THIRD QUARTER 2020 HIGHLIGHTS1
- GAAP diluted EPS of $0.50, compared to $0.63 in 2Q20 and $0.37 in 3Q19
- Record Core diluted EPS of $0.56 compared to $0.36 in 2Q20 and $0.48 in 3Q19
- Net interest margin of 3.00%, up 13bps QoQ and 63bps YoY
- Core net interest margin of 2.89%, up 4bps QoQ and 56bps YoY
- Record GAAP net interest income of $49.9 million, up 2.5% QoQ and 28.2% YoY
- Record Core net interest income of $49.7 million, up 1.2% QoQ and 23.6% YoY
- GAAP and core ROAE were 9.9% and 11.2%, respectively, compared with 13.1% and 7.4%, respectively in 2Q20
- GAAP and core ROAA were 0.8% and 0.9%, respectively, compared with 1.0% and 0.6%, respectively in 2Q20
- Loan pipeline remains strong at $394.1 million
- Provision for credit losses of $2.5 million, $0.07 after-tax per diluted common share, compared to $9.6 million in 2Q20 and $0.7 million in 3Q19
- Net charge-offs were $0.8 million, compared to $1.0 million in 2Q20
UNIONDALE, N.Y., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (NASDAQ-GS: FFIC) the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the third quarter ended September 30, 2020.
John R. Buran, President and Chief Executive Officer stated, “I want to thank our employees for their tireless work in assisting our customers and communities as we continue to navigate these unprecedented times due to the COVID-19 pandemic.”
Mr. Buran continued, “We are pleased to announce our third quarter earnings totaled $14.3 million, or $0.50 per diluted common share, driven by strong execution of our strategic objectives. We continued to proactively manage credit risk and made good progress improving our funding mix with an emphasis on non-interest bearing demand accounts, which increased 4% (not annualized), during the quarter. For the second consecutive quarter we achieved record net interest income, as the Company capitalized on the low interest rate environment. The cost of funds decreased 10 basis points while the yield on interest earning assets increased three basis points. The net interest margin expanded 13 basis points from the linked quarter. Given the current rate environment, we expect to sustain a strong margin and anticipate that our cost of funds will further decline during the fourth quarter as $315 million of retail certificates of deposits are scheduled to mature at an average rate of 1.10% compared to a current one year CD rate of 0.60%.”
“The principal balance of loans granted forbearance has decreased from a peak of $1.5 billion to $846 million with approximately 80% of loans scheduled to return to full payment have already done so. We generally granted additional forbearances at new terms more advantageous to the Company for the majority of customers that have not yet returned to full payment status. We expect further reduction in active forbearances during the fourth quarter as most will reach their expiration prior to year-end. Our loan portfolio is primarily real estate based with 88% collateralized by real estate with an average loan to value of less than 40%. Our forbearances share similar credit quality characteristics with the overall loan portfolio. We have a conservative, resilient seasoned loan portfolio built upon our long history and foundation of disciplined underwriting and excellent credit quality.”
“Our enhanced technology platform, which went live in March 2020 offering mobile banking capabilities, has effectively extended our branch footprint. Importantly, 23% of all account openings in the third quarter were completed using our technology platform as customers continue to shift to digital banking. Additionally, our online banking enrollment has increased 4% quarter over quarter.”
“Finally, we are excited to report that earlier today Empire Bancorp, Inc. (“Empire”) shareholders approved the merger, which is scheduled to close on or about October 31, 2020. The credit quality of Empire remains strong with no loans greater than 90 days past due and less than $1.0 million in loans greater than 30 days past due. As of September 30, 2020, Empire has $120 million in active forbearance agreements outstanding.”
Mr. Buran concluded, “We are pleased with the execution against our strategic objectives resulting in record net interest income of $49.9 million and record core earnings for the quarter which totaled $16.2 million, or $0.56 per diluted common share. Credit continued to be strong as non-performing assets at the end of the quarter totaled only 35 basis points. In addtition, loan forbearances declined consistent with our expectations. We look forward to welcoming Empire employees to the Flushing Bank family to together build upon their success and provide continued exceptional service as a leading banking franchise on Long Island.”
Summary of Strategic Objectives
- Manage cost of funds and continue to improve funding mix
- Increase interest income by leveraging loan pricing opportunities and portfolio mix
- Enhance core earnings power by improving scalability and efficiency
- Manage credit risk
- Remain well capitalized under all stress test scenarios
Earnings Summary:
Net Interest Income
Net interest income for 3Q20 was $49.9 million, an increase of $11.0 million, or 28.2% YoY and $1.2 million, or 2.5% QoQ.
- Net interest margin of 3.00%, increased 63bps YoY and 13bps QoQ
- Net interest spread of 2.86%, increased 71bps YoY and 14bps QoQ
- Yield on average interest-earning assets of 3.84%, decreased 38bps YoY, but increased 3bps QoQ
- Cost of average interest-bearing liabilities of 0.98%, decreased 109bps YoY and 11bps QoQ
- Cost of funds of 0.89%, decreased 105bps YoY and 10bps QoQ
- Average balance of total interest-earning assets of $6,675.9 million, increased $86.4 million, or 1.3%, YoY, but decreased $133.9 million, or 2.0%, QoQ
- Net interest income includes prepayment penalty income from loans and securities totaling $1.4 million in 3Q20, $0.7 million in 2Q20 and $1.7 million in 3Q19; recovered interest from delinquent loans of $0.1 million in 3Q20 and 2Q20, and $0.3 million in 3Q19; net gains (losses) from fair value adjustments on qualifying hedges totaling $0.2 million in 3Q20, ($0.4) million in 2Q20, and ($1.3) million in 3Q19
- Absent all above items noted in the preceding bullet, the net interest margin was 2.89% in 3Q20, an increase of 56bps YoY and 4bps QoQ
Provision for Credit Losses
The Company recorded a provision for credit losses of $2.5 million in 3Q20, a decrease of $7.1 million or 74.3% QoQ, but an increase of $1.8 million YoY.
- 3Q20 and 2Q20 provision for credit losses were primarily driven by the negative economic forecast; the reduction in provision for credit losses from 2Q20 was due to the consistency in the qualitative factors used in the calculation QoQ
- Net charge-offs of $0.8 million in 3Q20, $1.0 million in 2Q20 and $0.2 million in 3Q19
Non-interest Income
Non-interest income for 3Q20 was $1.4 million, an increase of $0.3 million or 30.0% YoY, but a decrease of $12.4 million or 90.2% QoQ.
- Non-interest income included net losses from fair value adjustments of $2.2 million and $2.1 million in 3Q20 and 3Q19, respectively; net gains from fair value adjustments of $10.2 million in 2Q20
- Additionally, non-interest income included life insurance proceeds totaling $0.7 million in 2Q20
- Absent all above items, non-interest income was $3.6 million in 3Q20, an increase of $0.4 million, or 13.1% YoY, and $0.7 million, or 24.5% QoQ
Non-interest Expense
Non-interest expense for 3Q20 was $30.0 million, an increase of $3.9 million or 15.1% YoY, and $1.2 million, or 4.3 % QoQ.
- Non-interest expense increased QoQ primarily due to 2Q20 including $1.4 million of benefit for deferred compensation costs from originations of PPP loans compared to $0.2 million in 3Q20, and increased YoY primarily due to Company growth
- 3Q19 Non-interest expense included FDIC assessment credit
- Non-interest expense included merger expenses totaling $0.4 million in 3Q20, $0.2 million in 2Q20 and $0.5 million in 3Q19
- The ratio of non-interest expense to average assets was 1.69% in 3Q20 compared to 1.60% in 2Q20 and 1.49% in 3Q19
- The efficiency ratio was 55.4% in 3Q20 compared to 54.9% in 2Q20 and 58.9% in 3Q19
Provision for Income Taxes
The provision for income taxes in 3Q20 was $4.5 million, an increase of $2.0 million, or 77.0% YoY, but a decrease of $1.3 million, or 22.7 % QoQ.
- Pre-tax income increased by $5.6 million YoY, but decreased by $5.3 million QoQ
- The effective tax rates were 23.9% in 3Q20, 24.1% in 2Q20 and 19.1% in 3Q19
Financial Condition Summary:
Loans:
- Net loans held for investment were $5,903.1 million reflecting an increase of 2.7% from December 31, 2019, as we continue to focus on the origination of full banking relationship loans through C&I loans, multi-family loans and commercial real estate
- SBA Paycheck Protection Program (“PPP”) closings totaled $18.4 million in 3Q20, which ended in August 2020
- Loan closings of commercial business loans, multi-family loans and commercial real estate totaled $126.9 million for 3Q20, or 91.5% of loan production, excluding PPP closings
- Loan pipeline was $394.1 million at September 30, 2020, compared to $324.5 million at December 31, 2019
The following table shows the weighted average rate received from loan closings for the periods indicated:
| For the three months ended | |||||||
| September 30, | June 30, | September 30, | |||||
| Loan type | 2020 | 2020 | 2019 | ||||
| Mortgage loans | 3.56 | % | 3.79 | % | 4.40 | % | |
| Non-mortgage loans | 2.81 | % | 1.99 | % | 4.38 | % | |
| Total loans | 3.16 | % | 2.62 | % | 4.39 | % | |
| Excluding PPP loans | 3.45 | % | 3.71 | % | 4.39 | % | |
Credit Quality:
- Non-performing loans totaled $24.8 million, an increase of $11.5 million, or 87.0%, from $13.3 million at December 31, 2019
- Non-performing assets totaled $24.8 million, an increase of $11.3 million, or 83.5%, from $13.5 million at December 31, 2019
- Classified assets totaled $30.4 million, an increase of $5.9 million, or 23.8%, from $24.6 million at December 31, 2019
- Loans classified as troubled debt restructured (TDR) totaled $5.1 million, a decrease of $1.4 million, or 20.9%, from $6.5 million at December 31, 2019
- Active COVID-19 forbearances at September 30th totaled 509 loans with a principal balance of $846.2 million at the time of modification decreased from a peak of $1.5 billion; total deferment of $28.4 million in principal, interest and escrow
- Over 88% of gross loans are collateralized by real estate
- The loan-to-value ratio on portfolio of real estate dependent loans as of September 30, 2020 totaled 37.8%
- Net charge-offs totaled $3.0 million for the nine months ended September 30, 2020.
Capital Management:
- The Company and Bank, at September 30, 2020, were both well capitalized under all applicable regulatory requirements
- Through 3Q20, stockholders’ equity increased $6.7 million, or 1.2%, from December 31, 2019, to $586.4 million primarily due to net income of $31.2 million, partially offset by payment of dividends on the Company’s common stock and unrealized losses in the fair value of interest rate swaps.
- During 3Q20, the Company did not repurchase any shares; as of September 30, 2020, up to 284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
- Book value per common share was $20.78 at September 30, 2020, compared to $20.59 at December 31, 2019
- Tangible book value per common share, a non-GAAP measure, was $20.22 at September 30, 2020, compared to $20.02 at December 31, 2019
Conference Call Information:
- John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call on Wednesday, October 28, 2020 at 9:30 AM (ET) to discuss the Company’s strategy and results for the third quarter
- Dial-in for Live Call: 1-877-509-5836
- Webcast: https://services.choruscall.com/links/ffic201021.html
- Dial-in for Replay: 1-877-344-7529
- Replay Access Code: 10138502
- The conference call will be simultaneously webcast and archived through October 28, 2021
About Flushing Financial Corporation
Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the 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. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, an eco-friendly, healthier lifestyle community brand.
Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the 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, 2019 and in other documents filed by the Company with the Securities and Exchange Commission from time to time, as well as the possibility that the expected benefits of the proposed Empire merger may not materialize in the timeframe expected or at all, or may be more costly to achieve; that the proposed transaction may not be timely completed, if at all; that prior to the completion of the proposed merger or thereafter, Flushing’s and Empire’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors; that the parties are unable to successfully implement integration strategies related to the proposed transaction; that customary closing conditions are not satisfied in a timely manner or at all; reputational risks and the reaction of the companies’ shareholders, customers, employees and other constituents to the proposed transaction; and diversion of management time on merger-related matters. These risks, as well as other risks associated with the proposed transaction, are more fully discussed in the proxy statement/prospectus that is included in the registration statement on Form S-4 filed with the SEC in connection with the proposed transaction, as amended and supplemented from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.
- Statistical Tables Follow -
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Interest and Dividend Income | ||||||||||||||||||||
| Interest and fees on loans | $ | 60,367 | $ | 60,557 | $ | 62,825 | $ | 182,033 | $ | 187,428 | ||||||||||
| Interest and dividends on securities: | ||||||||||||||||||||
| Interest | 3,525 | 4,182 | 6,287 | 12,963 | 20,007 | |||||||||||||||
| Dividends | 9 | 11 | 18 | 35 | 56 | |||||||||||||||
| Other interest income | 13 | 22 | 259 | 325 | 1,286 | |||||||||||||||
| Total interest and dividend income | 63,914 | 64,772 | 69,389 | 195,356 | 208,777 | |||||||||||||||
| Interest Expense | ||||||||||||||||||||
| Deposits | 7,093 | 9,971 | 22,244 | 35,842 | 66,540 | |||||||||||||||
| Other interest expense | 6,897 | 6,084 | 8,196 | 20,047 | 21,476 | |||||||||||||||
| Total interest expense | 13,990 | 16,055 | 30,440 | 55,889 | 88,016 | |||||||||||||||
| Net Interest Income | 49,924 | 48,717 | 38,949 | 139,467 | 120,761 | |||||||||||||||
| Provision for credit losses | 2,470 | 9,619 | 683 | 19,267 | 3,129 | |||||||||||||||
| Net Interest Income After Provision for Credit Losses | 47,454 | 39,098 | 38,266 | 120,200 | 117,632 | |||||||||||||||
| Non-interest Income | ||||||||||||||||||||
| Banking services fee income | 1,316 | 944 | 847 | 3,058 | 2,879 | |||||||||||||||
| Net loss on sale of securities | — | (54 | ) | — | (91 | ) | (15 | ) | ||||||||||||
| Net gain on sale of loans | — | — | 204 | 42 | 381 | |||||||||||||||
| Net gain on sale of assets | — | — | — | — | 770 | |||||||||||||||
| Net gain (loss) from fair value adjustments | (2,225 | ) | 10,205 | (2,124 | ) | 1,987 | (6,160 | ) | ||||||||||||
| Federal Home Loan Bank of New York stock dividends | 874 | 881 | 834 | 2,719 | 2,563 | |||||||||||||||
| Life insurance proceeds | — | 659 | — | 659 | 43 | |||||||||||||||
| Bank owned life insurance | 923 | 932 | 1,000 | 2,798 | 2,550 | |||||||||||||||
| Other income | 463 | 170 | 278 | 1,052 | 1,422 | |||||||||||||||
| Total non-interest income | 1,351 | 13,737 | 1,039 | 12,224 | 4,433 | |||||||||||||||
| Non-interest Expense | ||||||||||||||||||||
| Salaries and employee benefits | 17,335 | 16,184 | 15,461 | 52,139 | 50,295 | |||||||||||||||
| Occupancy and equipment | 3,021 | 2,827 | 2,847 | 8,688 | 8,378 | |||||||||||||||
| Professional services | 2,064 | 1,985 | 2,167 | 6,911 | 6,238 | |||||||||||||||
| FDIC deposit insurance | 727 | 737 | (589 | ) | 2,114 | 563 | ||||||||||||||
| Data processing | 1,668 | 1,813 | 1,490 | 5,175 | 4,402 | |||||||||||||||
| Depreciation and amortization | 1,542 | 1,555 | 1,439 | 4,633 | 4,454 | |||||||||||||||
| Other real estate owned/foreclosure expense | 240 | 45 | 48 | 121 | 145 | |||||||||||||||
| Net loss from sales of real estate owned | 5 | — | — | 36 | — | |||||||||||||||
| Other operating expenses | 3,383 | 3,609 | 3,182 | 11,303 | 11,147 | |||||||||||||||
| Total non-interest expense | 29,985 | 28,755 | 26,045 | 91,120 | 85,622 | |||||||||||||||
| Income Before Income Taxes | 18,820 | 24,080 | 13,260 | 41,304 | 36,443 | |||||||||||||||
| Provision for Income Taxes | ||||||||||||||||||||
| Federal | 3,359 | 4,307 | 2,457 | 8,655 | 7,381 | |||||||||||||||
| State and local | 1,130 | 1,501 | 79 | 1,436 | 714 | |||||||||||||||
| Total taxes | 4,489 | 5,808 | 2,536 | 10,091 | 8,095 | |||||||||||||||
| Net Income | $ | 14,331 | $ | 18,272 | $ | 10,724 | $ | 31,213 | $ | 28,348 | ||||||||||
| Basic earnings per common share | $ | 0.50 | $ | 0.63 | $ | 0.37 | $ | 1.08 | $ | 0.99 | ||||||||||
| Diluted earnings per common share | $ | 0.50 | $ | 0.63 | $ | 0.37 | $ | 1.08 | $ | 0.99 | ||||||||||
| Dividends per common share | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.63 | $ | 0.63 | ||||||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
| September 30, | June 30, | December 31, | ||||||||||
| 2020 | 2020 | 2019 | ||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 75,560 | $ | 84,754 | $ | 49,787 | ||||||
| Securities held-to-maturity: | ||||||||||||
| Mortgage-backed securities | 7,919 | 7,924 | 7,934 | |||||||||
| Other securities | 50,252 | 50,078 | 50,954 | |||||||||
| Securities available for sale: | ||||||||||||
| Mortgage-backed securities | 386,235 | 442,507 | 523,849 | |||||||||
| Other securities | 234,721 | 232,803 | 248,651 | |||||||||
| Loans: | ||||||||||||
| Multi-family residential | 2,252,757 | 2,285,555 | 2,238,591 | |||||||||
| Commercial real estate | 1,636,659 | 1,646,085 | 1,582,008 | |||||||||
| One-to-four family ― mixed-use property | 585,159 | 591,347 | 592,471 | |||||||||
| One-to-four family ― residential | 191,011 | 184,741 | 188,216 | |||||||||
| Co-operative apartments | 8,132 | 8,423 | 8,663 | |||||||||
| Construction | 63,567 | 69,433 | 67,754 | |||||||||
| Small Business Administration | 124,649 | 106,813 | 14,445 | |||||||||
| Taxi medallion | 2,317 | 3,269 | 3,309 | |||||||||
| Commercial business and other | 1,063,429 | 1,073,623 | 1,061,478 | |||||||||
| Net unamortized premiums and unearned loan fees | 13,718 | 13,986 | 15,271 | |||||||||
| Allowance for loan losses | (38,343 | ) | (36,710 | ) | (21,751 | ) | ||||||
| Net loans | 5,903,055 | 5,946,565 | 5,750,455 | |||||||||
| Interest and dividends receivable | 36,068 | 30,219 | 25,722 | |||||||||
| Bank premises and equipment, net | 25,766 | 27,018 | 28,676 | |||||||||
| Federal Home Loan Bank of New York stock | 57,119 | 56,400 | 56,921 | |||||||||
| Bank owned life insurance | 158,701 | 157,779 | 157,713 | |||||||||
| Goodwill | 16,127 | 16,127 | 16,127 | |||||||||
| Other real estate owned, net | — | 208 | 239 | |||||||||
| Right of use asset | 42,326 | 38,303 | 41,254 | |||||||||
| Other assets | 69,207 | 71,974 | 59,494 | |||||||||
| Total assets | $ | 7,063,056 | $ | 7,162,659 | $ | 7,017,776 | ||||||
| LIABILITIES | ||||||||||||
| Due to depositors: | ||||||||||||
| Non-interest bearing | $ | 607,954 | $ | 581,881 | $ | 435,072 | ||||||
| Certificate of deposit accounts | 1,051,644 | 1,135,977 | 1,437,890 | |||||||||
| Savings accounts | 160,294 | 184,895 | 191,485 | |||||||||
| Money market accounts | 1,381,552 | 1,474,880 | 1,592,011 | |||||||||
| NOW accounts | 1,704,915 | 1,672,241 | 1,365,591 | |||||||||
| Total deposits | 4,906,359 | 5,049,874 | 5,022,049 | |||||||||
| Mortgagors' escrow deposits | 57,136 | 48,525 | 44,375 | |||||||||
| Borrowed funds | 1,323,975 | 1,305,187 | 1,237,231 | |||||||||
| Operating lease liability | 49,737 | 45,897 | 49,367 | |||||||||
| Other liabilities | 139,443 | 141,255 | 85,082 | |||||||||
| Total liabilities | 6,476,650 | 6,590,738 | 6,438,104 | |||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Preferred stock (5,000,000 shares authorized; none issued) | — | — | — | |||||||||
| Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares issued at September 30, 2020, June 30, 2020 and December 31, 2019; 28,218,427 shares, 28,217,434 shares and 28,157,206 shares outstanding at September 30, 2020, June 30, 2020 and December 31, 2019, respectively) | 315 | 315 | 315 | |||||||||
| Additional paid-in capital | 227,877 | 226,901 | 226,691 | |||||||||
| Treasury stock (3,312,168 shares, 3,313,161 shares and 3,373,389 shares at September 30, 2020, June 30, 2020 and December 31, 2019, respectively) | (69,409 | ) | (69,436 | ) | (71,487 | ) | ||||||
| Retained earnings | 445,931 | 437,663 | 433,960 | |||||||||
| Accumulated other comprehensive loss, net of taxes | (18,308 | ) | (23,522 | ) | (9,807 | ) | ||||||
| Total stockholders' equity | 586,406 | 571,921 | 579,672 | |||||||||
| Total liabilities and stockholders' equity | $ | 7,063,056 | $ | 7,162,659 | $ | 7,017,776 | ||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
| At or for the three months ended | At or for the nine months ended | |||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Per Share Data | ||||||||||||||||
| Basic earnings per share | $ | 0.50 | $ | 0.63 | $ | 0.37 | $ | 1.08 | $ | 0.99 | ||||||
| Diluted earnings per share | $ | 0.50 | $ | 0.63 | $ | 0.37 | $ | 1.08 | $ | 0.99 | ||||||
| Average number of shares outstanding for: | ||||||||||||||||
| Basic earnings per common share computation | 28,873,606 | 28,866,984 | 28,730,161 | 28,864,503 | 28,704,398 | |||||||||||
| Diluted earnings per common share computation | 28,873,606 | 28,866,984 | 28,730,161 | 28,864,503 | 28,704,402 | |||||||||||
| Shares outstanding | 28,218,427 | 28,217,434 | 28,157,206 | 28,218,427 | 28,157,206 | |||||||||||
| Book value per common share (1) | $ | 20.78 | $ | 20.27 | $ | 20.19 | $ | 20.78 | $ | 20.19 | ||||||
| Tangible book value per common share (2) | $ | 20.22 | $ | 19.71 | $ | 19.62 | $ | 20.22 | $ | 19.62 | ||||||
| Stockholders' Equity | ||||||||||||||||
| Stockholders' equity | $ | 586,406 | $ | 571,921 | $ | 568,392 | $ | 586,406 | $ | 568,392 | ||||||
| Tangible stockholders' equity | 570,571 | 556,086 | 552,551 | 570,571 | 552,551 | |||||||||||
| Average Balances | ||||||||||||||||
| Total loans, net | $ | 5,904,051 | $ | 5,946,412 | $ | 5,645,503 | $ | 5,881,858 | $ | 5,585,445 | ||||||
| Total interest-earning assets | 6,675,896 | 6,809,835 | 6,589,498 | 6,734,979 | 6,550,509 | |||||||||||
| Total assets | 7,083,028 | 7,206,059 | 6,972,403 | 7,131,850 | 6,911,077 | |||||||||||
| Total due to depositors | 4,353,560 | 4,395,228 | 4,422,050 | 4,442,202 | 4,537,869 | |||||||||||
| Total interest-bearing liabilities | 5,731,899 | 5,912,774 | 5,877,740 | 5,865,045 | 5,838,307 | |||||||||||
| Stockholders' equity | 576,512 | 557,414 | 564,255 | 570,198 | 559,209 | |||||||||||
| Performance Ratios (3) | ||||||||||||||||
| Return on average assets | 0.81 | % | 1.01 | % | 0.62 | % | 0.58 | % | 0.55 | % | ||||||
| Return on average equity | 9.94 | 13.11 | 7.60 | 7.30 | 6.76 | |||||||||||
| Yield on average interest-earning assets (4) | 3.84 | 3.81 | 4.22 | 3.88 | 4.26 | |||||||||||
| Cost of average interest-bearing liabilities | 0.98 | 1.09 | 2.07 | 1.27 | 2.01 | |||||||||||
| Cost of funds | 0.89 | 0.99 | 1.94 | 1.16 | 1.88 | |||||||||||
| Net interest rate spread during period (4) | 2.86 | 2.72 | 2.15 | 2.61 | 2.25 | |||||||||||
| Net interest margin (4) | 3.00 | 2.87 | 2.37 | 2.77 | 2.47 | |||||||||||
| Non-interest expense to average assets | 1.69 | 1.60 | 1.49 | 1.70 | 1.65 | |||||||||||
| Efficiency ratio (5) | 55.37 | 54.92 | 58.87 | 59.12 | 63.52 | |||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 1.16 | X | 1.15 | X | 1.12 | X | 1.15 | X | 1.12 | X | ||||||
(1) Calculated by dividing stockholders’ equity by shares outstanding.
(2) Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure, by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(3) Ratios are presented on an annualized basis, where appropriate.
(4) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
(5) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding accelerated employee benefits upon officer’s death, merger expense, OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges) and non-interest income (excluding life insurance proceeds, net gains and losses from the sale of securities and fair value adjustments).
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
| At or for the nine | At or for the year | At or for the nine | ||||||||
| months ended | ended | months ended | ||||||||
| September 30, 2020 | December 31, 2019 | September 30, 2019 | ||||||||
| Selected Financial Ratios and Other Data | ||||||||||
| Regulatory capital ratios (for Flushing Financial Corporation): | ||||||||||
| Tier 1 capital | $ | 630,380 | $ | 615,500 | $ | 606,844 | ||||
| Common equity Tier 1 capital | 593,344 | 572,651 | 564,466 | |||||||
| Total risk-based capital | 740,499 | 712,251 | 703,879 | |||||||
| Tier 1 leverage capital (well capitalized = 5%) | 9.03 | % | 8.73 | % | 8.71 | % | ||||
| Common equity Tier 1 risk-based capital (well capitalized = 6.5%) | 11.02 | 10.95 | 10.73 | |||||||
| Tier 1 risk-based capital (well capitalized = 8.0%) | 11.71 | 11.77 | 11.53 | |||||||
| Total risk-based capital (well capitalized = 10.0%) | 13.76 | 13.62 | 13.37 | |||||||
| Regulatory capital ratios (for Flushing Bank only): | ||||||||||
| Tier 1 capital | $ | 694,041 | $ | 680,749 | $ | 673,084 | ||||
| Common equity Tier 1 capital | 694,041 | 680,749 | 673,084 | |||||||
| Total risk-based capital | 729,160 | 702,500 | 695,120 | |||||||
| Tier 1 leverage capital (well capitalized = 5%) | 9.93 | % | 9.65 | % | 9.66 | % | ||||
| Common equity Tier 1 risk-based capital (well capitalized = 6.5%) | 12.88 | 13.02 | 12.79 | |||||||
| Tier 1 risk-based capital (well capitalized = 8.0%) | 12.88 | 13.02 | 12.79 | |||||||
| Total risk-based capital (well capitalized = 10.0%) | 13.54 | 13.43 | 13.21 | |||||||
| Capital ratios: | ||||||||||
| Average equity to average assets | 8.00 | % | 8.08 | % | 8.09 | % | ||||
| Equity to total assets | 8.30 | 8.26 | 7.99 | |||||||
| Tangible common equity to tangible assets (1) | 8.10 | 8.05 | 7.79 | |||||||
| Asset quality: | ||||||||||
| Non-accrual loans (2) | $ | 24,792 | $ | 12,813 | $ | 14,260 | ||||
| Non-performing loans | 24,792 | 13,258 | 14,705 | |||||||
| Non-performing assets | 24,827 | 13,532 | 14,979 | |||||||
| Net charge-offs | 2,993 | 2,005 | 2,039 | |||||||
| Asset quality ratios: | ||||||||||
| Non-performing loans to gross loans | 0.42 | % | 0.23 | % | 0.26 | % | ||||
| Non-performing assets to total assets | 0.35 | 0.19 | 0.21 | |||||||
| Allowance for loan losses to gross loans | 0.65 | 0.38 | 0.38 | |||||||
| Allowance for loan losses to non-performing assets | 154.44 | 160.73 | 147.11 | |||||||
| Allowance for loan losses to non-performing loans | 154.66 | 164.05 | 149.85 | |||||||
| Full-service customer facilities | 20 | 20 | 19 | |||||||
(1) See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(2) Excludes performing non-accrual TDR loans.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
| For the three months ended | |||||||||||||||||||||||||||
| September 30, 2020 | June 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||||||||||
| Balance | Interest | Cost | Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||||||||
| Interest-earning Assets: | |||||||||||||||||||||||||||
| Mortgage loans, net | $ | 4,721,742 | $ | 49,814 | 4.22 | % | $ | 4,762,068 | $ | 49,719 | 4.18 | % | $ | 4,598,898 | $ | 50,462 | 4.39 | % | |||||||||
| Other loans, net | 1,182,309 | 10,553 | 3.57 | 1,184,344 | 10,838 | 3.66 | 1,046,605 | 12,363 | 4.72 | ||||||||||||||||||
| Total loans, net (1) (2) | 5,904,051 | 60,367 | 4.09 | 5,946,412 | 60,557 | 4.07 | 5,645,503 | 62,825 | 4.45 | ||||||||||||||||||
| Taxable securities: | |||||||||||||||||||||||||||
| Mortgage-backed securities | 413,902 | 1,928 | 1.86 | 465,365 | 2,327 | 2.00 | 574,756 | 3,765 | 2.62 | ||||||||||||||||||
| Other securities | 243,754 | 1,166 | 1.91 | 243,867 | 1,358 | 2.23 | 244,757 | 1,982 | 3.24 | ||||||||||||||||||
| Total taxable securities | 657,656 | 3,094 | 1.88 | 709,232 | 3,685 | 2.08 | 819,513 | 5,747 | 2.81 | ||||||||||||||||||
| Tax-exempt securities: (3) | |||||||||||||||||||||||||||
| Other securities | 51,652 | 557 | 4.31 | 60,280 | 643 | 4.27 | 65,709 | 706 | 4.30 | ||||||||||||||||||
| Total tax-exempt securities | 51,652 | 557 | 4.31 | 60,280 | 643 | 4.27 | 65,709 | 706 | 4.30 | ||||||||||||||||||
| Interest-earning deposits and federal funds sold | 62,537 | 13 | 0.08 | 93,911 | 22 | 0.09 | 58,773 | 259 | 1.76 | ||||||||||||||||||
| Total interest-earning assets | 6,675,896 | 64,031 | 3.84 | 6,809,835 | 64,907 | 3.81 | 6,589,498 | 69,537 | 4.22 | ||||||||||||||||||
| Other assets | 407,132 | 396,224 | 382,905 | ||||||||||||||||||||||||
| Total assets | $ | 7,083,028 | $ | 7,206,059 | $ | 6,972,403 | |||||||||||||||||||||
| Interest-bearing Liabilities: | |||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||
| Savings accounts | $ | 160,100 | 65 | 0.16 | $ | 188,587 | 74 | 0.16 | $ | 194,736 | 344 | 0.71 | |||||||||||||||
| NOW accounts | 1,625,109 | 1,242 | 0.31 | 1,440,147 | 2,099 | 0.58 | 1,347,145 | 5,654 | 1.68 | ||||||||||||||||||
| Money market accounts | 1,461,996 | 2,108 | 0.58 | 1,580,652 | 3,208 | 0.81 | 1,306,634 | 6,859 | 2.10 | ||||||||||||||||||
| Certificate of deposit accounts | 1,106,355 | 3,700 | 1.34 | 1,185,842 | 4,564 | 1.54 | 1,573,535 | 9,321 | 2.37 | ||||||||||||||||||
| Total due to depositors | 4,353,560 | 7,115 | 0.65 | 4,395,228 | 9,945 | 0.91 | 4,422,050 | 22,178 | 2.01 | ||||||||||||||||||
| Mortgagors' escrow accounts | 55,868 | (22 | ) | (0.16 | ) | 87,058 | 26 | 0.12 | 60,084 | 66 | 0.44 | ||||||||||||||||
| Total interest-bearing deposits | 4,409,428 | 7,093 | 0.64 | 4,482,286 | 9,971 | 0.89 | 4,482,134 | 22,244 | 1.99 | ||||||||||||||||||
| Borrowings | 1,322,471 | 6,897 | 2.09 | 1,430,488 | 6,084 | 1.70 | 1,395,606 | 8,196 | 2.35 | ||||||||||||||||||
| Total interest-bearing liabilities | 5,731,899 | 13,990 | 0.98 | 5,912,774 | 16,055 | 1.09 | 5,877,740 | 30,440 | 2.07 | ||||||||||||||||||
| Non interest-bearing demand deposits | 589,674 | 560,637 | 400,762 | ||||||||||||||||||||||||
| Other liabilities | 184,943 | 175,234 | 129,646 | ||||||||||||||||||||||||
| Total liabilities | 6,506,516 | 6,648,645 | 6,408,148 | ||||||||||||||||||||||||
| Equity | 576,512 | 557,414 | 564,255 | ||||||||||||||||||||||||
| Total liabilities and equity | $ | 7,083,028 | $ | 7,206,059 | $ | 6,972,403 | |||||||||||||||||||||
| Net interest income / net interest rate spread (tax equivalent) (3) | $ | 50,041 | 2.86 | % | $ | 48,852 | 2.72 | % | $ | 39,097 | 2.15 | % | |||||||||||||||
| Net interest-earning assets / net interest margin (tax equivalent) | $ | 943,997 | 3.00 | % | $ | 897,061 | 2.87 | % | $ | 711,758 | 2.37 | % | |||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.16 | X | 1.15 | X | 1.12 | X | |||||||||||||||||||||
(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.8 million, $0.3 million and $0.9 million for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(2) Loan interest income includes net gains (losses) from fair value adjustments on qualifying hedges of $0.2 million, ($0.4) million and ($1.3) million for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.1 million in each period.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
| For the nine months ended | ||||||||||||||||||
| September 30, 2020 | September 30, 2019 | |||||||||||||||||
| Average | Yield/ | Average | Yield/ | |||||||||||||||
| Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||
| Interest-earning Assets: | ||||||||||||||||||
| Mortgage loans, net | $ | 4,727,094 | $ | 148,945 | 4.20 | % | $ | 4,602,896 | $ | 151,513 | 4.39 | % | ||||||
| Other loans, net | 1,154,764 | 33,088 | 3.82 | 982,549 | 35,915 | 4.87 | ||||||||||||
| Total loans, net (1) (2) | 5,881,858 | 182,033 | 4.13 | 5,585,445 | 187,428 | 4.47 | ||||||||||||
| Taxable securities: | ||||||||||||||||||
| Mortgage-backed securities | 462,216 | 7,295 | 2.10 | 578,020 | 12,238 | 2.82 | ||||||||||||
| Other securities | 243,782 | 4,221 | 2.31 | 243,071 | 6,328 | 3.47 | ||||||||||||
| Total taxable securities | 705,998 | 11,516 | 2.17 | 821,091 | 18,566 | 3.01 | ||||||||||||
| Tax-exempt securities: (3) | ||||||||||||||||||
| Other securities | 58,464 | 1,876 | 4.28 | 60,010 | 1,895 | 4.21 | ||||||||||||
| Total tax-exempt securities | 58,464 | 1,876 | 4.28 | 60,010 | 1,895 | 4.21 | ||||||||||||
| Interest-earning deposits and federal funds sold | 88,659 | 325 | 0.49 | 83,963 | 1,286 | 2.04 | ||||||||||||
| Total interest-earning assets | 6,734,979 | 195,750 | 3.88 | 6,550,509 | 209,175 | 4.26 | ||||||||||||
| Other assets | 396,871 | 360,568 | ||||||||||||||||
| Total assets | $ | 7,131,850 | $ | 6,911,077 | ||||||||||||||
| Interest-bearing Liabilities: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Savings accounts | $ | 180,829 | 420 | 0.31 | $ | 200,246 | 1,053 | 0.70 | ||||||||||
| NOW accounts | 1,495,473 | 7,989 | 0.71 | 1,458,801 | 18,326 | 1.67 | ||||||||||||
| Money market accounts | 1,579,712 | 12,358 | 1.04 | 1,340,841 | 20,654 | 2.05 | ||||||||||||
| Certificate of deposit accounts | 1,186,188 | 15,031 | 1.69 | 1,537,981 | 26,326 | 2.28 | ||||||||||||
| Total due to depositors | 4,442,202 | 35,798 | 1.07 | 4,537,869 | 66,359 | 1.95 | ||||||||||||
| Mortgagors' escrow accounts | 69,427 | 44 | 0.08 | 68,678 | 181 | 0.35 | ||||||||||||
| Total interest-bearing deposits | 4,511,629 | 35,842 | 1.06 | 4,606,547 | 66,540 | 1.93 | ||||||||||||
| Borrowings | 1,353,416 | 20,047 | 1.97 | 1,231,760 | 21,476 | 2.32 | ||||||||||||
| Total interest-bearing liabilities | 5,865,045 | 55,889 | 1.27 | 5,838,307 | 88,016 | 2.01 | ||||||||||||
| Non interest-bearing demand deposits | 533,563 | 398,085 | ||||||||||||||||
| Other liabilities | 163,044 | 115,476 | ||||||||||||||||
| Total liabilities | 6,561,652 | 6,351,868 | ||||||||||||||||
| Equity | 570,198 | 559,209 | ||||||||||||||||
| Total liabilities and equity | $ | 7,131,850 | $ | 6,911,077 | ||||||||||||||
| Net interest income / net interest rate spread (tax equivalent) (3) | $ | 139,861 | 2.61 | % | $ | 121,159 | 2.25 | % | ||||||||||
| Net interest-earning assets / net interest margin (tax equivalent) | $ | 869,934 | 2.77 | % | $ | 712,202 | 2.47 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.15 | X | 1.12 | X | ||||||||||||||
(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $1.3 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(2) Loan interest income includes net losses from fair value adjustments on qualifying hedges of $2.2 million and $2.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.4 million for each of the nine month periods ended September 30, 2020 and 2019.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
| September 2020 vs. | September 2020 vs. | ||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | December 2019 | September 30, | September 2019 | |||||||||||||||||
| (Dollars in thousands) | 2020 | 2020 | 2020 | 2019 | % Change | 2019 | % Change | ||||||||||||||||
| Deposits | |||||||||||||||||||||||
| Non-interest bearing | $ | 607,954 | $ | 581,881 | $ | 489,198 | $ | 435,072 | 39.7 | % | $ | 421,786 | 44.1 | % | |||||||||
| Interest bearing: | |||||||||||||||||||||||
| Certificate of deposit accounts | 1,051,644 | 1,135,977 | 1,172,381 | 1,437,890 | (26.9 | ) | % | 1,506,376 | (30.2 | ) | % | ||||||||||||
| Savings accounts | 160,294 | 184,895 | 192,192 | 191,485 | (16.3 | ) | % | 193,497 | (17.2 | ) | % | ||||||||||||
| Money market accounts | 1,381,552 | 1,474,880 | 1,597,109 | 1,592,011 | (13.2 | ) | % | 1,329,156 | 3.9 | % | |||||||||||||
| NOW accounts | 1,704,915 | 1,672,241 | 1,377,555 | 1,365,591 | 24.8 | % | 1,461,694 | 16.6 | % | ||||||||||||||
| Total interest-bearing deposits | 4,298,405 | 4,467,993 | 4,339,237 | 4,586,977 | (6.3 | ) | % | 4,490,723 | (4.3 | ) | % | ||||||||||||
| Total deposits | $ | 4,906,359 | $ | 5,049,874 | $ | 4,828,435 | $ | 5,022,049 | (2.3 | ) | % | $ | 4,912,509 | (0.1 | ) | % | |||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Closings
| For the three months ended | For the nine months ended | ||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||
| (In thousands) | 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||
| Multi-family residential | $ | 33,733 | $ | 59,654 | $ | 60,454 | $ | 160,705 | $ | 143,297 | |||||
| Commercial real estate | 26,644 | 8,003 | 66,648 | 134,218 | 123,289 | ||||||||||
| One-to-four family – mixed-use property | 3,867 | 8,117 | 18,167 | 25,439 | 47,475 | ||||||||||
| One-to-four family – residential | 2,296 | 2,674 | 7,421 | 13,383 | 19,191 | ||||||||||
| Co-operative apartments | — | — | 1,817 | 704 | 2,117 | ||||||||||
| Construction | 5,420 | 2,821 | 5,761 | 14,990 | 30,377 | ||||||||||
| Small Business Administration (1) | 18,456 | 93,241 | 121 | 111,754 | 2,705 | ||||||||||
| Commercial business and other | 65,160 | 59,287 | 237,754 | 226,895 | 524,113 | ||||||||||
| Total | $ | 155,576 | $ | 233,797 | $ | 398,143 | $ | 688,088 | $ | 892,564 | |||||
(1) Includes $18.4 million and $93.2 million of PPP closings for the three months ended September 30, 2020 and June 30, 2020, respectively. Includes $111.6 million of PPP closings for the nine months ended September 30, 2020.
Loan Composition
| September 2020 vs. | September 2020 vs. | |||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | December 2019 | September 30, | September 2019 | ||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2020 | 2020 | 2019 | % Change | 2019 | % Change | |||||||||||||||||||||
| Loans held for investment: | ||||||||||||||||||||||||||||
| Multi-family residential | $ | 2,252,757 | $ | 2,285,555 | $ | 2,272,343 | $ | 2,238,591 | 0.6 | % | $ | 2,232,305 | 0.9 | % | ||||||||||||||
| Commercial real estate | 1,636,659 | 1,646,085 | 1,664,934 | 1,582,008 | 3.5 | % | 1,559,581 | 4.9 | % | |||||||||||||||||||
| One-to-four family ― mixed-use property | 585,159 | 591,347 | 592,109 | 592,471 | (1.2 | ) | % | 587,100 | (0.3 | ) | % | |||||||||||||||||
| One-to-four family ― residential | 191,011 | 184,741 | 189,774 | 188,216 | 1.5 | % | 184,432 | 3.6 | % | |||||||||||||||||||
| Co-operative apartments | 8,132 | 8,423 | 8,493 | 8,663 | (6.1 | ) | % | 9,089 | (10.5 | ) | % | |||||||||||||||||
| Construction | 63,567 | 69,433 | 66,727 | 67,754 | (6.2 | ) | % | 64,234 | (1.0 | ) | % | |||||||||||||||||
| Small Business Administration (1) | 124,649 | 106,813 | 14,076 | 14,445 | 762.9 | % | 13,982 | 791.5 | % | |||||||||||||||||||
| Taxi medallion | 2,317 | 3,269 | 3,281 | 3,309 | (30.0 | ) | % | 3,513 | (34.0 | ) | % | |||||||||||||||||
| Commercial business and other | 1,063,429 | 1,073,623 | 1,104,967 | 1,061,478 | 0.2 | % | 1,096,164 | (3.0 | ) | % | ||||||||||||||||||
| Net unamortized premiums and unearned loan fees | 13,718 | 13,986 | 15,384 | 15,271 | (10.2 | ) | % | 15,363 | (10.7 | ) | % | |||||||||||||||||
| Allowance for loan losses | (38,343 | ) | (36,710 | ) | (28,098 | ) | (21,751 | ) | 76.3 | % | (22,035 | ) | 74.0 | % | ||||||||||||||
| Net loans | $ | 5,903,055 | $ | 5,946,565 | $ | 5,903,990 | $ | 5,750,455 | 2.7 | % | $ | 5,743,728 | 2.8 | % | ||||||||||||||
(1) Includes $111.6 million and $93.2 million of PPP loans at September 30, 2020 and June 30, 2020, respectively.
Net Loans Activity
| Three Months Ended | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (In thousands) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
| Loans originated and purchased | $ | 155,576 | $ | 233,797 | $ | 298,715 | $ | 269,736 | $ | 398,143 | ||||||||||
| Principal reductions | (196,221 | ) | (180,182 | ) | (137,189 | ) | (255,977 | ) | (266,894 | ) | ||||||||||
| Loans sold | — | — | (498 | ) | (7,129 | ) | (3,553 | ) | ||||||||||||
| Loan charge-offs | (964 | ) | (1,030 | ) | (1,259 | ) | (95 | ) | (431 | ) | ||||||||||
| Foreclosures | — | — | — | — | — | |||||||||||||||
| Net change in deferred fees and costs | (268 | ) | (1,398 | ) | 113 | (92 | ) | 85 | ||||||||||||
| Net change in the allowance for loan losses | (1,633 | ) | (8,612 | ) | (6,347 | ) | 284 | (525 | ) | |||||||||||
| Total loan activity | $ | (43,510 | ) | $ | 42,575 | $ | 153,535 | $ | 6,727 | $ | 126,825 | |||||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
Non-Performing Assets
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
| (Dollars in thousands) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||||||||
| Loans 90 Days Or More Past Due and Still Accruing: | ||||||||||||||||
| Multi-family residential | $ | — | $ | — | $ | — | $ | 445 | $ | 445 | ||||||
| Commercial business and other | — | 150 | — | — | — | |||||||||||
| Total | — | 150 | — | 445 | 445 | |||||||||||
| Non-accrual Loans: | ||||||||||||||||
| Multi-family residential | 2,661 | 3,688 | 2,741 | 2,296 | 3,132 | |||||||||||
| Commercial real estate | 2,657 | 2,671 | 8 | 367 | 872 | |||||||||||
| One-to-four family - mixed-use property (1) | 1,366 | 2,511 | 607 | 274 | 683 | |||||||||||
| One-to-four family - residential | 6,454 | 6,412 | 5,158 | 5,139 | 5,050 | |||||||||||
| Small Business Administration | 1,151 | 1,321 | 1,518 | 1,151 | 1,151 | |||||||||||
| Taxi medallion(1) | 2,218 | 1,757 | 1,761 | 1,641 | 1,352 | |||||||||||
| Commercial business and other(1) | 8,285 | 1,678 | 4,959 | 1,945 | 2,020 | |||||||||||
| Total | 24,792 | 20,038 | 16,752 | 12,813 | 14,260 | |||||||||||
| Total Non-performing Loans | 24,792 | 20,188 | 16,752 | 13,258 | 14,705 | |||||||||||
| Other Non-performing Assets: | ||||||||||||||||
| Real estate acquired through foreclosure | — | 208 | 208 | 239 | 239 | |||||||||||
| Other asset acquired through foreclosure | 35 | 35 | 35 | 35 | 35 | |||||||||||
| Total | 35 | 243 | 243 | 274 | 274 | |||||||||||
| Total Non-performing Assets | $ | 24,827 | $ | 20,431 | $ | 16,995 | $ | 13,532 | $ | 14,979 | ||||||
| Non-performing Assets to Total Assets | 0.35 | % | 0.29 | % | 0.23 | % | 0.19 | % | 0.21 | % | ||||||
| Allowance For Loan Losses to Non-performing Loans | 154.7 | % | 181.8 | % | 167.7 | % | 164.1 | % | 149.8 | % | ||||||
(1) Not included in the above analysis are non-accrual performing one-to-four family mixed use property loans totaling $0.3 million; non-accrual performing TDR taxi medallion loans totaling $0.1 million in 3Q20, $1.5 million in 2Q20, $1.5 million in 1Q20, $1.7 million in 4Q19 and $2.2 million in 3Q19, and non-accrual performing TDR commercial business loans totaling $1.0 million in 3Q20, 2Q20, 1Q20 and 3Q19 respectively, and $0.9 million in 4Q19.
Net Charge-Offs (Recoveries)
| Three Months Ended | ||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| (In thousands) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
| Multi-family residential | $ | (14 | ) | $ | (7 | ) | $ | (6 | ) | $ | (14 | ) | $ | 183 | ||||||
| Commercial real estate | — | — | — | (30 | ) | — | ||||||||||||||
| One-to-four family – mixed-use property | (60 | ) | 3 | (78 | ) | 119 | (140 | ) | ||||||||||||
| One-to-four family – residential | (2 | ) | (3 | ) | (5 | ) | (3 | ) | (3 | ) | ||||||||||
| Small Business Administration | (47 | ) | 165 | (7 | ) | (8 | ) | (32 | ) | |||||||||||
| Taxi medallion | 951 | — | — | — | — | |||||||||||||||
| Commercial business and other | 9 | 849 | 1,245 | (98 | ) | 150 | ||||||||||||||
| Total net loan charge-offs (recoveries) | $ | 837 | $ | 1,007 | $ | 1,149 | $ | (34 | ) | $ | 158 | |||||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FORBEARANCES DETAIL
(Dollars in thousands)
(Unaudited)
| Forbearances (1) | Backed by Mortgages (1) | |||||||||||||
| Balance | % of Sector | Balance | % of Forbearances | LTV | ||||||||||
| Higher Risk Segments | ||||||||||||||
| Restaurants and Catering Halls | $ | 22,228 | 29.2 | % | $ | 22,228 | 100.0 | % | 37.7 | % | ||||
| Hotels | 105,942 | 60.0 | 105,942 | 100.0 | 61.9 | |||||||||
| Travel and Leisure | 37,670 | 20.8 | 33,918 | 90.0 | 36.4 | |||||||||
| Retail Services (2) | 299 | 0.3 | — | — | — | |||||||||
| CRE - Shopping Center | 74,746 | 29.6 | 74,746 | 100.0 | 39.8 | |||||||||
| CRE - Single Tenant | 14,366 | 10.9 | 14,366 | 100.0 | 38.0 | |||||||||
| CRE - Strip Mall | 85,921 | 31.0 | 85,921 | 100.0 | 51.1 | |||||||||
| Transportation (2) | 4,621 | 3.9 | 1,802 | 39.0 | 40.5 | |||||||||
| Contractors (2) | 4,935 | 2.2 | 3,598 | 72.9 | 33.7 | |||||||||
| Schools and Child Care | 14,200 | 27.4 | 8,701 | 61.3 | 42.6 | |||||||||
| Subtotal | $ | 364,928 | 23.0 | % | $ | 351,222 | 96.2 | % | 46.7 | % | ||||
| Lower Risk Segments | $ | 481,296 | 11.1 | % | $ | 472,629 | 98.2 | % | 44.6 | % | ||||
| Total | $ | 846,224 | 14.3 | % | $ | 823,851 | 97.4 | % | 45.5 | % | ||||
(1) Represents dollar amount granted at modification
(2) Loans not backed by mortgages are collateralized by equipment
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
Non-cash Fair Value Adjustments to GAAP Earnings
The variance in GAAP and core earnings is primarily due to the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.
Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income, Core Yield on Total Loans, Core Net Interest Margin and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.
These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| GAAP income before income taxes | $ | 18,820 | $ | 24,080 | $ | 13,260 | $ | 41,304 | $ | 36,443 | ||||||||||
| Net (gain) loss from fair value adjustments | 2,225 | (10,205 | ) | 2,124 | (1,987 | ) | 6,160 | |||||||||||||
| Net loss on sale of securities | — | 54 | — | 91 | 15 | |||||||||||||||
| Life insurance proceeds | — | (659 | ) | — | (659 | ) | (43 | ) | ||||||||||||
| Net gain on sale of assets | — | — | — | — | (770 | ) | ||||||||||||||
| Net (gain) loss from fair value adjustments on qualifying hedges | (230 | ) | 365 | 1,262 | 2,208 | 2,717 | ||||||||||||||
| Accelerated employee benefits upon Officer's death | — | — | — | — | 455 | |||||||||||||||
| Merger expense | 422 | 194 | 510 | 1,545 | 510 | |||||||||||||||
| Core income before taxes | 21,237 | 13,829 | 17,156 | 42,502 | 45,487 | |||||||||||||||
| Provision for income taxes for core income | 5,069 | 3,532 | 3,312 | 10,537 | 10,116 | |||||||||||||||
| Core net income | $ | 16,168 | $ | 10,297 | $ | 13,844 | $ | 31,965 | $ | 35,371 | ||||||||||
| GAAP diluted earnings per common share | $ | 0.50 | $ | 0.63 | $ | 0.37 | $ | 1.08 | $ | 0.99 | ||||||||||
| Net (gain) loss from fair value adjustments, net of tax | 0.06 | (0.27 | ) | 0.06 | (0.05 | ) | 0.17 | |||||||||||||
| Net loss on sale of securities, net of tax | — | — | — | — | — | |||||||||||||||
| Life insurance proceeds | — | (0.02 | ) | — | (0.02 | ) | — | |||||||||||||
| Net gain on sale of assets, net of tax | — | — | — | — | (0.02 | ) | ||||||||||||||
| Net (gain) loss from fair value adjustments on qualifying hedges, net of tax | (0.01 | ) | 0.01 | 0.04 | 0.06 | 0.07 | ||||||||||||||
| Accelerated employee benefits upon Officer's death, net of tax | — | — | — | — | 0.01 | |||||||||||||||
| Merger expense, net of tax | 0.01 | 0.01 | 0.01 | 0.04 | 0.01 | |||||||||||||||
| Core diluted earnings per common share(1) | $ | 0.56 | $ | 0.36 | $ | 0.48 | $ | 1.11 | $ | 1.23 | ||||||||||
| Core net income, as calculated above | $ | 16,168 | $ | 10,297 | $ | 13,844 | $ | 31,965 | $ | 35,371 | ||||||||||
| Average assets | 7,083,028 | 7,206,059 | 6,972,403 | 7,131,850 | 6,911,077 | |||||||||||||||
| Average equity | 576,512 | 557,414 | 564,255 | 570,198 | 559,209 | |||||||||||||||
| Core return on average assets(2) | 0.91 | % | 0.57 | % | 0.79 | % | 0.60 | % | 0.68 | % | ||||||||||
| Core return on average equity(2) | 11.22 | % | 7.39 | % | 9.81 | % | 7.47 | % | 8.43 | % | ||||||||||
(1) Core diluted earnings per common share may not foot due to rounding.
(2) Ratios are calculated on an annualized basis.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP REVENUE and PRE-PROVISION
PRE-TAX NET REVENUE
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| Net interest income | $ | 49,924 | $ | 48,717 | $ | 38,949 | $ | 139,467 | $ | 120,761 | |||||||||||
| Non-interest income | 1,351 | 13,737 | 1,039 | 12,224 | 4,433 | ||||||||||||||||
| Non-interest expense | (29,985 | ) | (28,755 | ) | (26,045 | ) | (91,120 | ) | (85,622 | ) | |||||||||||
| Pre-provision pre-tax net revenue (1) | $ | 21,290 | $ | 33,699 | $ | 13,943 | $ | 60,571 | $ | 39,572 | |||||||||||
(1) Includes non-cash net gains (losses) from fair value adjustments totaling ($2.0) million, $9.8 million and ($3.4) million for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively and ($0.2) million and ($8.9) million for the nine months ended September 30, 2020 and 2019, respectively.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
To CORE NET INTEREST INCOME and NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| GAAP net interest income | $ | 49,924 | $ | 48,717 | $ | 38,949 | $ | 139,467 | $ | 120,761 | |||||||||||
| Net (gain) loss from fair value adjustments on qualifying hedges | (230 | ) | 365 | 1,262 | 2,208 | 2,717 | |||||||||||||||
| Core net interest income | $ | 49,694 | $ | 49,082 | $ | 40,211 | $ | 141,675 | $ | 123,478 | |||||||||||
| GAAP interest income on total loans, net | $ | 60,367 | $ | 60,557 | $ | 62,825 | $ | 182,033 | $ | 187,428 | |||||||||||
| Net (gain) loss from fair value adjustments on qualifying hedges | (230 | ) | 365 | 1,262 | 2,208 | 2,717 | |||||||||||||||
| Prepayment penalties received on loans | (1,357 | ) | (702 | ) | (1,697 | ) | (2,812 | ) | (3,622 | ) | |||||||||||
| Net recoveries of interest from non-accrual loans | (86 | ) | (74 | ) | (292 | ) | (596 | ) | (1,525 | ) | |||||||||||
| Core interest income on total loans, net | $ | 58,694 | $ | 60,146 | $ | 62,098 | $ | 180,833 | $ | 184,998 | |||||||||||
| Average total loans, net | $ | 5,904,051 | $ | 5,946,412 | $ | 5,645,503 | $ | 5,881,858 | $ | 5,585,445 | |||||||||||
| Core yield on total loans | 3.98 | % | 4.05 | % | 4.40 | % | 4.10 | % | 4.42 | % | |||||||||||
| Net interest income tax equivalent | $ | 50,041 | $ | 48,852 | $ | 39,097 | $ | 139,861 | $ | 121,159 | |||||||||||
| Net (gain) loss from fair value adjustments on qualifying hedges | (230 | ) | 365 | 1,262 | 2,208 | 2,717 | |||||||||||||||
| Prepayment penalties received on loans and securities | (1,432 | ) | (702 | ) | (1,697 | ) | (2,887 | ) | (3,622 | ) | |||||||||||
| Net recoveries of interest from non-accrual loans | (86 | ) | (74 | ) | (292 | ) | (596 | ) | (1,525 | ) | |||||||||||
| Net interest income used in calculation of Core net interest margin | $ | 48,293 | $ | 48,441 | $ | 38,370 | $ | 138,586 | $ | 118,729 | |||||||||||
| Total average interest-earning assets | $ | 6,675,896 | $ | 6,809,835 | $ | 6,589,498 | $ | 6,734,979 | $ | 6,550,509 | |||||||||||
| Core net interest margin | 2.89 | % | 2.85 | % | 2.33 | % | 2.74 | % | 2.42 | % | |||||||||||
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)
| September 30, | December 31, | September 30, | |||||||||||
| (Dollars in thousands) | 2020 | 2019 | 2019 | ||||||||||
| Total Equity | $ | 586,406 | $ | 579,672 | $ | 568,392 | |||||||
| Less: | |||||||||||||
| Goodwill | (16,127 | ) | (16,127 | ) | (16,127 | ) | |||||||
| Intangible deferred tax liabilities | 292 | 292 | 286 | ||||||||||
| Tangible Stockholders' Common Equity | $ | 570,571 | $ | 563,837 | $ | 552,551 | |||||||
| Total Assets | $ | 7,063,056 | $ | 7,017,776 | $ | 7,110,895 | |||||||
| Less: | |||||||||||||
| Goodwill | (16,127 | ) | (16,127 | ) | (16,127 | ) | |||||||
| Intangible deferred tax liabilities | 292 | 292 | 286 | ||||||||||
| Tangible Assets | $ | 7,047,221 | $ | 7,001,941 | $ | 7,095,054 | |||||||
| Tangible Stockholders' Common Equity to Tangible Assets | 8.10 | % | 8.05 | % | 7.79 | % | |||||||
__________________________________
1 See the tables entitled “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Income and Net Interest Margin to Core Net Interest Income and Net Interest Margin.”
Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer
Flushing Financial Corporation
(718) 961-5400