2008 Full Year and Fourth Quarter Highlights and Other Significant Events * Core Earnings for the Year Were a Record At $24.9 Million, Core EPS of $1.23; Core Earnings for the 4th Quarter Were $6.3 Million, Core EPS Of $0.31. * Net Income Per Share Was $1.10 for the Year and $0.31 for the 4th Quarter. * Net Interest Income for the 4th Quarter and Full Year of $22.8 Million and $87.7 Million, Respectively, Were At Record Levels. * Increased Capital $70.0 Million Through Issuance of Preferred Shares to U.S. Treasury. * Loans, Net Grew $258.5 Million, or 9.6%, for the Year to Over $2.9 Billion. * Deposits Grew $434.7 Million, or 21.7%, for the Year to Over $2.4 Billion. * Net Charge-Offs for 2008 Were 0.04% of Average Loans. * Total Non-Performing Assets At December 31, 2008 Were 1.03% of Total Assets. * $2.0 Million Provision Recorded for Loan Losses in 4th Quarter. * $0.6 Million After-Tax Other-Than-Temporary Impairment Charge Recorded in the 4th Quarter On Freddie Mac and Fannie Mae Preferred Stock. * $0.8 Million After-Tax Net Gain Recorded in 4th Quarter On Financial Assets and Financial Liabilities Carried At Fair Value Under SFAS No.159. * Regulatory Capital Ratios At December 31, 2008 Were 7.92% for Core Capital and 13.02% for Risk-Weighted Capital.
LAKE SUCCESS, N.Y., Jan. 27, 2009 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the "Company") (Nasdaq:FFIC), the parent holding company for Flushing Savings Bank, FSB (the "Bank"), today announced record core earnings for the year, and increases in net income for the year and fourth quarter over comparable prior year periods.
John R. Buran, President and Chief Executive Officer, stated: "We are pleased to report record core earnings for the year ended December 31, 2008 of $24.9 million, an increase of $3.6 million from the year ended December 31, 2007. Core diluted earnings per share for the year ended December 31, 2008 were $1.23, an increase of $0.16, or 15.0%, from that reported for the prior year. Our strong operating performance for 2008 was primarily driven by an increase of $16.8 million in net interest income, as the net interest margin for the year ended December 31, 2008 improved over the prior year by 16 basis points to 2.60%, and total assets increased $595.0 million, or 17.7%.
"2008 was a challenging and difficult year for the banking industry and the economy as a whole. The nation's economy has been in a recession since December 2007. Several major banks and thrifts either failed and were taken over by the FDIC or were acquired by stronger financial institutions. The banking industry incurred significant loan losses and impairment charges during the year. We recorded after-tax, non-cash, other-than-temporary impairment charges on our holdings of Fannie Mae and Freddie Mac preferred stock, and our non-performing loans increased significantly. We have taken a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative. When deemed appropriate, we have been developing short-term payment plans that enable borrowers to bring their loans current, generally within six to nine months. As a result, charge-offs of loans during 2008 were only $1.2 million, or 0.04% of average loans. We grew lower risk assets during the year and funded them with less expensive deposits and borrowings to generate improved cash flows and improved operating results.
"Throughout this recessionary environment, we have remained a profitable, 'well capitalized' institution, so it was not without significant consideration that we elected to participate in the U.S. Treasury's ('Treasury') Capital Purchase Program ('CPP'). On December 19, 2008, we issued 70,000 shares of preferred stock and a warrant to purchase 751,611 shares of the Company's common stock (at $13.97 per share) to the Treasury for an aggregate purchase price of $70.0 million. We did so because our historically strong ability to grow deposits and make quality loans enables the Bank to put this additional capital to good work. Since we received this investment, we have extended over $43 million to residential and commercial borrowers in the New York metropolitan area. Our job as a community bank will be to use these funds to help generate economic activity and provide a positive financial return for the U.S. taxpayer and our shareholders.
"Our cost of funds continued to decline in the fourth quarter of 2008, although it has improved at a slower pace than earlier in the year, primarily due to the residual effect of the Federal Open Market Committee ('FOMC') rate reductions, which lowered the overnight rate from 4.25% at December 31, 2007 to essentially zero as of December 31, 2008. These rate reductions, combined with a decrease in rate-based deposit competition in the New York Market, translated into a reduction in our funding costs as we took advantage of several funding sources, mixing rate reductions with duration increases. As a result, we were able to reduce our cost of funds to 3.85% for the fourth quarter of 2008, a decline of 69 basis points from the fourth quarter of 2007.
"We continued to implement the key elements of our strategic plan as we worked towards transitioning to a more 'commercial-like' bank. We have increased the balances of our transaction accounts by $195.3 million, or 139%, during the year as more business, consumer and municipal customers chose Flushing products for their needs.
"As we continue to grow the balance sheet, we are mindful of asset quality and our capital requirements. The Bank continues to be well-capitalized under regulatory requirements, with tangible and risk-weighted capital ratios of 7.92% and 13.02%, respectively, at December 31, 2008."
Core earnings, which exclude certain non-operating items, were $6.3 million for the fourth quarter of 2008, an increase of $0.4 million, from the $6.0 million earned for the fourth quarter of 2007. Core diluted earnings per share were $0.31 per diluted share for the fourth quarter of 2008, an increase of $0.01 from the $0.30 per diluted share recorded in the fourth quarter of 2007.
Core earnings for the year ended December 31, 2008 were $24.9 million, or $1.23 per diluted share, an increase of $3.6 million, or $0.16 per diluted share from the $21.3 million, or $1.07 per diluted share, for the year ended December 31, 2007.
Net income for the three months ended December 31, 2008 was $6.5 million, an increase of $2.2 million, or 51.0%, from the $4.3 million earned in the fourth quarter of 2007. Diluted earnings per share for the fourth quarter were $0.31, an increase of $0.09, or 41.0%, from the $0.22 earned in the comparable quarter a year ago. The increase in net income for the fourth quarter of 2008 compared to the fourth quarter of 2007 was attributed to a $4.6 million increase in net interest income combined with a reduction of $3.5 million in other-than-temporary impairment charges, partially offset by a $2.0 million increase in the provision for loan losses and a $1.5 million increase in non-interest expense due to the growth of the Bank and an increase in Federal Deposit Insurance Corporation ("FDIC") deposit insurance expense.
Net income for the year ended December 31, 2008 was $22.3 million, an increase of $2.1 million, or 10.3%, from the $20.2 million earned in the year ended December 31, 2007. Diluted earnings per share for the year ended December 31, 2008 were $1.10, an increase of $0.08, or 7.8%, from the $1.02 earned in the comparable 2007 period.
Core earnings and net income both reflect provisions for loan losses of $2.0 million and $5.6 million recorded in the fourth quarter and full year of 2008, respectively. The Bank experienced an increase in non-performing loans of $21.5 million and $34.1 million for the fourth quarter and full year of 2008, respectively. Total non-performing loans were $40.0 million at December 31, 2008. The increase in the provision for loan losses recorded during the fourth quarter and full year of 2008 were determined necessary by management as a result of the regular quarterly analyses of the allowance for loan losses.
For a reconciliation of core earnings and core earnings per share to accounting principles generally accepted in the United States ("GAAP") net income and GAAP earnings per share, please refer to the tables in the section titled "Reconciliation of GAAP and Core Earnings".
Earnings Summary - Three Months Ended December 31, 2008
For the three months ended December 31, 2008, net interest income was $22.8 million, an increase of $4.6 million, or 25.0%, from $18.2 million for the three months ended December 31, 2007. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $422.4 million, to $3,573.9 million for the quarter ended December 31, 2008, combined with an increase in the net interest spread of 28 basis points to 2.39% for the quarter ended December 31, 2008 from 2.11% for the comparable period in 2007. The yield on interest-earning assets decreased 41 basis points to 6.24% for the three months ended December 31, 2008 from 6.65% in the three months ended December 31, 2007. However, this was more than offset by a decline in the cost of funds of 69 basis points to 3.85% for the three months ended December 31, 2008 from 4.54% for the comparable prior year period. The net interest margin improved 24 basis points to 2.55% for the three months ended December 31, 2008 from 2.31% for the three months ended December 31, 2007. Excluding prepayment penalty income, the net interest margin would have been 2.44% and 2.21% for the three month periods ended December 31, 2008 and 2007, respectively.
The decline in the yield of interest-earning assets was primarily due to a 36 basis point reduction in the yield of the loan portfolio combined with a $171.3 million increase in the combined average balances of the lower yielding securities portfolio and interest-earning deposits, with each having a lower yield than the average yield of total interest-earning assets. The yield was also negatively affected by the suspension of dividends paid on preferred stock issued by both Freddie Mac and Fannie Mae. The 36 basis point decline in the yield of the loan portfolio to 6.53% for the three months ended December 31, 2008 from 6.89% for the three months ended December 31, 2007, was primarily the result of adjustable rate loans adjusting down, as rates have declined throughout 2008. Additionally, an increase in non-accrual loans has reduced the yield of the loan portfolio. However, the yield on mortgage loans was positively impacted by the average rate on mortgage loans originated during the past twelve months being higher than the average rate of both the existing loan portfolio and mortgage loans which were paid-in-full during the period. The yield on the mortgage loan portfolio declined 30 basis points to 6.55% for the three months ended December 31, 2008 from 6.85% for the three months ended December 31, 2007. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 32 basis points to 6.41% for the three months ended December 31, 2008 from 6.73% for the three months ended December 31, 2007. The decline in the yield of interest-earning assets was partially offset by an increase of $251.1 million in the average balance of the loan portfolio to $2,927.8 million for the three months ended December 31, 2008.
The decrease in the cost of interest-bearing liabilities is primarily attributed to the FOMC lowering the overnight interest rate to a range of 0.00% to 0.25% as of December 31, 2008. Certificates of deposit, money market accounts and saving accounts decreased 86 basis points, 141 basis points and 84 basis points respectively, for the three months ended December 31, 2008 compared to the three months ended December 31, 2007. NOW accounts increased 43 basis points for the three months ended December 31, 2008 compared to the three months ended December 31, 2007. This increase in the average cost of NOW accounts is due to the introduction and promotion of new products which, although carrying a higher rate than other products in these types of accounts, had a lower rate during the quarter ended December 31, 2008 than the average cost of deposits. This resulted in a decrease in the cost of due to depositors of 91 basis points to 3.47% for the three months ended December 31, 2008 compared to the three months ended December 31, 2007. The cost of borrowed funds also declined 22 basis points to 4.76% for the three months ended December 31, 2008 compared to the three months ended December 31, 2007. The average balance of the higher-costing certificates of deposit and borrowed funds increased $220.5 million and $56.4 million, respectively, for the quarter ended December 31, 2008 compared to the prior year period. In addition, the combined average balances of lower-costing savings, money market and NOW accounts increased a total of $129.7 million for the quarter ended December 31, 2008 compared to the prior year period.
The net interest margin for the three months ended December 31, 2008 decreased five basis points to 2.55% from 2.60% for the quarter ended September 30, 2008. The yield on interest-earning assets decreased 12 basis points during the quarter, while the cost of interest-bearing liabilities decreased seven basis points. Excluding prepayment penalty income, the net interest margin would have been 2.44% for the quarter ended December 31, 2008, a decrease of four basis points from 2.48% for the quarter ended September 30, 2008.
A provision for loan losses of $2.0 million was recorded for the three months ended December 31, 2008, a $1.0 million reduction from the $3.0 million provision for loan losses recorded for the three months ended September 30, 2008, and a $1.7 million increase from the $0.3 million that was recorded in each of the first and second quarters of 2008. The Company did not record a provision for loan losses for the three months ended December 31, 2007. The provision for loan losses recorded in the fourth quarter was primarily due to an increase in non-performing loans. This increase in non-performing loans primarily consists of mortgage loans that are located in the New York City metropolitan market. Historically, the Bank has not incurred losses on mortgage loans, primarily due to conservative underwriting standards that include, among other things, a loan to value ratio of 75% or less and a debt coverage ratio of at least 125%. However, given the increase in non-performing loans and current economic uncertainties, management, as a result of the regular quarterly analysis of the allowance for loans losses, deemed it necessary to record an additional provision for possible loan losses in the fourth quarter of 2008.
Non-interest income was $2.9 million for the three months ended December 31, 2008, an increase of $2.8 million from $0.1 million for the three months ended December 31, 2007. A $0.3 million decline in dividends received on FHLB-NY stock was more than offset by a $3.5 million reduction in other-than-temporary impairment charges recorded during the three months ended December 31, 2008 as compared to the three months ended December 31, 2007. The other-than-temporary impairment charges in both periods were the result of reducing the carrying value of the Company's investments in Freddie Mac and Fannie Mae preferred stocks to the preferred stocks market value.
Non-interest expense was $13.6 million for the three months ended December 31, 2008, an increase of $1.5 million, or 12.0%, from $12.2 million for the three months ended December 31, 2007. The increase is primarily attributed to increases over the period of: $0.9 million in employee salary and benefit expenses resulting from the growth of the Bank over the past twelve months and $0.7 million in other operating expenses primarily due to an increase in deposit insurance expense. The efficiency ratio was 58.0% and 57.2% for the three month periods ended December 31, 2008 and 2007, respectively.
Net income for the three months ended December 31, 2008 was $6.5 million, an increase of $2.2 million or 51.0%, as compared to $4.3 million for the three months ended December 31, 2007. Diluted earnings per share was $0.31 for the three months ended December 31, 2008, an increase of $0.09, or 40.9%, from $0.22 for the three months ended December 31, 2007.
Return on average equity was 11.0% for the three months ended December 31, 2008 compared to 7.6% for the three months ended December 31, 2007. Return on average assets was 0.7% for the three months ended December 31, 2008 compared to 0.5% for the three months ended December 31, 2007.
Earnings Summary - Year Ended December 31, 2008
For the year ended December 31, 2008, net interest income was $87.7 million, an increase of $16.8 million, or 23.7%, from $70.9 million for the year ended December 31, 2007. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $476.0 million, to $3,377.5 million for the year ended December 31, 2008, combined with an increase in the net interest spread of 20 basis points to 2.43% for the year ended December 31, 2008 from 2.23% for the comparable period in 2007. The yield on interest-earning assets decreased 25 basis points to 6.42% for the year ended December 31, 2008 from 6.67% for the year ended December 31, 2007. However, this was more than offset by a decline in the cost of funds of 45 basis points to 3.99% for the year ended December 31, 2008 from 4.44% for the comparable prior year period. The net interest margin improved 16 basis points to 2.60% for the year ended December 31, 2008 from 2.44% for the year ended December 31, 2007. Excluding prepayment penalty income, the net interest margin would have been 2.48% and 2.32% for the years ended December 31, 2008 and 2007, respectively.
The decline in the yield of interest-earning assets was primarily due to a 21 basis point reduction in the yield of the loan portfolio combined with a $168.3 million increase in the combined average balances of the lower yielding securities portfolio and interest-earning deposits, with each having a lower yield than the average yield of total interest-earning assets. The 21 basis point reduction in the yield of the loan portfolio to 6.69% for the year ended December 31, 2008 from 6.90% for the year ended December 31, 2007 was primarily the result of adjustable rate loans adjusting down, as rates have declined throughout 2008. Additionally, an increase in non-accrual loans has reduced the yield of the loan portfolio. The yield was positively impacted by the average rate on mortgage loans originated during the past twelve months being higher than the average rate of both the existing loan portfolio and mortgage loans which were paid-in-full during the period. The yield on the mortgage loan portfolio declined 18 basis points to 6.69% for the year ended December 31, 2008 from 6.87% for the year ended December 31, 2007. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 17 basis points to 6.55% for the year ended December 31, 2008 from 6.72% for the year ended December 31, 2007. The decline in the yield of interest-earning assets was partially offset by an increase of $307.7 million in the average balance of the loan portfolio to $2,841.9 million for the year ended December 31, 2008.
The decrease in the cost of interest-bearing liabilities is primarily attributed to the FOMC lowering the overnight interest rate to a range of 0.00% to 0.25% as of December 31, 2008. Certificates of deposit, money market accounts and saving accounts decreased 53 basis points, 103 basis points and 31 basis points respectively, for the year ended December 31, 2008 compared to the year ended December 31, 2007. NOW accounts increased 93 basis points for the year ended December 31, 2008 compared to the year ended December 31, 2007 due to the introduction and promotion of new products which, although carrying a higher rate than other products in these types of accounts, had a lower rate during the year ended December 31, 2008 than the average cost of deposits. This resulted in a decrease in the cost of due to depositors of 60 basis points to 3.66% for the year ended December 31, 2008 compared to 4.26% for the year ended December 31, 2007. The cost of borrowed funds also decreased 26 basis points to 4.71% for the year ended December 31, 2008 compared to 4.97% for the year ended December 31, 2007. The average balance of higher-costing certificates of deposit and borrowed funds increased $107.3 million and $209.8 million, respectively, for the year ended December 31, 2008 compared to the prior year period. In addition, the combined average balances of lower-costing savings, money market and NOW accounts increased a total of $153.9 million for the year ended December 31, 2008 compared to the prior year period.
A provision for loan losses of $5.6 million was recorded for the year ended December 31, 2008. The Company did not record a provision for loan losses for the year ended December 31, 2007. The provision for loan losses recorded in 2008 was primarily due to an increase in non-performing loans. This increase in non-performing loans primarily consists of mortgage loans that are located in the New York City metropolitan market. Historically, the Bank has not incurred losses on mortgage loans, primarily due to conservative underwriting standards that include, among other things, a loan to value ratio of 75% or less and a debt coverage ratio of at least 125%. However, given the increase in non-performing loans and current economic uncertainties, management, as a result of the regular quarterly analyses of the allowance for loans losses, deemed it necessary to record additional provisions for possible loan losses in the year ended December 31, 2008.
Non-interest income for the year ended December 31, 2008 decreased by $3.3 million, or 32.0%, to $7.0 million from $10.3 million for the year ended December 31, 2007. Increases of $17.4 million in the net gain attributed to changes in fair value of financial assets and financial liabilities carried at fair value under SFAS No. 159, $0.2 million in dividends received from FHLB-NY stock, and $0.5 million in income from Bank Owned Life Insurance were more than offset by a $0.5 million decrease in fee income and a $22.9 million increase in other-than-temporary impairment charges recorded during the year ended December 31, 2008 as compared to the year ended December 31, 2007. The other-than-temporary impairment charges in both periods were the result of reducing the carrying value of the Company's investments in Freddie Mac and Fannie Mae preferred stocks to the preferred stocks market value. The year ended December 31, 2008 includes income of $2.4 million representing a partial recovery of a loss sustained in 2002, on a WorldCom, Inc. senior note. This amount was received as a result of a class action litigation settlement, and was included in Other Income.
Non-interest expense was $54.8 million for the year ended December 31, 2008, an increase of $4.7 million, or 9.4%, from $50.1 million for the year ended December 31, 2007. The increase from the comparable prior year period is primarily attributed to increases of: $2.6 million in employee salary and benefits, $0.6 million in professional services and $0.4 million in data processing expense, each of which is primarily attributed to the growth of the Bank over the past twelve months. Additionally, other operating expense increased $1.2 million primarily due to an increase in deposit insurance expense. The efficiency ratio was 58.4% and 60.2% for the years ended December 31, 2008 and 2007, respectively.
Net income for the year ended December 31, 2008 was $22.3 million, an increase of $2.1 million or 10.3%, as compared to $20.2 million for the year ended December 31, 2007. Diluted earnings per share was $1.10 for the year ended December 31, 2008, an increase of $0.08, or 7.8%, from $1.02 in the year ended December 31, 2007.
Return on average equity was 9.6% for the year ended December 31, 2008 compared to 9.2% for the year ended December 31, 2007. Return on average assets was 0.6% for the year ended December 31, 2008 compared to 0.7% for the year ended December 31, 2007.
Balance Sheet Summary
At December 31, 2008, total assets were $3,949.5 million, an increase of $595.0 million, or 17.7%, from $3,354.5 million at December 31, 2007. Total loans, net increased $258.5 million, or 9.6%, during the year ended December 31, 2008 to $2,960.7 million from $2,702.1 million at December 31, 2007. At December 31, 2008, loan applications in process totaled $185.4 million, compared to $201.0 million at December 31, 2007.
The following table shows loan originations and purchases for the periods indicated.
For the three months For the year
ended December 31, ended December 31,
------------------- ------------------
(In thousands) 2008 2007 2008 2007
---------------------------------------------------------------------
Multi-family residential $ 34,956 $ 64,111 $153,023 $231,342
Commercial real estate 59,565 31,029 182,357 168,342
One-to-four family - mixed-use
property 12,446 30,176 118,270 159,331
One-to-four family -
residential 11,348 10,117 120,422 37,225
Construction 5,764 16,378 30,673 54,151
Commercial business and other
loans 14,491 26,336 62,855 107,033
-------- -------- -------- --------
Total $138,570 $178,147 $667,600 $757,424
======== ======== ======== ========
Loan purchases included in the table above totaled $65.3 million and $11.6 million for twelve months ended December 31, 2008 and December 31, 2007, respectively. Loan purchases totaled $2.5 million for the three months ended December 31, 2007. There were no loan purchases for the three months ended December 31, 2008.
As the Bank continues to increase its loan portfolio, management continues to adhere to the Bank's conservative underwriting standards. Although non-accrual loans have increased, the Bank has been able to minimize charge-offs of losses from impaired loans and maintain asset quality. As of December 31, 2008, using the current principal balance and the appraised value at time of origination, the average loan to value ratio for the non-performing mortgage loans was less than 60%. The increase in non-accrual loans in the quarter ended December 31, 2008 includes a commercial real estate mortgage loan in the amount of $4.0 million. This property was reappraised in the fourth quarter of 2008 at a value of $6.0 million. The Bank takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative. When deemed appropriate, the Bank will develop short-term payment plans that enable borrowers to bring their loans current. The Bank reviews its delinquencies on a loan by loan basis, diligently exploring ways to help borrowers meet their obligations and return them back to current status as soon as possible. The Bank has recently increased staffing that handles the delinquent loans by hiring people experienced in loan workouts. The Company's non-performing assets were $40.7 million at December 31, 2008 an increase of $34.8 million from $5.9 million at December 31, 2007 and an increase of $20.2 million from $20.5 million at September 30, 2008. Total non-performing assets as a percentage of total assets was 1.03% at December 31, 2008 compared to 0.18% at December 31, 2007. The ratio of allowance for loan losses to total non-performing loans was 28% at December 31, 2008 compared to 113% at December 31, 2007.
During the year ended December 31, 2008, mortgage-backed securities increased $312.0 million to $674.8 million, while other securities decreased $4.9 million to $72.5 million. During the year ended December 31, 2008, there were purchases of $473.9 million of mortgage-backed securities, of which $264.2 million were purchased during the three months ended December 31, 2008. Mortgage-backed securities increased during the three months and year ended December 31, 2008 primarily to support the activities of Flushing Commercial Bank. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities.
Total liabilities were $3,648.0 million at December 31, 2008, an increase of $527.1 million, or 16.9%, from December 31, 2007. During the year ended December 31, 2008, due to depositors increased $434.7 million to $2,437.6 million, with $211.8 million of the increase occurring at Flushing Commercial Bank. The deposit growth was achieved through increases of $269.1 million in certificates of deposit and $165.6 million in core deposits. The increase in certificates of deposit is attributed to an increase in brokered deposits of $183.2 million combined with an increase of $85.9 million in retail certificates of deposit. Borrowed funds increased $66.4 million to partially fund balance sheet growth. In addition, mortgagors' escrow deposits increased $8.7 million during the twelve months ended December 31, 2008.
Total stockholders' equity increased $67.8 million, or 29.0%, to $301.5 million at December 31, 2008 from $233.7 million at December 31, 2007. During the fourth quarter the Company received $70.0 million from the Treasury under the CPP in exchange for 70,000 shares of preferred stock (which pays a cumulative dividend at a rate of 5.0% for the first five years), and a warrant to purchase 751,611 shares of the Company's common stock at an exercise price of $13.97 per share. The remaining decrease in stockholders' equity was the result of net income of $22.3 million for the year ended December 31, 2008, which was more than offset by: a net after-tax decrease of $15.2 million on the market value of securities available for sale, $10.4 million of cash dividends declared and paid, unrecognized actuarial losses in the Company's postretirement benefit plans increased $4.2 million on an after-tax basis, and a $1.1 million charge as a result of the adoption of EITF Issue No. 06-4, which requires the accrual of the postretirement cost of endorsement split-dollar life insurance arrangements with employees. The exercise of stock options increased stockholders' equity by $2.9 million, including the income tax benefit realized by the Company upon the exercise of the options. Book value per common share was $10.77 at December 31, 2008 and $10.96 per share at December 31, 2007.
In December 2008 the Company filed a shelf registration statement with the Securities and Exchange Commission under which it registered a total of $170.0 million of various securities for possible issuance. The preferred stock and warrants issued to the Treasury will be registered under this shelf registration. At the present time, the Company does not have any plans to register additional securities for issuance under this shelf registration statement.
The Company did not repurchase any shares during the quarter ended December 31, 2008 under its current stock repurchase program. At December 31, 2008, 362,050 shares remain to be repurchased under the current stock repurchase program. As a condition of the Company's participation in the Treasury's CPP, shares may not be repurchased for the next three years without approval of the Treasury unless the preferred shares are redeemed or transferred to a third party. As of the date of this release, the Company has not requested approval from the Treasury to repurchase shares.
Reconciliation of GAAP and Core Earnings
Although core earnings are not a measure of performance calculated in accordance with GAAP, the Company believes that its core earnings are an important indication of performance through ongoing operations. The Company believes that core earnings are useful to management and investors in evaluating its ongoing operating performance, and in comparing its performance with other companies in the banking industry, particularly those that have not adopted the fair value option of SFAS No. 159. Core earnings should not be considered in isolation or as a substitute for GAAP earnings. During the periods presented, the Company calculated core earnings by subtracting or adding back the fair value gain or loss recorded under SFAS No.159 and the income or expense of certain non-recurring items listed below.
Three Months Ended Year Ended
------------------------- ----------------
Dec.31, Dec.31, Sept.30 Dec.31, Dec.31,
2008 2007 2008 2008 2007
------------------------- ----------------
(In thousands, except per share data)
GAAP net income $ 6,479 $ 4,291 $ 2,130 $22,259 $20,185
Net gain under SFAS
No. 159, net of tax (782) (964) (11,452) (11,150) (1,500)
Other-than-temporary
impairment charge,
net of tax 645 2,632 14,660 15,305 2,632
Net gain on sale of
securities, net of tax -- -- (197) (197) --
Partial recovery of
WorldCom, Inc. loss,
net of tax 4 -- 5 (1,343) --
------------------------- ----------------
Core net income $ 6,346 $ 5,959 $ 5,146 $24,874 $21,317
========================= ================
GAAP diluted earnings
per share $ 0.31 $ 0.22 $ 0.11 $ 1.10 $ 1.02
Net gain under SFAS
No. 159, net of tax (0.03) (0.05) (0.57) (0.55) (0.08)
Other-than-temporary
impairment charge,
net of tax 0.03 0.13 0.72 0.76 0.13
Net gain on sale of
securities, net of tax -- -- (0.01) (0.01) --
Partial recovery of
WorldCom, Inc. loss,
net of tax -- -- -- (0.07) --
------------------------- ----------------
Core diluted earnings
per share $ 0.31 $ 0.30 $ 0.25 $ 1.23 $ 1.07
========================= ================
About Flushing Financial Corporation
Flushing Financial Corporation is the parent holding company for Flushing Savings Bank, FSB, a federally chartered stock savings bank insured by the FDIC. The Bank serves consumers and businesses by offering a full complement of deposit, loan, and cash management services through its fifteen banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. The Bank also operates an online banking division, iGObanking.com(r), which enables the Bank to expand outside of its current geographic footprint. In 2007, the Bank established Flushing Commercial Bank, a wholly-owned subsidiary, to provide banking services to public entities including counties, towns, villages, school districts, libraries, fire districts and the various courts throughout the metropolitan area.
Additional information on Flushing Financial Corporation may be obtained by visiting the Company's website at http://www.flushingsavings.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, 2007 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.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, December 31,
(Dollars in thousands, except per share data) 2008 2007
---------------------------------------------------------------------
ASSETS (Unaudited)
------
Cash and due from banks $ 30,404 $ 36,148
Securities available for sale:
Mortgage-backed securities 674,764 362,729
Other securities 72,497 77,371
Loans:
Multi-family residential 999,185 964,455
Commercial real estate 752,120 625,843
One-to-four family - mixed-use property 751,952 686,921
One-to-four family - residential 238,711 161,666
Co-operative apartments 6,566 7,070
Construction 103,626 119,745
Small Business Administration 19,671 18,922
Taxi medallion 12,979 68,250
Commercial business and other 69,759 41,796
Net unamortized premiums and unearned
loan fees 17,121 14,083
Allowance for loan losses (11,028) (6,633)
----------- -----------
Net loans 2,960,662 2,702,118
Interest and dividends receivable 18,473 15,768
Bank premises and equipment, net 22,806 23,936
Federal Home Loan Bank of New York stock 47,665 42,669
Bank owned life insurance 57,499 52,260
Goodwill 16,127 16,127
Core deposit intangible 2,342 2,810
Other assets 46,232 22,583
----------- -----------
Total assets $ 3,949,471 $ 3,354,519
=========== ===========
LIABILITIES
-----------
Due to depositors:
Non-interest bearing $ 69,624 $ 69,299
Interest-bearing:
Certificate of deposit accounts 1,436,450 1,167,399
Savings accounts 359,595 354,746
Money market accounts 306,178 340,694
NOW accounts 265,762 70,817
----------- -----------
Total interest-bearing deposits 2,367,985 1,933,656
Mortgagors' escrow deposits 31,225 22,492
Borrowed funds 1,138,949 1,072,551
Other liabilities 40,196 22,867
----------- -----------
Total liabilities 3,647,979 3,120,865
----------- -----------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock ($0.01 par value; 5,000,000
shares authorized; 70,000 shares issued at
December 31, 2008, none issued at
December 31, 2007; liquidation preference
value of $70,000) 1 --
Common stock ($0.01 par value; 40,000,000
shares authorized; 21,625,709 shares and
21,321,564 shares issued and outstanding at
December 31, 2008 and December 31, 2007,
respectively) 216 213
Additional paid-in capital 150,662 74,861
Treasury stock (None at December 31, 2008 and
2007, respectively) -- --
Unearned compensation (1,300) (2,110)
Retained earnings 172,216 161,598
Accumulated other comprehensive loss,
net of taxes (20,303) (908)
----------- -----------
Total stockholders' equity 301,492 233,654
----------- -----------
Total liabilities and
stockholders' equity $ 3,949,471 $ 3,354,519
=========== ===========
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three For the year
months ended ended
December 31, December 31,
----------------- -----------------
(Dollars in thousands, except per
share data) 2008 2007 2008 2007
---------------------------------------------------------------------
Interest and dividend income
----------------------------
Interest and fees on loans $ 47,761 $ 46,117 $190,004 $174,987
Interest and dividends on
securities:
Interest 7,411 5,107 23,363 16,687
Dividends 475 810 2,740 1,181
Other interest income 61 370 594 707
-------- -------- -------- --------
Total interest and dividend
income 55,708 52,404 216,701 193,562
-------- -------- -------- --------
Interest expense
----------------
Deposits 19,804 21,166 76,754 78,017
Other interest expense 13,113 13,011 52,218 44,607
-------- -------- -------- --------
Total interest expense 32,917 34,177 128,972 122,624
-------- -------- -------- --------
Net interest income 22,791 18,227 87,729 70,938
Provision for loan losses 2,000 -- 5,600 --
-------- -------- -------- --------
Net interest income after
provision for loan losses 20,791 18,227 82,129 70,938
-------- -------- -------- --------
Non-interest income
-------------------
Loan fee income 534 677 2,585 3,171
Banking services fee income 406 429 1,638 1,566
Net gain on sale of loans held
for sale 18 90 151 359
Net gain on sale of loans (136) 117 (151) 341
Other-than-temporary impairment
charge on securities (1,255) (4,710) (27,575) (4,710)
Net gain on sale of securities -- -- 354 --
Net gain from fair value
adjustments 1,476 1,725 20,090 2,685
Federal Home Loan Bank of New York
stock dividends 399 735 2,863 2,654
Bank owned life insurance 573 448 2,239 1,743
Other income 902 558 4,774 2,444
-------- -------- -------- --------
Total non-interest income 2,917 69 6,968 10,253
-------- -------- -------- --------
Non-interest expense
--------------------
Salaries and employee benefits 6,361 5,418 26,160 23,564
Occupancy and equipment 1,599 1,659 6,528 6,527
Professional services 1,613 1,698 5,828 5,220
Data processing 994 1,033 3,958 3,605
Depreciation and amortization 603 623 2,407 2,417
Other operating expenses 2,455 1,737 9,900 8,743
-------- -------- -------- --------
Total non-interest expense 13,625 12,168 54,781 50,076
-------- -------- -------- --------
Income before income taxes 10,083 6,128 34,316 31,115
-------- -------- -------- --------
Provision for income taxes
--------------------------
Federal 2,827 1,652 9,769 9,272
State and local 777 185 2,288 1,658
-------- -------- -------- --------
Total taxes 3,604 1,837 12,057 10,930
-------- -------- -------- --------
Net income $ 6,479 $ 4,291 $ 22,259 $ 20,185
======== ======== ======== ========
Basic earnings per common share $ 0.32 $ 0.22 $ 1.11 $ 1.03
Diluted earnings per common share $ 0.31 $ 0.22 $ 1.10 $ 1.02
Dividends per common share $ 0.13 $ 0.12 $ 0.52 $ 0.48
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
At or for the three At or for the year
months ended Dec. 31, ended Dec. 31,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Per Share Data
--------------
Basic earnings per
common share $0.32 $0.22 $1.11 $1.03
Diluted earnings per
common share $0.31 $0.22 $1.10 $1.02
Average number of
common shares
outstanding for:
Basic earnings per
common share
computation 20,131,251 19,721,998 19,999,588 19,624,965
Diluted earnings
per common
share computation 20,219,696 19,930,865 20,170,633 19,861,491
Book value per common
share (based on
21,625,709 and
21,321,564 shares
outstanding at
December 31, 2008 and
2007, respectively) $10.77 $10.96 $10.77 $10.96
Average Balances
----------------
Total loans, net $ 2,927,805 $ 2,676,660 $ 2,841,933 $ 2,534,250
Total interest-earning
assets 3,573,889 3,151,483 3,377,449 2,901,435
Total assets 3,749,900 3,323,689 3,561,826 3,066,401
Total due to
depositors 2,281,756 1,931,553 2,092,628 1,831,394
Total interest-bearing
liabilities 3,423,380 3,011,371 3,235,727 2,761,618
Stockholders' equity 235,600 227,078 233,073 220,607
Performance Ratios (1)
-------------------
Return on average
assets 0.69% 0.52% 0.62% 0.66%
Return on average
equity 11.00 7.56 9.55 9.15
Yield on average
interest-earning
assets 6.24 6.65 6.42 6.67
Cost of average
interest-bearing
liabilities 3.85 4.54 3.99 4.44
Interest rate spread
during period 2.39 2.11 2.43 2.23
Net interest margin 2.55 2.31 2.60 2.44
Non-interest expense
to average assets 1.45 1.46 1.54 1.63
Efficiency ratio 58.01 57.18 58.40 60.20
Average interest-
earning assets to
average interest-
bearing liabilities 1.04X 1.05X 1.04X 1.05X
(1) Ratios for the three months ended December 31, 2008 and 2007 are
presented on an annualized basis.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
At or for the At or for the
year ended year ended
Dec. 31, 2008 Dec. 31, 2007
------------- -------------
Selected Financial Ratios
and Other Data
-------------------------
Regulatory capital ratios
(for Flushing Savings Bank only):
Tangible capital
(minimum requirement = 1.5%) 7.92 % 7.27 %
Leverage and core capital
(minimum requirement = 3%) 7.92 7.27
Total risk-based capital
(minimum requirement = 8%) 13.02 11.20
Capital ratios:
Average equity to average assets 6.54 % 7.19 %
Equity to total assets 7.63 6.97
Asset quality:
Non-accrual loans $38,659 $5,140
Non-performing loans 39,972 5,893
Non-performing assets 40,704 5,893
Net charge-offs 1,205 424
Asset quality ratios:
Non-performing loans to gross loans 1.35 % 0.22 %
Non-performing assets to
total assets 1.03 0.18
Allowance for loan losses to
gross loans 0.37 0.25
Allowance for loan losses to
non-performing assets 27.09 112.57
Allowance for loan losses to
non-performing loans 27.59 112.57
Full-service customer facilities 15 14
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in Thousands)
(Unaudited)
For the three months ended December 31,
-----------------------------------------------------
2008 2007
------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------------------------- -------------------------
Assets
Interest-earning
assets:
Mortgage loans,
net (1) $2,828,498 $46,334 6.55% $2,556,546 $43,811 6.85%
Other loans,
net (1) 99,307 1,427 5.75 120,114 2,306 7.68
------------------------- -------------------------
Total loans,
net 2,927,805 47,761 6.53 2,676,660 46,117 6.89
------------------------- -------------------------
Mortgage-backed
securities 531,830 6,949 5.23 363,215 4,697 5.17
Other
securities 76,353 937 4.91 79,156 1,220 6.17
------------------------- -------------------------
Total
securities 608,183 7,886 5.19 442,371 5,917 5.35
------------------------- -------------------------
Interest-earning
deposits and
federal funds
sold 37,901 61 0.64 32,452 370 4.56
------------------------- -------------------------
Total
interest-earning
assets 3,573,889 55,708 6.24 3,151,483 52,404 6.65
------------- -------------
Other assets 176,011 172,206
---------- ----------
Total assets $3,749,900 $3,323,689
========== ==========
Liabilities
and Equity
Interest-bearing
liabilities:
Deposits:
Savings
accounts $ 355,349 1,776 2.00 $ 349,158 2,482 2.84
NOW accounts 225,141 1,441 2.56 65,666 350 2.13
Money market
accounts 298,990 2,208 2.95 334,946 3,654 4.36
Certificate
of deposit
accounts 1,402,276 14,363 4.10 1,181,783 14,664 4.96
------------------------- -------------------------
Total due to
depositors 2,281,756 19,788 3.47 1,931,553 21,150 4.38
Mortgagors'
escrow
accounts 39,402 16 0.16 33,976 16 0.19
------------------------- -------------------------
Total
deposits 2,321,158 19,804 3.41 1,965,529 21,166 4.31
Borrowed funds 1,102,222 13,113 4.76 1,045,842 13,011 4.98
------------------------- -------------------------
Total
interest-
bearing
liabilities 3,423,380 32,917 3.85 3,011,371 34,177 4.54
------------- -------------
Non interest-
bearing
deposits 67,112 65,757
Other
liabilities 23,808 19,483
---------- ----------
Total
liabilities 3,514,300 3,096,611
Equity 235,600 227,078
---------- ----------
Total
liabilities
and equity $3,749,900 $3,323,689
========== ==========
Net interest
income / net
interest rate
spread $22,791 2.39% $18,227 2.11%
============== ==============
Net interest-
earning assets /
net interest
margin $ 150,509 2.55% $ 140,112 2.31%
========== ==== ========== ====
Ratio of
interest-earning
assets to
interest-bearing
liabilities 1.04X 1.05X
==== ====
(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 and
$0.9 million for the three-month periods ended December 31, 2008
and 2007, respectively.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in Thousands)
(Unaudited)
For the year ended December 31,
-----------------------------------------------------
2008 2007
------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------------------------- -------------------------
Assets
Interest-earning
assets:
Mortgage loans,
net (1) $2,731,823 $182,832 6.69% $2,438,479 $167,537 6.87%
Other loans,
net (1) 110,110 7,172 6.51 95,771 7,450 7.78
------------------------- -------------------------
Total loans,
net 2,841,933 190,004 6.69 2,534,250 174,987 6.90
------------------------- -------------------------
Mortgage-backed
securities 420,815 21,836 5.19 300,196 14,945 4.98
Other securities 82,351 4,267 5.18 51,767 2,923 5.65
------------------------- -------------------------
Total
securities 503,166 26,103 5.19 351,963 17,868 5.08
------------------------- -------------------------
Interest-earning
deposits and
federal funds
sold 32,350 594 1.84 15,222 707 4.64
------------------------- -------------------------
Total interest-
earning assets 3,377,449 216,701 6.42 2,901,435 193,562 6.67
------------- -------------
Other assets 184,377 164,966
---------- ----------
Total assets $3,561,826 $3,066,401
========== ==========
Liabilities and
Equity
Interest-bearing
liabilities:
Deposits:
Savings
accounts $ 365,885 7,793 2.13 $ 310,457 7,574 2.44
NOW accounts 147,003 3,688 2.51 57,915 913 1.58
Money market
accounts 303,776 9,704 3.19 294,402 12,425 4.22
Certificate of
deposit
accounts 1,275,964 55,501 4.35 1,168,620 57,029 4.88
------------------------- -------------------------
Total due to
depositors 2,092,628 76,686 3.66 1,831,394 77,941 4.26
Mortgagors'
escrow
accounts 35,465 68 0.19 32,403 76 0.23
------------------------- -------------------------
Total
deposits 2,128,093 76,754 3.61 1,863,797 78,017 4.19
Borrowed funds 1,107,634 52,218 4.71 897,821 44,607 4.97
------------------------- -------------------------
Total
interest-
bearing
liabilities 3,235,727 128,972 3.99 2,761,618 122,624 4.44
-------------- --------------
Non interest-
bearing deposits 71,613 65,508
Other liabilities 21,413 18,668
---------- ----------
Total
liabilities 3,328,753 2,845,794
Equity 233,073 220,607
---------- ----------
Total
liabilities
and equity $3,561,826 $3,066,401
========== ==========
Net interest
income / net
interest rate
spread $ 87,729 2.43% $ 70,938 2.23%
============== ==============
Net interest-
earning assets /
net interest
margin $ 141,722 2.60% $ 139,817 2.44%
========== ==== ========== ====
Ratio of
interest-earning
assets to
interest-bearing
liabilities 1.04X 1.05X
==== ====
(1) Loan interest income includes loan fee income (which includes net
amortization of deferred fees and costs, late charges, and
prepayment penalties) of approximately $3.7 million and
$3.7 million for the years ended December 31, 2008 and 2007,
respectively.