Flushing Financial Corporation Reports 1Q23 GAAP EPS of $0.17 and Core EPS of $0.10; Deposits Increase Sequentially and Year-Over-Year; Liquidity Remains Strong Outlines Action Plan to Enhance Business Model Resilience and Drive Profitability in Current Environment
04/25/2023 - 05:30 PM
John R. Buran, President and CEO Commentary
“The inverted yield curve and the rising rate environment led to first quarter results below our expectations. To better adapt to the changing environment, we are accelerating the following actions to enhance the resilience of our business model and strengthen performance: 1) move more towards being interest rate neutral in the shorter term; 2) increase our focus on risk adjusted returns and profitability; 3) emphasize our brand of customer service and deep relationships to continue to expand the client base and enhance loyalty; 4) further tighten expense controls; 5) review new and existing lending relationships to prepare for the next credit cycle; and 6) preserve our strong liquidity and capital. We continue to experience solid deposit growth, which reflects our deep client relationships and ties to our communities. Further, our strong liquidity is expected to allow us to continue our long track record of dividend payments. While the environment has clearly become more challenging, we are confident that our decisive actions we are taking now will result in improved profitability in the future and set the stage for consistent and significantly higher returns.” - John R. Buran, President and CEO
UNIONDALE, N.Y., April 25, 2023 (GLOBE NEWSWIRE) -- Strong Credit Quality Despite Loss on One Singular Relationship. Results for the quarter were impacted by our decision to fully charge off a $9.2 million business credit placed on non-accrual in 2Q22. This credit was a participation where the domestic borrower had a significant customer who shipped its product internationally and was impacted by world events. Existing credit protection became more questionable during the quarter which led to the decision to charge-off. Consistent with our long-standing history of conservative underwriting, the remainder of the credit portfolio continued to perform well as delinquencies improved 16 basis points and criticized and classified assets declined QoQ. NIM Outlook; Solid Capital and Liquidity. While rising rates temporarily compress our net interest margin, the NIM should begin to rebound, on a lagged basis, after the Fed stops raising rates. To limit additional margin squeeze, we moved closer to interest rate neutral, achieving approximately 40% of our target for 2023 in the first quarter. Capital continues to be strong with a TCE1 of 7.73%. Liquidity is solid with $3.7 billion of availability while uninsured and uncollateralized deposits are a low $1.1 billion or 16.2% of total deposits.
1Q23 4Q22 3Q22 2Q22 1Q22 GAAP: EPS $0.17 $0.34 $0.76 $0.81 $0.58 ROAA (%) 0.24 0.48 1.11 1.22 0.91 ROAE (%) 3.02 6.06 13.91 15.00 10.83 NIM FTE3 (%) 2.27 2.70 3.07 3.35 3.36 Core: EPS $0.10 $0.57 $0.62 $0.70 $0.61 ROAA (%) 0.14 0.82 0.90 1.05 0.94 ROAE (%) 1.76 10.29 11.24 12.90 11.27 Core NIM FTE (%) 2.25 2.63 3.03 3.33 3.31 Credit Quality: NPAs/Loans & OREO (%) 0.61 0.77 0.72 0.72 0.21 ACLs/Loans (%) 0.56 0.58 0.59 0.58 0.57 ACLs/NPLs (%) 182.89 124.89 142.29 141.06 266.12 NCOs/Avg Loans (%) 0.54 0.05 0.02 (0.03 ) 0.06 Balance Sheet: Avg Loans ($B) $6.9 $6.9 $6.9 $6.6 $6.6 Avg Dep ($B) $6.8 $6.7 $6.3 $6.4 $6.4 Book Value/Share $22.84 $22.97 $22.47 $22.38 $22.26 Tangible BV/Share $22.18 $22.31 $21.81 $21.71 $21.61 TCE/TA (%) 7.73 7.82 7.62 7.82 8.05
1 Tangible Common Equity (“TCE”)/Total Assets (“TA”) 2 See “Reconciliation of GAAP Earnings and Core Earnings”, “Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue”, and “Reconciliation of GAAP Net Interest Margin to Core Net Interest Income and Net Interest Margin.” 3 Net Interest Margin (“NIM”) Fully Taxable Equivalent (“FTE”)
Average total deposits increased 2.0% QoQ and 6.2% YoY to $6.8 billion, with core deposits comprising 75.3% of total average deposits; opened new Hauppauge branch during the quarter Period end net loans declined slightly QoQ and increased 4.5% YoY; loan closings were $173.5 million down 22.9% QoQ and 47.3% YoY; the yield on closings increased 91 bps QoQ and 357 bps YoY to 7.01% Loan pipeline decreased 59.9% YoY, but increased 5.5% QoQ to $266.1 million reflecting higher rates and greater client selectivity Net interest margin FTE decreased 43 bps QoQ and 109 bps YoY to 2.27%; Core net interest margin FTE decreased 38 bps QoQ and 106 bps YoY to 2.25%; The decline in GAAP and Core NIM was primarily driven by our liability sensitive balance sheet resulting in liabilities repricing faster than assets; after a lag, the NIM is expected to expand when the Fed stops raising rates Achieved 40% of our goal of moving towards interest rate neutral in 1Q23. These actions include adding $200 million hedge on investments, $50 million (net) of funding swaps, increasing floating rate securities, and extending funding NPAs declined to $42.2 million from $53.4 million at 4Q22, but increased from $14.1 million at 1Q22 Provision for credit losses was $7.5 million in 1Q23 compared to $1.4 million in 1Q22; net charge-offs were $9.2 million in 1Q23 compared to $0.9 million in 1Q22 Tangible Common Equity to Tangible Assets was 7.73%, down from 7.82% at 4Q22; the change in accumulated other comprehensive loss, net of taxes negatively impacted this ratio by 2 bps in 1Q23; our swaps portfolio serves as a partial offset to the value of the AFS securities portfolio when rates change Repurchased 159,516 shares at an average price of $19.14 Areas of Focus Credit Quality Midtown Manhattan office exposure is 0.1% of net loans The Company is a conservatively managed institution with a history of low and below industry levels of credit losses Over 88% of the loan portfolio is collateralized by real estate with an average loan to value less than 37% and debt service coverage ratios for multifamily and commercial real estate, which together total 65% of the loan portfolio, of 1.9x; This strong level of coverage is expected to enable our borrowers to absorb the impact of higher operating costs and higher interest rates while still generating ample cash flows to cover required principal and interest payments Interest Rate Risk Historically the Company operated with a liability sensitive balance sheet resulting in liabilities repricing faster than assets when interest rates change During 1Q23, the Company took significant actions to position the balance sheet towards a more interest rate risk neutral position These actions, which include adding hedges, floating rate assets, and extending funding, resulted in achievement of 40% of our goal for 2023 Liquidity Deposits increased nearly $250 million in the first quarter, and we see new opportunities for growth The Company continues to have ample liquidity with $3.7 billion of undrawn lines and resources Uninsured and uncollateralized deposits were only 16.2% of total deposits at March 31, 2023 Checking account openings were up 30% YoY in 1Q23 Customer Experience Additional opportunities emerging as a result of a major competitor leaving the market Approximately 33% of our branches are in Asian markets Bensonhurst, our 27th branch, is expected to open in 2023 and will enhance our Asian branch presence Digital banking usage continues to increase with double digit growth in monthly mobile deposit active uses and digital banking enrollment in March 2023 versus a year ago
Income Statement Highlights
YoY QoQ ($000s, except EPS) 1Q23 4Q22 3Q22 2Q22 1Q22 Change Change Net Interest Income $45,262 $54,201 $61,206 $64,730 $63,479 (28.7 ) % (16.5 ) % Provision (Benefit) for Credit Losses 7,508 (12 ) 2,145 1,590 1,358 452.9 NM Noninterest Income (Loss) 6,908 (7,652 ) 8,995 7,353 1,313 NM (190.3 ) Noninterest Expense 37,703 33,742 35,634 35,522 38,794 (2.8 ) 11.7 Income Before Income Taxes 6,959 12,819 32,422 34,971 24,640 (71.8 ) (45.7 ) Provision for Income Taxes 1,801 2,570 8,980 9,936 6,421 (72.0 ) (29.9 ) Net Income $5,158 $10,249 $23,442 $25,035 $18,219 (71.7 ) (49.7 ) Diluted EPS $0.17 $0.34 $0.76 $0.81 $0.58 (70.7 ) (50.0 ) Avg. Diluted Shares (000s) 30,265 30,420 30,695 30,937 31,254 (3.2 ) (0.5 ) Core Net Income1 $3,003 $17,399 $18,953 $21,518 $18,969 (84.2 ) (82.7 ) Core EPS1 $0.10 $0.57 $0.62 $0.70 $0.61 (83.6 ) (82.5 )
1 See Reconciliation of GAAP Earnings and Core Earnings
Net interest income totaled $45.3 million in 1Q23 compared to $54.2 million in 4Q22, $61.2 million in 3Q22, $64.7 million in 2Q22, and $63.5 million in 1Q22.
Net interest margin, FTE (“NIM”) of 2.27% decreased 109 bps YoY and 43 bps QoQ Prepayment penalty income from loans and securities, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $1.1 million (6 bps to the NIM) in 1Q23 compared to $2.4 million (12 bps) in 4Q22, $2.2 million (11 bps) in 3Q22, $2.6 million (13 bps) in 2Q22, and $2.6 million (14 bps) in 1Q22 Excluding the items in the previous bullet, net interest margin was 2.21% in 1Q23, 2.58% in 4Q22, 2.96% in 3Q22, and 3.22% in both 2Q22 and 1Q22 In order to move more towards a neutral interest rate risk position, the following actions were taken: Added $200 million of hedges against the investment portfolio converting securities yielding 1.90% into assets yielding 3.41% Purchases $250.0 million of funding derivatives locking in funding at a weighted average cost of 3.72% with a duration approximately 3.2 years Extended funding through FHLB advances totaling $71.7 million at 4.05%, with an average duration of 4.0 years Purchased $66.7 million of floating (reprice within 90 days) rate securities with an initial weighted average yield of 6.45% The totality of these actions equates to approximately 40% of the goal of moving towards interest rate neutral Additionally, the balance sheet, as of March 31, 2023, consists of: Approximately $1.6 billion of assets were floating or swapped into floating rate assets Funding derivatives totaled $921.5 million with $621.5 million effective at 2.53% for 2.4 years and $300.0 million forward starting at 1.80% with a remaining term of 2.7 years; this strategy was started in 2018 The Company has $2.5 billion of protection in place against a rising rate environment through floating assets and derivative strategy The Company recorded a provision for credit losses of $7.5 million in 1Q23 compared to a benefit for credit losses of $12 thousand in 4Q22, a provision for credit losses of $2.1 million in 3Q22, $1.6 million in 2Q22, and $1.4 million in 1Q22.
Net charge-offs (recoveries) were $9.2 million in 1Q23 (54 bps of average loans), $0.8 million in 4Q22 (5 bps of average loans), $0.3 million in 3Q22 (2 bps of average loans), $(0.5) million in 2Q22 ((3) bps of average loans), and $0.9 million in 1Q22 (6 bps of average loans) 1Q23 net charge-offs were primarily related to a commercial business relationship that was placed on nonaccrual in 2Q22 Noninterest income (loss) was $6.9 million in 1Q23, $(7.7) million in 4Q22, $9.0 million in 3Q22, $7.4 million in 2Q22, and $1.3 million in 1Q22.
Noninterest income included net gains (losses) from fair value adjustments of $2.6 million in 1Q23 ($0.06 per share, net of tax), $(0.6) million in 4Q22 ($(0.02) per share, net of tax), $5.6 million in 3Q22 ($0.13 per share, net of tax), $2.5 million in 2Q22 ($0.06 per share, net of tax), and $(1.8) million in 1Q22 ($(0.04) per share, net of tax) Loss on the sale of securities was $10.9 million ($0.27 per share, net of tax) in 4Q22 as the Company sold $84.2 million of mortgage-based securities with an approximate yield of 1.17%; proceeds were primarily reinvested in 1Q23 into floating rate securities that have a yield that approximates 6.40% Life insurance proceeds were $0.3 million ($0.01 per share) in 4Q22 and $1.5 million ($0.05 per share) in 2Q22 Absent all above items and other immaterial adjustments, core noninterest income was $4.3 million in 1Q23, up 37.4% YoY and 21.6% QoQ; investment product sales were a significant driver of the YOY and QoQ increase Noninterest expense totaled $37.7 million in 1Q23 (a decrease of 2.8% YoY, but an increase of 11.7% QoQ) compared to $33.7 million in 4Q22, $35.6 million in 3Q22, $35.5 million in 2Q22, and $38.8 million in 1Q22.
Given the challenging rate environment, management continues to actively review all noninterest expenses Salaries and employee benefits include $1.7 million and $1.4 million benefit from Employee Retention Tax Credit refunds in 1Q23 and 4Q22, respectively, and $2.8 million benefit from a lower discount rate for certain benefit plans in 4Q22 Other operating expenses include $0.6 million reduction in reserves for unfunded commitments in 3Q22 Seasonal compensation expense was $4.1 million and $4.3 million in 1Q23 and 1Q22, respectively Excluding the effects of other immaterial adjustments, core operating expenses were $37.6 million in 1Q23, down 2.8% YoY but up 11.8% QoQ; excluding the Employee Retention Tax Credit refund and the benefit from the lower discount rate in 4Q22, 1Q23 and 4Q22 core noninterest expense would have been $39.3 million and $37.8 million, respectively GAAP noninterest expense to average assets was 1.78% in 1Q23, 1.58% in 4Q22, 1.69% in 3Q22, 1.73% in 2Q22, and 1.93% in 1Q22 The provision for income taxes was $1.8 million in 1Q23 compared to $2.6 million in 4Q22, $9.0 million in 3Q22, $9.9 million in 2Q22, and $6.4 million in 1Q22.
The effective tax rate was 25.9% in 1Q23, 20.0% in 4Q22, 27.7% in 3Q22, 28.4% in 2Q22, and 26.1% in 1Q22 The 4Q22 effective tax rate declined due to preferential tax items having a larger impact due to lower levels of pre-tax income The 2Q22 effective tax rate includes a loss of certain state and city tax deductions and a resolution of certain examinations by taxing authorities Balance Sheet, Credit Quality, and Capital Highlights
YoY QoQ 1Q23 4Q22 3Q22 2Q22 1Q22 Change Change Averages ($MM) Loans $6,871 $6,881 $6,861 $6,640 $6,579 4.4 % (0.1 ) % Total Deposits 6,810 6,678 6,277 6,441 6,410 6.2 2.0 Credit Quality ($000s) Nonperforming Loans $21,176 $32,382 $29,003 $27,948 $14,066 50.5 % (34.6 ) % Nonperforming Assets 42,157 53,363 49,984 48,929 14,066 199.7 (21.0 ) Criticized and Classified Loans 58,130 68,093 61,684 57,145 59,548 (2.4 ) (14.6 ) Criticized and Classified Assets 79,111 89,073 82,665 78,125 80,527 (1.8 ) (11.2 ) Allowance for Credit Losses/Loans (%) 0.56 0.58 0.59 0.58 0.57 (1 ) bp (2 ) bps Capital Book Value/Share $22.84 $22.97 $22.47 $22.38 $22.26 2.6 % (0.6 ) % Tangible Book Value/Share 22.18 22.31 21.81 21.71 21.61 2.6 (0.6 ) Tang. Common Equity/Tang. Assets (%) 7.73 7.82 7.62 7.82 8.05 (32 ) bps (9 ) bps Leverage Ratio (%) 8.58 8.61 8.74 8.91 9.05 (47 ) (3 )
Average loans were $6.9 billion, an increase of 4.4% YoY and down 0.1% QoQ.
Maintain the credit strategy of loans secured by real estate with an emphasis on rent regulated multifamily Period end net loans totaled $6.9 billion, up 4.5% YoY, but down 0.4% QoQ Total loan closings were $173.5 million in 1Q23, $225.2 million in 4Q22, $463.7 million in 3Q22, $503.8 million in 2Q22, and $329.3 million in 1Q22; the loan pipeline was $266.1 million at March 31, 2023, down 59.9% YoY, but up 5.5% QoQ The diversified loan portfolio is over 88% collateralized by real estate with an average loan-to-value ratio of <37% Midtown Manhattan office exposure is 0.1% of net loans Average total deposits were $6.8 billion, increasing 6.2% YoY and 2.0% QoQ.
Average core deposits (non-CD deposits) were 75.3% of total average deposits in 1Q23, compared to 86.1% a year ago Average noninterest bearing deposits decreased 10.5% YoY in 1Q23 and 8.5% QoQ and comprised 13.2% of average total deposits in 1Q23 compared to 15.6% a year ago Uninsured and uncollateralized deposits totaled $1.1 billion or 16.2% of total deposits; Bank liquidity remains strong with $3.7 billion of availability Credit Quality: Nonperforming loans at the end of each quarter totaled $21.2 million at 1Q23, $32.4 million at 4Q22, $29.0 million at 3Q22, $27.9 million at 2Q22, and $14.1 million at 1Q22.
Criticized and classified loans were 84 bps of gross loans at 1Q23 compared to 98 bps at 4Q22, 89 bps at 3Q22, 85 bps at 2Q22, and 90 bps at 1Q22 Total delinquent loans improved 16 bps QoQ to 42 bps from 58 bps indicating further improvement in future credit quality Allowance for credit losses were 182.9% of nonperforming loans at 1Q23 compared to 124.9% at 4Q22, and 266.1% at 1Q22 Capital: Book value per common share was $22.84 at 1Q23, up 2.6% YoY, but down 0.6% QoQ; tangible book value per common share, a non-GAAP measure, was $22.18 at 1Q23, up 2.6% YoY, but down 0.6% QoQ.
The Company paid a dividend of $0.22 per share; the Company has ample available liquidity to meet its obligations; Purchased 159,516 shares at an average price of $19.14 in 1Q23 with 434,946 shares remain subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit Tangible common equity to tangible assets was 7.73% at 1Q23 compared to 7.82% at 4Q22 and 8.05% at 1Q22; the swaps portfolio serves as a partial offset to market value changes in the AFS securities portfolio The Company and the Bank remain well capitalized under all applicable regulatory requirements Conference Call Information And Second Quarter Earnings Release Date
Conference Call Information:
John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer and Treasurer, will host a conference call on Wednesday, April 26, 2023, at 9:30 AM (ET) to discuss the Company’s first quarter results and strategy. Dial-in for Live Call: 1-877-509-5836; Canada 855-669-9657 Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=LTE5H6Xo Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658 Replay Access Code: 2825200 The conference call will be simultaneously webcast and archived Second Quarter 2023 Earnings Release Date:
The Company plans to release Second Quarter 2023 financial results after the market close on July 25, 2023; followed by a conference call at 9:30 AM (ET) on July 26, 2023.
A detailed announcement will be issued prior to the second quarter’s close confirming the date and time of the earnings release.
About Flushing Financial Corporation
Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, an FDIC insured, New York State—chartered commercial bank that operates banking offices in Queens, Brooklyn, Manhattan, and on Long Island. The Bank has been building relationships with families, business owners, and communities since 1929. Today, it offers the products, services, and conveniences associated with large commercial banks, including a full complement of deposit, loan, equipment finance, and cash management services. Rewarding customers with personalized attention and bankers that can communicate in the languages prevalent within these multicultural markets is what makes the Bank uniquely different. As an Equal Housing Lender and leader in real estate lending, the Bank’s experienced lending teams create mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also fosters relationships with consumers nationwide through its online banking division with the iGObanking® and BankPurely® brands.
Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at FlushingBank.com . Flushing Financial Corporation’s earnings release and presentation slides will be available prior to the conference call at www.FlushingBank.com under Investor Relations.
“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, 2022 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”, “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.
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- Statistical Tables Follow -
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited)
At or for the three months ended March 31, December 31, September 30, June 30, March 31, (Dollars in thousands, except per share data) 2023 2022 2022 2022 2022 Performance Ratios (1) Return on average assets 0.24 % 0.48 % 1.11 % 1.22 % 0.91 % Return on average equity 3.02 6.06 13.91 15.00 10.83 Yield on average interest-earning assets (2) 4.61 4.44 4.10 3.85 3.77 Cost of average interest-bearing liabilities 2.80 2.11 1.25 0.60 0.50 Cost of funds 2.47 1.84 1.08 0.52 0.43 Net interest rate spread during period (2) 1.81 2.33 2.85 3.25 3.27 Net interest margin (2) 2.27 2.70 3.07 3.35 3.36 Noninterest expense to average assets 1.78 1.58 1.69 1.73 1.93 Efficiency ratio (3) 76.48 59.55 55.68 52.27 58.87 Average interest-earning assets to average interest-bearing liabilities 1.19 X 1.21 X 1.22 X 1.22 X 1.22 X Average Balances Total loans, net $ 6,871,192 $ 6,881,245 $ 6,861,463 $ 6,640,331 $ 6,578,680 Total interest-earning assets 7,996,677 8,045,691 7,979,070 7,740,683 7,570,373 Total assets 8,468,311 8,518,019 8,442,657 8,211,763 8,049,470 Total deposits 6,810,485 6,678,383 6,276,613 6,440,904 6,410,063 Total interest-bearing liabilities 6,703,558 6,662,209 6,553,087 6,337,374 6,220,510 Stockholders’ equity 683,071 676,165 674,282 667,456 673,012 Per Share Data Book value per common share (4) $ 22.84 $ 22.97 $ 22.47 $ 22.38 $ 22.26 Tangible book value per common share (5) $ 22.18 $ 22.31 $ 21.81 $ 21.71 $ 21.61 Stockholders’ Equity Stockholders’ equity $ 673,459 $ 677,157 $ 670,719 $ 670,812 $ 675,813 Tangible stockholders’ equity 653,932 657,504 650,936 650,894 656,085 Consolidated Regulatory Capital Ratios Tier 1 capital $ 737,138 $ 746,880 $ 749,526 $ 739,776 $ 731,536 Common equity Tier 1 capital 690,846 698,258 701,532 686,258 675,434 Total risk-based capital 965,384 975,709 979,021 903,047 892,861 Risk Weighted Assets 6,659,532 6,640,542 6,689,284 6,522,710 6,232,020 Tier 1 leverage capital (well capitalized = 5%) 8.58 % 8.61 % 8.74 % 8.91 % 9.05 % Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 10.37 10.52 10.49 10.52 10.84 Tier 1 risk-based capital (well capitalized = 8.0%) 11.07 11.25 11.20 11.34 11.74 Total risk-based capital (well capitalized = 10.0%) 14.50 14.69 14.64 13.84 14.33 Capital Ratios Average equity to average assets 8.07 % 7.94 % 7.99 % 8.13 % 8.36 % Equity to total assets 7.94 8.04 7.84 8.04 8.27 Tangible common equity to tangible assets (6) 7.73 7.82 7.62 7.82 8.05 Asset Quality Nonaccrual loans (7) $ 21,176 $ 29,782 $ 27,003 $ 27,848 $ 14,066 Nonperforming loans 21,176 32,382 29,003 27,948 14,066 Nonperforming assets 42,157 53,363 49,984 48,929 14,066 Net charge-offs (recoveries) 9,234 811 290 (501 ) 935 Asset Quality Ratios Nonperforming loans to gross loans 0.31 % 0.47 % 0.42 % 0.41 % 0.21 % Nonperforming assets to total assets 0.50 0.63 0.58 0.59 0.17 Allowance for credit losses to gross loans 0.56 0.58 0.59 0.58 0.57 Allowance for credit losses to nonperforming assets 91.87 75.79 82.56 80.57 266.12 Allowance for credit losses to nonperforming loans 182.89 124.89 142.29 141.06 266.12 Net charge-offs (recoveries) to average loans 0.54 0.05 0.02 (0.03 ) 0.06 Full-service customer facilities 26 25 25 25 24
(1) Ratios are presented on an annualized basis, where appropriate.(2) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.(3) Efficiency ratio, a non-GAAP measure, was calculated by dividing core noninterest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of core net interest income and core noninterest income.(4) Calculated by dividing stockholders’ equity by shares outstanding.(5) 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”.(6) See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.(7) Excludes performing nonaccrual TDR loans in periods prior to 1Q23.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the three months ended March 31, December 31, September 30, June 30, March 31, (In thousands, except per share data) 2023 2022 2022 2022 2022 Interest and Dividend Income Interest and fees on loans $ 82,889 $ 81,033 $ 75,546 $ 69,192 $ 67,516 Interest and dividends on securities: Interest 7,240 6,511 5,676 4,929 3,745 Dividends 29 24 17 11 8 Other interest income 1,959 1,702 506 159 51 Total interest and dividend income 92,117 89,270 81,745 74,291 71,320 Interest Expense Deposits 39,056 27,226 11,965 4,686 3,408 Other interest expense 7,799 7,843 8,574 4,875 4,433 Total interest expense 46,855 35,069 20,539 9,561 7,841 Net Interest Income 45,262 54,201 61,206 64,730 63,479 Provision (benefit) for credit losses 7,508 (12 ) 2,145 1,590 1,358 Net Interest Income After Provision (Benefit) for Credit Losses 37,754 54,213 59,061 63,140 62,121 Noninterest Income (Loss) Banking services fee income 1,411 1,231 1,351 1,166 1,374 Net loss on sale of securities — (10,948 ) — — — Net gain on sale of loans 54 46 — 73 — Net gain on disposition of assets — 104 — — — Net gain (loss) from fair value adjustments 2,619 (622 ) 5,626 2,533 (1,809 ) Federal Home Loan Bank of New York stock dividends 697 658 538 407 397 Life insurance proceeds — 286 — 1,536 — Bank owned life insurance 1,109 1,126 1,132 1,115 1,114 Other income 1,018 467 348 523 237 Total noninterest income (loss) 6,908 (7,652 ) 8,995 7,353 1,313 Noninterest Expense Salaries and employee benefits 20,887 18,178 21,438 21,109 23,649 Occupancy and equipment 3,793 3,701 3,541 3,760 3,604 Professional services 2,483 2,130 2,570 2,285 2,222 FDIC deposit insurance 977 485 738 615 420 Data processing 1,435 1,421 1,367 1,383 1,424 Depreciation and amortization 1,510 1,535 1,488 1,447 1,460 Other real estate owned/foreclosure expense 165 35 143 32 84 Other operating expenses 6,453 6,257 4,349 4,891 5,931 Total noninterest expense 37,703 33,742 35,634 35,522 38,794 Income Before Provision for Income Taxes 6,959 12,819 32,422 34,971 24,640 Provision for Income Taxes 1,801 2,570 8,980 9,936 6,421 Net Income $ 5,158 $ 10,249 $ 23,442 $ 25,035 $ 18,219 Basic earnings per common share $ 0.17 $ 0.34 $ 0.76 $ 0.81 $ 0.58 Diluted earnings per common share $ 0.17 $ 0.34 $ 0.76 $ 0.81 $ 0.58 Dividends per common share $ 0.22 $ 0.22 $ 0.22 $ 0.22 $ 0.22 Basic average shares 30,265 30,420 30,695 30,937 31,254 Diluted average shares 30,265 30,420 30,695 30,937 31,254
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 ASSETS Cash and due from banks $ 176,747 $ 151,754 $ 164,693 $ 137,026 $ 186,407 Securities held-to-maturity: Mortgage-backed securities 7,870 7,875 7,880 7,885 7,890 Other securities 65,653 65,836 66,032 66,230 66,327 Securities available for sale: Mortgage-backed securities 380,110 384,283 468,366 510,934 553,828 Other securities 431,818 351,074 351,495 346,720 286,041 Loans 6,904,176 6,934,769 6,956,674 6,760,393 6,607,264 Allowance for credit losses (38,729 ) (40,442 ) (41,268 ) (39,424 ) (37,433 ) Net loans 6,865,447 6,894,327 6,915,406 6,720,969 6,569,831 Interest and dividends receivable 46,836 45,048 42,571 38,811 37,308 Bank premises and equipment, net 21,567 21,750 22,376 22,285 22,752 Federal Home Loan Bank of New York stock 38,779 45,842 62,489 50,017 33,891 Bank owned life insurance 214,240 213,131 212,353 211,220 211,867 Goodwill 17,636 17,636 17,636 17,636 17,636 Core deposit intangibles 1,891 2,017 2,147 2,282 2,420 Right of use asset 42,268 43,289 44,885 46,687 48,475 Other assets 168,259 179,084 179,090 160,885 125,160 Total assets $ 8,479,121 $ 8,422,946 $ 8,557,419 $ 8,339,587 $ 8,169,833 LIABILITIES Total deposits $ 6,734,090 $ 6,485,342 $ 6,125,305 $ 6,407,577 $ 6,452,895 Borrowed funds 887,509 1,052,973 1,572,830 1,089,621 877,122 Operating lease liability 45,353 46,125 48,330 50,346 52,292 Other liabilities 138,710 161,349 140,235 121,231 111,711 Total liabilities 7,805,662 7,745,789 7,886,700 7,668,775 7,494,020 STOCKHOLDERS' EQUITY Preferred stock (5,000,000 shares authorized; none issued) — — — — — Common stock ($0.01 par value; 100,000,000 shares authorized) 341 341 341 341 341 Additional paid-in capital 262,876 264,332 263,755 262,860 261,837 Treasury stock (97,760 ) (98,535 ) (90,977 ) (88,342 ) (79,834 ) Retained earnings 545,786 547,507 543,894 527,217 508,973 Accumulated other comprehensive loss, net of taxes (37,784 ) (36,488 ) (46,294 ) (31,264 ) (15,504 ) Total stockholders' equity 673,459 677,157 670,719 670,812 675,813 Total liabilities and stockholders' equity $ 8,479,121 $ 8,422,946 $ 8,557,419 $ 8,339,587 $ 8,169,833 (In thousands) Issued shares 34,088 34,088 34,088 34,088 34,088 Outstanding shares 29,488 29,476 29,851 29,980 30,367 Treasury shares 4,600 4,612 4,237 4,108 3,721
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES AVERAGE BALANCE SHEETS (Unaudited)
For the three months ended March 31, December 31, September 30, June 30, March 31, (In thousands) 2023 2022 2022 2022 2022 Interest-earning Assets: Mortgage loans, net $ 5,333,274 $ 5,338,612 $ 5,340,694 $ 5,178,029 $ 5,152,070 Other loans, net 1,537,918 1,542,633 1,520,769 1,462,302 1,426,610 Total loans, net 6,871,192 6,881,245 6,861,463 6,640,331 6,578,680 Taxable securities: Mortgage-backed securities 457,911 549,204 568,854 594,923 580,670 Other securities 411,723 371,897 362,629 333,158 226,744 Total taxable securities 869,634 921,101 931,483 928,081 807,414 Tax-exempt securities: Other securities 66,828 67,022 67,211 67,315 57,611 Total tax-exempt securities 66,828 67,022 67,211 67,315 57,611 Interest-earning deposits and federal funds sold 189,023 176,323 118,913 104,956 126,668 Total interest-earning assets 7,996,677 8,045,691 7,979,070 7,740,683 7,570,373 Other assets 471,634 472,328 463,587 471,080 479,097 Total assets $ 8,468,311 $ 8,518,019 $ 8,442,657 $ 8,211,763 $ 8,049,470 Interest-bearing Liabilities: Deposits: Savings accounts $ 134,945 $ 146,598 $ 154,545 $ 156,785 $ 156,592 NOW accounts 1,970,555 1,972,134 1,808,608 2,089,851 2,036,914 Money market accounts 2,058,523 2,146,649 2,136,829 2,231,743 2,253,630 Certificate of deposit accounts 1,679,517 1,350,683 1,057,733 820,476 889,847 Total due to depositors 5,843,540 5,616,064 5,157,715 5,298,855 5,336,983 Mortgagors' escrow accounts 70,483 82,483 68,602 97,496 71,509 Total interest-bearing deposits 5,914,023 5,698,547 5,226,317 5,396,351 5,408,492 Borrowings 789,535 963,662 1,326,770 941,023 812,018 Total interest-bearing liabilities 6,703,558 6,662,209 6,553,087 6,337,374 6,220,510 Noninterest-bearing demand deposits 896,462 979,836 1,050,296 1,044,553 1,001,571 Other liabilities 185,220 199,809 164,992 162,380 154,377 Total liabilities 7,785,240 7,841,854 7,768,375 7,544,307 7,376,458 Equity 683,071 676,165 674,282 667,456 673,012 Total liabilities and equity $ 8,468,311 $ 8,518,019 $ 8,442,657 $ 8,211,763 $ 8,049,470 Net interest-earning assets $ 1,293,119 $ 1,383,482 $ 1,425,983 $ 1,403,309 $ 1,349,863
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES NET INTEREST INCOME AND NET INTEREST MARGIN (Unaudited)
For the three months ended March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 Interest Income: Mortgage loans, net $ 62,054 $ 60,946 $ 58,374 $ 54,775 $ 53,970 Other loans, net 20,835 20,087 17,172 14,417 13,546 Total loans, net 82,889 81,033 75,546 69,192 67,516 Taxable securities: Mortgage-backed securities 2,281 2,425 2,466 2,356 2,167 Other securities 4,611 3,723 2,839 2,090 1,119 Total taxable securities 6,892 6,148 5,305 4,446 3,286 Tax-exempt securities: Other securities 477 489 492 625 591 Total tax-exempt securities 477 489 492 625 591 Interest-earning deposits and federal funds sold 1,959 1,702 506 159 51 Total interest-earning assets 92,217 89,372 81,849 74,422 71,444 Interest Expense: Deposits: Savings accounts $ 126 $ 59 $ 53 $ 50 $ 49 NOW accounts 13,785 9,515 3,640 1,405 793 Money market accounts 14,102 10,532 5,280 1,952 1,275 Certificate of deposit accounts 11,007 7,037 2,948 1,273 1,289 Total due to depositors 39,020 27,143 11,921 4,680 3,406 Mortgagors' escrow accounts 36 83 44 6 2 Total interest-bearing deposits 39,056 27,226 11,965 4,686 3,408 Borrowings 7,799 7,843 8,574 4,875 4,433 Total interest-bearing liabilities 46,855 35,069 20,539 9,561 7,841 Net interest income- tax equivalent $ 45,362 $ 54,303 $ 61,310 $ 64,861 $ 63,603 Included in net interest income above: Prepayment penalties received on loans and securities and net of reversals and recovered interest from nonaccrual loans $ 680 $ 1,080 $ 1,368 $ 2,281 $ 1,716 Net gains/(losses) from fair value adjustments on qualifying hedges included in interest income 100 936 28 (60 ) (129 ) Purchase accounting adjustments 306 342 775 367 1,058 Interest-earning Assets Yields: Mortgage loans, net 4.65 % 4.57 % 4.37 % 4.23 % 4.19 % Other loans, net 5.42 5.21 4.52 3.94 3.80 Total loans, net 4.83 4.71 4.40 4.17 4.11 Taxable securities: Mortgage-backed securities 1.99 1.77 1.73 1.58 1.49 Other securities 4.48 4.00 3.13 2.51 1.97 Total taxable securities 3.17 2.67 2.28 1.92 1.63 Tax-exempt securities: (1) Other securities 2.86 2.92 2.93 3.71 4.10 Total tax-exempt securities 2.86 2.92 2.93 3.71 4.10 Interest-earning deposits and federal funds sold 4.15 3.86 1.70 0.61 0.16 Total interest-earning assets (1) 4.61 % 4.44 % 4.10 % 3.85 % 3.77 % Interest-bearing Liabilities Yields: Deposits: Savings accounts 0.37 % 0.16 % 0.14 % 0.13 % 0.13 % NOW accounts 2.80 1.93 0.81 0.27 0.16 Money market accounts 2.74 1.96 0.99 0.35 0.23 Certificate of deposit accounts 2.62 2.08 1.11 0.62 0.58 Total due to depositors 2.67 1.93 0.92 0.35 0.26 Mortgagors’ escrow accounts 0.20 0.40 0.26 0.02 0.01 Total interest-bearing deposits 2.64 1.91 0.92 0.35 0.25 Borrowings 3.95 3.26 2.58 2.07 2.18 Total interest-bearing liabilities 2.80 % 2.11 % 1.25 % 0.60 % 0.50 % Net interest rate spread (tax equivalent) (1) 1.81 % 2.33 % 2.85 % 3.25 % 3.27 % Net interest margin (tax equivalent) (1) 2.27 % 2.70 % 3.07 % 3.35 % 3.36 % Ratio of interest-earning assets to interest-bearing liabilities 1.19 X 1.21 X 1.22 X 1.22 X 1.22 X
_____________________________(1) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES DEPOSIT and LOAN COMPOSITION (Unaudited)
Deposit Composition
1Q23 vs. 1Q23 vs. March 31, December 31, September 30, June 30, March 31, 4Q22 1Q22 (Dollars in thousands) 2023 2022 2022 2022 2022 % Change % Change Noninterest bearing $ 872,254 $ 921,238 $ 992,378 $ 1,081,208 $ 1,041,027 (5.3 ) % (16.2 ) % Interest bearing: Certificate of deposit accounts 1,880,260 1,526,338 1,036,107 906,943 886,317 23.2 112.1 Savings accounts 128,245 143,641 150,552 154,670 158,542 (10.7 ) (19.1 ) Money market accounts 1,855,781 2,099,776 2,113,256 2,229,993 2,362,390 (11.6 ) (21.4 ) NOW accounts 1,918,977 1,746,190 1,762,468 1,977,186 1,925,124 9.9 (0.3 ) Total interest-bearing deposits 5,783,263 5,515,945 5,062,383 5,268,792 5,332,373 4.8 8.5 Total due to depositors 6,655,517 6,437,183 6,054,761 6,350,000 6,373,400 3.4 4.4 Mortgagors' escrow deposits 78,573 48,159 70,544 57,577 79,495 63.2 (1.2 ) Total deposits $ 6,734,090 $ 6,485,342 $ 6,125,305 $ 6,407,577 $ 6,452,895 3.8 % 4.4 %
Loan Composition
1Q23 vs. 1Q23 vs. March 31, December 31, September 30, June 30, March 31, 4Q22 1Q22 (Dollars in thousands) 2023 2022 2022 2022 2022 % Change % Change Multifamily residential $ 2,601,174 $ 2,601,384 $ 2,608,192 $ 2,531,858 $ 2,500,570 — % 4.0 % Commercial real estate 1,904,293 1,913,040 1,914,326 1,864,507 1,764,927 (0.5 ) 7.9 One-to-four family ― mixed-use property 549,207 554,314 560,885 561,100 563,679 (0.9 ) (2.6 ) One-to-four family ― residential 232,302 235,067 233,469 242,729 248,226 (1.2 ) (6.4 ) Co-operative apartments 6,115 6,179 7,015 8,130 8,248 (1.0 ) (25.9 ) Construction 60,486 70,951 63,651 72,148 68,488 (14.7 ) (11.7 ) Mortgage Loans 5,353,577 5,380,935 5,387,538 5,280,472 5,154,138 (0.5 ) 3.9 Small Business Administration (1) 22,860 23,275 27,712 40,572 59,331 (1.8 ) (61.5 ) Commercial business and other 1,518,756 1,521,548 1,532,497 1,431,417 1,387,155 (0.2 ) 9.5 Nonmortgage loans 1,541,616 1,544,823 1,560,209 1,471,989 1,446,486 (0.2 ) 6.6 Net unamortized premiums and unearned loan fees (2) 8,983 9,011 8,927 7,932 6,640 (0.3 ) 35.3 Allowance for credit losses (38,729 ) (40,442 ) (41,268 ) (39,424 ) (37,433 ) (4.2 ) 3.5 Net loans $ 6,865,447 $ 6,894,327 $ 6,915,406 $ 6,720,969 $ 6,569,831 (0.4 ) % 4.5 %
_____________________________(1) Includes $4.8 million, $5.2 million, $9.6 million, $22.2 million, and $43.2 million of PPP loans at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.(2) Includes $5.1 million, $5.4 million, $5.8 million, $6.6 million, and $6.9 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES LOAN CLOSINGS and RATES (Unaudited)
Loan Closings
For the three months ended March 31, December 31, September 30, June 30, March 31, (In thousands) 2023 2022 2022 2022 2022 Multifamily residential $ 42,164 $ 65,347 $ 173,980 $ 136,902 $ 98,180 Commercial real estate 15,570 20,750 77,777 164,826 45,102 One-to-four family – mixed-use property 4,938 4,489 12,383 12,228 8,498 One-to-four family – residential 4,296 7,485 4,102 4,211 9,237 Co-operative apartments — — — — 24 Construction 10,592 7,301 7,170 8,319 8,802 Mortgage Loans 77,560 105,372 275,412 326,486 169,843 Small Business Administration 318 665 46 2,750 — Commercial business and other 95,668 119,191 188,202 174,551 159,476 Nonmortgage Loans 95,986 119,856 188,248 177,301 159,476 Total Closings $ 173,546 $ 225,228 $ 463,660 $ 503,787 $ 329,319
Weighted Average Rate on Loan Closings
For the three months ended March 31, December 31, September 30, June 30, March 31, Loan type 2023 2022 2022 2022 2022 Mortgage loans 6.30 % 5.59 % 4.37 % 3.76 % 3.61 % Nonmortgage loans 7.58 6.57 4.93 4.21 3.27 Total loans 7.01 % 6.10 % 4.60 % 3.92 % 3.44 %
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES ASSET QUALITY (Unaudited)
Allowance for Credit Losses
For the three months ended March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 Allowance for credit losses - loans Beginning balances $ 40,442 $ 41,268 $ 39,424 $ 37,433 $ 37,135 Net loan charge-off (recoveries): Multifamily residential (1 ) 132 — (1 ) — One-to-four family – residential (36 ) 17 2 (2 ) (2 ) Small Business Administration (6 ) (9 ) (12 ) 13 1,015 Taxi medallion — — — (435 ) (12 ) Commercial business and other 9,277 671 300 (76 ) (66 ) Total 9,234 811 290 (501 ) 935 Provision (benefit) for loan losses 7,521 (15 ) 2,134 1,490 1,233 Ending balance $ 38,729 $ 40,442 $ 41,268 $ 39,424 $ 37,433 Gross charge-offs $ 9,298 $ 1,938 $ 324 $ 50 $ 1,036 Gross recoveries 64 1,127 34 551 101 Allowance for credit losses - loans to gross loans 0.56 % 0.58 % 0.59 % 0.58 % 0.57 % Net loan charge-offs (recoveries) to average loans 0.54 0.05 0.02 (0.03 ) 0.06
Nonperforming Assets
March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 Loans 90 Days Or More Past Due and Still Accruing: Commercial real estate $ — $ — $ 2,000 $ — $ — Construction — 2,600 — — — Commercial business and other — — — 100 — Total — 2,600 2,000 100 — Nonaccrual Loans: Multifamily residential 3,628 3,206 3,414 3,414 3,414 Commercial real estate — 237 1,851 242 5 One-to-four family - mixed-use property(1) 790 790 790 790 790 One-to-four family - residential 4,961 4,425 4,655 5,055 7,387 Construction — — — 856 — Small Business Administration 937 937 937 937 937 Commercial business and other(1) 10,860 20,187 15,356 16,554 1,533 Total 21,176 29,782 27,003 27,848 14,066 Total Nonperforming Loans (NPLs) 21,176 32,382 29,003 27,948 14,066 Total Nonaccrual HTM Securities 20,981 20,981 20,981 20,981 — Total Nonperforming Assets $ 42,157 $ 53,363 $ 49,984 $ 48,929 $ 14,066 Nonperforming Assets to Total Assets 0.50 % 0.63 % 0.58 % 0.59 % 0.17 % Allowance for Credit Losses to NPLs 182.9 % 124.9 % 142.3 % 141.1 % 266.1 %
_____________________________(1) Adopted ASU No. 2022-02 Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023; Not included in the above analysis are nonaccrual performing TDR one-to-four family - mixed use property loans totaling $0.2 million in 4Q22 and in 3Q22 and $0.3 million in 2Q22 and 1Q22; nonaccrual performing TDR commercial business loans totaling less than $0.1 million in 4Q22, $2.9 million in 3Q22, and $2.8 million in 2Q22 and 1Q22.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESRECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
Non-cash Fair Value Adjustments to GAAP Earnings
The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to borrowings carried at fair value under the fair value option.
Core Net Income, Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income FTE, Core Net Interest Margin FTE, Core Interest Income and Yield on Total Loans, Core Noninterest Income, Core Noninterest Expense 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 noninterest 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 this measure is 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 (Unaudited)
For the three months ended (Dollars in thousands, March 31, December 31, September 30, June 30, March 31, except per share data) 2023 2022 2022 2022 2022 GAAP income before income taxes $ 6,959 $ 12,819 $ 32,422 $ 34,971 $ 24,640 Net (gain) loss from fair value adjustments (Noninterest income (loss)) (2,619 ) 622 (5,626 ) (2,533 ) 1,809 Net loss on sale of securities (Noninterest income (loss)) — 10,948 — — — Life insurance proceeds (Noninterest income (loss)) — (286 ) — (1,536 ) — Net gain on disposition of assets (Noninterest income (loss)) — (104 ) — — — Net (gain) loss from fair value adjustments on qualifying hedges (Interest and fees on loans) (100 ) (936 ) (28 ) 60 129 Net amortization of purchase accounting adjustments (Various) (188 ) (219 ) (650 ) (237 ) (924 ) Core income before taxes 4,052 22,844 26,118 30,725 25,654 Provision for core income taxes 1,049 5,445 7,165 9,207 6,685 Core net income $ 3,003 $ 17,399 $ 18,953 $ 21,518 $ 18,969 GAAP diluted earnings per common share $ 0.17 $ 0.34 $ 0.76 $ 0.81 $ 0.58 Net (gain) loss from fair value adjustments, net of tax (0.06 ) 0.02 (0.13 ) (0.06 ) 0.04 Net loss on sale of securities, net of tax — 0.27 — — — Life insurance proceeds — (0.01 ) — (0.05 ) — Net gain on disposition of assets, net of tax — — — — — Net (gain) loss from fair value adjustments on qualifying hedges, net of tax — (0.02 ) — — — Net amortization of purchase accounting adjustments, net of tax (0.01 ) (0.01 ) (0.02 ) (0.01 ) (0.02 ) Core diluted earnings per common share(1) $ 0.10 $ 0.57 $ 0.62 $ 0.70 $ 0.61 Core net income, as calculated above $ 3,003 $ 17,399 $ 18,953 $ 21,518 $ 18,969 Average assets 8,468,311 8,518,019 8,442,657 8,211,763 8,049,470 Average equity 683,071 676,165 674,282 667,456 673,012 Core return on average assets(2) 0.14 % 0.82 % 0.90 % 1.05 % 0.94 % Core return on average equity(2) 1.76 % 10.29 % 11.24 % 12.90 % 11.27 %
_____________________________(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 (Unaudited)
For the three months ended March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 GAAP Net interest income $ 45,262 $ 54,201 $ 61,206 $ 64,730 $ 63,479 Net (gain) loss from fair value adjustments on qualifying hedges (100 ) (936 ) (28 ) 60 129 Net amortization of purchase accounting adjustments (306 ) (342 ) (775 ) (367 ) (1,058 ) Core Net interest income $ 44,856 $ 52,923 $ 60,403 $ 64,423 $ 62,550 GAAP Noninterest income (loss) $ 6,908 $ (7,652 ) $ 8,995 $ 7,353 $ 1,313 Net (gain) loss from fair value adjustments (2,619 ) 622 (5,626 ) (2,533 ) 1,809 Net loss on sale of securities — 10,948 — — — Life insurance proceeds — (286 ) — (1,536 ) — Net gain on sale of assets — (104 ) — — — Core Noninterest income $ 4,289 $ 3,528 $ 3,369 $ 3,284 $ 3,122 GAAP Noninterest expense $ 37,703 $ 33,742 $ 35,634 $ 35,522 $ 38,794 Net amortization of purchase accounting adjustments (118 ) (123 ) (125 ) (130 ) (134 ) Core Noninterest expense $ 37,585 $ 33,619 $ 35,509 $ 35,392 $ 38,660 Net interest income $ 45,262 $ 54,201 $ 61,206 $ 64,730 $ 63,479 Noninterest income (loss) 6,908 (7,652 ) 8,995 7,353 1,313 Noninterest expense (37,703 ) (33,742 ) (35,634 ) (35,522 ) (38,794 ) Pre-provision pre-tax net revenue $ 14,467 $ 12,807 $ 34,567 $ 36,561 $ 25,998 Core: Net interest income $ 44,856 $ 52,923 $ 60,403 $ 64,423 $ 62,550 Noninterest income 4,289 3,528 3,369 3,284 3,122 Noninterest expense (37,585 ) (33,619 ) (35,509 ) (35,392 ) (38,660 ) Pre-provision pre-tax net revenue $ 11,560 $ 22,832 $ 28,263 $ 32,315 $ 27,012 Efficiency Ratio 76.5 % 59.6 % 55.7 % 52.3 % 58.9 %
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN to CORE NET INTEREST INCOME (Unaudited)
For the three months ended March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 GAAP net interest income $ 45,262 $ 54,201 $ 61,206 $ 64,730 $ 63,479 Net (gain) loss from fair value adjustments on qualifying hedges (100 ) (936 ) (28 ) 60 129 Net amortization of purchase accounting adjustments (306 ) (342 ) (775 ) (367 ) (1,058 ) Tax equivalent adjustment 100 102 104 131 124 Core net interest income FTE $ 44,956 $ 53,025 $ 60,507 $ 64,554 $ 62,674 Total average interest-earning assets (1) $ 8,001,271 $ 8,050,601 $ 7,984,558 $ 7,746,640 $ 7,577,053 Core net interest margin FTE 2.25 % 2.63 % 3.03 % 3.33 % 3.31 % GAAP interest income on total loans, net $ 82,889 $ 81,033 $ 75,546 $ 69,192 $ 67,516 Net (gain) loss from fair value adjustments on qualifying hedges - loans (101 ) (936 ) (28 ) 60 129 Net amortization of purchase accounting adjustments (316 ) (372 ) (783 ) (357 ) (1,117 ) Core interest income on total loans, net $ 82,472 $ 79,725 $ 74,735 $ 68,895 $ 66,528 Average total loans, net (1) $ 6,876,495 $ 6,886,900 $ 6,867,758 $ 6,647,131 $ 6,586,253 Core yield on total loans 4.80 % 4.63 % 4.35 % 4.15 % 4.04 %
_____________________________(1) Excludes purchase accounting average balances for all periods presented.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES CALCULATION OF TANGIBLE STOCKHOLDERS’ COMMON EQUITY to TANGIBLE ASSETS (Unaudited)
March 31, December 31, September 30, June 30, March 31, (Dollars in thousands) 2023 2022 2022 2022 2022 Total Equity $ 673,459 $ 677,157 $ 670,719 $ 670,812 $ 675,813 Less: Goodwill (17,636 ) (17,636 ) (17,636 ) (17,636 ) (17,636 ) Core deposit Intangibles (1,891 ) (2,017 ) (2,147 ) (2,282 ) (2,420 ) Intangible deferred tax liabilities — — — — 328 Tangible Stockholders' Common Equity $ 653,932 $ 657,504 $ 650,936 $ 650,894 $ 656,085 Total Assets $ 8,479,121 $ 8,422,946 $ 8,557,419 $ 8,339,587 $ 8,169,833 Less: Goodwill (17,636 ) (17,636 ) (17,636 ) (17,636 ) (17,636 ) Core deposit Intangibles (1,891 ) (2,017 ) (2,147 ) (2,282 ) (2,420 ) Intangible deferred tax liabilities — — — — 328 Tangible Assets $ 8,459,594 $ 8,403,293 $ 8,537,636 $ 8,319,669 $ 8,150,105 Tangible Stockholders' Common Equity to Tangible Assets 7.73 % 7.82 % 7.62 % 7.82 % 8.05 %