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Flushing Financial Corporation Reports Record Commercial Business Loan Originations; 10.5% Annualized Net Loan Growth

FIRST QUARTER 20181

  • GAAP diluted EPS was $0.39, up 85.7% QoQ and down 7.1% YoY
  • Core diluted EPS was $0.37, up 12.1% QoQ and down 7.5% YoY
  • Net interest income was $42.6 million, down 1.0% QoQ and 1.8% YoY
  • Net interest margin was 2.79%, down 11bps QoQ and 16bps YoY
    -- Excluding prepayment penalty income from loans and securities, recovered interest from delinquent loans and accelerated accretion of discount upon the call of CLO securities, the net interest margin was 2.72%, down 5bps QoQ and 13bps YoY
  • Net recoveries were $38,000 for 1Q18, compared to net charge-offs of $11.5 million in 4Q17 and $18,000 in 1Q17
  • GAAP and core ROAE were 8.6% and 8.1%, compared with 4.4% and 7.2%, respectively in 4Q17
  • GAAP and core ROAA were both 0.7%, compared with 0.4% and 0.6%, respectively in 4Q17
  • Increased quarterly dividend by 11% to $0.20 per share

UNIONDALE, N.Y., April 24, 2018 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq:FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the first quarter ended March 31, 2018.

John R. Buran, President and Chief Executive Officer, stated, “We experienced superior loan growth during the quarter highlighted by record commercial business originations and purchases totaling $141.0 million, over 40% of total production. Loan originations for the quarter totaled $341.8 million with a yield of 4.27%, 42bps higher than the comparable prior year period and 12bps greater than the linked quarter. Over the last four quarters, our commercial business origination and purchases have averaged approximately 35% of quarterly production, resulting in the commercial business balances growing over 20% during the same period to approximately 15% of gross loans as of March 31, 2018."

“Our strategic focus remains the origination of multi-family, commercial real estate and commercial business loans with a full relationship, which comprised over 85% of the first quarter’s originations and purchases. Loan growth for the period was 2.6% (non-annualized), on pace to meet our annual expectations of high-single to low-double digit growth, while emphasizing rate over volume. For the third consecutive quarter, the yield on new loans exceeded the quarterly average yield of the total portfolio, net of prepayment penalty income and recovered interest from delinquent loans. For the first quarter, the yield on new loans exceeded the quarterly average yield of the total loan portfolio by 15bps, excluding prepayment penalty income and recovered interest from delinquent loans. The increase in the yield of our loan production aided in improving our yield on interest-earning assets to 3.92% for the recent quarter, an increase of 12bps YoY and 2bps QoQ, excluding prepayment penalty income, accelerated accretion of discount upon the call of CLO securities and recovered interest from delinquent loans.”

“On the liability side of the balance sheet, we experienced deposit growth of 6.8% (non-annualized), reducing the loan-to-deposit ratio to 113% from 118% at December 31, 2017. The cost of interest-bearing liabilities increased due to an increase in rates, as we raised the rates we pay on certain deposit products to remain competitive in our market, resulting in the average cost of our interest-bearing liabilities increasing 28bps YoY and 7bps QoQ. To mitigate the impact of future rate increases, we have been actively extending the maturity on our liabilities and, as previously announced, entered into forward interest rate swaps totaling $441.5 million to hedge against rising interest rates.”

“In addition to utilizing forward swaps, we continued our strategy of focusing our origination efforts on higher yielding loans and experienced an increase in the yield of loan originations and purchases during the current quarter compared to the linked quarter and the comparable prior year period. Similar to the improved yield received on new loan originations and purchases, we will see a benefit as our adjustable-rate loan portfolio continues to re-price upward. The combined effect of increases in loan yields and re-pricing of the portfolio continues to partially mitigate net interest margin compression.”

“At March 31, 2018, our total loan portfolio had an average LTV of only 39.1% for loans secured by real estate. During the recent quarter, the pipeline remained strong totaling $325.6 million, supporting our expectation of solid loan growth throughout 2018.”

Mr. Buran continued, “We remain focused on credit quality. Credit quality improved as our non-performing assets decreased by 4.1% in the first quarter and we recognized net recoveries in the period.  Also, total delinquencies have decreased 17% since December 31, 2017. The allowance for loan losses to gross loans has remained constant at 0.39% while the allowance for loan losses to non-performing loans increased to 123% from 112% at the end of 2017. The LTV on our non-performing real estate loans at March 31, 2018 is 36.7%.”

“We continued implementing the strategic objective of improving the expense scalability of our branch network. At the end of the quarter, we have converted 11 branches to the Universal Banker model. The remaining seven branches are scheduled for conversion to the Universal Banker model during 2018 and 2019.  The Universal Banker model, coupled with Video Banker, is a success with our customers as evidenced by the number of transactions handled by our enhanced ATMs and calls to Video Banker. The conversion to the Universal Banker model allows the branch staff to focus on sales resulting in deposit growth. We estimate that the Universal Banker model provides on average a savings of 20% in compensation costs.”

“In addition to the conversion of the branches, we have commenced a marketing campaign entitled “Win Flushing.”  The Flushing, Queens market is a $16 billion market for which our goal is to increase our deposit share by 1%, or $160 million by the first quarter of 2019. Through the first quarter, we have captured $50.7 million in deposit growth in this market place. We continue seeking opportunities for increasing our branch network, focusing on Asian markets. ”

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

  • In the first quarter, commercial business, multi-family, and commercial real estate loan originations and purchases represented 41%, 24%, and 21%, respectively, of all originations, which were made while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield. 
  • The average interest rate obtained for first quarter originations and purchases totaled 4.27%, an increase of 12bps compared to 4.15% for 4Q17 and of 42bps compared to 3.85% for 1Q17.
  • The average rate of mortgage loan applications in the pipeline totaled 4.41% at March 31, 2018, as compared to 4.10% at December 31, 2017 and 4.22% at March 31, 2017.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 1Q18 had a yield of 3.97%, an increase of 6bps from 3.91% for 4Q17 and an increase of 25bps from 3.72% for 1Q17. We have maintained our asset quality as these loans had an average loan-to-value ratio of 47.9% and an average debt coverage ratio of 171%.

Mr. Buran concluded, “As previously announced, we have shared a portion of the tax benefits from the Tax Reform Act with our non-executive employees in the form of one-time bonuses totaling $0.5 million and with our shareholders in the form of the 11% increase in our quarterly dividend. We continue to evaluate opportunities to invest additional tax savings into the business to position the Company for future growth. Additionally, the Board of Directors authorized a share repurchase program of 1,000,000 shares with no dollar or time limitations. We remain well capitalized and positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute on our strategic objectives.”

Summary of Strategic Objectives

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

Earnings Summary:

Net Interest Income

Net interest income for 1Q18 was $42.6 million, a decrease of $0.8 million, or 1.8% YoY (1Q18 compared to 1Q17) and a decrease of $0.5 million, or 1.0% QoQ (1Q18 compared to 4Q17). During 1Q18 the increase in the cost of funds outpaced the increase in the yield of interest-earning assets.

  • Net interest margin of 2.79%, decreased 16bps YoY and 11bps QoQ
  • Net interest spread of 2.65%, decreased 19bps YoY and 10bps QoQ
  • Net interest income includes prepayment penalty income from loans of $0.9 million in 1Q18 compared with $1.1 million in 1Q17 and $1.4 million in 4Q17, and recovered interest from delinquent loans of $0.2 million in 1Q18, compared to $0.5 million in 1Q17 and $0.1 million in 4Q17
  • Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets was 3.92% in 1Q18, an improvement from 3.80% in 1Q17 and 3.90% in 4Q17, and the net interest margin was 2.72% in 1Q18, which decreased from 2.85% in 1Q17 and from 2.77% in 4Q17
  • Average balance of total interest-earning assets of $6,098.7 million, increased $224.9 million, or 3.8%, YoY and $164.2 million, or 2.8%, QoQ
  • Yield on interest-earning assets of 3.99%, increased 9bps YoY and decreased 3bps QoQ
  • Cost of interest-bearing liabilities of 1.34%, increased 28bps YoY and 7bps QoQ
  • Cost of funds of 1.27%, increased 26bps YoY and 10bps QoQ, driven by increases in rates paid on certificates of deposit, government deposits and short-term borrowings resulting from increases in the Fed Funds rate during 2018  

Provision for loan losses

Provision recorded for loan losses for 1Q18 was $0.2 million compared to $6.6 million in 4Q17 and no provision in 1Q17.

  • Provision in 1Q18 was primarily driven by the growth in the loan portfolio

Non-interest Income

Non-interest income for 1Q18 was $3.2 million, a decrease of $0.5 million, or 13.3%, YoY and an increase of $0.1 million, or 4.4% QoQ.

  • Non-interest income included net losses from the sale of loans of $0.3 million in 1Q18 and net gains from the sale of loans of $0.2 million in both 4Q17 and 1Q17
  • Additionally, non-interest income included net losses from fair value adjustments of $0.1 million in 1Q18, $0.6 million in 4Q17 and $0.4 million in 1Q17 and gains from life insurance proceeds of $0.8 million in 1Q18 and $1.2 million in 1Q17
  • Absent all above items, non-interest income was $2.8 million, an increase of $0.1 million YoY, but a decrease of $0.7 million QoQ

Non-interest Expense

Non-interest expense for 1Q18 was $31.3 million, an increase of $1.7 million, or 5.9%, YoY and $5.4 million, or 20.9% QoQ.

  • Salaries and benefits increased $1.4 million YoY primarily due to annual salary increases and the previously announced one-time bonuses paid to non-executive employees in 1Q18 totaling $0.5 million and increased $4.2 million QoQ due to those items compounded with annual restricted stock unit awards to employees and increased payroll taxes
  • The first quarter of each year includes the impact of annual grants of employee and director restricted stock unit awards; restricted stock expense totaled $3.5 million in 1Q18 compared to $3.3 million in 1Q17 and $0.9 million in 4Q17  
  • Non-interest expense (excluding: salaries and benefits expense, director restricted stock unit awards and net gain/losses on sale of OREO) totaled $11.6 million in 1Q18, an increase of $0.3 million, or 2.7% YoY and $0.1 million, or 0.7% QoQ
  • The efficiency ratio was 69.3% in 1Q18 compared to 64.0% in 1Q17 and 55.4% in 4Q17

Provision for Income Taxes

The provision for income taxes in 1Q18 was $3.0 million, a decrease of $2.3 million, or 43.9%, YoY and $4.7 million, or 61.7%, QoQ.

  • Pre-tax income decreased by $3.2 million, or 18.0% YoY but increased $0.7 million, or 5.2% QoQ
  • The effective tax rates were 20.5% in 1Q18, 28.7% in 4Q17 (excluding $3.8 million from the revaluation of net deferred tax assets), and 30.0% in 1Q17
  • Both 1Q18 and 1Q17 effective tax rates reflect the vesting of restricted stock awards, which are treated as discrete items for tax purposes, our stock awards generally vest in the first quarter, therefore we anticipate the Company’s effective tax rate to increase to approximately 24.5% in the second quarter of 2018 and approximately 23.5% for the full year

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,292.3 million reflecting an increase of 2.6% QoQ (not annualized) and 6.9% YoY as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship while emphasizing rate over volume
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $292.1 million for 1Q18, or 85.5% of loan production
  • Loan pipeline was $325.6 million at March 31, 2018, compared to $359.8 million at December 31, 2017 and $303.1 million at March 31, 2017
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of March 31, 2018 totaled 39.1%

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

    For the three months ended
    March 31,   December 31,   March 31,
Loan type   2018
  2017
  2017
Mortgage loans   4.15%     3.92%     3.78%  
Non-mortgage loans   4.43%     4.52%     4.02%  
Total loans   4.27%     4.15%     3.85%  
             

Credit Quality:

  • Non-performing loans totaled $16.6 million, a decrease of $1.5 million, or 8.2%, from $18.1 million at December 31, 2017
  • Non-performing assets totaled $17.4 million, a decrease of $0.8 million, or 4.1%, from $18.1 million at December 31, 2017
  • Classified assets totaled $30.9 million, a decrease of $3.1 million, or 9.0%, from $34.0 million at December 31, 2017, primarily due to reductions in non-performing loans
  • Loans classified as troubled debt restructured (TDR) totaled $10.9 million, a decrease of $2.3 million, or 17.2%, from $13.2 million at December 31, 2017, primarily due to the sale of one commercial TDR
  • We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 36.7% average loan-to-value for non-performing loans collateralized by real estate at March 31, 2018
  • Provision for loan losses of $0.2 million was recorded during the first quarter of 2018, as the result of the growth in the loan portfolio; net recoveries totaled $38,000 during the first quarter of 2018, compared to net charge-offs of $11.5 million for the fourth quarter of 2017, of which $11.2 million was related to taxi medallion loans

Capital Management:

  • The Company and Bank, at March 31, 2018, were both well capitalized under all applicable regulatory requirements
  • During 1Q18, stockholders’ equity increased $2.7 million, or 0.5%, to $535.3 million due to net income of $11.4 million, partially offset by the declaration and payment of dividends on the Company’s common stock and repurchases of the Company’s common stock
  • During 1Q18, the Company repurchased 217,863 treasury shares at an average cost of $27.14 per share; as of March 31, 2018, up to 36,417 shares may be repurchased under the previous authorized stock repurchase program, which has no expiration or maximum dollar limit.
  • In 1Q18, the Company authorized the purchase of up to 1,000,000 shares of its common stock under a new authorized stock repurchase program; the Company will complete its previous purchase authorization prior to purchasing shares under this authorization
  • Book value per common share increased to $18.75 at March 31, 2018, from $18.63 at December 31, 2017 and tangible book value per common share, a non-GAAP measure, increased to $18.20 at March 31, 2018, from $18.08 at December 31, 2017

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Wednesday, April 25, 2018 at 9:30 AM (ET) to discuss the Company’s strategy and results for the first quarter of 2018
  • Dial-in for Live Call: 1-877-509-5836
  • Webcast: https://services.choruscall.com/links/ffic180425.html 
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10118145
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on April 25, 2019

About Flushing Financial Corporation

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

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

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

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


- Statistical Tables Follow -

 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 
      For the three months ended
      March 31,   December 31,   March 31,
        2018       2017       2017  
               
Interest and Dividend Income            
Interest and fees on loans   $ 55,017     $ 53,449     $ 50,885  
Interest and dividends on securities:            
Interest     5,468       6,112       6,095  
Dividends     14       13       121  
Other interest income     287       123       153  
Total interest and dividend income     60,786       59,697       57,254  
               
Interest Expense            
Deposits     12,110       11,174       8,980  
Other interest expense     6,067       5,463       4,885  
Total interest expense     18,177       16,637       13,865  
               
Net Interest Income     42,609       43,060       43,389  
Provision for loan losses     153       6,595       -  
Net Interest Income After Provision for Loan Losses     42,456       36,465       43,389  
               
Non-interest Income            
Banking services fee income     948       1,383       874  
Net gain (loss) on sale of loans     (263 )     207       210  
Net loss from fair value adjustments     (100 )     (631 )     (378 )
Federal Home Loan Bank of New York stock dividends     876       875       823  
Gains from life insurance proceeds     776       -       1,161  
Bank owned life insurance     762       809       795  
Other income     201       421       204  
Total non-interest income     3,200       3,064       3,689  
               
Non-interest Expense            
Salaries and employee benefits     18,455       14,249       17,104  
Occupancy and equipment     2,577       2,757       2,496  
Professional services     2,185       1,822       1,996  
FDIC deposit insurance     500       487       326  
Data processing     1,401       1,365       1,203  
Depreciation and amortization     1,389       1,339       1,165  
Other real estate owned/foreclosure expense     96       28       351  
Net gain from sales of real estate owned     -       -       (50 )
Other operating expenses     4,691       3,832       4,973  
Total non-interest expense     31,294       25,879       29,564  
               
Income Before Income Taxes     14,362       13,650       17,514  
               
Provision for Income Taxes            
Federal     2,607       7,838       4,749  
State and local     343       (145 )     505  
Total taxes     2,950       7,693       5,254  
               
Net Income   $ 11,412     $ 5,957     $ 12,260  
               
               
Basic earnings per common share   $ 0.39     $ 0.21     $ 0.42  
Diluted earnings per common share   $ 0.39     $ 0.21     $ 0.42  
Dividends per common share   $ 0.20     $ 0.18     $ 0.18  
               


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
 
        March 31,   December 31,   March 31,
          2018       2017       2017  
ASSETS            
Cash and due from banks $ 91,959     $ 51,546     $ 51,215  
Securities held-to-maturity:          
  Mortgage-backed securities   7,968       7,973       -  
  Other securities   23,267       22,913       36,406  
Securities available for sale:          
  Mortgage-backed securities   512,781       509,650       537,905  
  Other securities   216,480       228,704       346,238  
Loans:            
  Multi-family residential   2,286,803       2,273,595       2,261,946  
  Commercial real estate   1,426,847       1,368,112       1,268,770  
  One-to-four family ― mixed-use property   566,930       564,206       561,355  
  One-to-four family ― residential   190,115       180,663       184,201  
  Co-operative apartments   6,826       6,895       7,216  
  Construction   23,887       8,479       12,413  
  Small Business Administration   20,004       18,479       10,519  
  Taxi medallion   6,617       6,834       18,832  
  Commercial business and other   768,440       732,973       632,503  
  Net unamortized premiums and unearned loan fees   16,395       16,763       16,836  
  Allowance for loan losses   (20,542 )     (20,351 )     (22,211 )
      Net loans   5,292,322       5,156,648       4,952,380  
Interest and dividends receivable   22,578       21,405       20,602  
Bank premises and equipment, net   31,314       30,836       26,026  
Federal Home Loan Bank of New York stock   54,045       60,089       57,384  
Bank owned life insurance   130,653       131,856       129,824  
Goodwill     16,127       16,127       16,127  
Other assets   83,277       61,527       57,378  
      Total assets $ 6,482,771     $ 6,299,274     $ 6,231,485  
                 
LIABILITIES          
Due to depositors:          
  Non-interest bearing $ 377,861     $ 385,269     $ 344,028  
  Interest-bearing:          
    Certificate of deposit accounts   1,499,326       1,351,933       1,411,819  
    Savings accounts   246,888       290,280       254,822  
    Money market accounts   1,032,409       979,958       851,129  
    NOW accounts   1,479,319       1,333,232       1,487,120  
      Total interest-bearing deposits   4,257,942       3,955,403       4,004,890  
Mortgagors' escrow deposits   65,979       42,606       61,828  
Borrowed funds   1,177,101       1,309,653       1,227,852  
Other liabilities   68,581       73,735       67,485  
      Total liabilities   5,947,464       5,766,666       5,706,083  
                 
STOCKHOLDERS' EQUITY          
Preferred stock (5,000,000 shares authorized; none issued)   -       -       -  
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares          
  issued at March 31, 2018, December 31, 2017 and March 31, 2017; 28,546,443          
  shares, 28,588,266 shares and 28,811,160 shares outstanding at March 31, 2018,          
  December 31, 2017 and March 31, 2017, respectively)   315       315       315  
Additional paid-in capital   219,115       217,906       215,501  
Treasury stock (2,984,152 shares, 2,942,329 shares and 2,719,435 shares at          
  March 31, 2018, December 31, 2017 and March 31, 2017, respectively)   (60,737 )     (57,675 )     (51,224 )
Retained earnings   388,568       383,121       367,944  
Accumulated other comprehensive loss, net of taxes   (11,954 )     (11,059 )     (7,134 )
      Total stockholders' equity   535,307       532,608       525,402  
                 
      Total liabilities and stockholders' equity $ 6,482,771     $ 6,299,274     $ 6,231,485  
                 


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
 
   
    At or for the three months ended  
    March 31,   December 31,   March 31,  
      2018     2017     2017  
Per Share Data              
Basic earnings per share   $ 0.39   $ 0.21   $ 0.42  
Diluted earnings per share   $ 0.39   $ 0.21   $ 0.42  
Average number of shares outstanding for:              
Basic earnings per common share computation     28,974,156     29,045,491     29,019,070  
Diluted earnings per common share computation     28,974,757     29,046,111     29,022,745  
Shares outstanding     28,546,443     28,588,266     28,811,160  
Book value per common share (1)   $ 18.75   $ 18.63   $ 18.24  
Tangible book value per common share (2)   $ 18.20   $ 18.08   $ 17.69  
               
Stockholders' Equity              
Stockholders' equity   $ 535,307   $ 532,608   $ 525,402  
Tangible stockholders' equity     519,471     516,772     509,666  
               
Average Balances              
Total loans, net   $ 5,231,377   $ 5,087,102   $ 4,868,048  
Total interest-earning assets     6,098,706     5,934,493     5,873,799  
Total assets     6,403,396     6,243,686     6,168,848  
Total due to depositors     4,176,457     4,020,334     4,088,031  
Total interest-bearing liabilities     5,442,554     5,254,030     5,254,640  
Stockholders' equity     529,281     537,201     517,800  
               
Performance Ratios (3)              
Return on average assets     0.71 %   0.38 %   0.79 %
Return on average equity     8.62     4.44     9.47  
Yield on average interest-earning assets     3.99     4.02     3.90  
Cost of average interest-bearing liabilities     1.34     1.27     1.06  
Cost of funds     1.27     1.17     1.01  
Interest rate spread during period     2.65     2.75     2.84  
Net interest margin     2.79     2.90     2.95  
Non-interest expense to average assets     1.95     1.66     1.92  
Efficiency ratio (4)     69.34     55.35     63.98  
Average interest-earning assets to average              
interest-bearing liabilities     1.12 X   1.13 X   1.12 X
               

(1) Calculated by dividing stockholders’ equity by shares outstanding.

(2) Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.

(3) Ratios are presented on an annualized basis, where appropriate.

(4) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income and non-interest income (excluding net gains and losses from fair value adjustments and life insurance proceeds).

   
   
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
 
   
    At or for the three     At or for the year     At or for the three  
    months ended     ended     months ended  
    March 31, 2018     December 31, 2017     March 31, 2017  
                   
Selected Financial Ratios and Other Data                  
                   
Regulatory capital ratios (for Flushing Financial Corporation):                  
Tier 1 capital   $ 568,635     $ 563,426     $ 550,055  
Common equity Tier 1 capital     531,305       527,727       516,706  
Total risk-based capital     664,177       658,777       647,266  
                   
Tier 1 leverage capital (well capitalized = 5%)     8.86 %     9.02 %     8.92 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)     11.17       11.59       11.59  
Tier 1 risk-based capital (well capitalized = 8.0%)     11.95       12.38       12.34  
Total risk-based capital (well capitalized = 10.0%)     13.96       14.47       14.52  
                   
Regulatory capital ratios (for Flushing Bank only):                  
Tier 1 capital   $ 637,091     $ 631,285     $ 616,017  
Common equity Tier 1 capital     637,091       631,285       616,017  
Total risk-based capital     657,633       651,636       638,228  
                   
Tier 1 leverage capital (well capitalized = 5%)     9.92 %     10.11 %     9.98 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)     13.39       13.87       13.80  
Tier 1 risk-based capital (well capitalized = 8.0%)     13.39       13.87       13.80  
Total risk-based capital (well capitalized = 10.0%)     13.82       14.31       14.30  
                   
Capital ratios:                  
Average equity to average assets     8.27 %     8.53 %     8.39 %
Equity to total assets     8.26       8.46       8.43  
Tangible common equity to tangible assets (1)     8.03       8.22       8.20  
                   
Asset quality:                  
Non-accrual loans (2)   $ 14,972     $ 15,710     $ 17,858  
Non-performing loans     16,640       18,134       18,535  
Non-performing assets     17,384       18,134       18,535  
Net charge-offs/ (recoveries)     (38 )     11,739       18  
                   
Asset quality ratios:                  
Non-performing loans to gross loans     0.31 %     0.35 %     0.37 %
Non-performing assets to total assets     0.27       0.29       0.30  
Allowance for loan losses to gross loans     0.39       0.39       0.45  
Allowance for loan losses to non-performing assets     118.17       112.23       119.84  
Allowance for loan losses to non-performing loans     123.45       112.23       119.84  
                   
Full-service customer facilities     18       18       19  

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


   
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
 
   
  For the three months ended  
  March 31, 2018   December 31, 2017   March 31, 2017  
  Average   Yield/   Average   Yield/   Average   Yield/  
  Balance Interest Cost   Balance Interest Cost   Balance Interest Cost  
Interest-earning Assets:                        
Mortgage loans, net $ 4,442,870 $ 46,112 4.15 % $ 4,355,973 $ 45,577 4.19 % $ 4,213,482 $ 44,429 4.22 %
Other loans, net   788,507   8,905 4.52     731,129   7,872 4.31     654,566   6,456 3.95  
Total loans, net (1)   5,231,377   55,017 4.21     5,087,102   53,449 4.20     4,868,048   50,885 4.18  
Taxable securities:                        
Mortgage-backed                        
securities   524,710   3,507 2.67     524,098   3,567 2.72     529,942   3,366 2.54  
Other securities   131,078   1,121 3.42     151,565   1,696 4.48     239,345   1,882 3.15  
Total taxable securities   655,788   4,628 2.82     675,663   5,263 3.12     769,287   5,248 2.73  
Tax-exempt securities: (2)                        
Other securities   124,125   854 2.75     123,816   862 2.78     146,502   968 2.64  
Total tax-exempt securities   124,125   854 2.75     123,816   862 2.78     146,502   968 2.64  
Interest-earning deposits                        
and federal funds sold   87,416   287 1.31     47,912   123 1.03     89,962   153 0.68  
Total interest-earning                        
assets   6,098,706   60,786 3.99     5,934,493   59,697 4.02     5,873,799   57,254 3.90  
Other assets   304,690         309,193         295,049      
Total assets $ 6,403,396       $ 6,243,686       $ 6,168,848      
                         
                         
Interest-bearing Liabilities:                        
Deposits:                        
Savings accounts $ 265,895   389 0.59   $ 306,273   519 0.68   $ 254,255   307 0.48  
NOW accounts   1,540,465   3,148 0.82     1,357,028   2,634 0.78     1,568,267   2,207 0.56  
Money market accounts   1,025,727   3,075 1.20     984,619   2,664 1.08     860,779   1,499 0.70  
Certificate of deposit                        
accounts   1,344,370   5,463 1.63     1,372,414   5,322 1.55     1,404,730   4,940 1.41  
Total due to depositors   4,176,457   12,075 1.16     4,020,334   11,139 1.11     4,088,031   8,953 0.88  
Mortgagors' escrow                        
accounts   58,960   35 0.24     65,127   35 0.21     54,616   27 0.20  
Total interest-bearing                        
deposits   4,235,417   12,110 1.14     4,085,461   11,174 1.09     4,142,647   8,980 0.87  
Borrowings   1,207,137   6,067 2.01     1,168,569   5,463 1.87     1,111,993   4,885 1.76  
Total interest-bearing                        
liabilities   5,442,554   18,177 1.34     5,254,030   16,637 1.27     5,254,640   13,865 1.06  
Non interest-bearing                        
demand deposits   364,983         373,136         330,215      
Other liabilities   66,578         79,319         66,193      
Total liabilities   5,874,115         5,706,485         5,651,048      
Equity   529,281         537,201         517,800      
Total liabilities and                        
equity $ 6,403,396       $ 6,243,686       $ 6,168,848      
                         
Net interest income /                        
net interest rate spread   $ 42,609 2.65 %   $ 43,060 2.75 %   $ 43,389 2.84 %
                         
Net interest-earning assets /                        
net interest margin $ 656,152   2.79 % $ 680,463   2.90 % $ 619,159   2.95 %
                         
Ratio of interest-earning                        
assets to interest-bearing                        
liabilities     1.12 X     1.13 X     1.12 X
                         

(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.1 million, $0.5 million and $0.6 million for the three months ended March 31, 2018, December 31, 2017 and March 31, 2107, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
 
                        March 2018 vs.       March 2018 vs.
        March 31,   December 31,   September 30,   June 30,   December 2017   March 31,   March 2017,
(Dollars in thousands)   2018     2017     2017     2017   % Change     2017   % Change
Deposits                            
Non-interest bearing $ 377,861   $ 385,269   $ 362,509   $ 349,302   -1.9 %   $ 344,028   9.8 %
Interest bearing:                          
  Certificate of deposit                          
    accounts   1,499,326     1,351,933     1,404,555     1,332,377   10.9 %     1,411,819   6.2 %
  Savings accounts   246,888     290,280     323,186     325,815   -14.9 %     254,822   -3.1 %
  Money market accounts   1,032,409     979,958     991,706     837,565   5.4 %     851,129   21.3 %
  NOW accounts   1,479,319     1,333,232     1,308,821     1,368,441   11.0 %     1,487,120   -0.5 %
    Total interest-bearing                          
      deposits   4,257,942     3,955,403     4,028,268     3,864,198   7.6 %     4,004,890   6.3 %
                                 
      Total deposits $ 4,635,803   $ 4,340,672   $ 4,390,777   $ 4,213,500   6.8 %   $ 4,348,918   6.6 %
                                 
                                 

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Originations and Purchases

    For the three months
    March 31,   December 31,   March 31,
(In thousands)   2018   2017   2017
Multi-family residential   $ 81,181   $ 118,784   $ 126,708
Commercial real estate     71,554     53,381     35,732
One-to-four family – mixed-use property     16,068     19,913     18,542
One-to-four family – residential     16,968     9,545     5,920
Co-operative apartments     -     100     -
Construction     14,679     726     2,544
Small Business Administration     1,967     4,772     641
Commercial business and other     139,407     121,598     76,484
Total   $ 341,824   $ 328,819   $ 266,571
             

Loan Composition

                      March 2018 vs.         March 2018 vs.
        March 31,   December 31,   September 30,   June 30, December 2017     March 31,   March 2017
(Dollars in thousands)   2018       2017       2017       2017   % Change       2017     % Change
Loans held for investment:                              
Multi-family residential $ 2,286,803     $ 2,273,595     $ 2,236,173     $ 2,243,643   0.6 %       $ 2,261,946     1.1 %  
Commercial real estate   1,426,847       1,368,112       1,352,775       1,349,634   4.3 %         1,268,770     12.5 %  
One-to-four family ―                              
  mixed-use property   566,930       564,206       556,723       556,906   0.5 %         561,355     1.0 %  
One-to-four family ― residential   190,115       180,663       177,578       181,213   5.2 %         184,201     3.2 %  
Co-operative apartments   6,826       6,895       7,035       7,069   -1.0 %         7,216     -5.4 %  
Construction   23,887       8,479       15,811       16,842   181.7 %         12,413     92.4 %  
Small Business Administration   20,004       18,479       14,485       10,591   8.3 %         10,519     90.2 %  
Taxi medallion   6,617       6,834       18,165       18,303   -3.2 %         18,832     -64.9 %  
Commercial business and other   768,440       732,973       674,706       644,262   4.8 %         632,503     21.5 %  
Net unamortized premiums                              
  and unearned loan fees   16,395       16,763       16,925       17,217   -2.2 %         16,836     -2.6 %  
Allowance for loan losses   (20,542 )     (20,351 )     (25,269 )     (22,157 ) 0.9 %         (22,211 )   -7.5 %  
      Net loans $ 5,292,322     $ 5,156,648     $ 5,045,107     $ 5,023,523   2.6 %       $ 4,952,380     6.9 %  
                                     

Net Loans Activity

    Three Months Ended  
    March 31,   December 31,   September, 30   June 30,   March 31,  
(In thousands)     2018       2017       2017       2017       2017    
Loans originated and purchased $ 341,824     $ 328,819     $ 182,925     $ 261,155     $ 266,571    
Principal reductions   (202,059 )     (209,400 )     (155,007 )     (143,195 )     (122,897 )  
Loans transferred to held-for-sale   -       -       -       (30,565 )     -    
Loans sold     (2,703 )     (1,018 )     (2,606 )     (16,337 )     (4,874 )  
Loan charged-offs   (85 )     (11,616 )     (324 )     (350 )     (179 )  
Foreclosures     (744 )     -       -       -       -    
Net change in deferred (fees) and costs   (368 )     (162 )     (292 )     381       277    
Net change in the allowance for loan losses   (191 )     4,918       (3,112 )     54       18    
  Total loan activity $ 135,674     $ 111,541     $ 21,584     $ 71,143     $ 138,916    
                       


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
 
      March 31,   December 31,   September 30,   June 30,   March 31,
(Dollars in thousands)     2018       2017       2017       2017       2017  
Loans 90 Days Or More Past Due                    
  and Still Accruing:                    
Multi-family residential   $ -     $ -     $ 415     $ -     $ -  
Commercial real estate     1,668       2,424       38       -       75  
One-to-four family - mixed-use property     -       -       129       -       -  
Construction     -       -       -       602       602  
Taxi medallion     -       -       1,147       727       -  
  Total     1,668       2,424       1,729       1,329       677  
                       
Non-accrual Loans:                    
Multi-family residential     2,193       3,598       1,309       1,537       1,354  
Commercial real estate     1,894       1,473       1,147       1,948       1,462  
One-to-four family - mixed-use property     2,396       1,867       2,217       2,971       3,328  
One-to-four family - residential     7,542       7,808       7,434       7,616       7,847  
Small Business Administration     41       46       50       53       58  
Taxi medallion(1)     906       918       -       -       3,771  
Commercial business and other     -       -       4       5       38  
  Total     14,972       15,710       12,161       14,130       17,858  
                       
  Total Non-performing Loans     16,640       18,134       13,890       15,459       18,535  
                       
Other Non-performing Assets:                    
Real estate acquired through foreclosure     638       -       -       -       -  
Other asset acquired through foreclosure     106       -       -       -       -  
  Total     744       -       -       -       -  
                       
  Total Non-performing Assets   $ 17,384     $ 18,134     $ 13,890     $ 15,459     $ 18,535  
                       
Non-performing Assets to Total Assets     0.27%       0.29%       0.22%       0.25%       0.30%  
Allowance For Loan Losses to Non-performing Loans     123.5%       112.2%       181.9%       143.3%       119.8%  
                       

(1)  Not included in the above analysis are troubled debt restructured taxi medallion loans totaling $5.7 million at March 31, 2018.

Net Charge-Offs (Recoveries)

      Three Months Ended
      March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands)     2018       2017       2017       2017       2017  
Multi-family residential   $ 51     $ (1 )   $ 224     $ (53 )   $ (16 )
Commercial real estate     -       (3 )     (25 )     4       (68 )
One-to-four family – mixed-use property     -       (37 )     1       (67 )     34  
One-to-four family – residential     (107 )     212       (58 )     170       -  
Small Business Administration     19       109       (17 )     14       26  
Taxi medallion     -       11,229       -       -       54  
Commercial business and other     (1 )     4       29       (14 )     (12 )
Total net loan charge-offs (recoveries)   $ (38 )   $ 11,513     $ 154     $ 54     $ 18  
                       

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

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

   
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
 
   
    Three Months Ended  
    March 31, December 31, March 31,  
      2018     2017     2017    
     
           
GAAP income before income taxes $ 14,362   $ 13,650   $ 17,514    
           
Net loss from fair value adjustments   100     631     378    
Gain from life insurance proceeds   (776 )   -     (1,161 )  
           
Core income before taxes   13,686     14,281     16,731    
           
Provision for income taxes for core income   2,982     4,652     5,020    
           
Core net income $ 10,704   $ 9,629   $ 11,711    
           
GAAP diluted earnings per common share $ 0.39   $ 0.21   $ 0.42    
           
Net loss from fair value adjustments, net of tax   -     0.01     0.01    
Gain from life insurance proceeds   (0.03 )   -     (0.04 )  
Federal tax reform of 2017   -     0.13     -    
           
Core diluted earnings per common share* $ 0.37   $ 0.33   $ 0.40    
           
           
Core net income, as calculated above $ 10,704   $ 9,629   $ 11,711    
Average assets   6,403,396     6,243,686     6,168,848    
Average equity   529,281     537,201     517,800    
Core return on average assets**   0.67%     0.62%     0.76%    
Core return on average equity**   8.09%     7.17%     9.05%    
           
* Core diluted earnings per common share may not foot due to rounding.            
** Ratios are calculated on an annualized basis.      


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)
 
            March 31, December 31, March 31,
(Dollars in thousands)     2018 2017 2017
Total Equity     $ 535,307   $ 532,608   $ 525,402  
Less:              
  Goodwill       (16,127 )   (16,127 )   (16,127 )
  Intangible deferred tax liabilities       291     291     391  
    Tangible Stockholders' Common Equity $ 519,471   $ 516,772   $ 509,666  
                 
Total Assets     $ 6,482,771   $ 6,299,274   $ 6,231,485  
Less:              
  Goodwill       (16,127 )   (16,127 )   (16,127 )
  Intangible deferred tax liabilities       291     291     391  
    Tangible Assets     $ 6,466,935   $ 6,283,438   $ 6,215,749  
                 
Tangible Stockholders' Common Equity to Tangible Assets   8.03%     8.22%     8.20%  
                 

 

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

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