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Flushing Financial Corporation Reports Record Second Quarter GAAP Diluted EPS of $1.05 Driven by the Sale of a Building; Core Diluted EPS of $0.39, Up 8.3% YoY Driven by 21.6% Annualized Loan Growth

Second Quarter 2016

  • GAAP diluted EPS was $1.05, up 105.9% YoY, materially impacted by the sale of one of the Bank’s branch buildings for a pre-tax gain of $33.8 million
  • Notable items in GAAP include net gains on sale of buildings and securities, net loss from fair value adjustments and prepayment penalties from the extinguishment of debt that, combined, increased diluted EPS by $0.66
  • Core diluted EPS was $0.39, up 8.3% YoY
  • Net interest margin was 2.99%, compared to 3.03% for the second quarter of 2015
  • Excluding prepayment penalty income from loans and recovered interest from nonaccrual loans, the net interest margin improved to 2.87%, an increase of four basis points QoQ
  • GAAP ROAE was 25.0%, compared with 12.7% for the second quarter of 2015
  • Core ROAE was 9.3%, compared with 9.1% for the second quarter of 2015
  • GAAP ROAA was 2.1%, compared with 1.1% for the second quarter of 2015
  • Core ROAA was 0.8%, the same as the second quarter of 2015
  • Net interest income was a record totaling $41.9 million, up 9.8% YoY

UNIONDALE, N.Y., July 26, 2016 (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 three and six months ended June 30, 2016.

John R. Buran, President and Chief Executive Officer, stated: “We are pleased to report record earnings per diluted common share of $1.05 for the second quarter of 2016. The quarter’s earnings were driven by the gain recognized on the sale of one of our properties in Flushing, Queens. The planned sale is part of our greater strategy of reducing non-interest-earning assets and redeploying those assets into our growing markets.

“The current quarter’s earnings were aided by continuing the strategy of originating and purchasing multi-family, commercial real estate, and commercial business loans. Loan originations and purchases for these loans totaled $368.8 million, or 95.1%, of the total second quarter loan production of $387.9 million. This level of loan production resulted in net loans increasing a record $237.5 million, or a 21.6% annualized growth rate, while maintaining our underwriting standards. Loan originations for these loan products, excluding underlying co-operative mortgages, had an average loan-to-value of 52.7% and an average debt coverage ratio of 184%. The loan pipeline remains strong totaling $329.8 million at June 30, 2016.”

Core earnings, a non-GAAP measure, exclude the effects of net gains/losses from the sale of buildings and securities, net gains/losses from fair value adjustments, prepayment penalties from the extinguishment of debt, and the gain from life insurance proceeds.

For a reconciliation of core earnings and core diluted earnings per common share to accounting principles generally accepted in the United States (“GAAP”) net income and GAAP diluted earnings per common share, please refer to the table titled “Reconciliation of GAAP Earnings and Core Earnings."

Earnings Summary:

Quarter ended June 30, 2016 (2Q16) compared to the quarters ended June 30, 2015 (2Q15) and March 31, 2016 (1Q16)

Net Interest Income

Net interest income for 2Q16 was $41.9 million, an increase of 9.8% YoY and 1.8% QoQ.

  • Average balance of total interest-earning assets of $5,612.9 million, increased $579.2 million, or 11.5% YoY and increased $122.2 million, or 2.2% QoQ
  • Yield on interest-earning assets of 3.93% decreased 6 basis points YoY and 3 basis points QoQ
  • Cost of interest-bearing liabilities of 1.05% decreased 1 basis point YoY and 2 basis points QoQ
  • Net interest spread and net interest margin of 2.88% and 2.99%, respectively, decreased 5 basis points and 4 basis points, respectively YoY and decreased 1 basis point each QoQ
  • Includes prepayment penalty income from loans of $1.4 million, compared with $1.5 million in 2Q15 and $2.2 million in 1Q16, and recovered interest from nonaccrual loans of $0.2 million, compared with $0.1 million in 2Q15 and 1Q16
  • Excluding prepayment penalty income and recovered interest from nonaccrual loans, the yield on total loans, net, would be 4.10%, compared with 4.27% in 2Q15 and 4.13% in 1Q16, and the net interest margin would be 2.87%, compared with 2.90% in 2Q15 and 2.83% in 1Q16
  • Cost of total deposits of 0.84% decreased 2 basis points YoY but was flat QoQ
  • Cost of borrowed funds of 1.70% decreased 5 basis points YoY and 11 basis points QoQ, primarily due to the extinguishment of debt at an average cost of 4.16%

The following table shows the basis points increase (decrease) in the cost of interest-bearing liabilities:

Change in the Cost of Interest-Bearing Liabilities (bps)
2Q16 vs.
1Q16 2Q15
Savings 1 3
NOW 2 4
Money market 3 19
Certificate of deposit (1) (9)
Borrowings (11) (5)
Total interest-bearing liabilities (2) (1)

Non-interest Income

Non-interest income for 2Q16 was $37.7 million, an increase of $27.8 million YoY and $35.2 million QoQ.

  • Gain of $33.8 million recorded from the planned sale of one of our properties in Flushing, Queens (the “Building Sale”)
  • Net gain of $2.4 million recorded from the sale of $64.6 million in securities in connection with the extinguishment of debt
  • Decrease in fair value adjustments of $1.9 million compared to 2Q15 and $0.1 compared to 1Q16, which also included net gains of $0.4 million from life insurance proceeds and $0.3 million from the sale of loans

Non-interest Expense

Non-interest expense for 2Q16 was $28.5 million, an increase of $4.2 million, or 17.3%, YoY and essentially unchanged QoQ.

  • The 2Q16 includes a non-recurring penalty of $2.1 million on the prepayment of $38.0 million in repurchase agreements and a write-down of $0.8 million on one OREO property. Absent these two items, non-interest expense decreased $3.0 million, or 10.4% QoQ
  • Salaries and benefits increased YoY by $0.8 million primarily due to annual salary increases and additions in staffing but declined $2.3 million QoQ due to 1Q16 including seasonal expenses from annual restricted stock unit awards for employees and higher payroll taxes
  • Professional services increased $0.7 million YoY due to increased legal and consulting expenses but declined $0.1 QoQ
  • The efficiency ratio improved to 57.1% from 57.5% in 2Q15 and 64.5% in 1Q16

Provision for Income Taxes

The provision for income taxes in 2Q16 was $20.7 million, an increase of $11.2 million YoY and $15.1 million QoQ.

  • Increase in income before income taxes of $26.8 million YoY and $36.0 million QoQ, primarily due to the net gain from the Building Sale
  • Higher effective tax rate of 40.5% from 39.1% in 2Q15 and 37.0% in 1Q16 mainly reflects the reduced impact of preferential tax items as a result of the Building Sale

Loans:

  • Net loans were $4,674.1 million reflecting an increase of 5.4% QoQ (not annualized) and 7.0% year-to-date as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship
  • Total loan originations and purchases were $617.1 million year-to-date, an increase of $113.7 million YoY
  • Loan purchases, which are underwritten to the same standards as organic originations, were $138.0 million year-to-date, an increase of $11.9 million YoY
  • Loan pipeline remains strong, totaling $329.8 million at June 30, 2016 compared with $330.5 million at December 31, 2015
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate and one-to-four family mixed-use property mortgage loans originated during the quarter had an average loan-to-value ratio of 53.7% and an average debt coverage ratio of 184%

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

For the three months ended
June 30, March 31, June 30,
Loan type 2016 2016 2015
Mortgage loans 3.53% 3.78% 3.74%
Non-mortgage loans 4.29% 3.73% 3.87%
Total loans 3.71% 3.76% 3.79%

Credit Quality:

  • Credit quality continues to improve with non-performing loans totaling $21.9 million, a decrease of $4.2 million, or 15.9%, from $26.1 million at December 31, 2015
  • Classified assets totaled $44.8 million, an increase of $0.9 million, or 2.0%, from $43.9 million at December 31, 2015
  • Loans classified as troubled debt restructured totaled $8.3 million, a decrease of $1.2 million, or 12.7%, from $9.5 million at December 31, 2015
  • Strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs, when necessary, has resulted in a 41.8% average loan-to-value for non-performing loans collateralized by real estate
  • Year-to-date, no provision for loan losses was recorded compared with a benefit of $1.3 million recorded in the comparable prior year period
  • Net recoveries totaled $0.7 million year-to-date, amid continued improvement in credit conditions
  • Properties obtained through foreclosure have been sold at amounts that approximate book value
  • The Bank takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative
  • We anticipate continued low loss content in the loan portfolio

Capital Management:

  • The Bank and Company are subject to the same regulatory capital requirements and at June 30, 2016, both were well-capitalized under all regulatory requirements
  • Year-to-date, stockholders’ equity increased $35.8 million, or 7.6% to $508.9 million due to net income of $40.0 million and an improvement in other comprehensive income of $8.7 million, mainly due to an increase in the fair value of the securities portfolio and the net impact of $4.5 million from the vesting and exercising of shares of employee and director stock plans
  • Increases above were partially offset by the declaration and payment of dividends on the Company’s common stock of $0.34 per common share totaling $9.9 million and the purchase of 378,695 treasury shares, at an average price of $19.78 per share, for a total cost of $7.5 million
  • As of June 30, 2016, 520,905 shares may still be repurchased under the currently authorized stock repurchase program, which has no expiration or maximum dollar amount
  • Book value per common share was $17.77 at June 30, 2016, compared with $16.41 at December 31, 2015
  • Tangible book value per common share, a non-GAAP measure, was $17.22, compared with $15.86 at December 31, 2015

About Flushing Financial Corporation

Flushing Financial Corporation 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, and public entities by offering a full complement of deposit, loan, and cash management services through its 19 banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. The Bank also operates an online banking division, iGObanking.com®, which offers competitively priced deposit products to consumers nationwide.

Additional information on 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, 2015 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”, “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 six months ended
June 30, March 31, June 30, June 30,
2016
2016
2015
2016
2015
Interest and Dividend Income
Interest and fees on loans $48,413 $47,558 $44,084 $95,971 $87,618
Interest and dividends on securities:
Interest 6,510 6,592 5,988 13,102 11,858
Dividends 120 119 118 239 236
Other interest income 48 94 32 142 53
Total interest and dividend income 55,091 54,363 50,222 109,454 99,765
Interest Expense
Deposits 8,097 7,973 7,437 16,070 14,895
Other interest expense 5,105 5,257 4,645 10,362 9,176
Total interest expense 13,202 13,230 12,082 26,432 24,071
Net Interest Income 41,889 41,133 38,140 83,022 75,694
Benefit for loan losses - - (516) - (1,250)
Net Interest Income After Benefit for Loan Losses 41,889 41,133 38,656 83,022 76,944
Non-interest Income
Banking services fee income 973 976 898 1,949 1,782
Net gain on sale of securities 2,363 - 64 2,363 64
Net gain on sale of loans 3 341 47 344 49
Net gain on sale of buildings 33,814 - 6,537 33,814 6,537
Net (loss) gain from fair value adjustments (1,115) (987) 768 (2,102) 173
Federal Home Loan Bank of New York stock dividends 582 623 457 1,205 975
Gains from life insurance proceeds - 411 - 411 -
Bank owned life insurance 694 695 715 1,389 1,432
Other income 403 481 461 884 865
Total non-interest income 37,717 2,540 9,947 40,257 11,877
Non-interest Expense
Salaries and employee benefits 13,968 16,261 13,157 30,229 27,823
Occupancy and equipment 2,352 2,370 2,635 4,722 5,348
Professional services 2,027 2,150 1,350 4,177 3,129
FDIC deposit insurance 940 904 811 1,844 1,560
Data processing 1,199 1,091 1,172 2,290 2,247
Depreciation and amortization 1,062 1,032 867 2,094 1,535
Other real estate owned/foreclosure expense 405 153 87 558 607
Prepayment penalty on borrowings 2,082 - - 2,082 -
Other operating expenses 4,419 4,536 4,169 8,955 7,938
Total non-interest expense 28,454 28,497 24,248 56,951 50,187
Income Before Income Taxes 51,152 15,176 24,355 66,328 38,634
Provision for Income Taxes
Federal 15,203 4,747 7,155 19,950 11,407
State and local 5,514 868 2,366 6,382 3,660
Total taxes 20,717 5,615 9,521 26,332 15,067
Net Income $30,435 $9,561 $14,834 $39,996 $23,567
Basic earnings per common share $1.05 $0.33 $0.51 $1.38 $0.80
Diluted earnings per common share $1.05 $0.33 $0.51 $1.38 $0.80
Dividends per common share $0.17 $0.17 $0.16 $0.34 $0.32


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
June 30, March 31, December 31,
2016 2016 2015
ASSETS
Cash and due from banks$50,165 $51,417 $42,363
Securities held-to-maturity:
Other securities 28,410 7,885 6,180
Securities available for sale:
Mortgage-backed securities 580,500 668,412 668,740
Other securities 368,611 372,851 324,657
Loans:
Multi-family residential 2,159,138 2,039,794 2,055,228
Commercial real estate 1,146,400 1,058,028 1,001,236
One-to-four family ― mixed-use property 566,702 571,846 573,043
One-to-four family ― residential 190,251 191,158 187,838
Co-operative apartments 7,571 8,182 8,285
Construction 9,899 7,472 7,284
Small Business Administration 14,718 14,701 12,194
Taxi medallion 20,641 20,757 20,881
Commercial business and other 564,084 531,322 506,622
Net unamortized premiums and unearned loan fees 16,875 15,281 15,368
Allowance for loan losses (22,198) (21,993) (21,535)
Net loans 4,674,081 4,436,548 4,366,444
Interest and dividends receivable 20,390 19,369 18,937
Bank premises and equipment, net 24,470 25,130 25,622
Federal Home Loan Bank of New York stock 67,195 53,368 56,066
Bank owned life insurance 115,100 114,405 115,536
Goodwill 16,127 16,127 16,127
Other assets 41,678 47,555 63,962
Total assets$5,986,727 $5,813,067 $5,704,634
LIABILITIES
Due to depositors:
Non-interest bearing$317,112 $280,450 $269,469
Interest-bearing:
Certificate of deposit accounts 1,411,550 1,362,062 1,403,302
Savings accounts 260,528 268,057 261,748
Money market accounts 452,589 485,774 472,489
NOW accounts 1,453,540 1,610,932 1,448,695
Total interest-bearing deposits 3,578,207 3,726,825 3,586,234
Mortgagors' escrow deposits 45,905 56,612 36,844
Borrowed funds 1,444,751 1,190,789 1,271,676
Other liabilities 91,869 70,612 67,344
Total liabilities 5,477,844 5,325,288 5,231,567
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 June 30, 2016, March 31, 2016 and December 31, 2015; 28,631,243
shares, 28,986,566 shares and 28,830,558 shares outstanding at June 30, 2016,
March 31, 2016 and December 31, 2015, respectively) 315 315 315
Additional paid-in capital 212,613 211,735 210,652
Treasury stock (2,899,352 shares, 2,544,029 shares and 2,700,037 shares at
June 30, 2016, March 31, 2016 and December 31, 2015, respectively) (53,351) (46,307) (48,868)
Retained earnings 346,218 320,725 316,530
Accumulated other comprehensive income (loss), net of taxes 3,088 1,311 (5,562)
Total stockholders' equity 508,883 487,779 473,067
Total liabilities and stockholders' equity$5,986,727 $5,813,067 $5,704,634


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 six months ended
June 30, March 31, June 30, June 30,
2016
2016
2015
2016
2015
Per Share Data
Basic earnings per share $1.05 $0.33 $0.51 $1.38 $0.80
Diluted earnings per share $1.05 $0.33 $0.51 $1.38 $0.80
Average number of shares outstanding for:
Basic earnings per common share computation 29,022,122 29,096,663 29,245,792 29,059,393 29,321,203
Diluted earnings per common share computation 29,034,454 29,111,172 29,268,138 29,072,813 29,342,940
Shares outstanding 28,631,243 28,986,566 28,923,000 28,631,243 28,923,000
Book value per common share (1) $17.77 $16.83 $15.98 $17.77 $15.98
Tangible book value per common share (2) $17.22 $16.29 $15.43 $17.22 $15.43
Stockholders' Equity
Stockholders' equity 508,883 487,779 462,136 508,883 462,136
Tangible stockholders' equity 493,163 472,059 446,410 493,163 446,410
Average Balances
Total loans, net $4,567,019 $4,389,331 $3,981,908 $4,478,175 $3,915,185
Total interest-earning assets 5,612,935 5,490,714 5,033,694 5,551,825 4,948,144
Total assets 5,897,858 5,774,750 5,309,463 5,836,304 5,221,699
Total due to depositors 3,779,256 3,746,268 3,415,938 3,762,762 3,368,274
Total interest-bearing liabilities 5,046,162 4,959,563 4,542,899 5,002,863 4,466,793
Stockholders' equity 486,261 479,424 465,618 482,843 462,877
Performance Ratios (3)
Return on average assets 2.06 % 0.66 % 1.12 % 1.37 % 0.90 %
Return on average equity 25.04 7.98 12.74 16.57 10.18
Yield on average interest-earning assets 3.93 3.96 3.99 3.94 4.03
Cost of average interest-bearing liabilities 1.05 1.07 1.06 1.06 1.08
Interest rate spread during period 2.88 2.89 2.93 2.88 2.95
Net interest margin 2.99 3.00 3.03 2.99 3.06
Non-interest expense to average assets 1.93 1.97 1.83 1.95 1.92
Efficiency ratio (4) 57.09 64.50 57.54 60.78 61.17
Average interest-earning assets to average
interest-bearing liabilities 1.11 X 1.11 X 1.11 X 1.11 X 1.11 X
(1) Calculated by dividing common stockholders’ equity by shares outstanding.
(2) Calculated by dividing tangible common stockholders’ equity, a non-GAAP measure by shares outstanding. Tangible common stockholders’ equity is total stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Reconciliation of GAAP Earnings and Core Earnings”.
(3) Ratios are presented on an annualized basis.
(4) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense, prepayment penalties from the extinguishment of debt 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, net gain and losses from the sale of securities, life insurance proceeds, and sale of buildings). See “Reconciliation of GAAP Earnings and Core Earnings”.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
At or for the six At or for the year At or for the six
months ended ended months ended
June 30, 2016 December 31, 2015 June 30, 2015
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital $516,551 $490,919 $478,658
Common equity Tier 1 capital 490,015 462,883 450,169
Total risk-based capital 538,749 512,454 501,742
Tier 1 leverage capital (well capitalized = 5%) 8.80 % 8.84 % 9.06 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 11.45 11.83 12.20
Tier 1 risk-based capital (well capitalized = 8.0%) 12.07 12.55 12.97
Total risk-based capital (well capitalized = 10.0%) 12.59 13.10 13.59
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital $522,961 $494,690 $483,407
Common equity Tier 1 capital 522,961 494,690 483,407
Total risk-based capital 545,159 516,226 506,491
Tier 1 leverage capital (well capitalized = 5%) 8.89 % 8.89 % 9.13 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 12.20 12.62 13.07
Tier 1 risk-based capital (well capitalized = 8.0%) 12.20 12.62 13.07
Total risk-based capital (well capitalized = 10.0%) 12.72 13.17 13.70
Capital ratios:
Average equity to average assets 8.27 % 8.68 % 8.86 %
Equity to total assets 8.50 8.29 8.62
Tangible common equity to tangible assets (1) 8.26 8.04 8.35
Asset quality:
Non-accrual loans (2) $20,381 $22,817 $27,462
Non-performing loans 21,923 26,077 28,559
Non-performing assets 25,591 31,009 32,814
Net charge-offs/ (recoveries) (663) 2,605 762
Asset quality ratios:
Non-performing loans to gross loans 0.47 % 0.60 % 0.71 %
Non-performing assets to total assets 0.43 0.54 0.61
Allowance for loan losses to gross loans 0.47 0.49 0.57
Allowance for loan losses to non-performing assets 86.74 69.45 70.35
Allowance for loan losses to non-performing loans 101.25 82.58 80.83
Full-service customer facilities 19 19 18
(1) See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(2) Excludes performing non-accrual TDR loans.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
For the three months ended
June 30, 2016 March 31, 2016 June 30, 2015
Average Yield/ Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net$3,983,615 $42,969 4.31%$3,839,325 $42,454 4.42%$3,476,163 $39,737 4.57%
Other loans, net 583,404 5,444 3.73 550,006 5,104 3.71 505,745 4,347 3.44
Total loans, net (1) 4,567,019 48,413 4.24 4,389,331 47,558 4.33 3,981,908 44,084 4.43
Taxable securities:
Mortgage-backed
securities 599,247 3,707 2.47 658,764 4,174 2.53 706,510 4,340 2.46
Other securities 249,956 2,133 3.41 229,991 1,745 3.03 148,244 887 2.39
Total taxable securities 849,203 5,840 2.75 888,755 5,919 2.66 854,754 5,227 2.45
Tax-exempt securities: (2)
Other securities 147,230 790 2.15 127,355 792 2.49 137,270 879 2.56
Total tax-exempt securities 147,230 790 2.15 127,355 792 2.49 137,270 879 2.56
Interest-earning deposits
and federal funds sold 49,483 48 0.39 85,273 94 0.44 59,762 32 0.21
Total interest-earning
assets 5,612,935 55,091 3.93 5,490,714 54,363 3.96 5,033,694 50,222 3.99
Other assets 284,923 284,036 275,769
Total assets$5,897,858 $5,774,750 $5,309,463
Interest-bearing Liabilities:
Deposits:
Savings accounts$265,856 306 0.46 $262,443 298 0.45 $268,791 291 0.43
NOW accounts 1,612,704 1,962 0.49 1,621,779 1,922 0.47 1,475,574 1,651 0.45
Money market accounts 483,317 681 0.56 457,895 606 0.53 331,117 307 0.37
Certificate of deposit
accounts 1,417,379 5,121 1.45 1,404,151 5,121 1.46 1,340,456 5,165 1.54
Total due to depositors 3,779,256 8,070 0.85 3,746,268 7,947 0.85 3,415,938 7,414 0.87
Mortgagors' escrow
accounts 67,728 27 0.16 49,947 26 0.21 62,906 23 0.15
Total interest-bearing
deposits 3,846,984 8,097 0.84 3,796,215 7,973 0.84 3,478,844 7,437 0.86
Borrowings 1,199,178 5,105 1.70 1,163,348 5,257 1.81 1,064,055 4,645 1.75
Total interest-bearing
liabilities 5,046,162 13,202 1.05 4,959,563 13,230 1.07 4,542,899 12,082 1.06
Non interest-bearing
demand deposits 296,597 273,937 242,732
Other liabilities 68,838 61,826 58,214
Total liabilities 5,411,597 5,295,326 4,843,845
Equity 486,261 479,424 465,618
Total liabilities and
equity$5,897,858 $5,774,750 $5,309,463
Net interest income /
net interest rate spread $41,889 2.88% $41,133 2.89% $38,140 2.93%
Net interest-earning assets /
net interest margin$566,773 2.99%$531,151 3.00%$490,795 3.03%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.11X 1.11X 1.11X
(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.0 million, $1.5 million and $1.0 million for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
For the six months ended
June 30, 2016 June 30, 2015
Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net$3,911,470 $85,423 4.37% $3,417,708 $79,177 4.63%
Other loans, net 566,705 10,548 3.72 497,477 8,441 3.39
Total loans, net (1) 4,478,175 95,971 4.29 3,915,185 87,618 4.48
Taxable securities:
Mortgage-backed
securities 629,006 7,881 2.51 704,520 8,721 2.48
Other securities 239,973 3,878 3.23 139,143 1,607 2.31
Total taxable securities 868,979 11,759 2.71 843,663 10,328 2.45
Tax-exempt securities: (2)
Other securities 137,293 1,582 2.30 137,627 1,766 2.57
Total tax-exempt securities 137,293 1,582 2.30 137,627 1,766 2.57
Interest-earning deposits
and federal funds sold 67,378 142 0.42 51,669 53 0.21
Total interest-earning
assets 5,551,825 109,454 3.94 4,948,144 99,765 4.03
Other assets 284,479 273,555
Total assets$5,836,304 $5,221,699
Interest-bearing Liabilities:
Deposits:
Savings accounts$264,150 604 0.46 $267,507 555 0.41
NOW accounts 1,617,241 3,884 0.48 1,463,576 3,201 0.44
Money market accounts 470,606 1,287 0.55 317,962 560 0.35
Certificate of deposit
accounts 1,410,765 10,242 1.45 1,319,229 10,533 1.60
Total due to depositors 3,762,762 16,017 0.85 3,368,274 14,849 0.88
Mortgagors' escrow
accounts 58,838 53 0.18 55,415 46 0.17
Total interest-bearing
deposits 3,821,600 16,070 0.84 3,423,689 14,895 0.87
Borrowings 1,181,263 10,362 1.75 1,043,104 9,176 1.76
Total interest-bearing
liabilities 5,002,863 26,432 1.06 4,466,793 24,071 1.08
Non interest-bearing
demand deposits 285,267 238,234
Other liabilities 65,331 53,795
Total liabilities 5,353,461 4,758,822
Equity 482,843 462,877
Total liabilities and
equity$5,836,304 $5,221,699
Net interest income /
net interest rate spread $83,022 2.88% $75,694 2.95%
Net interest-earning assets /
net interest margin$548,962 2.99% $481,351 3.06%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.11X 1.11X
(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.5 million and $1.7 million for the six months ended June 30, 2016 and 2015, 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)
June 2016 vs. June 2016 vs.
June 30, March 31, December 31, December 2015 September 30, June 30, June 2015
(Dollars in thousands)2016
2016
2015
% Change 2015
2015
% Change
Deposits
Non-interest bearing$317,112 $280,450 $269,469 17.7% $257,196 $257,575 23.1%
Interest bearing:
Certificate of deposit
accounts 1,411,550 1,362,062 1,403,302 0.6% 1,386,945 1,375,506 2.6%
Savings accounts 260,528 268,057 261,748 (0.5%) 261,400 264,718 (1.6%)
Money market accounts 452,589 485,774 472,489 (4.2%) 438,457 399,191 13.4%
NOW accounts 1,453,540 1,610,932 1,448,695 0.3% 1,338,715 1,357,412 7.1%
Total interest-bearing
deposits 3,578,207 3,726,825 3,586,234 (0.2%) 3,425,517 3,396,827 5.3%
Total deposits$3,895,319 $4,007,275 $3,855,703 1.0% $3,682,713 $3,654,402 6.6%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Origination and Purchases
For the three months For the six months ended
June 30, March 31, June 30, June 30,
(In thousands) 2016
2016
2015
2016
2015
Multi-family residential $162,364 $69,643 $50,429 $232,007 $177,175
Commercial real estate 114,007 62,137 57,331 176,144 143,726
One-to-four family – mixed-use property 11,630 18,245 9,916 29,875 24,897
One-to-four family – residential 4,195 9,493 8,975 13,688 22,078
Co-operative apartments 470 - 450 470 450
Construction 2,427 1,687 845 4,114 1,387
Small Business Administration 314 6,001 5,233 6,315 6,481
Taxi Medallion - - - - -
Commercial business and other 92,456 62,034 63,704 154,490 127,211
Total $387,863 $229,240 $196,883 $617,103 $503,405

Loan Composition
June 30, 2016 vs. June 2016 vs.
June 30, March 31, December 31, December 2015 September 30, June 30, June 2015
(Dollars in thousands)2016 2016 2015 % Change 2015 2015 % Change
Loans:
Multi-family residential$2,159,138 $2,039,794 $2,055,228 5.1% $2,043,740 $2,017,891 7.0%
Commercial real estate 1,146,400 1,058,028 1,001,236 14.5% 857,806 726,136 57.9%
One-to-four family ―
mixed-use property 566,702 571,846 573,043 (1.1%) 568,401 567,060 (0.1%)
One-to-four family ― residential 190,251 191,158 187,838 1.3% 191,430 189,573 0.4%
Co-operative apartments 7,571 8,182 8,285 (8.6%) 9,122 7,681 (1.4%)
Construction 9,899 7,472 7,284 35.9% 5,671 3,673 169.5%
Small Business Administration 14,718 14,701 12,194 20.7% 10,540 12,181 20.8%
Taxi medallion 20,641 20,757 20,881 (1.1%) 21,025 21,211 (2.7%)
Commercial business and other 564,084 531,322 506,622 11.3% 479,085 472,485 19.4%
Net unamortized premiums
and unearned loan fees 16,875 15,281 15,368 9.8% 14,129 13,251 27.3%
Allowance for loan losses (22,198) (21,993) (21,535) 3.1% (22,973) (23,084) (3.8%)
Net loans$4,674,081 $4,436,548 $4,366,444 7.0% $4,177,976 $4,008,058 16.6%

Loan Activity
Three Months Ended
June 30, December 31, March 31, September 30, June 30,
(In thousands) 2016 2015 2016 2015 2015
Loans originated and purchased$387,863 $395,592 $229,240 $334,464 $196,883
Principal reductions (149,307) (206,125) (152,521) (155,794) (158,829)
Loans transferred to held-for-sale - - - - (300)
Loans sold (2,310) (1,164) (5,515) (8,800) (3,601)
Loan charged-offs (102) (2,478) (147) (168) (803)
Foreclosures - (34) (408) (773) (239)
Net change in deferred (fees) and costs 1,594 1,239 (87) 878 (23)
Net change in the allowance for loan losses (205) 1,438 (458) 111 1,007
Total loan activity$237,533 $188,468 $70,104 $169,918 $34,095


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands) 2016 2016 2015 2015 2015
Loans 90 Days Or More Past Due
and Still Accruing:
Multi-family residential $574 $792 $233 $516 $-
Commercial real estate 320 1,083 1,183 253 416
One-to-four family - mixed-use property 635 743 611 1,293 353
One-to-four family - residential 13 13 13 13 13
Construction - 570 1,000 - -
Commercial business and other - - 220 222 315
Total 1,542 3,201 3,260 2,297 1,097
Non-accrual Loans:
Multi-family residential 3,162 3,518 3,561 4,686 6,352
Commercial real estate 2,299 3,295 2,398 2,407 2,694
One-to-four family - mixed-use property 6,005 5,519 5,952 5,446 6,238
One-to-four family - residential 8,406 8,861 10,120 10,441 11,329
Small business administration 185 201 218 234 170
Taxi Medallion 196 196 - - -
Commercial business and other 128 511 568 3,089 679
Total 20,381 22,101 22,817 26,303 27,462
Total Non-performing Loans 21,923 25,302 26,077 28,600 28,559
Other Non-performing Assets:
Real estate acquired through foreclosure 3,668 4,602 4,932 4,855 4,255
Total 3,668 4,602 4,932 4,855 4,255
Total Non-performing Assets $25,591 $29,904 $31,009 $33,455 $32,814
Non-performing Assets to Total Assets 0.43% 0.51% 0.54% 0.61% 0.61%
Allowance For Loan Losses to Non-performing Loans 101.3% 86.9% 82.6% 80.3% 80.8%



Net Charge-Offs (Recoveries)
Three Months Ended
June 30, March 31, December 31, September 30, June 30,
(In thousands) 2016
2016
2015
2015
2015
Multi-family residential $(183) $29 $(35) $54 $112
Commercial real estate - - - (100) 18
One-to-four family – mixed-use property 36 (173) 18 73 350
One-to-four family – residential 7 (299) 97 (300) 17
Co-operative apartments - - - - -
Small Business Administration (42) (31) 17 4 (7)
Commercial business and other (23) 16 2,005 10 1
Total net loan charge-offs (recoveries) $(205) $(458) $2,102 $(259) $491

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per share and tangible common stockholders’ equity 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 share and tangible common stockholders’ equity are 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 Six Months Ended
June 30,March 31,June 30, June 30,June 30,
2016 2016 2015 2016 2015
GAAP income before income taxes $ 51,152 $ 15,176 $ 24,355 $ 66,328 $ 38,634
Net (gain) loss from fair value adjustments 1,115 987 (768) 2,102 (173)
Net gain on sale of securities (2,363) - (64) (2,363) (64)
Gain from life insurance proceeds - (411) - (411) -
Net gain on sale of buildings (33,814) - (6,537) (33,814) (6,537)
Prepayment penalty on borrowings 2,082 - - 2,082 -
Core income before taxes 18,172 15,752 16,986 33,924 31,860
Provision for income taxes for core income 6,851 6,041 6,359 12,892 12,160
Core net income $ 11,321 $ 9,711 $ 10,627 $ 21,032 $ 19,700
GAAP diluted earnings per common share $ 1.05 $ 0.33 $ 0.51 $ 1.38 $ 0.80
Net (gain) loss from fair value adjustments, net of tax 0.02 0.02 (0.01) 0.04 -
Net gain on sale of securities, net of tax (0.05) - - (0.05) -
Gain from life insurance proceeds - (0.01) - (0.01) -
Net gain on sale of buildings, net of tax (0.67) - (0.13) (0.67) (0.13)
Prepayment penalty on borrowings 0.04 - - 0.04 -
Core diluted earnings per common share* $ 0.39 $ 0.33 $ 0.36 $ 0.72 $ 0.67
Core net income, as calculated above $ 11,321 $ 9,711 $ 10,627 $ 21,032 $ 19,700
Average assets 5,897,858 5,774,750 5,309,463 5,836,304 5,221,699
Average equity 486,261 479,424 465,618 482,843 462,877
Core return on average assets** 0.77% 0.67% 0.80% 0.72% 0.75%
Core return on average equity** 9.31% 8.10% 9.13% 8.71% 8.51%
* 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)
June 30,December 31,
(Dollars in thousands) 20162015
Total Equity $508,883 $473,067
Less:
Goodwill (16,127) (16,127)
Intangible deferred tax liabilities 407 406
Tangible Stockholders' Common Equity$493,163 $457,346
Total Assets $5,986,727 $5,704,634
Less:
Goodwill (16,127) (16,127)
Intangible deferred tax liabilities 407 406
Tangible Assets $5,971,007 $5,688,913
Tangible Stockholders' Common Equity to Tangible Assets 8.26% 8.04%


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

Source:Flushing Financial Corporation