprehensive loss to interest expense. During the
six
months ended
June 30, 2019
and
2018,
$0.8 million and $0.4 million, respectively, were reclassified from accumulated other comprehensive loss to interest expense.
- 35 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Changes in the fair value of interest rate swaps
not
designated as hedges are reflected in “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income.
The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
Notional
|
|
|
Net Carrying
|
|
|
Notional
|
|
|
Net Carrying
|
|
|
|
|
Amount
|
|
|
Value
(1)
|
|
|
Amount
|
|
|
Value
(1)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (fair value hedge)
|
|
$
|
80,835
|
|
|
$
|
1,635
|
|
|
$
|
248,330
|
|
|
$
|
10,593
|
|
|
Interest rate swaps (fair value hedge)
|
|
|
183,034
|
|
|
|
(6,886
|
)
|
|
|
19,468
|
|
|
|
(502
|
)
|
|
Interest rate swaps (cash flow hedge)
|
|
|
-
|
|
|
|
-
|
|
|
|
441,500
|
|
|
|
5,368
|
|
|
Interest rate swaps (cash flow hedge)
|
|
|
541,500
|
|
|
|
(8,878
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Interest rate swaps (non-hedge)
|
|
|
36,321
|
|
|
|
(4,383
|
)
|
|
|
36,321
|
|
|
|
(1,737
|
)
|
|
Total derivatives
|
|
$
|
841,690
|
|
|
$
|
(18,512
|
)
|
|
$
|
745,619
|
|
|
$
|
13,722
|
|
|
(
1
)
|
Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.
|
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (non-hedge)
(1)
|
|
$
|
(1,597
|
)
|
|
$
|
438
|
|
|
$
|
(2,647
|
)
|
|
$
|
1,714
|
|
|
Interest rate swaps (fair value hedge)
(2)
|
|
|
(818
|
)
|
|
|
224
|
|
|
|
(1,455
|
)
|
|
|
678
|
|
|
Net (loss) gain
|
|
$
|
(2,415
|
)
|
|
$
|
662
|
|
|
$
|
(4,102
|
)
|
|
$
|
2,392
|
|
|
(
1
)
|
Net gains and losses are recorded as part of “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income.
|
|
(
2
)
|
Net gains and losses recorded during the
three
and
six
months ended
June 30, 2019,
are recorded as part of “Interests and fees on loans” in the Consolidated Statements of Income. Net gains and losses recorded during the
three
and
six
months ended
June 30, 2018,
are recorded as part of “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income.
|
The Company’s interest rate swaps are subject to master netting arrangements between the Company and its
two
designated counterparties. The Company has
not
made a policy election to offset its derivative positions.
- 36 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables present the effect of the master netting arrangements on the presentation of the derivative assets and liabilities in the Consolidated Statements of Condition as of the dates indicated:
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
|
|
|
|
|
|
|
(In thousands)
|
|
Gross Amount of
Recognized Assets
|
|
|
Gross Amount Offset
in the Statement
of Condition
|
|
|
Net Amount of Assets
Presented in the Statement
of Condition
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Received
|
|
|
Net Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
1,635
|
|
|
$
|
-
|
|
|
$
|
1,635
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
|
|
|
|
|
|
|
(In thousands)
|
|
Gross Amount of
Recognized Liabilities
|
|
|
Gross Amount Offset
in the Statement
of Condition
|
|
|
Net Amount of Liabilities
Presented in the Statement
of Condition
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Pledged
|
|
|
Net Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
20,147
|
|
|
$
|
-
|
|
|
$
|
20,147
|
|
|
$
|
15,607
|
|
|
$
|
-
|
|
|
$
|
4,540
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
|
|
|
|
|
|
|
(In thousands)
|
|
Gross Amount of
Recognized Assets
|
|
|
Gross Amount Offset
in the Statement
of Condition
|
|
|
Net Amount of Assets
Presented in the Statement
of Condition
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Received
|
|
|
Net Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
15,961
|
|
|
$
|
-
|
|
|
$
|
15,961
|
|
|
$
|
-
|
|
|
$
|
14,960
|
|
|
$
|
1,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
|
|
|
|
|
|
|
(In thousands)
|
|
Gross Amount of
Recognized Liabilities
|
|
|
Gross Amount Offset
in the Statement
of Condition
|
|
|
Net Amount of Liabilities
Presented in the Statement
of Condition
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Pledged
|
|
|
Net Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
2,239
|
|
|
$
|
-
|
|
|
$
|
2,239
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,239
|
|
- 37 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1
3
. 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 Company’s trusts, which file separate Federal income tax returns as trusts, and Flushing Preferred Funding Corporation, which files a separate Federal income tax return as a real estate investment trust. Additionally, the Bank files New Jersey State tax returns. As of
June 30, 2019,
the Company is undergoing examination for its New York State income tax returns for
2014,
2015
and
2016
and its New York City income tax return for
2014.
Income tax provisions are summarized as follows:
|
|
|
For the three months
|
|
|
For the six months
|
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
4,450
|
|
|
$
|
3,755
|
|
|
$
|
5,776
|
|
|
$
|
6,165
|
|
|
Deferred
|
|
|
(1,469
|
)
|
|
|
(444
|
)
|
|
|
(852
|
)
|
|
|
(247
|
)
|
|
Total federal tax provision
|
|
|
2,981
|
|
|
|
3,311
|
|
|
|
4,924
|
|
|
|
5,918
|
|
|
State and Local:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,017
|
|
|
|
1,499
|
|
|
|
1,173
|
|
|
|
1,689
|
|
|
Deferred
|
|
|
(726
|
)
|
|
|
(321
|
)
|
|
|
(538
|
)
|
|
|
(168
|
)
|
|
Total state and local tax provision
|
|
|
291
|
|
|
|
1,178
|
|
|
|
635
|
|
|
|
1,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
3,272
|
|
|
$
|
4,489
|
|
|
$
|
5,559
|
|
|
$
|
7,439
|
|
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1
4
. Accumulated Other Comprehensive Income
(Loss)
:
The following tables sets forth the changes in accumulated other comprehensive income (loss) by component for the periods indicated:
|
|
|
For the three months ended June 30, 2019
|
|
|
|
|
Unrealized Gains
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Losses) on
|
|
|
(Losses) on
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Cash flow
|
|
|
Defined Benefit
|
|
|
Option Elected
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Hedges
|
|
|
Pension Items
|
|
|
on Liabilities
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, net of tax
|
|
$
|
(10,029
|
)
|
|
$
|
199
|
|
|
$
|
(1,666
|
)
|
|
$
|
954
|
|
|
$
|
(10,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax
|
|
|
6,204
|
|
|
|
(5,884
|
)
|
|
|
-
|
|
|
|
35
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income, net of tax
|
|
|
10
|
|
|
|
(447
|
)
|
|
|
8
|
|
|
|
-
|
|
|
|
(429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss), net of tax
|
|
|
6,214
|
|
|
|
(6,331
|
)
|
|
|
8
|
|
|
|
35
|
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax
|
|
$
|
(3,815
|
)
|
|
$
|
(6,132
|
)
|
|
$
|
(1,658
|
)
|
|
$
|
989
|
|
|
$
|
(10,616
|
)
|
|
|
|
For the three months ended June 30, 2018
|
|
|
|
|
Unrealized Gains
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Losses) on
|
|
|
(Losses) on
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Cash flow
|
|
|
Defined Benefit
|
|
|
Option Elected
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Hedges
|
|
|
Pension Items
|
|
|
on Liabilities
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, net of tax
|
|
$
|
(13,487
|
)
|
|
$
|
5,942
|
|
|
$
|
(4,409
|
)
|
|
$
|
779
|
|
|
$
|
(11,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax
|
|
|
(3,014
|
)
|
|
|
1,898
|
|
|
|
-
|
|
|
|
13
|
|
|
|
(1,103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income, net of tax
|
|
|
-
|
|
|
|
187
|
|
|
|
84
|
|
|
|
-
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss), net of tax
|
|
|
(3,014
|
)
|
|
|
2,085
|
|
|
|
84
|
|
|
|
13
|
|
|
|
(832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax
|
|
$
|
(16,501
|
)
|
|
$
|
8,027
|
|
|
$
|
(4,325
|
)
|
|
$
|
792
|
|
|
$
|
(12,007
|
)
|
- 39 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
For the six months ended June 30, 2019
|
|
|
|
|
Unrealized Gains
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Losses) on
|
|
|
(Losses) on
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Cash flow
|
|
|
Defined Benefit
|
|
|
Option Elected
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Hedges
|
|
|
Pension Items
|
|
|
on Liabilities
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, net of tax
|
|
$
|
(15,649
|
)
|
|
$
|
3,704
|
|
|
$
|
(1,673
|
)
|
|
$
|
866
|
|
|
$
|
(12,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax
|
|
|
11,824
|
|
|
|
(9,250
|
)
|
|
|
-
|
|
|
|
123
|
|
|
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income, net of tax
|
|
|
10
|
|
|
|
(586
|
)
|
|
|
15
|
|
|
|
-
|
|
|
|
(561
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss), net of tax
|
|
|
11,834
|
|
|
|
(9,836
|
)
|
|
|
15
|
|
|
|
123
|
|
|
|
2,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax
|
|
$
|
(3,815
|
)
|
|
$
|
(6,132
|
)
|
|
$
|
(1,658
|
)
|
|
$
|
989
|
|
|
$
|
(10,616
|
)
|
|
|
|
For the six months ended June 30, 2018
|
|
|
|
|
Unrealized Gains
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Losses) on
|
|
|
(Losses) on
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Cash flow
|
|
|
Defined Benefit
|
|
|
Option Elected
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Hedges
|
|
|
Pension Items
|
|
|
on Liabilities
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, net of tax
|
|
$
|
(5,522
|
)
|
|
$
|
231
|
|
|
$
|
(3,695
|
)
|
|
$
|
-
|
|
|
$
|
(8,986
|
)
|
|
Reclassification of the Income Tax Effects of the Tax Cuts and Jobs Act from AOCL to Retained Earnings
|
|
|
(1,325
|
)
|
|
|
50
|
|
|
|
(798
|
)
|
|
|
-
|
|
|
|
(2,073
|
)
|
|
Impact of adoption of Accounting Standard Update 2016-01
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
779
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax
|
|
|
(9,654
|
)
|
|
|
7,505
|
|
|
|
-
|
|
|
|
13
|
|
|
|
(2,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
|
|
-
|
|
|
|
241
|
|
|
|
168
|
|
|
|
-
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income, net of tax
|
|
|
(9,654
|
)
|
|
|
7,746
|
|
|
|
168
|
|
|
|
13
|
|
|
|
(1,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax
|
|
$
|
(16,501
|
)
|
|
$
|
8,027
|
|
|
$
|
(4,325
|
)
|
|
$
|
792
|
|
|
$
|
(12,007
|
)
|
- 40 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth significant amounts reclassified from accumulated other comprehensive income (loss) by component for the periods indicated:
|
For the three months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Reclassified from
|
|
|
|
|
Details about Accumulated Other
|
|
Accumulated Other
|
|
|
Affected Line Item in the Statement
|
|
Comprehensive Loss Components
|
|
Comprehensive Loss
|
|
|
Where Net Income is Presented
|
|
|
|
(In thousands)
|
|
|
|
|
Unrealized gains (losses) on available for sale securities
|
|
$
|
(15
|
)
|
|
Net loss on sale of securities
|
|
|
|
|
5
|
|
|
Provision for income taxes
|
|
|
|
$
|
(10
|
)
|
|
Net of tax
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
647
|
|
|
Other interest expense
|
|
|
|
|
(200
|
)
|
|
Provision for income taxes
|
|
|
|
$
|
447
|
|
|
Net of tax
|
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
Actuarial gain (losses)
|
|
$
|
(31
|
)
|
(1)
|
Other operating expense
|
|
Prior service credits
|
|
|
20
|
|
(1)
|
Other operating expense
|
|
|
|
|
(11
|
)
|
|
Total before tax
|
|
|
|
|
3
|
|
|
Provision for income taxes
|
|
|
|
$
|
(8
|
)
|
|
Net of tax
|
|
For the three months ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Reclassified from
|
|
|
|
|
Details about Accumulated Other
|
|
Accumulated Other
|
|
|
Affected Line Item in the Statement
|
|
Comprehensive Loss Components
|
|
Comprehensive Loss
|
|
|
Where Net Income is Presented
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(273
|
)
|
|
Other interest expense
|
|
|
|
|
86
|
|
|
Provision for income taxes
|
|
|
|
$
|
(187
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
Actuarial losses
|
|
$
|
(133
|
)
|
(1)
|
Other operating expense
|
|
Prior service credits
|
|
|
9
|
|
(1)
|
Other operating income
|
|
|
|
|
(124
|
)
|
|
Total before tax
|
|
|
|
|
40
|
|
|
Provision for income taxes
|
|
|
|
$
|
(84
|
)
|
|
Net of tax
|
- 41 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
For the six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Reclassified from
|
|
|
|
|
Details about Accumulated Other
|
|
Accumulated Other
|
|
|
Affected Line Item in the Statement
|
|
Comprehensive Loss Components
|
|
Comprehensive Loss
|
|
|
Where Net Income is Presented
|
|
|
|
(In thousands)
|
|
|
|
|
Unrealized gains (losses) on available for sale securities
|
|
$
|
(15
|
)
|
|
Net loss on sale of securities
|
|
|
|
|
5
|
|
|
Provision for income taxes
|
|
|
|
$
|
(10
|
)
|
|
Net of tax
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
848
|
|
|
Other interest income
|
|
|
|
|
(262
|
)
|
|
Provision for income taxes
|
|
|
|
$
|
586
|
|
|
Net of tax
|
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
Actuarial gain (losses)
|
|
$
|
(63
|
)
|
(1)
|
Other operating expense
|
|
Prior service credits
|
|
|
42
|
|
(1)
|
Other operating expense
|
|
|
|
|
(21
|
)
|
|
Total before tax
|
|
|
|
|
6
|
|
|
Provision for income taxes
|
|
|
|
$
|
(15
|
)
|
|
Net of tax
|
|
For the six months ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Reclassified from
|
|
|
|
|
Details about Accumulated Other
|
|
Accumulated Other
|
|
|
Affected Line Item in the Statement
|
|
Comprehensive Loss Components
|
|
Comprehensive Loss
|
|
|
Where Net Income is Presented
|
|
|
|
(In thousands)
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(351
|
)
|
|
Interest expense
|
|
|
|
|
110
|
|
|
Provision for income taxes
|
|
|
|
$
|
(241
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
Actuarial losses
|
|
$
|
(265
|
)
|
(1)
|
Other operating expense
|
|
Prior service credits
|
|
|
19
|
|
(1)
|
Other operating expense
|
|
|
|
|
(246
|
)
|
|
Total before tax
|
|
|
|
|
78
|
|
|
Provision for income taxes
|
|
|
|
$
|
(168
|
)
|
|
Net of tax
|
|
|
(
1
)
|
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note
10
(“Pension and Other Postretirement Benefit Plans”) for additional information.
|
1
5
.
Regulatory
Capital
Under current capital regulations, the Bank is required to comply with
four
separate capital adequacy standards. As
June 30, 2019,
the Bank continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. The Bank is also required to comply with a Capital Conservation Buffer (“CCB”). The CCB is designed to establish a capital range above minimum capital requirements and impose constraints on dividends, share buybacks and discretionary bonus payments when capital levels fall below prescribed levels. The minimum CCB is 2.500%. The CCB for the Bank at
June 30, 2019
was 5.07%.
- 42 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Amount
|
|
|
Assets
|
|
|
Amount
|
|
|
Assets
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I (leverage) capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
667,882
|
|
|
|
9.69
|
%
|
|
$
|
660,782
|
|
|
|
9.85
|
%
|
|
Requirement to be well capitalized
|
|
|
344,642
|
|
|
|
5.00
|
|
|
|
335,512
|
|
|
|
5.00
|
|
|
Excess
|
|
|
323,240
|
|
|
|
4.69
|
|
|
|
325,270
|
|
|
|
4.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier I risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
667,882
|
|
|
|
12.66
|
%
|
|
$
|
660,782
|
|
|
|
13.28
|
%
|
|
Requirement to be well capitalized
|
|
|
342,872
|
|
|
|
6.50
|
|
|
|
323,386
|
|
|
|
6.50
|
|
|
Excess
|
|
|
325,010
|
|
|
|
6.16
|
|
|
|
337,396
|
|
|
|
6.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
667,882
|
|
|
|
12.66
|
%
|
|
$
|
660,782
|
|
|
|
13.28
|
%
|
|
Requirement to be well capitalized
|
|
|
421,997
|
|
|
|
8.00
|
|
|
|
398,014
|
|
|
|
8.00
|
|
|
Excess
|
|
|
245,885
|
|
|
|
4.66
|
|
|
|
262,768
|
|
|
|
5.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
689,392
|
|
|
|
13.07
|
%
|
|
$
|
681,727
|
|
|
|
13.70
|
%
|
|
Requirement to be well capitalized
|
|
|
527,496
|
|
|
|
10.00
|
|
|
|
497,517
|
|
|
|
10.00
|
|
|
Excess
|
|
|
161,896
|
|
|
|
3.07
|
|
|
|
184,210
|
|
|
|
3.70
|
|
- 43 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Holding Company is subject to the same regulatory capital requirements as the Bank. As of
June 30, 2019,
the Holding Company continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. The CCB for the Holding Company at
June 30, 2019
was 5.22%.
Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Amount
|
|
|
Assets
|
|
|
Amount
|
|
|
Assets
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I (leverage) capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
600,730
|
|
|
|
8.72
|
%
|
|
$
|
586,582
|
|
|
|
8.74
|
%
|
|
Requirement to be well capitalized
|
|
|
344,637
|
|
|
|
5.00
|
|
|
|
335,616
|
|
|
|
5.00
|
|
|
Excess
|
|
|
256,093
|
|
|
|
3.72
|
|
|
|
250,966
|
|
|
|
3.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier I risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
558,848
|
|
|
|
10.60
|
%
|
|
$
|
546,230
|
|
|
|
10.98
|
%
|
|
Requirement to be well capitalized
|
|
|
342,840
|
|
|
|
6.50
|
|
|
|
323,382
|
|
|
|
6.50
|
|
|
Excess
|
|
|
216,008
|
|
|
|
4.10
|
|
|
|
222,848
|
|
|
|
4.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
600,730
|
|
|
|
11.39
|
%
|
|
$
|
586,582
|
|
|
|
11.79
|
%
|
|
Requirement to be well capitalized
|
|
|
421,957
|
|
|
|
8.00
|
|
|
|
398,008
|
|
|
|
8.00
|
|
|
Excess
|
|
|
178,773
|
|
|
|
3.39
|
|
|
|
188,574
|
|
|
|
3.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital level
|
|
$
|
697,240
|
|
|
|
13.22
|
%
|
|
$
|
682,527
|
|
|
|
13.72
|
%
|
|
Requirement to be well capitalized
|
|
|
527,446
|
|
|
|
10.00
|
|
|
|
497,511
|
|
|
|
10.00
|
|
|
Excess
|
|
|
169,794
|
|
|
|
3.22
|
|
|
|
185,016
|
|
|
|
3.72
|
|
- 44 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1
6
. New Authoritative Accounting Pronouncements
Accounting Standards Adopted in
2019:
In
February 2016,
the FASB established Topic
842,
Leases
, by issuing Accounting Standards Update (“ASU”)
No.
2016
-
02,
Leases
, which requires lessees to recognize leases on the balance sheet, makes targeted changes to lessor accounting, and enhances disclosures to include key information about leasing arrangements. An entity
may
adopt the new guidance by either restating prior periods and recording a cumulative effect adjustment at the beginning of the earliest comparative period presented (the modified retrospective transition approach) or by recording a cumulative adjustment at the beginning of the period of adoption (the additional transition method). The Company adopted this standard using the additional transition method approach and elected to use the effective date,
January 1, 2019,
as the date of initial application. As part of the Company’s adoption of ASC
842,
the Company undertook a detailed scoping exercise to identify all leasing arrangements subject to the new leasing guidance and believes that all arrangements that meet the definition of a lease under historic US GAAP will continue to meet the definition of a lease under ASC
842.
Upon adoption, the Company recorded right of use assets totaling $45.4 million and operating lease liabilities totaling $54.0 million. Additionally, a deferred gain from the sale of buildings totaling $2.7 million, net of tax, was reclassified to retained earnings.
As the rate implicit in each of the Company’s leases is
not
readily determinable, the Company is required to apply the Company’s incremental borrowing rate (“IBR”) to calculate the lease liability and right-of-use (“ROU”) asset for its leasing arrangements. The Company has used its unsecured Kroll rating as a starting point for calculation of the IBR and will adjust for considerations of collateral (i.e., notch the Company’s Kroll rating from an unsecured to a secured rating). The Company will also consider lease renewal options reasonably certain of exercise for purposes of determining the term of the underlying borrowing. The Company has considered various other factors, including, economic environment and determined that these factors do
not
currently impact the Company’s IBR calculation. The Company will continue to assess the appropriateness of the conclusions reached herein with respect to each of the factors discussed above and will determine the appropriate IBR for each new lease arrangement or modification, as required.
The new leasing standard provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedients”, which permits the Company
not
to reassess prior conclusions about lease identification, lease classification and initial direct costs. The Company did
not
elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter
not
being applicable to the Company. ASC
842
also provides certain accounting policy elections for an entity’s ongoing accounting. For operating leases wherein the Company is the lessee, the Company has elected the practical expedient to
not
separate lease and non-lease components. See Note
8
(“Leases”) for additional information.
In
August 2017,
the FASB issued ASU
No.
2017
-
12,
“Derivatives and Hedging (Topic
815
)” providing targeted improvements to the accounting for hedging activities, which is effective
January 1, 2019,
with early adoption permitted in any interim period or fiscal year before the effective date. The guidance introduces a number of amendments, several of which are optional, that are designed to simplify the application of hedge accounting, improve financial statement transparency and more closely align hedge accounting with an entity’s risk management strategies. This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and changes the presentation so that all items that affect earnings are in the same income statement line as the hedged item. The Company adopted this standard
January 1, 2019,
as the date of initial application. As a result of adoption, fair value adjustments on qualifying fair value hedges were recorded in interest income during the
three
and
six
months ended
June 30, 2019.
These adjustments were recorded in non-interest income in prior periods. See Note
12
(“Derivative Financial Instruments”) for additional information.
- 45 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Accounting Standards Pending Adoption:
In
August 2018,
the FASB issued ASU
No.
2018
-
14,
“Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic
715
-
20
)” providing targeted improvements to the disclosures required for Defined Benefit Plans. The amendments in in this Update are effective for fiscal years ended after
December 15, 2020.
Early adoption is permitted. The amendments are to be applied on a retrospective basis to all periods presented. We are currently evaluating the impact of adopting this new guidance on our disclosures.
In
August 2018,
the FASB issued ASU
No.
2018
-
13,
“Fair Value Measurement (Topic
820
)”. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic
820.
The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years beginning after
December 15, 2019.
Early adoption is permitted. The amendments are to be applied on a retrospective basis to all periods presented. We are currently evaluating the impact of adopting this new guidance on our disclosures.
In
January 2017,
the FASB issued ASU
No.
2017
-
04,
“Intangibles - Goodwill and Other (Topic
350
): Simplifying the Test for Goodwill Impairment.” The ASU simplifies the subsequent measurement of goodwill and eliminates Step
2
from the goodwill impairment test. Under this ASU, the Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after
December 15, 2019,
including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after
January 1, 2017.
The guidance is
not
expected to have a significant impact on the Company's financial positions, results of operations or disclosures.
In
June 2016,
the FASB issued ASU
No.
2016
-
13,
“Financial Instruments – Credit Losses” which sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and will apply to the measurement of credit losses on financial assets measured at amortized cost and to some off-balance sheet credit exposures. This ASU will be effective for fiscal years beginning after
December 15, 2019,
including interim periods within those fiscal years. The Company has been collecting and evaluating data and system requirements to implement this standard. Management has developed inter-departmental steering and working committees to evaluate and implement CECL. We have chosen a vendor solution to model CECL results and are in the middle stages of implementing this solution. The adoption of this update could have a material impact on the Company’s consolidated results of operations and financial condition. The extent of the impact is still unknown and will depend on many factors, such as the composition of the Company’s loan portfolio and expected loss history at adoption.
- 46 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES