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Flushing Financial Corporation Reports Third Quarter GAAP Diluted EPS of $0.35 and Core Diluted EPS of $0.37

THIRD QUARTER 20171

  • GAAP diluted EPS was $0.35, down 20.5% QoQ and 5.4% YoY, largely due to pre-tax provision for losses of $3.3 million, or $0.07 diluted EPS, after-tax, primarily related to the taxi medallion portfolio
  • Core diluted EPS was $0.37, down 19.6% QoQ and 5.1% YoY
  • Net interest income was $43.0 million, an improvement of 3.2% YoY, but a reduction of 1.3% QoQ
  • Net interest margin was 2.90%, down 5bps QoQ and 4bps YoY
  • GAAP and core ROAE were 7.6% and 5.1%, compared with 9.6% and 10.2%, respectively in 2Q17
  • GAAP and core ROAA were both 0.7% for 3Q17 compared with 0.8% and 0.9%, respectively in 2Q17
  • Yield on quarterly loan originations and purchases exceeded yield on the loan portfolio, net of prepayment penalties and interest recovered from delinquent loans, for the first time since 4Q08

UNIONDALE, N.Y., Oct. 31, 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 three and nine months ended September 30, 2017.

John R. Buran, President and Chief Executive Officer, stated, “During the third quarter of 2017, we recognized a provision for loan losses totaling $3.3 million related to our taxi medallion loan portfolio. The vast majority of loans in this portfolio are performing and over 80% of taxi medallion loans have been restructured by reducing interest rates and/or extending maturities. The taxi medallion loan classified as non-performing is due to one loan being past its maturity date; however, the loan continues to make required payments. This is the first provision we have taken since the fourth quarter of 2015. The net effect of the provision for loan losses was a $0.07 reduction of diluted earnings per share. The provision resulted from a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio to a net carrying value of approximately $304,000 per New York City corporate medallion. At September 30, 2017, we have allocated $6.0 million of the allowance to the taxi medallion portfolio which equals 33.0% of the outstanding principal.”

“For many months following the current cycle of interest rate increases, we have been able to keep our government deposit costs considerably below market rates. However, due to competitive pressures we were compelled to move these rates to match competition by a weighted average of 33 basis points. The full impact of this increase was recorded in the recent quarter as the cost to total deposits increased 14 basis points versus the second quarter of 2017. For the fourth quarter of 2017, we expect to raise an additional $200 million in low cost government deposits to replace higher costing borrowings on our balance sheet.”

“The loan to deposit ratio improved for the quarter to 113.7% from 118.2% due to increasing branch based money market balances and the growth or our internet based eco-friendly, socially conscious, healthier lifestyle community internet brand, Bank Purely. Bank Purely had balances in excess of $80 million at quarter end. We look to further improve the loan to deposit ratio in the coming quarter as we increase business development efforts in the lucrative Flushing market consistent with the relocation and modernization of two branches.”

“In order to reduce the impact of rising interest rates on the net interest margin, we continued our strategy of focusing our origination efforts on higher yielding loans. This effort provided a 21bps improvement in the yield received on loan originations and purchases in the third quarter of 2017 to 4.25%, which is 51bps greater than the yield on originated and purchased loans for the third quarter of 2016. This yield is 16bps greater than the quarterly average yield of our total loan portfolio, net of prepayment penalty and recovered interest from delinquent loans. Our total loan portfolio increased 5%, with an average LTV of 41.2% for loans secured by real estate, during the nine months ended September 30, 2017, while maintaining our strong underwriting standards. Similar to the activity noted in the third quarter of 2016, we experienced a delay in closing loans during the recent quarter. Consequently, the loan pipeline increased to $417.0 million from $279.1 million at June 30, 2017, the highest level since March 2016. Given the level of the pipeline, we are expecting strong loan growth in the fourth quarter of 2017.”

Mr. Buran continued, “We remain disciplined regarding credit quality. Credit quality improved as our non-performing assets have decreased by 37% since the end of 2016 and net charge-offs remain minimal. Additionally, total delinquencies have decreased 15% since December 31, 2016. The percentage of allowance for loan losses to gross loans has increased to 0.50% from 0.46% at December 31, 2016 while the percentage of allowance for loan losses to non-performing loans increased to 182% from 104% at the end of 2016. The LTV on our non-performing real estate loans at September 30, 2017 is 34.9%.”

“We continued to convert our branch network to the more cost effective Universal Banker model and remain on track to convert half of our brick and mortar branches by the end of 2017.”

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

  • In the third quarter, multi-family, commercial real estate, and commercial business loan originations and purchases represented 35%, 14%, and 38%, respectively, of all originations, which were made while maintaining conservative loan-to-values, debt coverage ratios, and increasing yield.
  • The average interest rate obtained for third quarter originations and purchases improved to 4.25% compared to 4.04% for 2Q17 and 3.74% for 3Q16.
  • The average rate of mortgage loan applications in the pipeline totaled 4.04% at September 30, 2017, as compared to 4.17% at June 30, 2017 and 4.05% at September 30, 2016.
  • Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 3Q17 had an increased yield of 4.86% from 4.19% for 2Q17 and 3.53% for 3Q16. While the yields increased, we have maintained our asset quality as these loans had an average loan-to-value ratio of 41.2% and an average debt coverage ratio of 187%.

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.”

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

Summary of Strategic Objectives

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

Earnings Summary:

Net Interest Income

Net interest income for 3Q17 was $43.0 million, an increase of 3.2% YoY (September 30, 2017 compared to September 30, 2016) and decrease of 1.3% QoQ (September 30, 2017 compared to June 30, 2017).

  • Net interest margin of 2.90%, decreased 4bps YoY and 5bps QoQ
  • Net interest spread of 2.77%, decreased 5bps YoY and 6bps QoQ
  • Net interest income includes prepayment penalty income from loans of $1.6 million in 3Q17 compared with $1.5 million in 3Q16 and $1.0 million in 2Q17, and recovered interest from delinquent loans of $0.3 million in each of 3Q17, 3Q16 and 2Q17
  • Excluding prepayment penalty income, accelerated accretion of discount and recovered interest from nonaccrual loans, the yield on interest-earning assets was 3.87% in 3Q17, improved from 3.78% in 3Q16 and 3.82% in 2Q17, and the net interest margin was 2.77% in 3Q17, decreased from 2.81% in 3Q16 and 2.83% in 2Q17
  • Average balance of total interest-earning assets of $5,936.1 million, increased $251.7 million, or 4.4% YoY and increased $17.1 million, or 0.3% QoQ
  • Yield on interest-earning assets of 4.0%, increased 9bps YoY and 6bps QoQ
  • Cost of interest-bearing liabilities of 1.23%, increased 14bps YoY and 12bps QoQ
  • Cost of funds of 1.15%, increased 13bps YoY and 10bps QoQ, driven by an increase in rates paid on our government deposits and short-term borrowings resulting from the increase in the Fed Fund rate during 2017

Provision for loan losses

Provision for loan losses for 3Q17 was $3.3 million compared to none in 3Q16 and 2Q17.

  • Provision driven by a reduction in the estimated fair value of NYC taxi medallions based on most recent sales data

Non-interest Income

Non-interest income for 3Q17 was $1.7 million, a decrease of $0.2 million, or 10.4%, YoY and $0.3 million, or 14.7%, QoQ.

  • Non-interest income included net losses from fair value adjustments of $1.3 million in 3Q17, $0.8 million in 3Q16 and $1.2 million in 2Q17
  • 3Q17 included a loss on the sale of securities of $0.2 million and a gain from insurance proceeds of $0.2 million
  • Absent the above items, non-interest income was $2.9 million, an increase of $0.3 million YoY and decrease of $0.2 million QoQ

Non-interest Expense

Non-interest expense for 3Q17 was $26.0 million, a decrease of $0.3 million, or 1.2%, YoY and $0.1 million, or 0.4% QoQ.

  • 3Q16 included a write-down of $0.8 million on one OREO property; absent this item, non-interest expense increased $0.5 million, or 2.0% YoY, driven by increased salaries and benefits from annual salary increases and additions in staffing and increased data processing costs, partially offset by decreased foreclosure expense due to continued improvement in asset quality and a reduction in FDIC insurance expense, due to lower assessment rates
  • Lower costs associated with FDIC insurance and foreclosure expense should be sustainable
  • The efficiency ratio was 56.5% in 3Q17 compared to 57.4% in 3Q16 and 55.8% in 2Q17

Provision for Income Taxes

The provision for income taxes in 3Q17 was $5.3 million, a decrease of $1.4 million, or 20.5%, YoY and $1.5 million, or 21.9%, QoQ.

  • Pre-tax income decreased by $1.8 million, or 10.5%, YoY and $4.0 million, or 20.7%, QoQ
  • The effective tax rates were 34.2% in 3Q17, 38.5% in 3Q16 and 34.7% in 2Q17
  • The improvement in the Company’s effective tax rate compared to 3Q16 was primarily due to a change in 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 on the Company’s effective tax rate
  • We anticipate the effective tax rate to approximate the 3Q17 rate for the remainder of the year

Financial Condition Summary:

Loans:

  • Net loans held for investment were $5,045.1 million reflecting an increase of 0.4% QoQ (not annualized) and 4.8% 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 while emphasizing rate over volume
  • Loan originations and purchases of multi-family, commercial real estate and commercial business loans totaled $159.3 million for 3Q17, or 87.1% of loan production
  • Loan pipeline was $417.0 million at September 30, 2017, compared to $279.1 million at June 30, 2017 and $289.3 million at September 30, 2016
  • The loan-to-value ratio on our portfolio of real estate dependent loans as of September 30, 2017 totaled 39.4%

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 2017 2017 2016
Mortgage loans 4.13% 4.01% 3.52%
Non-mortgage loans 4.43% 4.13% 4.12%
Total loans 4.25% 4.04% 3.74%

Credit Quality:

  • Non-performing loans totaled $13.9 million, a decrease of $7.5 million, or 35.1%, from $21.4 million at December 31, 2016
  • Classified assets totaled $41.3 million, a decrease of $2.7 million, or 6.1%, from $44.0 million at December 31, 2016, primarily due to reductions in non-performing assets, partially offset by an increase in substandard taxi medallion loans
  • Loans classified as troubled debt restructured (TDR) totaled $22.5 million, an increase of $5.1 million, or 29.0%, from $17.4 million at December 31, 2016, attributable to the addition of nine taxi medallion TDRs
  • 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 34.9% average loan-to-value for non-performing loans collateralized by real estate at September 30, 2017
  • Provision for loan losses of $3.3 million was recorded during the nine months ended September 30, 2017, as the estimated fair value of NYC taxi medallions were lowered based on most recent sales data, while no provision for loan losses was recorded during 2016; net charge-offs totaled $0.2 million during the nine months ended September 30, 2017 compared to net recoveries of $0.7 million for all of 2016
  • For taxi medallion loans, an allowance for loan losses is allocated in the amount by which the outstanding loan balance exceeds the estimated fair value of the taxi medallion, which allowance totaled $6.0 million at September 30, 2017

Capital Management:

  • The Company and Bank, at September 30, 2017, were both well capitalized under all applicable regulatory requirements
  • During the nine months ended September 30, 2017, stockholders’ equity increased $25.8 million, or 5.0%, to $539.6 million due to net income of $35.2 million and $1.7 million of other comprehensive income, partially offset by the declaration and payment of dividends on the Company’s common stock
  • During the nine months ended September 30, 2017, the Company repurchased 10,000 treasury shares at an average cost of $27.80 per share; as of September 30, 2017, up to 485,905 shares may be repurchased under the current authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Book value per common share increased to $18.72 at September 30, 2017, from $17.95 at December 31, 2016
  • Tangible book value per common share, a non-GAAP measure, increased to $18.18 at September 30, 2017, from $17.40 at December 31, 2016

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Wednesday, November 1, 2017 at 9:30 AM (ET) to discuss the Company’s strategy and results for the third quarter of 2017
  • Dial-in for Live Call: 1-888-317-6016
  • Webcast: https://services.choruscall.com/links/ffic171101.html
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10112013
  • The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on December 31, 2017

About Flushing Financial Corporation

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

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

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 For the nine months ended
September 30, June 30, September 30, September 30,
2017 2017 2016 2017 2016
Interest and Dividend Income
Interest and fees on loans $53,318 $51,631 $49,181 $155,834 $145,152
Interest and dividends on securities:
Interest 5,850 6,432 6,173 18,377 19,275
Dividends 30 123 121 274 360
Other interest income 121 129 49 403 191
Total interest and dividend income 59,319 58,315 55,524 174,888 164,978
Interest Expense
Deposits 10,655 9,510 8,520 29,145 24,590
Other interest expense 5,623 5,188 5,291 15,696 15,653
Total interest expense 16,278 14,698 13,811 44,841 40,243
Net Interest Income 43,041 43,617 41,713 130,047 124,735
Provision for loan losses 3,266 - - 3,266 -
Net Interest Income After Provision for Loan Losses 39,775 43,617 41,713 126,781 124,735
Non-interest Income
Banking services fee income 885 1,014 826 2,773 2,775
Net (loss) gain on sale of securities (186) - - (186) 2,363
Net gain on sale of loans 152 34 240 396 584
Net gain on sale of buildings - - - - 33,814
Net loss from fair value adjustments (1,297) (1,159) (823) (2,834) (2,925)
Federal Home Loan Bank of New York stock dividends 740 643 665 2,206 1,870
Gains from life insurance proceeds 238 6 47 1,405 458
Bank owned life insurance 816 807 707 2,418 2,096
Other income 313 603 191 1,120 1,075
Total non-interest income 1,661 1,948 1,853 7,298 42,110
Non-interest Expense
Salaries and employee benefits 15,310 15,424 14,795 47,838 45,024
Occupancy and equipment 2,502 2,654 2,576 7,652 7,298
Professional services 1,763 1,919 1,730 5,678 5,907
FDIC deposit insurance 499 503 536 1,328 2,380
Data processing 1,349 1,321 939 3,873 3,229
Depreciation and amortization 1,173 1,155 1,169 3,493 3,263
Other real estate owned/foreclosure (income) expense 121 (96) 273 376 831
Net loss (gain) from sales of real estate owned - - 829 (50) 1,726
Prepayment penalty on borrowings - - - - 2,082
Other operating expenses 3,249 3,185 3,430 11,407 11,488
Total non-interest expense 25,966 26,065 26,277 81,595 83,228
Income Before Income Taxes 15,470 19,500 17,289 52,484 83,617
Provision for Income Taxes
Federal 4,680 5,576 5,568 15,005 25,518
State and local 611 1,199 1,087 2,315 7,469
Total taxes 5,291 6,775 6,655 17,320 32,987
Net Income $10,179 $12,725 $10,634 $35,164 $50,630
Basic earnings per common share $0.35 $0.44 $0.37 $1.21 $1.75
Diluted earnings per common share $0.35 $0.44 $0.37 $1.21 $1.75
Dividends per common share $0.18 $0.18 $0.17 $0.54 $0.51


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
September 30, June 30, December 31,
2017 2017 2016
ASSETS
Cash and due from banks$60,161 $48,539 $35,857
Securities held-to-maturity:
Mortgage-backed securities 7,978 7,983 -
Other securities 22,952 24,451 37,735
Securities available for sale:
Mortgage-backed securities 519,861 520,012 516,476
Other securities 276,698 317,693 344,905
Loans held for sale - 30,565 -
Loans:
Multi-family residential 2,236,173 2,243,643 2,178,504
Commercial real estate 1,352,775 1,349,634 1,246,132
One-to-four family ― mixed-use property 556,723 556,906 558,502
One-to-four family ― residential 177,578 181,213 185,767
Co-operative apartments 7,035 7,069 7,418
Construction 15,811 16,842 11,495
Small Business Administration 14,485 10,591 15,198
Taxi medallion 18,165 18,303 18,996
Commercial business and other 674,706 644,262 597,122
Net unamortized premiums and unearned loan fees 16,925 17,217 16,559
Allowance for loan losses (25,269) (22,157) (22,229)
Net loans 5,045,107 5,023,523 4,813,464
Interest and dividends receivable 21,076 21,439 20,228
Bank premises and equipment, net 28,389 26,592 26,561
Federal Home Loan Bank of New York stock 55,228 66,630 59,173
Bank owned life insurance 131,047 130,631 132,508
Goodwill 16,127 16,127 16,127
Other assets 76,758 51,051 55,453
Total assets$6,261,382 $6,285,236 $6,058,487
LIABILITIES
Due to depositors:
Non-interest bearing$362,509 $349,302 $333,163
Interest-bearing:
Certificate of deposit accounts 1,404,555 1,332,377 1,372,115
Savings accounts 323,186 325,815 254,283
Money market accounts 991,706 837,565 843,370
NOW accounts 1,308,821 1,368,441 1,362,484
Total interest-bearing deposits 4,028,268 3,864,198 3,832,252
Mortgagors' escrow deposits 53,671 41,303 40,216
Borrowed funds 1,200,682 1,425,779 1,266,563
Other liabilities 76,643 70,563 72,440
Total liabilities 5,721,773 5,751,145 5,544,634
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, 2017, June 30, 2017 and December 31, 2016; 28,819,891
shares, 28,803,937 shares and 28,632,904 shares outstanding at September 30, 2017,
June 30, 2017 and December 31, 2016, respectively) 315 315 315
Additional paid-in capital 216,929 216,447 214,462
Treasury stock (2,710,704 shares, 2,726,658 shares and 2,897,691 shares at
September 30, 2017, June 30, 2017 and December 31, 2016, respectively) (51,287) (51,483) (53,754)
Retained earnings 380,316 375,388 361,192
Accumulated other comprehensive loss, net of taxes (6,664) (6,576) (8,362)
Total stockholders' equity 539,609 534,091 513,853
Total liabilities and stockholders' equity$6,261,382 $6,285,236 $6,058,487


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,
2017 2017 2016 2017 2016
Per Share Data
Basic earnings per share$0.35 $0.44 $0.37 $1.21 $1.75
Diluted earnings per share$0.35 $0.44 $0.37 $1.21 $1.75
Average number of shares outstanding for:
Basic earnings per common share computation 29,119,753 29,135,339 28,861,101 29,091,756 28,992,813
Diluted earnings per common share computation 29,120,356 29,135,945 28,874,979 29,093,723 29,006,423
Shares outstanding 28,819,891 28,803,937 28,632,796 28,819,891 28,632,796
Book value per common share (1)$18.72 $18.54 $17.90 $18.72 $17.90
Tangible book value per common share (2)$18.18 $18.00 $17.35 $18.18 $17.35
Stockholders' Equity
Stockholders' equity 539,609 534,091 512,621 539,609 512,621
Tangible stockholders' equity 523,873 518,355 496,901 523,873 496,901
Average Balances
Total loans, net$5,033,666 $4,962,734 $4,686,593 $4,955,423 $4,548,154
Total interest-earning assets 5,936,129 5,918,981 5,684,413 5,909,866 5,596,342
Total assets 6,239,321 6,218,072 5,976,725 6,209,005 5,883,453
Total due to depositors 3,972,663 4,065,810 3,673,731 4,041,744 3,732,869
Total interest-bearing liabilities 5,275,937 5,287,720 5,059,620 5,272,842 5,021,921
Stockholders' equity 536,468 529,451 508,974 527,975 491,617
Performance Ratios (3)
Return on average assets 0.65% 0.82% 0.71% 0.76% 1.15%
Return on average equity 7.59 9.61 8.36 8.88 13.73
Yield on average interest-earning assets 4.00 3.94 3.91 3.95 3.93
Cost of average interest-bearing liabilities 1.23 1.11 1.09 1.13 1.07
Cost of funds 1.15 1.05 1.02 1.07 1.01
Interest rate spread during period 2.77 2.83 2.82 2.82 2.86
Net interest margin 2.90 2.95 2.94 2.93 2.97
Non-interest expense to average assets 1.66 1.68 1.76 1.75 1.89
Efficiency ratio (4) 56.51 55.80 57.37 58.76 59.64
Average interest-earning assets to average
interest-bearing liabilities 1.13X 1.12X 1.12X 1.12X 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 nine At or for the year At or for the nine
months ended ended months ended
September 30, 2017 December 31, 2016 September 30, 2016
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital $565,265 $539,228 $523,428
Common equity Tier 1 capital 530,442 506,432 496,605
Total risk-based capital 665,534 636,457 545,223
Tier 1 leverage capital (well capitalized = 5%) 9.07% 9.00% 8.80%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 11.84 11.79 11.72
Tier 1 risk-based capital (well capitalized = 8.0%) 12.61 12.56 12.35
Total risk-based capital (well capitalized = 10.0%) 14.85 14.82 12.87
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital $629,748 $607,033 $528,168
Common equity Tier 1 capital 629,748 607,033 528,168
Total risk-based capital 655,017 629,262 549,963
Tier 1 leverage capital (well capitalized = 5%) 10.10% 10.12% 8.88%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 14.04 14.12 12.44
Tier 1 risk-based capital (well capitalized = 8.0%) 14.04 14.12 12.44
Total risk-based capital (well capitalized = 10.0%) 14.60 14.64 12.96
Capital ratios:
Average equity to average assets 8.50% 8.40% 8.36%
Equity to total assets 8.62 8.48 8.54
Tangible common equity to tangible assets (1) 8.39 8.24 8.30
Asset quality:
Non-accrual loans (2) $12,161 $21,030 $21,882
Non-performing loans 13,890 21,416 23,535
Non-performing assets 13,890 21,949 26,374
Net charge-offs/ (recoveries) 226 (694) (260)
Asset quality ratios:
Non-performing loans to gross loans 0.27% 0.44% 0.50%
Non-performing assets to total assets 0.22 0.36 0.44
Allowance for loan losses to gross loans 0.50 0.46 0.46
Allowance for loan losses to non-performing assets 181.92 101.28 82.64
Allowance for loan losses to non-performing loans 181.92 103.80 92.61
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, 2017 June 30, 2017 September 30, 2016
Average Yield/ Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net$4,350,338$46,1214.24%$4,297,697$44,8794.18%$4,093,240$43,7774.28%
Other loans, net 683,328 7,1974.21 665,037 6,7524.06 593,353 5,4043.64
Total loans, net (1) 5,033,666 53,3184.24 4,962,734 51,6314.16 4,686,593 49,1814.20
Taxable securities:
Mortgage-backed
securities 520,889 3,3352.56 532,938 3,4202.57 554,515 3,3502.42
Other securities 189,957 1,7873.76 217,599 2,3614.34 245,477 2,1603.52
Total taxable securities 710,846 5,1222.88 750,537 5,7813.08 799,992 5,5102.76
Tax-exempt securities: (2)
Other securities 142,899 7582.12 145,812 7742.12 148,004 7842.12
Total tax-exempt securities 142,899 7582.12 145,812 7742.12 148,004 7842.12
Interest-earning deposits
and federal funds sold 48,718 1210.99 59,898 1290.86 49,824 490.39
Total interest-earning
assets 5,936,129 59,3194.00 5,918,981 58,3153.94 5,684,413 55,5243.91
Other assets 303,192 299,091 292,312
Total assets$6,239,321 $6,218,072 $5,976,725
Interest-bearing Liabilities:
Deposits:
Savings accounts$330,316 5830.71 $279,723$3990.57 $258,884 3060.47
NOW accounts 1,340,228 2,4680.74 1,517,726 2,3310.61 1,384,368 1,9790.57
Money market accounts 927,067 2,3371.01 858,066 1,6510.77 601,709 9900.66
Certificate of deposit
accounts 1,375,052 5,2181.52 1,410,295 5,0991.45 1,428,770 5,2131.46
Total due to depositors 3,972,663 10,6061.07 4,065,810 9,4800.93 3,673,731 8,4880.92
Mortgagors' escrow
accounts 54,236 490.36 73,838 300.16 48,840 320.26
Total interest-bearing
deposits 4,026,899 10,6551.06 4,139,648 9,5100.92 3,722,571 8,5200.92
Borrowings 1,249,038 5,6231.80 1,148,072 5,1881.81 1,337,049 5,2911.58
Total interest-bearing
liabilities 5,275,937 16,2781.23 5,287,720 14,6981.11 5,059,620 13,8111.09
Non interest-bearing
demand deposits 354,149 336,036 318,188
Other liabilities 72,767 64,865 89,943
Total liabilities 5,702,853 5,688,621 5,467,751
Equity 536,468 529,451 508,974
Total liabilities and
equity$6,239,321 $6,218,072 $5,976,725
Net interest income /
net interest rate spread $43,0412.77% $43,6172.83% $41,7132.82%
Net interest-earning assets /
net interest margin$660,192 2.90%$631,261 2.95%$624,793 2.94%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.13X 1.12X 1.12X

(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, $0.3 million and $0.9 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 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
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
For the nine months ended
September 30, 2017 September 30, 2016
Average Yield/ Average Yield/
BalanceInterestCost BalanceInterestCost
Interest-earning Assets:
Mortgage loans, net$4,287,674$135,4294.21% $3,972,502$129,2004.34%
Other loans, net 667,749 20,4054.07 575,652 15,9523.69
Total loans, net (1) 4,955,423 155,8344.19 4,548,154 145,1524.26
Taxable securities:
Mortgage-backed
securities 527,890 10,1222.56 603,994 11,2312.48
Other securities 215,453 6,2203.85 241,821 6,0383.33
Total taxable securities 743,343 16,3422.93 845,815 17,2692.72
Tax-exempt securities: (2)
Other securities 145,058 2,3092.12 140,889 2,3662.24
Total tax-exempt securities 145,058 2,3092.12 140,889 2,3662.24
Interest-earning deposits
and federal funds sold 66,042 4030.81 61,484 1910.41
Total interest-earning
assets 5,909,866 174,8883.95 5,596,342 164,9783.93
Other assets 299,139 287,111
Total assets$6,209,005 $5,883,453
Interest-bearing Liabilities:
Deposits:
Savings accounts$288,376 1,2890.60 $262,382 9100.46
NOW accounts 1,474,572 7,0060.63 1,539,050 5,8630.51
Money market accounts 882,213 5,4870.83 514,626 2,2770.59
Certificate of deposit
accounts 1,396,583 15,2571.46 1,416,811 15,4551.45
Total due to depositors 4,041,744 29,0390.96 3,732,869 24,5050.88
Mortgagors' escrow
accounts 60,895 1060.23 55,481 850.20
Total interest-bearing
deposits 4,102,639 29,1450.95 3,788,350 24,5900.87
Borrowings 1,170,203 15,6961.79 1,233,571 15,6531.69
Total interest-bearing
liabilities 5,272,842 44,8411.13 5,021,921 40,2431.07
Non interest-bearing
demand deposits 340,221 296,321
Other liabilities 67,967 73,594
Total liabilities 5,681,030 5,391,836
Equity 527,975 491,617
Total liabilities and
equity$6,209,005 $5,883,453
Net interest income /
net interest rate spread $130,0472.82% $124,7352.86%
Net interest-earning assets /
net interest margin$637,024 2.93% $574,421 2.97%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.12X 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 $1.9 million and $3.4 million for the nine months ended September 30, 2017 and 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
(Unaudited)
September 2017 vs. September 2017 vs.
September 30,June 30, March 31, December 31, December 2016 September 30, September 2016,
(Dollars in thousands) 2017 2017 2017 2016 % Change 2016 % Change
Deposits
Non-interest bearing$362,509$349,302 $344,028 $333,163 8.8% $320,060 13.3%
Interest bearing:
Certificate of deposit
accounts 1,404,555 1,332,377 1,411,819 1,372,115 2.4% 1,384,551 1.4%
Savings accounts 323,186 325,815 254,822 254,283 27.1% 258,058 25.2%
Money market accounts 991,706 837,565 851,129 843,370 17.6% 733,361 35.2%
NOW accounts 1,308,821 1,368,441 1,487,120 1,362,484 -3.9% 1,296,475 1.0%
Total interest-bearing
deposits 4,028,268 3,864,198 4,004,890 3,832,252 5.1% 3,672,445 9.7%
Total deposits$4,390,777$4,213,500 $4,348,918 $4,165,415 5.4% $3,992,505 10.0%


FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Originations and Purchases
For the three months For the nine months ended
September 30, June 30, September 30, September 30,
(In thousands) 2017 2017 2016 2017 2016
Multi-family residential $64,551 $63,469 $61,378 $254,728 $293,385
Commercial real estate 25,385 123,559 68,970 184,676 245,114
One-to-four family – mixed-use property 13,136 13,656 12,618 45,334 42,493
One-to-four family – residential 5,843 4,860 3,362 16,623 17,050
Co-operative apartments 232 - - 232 470
Construction 148 4,429 1,920 7,121 6,034
Small Business Administration 4,276 1,870 470 6,787 6,785
Taxi medallion - - - - -
Commercial business and other 69,354 49,312 84,525 195,150 239,015
Total $182,925 $261,155 $233,243 $710,651 $850,346


Loan Composition
September 2017 vs. September 2017 vs.
September 30, June 30, March 31, December 31,December 2016 September 30, September 2016
(Dollars in thousands) 2017 2017 2017 2016 % Change 2016 % Change
Loans held for investment:
Multi-family residential$2,236,173 $2,243,643 $2,261,946 $2,178,504 2.6% $2,171,289 3.0%
Commercial real estate 1,352,775 1,349,634 1,268,770 1,246,132 8.6% 1,195,266 13.2%
One-to-four family ―
mixed-use property 556,723 556,906 561,355 558,502 -0.3% 555,691 0.2%
One-to-four family ― residential 177,578 181,213 184,201 185,767 -4.4% 183,993 -3.5%
Co-operative apartments 7,035 7,069 7,216 7,418 -5.2% 7,494 -6.1%
Construction 15,811 16,842 12,413 11,495 37.5% 11,250 40.5%
Small Business Administration 14,485 10,591 10,519 15,198 -4.7% 14,339 1.0%
Taxi medallion 18,165 18,303 18,832 18,996 -4.4% 20,536 -11.5%
Commercial business and other 674,706 644,262 632,503 597,122 13.0% 564,972 19.4%
Net unamortized premiums
and unearned loan fees 16,925 17,217 16,836 16,559 2.2% 16,447 2.9%
Allowance for loan losses (25,269) (22,157) (22,211) (22,229)13.7% (21,795) 15.9%
Net loans$5,045,107 $5,023,523 $4,952,380 $4,813,464 4.8% $4,719,482 6.9%


Loans Held for Investment Activity
Three Months Ended
September, 30 June 30, March 31, December 31, September 30,
(In thousands) 2017 2017 2017 2016 2016
Loans originated and purchased$182,925 $261,155 $266,571 $282,592 $233,243
Principal reductions (155,007) (143,195) (122,897) (187,780) (183,583)
Loans transferred to held-for-sale - (30,565) - - -
Loans sold (2,606) (16,337) (4,874) - (3,693)
Loan charged-offs (324) (350) (179) (370) (541)
Foreclosures - - - (138) -
Net change in deferred (fees) and costs (292) 381 277 112 (428)
Net change in the allowance for loan losses (3,112) 54 18 (434) 403
Total loan activity$21,584 $71,143 $138,916 $93,982 $45,401


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) 2017 2017 2017 2016 2016
Loans 90 Days Or More Past Due
and Still Accruing:
Multi-family residential $415 $- $- $- $-
Commercial real estate 38 - 75 - 1,183
One-to-four family - mixed-use property 129 - - 386 470
Construction - 602 602 - -
Taxi medallion 1,147 727 - - -
Total 1,729 1,329 677 386 1,653
Non-accrual Loans:
Multi-family residential 1,309 1,537 1,354 1,837 1,649
Commercial real estate 1,147 1,948 1,462 1,148 1,157
One-to-four family - mixed-use property 2,217 2,971 3,328 4,025 4,534
One-to-four family - residential 7,434 7,616 7,847 8,241 8,340
Small Business Administration 50 53 58 1,886 2,132
Taxi medallion - - 3,771 3,825 3,971
Commercial business and other 4 5 38 68 99
Total 12,161 14,130 17,858 21,030 21,882
Total Non-performing Loans 13,890 15,459 18,535 21,416 23,535
Other Non-performing Assets:
Real estate acquired through foreclosure - - - 533 2,839
Total - - - 533 2,839
Total Non-performing Assets $13,890 $15,459 $18,535 $21,949 $26,374
Non-performing Assets to Total Assets 0.22% 0.25% 0.30% 0.36% 0.44%
Allowance For Loan Losses to Non-performing Loans 181.9% 143.3% 119.8% 103.8% 92.6%


Net Charge-Offs (Recoveries)
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2017 2017 2017 2016 2016
Multi-family residential $224 $(53) $(16) $(103) $79
Commercial real estate (25) 4 (68) - (11)
One-to-four family – mixed-use property 1 (67) 34 (520) 24
One-to-four family – residential (58) 170 - 40 -
Small Business Administration (17) 14 26 186 317
Taxi medallion - - 54 142 -
Commercial business and other 29 (14) (12) (179) (6)
Total net loan charge-offs (recoveries) $154 $54 $18 $(434) $403

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 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,
2017 2017 2016 2017 2016
GAAP income before income taxes$15,470 $19,500 $17,289 $52,484 $83,617
Net loss from fair value adjustments 1,297 1,159 823 2,834 2,925
Net loss (gain) on sale of securities 186 - - 186 (2,363)
Gain from life insurance proceeds (238) (6) (47) (1,405) (458)
Net gain on sale of buildings - - - - (33,814)
Prepayment penalty on borrowings - - - - 2,082
Core income before taxes 16,715 20,653 18,065 54,099 51,989
Provision for income taxes for core income 5,812 7,129 6,736 17,961 19,628
Core net income$10,903 $13,524 $11,329 $36,138 $32,361
GAAP diluted earnings per common share$0.35 $0.44 $0.37 $1.21 $1.75
Net loss from fair value adjustments, net of tax 0.03 0.02 0.03 0.07 0.06
Net loss (gain) on sale of securities, net of tax - - - - (0.05)
Gain from life insurance proceeds (0.01) - - (0.05) (0.02)
Net gain on sale of buildings, net of tax - - - - (0.67)
Prepayment penalty on borrowings - - - - 0.04
Core diluted earnings per common share*$0.37 $0.46 $0.39 $1.24 $1.12
Core net income, as calculated above$10,903 $13,524 $11,329 $36,138 $32,361
Average assets 6,239,321 6,218,072 5,976,725 6,209,005 5,883,453
Average equity 536,468 529,451 508,974 527,975 491,617
Core return on average assets** 0.70% 0.87% 0.76% 0.78% 0.73%
Core return on average equity** 8.13% 10.22% 8.90% 9.13% 8.78%
*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,September 30,
(Dollars in thousands) 2017 2016 2016
Total Equity $539,609 $513,853 $512,621
Less:
Goodwill (16,127) (16,127) (16,127)
Intangible deferred tax liabilities 391 389 407
Tangible Stockholders' Common Equity $523,873 $498,115 $496,901
Total Assets $6,261,382 $6,058,487 $5,999,255
Less:
Goodwill (16,127) (16,127) (16,127)
Intangible deferred tax liabilities 391 389 407
Tangible Assets $6,245,646 $6,042,749 $5,983,535
Tangible Stockholders' Common Equity to Tangible Assets 8.39% 8.24% 8.30%

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

Source:Flushing Financial Corporation