×

Flushing Financial Corporation Reports Third Quarter GAAP Diluted EPS of $0.37 and Core Diluted EPS of $0.39

THIRD QUARTER 2016

  • GAAP diluted EPS was $0.37, down 64.8% QoQ
  • Core diluted EPS was $0.39, flat QoQ
  • Net interest income was $41.7 million, up 6.1% YoY
  • Net interest margin was 2.94%, compared to 2.99% for the second quarter of 2016
  • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, the net interest margin was 2.81%, a decrease of six basis points QoQ
  • GAAP ROAE was 8.4%, compared with 9.5% for the third quarter of 2015
  • Core ROAE was 8.9%, compared with 10.0% for the third quarter of 2015
  • GAAP ROAA was 0.7%, compared with 0.8% for the third quarter of 2015
  • Core ROAA was 0.8%, compared with 0.9% for the third quarter of 2015

UNIONDALE, N.Y., Oct. 25, 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 nine months ended September 30, 2016.

John R. Buran, President and Chief Executive Officer, stated: “We are pleased to report core earnings per diluted common share of $0.39 for the third quarter of 2016.

“Our main focus continues to be growing multi-family, commercial real estate, and commercial business loans while maintaining our conservative underwriting standards. During the quarter ended September 30, 2016, loan originations for multi-family, commercial real estate and commercial business loans totaled 26%, 30% and 36%, respectively, of total loan production. We produced solid earnings this quarter through continued strong credit quality, a small uptick in the coupon rates on loan originations, and by reducing our expenses. We have begun to successfully execute on the strategy change to increase net interest income through increasing rates as opposed to increasing volume. The interest rates on our mortgage loan pipeline increased 11 basis points to 4.05% from 3.94% at June 30, 2016. This strategy shift positions the Company to reap the benefits of an increase in rates. Conversely, the cost of funds increased four basis points to 1.03% on a linked quarter basis, as rates on certain government deposits were raised.”

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 September 30, 2016 (3Q16) compared to the quarters ended September 30, 2015 (3Q15) and June 30, 2016 (2Q16).

Net Interest Income

Net interest income for 3Q16 was $41.7 million, an increase of 6.1% YoY but a decrease of 0.4% QoQ.

  • Average balance of total interest-earning assets of $5,684.4 million, increased $533.4 million, or 10.4% YoY and $71.5 million, or 1.3% QoQ
  • Yield on interest-earning assets of 3.91% decreased 12 basis points YoY and 2 basis points QoQ
  • Cost of interest-bearing liabilities of 1.09% remained unchanged YoY but increased 4 basis points QoQ
  • Net interest spread and net interest margin of 2.82% and 2.94%, respectively, decreased 12 basis points and 11 basis points, respectively YoY and decreased 6 basis points and 5 basis points, respectively QoQ
  • Includes prepayment penalty income from loans and securities of $1.5 million, compared with $2.2 million in 3Q15 and $1.4 million in 2Q16, and recovered interest from nonaccrual loans of $0.3 million, compared with $0.4 million in 3Q15 and $0.2 million in 2Q16
  • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, the yield on interest-earning assets, would be 3.78%, compared with 3.83% in 3Q15 and 3.81% in 2Q16, and the net interest margin would be 2.81%, compared with 2.85% in 3Q15 and 2.87% in 2Q16
  • Cost of total deposits of 0.92% increased 4 basis points YoY and 8 basis points QoQ
  • Cost of borrowed funds of 1.58% decreased 16 basis points YoY and 12 basis points QoQ, primarily due to an increase in the average balance of lower-costing short-term borrowings

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)
3Q16 vs.
2Q163Q15
Savings 1 2
NOW 8 10
Money market 10 23
Certificate of deposit 1 (6)
Borrowings (12) (16)
Total interest-bearing liabilities 4 -

Non-interest Income

Non-interest income (excluding: net gains on sale of buildings and securities) for 3Q16 was $1.9 million, an increase of $0.3 million YoY and QoQ.

  • Increase in fair value adjustments of $0.3 million compared to 3Q15 and 2Q16

Non-interest Expense

Non-interest expense for 3Q16 was $26.3 million, an increase of $2.6 million, or 10.8% YoY but a decrease of $2.2 million, or 7.7% QoQ.

  • 2Q16 includes a non-recurring penalty of $2.1 million on the prepayment of $38.0 million in repurchase agreements
  • Salaries and benefits increased YoY by $2.1 million primarily due to annual salary increases and additions in staffing and increased $0.8 million QoQ due to increased staffing and stock-based compensation costs as a result of the recent increase in the Company’s stock price
  • 3Q16 and 2Q16 both include a write-down of $0.8 million on one OREO property
  • Non-interest expense (excluding: salaries and benefits expense, prepayment penalty on borrowings and net gain/losses on sale of OREO) totaled $10.7 million, a decrease of $0.4 million, or 3.7% YoY and $0.8 million, or 7.1% QoQ
  • The efficiency ratio increased to 57.4% in 3Q16 from 56.2% in 3Q15 and 57.1% in 2Q16

Provision for Income Taxes

The provision for income taxes for 3Q16 was $6.7 million, essentially unchanged YoY but was a decrease of $14.1 million QoQ.

  • Income before income taxes decreased by $33.9 million QoQ, primarily due to the net gain from the Building Sale, which also reduced impact of preferential tax items in 2Q16
  • Effective tax rates of 38.5% in 3Q16, 40.5% in 2Q16 and 37.7% in 3Q15.

Loans:

  • Net loans were $4,719.5 million reflecting an increase of 1.0% QoQ (not annualized) and 8.1% 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
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $777.5 million year-to-date, or 91.4% of loan production during the period
  • Total loan originations and purchases were $850.3 million year-to-date, an increase of $12.5 million YoY
  • Loan purchases, which are underwritten to the same standards as organic originations, were $138.0 million year-to-date, a decrease of $78.3 million YoY
  • Loan pipeline totaled $289.3 million at September 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 41.9% and an average debt coverage ratio of 204%

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

For the three months ended
September 30, June 30, September 30,
Loan type 2016 2016 2015
Mortgage loans 3.52% 3.53% 3.58%
Non-mortgage loans 4.12% 4.29% 3.43%
Total loans 3.74% 3.71% 3.56%

Credit Quality:

  • Non-performing loans totaled $23.5 million, a decrease of $2.5 million, or 9.7%, from $26.1 million at December 31, 2015
  • Classified assets totaled $48.7 million, an increase of $4.8 million, or 10.9%, from $43.9 million at December 31, 2015, primarily due to an increase in substandard taxi medallion loans
  • Loans classified as troubled debt restructured totaled $8.2 million, a decrease of $1.3 million, or 13.7%, 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 40.3% 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 $1.6 million recorded in the comparable prior year period
  • 3Q16 included a charge-off of $0.4 million on one SBA loan
  • Net recoveries totaled $0.3 million year-to-date, amid continued improvement in credit conditions
  • 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 September 30, 2016, both were well-capitalized under all regulatory requirements
  • Year-to-date, stockholders’ equity increased $39.6 million, or 8.4% to $512.6 million due to net income of $50.6 million and an improvement in other comprehensive income of $5.8 million, mainly due to an increase in the fair value of the securities portfolio
  • Increases noted above were partially offset by the declaration and payment of dividends on the Company’s common stock of $0.51 per common share totaling $14.8 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 September 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 $17.90 at September 30, 2016, compared with $16.41 at December 31, 2015
  • Tangible book value per common share, a non-GAAP measure, was $17.35, 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 nine months ended
September 30, June 30, September 30, September 30,
2016 2016 2015 2016 2015
Interest and Dividend Income
Interest and fees on loans $ 49,181 $ 48,413 $ 45,243 $ 145,152 $ 132,861
Interest and dividends on securities:
Interest 6,173 6,510 6,508 19,275 18,366
Dividends 121 120 119 360 355
Other interest income 49 48 43 191 96
Total interest and dividend income 55,524 55,091 51,913 164,978 151,678
Interest Expense
Deposits 8,520 8,097 7,701 24,590 22,596
Other interest expense 5,291 5,105 4,902 15,653 14,078
Total interest expense 13,811 13,202 12,603 40,243 36,674
Net Interest Income 41,713 41,889 39,310 124,735 115,004
Benefit for loan losses - - (370) - (1,620)
Net Interest Income After Benefit for Loan Losses 41,713 41,889 39,680 124,735 116,624
Non-interest Income
Banking services fee income 826 973 778 2,775 2,560
Net gain on sale of securities - 2,363 103 2,363 167
Net gain on sale of loans 240 3 306 584 355
Net gain on sale of buildings - 33,814 - 33,814 6,537
Net loss from fair value adjustments (823) (1,115) (1,094) (2,925) (921)
Federal Home Loan Bank of New York stock dividends 665 582 480 1,870 1,455
Gains from life insurance proceeds 47 - - 458 -
Bank owned life insurance 707 694 725 2,096 2,157
Other income 191 403 399 1,075 1,264
Total non-interest income 1,853 37,717 1,697 42,110 13,574
Non-interest Expense
Salaries and employee benefits 14,795 13,968 12,648 45,024 40,471
Occupancy and equipment 2,576 2,352 2,443 7,298 7,791
Professional services 1,730 2,027 1,907 5,907 5,036
FDIC deposit insurance 536 940 817 2,380 2,377
Data processing 939 1,199 1,178 3,229 3,425
Depreciation and amortization 1,169 1,062 993 3,263 2,528
Other real estate owned/foreclosure expense 273 405 110 831 717
Prepayment penalty on borrowings - 2,082 - 2,082 -
Other operating expenses 4,259 4,419 3,612 13,214 11,550
Total non-interest expense 26,277 28,454 23,708 83,228 73,895
Income Before Income Taxes 17,289 51,152 17,669 83,617 56,303
Provision for Income Taxes
Federal 5,568 15,203 5,375 25,518 16,782
State and local 1,087 5,514 1,286 7,469 4,946
Total taxes 6,655 20,717 6,661 32,987 21,728
Net Income $ 10,634 $ 30,435 $ 11,008 $ 50,630 $ 34,575
Basic earnings per common share $ 0.37 $ 1.05 $ 0.38 $ 1.75 $ 1.18
Diluted earnings per common share $ 0.37 $ 1.05 $ 0.38 $ 1.75 $ 1.18
Dividends per common share $ 0.17 $ 0.17 $ 0.16 $ 0.51 $ 0.48


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
September 30, June 30, December 31,
2016 2016 2015
ASSETS
Cash and due from banks$ 47,880 $ 50,165 $ 42,363
Securities held-to-maturity:
Other securities 33,274 28,410 6,180
Securities available for sale:
Mortgage-backed securities 545,067 580,500 668,740
Other securities 365,812 368,611 324,657
Loans:
Multi-family residential 2,171,289 2,159,138 2,055,228
Commercial real estate 1,195,266 1,146,400 1,001,236
One-to-four family ― mixed-use property 555,691 566,702 573,043
One-to-four family ― residential 183,993 190,251 187,838
Co-operative apartments 7,494 7,571 8,285
Construction 11,250 9,899 7,284
Small Business Administration 14,339 14,718 12,194
Taxi medallion 20,536 20,641 20,881
Commercial business and other 564,972 564,084 506,622
Net unamortized premiums and unearned loan fees 16,447 16,875 15,368
Allowance for loan losses (21,795) (22,198) (21,535)
Net loans 4,719,482 4,674,081 4,366,444
Interest and dividends receivable 19,833 20,390 18,937
Bank premises and equipment, net 26,000 24,470 25,622
Federal Home Loan Bank of New York stock 65,185 67,195 56,066
Bank owned life insurance 115,807 115,100 115,536
Goodwill 16,127 16,127 16,127
Other assets 44,788 41,678 63,962
Total assets$ 5,999,255 $ 5,986,727 $ 5,704,634
LIABILITIES
Due to depositors:
Non-interest bearing$ 320,060 $ 317,112 $ 269,469
Interest-bearing:
Certificate of deposit accounts 1,384,551 1,411,550 1,403,302
Savings accounts 258,058 260,528 261,748
Money market accounts 733,361 452,589 472,489
NOW accounts 1,296,475 1,453,540 1,448,695
Total interest-bearing deposits 3,672,445 3,578,207 3,586,234
Mortgagors' escrow deposits 49,276 45,905 36,844
Borrowed funds 1,360,515 1,444,751 1,271,676
Other liabilities 84,338 91,869 67,344
Total liabilities 5,486,634 5,477,844 5,231,567
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued) - - -
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares
issued at September 30, 2016, June 30, 2016 and December 31, 2015; 28,632,796
shares, 28,631,243 shares and 28,830,558 shares outstanding at September 30, 2016,
June 30, 2016 and December 31, 2015, respectively) 315 315 315
Additional paid-in capital 213,488 212,613 210,652
Treasury stock (2,897,799 shares, 2,899,352 shares and 2,700,037 shares at
September 30, 2016, June 30, 2016 and December 31, 2015, respectively) (53,373) (53,351) (48,868)
Retained earnings 351,942 346,218 316,530
Accumulated other comprehensive income (loss), net of taxes 249 3,088 (5,562)
Total stockholders' equity 512,621 508,883 473,067
Total liabilities and stockholders' equity$ 5,999,255 $ 5,986,727 $ 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 nine months ended
September 30, June 30, September 30, September 30,
2016 2016 2015 2016 2015
Per Share Data
Basic earnings per share $ 0.37 $ 1.05 $ 0.38 $ 1.75 $ 1.18
Diluted earnings per share $ 0.37 $ 1.05 $ 0.38 $ 1.75 $ 1.18
Average number of shares outstanding for:
Basic earnings per common share computation 28,861,101 29,022,122 28,926,735 28,992,813 29,188,269
Diluted earnings per common share computation 28,874,979 29,034,454 28,946,496 29,006,423 29,209,369
Shares outstanding 28,632,796 28,631,243 28,830,210 28,632,796 28,830,210
Book value per common share (1) $ 17.90 $ 17.77 $ 16.34 $ 17.90 $ 16.34
Tangible book value per common share (2) $ 17.35 $ 17.22 $ 15.80 $ 17.35 $ 15.80
Stockholders' Equity
Stockholders' equity 512,621 508,883 471,190 512,621 471,190
Tangible stockholders' common equity 496,901 493,163 455,469 496,901 455,469
Average Balances
Total loans, net $ 4,686,593 $ 4,567,019 $ 4,069,650 $ 4,548,154 $ 3,967,239
Total interest-earning assets 5,684,413 5,612,935 5,151,015 5,596,342 5,016,512
Total assets 5,976,725 5,897,858 5,427,619 5,883,453 5,291,093
Total due to depositors 3,673,731 3,779,256 3,473,264 3,732,869 3,403,656
Total interest-bearing liabilities 5,059,620 5,046,162 4,643,161 5,021,921 4,526,229
Stockholders' equity 508,974 486,261 464,180 491,617 463,316
Performance Ratios (3)
Return on average assets 0.71 % 2.06 % 0.81 % 1.15 % 0.87 %
Return on average equity 8.36 25.04 9.49 13.73 9.95
Yield on average interest-earning assets 3.91 3.93 4.03 3.93 4.03
Cost of average interest-bearing liabilities 1.09 1.05 1.09 1.07 1.08
Interest rate spread during period 2.82 2.88 2.94 2.86 2.95
Net interest margin 2.94 2.99 3.05 2.97 3.06
Non-interest expense to average assets 1.76 1.93 1.75 1.89 1.86
Efficiency ratio (4) 57.37 57.09 56.18 59.64 59.46
Average interest-earning assets to average
interest-bearing liabilities 1.12 X 1.11 X 1.11 X 1.11 X 1.11 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 “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 nine At or for the year At or for the nine
months ended ended months ended
September 30, 2016 December 31, 2015 September 30, 2015
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital $ 523,428 $ 490,919 $ 482,684
Common equity Tier 1 capital 496,605 462,883 455,153
Total risk-based capital 545,223 512,454 505,657
Tier 1 leverage capital (well capitalized = 5%) 8.80 % 8.84 % 8.93 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 11.72 11.83 12.01
Tier 1 risk-based capital (well capitalized = 8.0%) 12.35 12.55 12.74
Total risk-based capital (well capitalized = 10.0%) 12.87 13.10 13.34
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital $ 528,168 $ 494,690 $ 488,327
Common equity Tier 1 capital 528,168 494,690 488,327
Total risk-based capital 549,963 516,226 511,300
Tier 1 leverage capital (well capitalized = 5%) 8.88 % 8.89 % 9.02 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 12.44 12.62 12.86
Tier 1 risk-based capital (well capitalized = 8.0%) 12.44 12.62 12.86
Total risk-based capital (well capitalized = 10.0%) 12.96 13.17 13.47
Capital ratios:
Average equity to average assets 8.36 % 8.68 % 8.76 %
Equity to total assets 8.54 8.29 8.56
Tangible stockholders' common equity to tangible assets (1) 8.30 8.04 8.30
Asset quality:
Non-accrual loans (2) $ 21,882 $ 22,817 $ 26,303
Non-performing loans 23,535 26,077 28,600
Non-performing assets 26,374 31,009 33,455
Net charge-offs/ (recoveries) (260) 2,605 503
Asset quality ratios:
Non-performing loans to gross loans 0.50 % 0.60 % 0.68 %
Non-performing assets to total assets 0.44 0.54 0.61
Allowance for loan losses to gross loans 0.46 0.49 0.55
Allowance for loan losses to non-performing assets 82.64 69.45 68.67
Allowance for loan losses to non-performing loans 92.61 82.58 80.32
Full-service customer facilities 19 19 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, 2016 June 30, 2016 September 30, 2015
Average Yield/ Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net $ 4,093,240 $ 43,777 4.28% $ 3,983,615 $ 42,969 4.31%$ 3,561,262 $ 40,754 4.58%
Other loans, net 593,353 5,402 3.64 583,404 5,444 3.73 508,388 4,489 3.53
Total loans, net (1) 4,686,593 49,179 4.20 4,567,019 48,413 4.24 4,069,650 45,243 4.45
Taxable securities:
Mortgage-backed
securities 554,515 3,350 2.42 599,247 3,707 2.47 692,777 4,307 2.49
Other securities 245,477 2,162 3.52 249,956 2,133 3.41 176,072 1,290 2.93
Total taxable securities 799,992 5,512 2.76 849,203 5,840 2.75 868,849 5,597 2.58
Tax-exempt securities: (2) (3)
Other securities 148,004 784 2.12 147,230 790 2.15 136,043 1,030 3.03
Total tax-exempt securities 148,004 784 2.12 147,230 790 2.15 136,043 1,030 3.03
Interest-earning deposits
and federal funds sold 49,824 49 0.39 49,483 48 0.39 76,473 43 0.22
Total interest-earning
assets 5,684,413 55,524 3.91 5,612,935 55,091 3.93 5,151,015 51,913 4.03
Other assets 292,312 284,923 276,604
Total assets$ 5,976,725 $ 5,897,858 $ 5,427,619
Interest-bearing Liabilities:
Deposits:
Savings accounts$ 258,884 306 0.47 $ 265,856 306 0.46 $ 262,535 297 0.45
NOW accounts 1,384,368 1,979 0.57 1,612,704 1,962 0.49 1,398,358 1,646 0.47
Money market accounts 601,709 990 0.66 483,317 681 0.56 420,860 455 0.43
Certificate of deposit
accounts 1,428,770 5,213 1.46 1,417,379 5,121 1.45 1,391,511 5,276 1.52
Total due to depositors 3,673,731 8,488 0.92 3,779,256 8,070 0.85 3,473,264 7,674 0.88
Mortgagors' escrow
accounts 48,840 32 0.26 67,728 27 0.16 44,606 27 0.24
Total interest-bearing
deposits 3,722,571 8,520 0.92 3,846,984 8,097 0.84 3,517,870 7,701 0.88
Borrowings 1,337,049 5,291 1.58 1,199,178 5,105 1.70 1,125,291 4,902 1.74
Total interest-bearing
liabilities 5,059,620 13,811 1.09 5,046,162 13,202 1.05 4,643,161 12,603 1.09
Non interest-bearing
demand deposits 318,188 296,597 254,435
Other liabilities 89,943 68,838 65,843
Total liabilities 5,467,751 5,411,597 4,963,439
Equity 508,974 486,261 464,180
Total liabilities and
equity$ 5,976,725 $ 5,897,858 $ 5,427,619
Net interest income /
net interest rate spread $ 41,713 2.82% $ 41,889 2.88% $ 39,310 2.94%
Net interest-earning assets /
net interest margin$ 624,793 2.94% $ 566,773 2.99%$ 507,854 3.05%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.12X 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 $0.9 million , $1.0 million and $1.4 million for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.
(3) Includes prepayment penalty income of approximately $26,000 and $0.2 million for the three months ended September 30, 2016 and 2015. There was no prepayment penalty income during the three months ended June 30, 2016.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
For the nine months ended
September 30, 2016 September 30, 2015
Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net $ 3,972,502 $ 129,200 4.34% $ 3,466,085 $ 119,931 4.61%
Other loans, net 575,652 15,950 3.69 501,154 12,930 3.44
Total loans, net (1) 4,548,154 145,150 4.26 3,967,239 132,861 4.47
Taxable securities:
Mortgage-backed
securities 603,994 11,231 2.48 700,563 13,028 2.48
Other securities 241,821 6,040 3.33 151,589 2,897 2.55
Total taxable securities 845,815 17,271 2.72 852,152 15,925 2.49
Tax-exempt securities: (2) (3)
Other securities 140,889 2,366 2.24 137,093 2,796 2.72
Total tax-exempt securities 140,889 2,366 2.24 137,093 2,796 2.72
Interest-earning deposits
and federal funds sold 61,484 191 0.41 60,028 96 0.21
Total interest-earning
assets 5,596,342 164,978 3.93 5,016,512 151,678 4.03
Other assets 287,111 274,581
Total assets$ 5,883,453 $ 5,291,093
Interest-bearing Liabilities:
Deposits:
Savings accounts$ 262,382 910 0.46 $ 265,831 852 0.43
NOW accounts 1,539,050 5,863 0.51 1,441,598 4,847 0.45
Money market accounts 514,626 2,277 0.59 352,639 1,015 0.38
Certificate of deposit
accounts 1,416,811 15,455 1.45 1,343,588 15,809 1.57
Total due to depositors 3,732,869 24,505 0.88 3,403,656 22,523 0.88
Mortgagors' escrow
accounts 55,481 85 0.20 51,772 73 0.19
Total interest-bearing
deposits 3,788,350 24,590 0.87 3,455,428 22,596 0.87
Borrowings 1,233,571 15,653 1.69 1,070,801 14,078 1.75
Total interest-bearing
liabilities 5,021,921 40,243 1.07 4,526,229 36,674 1.08
Non interest-bearing
demand deposits 296,321 243,693
Other liabilities 73,594 57,855
Total liabilities 5,391,836 4,827,777
Equity 491,617 463,316
Total liabilities and
equity$ 5,883,453 $ 5,291,093
Net interest income /
net interest rate spread $ 124,735 2.86% $ 115,004 2.95%
Net interest-earning assets /
net interest margin$ 574,421 2.97% $ 490,283 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 $3.4 million and $3.2 million for the nine months ended September 30, 2016 and 2015, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.
(3) Includes prepayment penalty income of approximately $26,000 and $0.2 million for the nine months ended September 30, 2016 and 2015.


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
September 2016 vs. September 2016 vs.
September 30, June 30, March 31, December 31, December 2015 September 30, September 2015
(Dollars in thousands) 2016 2016 2016 2015 % Change 2015 % Change
Deposits
Non-interest bearing$ 320,060 $ 317,112 $ 280,450 $ 269,469 18.8% $ 257,196 24.4%
Interest bearing:
Certificate of deposit
accounts 1,384,551 1,411,550 1,362,062 1,403,302 (1.3%) 1,386,945 (0.2%)
Savings accounts 258,058 260,528 268,057 261,748 (1.4%) 261,400 (1.3%)
Money market accounts 733,361 452,589 485,774 472,489 55.2% 438,457 67.3%
NOW accounts 1,296,475 1,453,540 1,610,932 1,448,695 (10.5%) 1,338,715 (3.2%)
Total interest-bearing
deposits 3,672,445 3,578,207 3,726,825 3,586,234 2.4% 3,425,517 7.2%
Total deposits$ 3,992,505 $ 3,895,319 $ 4,007,275 $ 3,855,703 3.5% $ 3,682,713 8.4%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Origination and Purchases
For the three months For the nine months ended
September 30, June 30, September 30, September 30,
(In thousands) 2016 2016 2015 2016 2015
Multi-family residential $ 61,378 $ 162,364 $ 91,306 $ 293,385 $ 268,481
Commercial real estate 68,970 114,007 151,358 245,114 295,084
One-to-four family – mixed-use property 12,618 11,630 20,008 42,493 44,905
One-to-four family – residential 3,362 4,195 12,618 17,050 34,696
Co-operative apartments - 470 1,915 470 2,365
Construction 1,920 2,427 1,999 6,034 3,386
Small Business Administration 470 314 2,232 6,785 8,713
Taxi Medallion - - - - -
Commercial business and other 84,525 92,456 53,028 239,015 180,239
Total $ 233,243 $ 387,863 $ 334,464 $ 850,346 $ 837,869

Loan Composition
September 30, 2016 vs. September 2016 vs.
September 30, June 30, March 31, December 31, December 2015 September 30, September 2015
(Dollars in thousands) 2016 2016 2016 2015 % Change 2015 % Change
Loans:
Multi-family residential$ 2,171,289 $ 2,159,138 $ 2,039,794 $ 2,055,228 5.6% $ 2,043,740 6.2%
Commercial real estate 1,195,266 1,146,400 1,058,028 1,001,236 19.4% 857,806 39.3%
One-to-four family ―
mixed-use property 555,691 566,702 571,846 573,043 (3.0%) 568,401 (2.2%)
One-to-four family ― residential 183,993 190,251 191,158 187,838 (2.0%) 191,430 (3.9%)
Co-operative apartments 7,494 7,571 8,182 8,285 (9.5%) 9,122 (17.8%)
Construction 11,250 9,899 7,472 7,284 54.4% 5,671 98.4%
Small Business Administration 14,339 14,718 14,701 12,194 17.6% 10,540 36.0%
Taxi medallion 20,536 20,641 20,757 20,881 (1.7%) 21,025 (2.3%)
Commercial business and other 564,972 564,084 531,322 506,622 11.5% 479,085 17.9%
Net unamortized premiums
and unearned loan fees 16,447 16,875 15,281 15,368 7.0% 14,129 16.4%
Allowance for loan losses (21,795) (22,198) (21,993) (21,535) 1.2% (22,973) (5.1%)
Net loans$ 4,719,482 $ 4,674,081 $ 4,436,548 $ 4,366,444 8.1% $ 4,177,976 13.0%

Loan Activity
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2015 2016 2015 2015
Loans originated and purchased$ 233,243 $ 387,863 $ 229,240 $ 395,592 $ 334,464
Principal reductions (183,583) (149,307) (152,521) (206,125) (155,794)
Loans transferred to held-for-sale - - - - -
Loans sold (3,693) (2,310) (5,515) (1,164) (8,800)
Loan charged-offs (541) (102) (147) (2,478) (168)
Foreclosures - - (408) (34) (773)
Net change in deferred (fees) and costs (428) 1,594 (87) 1,239 878
Net change in the allowance for loan losses 403 (205) (458) 1,438 111
Total loan activity$ 45,401 $ 237,533 $ 70,104 $ 188,468 $ 169,918




FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2016 2016 2016 2015 2015
Loans 90 Days Or More Past Due
and Still Accruing:
Multi-family residential $ - $ 574 $ 792 $ 233 $ 516
Commercial real estate 1,183 320 1,083 1,183 253
One-to-four family - mixed-use property 470 635 743 611 1,293
One-to-four family - residential - 13 13 13 13
Construction - - 570 1,000 -
Commercial business and other - - - 220 222
Total 1,653 1,542 3,201 3,260 2,297
Non-accrual Loans:
Multi-family residential 1,649 3,162 3,518 3,561 4,686
Commercial real estate 1,157 2,299 3,295 2,398 2,407
One-to-four family - mixed-use property 4,534 6,005 5,519 5,952 5,446
One-to-four family - residential 8,340 8,406 8,861 10,120 10,441
Small business administration 2,132 185 201 218 234
Taxi Medallion 3,971 196 196 - -
Commercial business and other 99 128 511 568 3,089
Total 21,882 20,381 22,101 22,817 26,303
Total Non-performing Loans 23,535 21,923 25,302 26,077 28,600
Other Non-performing Assets:
Real estate acquired through foreclosure 2,839 3,668 4,602 4,932 4,855
Total 2,839 3,668 4,602 4,932 4,855
Total Non-performing Assets $ 26,374 $ 25,591 $ 29,904 $ 31,009 $ 33,455
Non-performing Assets to Total Assets 0.44% 0.43% 0.51% 0.54% 0.61%
Allowance For Loan Losses to Non-performing Loans 92.6% 101.3% 86.9% 82.6% 80.3%


Net Charge-Offs (Recoveries)
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2016 2016 2015 2015
Multi-family residential $ 79 $ (183) $ 29 $ (35) $ 54
Commercial real estate (11) - - - (100)
One-to-four family – mixed-use property 24 36 (173) 18 73
One-to-four family – residential - 7 (299) 97 (300)
Co-operative apartments - - - - -
Small Business Administration 317 (42) (31) 17 4
Commercial business and other (6) (23) 16 2,005 10
Total net loan charge-offs (recoveries) $ 403 $ (205) $ (458) $ 2,102 $ (259)

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common 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 Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2016 2016 2015 2016 2015
GAAP income before income taxes$ 17,289 $ 51,152 $ 17,669 $ 83,617 $ 56,303
Net (gain) loss from fair value adjustments 823 1,115 1,094 2,925 921
Net gain on sale of securities - (2,363) (103) (2,363) (167)
Gain from life insurance proceeds (47) - - (458) -
Net gain on sale of buildings - (33,814) - (33,814) (6,537)
Prepayment penalty on borrowings - 2,082 - 2,082 -
Core income before taxes 18,065 18,172 18,660 51,989 50,520
Provision for income taxes for core income 6,736 6,851 7,087 19,628 19,247
Core net income$ 11,329 $ 11,321 $ 11,573 $ 32,361 $ 31,273
GAAP diluted earnings per common share$ 0.37 $ 1.05 $ 0.38 $ 1.75 $ 1.18
Net loss from fair value adjustments, net of tax 0.03 0.02 0.02 0.06 0.02
Net gain on sale of securities, net of tax - (0.05) - (0.05) -
Gain from life insurance proceeds - - - (0.02) -
Net gain on sale of buildings, net of tax - (0.67) - (0.67) (0.13)
Prepayment penalty on borrowings - 0.04 - 0.04 -
Core diluted earnings per common share*$ 0.39 $ 0.39 $ 0.40 $ 1.12 $ 1.07
Core net income, as calculated above$ 11,329 $ 11,321 $ 11,573 $ 32,361 $ 31,273
Average assets 5,976,725 5,897,858 5,427,619 5,883,453 5,291,093
Average equity 508,974 486,261 464,180 491,617 463,316
Core return on average assets** 0.76% 0.77% 0.85% 0.73% 0.79%
Core return on average equity** 8.90% 9.31% 9.97% 8.78% 9.00%
* 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)
September 30,December 31,
(Dollars in thousands) 2016 2015
Total Equity $ 512,621 $ 473,067
Less:
Goodwill (16,127) (16,127)
Intangible deferred tax liabilities 407 406
Tangible Stockholders' Common Equity$ 496,901 $ 457,346
Total Assets $ 5,999,255 $ 5,704,634
Less:
Goodwill (16,127) (16,127)
Intangible deferred tax liabilities 407 406
Tangible Assets $ 5,983,535 $ 5,688,913
Tangible Stockholders' Common Equity to Tangible Assets 8.30% 8.04%

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

Source:Flushing Financial Corporation