Flushing Financial Corporation Reports 3Q20 GAAP Earnings of $0.50 and Record Core Earnings Up 56% Driven by Record Net Interest Income

Flushing Financial Corporation
·19-min read

THIRD QUARTER 2020 HIGHLIGHTS 1

  • GAAP diluted EPS of $0.50, compared to $0.63 in 2Q20 and $0.37 in 3Q19

  • Record Core diluted EPS of $0.56 compared to $0.36 in 2Q20 and $0.48 in 3Q19

  • Net interest margin of 3.00%, up 13bps QoQ and 63bps YoY

  • Core net interest margin of 2.89%, up 4bps QoQ and 56bps YoY

  • Record GAAP net interest income of $49.9 million, up 2.5% QoQ and 28.2% YoY

  • Record Core net interest income of $49.7 million, up 1.2% QoQ and 23.6% YoY

  • GAAP and core ROAE were 9.9% and 11.2%, respectively, compared with 13.1% and 7.4%, respectively in 2Q20

  • GAAP and core ROAA were 0.8% and 0.9%, respectively, compared with 1.0% and 0.6%, respectively in 2Q20

  • Loan pipeline remains strong at $394.1 million

  • Provision for credit losses of $2.5 million, $0.07 after-tax per diluted common share, compared to $9.6 million in 2Q20 and $0.7 million in 3Q19

  • Net charge-offs were $0.8 million, compared to $1.0 million in 2Q20

UNIONDALE, N.Y., Oct. 27, 2020 (GLOBE NEWSWIRE) --  Flushing Financial Corporation (the Company) (NASDAQ-GS:  FFIC) the parent holding company for Flushing Bank (the Bank), today announced its financial results for the third quarter ended September 30, 2020.

John R. Buran, President and Chief Executive Officer stated, I want to thank our employees for their tireless work in assisting our customers and communities as we continue to navigate these unprecedented times due to the COVID-19 pandemic.

Mr. Buran continued, We are pleased to announce our third quarter earnings totaled $14.3 million, or $0.50 per diluted common share, driven by strong execution of our strategic objectives. We continued to proactively manage credit risk and made good progress improving our funding mix with an emphasis on non-interest bearing demand accounts, which increased 4% (not annualized), during the quarter. For the second consecutive quarter we achieved record net interest income, as the Company capitalized on the low interest rate environment. The cost of funds decreased 10 basis points while the yield on interest earning assets increased three basis points. The net interest margin expanded 13 basis points from the linked quarter. Given the current rate environment, we expect to sustain a strong margin and anticipate that our cost of funds will further decline during the fourth quarter as $315 million of retail certificates of deposits are scheduled to mature at an average rate of 1.10% compared to a current one year CD rate of 0.60%.

The principal balance of loans granted forbearance has decreased from a peak of $1.5 billion to $846 million with approximately 80% of loans scheduled to return to full payment have already done so. We generally granted additional forbearances at new terms more advantageous to the Company for the majority of customers that have not yet returned to full payment status. We expect further reduction in active forbearances during the fourth quarter as most will reach their expiration prior to year-end. Our loan portfolio is primarily real estate based with 88% collateralized by real estate with an average loan to value of less than 40%. Our forbearances share similar credit quality characteristics with the overall loan portfolio. We have a conservative, resilient seasoned loan portfolio built upon our long history and foundation of disciplined underwriting and excellent credit quality.

Our enhanced technology platform, which went live in March 2020 offering mobile banking capabilities, has effectively extended our branch footprint.  Importantly, 23% of all account openings in the third quarter were completed using our technology platform as customers continue to shift to digital banking.  Additionally, our online banking enrollment has increased 4% quarter over quarter.

Finally, we are excited to report that earlier today Empire Bancorp, Inc. (Empire) shareholders approved the merger, which is scheduled to close on or about October 31, 2020. The credit quality of Empire remains strong with no loans greater than 90 days past due and less than $1.0 million in loans greater than 30 days past due. As of September 30, 2020, Empire has $120 million in active forbearance agreements outstanding.

Mr. Buran concluded, We are pleased with the execution against our strategic objectives resulting in record net interest income of $49.9 million and record core earnings for the quarter which totaled $16.2 million, or $0.56 per diluted common share. Credit continued to be strong as non-performing assets at the end of the quarter totaled only 35 basis points. In addtition, loan forbearances declined consistent with our expectations. We look forward to welcoming Empire employees to the Flushing Bank family to together build upon their success and provide continued exceptional service as a leading banking franchise on Long Island.

Summary of Strategic Objectives

  • Manage cost of funds and continue to improve funding mix

  • Increase interest income by leveraging loan pricing opportunities and portfolio mix

  • Enhance core earnings power by improving scalability and efficiency

  • Manage credit risk

  • Remain well capitalized under all stress test scenarios

Earnings Summary:

Net Interest Income

Net interest income for 3Q20 was $49.9 million, an increase of $11.0 million, or 28.2% YoY and $1.2 million, or 2.5% QoQ.

  • Net interest margin of 3.00%, increased 63bps YoY and 13bps QoQ

  • Net interest spread of 2.86%, increased 71bps YoY and 14bps QoQ

  • Yield on average interest-earning assets of 3.84%, decreased 38bps YoY, but increased 3bps QoQ

  • Cost of average interest-bearing liabilities of 0.98%, decreased 109bps YoY and 11bps QoQ

  • Cost of funds of 0.89%, decreased 105bps YoY and 10bps QoQ

  • Average balance of total interest-earning assets of $6,675.9 million, increased $86.4 million, or 1.3%, YoY, but decreased $133.9 million, or 2.0%, QoQ

  • Net interest income includes prepayment penalty income from loans and securities totaling $1.4 million in 3Q20, $0.7 million in 2Q20 and $1.7 million in 3Q19; recovered interest from delinquent loans of $0.1 million in 3Q20 and 2Q20, and $0.3 million in 3Q19; net gains (losses) from fair value adjustments on qualifying hedges totaling $0.2 million in 3Q20, ($0.4) million in 2Q20, and ($1.3) million in 3Q19

  • Absent all above items noted in the preceding bullet, the net interest margin was 2.89% in 3Q20, an increase of 56bps YoY and 4bps QoQ

Provision for Credit Losses

The Company recorded a provision for credit losses of $2.5 million in 3Q20, a decrease of $7.1 million or 74.3% QoQ, but an increase of $1.8 million YoY.

  • 3Q20 and 2Q20 provision for credit losses were primarily driven by the negative economic forecast; the reduction in provision for credit losses from 2Q20 was due to the consistency in the qualitative factors used in the calculation QoQ

  • Net charge-offs of $0.8 million in 3Q20, $1.0 million in 2Q20 and $0.2 million in 3Q19

Non-interest Income

Non-interest income for 3Q20 was $1.4 million, an increase of $0.3 million or 30.0% YoY, but a decrease of $12.4 million or 90.2% QoQ.

  • Non-interest income included net losses from fair value adjustments of $2.2 million and $2.1 million in 3Q20 and 3Q19, respectively; net gains from fair value adjustments of $10.2 million in 2Q20

  • Additionally, non-interest income included life insurance proceeds totaling $0.7 million in 2Q20

  • Absent all above items, non-interest income was $3.6 million in 3Q20, an increase of $0.4 million, or 13.1% YoY, and $0.7 million, or 24.5% QoQ

Non-interest Expense

Non-interest expense for 3Q20 was $30.0 million, an increase of $3.9 million or 15.1% YoY, and $1.2 million, or 4.3 % QoQ.

  • Non-interest expense increased QoQ primarily due to 2Q20 including $1.4 million of benefit for deferred compensation costs from originations of PPP loans compared to $0.2 million in 3Q20, and increased YoY primarily due to Company growth 

  • 3Q19 Non-interest expense included FDIC assessment credit

  • Non-interest expense included merger expenses totaling $0.4 million in 3Q20, $0.2 million in 2Q20 and $0.5 million in 3Q19

  • The ratio of non-interest expense to average assets was 1.69% in 3Q20 compared to 1.60% in 2Q20 and 1.49% in 3Q19

  • The efficiency ratio was 55.4% in 3Q20 compared to 54.9% in 2Q20 and 58.9% in 3Q19

Provision for Income Taxes

The provision for income taxes in 3Q20 was $4.5 million, an increase of $2.0 million, or 77.0% YoY, but a decrease of $1.3 million, or 22.7 % QoQ.

  • Pre-tax income increased by $5.6 million YoY, but decreased by $5.3 million QoQ

  • The effective tax rates were 23.9% in 3Q20, 24.1% in 2Q20 and 19.1% in 3Q19

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,903.1 million reflecting an increase of 2.7% from December 31, 2019, as we continue to focus on the origination of full banking relationship loans through C&I loans, multi-family loans and commercial real estate

  • SBA Paycheck Protection Program (PPP) closings totaled $18.4 million in 3Q20, which ended in August 2020

  • Loan closings of commercial business loans, multi-family loans and commercial real estate totaled $126.9 million for 3Q20, or 91.5% of loan production, excluding PPP closings

  • Loan pipeline was $394.1 million at September 30, 2020, compared to $324.5 million at December 31, 2019

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

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

Loan type

 

2020

 

2020

 

2019

 

Mortgage loans

 

3.56

%

3.79

%

4.40

%

Non-mortgage loans

 

2.81

%

1.99

%

4.38

%

Total loans

 

3.16

%

2.62

%

4.39

%

 

 

 

 

 

 

 

 

Excluding PPP loans

 

3.45

%

3.71

%

4.39

%

Credit Quality:

  • Non-performing loans totaled $24.8 million, an increase of $11.5 million, or 87.0%, from $13.3 million at December 31, 2019

  • Non-performing assets totaled $24.8 million, an increase of $11.3 million, or 83.5%, from $13.5 million at December 31, 2019

  • Classified assets totaled $30.4 million, an increase of $5.9 million, or 23.8%, from $24.6 million at December 31, 2019

  • Loans classified as troubled debt restructured (TDR) totaled $5.1 million, a decrease of $1.4 million, or 20.9%, from $6.5 million at December 31, 2019

  • Active COVID-19 forbearances at September 30 th totaled 509 loans with a principal balance of $846.2 million at the time of modification decreased from a peak of $1.5 billion; total deferment of $28.4 million in principal, interest and escrow

  • Over 88% of gross loans are collateralized by real estate

  • The loan-to-value ratio on portfolio of real estate dependent loans as of September 30, 2020 totaled 37.8%

  • Net charge-offs totaled $3.0 million for the nine months ended September 30, 2020.

Capital Management:

  • The Company and Bank, at September 30, 2020, were both well capitalized under all applicable regulatory requirements

  • Through 3Q20, stockholders equity increased $6.7 million, or 1.2%, from December 31, 2019, to $586.4 million primarily due to net income of $31.2 million, partially offset by payment of dividends on the Companys common stock and unrealized losses in the fair value of interest rate swaps.

  • During 3Q20, the Company did not repurchase any shares; as of September 30, 2020, up to 284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit

  • Book value per common share was $20.78 at September 30, 2020, compared to $20.59 at December 31, 2019

  • Tangible book value per common share, a non-GAAP measure, was $20.22 at September 30, 2020, compared to $20.02 at December 31, 2019

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Wednesday, October 28, 2020 at 9:30 AM (ET) to discuss the Companys strategy and results for the third quarter

  • Dial-in for Live Call: 1-877-509-5836

  • Webcast:  https://services.choruscall.com/links/ffic201021.html  

  • Dial-in for Replay: 1-877-344-7529

  • Replay Access Code: 10138502

  • The conference call will be simultaneously webcast and archived through October 28, 2021

About Flushing Financial Corporation

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

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Companys 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in other documents filed by the Company with the Securities and Exchange Commission from time to time, as well as the possibility that the expected benefits of the proposed Empire merger may not materialize in the timeframe expected or at all, or may be more costly to achieve; that the proposed transaction may not be timely completed, if at all; that prior to the completion of the proposed merger or thereafter, Flushings and Empires respective businesses may not perform as expected due to transaction-related uncertainty or other factors; that the parties are unable to successfully implement integration strategies related to the proposed transaction; that customary closing conditions are not satisfied in a timely manner or at all; reputational risks and the reaction of the companies shareholders, customers, employees and other constituents to the proposed transaction; and diversion of management time on merger-related matters. These risks, as well as other risks associated with the proposed transaction, are more fully discussed in the proxy statement/prospectus that is included in the registration statement on Form S-4 filed with the SEC in connection with the proposed transaction, as amended and supplemented 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.

Statistical Tables Follow  -

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

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

2020

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest and Dividend Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

60,367

 

 

$

60,557

 

 

$

62,825

 

 

$

182,033

 

 

$

187,428

 

Interest and dividends on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

3,525

 

 

 

4,182

 

 

 

6,287

 

 

 

12,963

 

 

 

20,007

 

Dividends

 

 

9

 

 

 

11

 

 

 

18

 

 

 

35

 

 

 

56

 

Other interest income

 

 

13

 

 

 

22

 

 

 

259

 

 

 

325

 

 

 

1,286

 

Total interest and dividend income

 

 

63,914

 

 

 

64,772

 

 

 

69,389

 

 

 

195,356

 

 

 

208,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

7,093

 

 

 

9,971

 

 

 

22,244

 

 

 

35,842

 

 

 

66,540

 

Other interest expense

 

 

6,897

 

 

 

6,084

 

 

 

8,196

 

 

 

20,047

 

 

 

21,476

 

Total interest expense

 

 

13,990

 

 

 

16,055

 

 

 

30,440

 

 

 

55,889

 

 

 

88,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

49,924

 

 

 

48,717

 

 

 

38,949

 

 

 

139,467

 

 

 

120,761

 

Provision for credit losses

 

 

2,470

 

 

 

9,619

 

 

 

683

 

 

 

19,267

 

 

 

3,129

 

Net Interest Income After Provision for Credit Losses

 

 

47,454

 

 

 

39,098

 

 

 

38,266

 

 

 

120,200

 

 

 

117,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking services fee income

 

 

1,316

 

 

 

944

 

 

 

847

 

 

 

3,058

 

 

 

2,879

 

Net loss on sale of securities

 

 

 

 

 

(54

)

 

 

 

 

 

(91

)

 

 

(15

)

Net gain on sale of loans

 

 

 

 

 

 

 

 

204

 

 

 

42

 

 

 

381

 

Net gain on sale of assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

770

 

Net gain (loss) from fair value adjustments

 

 

(2,225

)

 

 

10,205

 

 

 

(2,124

)

 

 

1,987

 

 

 

(6,160

)

Federal Home Loan Bank of New York stock dividends

 

 

874

 

 

 

881

 

 

 

834

 

 

 

2,719

 

 

 

2,563

 

Life insurance proceeds

 

 

 

 

 

659

 

 

 

 

 

 

659

 

 

 

43

 

Bank owned life insurance

 

 

923

 

 

 

932

 

 

 

1,000

 

 

 

2,798

 

 

 

2,550

 

Other income

 

 

463

 

 

 

170

 

 

 

278

 

 

 

1,052

 

 

 

1,422

 

Total non-interest income

 

 

1,351

 

 

 

13,737

 

 

 

1,039

 

 

 

12,224

 

 

 

4,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

17,335

 

 

 

16,184

 

 

 

15,461

 

 

 

52,139

 

 

 

50,295

 

Occupancy and equipment

 

 

3,021

 

 

 

2,827

 

 

 

2,847

 

 

 

8,688

 

 

 

8,378

 

Professional services

 

 

2,064

 

 

 

1,985

 

 

 

2,167

 

 

 

6,911

 

 

 

6,238

 

FDIC deposit insurance

 

 

727

 

 

 

737

 

 

 

(589

)

 

 

2,114

 

 

 

563

 

Data processing

 

 

1,668

 

 

 

1,813

 

 

 

1,490

 

 

 

5,175

 

 

 

4,402

 

Depreciation and amortization

 

 

1,542

 

 

 

1,555

 

 

 

1,439

 

 

 

4,633

 

 

 

4,454

 

Other real estate owned/foreclosure expense

 

 

240

 

 

 

45

 

 

 

48

 

 

 

121

 

 

 

145

 

Net loss from sales of real estate owned

 

 

5

 

 

 

 

 

 

 

 

 

36

 

 

 

 

Other operating expenses

 

 

3,383

 

 

 

3,609

 

 

 

3,182

 

 

 

11,303

 

 

 

11,147

 

Total non-interest expense

 

 

29,985

 

 

 

28,755

 

 

 

26,045

 

 

 

91,120

 

 

 

85,622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

18,820

 

 

 

24,080

 

 

 

13,260

 

 

 

41,304

 

 

 

36,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

3,359

 

 

 

4,307

 

 

 

2,457

 

 

 

8,655

 

 

 

7,381

 

State and local

 

 

1,130

 

 

 

1,501

 

 

 

79

 

 

 

1,436

 

 

 

714

 

Total taxes

 

 

4,489

 

 

 

5,808

 

 

 

2,536

 

 

 

10,091

 

 

 

8,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

14,331

 

 

$

18,272

 

 

$

10,724

 

 

$

31,213

 

 

$

28,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.50

 

 

$

0.63

 

 

$

0.37

 

 

$

1.08

 

 

$

0.99

 

Diluted earnings per common share

 

$

0.50

 

 

$

0.63

 

 

$

0.37

 

 

$

1.08

 

 

$

0.99

 

Dividends per common share

 

$

0.21

 

 

$

0.21

 

 

$

0.21

 

 

$

0.63

 

 

$

0.63

 


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

 

    

September 30, 

    

June 30,

    

December 31,

 

 

2020

 

 

2020

 

 

2019

 

ASSETS

 

 

  

 

 

  

 

 

  

Cash and due from banks

 

$

 75,560

 

 

$

 84,754

 

 

$

 49,787

 

Securities held-to-maturity:

 

 

 

 

 

 

 

 

  

Mortgage-backed securities

 

 

 7,919

 

 

 

 7,924

 

 

 

 7,934

 

Other securities

 

 

 50,252

 

 

 

 50,078

 

 

 

 50,954

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 386,235

 

 

 

 442,507

 

 

 

 523,849

 

Other securities

 

 

 234,721

 

 

 

 232,803

 

 

 

 248,651

 

Loans:

 

 

 

 

 

 

 

 

 

Multi-family residential

 

 

 2,252,757

 

 

 

 2,285,555

 

 

 

 2,238,591

 

Commercial real estate

 

 

 1,636,659

 

 

 

 1,646,085

 

 

 

 1,582,008

 

One-to-four family mixed-use property

 

 

 585,159

 

 

 

 591,347

 

 

 

 592,471

 

One-to-four family residential

 

 

 191,011

 

 

 

 184,741

 

 

 

 188,216

 

Co-operative apartments

 

 

 8,132

 

 

 

 8,423

 

 

 

 8,663

 

Construction

 

 

 63,567

 

 

 

 69,433

 

 

 

 67,754

 

Small Business Administration

 

 

 124,649

 

 

 

 106,813

 

 

 

 14,445

 

Taxi medallion

 

 

 2,317

 

 

 

 3,269

 

 

 

 3,309

 

Commercial business and other

 

 

 1,063,429

 

 

 

 1,073,623

 

 

 

 1,061,478

 

Net unamortized premiums and unearned loan fees

 

 

 13,718

 

 

 

 13,986

 

 

 

 15,271

 

Allowance for loan losses

 

 

 (38,343

)

 

 

 (36,710

)

 

 

 (21,751

)

Net loans

 

 

 5,903,055

 

 

 

 5,946,565

 

 

 

 5,750,455

 

Interest and dividends receivable

 

 

 36,068

 

 

 

 30,219

 

 

 

 25,722

 

Bank premises and equipment, net

 

 

 25,766

 

 

 

 27,018

 

 

 

 28,676

 

Federal Home Loan Bank of New York stock

 

 

 57,119

 

 

 

 56,400

 

 

 

 56,921

 

Bank owned life insurance

 

 

 158,701

 

 

 

 157,779

 

 

 

 157,713

 

Goodwill

 

 

 16,127

 

 

 

 16,127

 

 

 

 16,127

 

Other real estate owned, net

 

 

 

 

 

 

 208

 

 

 

 239

 

Right of use asset

 

 

 42,326

 

 

 

 38,303

 

 

 

 41,254

 

Other assets

 

 

 69,207

 

 

 

 71,974

 

 

 

 59,494

 

Total assets

 

$

 7,063,056

 

 

$

 7,162,659

 

 

$

 7,017,776

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

  

 

 

  

 

 

  

Due to depositors:

 

 

  

 

 

  

 

 

  

Non-interest bearing

 

$

 607,954

 

 

$

 581,881

 

 

$

 435,072

 

Certificate of deposit accounts

 

 

 1,051,644

 

 

 

 1,135,977

 

 

 

 1,437,890

 

Savings accounts

 

 

 160,294

 

 

 

 184,895

 

 

 

 191,485

 

Money market accounts

 

 

 1,381,552

 

 

 

 1,474,880

 

 

 

 1,592,011

 

NOW accounts

 

 

 1,704,915

 

 

 

 1,672,241

 

 

 

 1,365,591

 

Total deposits

 

 

 4,906,359

 

 

 

 5,049,874

 

 

 

 5,022,049

 

Mortgagors' escrow deposits

 

 

 57,136

 

 

 

 48,525

 

 

 

 44,375

 

Borrowed funds

 

 

 1,323,975

 

 

 

 1,305,187

 

 

 

 1,237,231

 

Operating lease liability

 

 

 49,737

 

 

 

 45,897

 

 

 

 49,367

 

Other liabilities

 

 

 139,443

 

 

 

 141,255

 

 

 

 85,082

 

Total liabilities

 

 

 6,476,650

 

 

 

 6,590,738

 

 

 

 6,438,104

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

  

 

 

  

 

 

  

Preferred stock (5,000,000 shares authorized; none issued)

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares issued at September 30, 2020, June 30, 2020 and December 31, 2019; 28,218,427 shares, 28,217,434 shares and 28,157,206 shares outstanding at September 30, 2020, June 30, 2020 and December 31, 2019, respectively)

 

 

 315

 

 

 

 315

 

 

 

 315

 

Additional paid-in capital

 

 

 227,877

 

 

 

 226,901

 

 

 

 226,691

 

Treasury stock (3,312,168 shares, 3,313,161 shares and 3,373,389 shares at September 30, 2020, June 30, 2020 and December 31, 2019, respectively)

 

 

 (69,409

)

 

 

 (69,436

)

 

 

 (71,487

)

Retained earnings

 

 

 445,931

 

 

 

 437,663

 

 

 

 433,960

 

Accumulated other comprehensive loss, net of taxes

 

 

 (18,308

)

 

 

 (23,522

)

 

 

 (9,807

)

Total stockholders' equity

 

 

 586,406

 

 

 

 571,921

 

 

 

 579,672

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity $ 7,063,056 $ 7,162,659 $ 7,017,776


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

At or for the three months ended

At or for the nine months ended

September 30,

June 30,

September 30,

September 30,

September 30,

2020

2020

2019

2020

2019

Per Share Data

Basic earnings per share

$

0.50

$

0.63

$

0.37

$

1.08

$

0.99

Diluted earnings per share

$

0.50

$

0.63

$

0.37

$

1.08

$

0.99

Average number of shares outstanding for:

Basic earnings per common share computation

28,873,606

28,866,984

28,730,161

28,864,503

28,704,398

Diluted earnings per common share computation

28,873,606

28,866,984

28,730,161

28,864,503

28,704,402

Shares outstanding

28,218,427

28,217,434

28,157,206

28,218,427

28,157,206

Book value per common share (1)

$

20.78

$

20.27

$

20.19

$

20.78

$

20.19

Tangible book value per common share (2)

$

20.22

$

19.71

$

19.62

$

20.22

$

19.62

Stockholders' Equity

Stockholders' equity

$

586,406

$

571,921

$

568,392

$

586,406

$

568,392

Tangible stockholders' equity

570,571

556,086

552,551

570,571

552,551

Average Balances

Total loans, net

$

5,904,051

$

5,946,412

$

5,645,503

$

5,881,858

$

5,585,445

Total interest-earning assets

6,675,896

6,809,835

6,589,498

6,734,979

6,550,509

Total assets

7,083,028

7,206,059

6,972,403

7,131,850

6,911,077

Total due to depositors

4,353,560

4,395,228

4,422,050

4,442,202

4,537,869

Total interest-bearing liabilities

5,731,899

5,912,774

5,877,740

5,865,045

5,838,307

Stockholders' equity

576,512

557,414

564,255

570,198

559,209

Performance Ratios (3)

Return on average assets

0.81

%

1.01

%

0.62

%

0.58

%

0.55

%

Return on average equity

9.94

13.11

7.60

7.30

6.76

Yield on average interest-earning assets (4)

3.84

3.81

4.22

3.88

4.26

Cost of average interest-bearing liabilities

0.98

1.09

2.07

1.27

2.01

Cost of funds

0.89

0.99

1.94

1.16

1.88

Net interest rate spread during period (4)

2.86

2.72

2.15

2.61

2.25

Net interest margin (4)

3.00

2.87

2.37

2.77

2.47

Non-interest expense to average assets

1.69

1.60

1.49

1.70

1.65

Efficiency ratio (5)

55.37

54.92

58.87

59.12

63.52

Average interest-earning assets to average interest-bearing liabilities

1.16

X

1.15

X

1.12

X

1.15

X

1.12

X

(1) Calculated by dividing stockholders’ equity by shares outstanding.
(2) Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure, by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(3) Ratios are presented on an annualized basis, where appropriate.
(4) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
(5) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding accelerated employee benefits upon officer’s death, merger expense, OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges) and non-interest income (excluding life insurance proceeds, net gains and losses from the sale of securities and fair value adjustments).


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

At or for the nine

At or for the year

At or for the nine

months ended

ended

months ended

September 30, 2020

December 31, 2019

September 30, 2019

Selected Financial Ratios and Other Data

Regulatory capital ratios (for Flushing Financial Corporation):

Tier 1 capital

$

630,380

$

615,500

$

606,844

Common equity Tier 1 capital

593,344

572,651

564,466

Total risk-based capital

740,499

712,251

703,879

Tier 1 leverage capital (well capitalized = 5%)

9.03

%

8.73

%

8.71

%

Common equity Tier 1 risk-based capital (well capitalized = 6.5%)

11.02

10.95

10.73

Tier 1 risk-based capital (well capitalized = 8.0%)

11.71

11.77

11.53

Total risk-based capital (well capitalized = 10.0%)

13.76

13.62

13.37

Regulatory capital ratios (for Flushing Bank only):

Tier 1 capital

$

694,041

$

680,749

$

673,084

Common equity Tier 1 capital

694,041

680,749

673,084

Total risk-based capital

729,160

702,500

695,120

Tier 1 leverage capital (well capitalized = 5%)

9.93

%

9.65

%

9.66

%

Common equity Tier 1 risk-based capital (well capitalized = 6.5%)

12.88

13.02

12.79

Tier 1 risk-based capital (well capitalized = 8.0%)

12.88

13.02

12.79

Total risk-based capital (well capitalized = 10.0%)

13.54

13.43

13.21

Capital ratios:

Average equity to average assets

8.00

%

8.08

%

8.09

%

Equity to total assets

8.30

8.26

7.99

Tangible common equity to tangible assets (1)

8.10

8.05

7.79

Asset quality:

Non-accrual loans (2)

$

24,792

$

12,813

$

14,260

Non-performing loans

24,792

13,258

14,705

Non-performing assets

24,827

13,532

14,979

Net charge-offs

2,993

2,005

2,039

Asset quality ratios:

Non-performing loans to gross loans

0.42

%

0.23

%

0.26

%

Non-performing assets to total assets

0.35

0.19

0.21

Allowance for loan losses to gross loans

0.65

0.38

0.38

Allowance for loan losses to non-performing assets

154.44

160.73

147.11

Allowance for loan losses to non-performing loans

154.66

164.05

149.85

Full-service customer facilities

20

20

19

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


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

For the three months ended

September 30, 2020

June 30, 2020

September 30, 2019

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest

Cost

Balance

Interest

Cost

Balance

Interest

Cost

Interest-earning Assets:

Mortgage loans, net

$

4,721,742

$

49,814

4.22

%

$

4,762,068

$

49,719

4.18

%

$

4,598,898

$

50,462

4.39

%

Other loans, net

1,182,309

10,553

3.57

1,184,344

10,838

3.66

1,046,605

12,363

4.72

Total loans, net (1) (2)

5,904,051

60,367

4.09

5,946,412

60,557

4.07

5,645,503

62,825

4.45

Taxable securities:

Mortgage-backed securities

413,902

1,928

1.86

465,365

2,327

2.00

574,756

3,765

2.62

Other securities

243,754

1,166

1.91

243,867

1,358

2.23

244,757

1,982

3.24

Total taxable securities

657,656

3,094

1.88

709,232

3,685

2.08

819,513

5,747

2.81

Tax-exempt securities: (3)

Other securities

51,652

557

4.31

60,280

643

4.27

65,709

706

4.30

Total tax-exempt securities

51,652

557

4.31

60,280

643

4.27

65,709

706

4.30

Interest-earning deposits and federal funds sold

62,537

13

0.08

93,911

22

0.09

58,773

259

1.76

Total interest-earning assets

6,675,896

64,031

3.84

6,809,835

64,907

3.81

6,589,498

69,537

4.22

Other assets

407,132

396,224

382,905

Total assets

$

7,083,028

$

7,206,059

$

6,972,403

Interest-bearing Liabilities:

Deposits:

Savings accounts

$

160,100

65

0.16

$

188,587

74

0.16

$

194,736

344

0.71

NOW accounts

1,625,109

1,242

0.31

1,440,147

2,099

0.58

1,347,145

5,654

1.68

Money market accounts

1,461,996

2,108

0.58

1,580,652

3,208

0.81

1,306,634

6,859

2.10

Certificate of deposit accounts

1,106,355

3,700

1.34

1,185,842

4,564

1.54

1,573,535

9,321

2.37

Total due to depositors

4,353,560

7,115

0.65

4,395,228

9,945

0.91

4,422,050

22,178

2.01

Mortgagors' escrow accounts

55,868

(22

)

(0.16

)

87,058

26

0.12

60,084

66

0.44

Total interest-bearing deposits

4,409,428

7,093

0.64

4,482,286

9,971

0.89

4,482,134

22,244

1.99

Borrowings

1,322,471

6,897

2.09

1,430,488

6,084

1.70

1,395,606

8,196

2.35

Total interest-bearing liabilities

5,731,899

13,990

0.98

5,912,774

16,055

1.09

5,877,740

30,440

2.07

Non interest-bearing demand deposits

589,674

560,637

400,762

Other liabilities

184,943

175,234

129,646

Total liabilities

6,506,516

6,648,645

6,408,148

Equity

576,512

557,414

564,255

Total liabilities and equity

$

7,083,028

$

7,206,059

$

6,972,403

Net interest income / net interest rate spread (tax equivalent) (3)

$

50,041

2.86

%

$

48,852

2.72

%

$

39,097

2.15

%

Net interest-earning assets / net interest margin (tax equivalent)

$

943,997

3.00

%

$

897,061

2.87

%

$

711,758

2.37

%

Ratio of interest-earning assets to interest-bearing liabilities

1.16

X

1.15

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 $0.8 million, $0.3 million and $0.9 million for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(2) Loan interest income includes net gains (losses) from fair value adjustments on qualifying hedges of $0.2 million, ($0.4) million and ($1.3) million for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.1 million in each period.


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

For the nine months ended

September 30, 2020

September 30, 2019

Average

Yield/

Average

Yield/

Balance

Interest

Cost

Balance

Interest

Cost

Interest-earning Assets:

Mortgage loans, net

$

4,727,094

$

148,945

4.20

%

$

4,602,896

$

151,513

4.39

%

Other loans, net

1,154,764

33,088

3.82

982,549

35,915

4.87

Total loans, net (1) (2)

5,881,858

182,033

4.13

5,585,445

187,428

4.47

Taxable securities:

Mortgage-backed securities

462,216

7,295

2.10

578,020

12,238

2.82

Other securities

243,782

4,221

2.31

243,071

6,328

3.47

Total taxable securities

705,998

11,516

2.17

821,091

18,566

3.01

Tax-exempt securities: (3)

Other securities

58,464

1,876

4.28

60,010

1,895

4.21

Total tax-exempt securities

58,464

1,876

4.28

60,010

1,895

4.21

Interest-earning deposits and federal funds sold

88,659

325

0.49

83,963

1,286

2.04

Total interest-earning assets

6,734,979

195,750

3.88

6,550,509

209,175

4.26

Other assets

396,871

360,568

Total assets

$

7,131,850

$

6,911,077

Interest-bearing Liabilities:

Deposits:

Savings accounts

$

180,829

420

0.31

$

200,246

1,053

0.70

NOW accounts

1,495,473

7,989

0.71

1,458,801

18,326

1.67

Money market accounts

1,579,712

12,358

1.04

1,340,841

20,654

2.05

Certificate of deposit accounts

1,186,188

15,031

1.69

1,537,981

26,326

2.28

Total due to depositors

4,442,202

35,798

1.07

4,537,869

66,359

1.95

Mortgagors' escrow accounts

69,427

44

0.08

68,678

181

0.35

Total interest-bearing deposits

4,511,629

35,842

1.06

4,606,547

66,540

1.93

Borrowings

1,353,416

20,047

1.97

1,231,760

21,476

2.32

Total interest-bearing liabilities

5,865,045

55,889

1.27

5,838,307

88,016

2.01

Non interest-bearing demand deposits

533,563

398,085

Other liabilities

163,044

115,476

Total liabilities

6,561,652

6,351,868

Equity

570,198

559,209

Total liabilities and equity

$

7,131,850

$

6,911,077

Net interest income / net interest rate spread
(tax equivalent) (3)

$

139,861

2.61

%

$

121,159

2.25

%

Net interest-earning assets / net interest margin (tax equivalent)

$

869,934

2.77

%

$

712,202

2.47

%

Ratio of interest-earning assets to interest-bearing liabilities

1.15

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 $1.3 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(2) Loan interest income includes net losses from fair value adjustments on qualifying hedges of $2.2 million and $2.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.4 million for each of the nine month periods ended September 30, 2020 and 2019.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)

September 2020 vs.

September 2020 vs.

September 30,

June 30,

March 31,

December 31,

December 2019

September 30,

September 2019

(Dollars in thousands)

2020

2020

2020

2019

% Change

2019

% Change

Deposits

Non-interest bearing

$

607,954

$

581,881

$

489,198

$

435,072

39.7

%

$

421,786

44.1

%

Interest bearing:

Certificate of deposit accounts

1,051,644

1,135,977

1,172,381

1,437,890

(26.9

)

%

1,506,376

(30.2

)

%

Savings accounts

160,294

184,895

192,192

191,485

(16.3

)

%

193,497

(17.2

)

%

Money market accounts

1,381,552

1,474,880

1,597,109

1,592,011

(13.2

)

%

1,329,156

3.9

%

NOW accounts

1,704,915

1,672,241

1,377,555

1,365,591

24.8

%

1,461,694

16.6

%

Total interest-bearing deposits

4,298,405

4,467,993

4,339,237

4,586,977

(6.3

)

%

4,490,723

(4.3

)

%

Total deposits

$

4,906,359

$

5,049,874

$

4,828,435

$

5,022,049

(2.3

)

%

$

4,912,509

(0.1

)

%



FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)

Loan Closings

For the three months ended

For the nine months ended

September 30,

June 30,

September 30,

September 30,

September 30,

(In thousands)

2020

2020

2019

2020

2019

Multi-family residential

$

33,733

$

59,654

$

60,454

$

160,705

$

143,297

Commercial real estate

26,644

8,003

66,648

134,218

123,289

One-to-four family – mixed-use property

3,867

8,117

18,167

25,439

47,475

One-to-four family – residential

2,296

2,674

7,421

13,383

19,191

Co-operative apartments

1,817

704

2,117

Construction

5,420

2,821

5,761

14,990

30,377

Small Business Administration (1)

18,456

93,241

121

111,754

2,705

Commercial business and other

65,160

59,287

237,754

226,895

524,113

Total

$

155,576

$

233,797

$

398,143

$

688,088

$

892,564

(1) Includes $18.4 million and $93.2 million of PPP closings for the three months ended September 30, 2020 and June 30, 2020, respectively. Includes $111.6 million of PPP closings for the nine months ended September 30, 2020.

Loan Composition

September 2020 vs.

September 2020 vs.

September 30,

June 30,

March 31,

December 31,

December 2019

September 30,

September 2019

(Dollars in thousands)

2020

2020

2020

2019

% Change

2019

% Change

Loans held for investment:

Multi-family residential

$

2,252,757

$

2,285,555

$

2,272,343

$

2,238,591

0.6

%

$

2,232,305

0.9

%

Commercial real estate

1,636,659

1,646,085

1,664,934

1,582,008

3.5

%

1,559,581

4.9

%

One-to-four family ― mixed-use property

585,159

591,347

592,109

592,471

(1.2

)

%

587,100

(0.3

)

%

One-to-four family ― residential

191,011

184,741

189,774

188,216

1.5

%

184,432

3.6

%

Co-operative apartments

8,132

8,423

8,493

8,663

(6.1

)

%

9,089

(10.5

)

%

Construction

63,567

69,433

66,727

67,754

(6.2

)

%

64,234

(1.0

)

%

Small Business Administration (1)

124,649

106,813

14,076

14,445

762.9

%

13,982

791.5

%

Taxi medallion

2,317

3,269

3,281

3,309

(30.0

)

%

3,513

(34.0

)

%

Commercial business and other

1,063,429

1,073,623

1,104,967

1,061,478

0.2

%

1,096,164

(3.0

)

%

Net unamortized premiums and unearned loan fees

13,718

13,986

15,384

15,271

(10.2

)

%

15,363

(10.7

)

%

Allowance for loan losses

(38,343

)

(36,710

)

(28,098

)

(21,751

)

76.3

%

(22,035

)

74.0

%

Net loans

$

5,903,055

$

5,946,565

$

5,903,990

$

5,750,455

2.7

%

$

5,743,728

2.8

%

(1) Includes $111.6 million and $93.2 million of PPP loans at September 30, 2020 and June 30, 2020, respectively.

Net Loans Activity

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

(In thousands)

2020

2020

2020

2019

2019

Loans originated and purchased

$

155,576

$

233,797

$

298,715

$

269,736

$

398,143

Principal reductions

(196,221

)

(180,182

)

(137,189

)

(255,977

)

(266,894

)

Loans sold

(498

)

(7,129

)

(3,553

)

Loan charge-offs

(964

)

(1,030

)

(1,259

)

(95

)

(431

)

Foreclosures

Net change in deferred fees and costs

(268

)

(1,398

)

113

(92

)

85

Net change in the allowance for loan losses

(1,633

)

(8,612

)

(6,347

)

284

(525

)

Total loan activity

$

(43,510

)

$

42,575

$

153,535

$

6,727

$

126,825


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

Non-Performing Assets

September 30,

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2020

2020

2020

2019

2019

Loans 90 Days Or More Past Due and Still Accruing:

Multi-family residential

$

$

$

$

445

$

445

Commercial business and other

150

Total

150

445

445

Non-accrual Loans:

Multi-family residential

2,661

3,688

2,741

2,296

3,132

Commercial real estate

2,657

2,671

8

367

872

One-to-four family - mixed-use property (1)

1,366

2,511

607

274

683

One-to-four family - residential

6,454

6,412

5,158

5,139

5,050

Small Business Administration

1,151

1,321

1,518

1,151

1,151

Taxi medallion(1)

2,218

1,757

1,761

1,641

1,352

Commercial business and other(1)

8,285

1,678

4,959

1,945

2,020

Total

24,792

20,038

16,752

12,813

14,260

Total Non-performing Loans

24,792

20,188

16,752

13,258

14,705

Other Non-performing Assets:

Real estate acquired through foreclosure

208

208

239

239

Other asset acquired through foreclosure

35

35

35

35

35

Total

35

243

243

274

274

Total Non-performing Assets

$

24,827

$

20,431

$

16,995

$

13,532

$

14,979

Non-performing Assets to Total Assets

0.35

%

0.29

%

0.23

%

0.19

%

0.21

%

Allowance For Loan Losses to Non-performing Loans

154.7

%

181.8

%

167.7

%

164.1

%

149.8

%

(1) Not included in the above analysis are non-accrual performing one-to-four family mixed use property loans totaling $0.3 million; non-accrual performing TDR taxi medallion loans totaling $0.1 million in 3Q20, $1.5 million in 2Q20, $1.5 million in 1Q20, $1.7 million in 4Q19 and $2.2 million in 3Q19, and non-accrual performing TDR commercial business loans totaling $1.0 million in 3Q20, 2Q20, 1Q20 and 3Q19 respectively, and $0.9 million in 4Q19.

Net Charge-Offs (Recoveries)

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

(In thousands)

2020

2020

2020

2019

2019

Multi-family residential

$

(14

)

$

(7

)

$

(6

)

$

(14

)

$

183

Commercial real estate

(30

)

One-to-four family – mixed-use property

(60

)

3

(78

)

119

(140

)

One-to-four family – residential

(2

)

(3

)

(5

)

(3

)

(3

)

Small Business Administration

(47

)

165

(7

)

(8

)

(32

)

Taxi medallion

951

Commercial business and other

9

849

1,245

(98

)

150

Total net loan charge-offs (recoveries)

$

837

$

1,007

$

1,149

$

(34

)

$

158


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FORBEARANCES DETAIL
(Dollars in thousands)
(Unaudited)

Forbearances (1)

Backed by Mortgages (1)

Balance

% of Sector

Balance

% of
Forbearances

LTV

Higher Risk Segments

Restaurants and Catering Halls

$

22,228

29.2

%

$

22,228

100.0

%

37.7

%

Hotels

105,942

60.0

105,942

100.0

61.9

Travel and Leisure

37,670

20.8

33,918

90.0

36.4

Retail Services (2)

299

0.3

CRE - Shopping Center

74,746

29.6

74,746

100.0

39.8

CRE - Single Tenant

14,366

10.9

14,366

100.0

38.0

CRE - Strip Mall

85,921

31.0

85,921

100.0

51.1

Transportation (2)

4,621

3.9

1,802

39.0

40.5

Contractors (2)

4,935

2.2

3,598

72.9

33.7

Schools and Child Care

14,200

27.4

8,701

61.3

42.6

Subtotal

$

364,928

23.0

%

$

351,222

96.2

%

46.7

%

Lower Risk Segments

$

481,296

11.1

%

$

472,629

98.2

%

44.6

%

Total

$

846,224

14.3

%

$

823,851

97.4

%

45.5

%

(1) Represents dollar amount granted at modification
(2) Loans not backed by mortgages are collateralized by equipment


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is primarily due to the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.

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

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

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

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2020

2020

2019

2020

2019

GAAP income before income taxes

$

18,820

$

24,080

$

13,260

$

41,304

$

36,443

Net (gain) loss from fair value adjustments

2,225

(10,205

)

2,124

(1,987

)

6,160

Net loss on sale of securities

54

91

15

Life insurance proceeds

(659

)

(659

)

(43

)

Net gain on sale of assets

(770

)

Net (gain) loss from fair value adjustments on qualifying hedges

(230

)

365

1,262

2,208

2,717

Accelerated employee benefits upon Officer's death