Flushing Financial Corporation Reports 2Q21 GAAP EPS of $0.61 and Record Core EPS of $0.73; Board of Directors Increases Share Repurchase Authorization

UNIONDALE, N.Y., July 27, 2021 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (NASDAQ-GS: FFIC)

John R. Buran, President and CEO Commentary

“Our successful deposit strategy, the integration of Empire National Bank and the reopening of the New York metro area, resulted in a strong quarter for our Company. Quarterly GAAP EPS of $0.61 resulted in an increase of 2% over the prior quarter. We achieved record core EPS of $0.73, up 103% YoY and 35% QoQ. Importantly, we recognized GAAP ROAA and ROAE of 0.93% and 11.95%, respectively, and record core ROAA and ROAE of 1.11% and 14.27%, respectively.”

“We delivered on our strategic objective of optimizing the cost of funds. The cost of funds decreased four basis points from the prior quarter while the average deposit mix continued to improve with both non-interest bearing and core deposits increasing 8% and 5% (not annualized), respectively. The fifth consecutive quarter of record net interest income equaled $61.0 million, despite total assets remaining flat. We also performed well against our strategic objective to obtain appropriate risk adjusted returns as credit quality improved due to non-performing assets decreasing 17% QoQ.”

- John R. Buran, President and CEO

Empire Exceeding Expectations. “The results of the acquisition of Empire National Bank have exceeded our expectations. When the acquisition was announced, tangible book value earn back was modeled at 3.4 years. Our tangible book value per share as of June 30, 2021 totaling $20.51 exceeds the tangible book value per share of $20.22 as of September 30, 2020, the reported value when the deal closed and the tangible book value per share of $19.62 as of September 30, 2019, the reported value when the deal was announced. This accomplishment provided investors with an earn back of 9 months as management actions to achieve targeted cost saves and improved NIM were successful despite the COVID-19 pandemic and subsequent delays.”

Strong Capital; Increased Share Repurchase Authorization. “The capital ratios increased during the quarter with TCE/TA increasing to 7.80%. The Board of Directors authorized an increase of 1 million shares to our current share repurchase program, which now totals nearly 1.3 million shares and had no expiration. With our history of a low inherent risk business model, low loan to values for our real estate loans along with improved credit metrics, we are confident in our ability to support an increased stock repurchase program.”

2Q21 Key Financial Metrics¹

		2Q21				1Q21			4Q20			3Q20			2Q20
GAAP:
EPS		$	0.61			$	0.60		$	0.11		$	0.50		$	0.63
ROAA (%)			0.93				0.93			0.18			0.81			1.01
ROAE (%)			11.95				12.29			2.27			9.94			13.11
NIM FTE (%)			3.14				3.18			3.08			3.00			2.87
Core:
EPS		$	0.73			$	0.54		$	0.58		$	0.56		$	0.36
ROAA (%)			1.11				0.83			0.92			0.91			0.57
ROAE (%)			14.27				10.96			11.67			11.22			7.39
Core NIM FTE (%)			3.14				3.06			3.03			2.98			2.89
Efficiency Ratio (%)			53.4				58.6			57.6			55.4			54.9
Credit Quality:
NPAs/Loans&REO (%)			0.26				0.31			0.31			0.42			0.34
LLRs/Loans (%)			0.64				0.67			0.67			0.65			0.61
LLRs/NPLs (%)			242.55				212.87			214.27			154.66			181.84
NCOs/Avg Loans (%)			0.05				0.17			0.04			0.06			0.07
Balance Sheet:
Avg Loans ($B)		$	6.7			$	6.7		$	6.4		$	5.9		$	5.9
Avg Dep ($B)		$	6.5			$	6.3		$	5.5		$	5.0		$	5.0
Book Value/Share		$	21.16			$	20.65		$	20.11		$	20.78		$	20.27
Tangible BV/Share		$	20.51			$	19.99		$	19.45		$	20.22		$	19.71
TCE/TA (%)			7.80				7.60			7.52			8.10			7.78

¹ See “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Margin to Core and Base Net Interest Income and Net Interest Margin.”

2Q21 Highlights

• Record net interest income up 0.2% QoQ and 25.3% YoY to $61.0 million, while core net interest income was up 4.4% QoQ and 24.6% YoY to $61.1 million due to continued improvement in funding costs, increased prepayment penalty income, and net PPP fees
• Net interest margin declined 4 bps QoQ, but rose 27 bps YoY to 3.14%, and core net interest margin was up 8 bps QoQ and 25 bps YoY to 3.14% primarily due to an improvement in funding costs and a rise in prepayment penalty income
• Period end loans, excluding PPP, rose 0.4% QoQ and 10.7% YoY; loan closings were $324.4 million in 2Q21, up 0.5% QoQ and 38.8% YoY  
• Average deposits rose 3.6% QoQ and 29.1% YoY to $6.5 billion, with core deposits 84% of total average deposits
• Loan pipeline rose 39.2% YoY to $432.6 million
• Benefit for credit losses of $1.6 million due to an improving economic outlook; strong LTVs, and improving credit metrics; net charge-offs were $0.9 million or 5 bps of average loans in 2Q21
• NPAs fell 17% QoQ to $17.6 million; criticized and classified assets increased 9.6% to $69.2 million (representing 1.03% of loans)
• Tangible Common Equity to Tangible Assets improved to 7.80% from 7.60% in 1Q21

Income Statement Highlights
																					Y/Y			Q/Q
($000s, except EPS)			2Q21					1Q21			4Q20				3Q20			2Q20			Change			Change
Net Interest Income			$	61,039				$	60,892		$	55,732			$	49,924		$	48,717		25.3	%		0.2	%
(Benefit) Provision for Credit Losses				(1,598	)				2,820			3,862				2,470			9,619		(116.6	)		(156.7	)
Non-interest Income (Loss)				(3,210	)				6,311			(1,181	)			1,351			13,737		(123.4	)		(150.9	)
Non-interest Expense				34,011					38,159			46,811				29,985			28,755		18.3			(10.9	)
Income Before Income Taxes				25,416					26,224			3,878				18,820			24,080		5.5			(3.1	)
Provision for Income Taxes				6,158					7,185			417				4,489			5,808		6.0			(14.3	)
Net Income			$	19,258				$	19,039		$	3,461			$	14,331		$	18,272		5.4			1.2
Diluted EPS			$	0.61				$	0.60		$	0.11			$	0.50		$	0.63		(3.2	)		1.7
Avg. Diluted Shares (000s)				31,677					31,604			30,603				28,874			28,867		9.7			0.2
Core Net Income1			$	22,994				$	16,973		$	17,784			$	16,168		$	10,297		123.3			35.5
Core EPS1			$	0.73				$	0.54		$	0.58			$	0.56		$	0.36		102.8			35.2

¹ See Reconciliation of GAAP Earnings and Core Earnings

Net interest income for 2Q21 was $61.0 million, an increase of 25.3% YoY and 0.2% QoQ.

• Net interest margin of 3.14%, increased 27 bps YoY, but declined 4 bps QoQ; there was no effect of the PPP loans on the NIM in 2Q21, but there was a drag on the NIM of 4 bps in 1Q21, 3 bps in 4Q20, 2 bps in 3Q20, and 1 bp in 2Q20; net purchase accounting accretion was $0.6 million in 2Q21, $0.9 million in 1Q21 and not meaningful in 4Q20
• Prepayment penalty income from loans and securities, net reversals and recoveries of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $1.8 million (10 bps) in 2Q21, $3.3 million (17 bps) in 1Q21, $2.1 million (11 bps) in 4Q20, $1.7 million (11 bps) in 3Q20, and $0.4 million (2 bps) in 2Q20
• Excluding these items in the previous bullet, net interest margin improved to 3.04% in 2Q21 from 3.01% in 1Q21, 2.97% in 4Q20, 2.89% in 3Q20, and 2.85% in 2Q20, or an increase of 19 bps YoY and 3 bps QoQ
• Net PPP loan fees were $1.2 million (6 bps NIM impact) in 2Q21, an increase from $0.5 million (3 bps) in 1Q21, $0.4 million (2 bps) in 4Q20, $0.3 million (1 bp) in 3Q20, and $0.1 million (1 bp) in 2Q20

The Company recorded a benefit for credit losses of $1.6 million in 2Q21, compared to provisions for credit losses of $2.8 million in 1Q21 and $9.6 million in 2Q20.

• 2Q21 benefit for credit losses was driven by the improving economic outlook supported by the low LTVs and inherent risk in the real estate portfolio
• Net charge-offs were $0.9 million in 2Q21, an improvement from $2.9 million in 1Q21, but roughly stable from the $0.6 million in 4Q20, $0.8 million in 3Q20, and $1.0 million in 2Q20

Non-interest income for 2Q21 was a loss of $3.2 million, compared to income of $6.3 million in 1Q21 and income of $13.7 million in 2Q20.

• Non-interest income included net gains (losses) from fair value adjustments of $(6.5) million ($(0.15) per share, net of tax) in 2Q21, $1.0 million ($0.02 per share, net of tax) in 1Q21, $(4.1) million ($(0.11) per share, net of tax) in 4Q20, $(2.2) million ($(0.06) per share, net of tax) in 3Q20, and $10.2 million ($0.27 per share, net of tax) in 2Q20
• Absent all above items and other immaterial adjustments, non-interest income was $3.2 million in 2Q21, up 9.8% YoY, but down 31.7% QoQ as customer swap activity normalized after a strong 1Q21

Non-interest expense was $34.0 million in 2Q21, down from $38.2 million in 1Q21 and $46.8 million in 4Q20, but up from $30.0 million in 3Q20, and $28.8 million in 2Q20.

• 2Q21 non-interest expense includes $0.5 million of pre-tax merger benefits primarily related to a refund received from a data processing vendor ($(0.01) per share, net of tax)
• 1Q21 non-interest expense includes $1.0 million of pre-tax merger charges ($0.02 per share, net of tax); 1Q21 includes $3.3 million of seasonal compensation expense
• 4Q20 non-interest expense includes $5.3 million pre-tax merger charges ($0.14 per share, net of tax) and $7.8 million pre-tax debt prepayment penalties ($0.20 per share, net of tax)
• Non-interest expense includes merger charges of $0.4 million in 3Q20 and $0.2 million in 2Q20 ($0.01 per share, net of tax, for each period)
• Excluding the above items and other and immaterial adjustments, core operating expenses were $34.4 million in 2Q21, up 20.3% YoY, but down 7.3% QoQ
• The efficiency ratio improved to 53.4% in 2Q21, from 58.6% in 1Q21, 57.6% in 4Q20, 55.4% in 3Q20, and 54.9% in 2Q20

The provision for income taxes was $6.2 million in 2Q21, $7.2 million in 1Q21, $0.4 million in 4Q20, $4.5 million in 3Q20, and $5.8 million in 2Q20.

• The effective tax rate was 24.2% in 2Q21, 27.4% in 1Q21, 10.8% in 4Q20, 23.9% in 3Q20, and 24.1% in 2Q20
• The 2Q21 effective tax rate includes $0.8 million benefit for the state rate change; absent this benefit the effective tax rate would have been 27.2%

Balance Sheet, Credit Quality, and Capital Highlights
																		Y/Y			Q/Q
($000s, except per share data)		2Q21				1Q21			4Q20			3Q20			2Q20			Change			Change
Average Loans And Deposits
Loans		$	6,687			$	6,700		$	6,376		$	5,904		$	5,946		12.5	%		(0.2	)%
Deposits			6,511				6,285			5,515			4,999			5,043		29.1			3.6
Credit Quality
Nonperforming Loans		$	17,592			$	21,186		$	21,073		$	24,792		$	20,188		(12.9	)%		(17.0	)%
Nonperforming Assets			17,592				21,221			21,108			24,827			20,431		(13.9	)		(17.1	)
Criticized and Classified Assets			69,161				63,130			71,691			42,181			48,712		42.0			9.6
Allowance for Credit Losses/Loans (%)			0.64				0.67			0.67			0.65			0.61		3	bps		(3	)bps
Capital
Book Value/Share		$	21.16			$	20.65		$	20.11		$	20.78		$	20.27		4.4	%		2.5	%
Tangible Book Value/Share			20.51				19.99			19.45			20.22			19.71		4.1			2.6
Tang. Common Equity/Tang. Assets (%)			7.80				7.60			7.52			8.10			7.78		2	bps		20	bps
Leverage Ratio (%)			8.50				8.44			8.38			9.03			8.64		(14	)		6

Average loans were $6.7 billion, an increase of 12.5% YoY, but a decline of 0.2% QoQ.

• Total loan closings rose to $324.4 million in 2Q21, compared to $322.9 million in 1Q21, $316.0 million in 4Q20, $155.6 million in 3Q20, and $233.8 million in 2Q20
• The loan pipeline increased to $432.6 million at June 30, 2021, compared to $310.8 million a year ago
• SBA Paycheck Protection Program (“PPP”) loans were $197.3 million at 2Q21, $251.0 million at 1Q21, $151.9 million at 4Q20, $111.6 million at 3Q20, and $93.2 million at 2Q20; forgiven PPP loans were $69.2 million in 2Q21 compared to $24.1 million in 1Q21; the SBA has up to 90 days to process forgiveness; remaining unamortized net PPP fees were $4.4 million
  

Average Deposits totaled $6.5 billion, rising 29.1% YoY and 3.6% QoQ.

• Average core deposits (non-CD deposits) rose to 84.0% of total average deposits (including escrow deposits) in 2Q21, compared to 76.5% a year ago
  

Credit Quality; Non-performing loans declined to $17.6 million in 2Q21, compared to $21.2 million in 1Q21 and $20.4 million in 2Q20.

• Non-performing assets totaled $17.6 million, down 17.1% QoQ, and 13.9% YoY
• Criticized and classified assets totaled $69.2 million at 2Q21, $63.1 million at 1Q21, $71.7 million at 4Q20, $42.2 million at 3Q20, and $48.7 million at 2Q20; the QoQ increase was primarily due to a rise in watch list loans; partially offset by a decline in classified loans
• Loans classified as troubled debt restructured (TDR) totaled $15.5 million versus $15.2 million at 1Q21 and $6.0 million a year ago
• Active COVID-19 forbearances totaled 69 loans with a principal balance of $245.8 million at June 30, 2021, with $163.3 million making interest payments and only $82.5 million (1.2% of loans) with full payment deferrals
• Over 85% of gross loans are collateralized by real estate and these loans have a loan-to-value ratio of 38% as of June 30, 2021
• Allowance for credit losses were 0.64% of loans at 2Q21 compared to 0.67% of loans at 1Q21 and 0.61% a year ago

Capital; Book value per common share increased to $21.16 at 2Q21, versus $20.65 at 1Q21 and $20.27 at 2Q20; tangible book value per common share, a non-GAAP measure, rose to $20.51 at 2Q21, compared to $19.99 at 1Q21 and $19.71 in 2Q20.

• The Company paid a dividend of $0.21 per share in 2Q21 and did not repurchase any shares in the quarter
• The Board of Directors increased the share repurchase authorization by 1 million shares; up to 1,284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Tangible common equity to tangible assets was 7.80% at 2Q21 compared to 7.78% a year ago
• The Company and the Bank remain well capitalized under all applicable regulatory requirements
• The leverage ratio was 8.50% in 2Q21 versus 8.64% in 2Q20
  

Conference Call Information And Third 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, will host a conference call tomorrow, Wednesday, July 28, 2021, at 9:30 AM (ET) to discuss the Company’s second quarter 2021 results and strategy.
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic210728.html
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10151629
• The conference call will be simultaneously webcast and archived through July 28, 2022.

Third Quarter 2021 Earnings Release Date:

The Company plans to release Third Quarter 2021 financial results after the market close on October 26, 2021; conference call at 9:30 AM (ET) on October 27, 2021.

A detailed announcement will be issued prior to the third 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®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the Bank’s experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, an eco-friendly, healthier lifestyle community brand.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at http://www.flushingbank.com. 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, 2020 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.

Investor Contact: Susan K. Cullen, SEVP, CFO and Treasurer, 718-961-5400

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)

		At or for the three months ended																				At or for the six months ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
(Dollars in thousands, except per share data)		2021				2021				2020				2020				2020				2021				2020
Performance Ratios (1)
Return on average assets			0.93	%			0.93	%			0.18	%			0.81	%			1.01	%			0.93	%			0.47	%
Return on average equity			11.95				12.29				2.27				9.94				13.11				12.11				5.95
Yield on average interest-earning assets (2)			3.69				3.77				3.82				3.84				3.81				3.73				3.89
Cost of average interest-bearing liabilities			0.66				0.69				0.86				0.98				1.09				0.67				1.41
Cost of funds			0.57				0.61				0.77				0.89				0.99				0.59				1.30
Net interest rate spread during period (2)			3.03				3.08				2.96				2.86				2.72				3.06				2.48
Net interest margin (2)			3.14				3.18				3.08				3.00				2.87				3.16				2.66
Non-interest expense to average assets			1.65				1.87				2.43				1.69				1.60				1.76				1.71
Efficiency ratio (3)			53.38				58.58				57.56				55.37				54.92				55.96				61.16
Average interest-earning assets to average interest-bearing liabilities			1.19	X			1.18	X			1.17	X			1.16	X			1.15	X			1.19	X			1.14	X
Average Balances
Total loans, net		$	6,686,888			$	6,700,476			$	6,375,516			$	5,904,051			$	5,946,412			$	6,693,644			$	5,870,640
Total interest-earning assets			7,790,174				7,667,217				7,243,472				6,675,896				6,809,835				7,729,035				6,764,846
Total assets			8,263,553				8,147,714				7,705,407				7,083,028				7,206,059				8,205,954				7,156,529
Total due to depositors			5,495,936				5,363,647				4,708,760				4,353,560				4,395,228				5,430,158				4,487,011
Total interest-bearing liabilities			6,532,891				6,477,871				6,169,574				5,731,899				5,912,774				6,505,534				5,932,350
Stockholders' equity			644,690				619,647				609,463				576,512				557,414				632,238				567,006
Per Share Data
Book value per common share (4)		$	21.16			$	20.65			$	20.11			$	20.78			$	20.27			$	21.16			$	20.27
Tangible book value per common share (5)		$	20.51			$	19.99			$	19.45			$	20.22			$	19.71			$	20.51			$	19.71
Stockholders' Equity
Stockholders' equity		$	655,167			$	639,201			$	618,997			$	586,406			$	571,921			$	655,167			$	571,921
Tangible stockholders' equity			634,959				618,839				598,476				570,571				556,086				634,959				556,086
Consolidated Regulatory Capital Ratios
Tier 1 capital		$	697,591			$	679,343			$	662,987			$	630,380			$	617,620			$	697,591			$	617,620
Common equity Tier 1 capital			649,367				636,071				621,247				593,344				583,238				649,367				583,238
Total risk-based capital			823,494				806,922				794,034				740,499				726,291				823,494				726,291
Risk Weighted Assets			6,344,076				6,281,136				6,287,598				5,381,938				5,406,014				6,344,076				5,406,104
Tier 1 leverage capital (well capitalized = 5%)			8.50	%			8.44	%			8.38	%			9.03	%			8.64	%			8.50	%			8.64	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			10.24				10.13				9.88				11.02				10.79				10.24				10.79
Tier 1 risk-based capital (well capitalized = 8.0%)			11.00				10.82				10.54				11.71				11.42				11.00				11.42
Total risk-based capital (well capitalized = 10.0%)			12.98				12.85				12.63				13.76				13.43				12.98				13.43
Capital Ratios
Average equity to average assets			7.80	%			7.61	%			7.91	%			8.14	%			7.74	%			7.70	%			7.92	%
Equity to total assets			8.03				7.83				7.76				8.30				7.98				8.03				7.98
Tangible common equity to tangible assets (6)			7.80				7.60				7.52				8.10				7.78				7.80				7.78
Asset Quality
Non-accrual loans (7)		$	17,391			$	18,604			$	18,325			$	24,792			$	20,038			$	17,391			$	20,038
Non-performing loans			17,592				21,186				21,073				24,792				20,188				17,592				20,188
Non-performing assets			17,592				21,221				21,108				24,827				20,431				17,592				20,431
Net charge-offs			902				2,865				646				837				1,007				3,767				2,156
Asset Quality Ratios
Non-performing loans to gross loans			0.26	%			0.31	%			0.31	%			0.42	%			0.34	%			0.26	%			0.34	%
Non-performing assets to total assets			0.22				0.26				0.26				0.35				0.29				0.22				0.29
Allowance for loan losses to gross loans			0.64				0.67				0.67				0.65				0.61				0.64				0.61
Allowance for loan losses to non-performing assets			242.55				212.52				213.91				154.44				179.68				242.55				179.68
Allowance for loan losses to non-performing loans			242.55				212.87				214.27				154.66				181.84				242.55				181.84
Net charge-offs to average loans			0.05				0.17				0.04				0.06				0.07				0.11				0.07
Full-service customer facilities			25				25				25				20				20				25				20

(See footnotes on next page)

---

⁽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 non-interest expense (excluding merger expense, OREO expense, prepayment penalty on borrowings, the net gain/loss from the sale of OREO and net amortization of purchase accounting adjustments) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges and net amortization of purchase accounting adjustments) and non-interest income (excluding life insurance proceeds, net gains and losses from the sale or disposition of securities, assets and fair value adjustments).
⁽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 non-accrual TDR loans.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	For the three months ended																				For the six months ended
	June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
(In thousands, except per share data)	2021				2021				2020				2020				2020				2021				2020
Interest and Dividend Income
Interest and fees on loans	$	67,999			$	69,021			$	66,120			$	60,367			$	60,557			$	137,020			$	121,666
Interest and dividends on securities:
Interest		3,685				3,072				2,813				3,525				4,182				6,757				9,438
Dividends		7				8				8				9				11				15				26
Other interest income		51				36				30				13				22				87				312
Total interest and dividend income		71,742				72,137				68,971				63,914				64,772				143,879				131,442
Interest Expense
Deposits		5,539				6,105				6,470				7,093				9,971				11,644				28,749
Other interest expense		5,164				5,140				6,769				6,897				6,084				10,304				13,150
Total interest expense		10,703				11,245				13,239				13,990				16,055				21,948				41,899
Net Interest Income		61,039				60,892				55,732				49,924				48,717				121,931				89,543
(Benefit) provision for credit losses		(1,598	)			2,820				3,862				2,470				9,619				1,222				16,797
Net Interest Income After (Benefit) Provision for Credit Losses		62,637				58,072				51,870				47,454				39,098				120,709				72,746
Non-interest Income (loss)
Banking services fee income		1,233				2,725				1,442				1,316				944				3,958				1,742
Net gain (loss) on sale of securities		123				—				(610	)			—				(54	)			123				(91	)
Net gain on sale of loans		127				31				6				—				—				158				42
Net gain on disposition of assets		—				621				—				—				—				621				—
Net gain (loss) from fair value adjustments		(6,548	)			982				(4,129	)			(2,225	)			10,205				(5,566	)			4,212
Federal Home Loan Bank of New York stock dividends		500				689				734				874				881				1,189				1,845
Life insurance proceeds		—				—				—				—				659				—				659
Bank owned life insurance		1,009				997				1,016				923				932				2,006				1,875
Other income		346				266				360				463				170				612				589
Total non-interest income (loss)		(3,210	)			6,311				(1,181	)			1,351				13,737				3,101				10,873
Non-interest Expense
Salaries and employee benefits		19,879				22,664				22,089				17,335				16,184				42,543				34,804
Occupancy and equipment		3,522				3,367				3,446				3,021				2,827				6,889				5,667
Professional services		1,988				2,400				2,463				2,064				1,985				4,388				4,847
FDIC deposit insurance		729				1,213				562				727				737				1,942				1,387
Data processing		1,419				2,109				3,411				1,668				1,813				3,528				3,507
Depreciation and amortization		1,638				1,639				1,579				1,542				1,555				3,277				3,091
Other real estate owned/foreclosure (recoveries) expense		22				(10	)			95				240				45				12				(119	)
Prepayment penalty on borrowings		—				—				7,834				—				—				—				—
Other operating expenses		4,814				4,777				5,332				3,388				3,609				9,591				7,951
Total non-interest expense		34,011				38,159				46,811				29,985				28,755				72,170				61,135
Income Before Income Taxes		25,416				26,224				3,878				18,820				24,080				51,640				22,484
Provision (benefit) for Income Taxes
Federal		4,857				5,071				533				3,359				4,307				9,928				5,296
State and local		1,301				2,114				(116	)			1,130				1,501				3,415				306
Total taxes		6,158				7,185				417				4,489				5,808				13,343				5,602
Net Income	$	19,258			$	19,039			$	3,461			$	14,331			$	18,272			$	38,297			$	16,882
Basic earnings per common share	$	0.61			$	0.60			$	0.11			$	0.50			$	0.63			$	1.21			$	0.58
Diluted earnings per common share	$	0.61			$	0.60			$	0.11			$	0.50			$	0.63			$	1.21			$	0.58
Dividends per common share	$	0.21			$	0.21			$	0.21			$	0.21			$	0.21			$	0.42			$	0.42
Basic average shares		31,677				31,604				30,603				28,874				28,867				31,641				28,860
Diluted average shares		31,677				31,604				30,603				28,874				28,867				31,641				28,860

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
ASSETS
Cash and due from banks		$	145,971			$	174,420			$	157,388			$	75,560			$	84,754
Securities held-to-maturity:
Mortgage-backed securities			7,904				7,909				7,914				7,919				7,924
Other securities			49,986				49,912				49,918				50,252				50,078
Securities available for sale:
Mortgage-backed securities			596,661				518,781				404,460				386,235				442,507
Other securities			224,784				242,440				243,514				234,721				232,803
Loans			6,718,806				6,745,316				6,704,674				5,941,398				5,983,275
Allowance for loan losses			(42,670	)			(45,099	)			(45,153	)			(38,343	)			(36,710	)
Net loans			6,676,136				6,700,217				6,659,521				5,903,055				5,946,565
Interest and dividends receivable			43,803				44,941				44,041				36,068				30,219
Bank premises and equipment, net			26,438				27,498				28,179				25,766				27,018
Federal Home Loan Bank of New York stock			41,630				41,498				43,439				57,119				56,400
Bank owned life insurance			183,715				182,707				181,710				158,701				157,779
Goodwill			17,636				17,636				17,636				16,127				16,127
Core deposit intangibles			2,859				3,013				3,172				—				—
Right of use asset			51,972				53,802				50,743				42,326				38,303
Other assets			89,850				94,410				84,759				69,207				72,182
Total assets		$	8,159,345			$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659
LIABILITIES
Deposits		$	6,298,790			$	6,326,577			$	6,090,733			$	4,906,359			$	5,049,874
Mortgagors' escrow deposits			58,230				74,348				45,622				57,136				48,525
Borrowed funds			971,827				948,920				1,020,895				1,323,975				1,305,187
Operating lease liability			56,151				58,080				59,100				49,737				45,897
Other liabilities			119,180				112,058				141,047				139,443				141,255
Total liabilities			7,504,178				7,519,983				7,357,397				6,476,650				6,590,738
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				315				315
Additional paid-in capital			260,958				260,019				261,533				227,877				226,901
Treasury stock			(65,335	)			(65,479	)			(69,400	)			(69,409	)			(69,436	)
Retained earnings			467,620				455,023				442,789				445,931				437,663
Accumulated other comprehensive loss, net of taxes			(8,417	)			(10,703	)			(16,266	)			(18,308	)			(23,522	)
Total stockholders' equity			655,167				639,201				618,997				586,406				571,921
Total liabilities and stockholders' equity		$	8,159,345			$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659
(In thousands)
Issued shares			34,088				34,088				34,088				31,531				31,531
Outstanding shares			30,962				30,954				30,776				28,218				28,217
Treasury shares			3,126				3,133				3,312				3,312				3,313

  

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited)

		For the three months ended															For the six months ended
		June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
(In thousands)		2021			2021			2020			2020			2020			2021			2020
Interest-earning Assets:
Mortgage loans, net		$	5,130,400		$	5,155,975		$	5,010,097		$	4,721,742		$	4,762,068		$	5,143,117		$	4,729,800
Other loans, net			1,556,488			1,544,501			1,365,419			1,182,309			1,184,344			1,550,527			1,140,840
Total loans, net			6,686,888			6,700,476			6,375,516			5,904,051			5,946,412			6,693,644			5,870,640
Taxable securities:
Mortgage-backed securities			578,134			433,917			413,875			413,902			465,365			506,424			486,638
Other securities			232,020			300,828			266,663			243,754			243,867			266,234			243,796
Total taxable securities			810,154			734,745			680,538			657,656			709,232			772,658			730,434
Tax-exempt securities:
Other securities			50,830			50,828			50,768			51,652			60,280			50,829			61,908
Total tax-exempt securities			50,830			50,828			50,768			51,652			60,280			50,829			61,908
Interest-earning deposits and federal funds sold			242,302			181,168			136,650			62,537			93,911			211,904			101,864
Total interest-earning assets			7,790,174			7,667,217			7,243,472			6,675,896			6,809,835			7,729,035			6,764,846
Other assets			473,379			480,497			461,935			407,132			396,224			476,919			391,683
Total assets		$	8,263,553		$	8,147,714		$	7,705,407		$	7,083,028		$	7,206,059		$	8,205,954		$	7,156,529
Interest-bearing Liabilities:
Deposits:
Savings accounts		$	153,113		$	170,079		$	163,382		$	160,100		$	188,587		$	161,549		$	191,307
NOW accounts			2,255,581			2,185,384			1,924,840			1,625,109			1,440,147			2,220,677			1,429,943
Money market accounts			2,043,257			1,905,543			1,507,245			1,461,996			1,580,652			1,974,781			1,639,217
Certificate of deposit accounts			1,043,985			1,102,641			1,113,293			1,106,355			1,185,842			1,073,151			1,226,544
Total due to depositors			5,495,936			5,363,647			4,708,760			4,353,560			4,395,228			5,430,158			4,487,011
Mortgagors' escrow accounts			91,545			65,372			75,005			55,868			87,058			78,531			76,281
Total interest-bearing deposits			5,587,481			5,429,019			4,783,765			4,409,428			4,482,286			5,508,689			4,563,292
Borrowings			945,410			1,048,852			1,385,809			1,322,471			1,430,488			996,845			1,369,058
Total interest-bearing liabilities			6,532,891			6,477,871			6,169,574			5,731,899			5,912,774			6,505,534			5,932,350
Non interest-bearing demand deposits			923,220			856,052			731,170			589,674			560,637			889,821			505,199
Other liabilities			162,752			194,144			195,200			184,943			175,234			178,361			151,974
Total liabilities			7,618,863			7,528,067			7,095,944			6,506,516			6,648,645			7,573,716			6,589,523
Equity			644,690			619,647			609,463			576,512			557,414			632,238			567,006
Total liabilities and equity		$	8,263,553		$	8,147,714		$	7,705,407		$	7,083,028		$	7,206,059		$	8,205,954		$	7,156,529
Net interest-earning assets		$	1,257,283		$	1,189,346		$	1,073,898		$	943,997		$	897,061		$	1,223,501		$	832,496

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST INCOME AND NET INTEREST MARGIN
(Unaudited)

		For the three months ended																				For the six months ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020				2021				2020
Interest Income:
Mortgage loans, net		$	52,987			$	55,219			$	53,777			$	49,814			$	49,719			$	108,206			$	99,131
Other loans, net			15,012				13,802				12,343				10,553				10,838				28,814				22,535
Total loans, net			67,999				69,021				66,120				60,367				60,557				137,020				121,666
Taxable securities:
Mortgage-backed securities			2,233				1,698				1,435				1,928				2,327				3,931				5,367
Other securities			1,037				963				957				1,166				1,358				2,000				3,055
Total taxable securities			3,270				2,661				2,392				3,094				3,685				5,931				8,422
Tax-exempt securities:
Other securities			535				530				543				557				643				1,065				1,319
Total tax-exempt securities			535				530				543				557				643				1,065				1,319
Interest-earning deposits and federal funds sold			51				36				30				13				22				87				312
Total interest-earning assets			71,855				72,248				69,085				64,031				64,907				144,103				131,719
Interest Expense:
Deposits:
Savings accounts		$	66			$	75			$	75			$	65			$	74			$	141			$	355
NOW accounts			1,499				1,706				1,320				1,242				2,099				3,205				6,747
Money market accounts			2,060				2,100				2,010				2,108				3,208				4,160				10,250
Certificate of deposit accounts			1,913				2,222				3,065				3,700				4,564				4,135				11,331
Total due to depositors			5,538				6,103				6,470				7,115				9,945				11,641				28,683
Mortgagors' escrow accounts			1				2				—				(22	)			26				3				66
Total interest-bearing deposits			5,539				6,105				6,470				7,093				9,971				11,644				28,749
Borrowings			5,164				5,140				6,769				6,897				6,084				10,304				13,150
Total interest-bearing liabilities			10,703				11,245				13,239				13,990				16,055				21,948				41,899
Net interest income- tax equivalent		$	61,152			$	61,003			$	55,846			$	50,041			$	48,852			$	122,155			$	89,820
Included in net interest income above:
Prepayment penalties received on loans and securities and net of reversals and recovered interest from non-accrual loans		$	2,046			$	947			$	1,093			$	1,518			$	776			$	2,993			$	1,965
Net gains/(losses) from fair value adjustments on qualifying hedges included in loan interest income			(664	)			1,427				1,023				230				(365	)			763				(2,438	)
Purchase accounting adjustments			565				922				11				—				—				1,487				—
Interest-earning Assets Yields:
Mortgage loans, net			4.13	%			4.28	%			4.29	%			4.22	%			4.18	%			4.21	%			4.19	%
Other loans, net			3.86				3.57				3.62				3.57				3.66				3.72				3.95
Total loans, net			4.07				4.12				4.15				4.09				4.07				4.09				4.14
Taxable securities:
Mortgage-backed securities			1.54				1.57				1.39				1.86				2.00				1.55				2.21
Other securities			1.79				1.28				1.44				1.91				2.23				1.50				2.51
Total taxable securities			1.61				1.45				1.41				1.88				2.08				1.54				2.31
Tax-exempt securities: (1)
Other securities			4.21				4.17				4.28				4.31				4.27				4.19				4.26
Total tax-exempt securities			4.21				4.17				4.28				4.31				4.27				4.19				4.26
Interest-earning deposits and federal funds sold			0.08				0.08				0.09				0.08				0.09				0.08				0.61
Total interest-earning assets			3.69	%			3.77	%			3.82	%			3.84	%			3.81	%			3.73	%			3.89	%
Interest-bearing Liabilities Yields:
Deposits:
Savings accounts			0.17	%			0.18	%			0.18	%			0.16	%			0.16	%			0.17	%			0.37	%
NOW accounts			0.27				0.31				0.27				0.31				0.58				0.29				0.94
Money market accounts			0.40				0.44				0.53				0.58				0.81				0.42				1.25
Certificate of deposit accounts			0.73				0.81				1.10				1.34				1.54				0.77				1.85
Total due to depositors			0.40				0.46				0.55				0.65				0.91				0.43				1.28
Mortgagors' escrow accounts			—				0.01				—				(0.16	)			0.12				0.01				0.17
Total interest-bearing deposits			0.40				0.45				0.54				0.64				0.89				0.42				1.26
Borrowings			2.18				1.96				1.95				2.09				1.70				2.07				1.92
Total interest-bearing liabilities			0.66	%			0.69	%			0.86	%			0.98	%			1.09	%			0.67	%			1.41	%
Net interest rate spread (tax equivalent)			3.03	%			3.08	%			2.96	%			2.86	%			2.72	%			3.06	%			2.48	%
Net interest margin (tax equivalent)			3.14	%			3.18	%			3.08	%			3.00	%			2.87	%			3.16	%			2.66	%
Ratio of interest-earning assets to interest-bearing liabilities			1.19	X			1.18	X			1.17	X			1.16	X			1.15	X			1.19	X			1.14	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

																	June 2021 vs.			June 2021 vs.
		June 30,			March 31,			December 31,			September 30,			June 30,			March 2021			June 2020
(Dollars in thousands)		2021			2021			2020			2020			2020			% Change			% Change
Non-interest bearing		$	945,491		$	917,189		$	778,672		$	607,954		$	581,881		3.1	%		62.5	%
Interest bearing:
Certificate of deposit accounts			1,020,615			1,070,595			1,138,361			1,051,644			1,135,977		(4.7	)		(10.2	)
Savings accounts			152,931			170,272			168,183			160,294			184,895		(10.2	)		(17.3	)
Money market accounts			2,057,188			1,990,656			1,682,345			1,381,552			1,474,880		3.3			39.5
NOW accounts			2,122,565			2,177,865			2,323,172			1,704,915			1,672,241		(2.5	)		26.9
Total interest-bearing deposits			5,353,299			5,409,388			5,312,061			4,298,405			4,467,993		(1.0	)		19.8
Total deposits		$	6,298,790		$	6,326,577		$	6,090,733		$	4,906,359		$	5,049,874		(0.4	)%		24.7	%

Loan Composition

																						June 2021 vs.			June 2021 vs.
		June 30,				March 31,				December 31,				September 30,				June 30,				March 2021			June 2020
(Dollars in thousands)		2021				2021				2020				2020				2020				% Change			% Change
Multi-family residential		$	2,542,010			$	2,525,967			$	2,533,952			$	2,252,757			$	2,285,555			0.6	%		11.2	%
Commercial real estate			1,726,895				1,721,702				1,754,754				1,636,659				1,646,085			0.3			4.9
One-to-four family ― mixed-use property			582,211				595,431				602,981				585,159				591,347			(2.2	)		(1.5	)
One-to-four family ― residential			288,652				239,391				245,211				191,011				184,741			20.6			56.2
Co-operative apartments			7,883				7,965				8,051				8,132				8,423			(1.0	)		(6.4	)
Construction			62,802				61,528				83,322				63,567				69,433			2.1			(9.6	)
Mortgage Loans			5,210,453				5,151,984				5,228,271				4,737,285				4,785,584			1.1			8.9
Small Business Administration (1)			215,158				267,120				167,376				124,649				106,813			(19.5	)		101.4
Taxi medallion			—				—				2,757				2,317				3,269			—			(100.0	)
Commercial business and other			1,291,526				1,326,657				1,303,225				1,063,429				1,073,623			(2.6	)		20.3
Non-mortgage loans			1,506,684				1,593,777				1,473,358				1,190,395				1,183,705			(5.5	)		27.3
Net unamortized premiums and unearned loan fees (2)			1,669				(445	)			3,045				13,718				13,986			(475.1	)		(88.1	)
Allowance for loan losses			(42,670	)			(45,099	)			(45,153	)			(38,343	)			(36,710	)		(5.4	)		16.2
Net loans		$	6,676,136			$	6,700,217			$	6,659,521			$	5,903,055			$	5,946,565			(0.4	)%		12.3	%

 

⁽¹⁾ Includes $197.3 million, $251.0 million, $151.9 million, $111.6 million and $93.2 million of PPP loans at June 30, 2021, March, 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.
⁽²⁾ Includes $8.3 million, $10.5 million and $11.3 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOAN CLOSINGS and RATES
(Unaudited)

Loan Closings

		For the three months ended															For the six months ended
		June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
(In thousands)		2021			2021			2020			2020			2020			2021			2020
Multi-family residential		$	66,913		$	58,553		$	52,024		$	33,733		$	59,654		$	125,466		$	126,972
Commercial real estate			37,963			17,156			57,634			26,644			8,003			55,119			107,574
One-to-four family – mixed-use property			7,135			8,712			9,692			3,867			8,117			15,847			21,572
One-to-four family – residential			59,494			3,131			8,422			2,296			2,674			62,625			11,087
Co-operative apartments			—			—			—			—			—			—			704
Construction			5,281			7,123			6,869			5,420			2,821			12,404			9,570
Mortgage Loans			176,786			94,675			134,641			71,960			81,269			271,461			277,479
Small Business Administration (1)			17,585			125,093			598			18,456			93,241			142,678			93,298
Commercial business and other			130,036			103,118			180,787			65,160			59,287			233,154			161,735
Non-mortgage Loans			147,621			228,211			181,385			83,616			152,528			375,832			255,033
Total		$	324,407		$	322,886		$	316,026		$	155,576		$	233,797		$	647,293		$	532,512

 

⁽¹⁾ Includes $15.5 million, $123.2 million, $18.4 million and $93.2 million of PPP closings for the three months ended June 30, 2021, March 31, 2021, September 30, 2020, and June 30, 2020, respectively.

Weighted Average Rate on Loan Closings

		For the three months ended
		June 30,			March 31,			December 31,			September 30,			June 30,
Loan type		2021			2021			2020			2020			2020
Mortgage loans		3.53	%		3.47	%		3.47	%		3.56	%		3.79	%
Non-mortgage loans		3.23			2.26			3.37			2.81			1.99
Total loans		3.39	%		2.62	%		3.41	%		3.16	%		2.62	%
Excluding PPP loans		3.51	%		3.62	%		3.41	%		3.45	%		3.71	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ASSET QUALITY
(Unaudited)
Allowance for Loan Losses

		For the Three Months Ended																				For the six months ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020				2021				2020
Allowance for loan losses
Beginning balances		$	45,099			$	45,153			$	38,343			$	36,710			$	28,098				45,153				21,751
Adoption of Current Expected Credit Losses			—				—				—				—				—				—				379
Multi-family residential			—				33				(11	)			(14	)			(7	)		$	33			$	(13	)
Commercial real estate			—				64				—				—				—				64				—
One-to-four family – mixed-use property			3				19				—				(60	)			3				22				(75	)
One-to-four family – residential			(2	)			(5	)			(2	)			(2	)			(3	)			(7	)			(8	)
Small Business Administration			(9	)			(10	)			(3	)			(47	)			165				(19	)			158
Taxi medallion			(222	)			2,758				124				951				—				2,536				—
Commercial business and other			1,132				6				538				9				849				1,138				2,094
Total net loan charge-offs			902				2,865				646				837				1,007				3,767				2,156
(Benefit) provision for loan losses			(1,527	)			2,811				3,357				2,470				9,619				1,284				16,736
Allowance recorded at the time of Acquisition			—				—				4,099				—				—				—				—
Ending balance		$	42,670			$	45,099			$	45,153			$	38,343			$	36,710			$	42,670			$	36,710
Gross charge-offs		$	1,186			$	2,922			$	752			$	964			$	1,030			$	4,108			$	2,289
Gross recoveries			284				57				106				127				23				341				133
Allowance for loan losses to gross loans			0.64	%			0.67	%			0.67	%			0.65	%			0.61	%			0.64	%			0.61	%
Net loan charge-offs to average loans			0.05				0.17				0.04				0.06				0.07				0.11				0.07

Non-Performing Assets

		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
Loans 90 Days Or More Past Due and Still Accruing:
Multi-family residential		$	201			$	201			$	201			$	—			$	—
Commercial real estate			—				—				2,547				—				—
Construction			—				2,381				—				—				—
Commercial business and other			—				—				—				—				150
Total			201				2,582				2,748				—				150
Non-accrual Loans:
Multi-family residential			4,669				4,338				2,524				2,661				3,688
Commercial real estate			8				8				1,683				2,657				2,671
One-to-four family - mixed-use property (1)			2,309				2,355				1,366				1,366				2,511
One-to-four family - residential			6,940				7,335				5,854				6,454				6,412
Small Business Administration			976				1,151				1,151				1,151				1,321
Taxi medallion(1)			—				—				2,317				2,218				1,757
Commercial business and other(1)			2,489				3,417				3,430				8,285				1,678
Total			17,391				18,604				18,325				24,792				20,038
Total Non-performing Loans (NPLs)			17,592				21,186				21,073				24,792				20,188
Other Non-performing Assets:
Real estate acquired through foreclosure			—				—				—				—				208
Other asset acquired through foreclosure			—				35				35				35				35
Total			—				35				35				35				243
Total Non-performing Assets		$	17,592			$	21,221			$	21,108			$	24,827			$	20,431
Non-performing Assets to Total Assets			0.22	%			0.26	%			0.26	%			0.35	%			0.29	%
Allowance For Loan Losses to NPLs			242.6	%			212.9	%			214.3	%			154.7	%			181.8	%

 

⁽¹⁾ Not included in the above analysis are non-accrual performing TDR one-to-four family mixed use property loans totaling $0.3 million each in 2Q21, 1Q21, 4Q20, and 3Q20; non-accrual performing TDR taxi medallion loans totaling $0.4 million in 4Q20, $0.1 million in 3Q20, and $1.5 million in 2Q20, and non-accrual performing TDR commercial business loans totaling $2.2 million each in 2Q21, 1Q21, and 4Q20, respectively; $1.0 million each in 3Q20 and 2Q20, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.

Core 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, Base Net Interest Income FTE, Base Net Interest Margin FTE, Core Interest Income and Yield on Total Loans, Base Interest Income and Yield on Total Loans, Core Non-interest Income, Core Non-interest 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 non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Unaudited)

		Three Months Ended																					Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,					June 30,				June 30,
(Dollars In thousands, except per share data)		2021				2021				2020				2020				2020					2021				2020
GAAP income before income taxes		$	25,416			$	26,224			$	3,878			$	18,820			$	24,080				$	51,640			$	22,484
Day 1, Provision for Credit Losses - Empire transaction (Provision for credit losses)			—				—				1,818				—				—					—				—
Net (gain) loss from fair value adjustments (Non-interest income (loss))			6,548				(982	)			4,129				2,225				(10,205	)				5,566				(4,212	)
Net (gain) loss on sale of securities (Non-interest income (loss))			(123	)			—				610				—				54					(123	)			91
Life insurance proceeds (Non-interest income (loss))			—				—				—				—				(659	)				—				(659	)
Net gain on disposition of assets (Non-interest income (loss))			—				(621	)			—				—				—					(621	)			—
Net (gain) loss from fair value adjustments on qualifying hedges (Interest and fees on loans)			664				(1,427	)			(1,023	)			(230	)			365					(763	)			2,438
Prepayment penalty on borrowings (Non-interest expense)			—				—				7,834				—				—					—				—
Net amortization of purchase accounting adjustments (Various)			(418	)			(789	)			80				—				—					(1,207	)			—
Merger (benefit) expense (Various)			(490	)			973				5,349				422				194					483				1,123
Core income before taxes			31,597				23,378				22,675				21,237				13,829					54,975				21,265
Provision for income taxes for core income			8,603				6,405				4,891				5,069				3,532					15,008				5,468
Core net income		$	22,994			$	16,973			$	17,784			$	16,168			$	10,297				$	39,967			$	15,797
GAAP diluted earnings per common share		$	0.61			$	0.60			$	0.11			$	0.50			$	0.63				$	1.21			$	0.58
Day 1, Provision for Credit Losses - Empire transaction, net of tax			—				—				0.05				—				—					—				—
Net (gain) loss from fair value adjustments, net of tax			0.15				(0.02	)			0.11				0.06				(0.27	)				0.13				(0.11	)
Net loss on sale of securities, net of tax			—				—				0.02				—				—					—				—
Life insurance proceeds			—				—				—				—				(0.02	)				—				(0.02	)
Net gain on disposition of assets, net of tax			—				(0.01	)			—				—				—					(0.01	)			—
Net (gain) loss from fair value adjustments on qualifying hedges, net of tax			0.02				(0.03	)			(0.03	)			(0.01	)			0.01					(0.02	)			0.06
Prepayment penalty on borrowings, net of tax			—				—				0.20				—				—					—				—
Net amortization of purchase accounting adjustments, net of tax			(0.01	)			(0.02	)			—				—				—					(0.03	)			—
Merger (benefit) expense, net of tax			(0.01	)			0.02				0.14				0.01				0.01					0.01				0.03
NYS tax change			(0.02	)			—				—				—				—					(0.02	)			—
Core diluted earnings per common share(1)		$	0.73			$	0.54			$	0.58			$	0.56			$	0.36				$	1.26			$	0.55
Core net income, as calculated above		$	22,994			$	16,973			$	17,784			$	16,168			$	10,297				$	39,967			$	15,797
Average assets			8,263,553				8,147,714				7,705,407				7,083,028				7,206,059					8,205,954				7,156,529
Average equity			644,690				619,647				609,463				576,512				557,414					632,238				567,006
Core return on average assets(2)			1.11	%			0.83	%			0.92	%			0.91	%			0.57	%				0.97	%			0.44	%
Core return on average equity(2)			14.27	%			10.96	%			11.67	%			11.22	%			7.39	%				12.64	%			5.57	%

 

⁽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)

		Three Months Ended																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
(Dollars In thousands)		2021				2021				2020				2020				2020				2021				2020
GAAP Net interest income		$	61,039			$	60,892			$	55,732			$	49,924			$	48,717			$	121,931			$	89,543
Net (gain) loss from fair value adjustments on qualifying hedges			664				(1,427	)			(1,023	)			(230	)			365				(763	)			2,438
Net amortization of purchase accounting adjustments			(565	)			(922	)			(11	)			—				—				(1,487	)			—
Core Net interest income		$	61,138			$	58,543			$	54,698			$	49,694			$	49,082			$	119,681			$	91,981
GAAP Non-interest income (loss)		$	(3,210	)		$	6,311			$	(1,181	)		$	1,351			$	13,737			$	3,101			$	10,873
Net (gain) loss from fair value adjustments			6,548				(982	)			4,129				2,225				(10,205	)			5,566				(4,212	)
Net loss on sale of securities			(123	)			—				610				—				54				(123	)			91
Life insurance proceeds			—				—				—				—				(659	)			—				(659	)
Net gain on sale of assets			—				(621	)			—				—				—				(621	)			—
Core Non-interest income		$	3,215			$	4,708			$	3,558			$	3,576			$	2,927			$	7,923			$	6,093
GAAP Non-interest expense		$	34,011			$	38,159			$	46,811			$	29,985			$	28,755			$	72,170			$	61,135
Prepayment penalty on borrowings			—				—				(7,834	)			—				—				—				—
Net amortization of purchase accounting adjustments			(147	)			(133	)			(91	)			—				—				(280	)			—
Merger (benefit) expense			490				(973	)			(5,349	)			(422	)			(194	)			(483	)			(1,123	)
Core Non-interest expense		$	34,354			$	37,053			$	33,537			$	29,563			$	28,561			$	71,407			$	60,012
Net interest income		$	61,039			$	60,892			$	55,732			$	49,924			$	48,717			$	121,931			$	89,543
Non-interest income (loss)			(3,210	)			6,311				(1,181	)			1,351				13,737				3,101				10,873
Non-interest expense			(34,011	)			(38,159	)			(46,811	)			(29,985	)			(28,755	)			(72,170	)			(61,135	)
Pre-provision pre-tax net revenue		$	23,818			$	29,044			$	7,740			$	21,290			$	33,699			$	52,862			$	39,281
Core:
Net interest income		$	61,138			$	58,543			$	54,698			$	49,694			$	49,082			$	119,681			$	91,981
Non-interest income			3,215				4,708				3,558				3,576				2,927				7,923				6,093
Non-interest expense			(34,354	)			(37,053	)			(33,537	)			(29,563	)			(28,561	)			(71,407	)			(60,012	)
Pre-provision pre-tax net revenue		$	29,999			$	26,198			$	24,719			$	23,707			$	23,448			$	56,197			$	38,062
Efficiency Ratio			53.4	%			58.6	%			57.6	%			55.4	%			54.9	%			56.0	%			61.2	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
to CORE and BASE NET INTEREST INCOME
(Unaudited)

		Three Months Ended																					Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,					June 30,				June 30,
(Dollars In thousands)		2021				2021				2020				2020				2020					2021				2020
GAAP net interest income		$	61,039			$	60,892			$	55,732			$	49,924			$	48,717				$	121,931			$	89,543
Net (gain) loss from fair value adjustments on qualifying hedges			664				(1,427	)			(1,023	)			(230	)			365					(763	)			2,438
Net amortization of purchase accounting adjustments			(565	)			(922	)			(11	)			—				—					(1,487	)			—
Tax equivalent adjustment			113				111				114				117				135					224				277
Core net interest income FTE		$	61,251			$	58,654			$	54,812			$	49,811			$	49,217				$	119,905			$	92,258
Prepayment penalties received on loans, net of reversals and recoveries of interest from non-accrual loans			(2,046	)			(947	)			(1,093	)			(1,518	)			(776	)				(2,993	)			(1,965	)
Base net interest income FTE		$	59,205			$	57,707			$	53,719			$	48,293			$	48,441				$	116,912			$	90,293
Total average interest-earning assets (1)		$	7,799,176			$	7,676,833			$	7,245,147			$	6,675,896			$	6,809,835				$	7,738,344			$	6,764,846
Core net interest margin FTE			3.14	%			3.06	%			3.03	%			2.98	%			2.89	%				3.10	%			2.73	%
Base net interest margin FTE			3.04	%			3.01	%			2.97	%			2.89	%			2.85	%				3.02	%			2.67	%
GAAP interest income on total loans, net		$	67,999			$	69,021			$	66,120			$	60,367			$	60,557				$	137,020			$	121,666
Net (gain) loss from fair value adjustments on qualifying hedges			664				(1,427	)			(1,023	)			(230	)			365					(763	)			2,438
Net amortization of purchase accounting adjustments			(624	)			(728	)			(356	)			—				—					(1,352	)			—
Core interest income on total loans, net		$	68,039			$	66,866			$	64,741			$	60,137			$	60,922				$	134,905			$	124,104
Prepayment penalties received on loans, net of reversals and recoveries of interest from non-accrual loans			(2,046	)			(947	)			(1,093	)			(1,443	)			(776	)				(2,993	)			(1,965	)
Base interest income on total loans, net		$	65,993			$	65,919			$	63,648			$	58,694			$	60,146				$	131,912			$	122,139
Average total loans, net (1)		$	6,697,103			$	6,711,446			$	6,379,429			$	5,904,051			$	5,946,412				$	6,704,237			$	5,870,640
Core yield on total loans			4.06	%			3.99	%			4.06	%			4.07	%			4.10	%				4.02	%			4.23	%
Base yield on total loans			3.94	%			3.93	%			3.99	%			3.98	%			4.05	%				3.94	%			4.16	%

 

⁽¹⁾ Excludes purchase accounting average balances for three months ended June 30, 2021, March 31, 2021, and December 31, 2020.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)

		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
Total Equity		$	655,167			$	639,201			$	618,997			$	586,406			$	571,921
Less:
Goodwill			(17,636	)			(17,636	)			(17,636	)			(16,127	)			(16,127	)
Core deposit Intangibles			(2,859	)			(3,013	)			(3,172	)			—				—
Intangible deferred tax liabilities			287				287				287				292				292
Tangible Stockholders' Common Equity		$	634,959			$	618,839			$	598,476			$	570,571			$	556,086
Total Assets		$	8,159,345			$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659
Less:
Goodwill			(17,636	)			(17,636	)			(17,636	)			(16,127	)			(16,127	)
Core deposit Intangibles			(2,859	)			(3,013	)			(3,172	)			—				—
Intangible deferred tax liabilities			287				287				287				292				292
Tangible Assets		$	8,139,137			$	8,138,822			$	7,955,873			$	7,047,221			$	7,146,824
Tangible Stockholders' Common Equity to Tangible Assets			7.80	%			7.60	%			7.52	%			8.10	%			7.78	%