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Flushing Financial Corporation Reports First Quarter Results GAAP Diluted EPS of $0.42, Up 27.3% YOY Driven by 11.5% Annualized Loan Growth and Record Net Interest Income

FIRST QUARTER 20171

  • GAAP diluted EPS was $0.42, up 27.3% YoY but down 16.0% QoQ, largely due to net gain on sale of buildings in 4Q16, and core diluted EPS was $0.40, up 21.2% YoY and unchanged QoQ
  • Record net interest income of $43.4 million, an improvement of 2.5% QoQ
  • Net interest margin was 2.95%, down 1bp QoQ
    • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, net interest margin improved to 2.85%, up 4bps QoQ
  • GAAP and core ROAE improved to 9.5% and 9.1%, compared with 8.0% and 8.1% for 1Q16
  • GAAP and core ROAA both improved to 0.8%, compared with 0.7% for 1Q16
  • Increased quarterly dividend by 6% to $0.18 per share

UNIONDALE, N.Y., April 25, 2017 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq:FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the first quarter ended March 31, 2017.

John R. Buran, President and Chief Executive Officer, remarked, “The positive momentum we saw at the end of last year carried over to a strong start in 2017. Loan growth of 3% coupled with an uptick on the yield of loan originations and purchases during the first quarter resulted in record net interest income. Credit quality remains a Company strength as we recorded minimal net charge offs and the percentage of non-performing assets to total assets improved from December 31, 2016. We continue to be well positioned for the future, as our loan pipeline totals over $300 million at an average rate of 4.15% as of March 31, 2017.”

“We moved further ahead with our strategy of enhancing operational scalability and efficiency by converting our fifth branch to the Universal Banker model, which provides our customers with cutting-edge technology and a higher-quality experience, while allowing us to operate our branches with reduced facilities and staffing costs. We sustained deposit growth, as total deposits increased 4% for the quarter and 9% from March 31, 2016, while our core deposits increased 4% from both the linked quarter and March 31, 2016.”

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

___________________________________________

1 Core diluted earnings per common share (“core diluted EPS”), core ROAE and core ROAA are not Generally Accepted Accounting Principle (“GAAP”) measures.

For a GAAP to non-GAAP reconciliation of core diluted EPS, core ROAE and core ROAA, refer to the table entitled “Reconciliation of Non-GAAP Financial Measures.”

  • In the first quarter, $238.9 million of multi-family, commercial real estate, and commercial business loans were originated and purchased, representing 89.6% of all originations while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield.
  • The average interest rate obtained for first quarter originations and purchases improved to 3.85% compared to 3.81% for the linked quarter and 3.77% for 1Q16.
  • The average rate of mortgage loan applications in the pipeline totaled 4.15% at March 31, 2017 as compared to 4.20% at December 31, 2016, and 4.03% at March 31, 2016.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during the first quarter of 2017 had a low average loan-to-value ratio of 49.7% and an average debt coverage ratio of 176%
  • Monitor and enhance due diligence to realize strategically favorable multi-family and commercial real estate concentration levels.

As in prior years, the first quarter results include seasonal non-interest expenses related to annual restricted stock awards for employees and directors along with increased payroll taxes. The seasonal items increased non-interest expense by approximately $3 million, or $0.06 per diluted common share. The restricted stock awards also affected the Company’s tax rate by reducing the tax rate to approximately 30%. We anticipate an annual tax rate of approximately 35% for 2017.

Mr. Buran concluded, “Overall, we remain well capitalized and positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute on our strategic objectives.”

Summary of Strategic Objectives

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

Earnings Summary:

Quarter ended March 31, 2017 (1Q17) compared to the quarters ended March 31, 2016 (1Q16) and December 31, 2016 (4Q16).

March 31, 2017 compared to December 31, 2016 (“QoQ”) March 31, 2017 compared to March 31, 2016 (“YoY”).

Net Interest Income

Net interest income for 1Q17 improved to $43.4 million, an increase of 5.5% YoY and 2.5% QoQ.

  • Net interest margin of 2.95%, decreased 5bpsYoY and decreased 1bp QoQ
  • Net interest spread of 2.84%, decreased 5bps YoY but remains unchanged QoQ
  • Net interest income includes prepayment penalty income from loans and securities of $1.1 million in 1Q17 compared with $2.2 million in 1Q16 and $1.6 million in 4Q16, and recovered interest from nonaccrual loans of $0.5 million in 1Q17, compared with $0.1 million in 1Q16 and $0.6 million in 4Q16
  • Excluding prepayment penalty income from loans and securities and recovered interest from nonaccrual loans, the yield on interest-earning assets would have been 3.80% in both 1Q17 and 1Q16 and 3.77% in 4Q16, and the net interest margin would have improved to 2.85% in 1Q17, compared with 2.83% in 1Q16 and 2.81% in 4Q16
  • Average balance of total interest-earning assets of $5,873.8 million increased $383.1 million, or 7.0% YoY and $156.5 million, or 2.7% QoQ
  • Yield on interest-earning assets of 3.90% decreased 6bps YoY and decreased 2bps QoQ
  • Cost of interest-bearing liabilities of 1.06% decreased 1bp YoY and decreased 2bps QoQ, driven by an improvement in our funding mix
  • Cost of funds of 1.01% a decrease of 1bp YoY but remains unchanged QoQ

Non-interest Income

Non-interest income for 1Q17 was $3.7 million, an increase of $1.1 million, or 45.2% YoY, but a decrease of $11.7 million, or 76.1% QoQ, largely driven by a decrease of $14.2 million from the net gain on sale of buildings in 4Q16.

  • The 1Q17 includes a gain from life insurance proceeds of $1.2 million compared to proceeds of $0.4 million in 1Q16 and $2,000 in 4Q16.
  • Losses from fair value adjustments decreased in 1Q17 to $0.4 million which was a reduction of $0.6 million from 1Q16 and $0.1 million from 4Q16.

Non-interest Expense

Non-interest expense for 1Q17 was $29.6 million, an increase of $1.1 million, or 3.7% YoY, and a decrease of $5.8 million, or 16.4% QoQ, largely driven by a decrease of $8.3 million relating to a non-recurring prepayment penalty in 4Q16.

  • Salaries and benefits increased $0.8 million YoY primarily due to annual salary increases and additions in staffing and increased $1.3 million QoQ due to annual salary increases, annual restricted stock unit awards to employees and increased payroll taxes partially offset by a decline in other stock-based compensation costs because of a decrease in the Company’s stock price
  • The first quarter of each year includes the impact of annual grants of employee and director restricted stock unit awards; restricted stock expense totaled $3.3 million in 1Q17 compared to $3.0 million in 1Q16 and $0.7 million in 4Q16
  • Non-interest expense (excluding: salaries and benefits expense, director restricted stock unit awards, prepayment penalty on borrowings and net gain/losses on sale of OREO) totaled $11.3 million in 1Q17 and 1Q16 but was an increase of $0.3 million, or 3.1% QoQ
  • The efficiency ratio improved to 64.0% in 1Q17 from 64.5% in 1Q16 but increased from 59.6% in 4Q16, primarily driven by annual grants of restricted stock awards

Provision for Income Taxes

The provision for income taxes for 1Q17 was $5.3 million, a decrease of $0.4 million YoY and $2.9 million QoQ.

  • Pre-tax income increased by $2.3 million, or 15.4% YoY and decreased $4.9 million, or 21.8% QoQ
  • The effective tax rates were 30.0% in 1Q17, 37.0% in 1Q16 and 36.2% in 4Q16
  • The improvement in the Company’s effective tax rate was primarily due to a change in 1Q17 to the accounting treatment of deductible stock compensation expense from prior years; in prior years the tax impact of deductible stock compensation expense flowed through additional paid-in-capital and did not have an impact of the Company’s effective tax rate
  • Deductible stock compensation is required to be treated, for tax purposes, as a discrete tax item in the period the shares vest; our stock awards generally vest in the first quarter, therefore we anticipate the Company’s effective tax rate to increase to approximately 36.0% in the second quarter of 2017 and be approximately 35% for the full year
  • Exclusive of the deductible stock compensation expense the effective tax rate for 1Q17 would have been approximately 36.0% which would reduce both GAAP and core EPS by $0.03

Financial Condition Summary:

Loans:

  • Net loans were $4,952.4 million reflecting an increase of 2.9% QoQ (not annualized) and 11.6% YoY as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full banking relationship
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $238.9 million for the quarter, or 89.6% of loan production
  • Loan pipeline totaled $303.1 million at March 31, 2017, compared to $310.9 million at December 31, 2016 and $436.5 million at March 31, 2016
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of March 31, 2017 totaled 40.3%.

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

For the three months ended
March 31, December 31, March 31,
Loan type 2017
2016
2016
Mortgage loans 3.78% 3.70% 3.78%
Non-mortgage loans 4.02% 4.05% 3.73%
Total loans 3.85% 3.81% 3.77%

Credit Quality

  • Non-performing loans totaled $18.5 million, a decrease of $2.9 million, or 13.5%, from $21.4 million at December 31, 2016
  • Classified assets totaled $47.8 million, an increase of $3.8 million, or 8.7%, from $44.0 million at December 31, 2016, primarily due to an increase in substandard taxi medallion loans, partially offset by reductions in non-performing assets
  • Loans classified as troubled debt restructured totaled $17.3 million, a decrease of $0.2 million, or 1.0%, from $17.4 million at December 31, 2016
  • We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 38.3% average loan-to-value for non-performing loans collateralized by real estate at March 31, 2017
  • No provision for loan losses was recorded in the first quarter of 2017 or all of 2016 due to continued strong credit quality

Capital Management

  • The Company and Bank are subject to the same regulatory requirements and at March 31, 2017, both were well capitalized under all regulatory requirements
  • During 1Q17, stockholders’ equity increased $11.5 million, or 2.2%, to $525.4 million due to net income of $12.3 million and an increase in other comprehensive income, partially offset by the declaration and payment of dividends on the Company’s common stock
  • As of March 31, 2017, up to 495,905 shares may be repurchased under the current authorized stock repurchase program, which has no expiration or maximum dollar limit; there were no purchases in 1Q17
  • Book value per common share increased to $18.24 at March 31, 2017, from $17.95 at December 31, 2016 and $16.83 at March 31, 2016
  • Tangible book value per common share, a non-GAAP measure, increased to $17.69 at March 31, 2017, from $17.40 at December 31, 2016 and $16.29 at March 31, 2016

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, 2016 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
March 31, December 31, March 31,
2017 2016 2016
Interest and Dividend Income
Interest and fees on loans $50,885 $49,973 $47,558
Interest and dividends on securities:
Interest 6,095 5,866 6,592
Dividends 121 121 119
Other interest income 153 59 94
Total interest and dividend income 57,254 56,019 54,363
Interest Expense
Deposits 8,980 8,760 7,973
Other interest expense 4,885 4,908 5,257
Total interest expense 13,865 13,668 13,230
Net Interest Income 43,389 42,351 41,133
Provision for loan losses - - -
Net Interest Income After Provision for Loan Losses 43,389 42,351 41,133
Non-interest Income
Banking services fee income 874 983 976
Net loss on sale of securities - (839) -
Net gain on sale of loans 210 - 341
Net gain on sale of buildings - 14,204 -
Net loss from fair value adjustments (378) (509) (987)
Federal Home Loan Bank of New York stock dividends 823 794 623
Gains from life insurance proceeds 1,161 2 411
Bank owned life insurance 795 701 695
Other income 204 90 481
Total non-interest income 3,689 15,426 2,540
Non-interest Expense
Salaries and employee benefits 17,104 15,801 16,261
Occupancy and equipment 2,496 2,550 2,370
Professional services 1,996 1,813 2,150
FDIC deposit insurance 326 613 904
Data processing 1,203 1,135 1,091
Depreciation and amortization 1,165 1,187 1,032
Other real estate owned/foreclosure expense 351 476 153
Prepayment penalty on borrowings - 8,274 -
Other operating expenses 4,923 3,526 4,536
Total non-interest expense 29,564 35,375 28,497
Income Before Income Taxes 17,514 22,402 15,176
Provision for Income Taxes
Federal 4,749 8,062 4,747
State and local 505 54 868
Total taxes 5,254 8,116 5,615
Net Income $12,260 $14,286 $9,561
Basic earnings per common share $0.42 $0.50 $0.33
Diluted earnings per common share $0.42 $0.50 $0.33
Dividends per common share $0.18 $0.17 $0.17


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
March 31, December 31, March 31,
2017 2016 2016
ASSETS
Cash and due from banks$51,215 $35,857 $51,417
Securities held-to-maturity:
Other securities 36,406 37,735 7,885
Securities available for sale:
Mortgage-backed securities 537,905 516,476 668,412
Other securities 346,238 344,905 372,851
Loans:
Multi-family residential 2,261,946 2,178,504 2,039,794
Commercial real estate 1,268,770 1,246,132 1,058,028
One-to-four family ― mixed-use property 561,355 558,502 571,846
One-to-four family ― residential 184,201 185,767 191,158
Co-operative apartments 7,216 7,418 8,182
Construction 12,413 11,495 7,472
Small Business Administration 10,519 15,198 14,701
Taxi medallion 18,832 18,996 20,757
Commercial business and other 632,503 597,122 531,322
Net unamortized premiums and unearned loan fees 16,836 16,559 15,281
Allowance for loan losses (22,211) (22,229) (21,993)
Net loans 4,952,380 4,813,464 4,436,548
Interest and dividends receivable 20,602 20,228 19,369
Bank premises and equipment, net 26,026 26,561 25,130
Federal Home Loan Bank of New York stock 57,384 59,173 53,368
Bank owned life insurance 129,824 132,508 114,405
Goodwill 16,127 16,127 16,127
Other assets 57,378 55,453 47,555
Total assets$6,231,485 $6,058,487 $5,813,067
LIABILITIES
Due to depositors:
Non-interest bearing$344,028 $333,163 $280,450
Interest-bearing:
Certificate of deposit accounts 1,411,819 1,372,115 1,362,062
Savings accounts 254,822 254,283 268,057
Money market accounts 851,129 843,370 485,774
NOW accounts 1,487,120 1,362,484 1,610,932
Total interest-bearing deposits 4,004,890 3,832,252 3,726,825
Mortgagors' escrow deposits 61,828 40,216 56,612
Borrowed funds 1,227,852 1,266,563 1,190,789
Other liabilities 67,485 72,440 70,612
Total liabilities 5,706,083 5,544,634 5,325,288
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued) - - -
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares
issued at March 31, 2017, December 31, 2016 and March 31, 2016; 28,811,160
shares, 28,632,904 shares and 28,986,566 shares outstanding at March 31, 2017,
December 31, 2016 and March 31, 2016, respectively) 315 315 315
Additional paid-in capital 215,501 214,462 211,735
Treasury stock (2,719,435 shares, 2,897,691 shares and 2,544,029 shares at
March 31, 2017, December 31, 2016 and March 31, 2016, respectively) (51,224) (53,754) (46,307)
Retained earnings 367,944 361,192 320,725
Accumulated other comprehensive income (loss), net of taxes (7,134) (8,362) 1,311
Total stockholders' equity 525,402 513,853 487,779
Total liabilities and stockholders' equity$6,231,485 $6,058,487 $5,813,067


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
At or for the three months ended
March 31, December 31, March 31,
2017 2016 2016
Per Share Data
Basic earnings per share $0.42 $0.50 $0.33
Diluted earnings per share $0.42 $0.50 $0.33
Average number of shares outstanding for:
Basic earnings per common share computation 29,019,070 28,849,783 29,096,663
Diluted earnings per common share computation 29,022,745 28,859,665 29,111,172
Shares outstanding 28,811,160 28,632,904 28,986,566
Book value per common share (1) $18.24 $17.95 $16.83
Tangible book value per common share (2) $17.69 $17.40 $16.29
Stockholders' Equity
Stockholders' equity $525,402 $513,853 $487,779
Tangible stockholders' common equity 509,666 498,115 472,059
Average Balances
Total loans, net $4,868,048 $4,757,124 $4,389,331
Total interest-earning assets 5,873,799 5,717,298 5,490,714
Total assets 6,168,848 6,003,125 5,774,750
Total due to depositors 4,088,031 3,796,337 3,746,268
Total interest-bearing liabilities 5,254,640 5,077,893 4,959,563
Stockholders' equity 517,800 512,317 479,424
Performance Ratios (3)
Return on average assets 0.79% 0.95% 0.66%
Return on average equity 9.47 11.15 7.98
Yield on average interest-earning assets 3.90 3.92 3.96
Cost of average interest-bearing liabilities 1.06 1.08 1.07
Interest rate spread during period 2.84 2.84 2.89
Net interest margin 2.95 2.96 3.00
Non-interest expense to average assets 1.92 2.36 1.97
Efficiency ratio (4) 63.98 59.63 64.50
Average interest-earning assets to average
interest-bearing liabilities 1.12X 1.13X 1.11X

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

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

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

(4) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense, 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).

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
At or for the three At or for the At or for the three
months ended year ended months ended
March 31, 2017 December 31, 2016 March 31, 2016
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital $550,055 $539,228 $497,698
Common equity Tier 1 capital 516,706 506,432 470,685
Total risk-based capital 647,266 636,457 519,691
Tier 1 leverage capital (well capitalized = 5%) 8.92% 9.00 % 8.65 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 11.59 11.79 11.84
Tier 1 risk-based capital (well capitalized = 8.0%) 12.34 12.56 12.52
Total risk-based capital (well capitalized = 10.0%) 14.52 14.82 13.07
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital $616,017 $607,033 $498,308
Common equity Tier 1 capital 616,017 607,033 498,308
Total risk-based capital 638,228 629,262 520,300
Tier 1 leverage capital (well capitalized = 5%) 9.98% 10.12 % 8.65 %
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 13.80 14.12 12.51
Tier 1 risk-based capital (well capitalized = 8.0%) 13.80 14.12 12.51
Total risk-based capital (well capitalized = 10.0%) 14.30 14.64 13.06
Capital ratios:
Average equity to average assets 8.39% 8.40 % 8.30 %
Equity to total assets 8.43 8.48 8.39
Tangible stockholders' common equity to tangible assets (1) 8.20 8.24 8.14
Asset quality:
Non-accrual loans (2) $17,858 $21,030 $22,101
Non-performing loans 18,535 21,416 25,302
Non-performing assets 18,535 21,949 29,904
Net charge-offs/ (recoveries) 18 (694) (458)
Asset quality ratios:
Non-performing loans to gross loans 0.37% 0.44 % 0.57 %
Non-performing assets to total assets 0.30 0.36 0.51
Allowance for loan losses to gross loans 0.45 0.46 0.49
Allowance for loan losses to non-performing assets 119.84 101.28 73.54
Allowance for loan losses to non-performing loans 119.84 103.80 86.92
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
March 31, 2017 December 31, 2016 March 31, 2016
Average Yield/ Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net$4,213,482$44,4294.22%$4,140,511$44,2194.27%$3,839,325$42,4544.42%
Other loans, net 654,566 6,4563.95 616,613 5,7543.73 550,006 5,1043.71
Total loans, net (1) 4,868,048 50,8854.18 4,757,124 49,9734.20 4,389,331 47,5584.33
Taxable securities:
Mortgage-backed
securities 529,942 3,3672.54 514,527 3,0022.33 658,764 4,1742.53
Other securities 239,345 2,0723.46 248,765 2,2033.54 229,991 1,7453.03
Total taxable securities 769,287 5,4392.83 763,292 5,2052.73 888,755 5,9192.66
Tax-exempt securities: (2)
Other securities 146,502 7772.12 147,184 7822.13 127,355 7922.49
Total tax-exempt securities 146,502 7772.12 147,184 7822.13 127,355 7922.49
Interest-earning deposits
and federal funds sold 89,962 1530.68 49,698 590.47 85,273 940.44
Total interest-earning
assets 5,873,799 57,2543.90 5,717,298 56,0193.92 5,490,714 54,3633.96
Other assets 295,049 285,827 284,036
Total assets$6,168,848 $6,003,125 $5,774,750
Interest-bearing Liabilities:
Deposits:
Savings accounts$254,255$3070.48 $256,677$3090.48 $262,443$2980.45
NOW accounts 1,568,267 2,2070.56 1,370,618 2,0280.59 1,621,779 1,9220.47
Money market accounts 860,779 1,4990.70 780,233 1,3150.67 457,895 6060.53
Certificate of deposit
accounts 1,404,730 4,9401.41 1,388,809 5,0811.46 1,404,151 5,1211.46
Total due to depositors 4,088,031 8,9530.88 3,796,337 8,7330.92 3,746,268 7,9470.85
Mortgagors' escrow
accounts 54,616 270.20 58,151 270.19 49,947 260.21
Total interest-bearing
deposits 4,142,647 8,9800.87 3,854,488 8,7600.91 3,796,215 7,9730.84
Borrowings 1,111,993 4,8851.76 1,223,405 4,9081.60 1,163,348 5,2571.81
Total interest-bearing
liabilities 5,254,640 13,8651.06 5,077,893 13,6681.08 4,959,563 13,2301.07
Non interest-bearing
demand deposits 330,215 331,232 273,937
Other liabilities 66,193 81,683 61,826
Total liabilities 5,651,048 5,490,808 5,295,326
Equity 517,800 512,317 479,424
Total liabilities and
equity$6,168,848 $6,003,125 $5,774,750
Net interest income /
net interest rate spread $43,3892.84% $42,3512.84% $41,1332.89%
Net interest-earning assets /
net interest margin$619,159 2.95%$639,405 2.96%$531,151 3.00%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.12X 1.13X 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 $0.6 million, $0.9 million and $1.5 million for the three months ended March 31, 2017, December 31, 2016 and March 31, 2016, 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
(Dollars in thousands)
(Unaudited)
March 2017 vs. March 2017 vs.
March 31, December 31, September 30, June 30, December, 2016 March 31, March 2016
2017 2016 2016 2016 % Change 2016 % Change
Deposits
Non-interest bearing$344,028 $333,163 $320,060 $317,112 3.3% $280,450 22.7%
Interest bearing:
Certificate of deposit
accounts 1,411,819 1,372,115 1,384,551 1,411,550 2.9% 1,362,062 3.7%
Savings accounts 254,822 254,283 258,058 260,528 0.2% 268,057 (4.9%)
Money market accounts 851,129 843,370 733,361 452,589 0.9% 485,774 75.2%
NOW accounts 1,487,120 1,362,484 1,296,475 1,453,540 9.1% 1,610,932 (7.7%)
Total interest-bearing
deposits 4,004,890 3,832,252 3,672,445 3,578,207 4.5% 3,726,825 7.5%
Total deposits$4,348,918 $4,165,415 $3,992,505 $3,895,319 4.4% $4,007,275 8.5%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Dollars in thousands)
(Unaudited)
Loan Origination and Purchases
For the three months
March 31, December 31, March 31,
2017 2016 2016
Multi-family residential $126,708 $77,812 $69,643
Commercial real estate 35,732 77,607 62,137
One-to-four family – mixed-use property 18,542 20,242 18,245
One-to-four family – residential 5,920 7,770 9,493
Construction 2,544 9,738 1,687
Small Business Administration 641 1,662 6,001
Commercial business and other 76,484 87,761 62,034
Total $266,571 $282,592 $229,240


Loan Composition
March 2017 vs. March 2017 vs.
March 31, December 31, September 30, June 30, December 2016 March 31, March 2016
2017 2016 2016 2016 % Change 2016 % Change
Loans:
Multi-family residential$2,261,946 $2,178,504 $2,171,289 $2,159,138 3.8% $2,039,794 10.9%
Commercial real estate 1,268,770 1,246,132 1,195,266 1,146,400 1.8% 1,058,028 19.9%
One-to-four family ―
mixed-use property 561,355 558,502 555,691 566,702 0.5% 571,846 (1.8%)
One-to-four family ― residential 184,201 185,767 183,993 190,251 (0.8%) 191,158 (3.6%)
Co-operative apartments 7,216 7,418 7,494 7,571 (2.7%) 8,182 (11.8%)
Construction 12,413 11,495 11,250 9,899 8.0% 7,472 66.1%
Small Business Administration 10,519 15,198 14,339 14,718 (30.8%) 14,701 (28.4%)
Taxi medallion 18,832 18,996 20,536 20,641 (0.9%) 20,757 (9.3%)
Commercial business and other 632,503 597,122 564,972 564,084 5.9% 531,322 19.0%
Net unamortized premiums
and unearned loan fees 16,836 16,559 16,447 16,875 1.7% 15,281 10.2%
Allowance for loan losses (22,211) (22,229) (21,795) (22,198) (0.1%) (21,993) 1.0%
Net loans$4,952,380 $4,813,464 $4,719,482 $4,674,081 2.9% $4,436,548 11.6%


Loan Activity
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Loans originated and purchased$266,571 $282,592 $233,243 $387,863 $229,240
Principal reductions (122,897) (187,780) (183,583) (149,308) (152,521)
Loans sold (4,874) - (3,693) (2,310) (5,515)
Loan charged-offs (179) (370) (541) (101) (147)
Foreclosures - (138) - - (408)
Net change in deferred (fees) and costs 277 112 (428) 1,594 (87)
Net change in the allowance for loan losses 18 (434) 403 (205) (458)
Total loan activity$138,916 $93,982 $45,401 $237,533 $70,104


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Dollars in thousands)
(Unaudited)
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Loans 90 Days Or More Past Due
and Still Accruing:
Multi-family residential $- $- $- $574 $792
Commercial real estate 75 - 1,183 320 1,083
One-to-four family - mixed-use property - 386 470 635 743
One-to-four family - residential - - - 13 13
Construction 602 - - - 570
Total 677 386 1,653 1,542 3,201
Non-accrual Loans:
Multi-family residential 1,354 1,837 1,649 3,162 3,518
Commercial real estate 1,462 1,148 1,157 2,299 3,295
One-to-four family - mixed-use property 3,328 4,025 4,534 6,005 5,519
One-to-four family - residential 7,847 8,241 8,340 8,406 8,861
Small business administration 58 1,886 2,132 185 201
Taxi Medallion 3,771 3,825 3,971 196 196
Commercial business and other 38 68 99 128 511
Total 17,858 21,030 21,882 20,381 22,101
Total Non-performing Loans 18,535 21,416 23,535 21,923 25,302
Other Non-performing Assets:
Real estate acquired through foreclosure - 533 2,839 3,668 4,602
Total - 533 2,839 3,668 4,602
Total Non-performing Assets $18,535 $21,949 $26,374 $25,591 $29,904
Non-performing Assets to Total Assets 0.30% 0.36% 0.44% 0.43% 0.51%
Allowance For Loan Losses to Non-performing Loans 119.8% 103.8% 92.6% 101.3% 86.9%


Net Charge-Offs (Recoveries)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Multi-family residential $(16) $(103) $79 $(183) $29
Commercial real estate (68) - (11) - -
One-to-four family – mixed-use property 34 (520) 24 36 (173)
One-to-four family – residential - 40 - 7 (299)
Small Business Administration 26 186 317 (42) (31)
Taxi Medallion 54 142 - - -
Commercial business and other (12) (179) (6) (23) 16
Total net loan charge-offs (recoveries) $18 $(434) $403 $(205) $(458)

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

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,December 31,March 31,
2017 2016 2016
GAAP income before income taxes$17,514 $22,402 $15,176
Net loss from fair value adjustments 378 509 987
Net loss on sale of securities - 839 -
Gain from life insurance proceeds (1,161) (2) (411)
Net gain on sale of buildings - (14,204) -
Prepayment penalty on borrowings - 8,274 -
Core income before taxes 16,731 17,818 15,752
Provision for income taxes for core income 5,020 6,227 6,041
Core net income$11,711 $11,591 $9,711
GAAP diluted earnings per common share$0.42 $0.50 $0.33
Net loss from fair value adjustments, net of tax 0.01 0.01 0.02
Net loss on sale of securities, net of tax - 0.02 -
Gain from life insurance proceeds (0.04) - (0.01)
Net gain on sale of buildings, net of tax - (0.29) -
Prepayment penalty on borrowings, net of tax - 0.17 -
Core diluted earnings per common share*$0.40 $0.40 $0.33
Core net income, as calculated above$11,711 $11,591 $9,711
Average assets 6,168,848 6,003,125 5,774,750
Average equity 517,800 512,317 479,424
Core return on average assets** 0.76% 0.77% 0.67%
Core return on average equity** 9.05% 9.05% 8.10%
*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
(Dollars in thousands)
(Unaudited)
March 31,December 31,March 31,
2017 2016 2016
Total Equity $525,402 $513,853 $487,779
Less:
Goodwill (16,127) (16,127) (16,127)
Intangible deferred tax liabilities 391 389 407
Tangible Stockholders' Common Equity$509,666 $498,115 $472,059
Total Assets $6,231,485 $6,058,487 $5,813,067
Less:
Goodwill (16,127) (16,127) (16,127)
Intangible deferred tax liabilities 391 389 407
Tangible Assets $6,215,749 $6,042,749 $5,797,347
Tangible Stockholders' Common Equity to Tangible Assets 8.20% 8.24% 8.14%


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

Source:Flushing Financial Corporation