UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2019
FLUSHING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
001-33013
(Commission File Number)
Delaware
(State or Other Jurisdiction of Incorporation)
11-3209278
(I.R.S. Employer Identification No.)
220 RXR Plaza, Uniondale, NY 11556
(Address of principal executive offices)
(718) 961-5400
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | FFIC | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
On October 29, 2019, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Exhibit 99.1. Press release dated October 29, 2019
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FLUSHING FINANCIAL CORPORATION | ||
Date: October 29, 2019 | By: | /s/ MARIA A. GRASSO |
Maria A. Grasso | ||
Senior Executive Vice President and Chief Operating Officer | ||
EXHIBIT 99.1
Flushing Financial Corporation Reports GAAP Diluted EPS of $0.37, Unchanged QoQ, and Core Diluted EPS of $0.48 up 14.3% QoQ; Record Quarterly Loan Closings; Quarter End Loan Pipeline Remains Strong at $419 Million
THIRD QUARTER 20191 HIGHLIGHTS
UNIONDALE, N.Y., Oct. 29, 2019 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq-GS: FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the third quarter ended September 30, 2019.
John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report core diluted earnings per share increased 14%, while GAAP earnings per diluted share was unchanged from 2Q19. The primary difference between GAAP and core earnings is the non-cash net losses from fair value adjustments, or $0.10 per diluted share, which is discussed in more detail later in this release. Core earnings for 3Q19 included the benefit of the FDIC small business assessment credit of $0.03, after-tax per diluted common share and the true-up of our effective tax rate to 22% from 24% which equated to $0.02 per diluted common share. Our core ROAE increased to 9.8% for the quarter compared to 8.6% for the linked quarter and our GAAP ROAE increased seven basis points during the same period to 7.6%. Similarly, the core ROAA increased nine basis points to 0.79% compared to 0.70% for 2Q19 and GAAP ROAA increased one basis point to 0.62%.”
“We generated robust loan growth of 9% (annualized) for the quarter, as we booked record quarterly loan closings driven by record C&I production. This marks the second consecutive quarter of record C&I closings. Total loan closings for the quarter amounted to $398 million, with $238 million, or 60% from C&I closings. The strong C&I production aids the continuing diversification of our loan portfolio. These C&I loans are generally floating rate and represent 19% of total loans at September 30, 2019, compared to 16% at September 30, 2018. At September 30, 2019, the loan pipeline remains strong at $419 million.”
“The net interest margin compressed 8bps QoQ. During the quarter, loan yields on originations decreased 50bps from 2Q19, as we continued to experience pricing pressure due to the inverted yield curve at the pricing point for our loan tenor. Although the Federal Reserve has recently cut rates, we still experienced margin compression on the liability side, with the cost of funds increasing 4bps primarily driven by pricing pressure on our retail and municipal deposits, as competition from traditional bank and non-bank competitors remains very strong. We have experienced an increase in the cost of funds throughout the first two quarters of 2019 and into the middle of 3Q19. Starting in late 3Q19, the cost of funds began to improve. The Company has approximately $1 billion of retail CDs maturing before 3Q20 at an average rate of 2.33%. At quarter-end, our average new CD cost was less than 2.00%. Additionally, in order to continue to diversify deposit gathering channels, we have embarked on a digital transformation strategy. This strategy will enhance our current technological offerings to state of the art digital services. We expect the new technologies to be fully operational in the first quarter of 2020.”
“We remain focused on preserving strong risk management practices, including conservative underwriting standards and improving yields to achieve improved risk-adjusted returns. We continue to focus on increasing the amount of direct loan business, as approximately 65% of 3Q19 loan closings were non-brokered loans.”
“Overall, we remain well capitalized and well positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute our strategic objectives.”
“As previously announced we are opening a new branch in Hicksville, NY, which expands our presence on Long Island.”
Mr. Buran continued, “We are excited about the signing of the definitive merger agreement to acquire Empire Bancorp, Inc. As previously reported, the transaction is valued at an estimated $111.6 million, based on our closing price on October 24, 2019. The combined company at close is expected to have approximately $8.0 billion in assets, $6.3 billion in loans and $5.8 billion in deposits.”
Mr. Buran concluded, “The combination of the new branch opening and merger will provide our customers with an expanded network of 24 branches, with 16 branches in New York City, five branches in Nassau County and three branches in Suffolk County.”
Summary of Strategic Objectives
Earnings Summary:
Net Interest Income
Net interest income for 3Q19 was $38.9 million, a decrease of $2.6 million, or 6.2% YoY (3Q19 compared to 3Q18) and $1.1 million, or 2.6% QoQ (3Q19 compared to 2Q19).
Provision for loan losses
The Company recorded a provision of $0.7 million compared to $1.5 million in 2Q19 and none in 3Q18.
Non-interest Income
Non-interest income for 3Q19 was $1.0 million, a decrease of $3.9 million YoY, and $1.4 million QoQ
Non-interest Expense
Non-interest expense for 3Q19 was $26.0 million, a decrease of $1.2 million, or 4.4 % YoY, and $1.1 million, or 4.1% QoQ
Provision for Income Taxes
The provision for income taxes in 3Q19 was $2.5 million, an increase of $0.6 million, or 32.8% YoY but a decrease of $0.7 million, or 22.5% QoQ.
Financial Condition Summary:
Loans:
Credit Quality:
Capital Management:
Conference Call Information:
About Flushing Financial Corporation
Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the Bank’s experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, an eco-friendly, healthier lifestyle community brand.
Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at http://www.flushingbank.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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.
- Statistical Tables Follow -
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Interest and Dividend Income | ||||||||||||||||||||
Interest and fees on loans | $ | 62,825 | $ | 62,273 | $ | 59,658 | $ | 187,428 | $ | 171,997 | ||||||||||
Interest and dividends on securities: | ||||||||||||||||||||
Interest | 6,287 | 6,811 | 5,562 | 20,007 | 16,646 | |||||||||||||||
Dividends | 18 | 19 | 18 | 56 | 49 | |||||||||||||||
Other interest income | 259 | 472 | 248 | 1,286 | 873 | |||||||||||||||
Total interest and dividend income | 69,389 | 69,575 | 65,486 | 208,777 | 189,565 | |||||||||||||||
Interest Expense | ||||||||||||||||||||
Deposits | 22,244 | 22,827 | 17,425 | 66,540 | 44,323 | |||||||||||||||
Other interest expense | 8,196 | 6,739 | 6,540 | 21,476 | 18,472 | |||||||||||||||
Total interest expense | 30,440 | 29,566 | 23,965 | 88,016 | 62,795 | |||||||||||||||
Net Interest Income | 38,949 | 40,009 | 41,521 | 120,761 | 126,770 | |||||||||||||||
Provision for loan losses | 683 | 1,474 | - | 3,129 | 153 | |||||||||||||||
Net Interest Income After Provision for Loan Losses | 38,266 | 38,535 | 41,521 | 117,632 | 126,617 | |||||||||||||||
Non-interest Income | ||||||||||||||||||||
Banking services fee income | 847 | 1,059 | 1,017 | 2,879 | 2,965 | |||||||||||||||
Net loss on sale of securities | - | (15 | ) | - | (15 | ) | - | |||||||||||||
Net gain on sale of loans | 204 | 114 | 10 | 381 | 168 | |||||||||||||||
Net gain on sale of assets | - | 770 | - | 770 | - | |||||||||||||||
Net loss from fair value adjustments | (2,124 | ) | (1,956 | ) | (170 | ) | (6,160 | ) | (537 | ) | ||||||||||
Federal Home Loan Bank of New York stock dividends | 834 | 826 | 873 | 2,563 | 2,630 | |||||||||||||||
Life insurance proceeds | - | - | 2,222 | 43 | 2,998 | |||||||||||||||
Bank owned life insurance | 1,000 | 810 | 782 | 2,550 | 2,320 | |||||||||||||||
Other income | 278 | 843 | 221 | 1,422 | 779 | |||||||||||||||
Total non-interest income | 1,039 | 2,451 | 4,955 | 4,433 | 11,323 | |||||||||||||||
Non-interest Expense | ||||||||||||||||||||
Salaries and employee benefits | 15,461 | 15,668 | 15,720 | 50,295 | 49,466 | |||||||||||||||
Occupancy and equipment | 2,847 | 2,742 | 2,475 | 8,378 | 7,528 | |||||||||||||||
Professional services | 2,167 | 1,806 | 1,915 | 6,238 | 6,539 | |||||||||||||||
FDIC deposit insurance | (589 | ) | 667 | 596 | 563 | 1,643 | ||||||||||||||
Data processing | 1,490 | 1,420 | 1,427 | 4,402 | 4,254 | |||||||||||||||
Depreciation and amortization | 1,439 | 1,497 | 1,484 | 4,454 | 4,328 | |||||||||||||||
Other real estate owned/foreclosure expense (benefit) | 48 | 20 | (102 | ) | 145 | 34 | ||||||||||||||
Net gain from sales of real estate owned | - | - | - | - | (27 | ) | ||||||||||||||
Other operating expenses | 3,182 | 3,338 | 3,718 | 11,147 | 12,158 | |||||||||||||||
Total non-interest expense | 26,045 | 27,158 | 27,233 | 85,622 | 85,923 | |||||||||||||||
Income Before Income Taxes | 13,260 | 13,828 | 19,243 | 36,443 | 52,017 | |||||||||||||||
Provision for Income Taxes | ||||||||||||||||||||
Federal | 2,457 | 2,981 | 2,307 | 7,381 | 8,225 | |||||||||||||||
State and local | 79 | 291 | (397 | ) | 714 | 1,124 | ||||||||||||||
Total taxes | 2,536 | 3,272 | 1,910 | 8,095 | 9,349 | |||||||||||||||
Net Income | $ | 10,724 | $ | 10,556 | $ | 17,333 | $ | 28,348 | $ | 42,668 | ||||||||||
Basic earnings per common share | $ | 0.37 | $ | 0.37 | $ | 0.61 | $ | 0.99 | $ | 1.48 | ||||||||||
Diluted earnings per common share | $ | 0.37 | $ | 0.37 | $ | 0.61 | $ | 0.99 | $ | 1.48 | ||||||||||
Dividends per common share | $ | 0.21 | $ | 0.21 | $ | 0.20 | $ | 0.63 | $ | 0.60 |
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |||||||||||
(Dollars in thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
September 30, | June 30, | December 31, | |||||||||
2019 | 2019 | 2018 | |||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 86,989 | $ | 56,484 | $ | 118,561 | |||||
Securities held-to-maturity: | |||||||||||
Mortgage-backed securities | 7,939 | 7,944 | 7,953 | ||||||||
Other securities | 52,101 | 52,242 | 24,065 | ||||||||
Securities available for sale: | |||||||||||
Mortgage-backed securities | 579,010 | 554,481 | 557,953 | ||||||||
Other securities | 246,465 | 254,172 | 264,702 | ||||||||
Loans: | |||||||||||
Multi-family residential | 2,232,305 | 2,263,875 | 2,269,048 | ||||||||
Commercial real estate | 1,559,581 | 1,524,693 | 1,542,547 | ||||||||
One-to-four family ― mixed-use property | 587,100 | 582,264 | 577,741 | ||||||||
One-to-four family ― residential | 184,432 | 184,024 | 190,350 | ||||||||
Co-operative apartments | 9,089 | 8,137 | 8,498 | ||||||||
Construction | 64,234 | 58,503 | 50,600 | ||||||||
Small Business Administration | 13,982 | 14,511 | 15,210 | ||||||||
Taxi medallion | 3,513 | 3,555 | 4,539 | ||||||||
Commercial business and other | 1,096,164 | 983,573 | 877,763 | ||||||||
Net unamortized premiums and unearned loan fees | 15,363 | 15,278 | 15,188 | ||||||||
Allowance for loan losses | (22,035 | ) | (21,510 | ) | (20,945 | ) | |||||
Net loans | 5,743,728 | 5,616,903 | 5,530,539 | ||||||||
Interest and dividends receivable | 26,566 | 26,552 | 25,485 | ||||||||
Bank premises and equipment, net | 28,146 | 28,623 | 30,418 | ||||||||
Federal Home Loan Bank of New York stock | 65,280 | 63,029 | 57,282 | ||||||||
Bank owned life insurance | 158,604 | 157,604 | 131,788 | ||||||||
Goodwill | 16,127 | 16,127 | 16,127 | ||||||||
Other real estate owned, net | 239 | 239 | - | ||||||||
Right of use asset | 42,400 | 42,557 | - | ||||||||
Other assets | 57,301 | 68,677 | 69,303 | ||||||||
Total assets | $ | 7,110,895 | $ | 6,945,634 | $ | 6,834,176 | |||||
LIABILITIES | |||||||||||
Due to depositors: | |||||||||||
Non-interest bearing | $ | 421,786 | $ | 413,813 | $ | 413,747 | |||||
Certificate of deposit accounts | 1,506,376 | 1,544,117 | 1,563,310 | ||||||||
Savings accounts | 193,497 | 196,820 | 210,022 | ||||||||
Money market accounts | 1,329,156 | 1,302,153 | 1,427,992 | ||||||||
NOW accounts | 1,461,694 | 1,368,813 | 1,300,852 | ||||||||
Total deposits | 4,912,509 | 4,825,716 | 4,915,923 | ||||||||
Mortgagors' escrow deposits | 61,803 | 52,201 | 44,861 | ||||||||
Borrowed funds | 1,422,440 | 1,371,890 | 1,250,843 | ||||||||
Operating lease liability | 50,626 | 50,898 | - | ||||||||
Other liabilities | 95,125 | 79,539 | 73,085 | ||||||||
Total liabilities | 6,542,503 | 6,380,244 | 6,284,712 | ||||||||
STOCKHOLDERS' EQUITY | |||||||||||
Preferred stock (5,000,000 shares authorized; none issued) | - | - | - | ||||||||
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares | |||||||||||
issued at September 30, 2019, June 30, 2019 and December 31, 2018; 28,157,206 | |||||||||||
shares, 28,187,922 shares and 27,983,637 shares outstanding at September 30, 2019, | |||||||||||
June 30, 2019 and December 31, 2018, respectively) | 315 | 315 | 315 | ||||||||
Additional paid-in capital | 225,471 | 224,231 | 222,720 | ||||||||
Treasury stock (3,373,389 shares, 3,342,673 shares and 3,546,958 shares at | |||||||||||
September 30, 2019, June 30, 2019 and December 31, 2018, respectively) | (71,487 | ) | (70,913 | ) | (75,146 | ) | |||||
Retained earnings | 427,062 | 422,373 | 414,327 | ||||||||
Accumulated other comprehensive loss, net of taxes | (12,969 | ) | (10,616 | ) | (12,752 | ) | |||||
Total stockholders' equity | 568,392 | 565,390 | 549,464 | ||||||||
Total liabilities and stockholders' equity | $ | 7,110,895 | $ | 6,945,634 | $ | 6,834,176 |
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | |||||||||||||||||||||||||
DEPOSIT COMPOSITION | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
September 2019 vs. | September 2019 vs. | ||||||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | December 2018 | September 30, | September 2018 | |||||||||||||||||||
(Dollars in thousands) | 2019 | 2019 | 2019 | 2018 | % Change | 2018 | % Change | ||||||||||||||||||
Deposits | |||||||||||||||||||||||||
Non-interest bearing | $ | 421,786 | $ | 413,813 | $ | 401,064 | $ | 413,747 | 1.9 | % | $ | 398,606 | 5.8 | % | |||||||||||
Interest bearing: | |||||||||||||||||||||||||
Certificate of deposit | |||||||||||||||||||||||||
accounts | 1,506,376 | 1,544,117 | 1,511,770 | 1,563,310 | -3.6 | % | 1,562,962 | -3.6 | % | ||||||||||||||||
Savings accounts | 193,497 | 196,820 | 201,811 | 210,022 | -7.9 | % | 216,976 | -10.8 | % | ||||||||||||||||
Money market accounts | 1,329,156 | 1,302,153 | 1,352,843 | 1,427,992 | -6.9 | % | 1,223,640 | 8.6 | % | ||||||||||||||||
NOW accounts | 1,461,694 | 1,368,813 | 1,542,606 | 1,300,852 | 12.4 | % | 1,255,464 | 16.4 | % | ||||||||||||||||
Total interest-bearing | |||||||||||||||||||||||||
deposits | 4,490,723 | 4,411,903 | 4,609,030 | 4,502,176 | -0.3 | % | 4,259,042 | 5.4 | % | ||||||||||||||||
Total deposits | $ | 4,912,509 | $ | 4,825,716 | $ | 5,010,094 | $ | 4,915,923 | -0.1 | % | $ | 4,657,648 | 5.5 | % |
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | ||||||||||||||||||||
LOANS | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Loan Closings | ||||||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
(In thousands) | 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
Multi-family residential | $ | 60,454 | $ | 55,629 | $ | 102,484 | $ | 143,297 | $ | 254,637 | ||||||||||
Commercial real estate | 66,648 | 42,700 | 38,569 | 123,289 | 175,013 | |||||||||||||||
One-to-four family – mixed-use property | 18,167 | 12,885 | 16,870 | 47,475 | 45,232 | |||||||||||||||
One-to-four family – residential | 7,421 | 7,884 | 11,362 | 19,191 | 35,304 | |||||||||||||||
Co-operative apartments | 1,817 | 300 | - | 2,117 | 1,500 | |||||||||||||||
Construction | 5,761 | 18,715 | 6,008 | 30,377 | 30,627 | |||||||||||||||
Small Business Administration | 121 | 2,255 | 344 | 2,705 | 2,539 | |||||||||||||||
Commercial business and other | 237,754 | 156,029 | 133,188 | 524,113 | 361,207 | |||||||||||||||
Total | $ | 398,143 | $ | 296,397 | $ | 308,825 | $ | 892,564 | $ | 906,059 |
Loan Composition | |||||||||||||||||||||||||
September 2019 vs. | September 2019 vs. | ||||||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | December 2018 | September 30, | September 2018 | |||||||||||||||||||
(Dollars in thousands) | 2019 | 2019 | 2019 | 2018 | % Change | 2018 | % Change | ||||||||||||||||||
Loans held for investment: | |||||||||||||||||||||||||
Multi-family residential | $ | 2,232,305 | $ | 2,263,875 | $ | 2,256,447 | $ | 2,269,048 | -1.6 | % | $ | 2,235,370 | -0.1 | % | |||||||||||
Commercial real estate | 1,559,581 | 1,524,693 | 1,529,001 | 1,542,547 | 1.1 | % | 1,460,555 | 6.8 | % | ||||||||||||||||
One-to-four family ― | |||||||||||||||||||||||||
mixed-use property | 587,100 | 582,264 | 582,049 | 577,741 | 1.6 | % | 565,302 | 3.9 | % | ||||||||||||||||
One-to-four family ― residential | 184,432 | 184,024 | 188,615 | 190,350 | -3.1 | % | 188,975 | -2.4 | % | ||||||||||||||||
Co-operative apartments | 9,089 | 8,137 | 7,903 | 8,498 | 7.0 | % | 7,771 | 17.0 | % | ||||||||||||||||
Construction | 64,234 | 58,503 | 54,933 | 50,600 | 26.9 | % | 40,239 | 59.6 | % | ||||||||||||||||
Small Business Administration | 13,982 | 14,511 | 15,188 | 15,210 | -8.1 | % | 14,322 | -2.4 | % | ||||||||||||||||
Taxi medallion | 3,513 | 3,555 | 3,891 | 4,539 | -22.6 | % | 6,078 | -42.2 | % | ||||||||||||||||
Commercial business and other | 1,096,164 | 983,573 | 935,297 | 877,763 | 24.9 | % | 846,224 | 29.5 | % | ||||||||||||||||
Net unamortized premiums | |||||||||||||||||||||||||
and unearned loan fees | 15,363 | 15,278 | 15,422 | 15,188 | 1.2 | % | 15,226 | 0.9 | % | ||||||||||||||||
Allowance for loan losses | (22,035 | ) | (21,510 | ) | (21,015 | ) | (20,945 | ) | 5.2 | % | (20,309 | ) | 8.5 | % | |||||||||||
Net loans | $ | 5,743,728 | $ | 5,616,903 | $ | 5,567,731 | $ | 5,530,539 | 3.9 | % | $ | 5,359,753 | 7.2 | % |
Net Loans Activity | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
(In thousands) | 2019 | 2019 | 2019 | 2018 | 2018 | ||||||||||||||
Loans originated and purchased | $ | 398,143 | $ | 296,397 | $ | 198,024 | $ | 344,732 | $ | 308,825 | |||||||||
Principal reductions | (266,894 | ) | (243,263 | ) | (158,815 | ) | (173,061 | ) | (257,902 | ) | |||||||||
Loans sold | (3,553 | ) | (1,970 | ) | (1,043 | ) | - | (4,027 | ) | ||||||||||
Loan charged-offs | (431 | ) | (1,114 | ) | (1,138 | ) | (211 | ) | (220 | ) | |||||||||
Foreclosures | - | (239 | ) | - | - | - | |||||||||||||
Net change in deferred fees and costs | 85 | (144 | ) | 234 | (38 | ) | (421 | ) | |||||||||||
Net change in the allowance for loan losses | (525 | ) | (495 | ) | (70 | ) | (636 | ) | (89 | ) | |||||||||
Total loan activity | $ | 126,825 | $ | 49,172 | $ | 37,192 | $ | 170,786 | $ | 46,166 |
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | ||||||||||||||||||||
NON-PERFORMING ASSETS and NET CHARGE-OFFS | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
(Dollars in thousands) | 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
Loans 90 Days Or More Past Due | ||||||||||||||||||||
and Still Accruing: | ||||||||||||||||||||
Multi-family residential | $ | 445 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Commercial real estate | - | - | - | - | 111 | |||||||||||||||
Total | 445 | - | - | - | 111 | |||||||||||||||
Non-accrual Loans: | ||||||||||||||||||||
Multi-family residential | 3,132 | 2,008 | 2,009 | 2,410 | 862 | |||||||||||||||
Commercial real estate | 872 | 1,488 | 1,050 | 1,379 | 1,398 | |||||||||||||||
One-to-four family - mixed-use property | 683 | 1,752 | 1,305 | 928 | 795 | |||||||||||||||
One-to-four family - residential | 5,050 | 5,411 | 5,708 | 6,144 | 6,610 | |||||||||||||||
Construction | - | - | 950 | - | - | |||||||||||||||
Small Business Administration | 1,151 | 1,224 | 1,227 | 1,267 | 1,395 | |||||||||||||||
Taxi medallion(1) | 1,352 | 1,361 | 1,372 | 613 | 712 | |||||||||||||||
Commercial business and other(1) | 2,020 | 2,458 | 2,114 | 3,512 | 761 | |||||||||||||||
Total | 14,260 | 15,702 | 15,735 | 16,253 | 12,533 | |||||||||||||||
Total Non-performing Loans | 14,705 | 15,702 | 15,735 | 16,253 | 12,644 | |||||||||||||||
Other Non-performing Assets: | ||||||||||||||||||||
Real estate acquired through foreclosure | 239 | 239 | - | - | - | |||||||||||||||
Other asset acquired through foreclosure | 35 | 35 | 35 | 35 | 35 | |||||||||||||||
Total | 274 | 274 | 35 | 35 | 35 | |||||||||||||||
Total Non-performing Assets | $ | 14,979 | $ | 15,976 | $ | 15,770 | $ | 16,288 | $ | 12,679 | ||||||||||
Non-performing Assets to Total Assets | 0.21 | % | 0.23 | % | 0.23 | % | 0.24 | % | 0.19 | % | ||||||||||
Allowance For Loan Losses to Non-performing Loans | 149.8 | % | 137.0 | % | 133.6 | % | 128.9 | % | 160.6 | % | ||||||||||
(1) Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $2.2 million in 3Q19, $2.2 million in 2Q19, $2.5 million in 1Q19, $3.9 million in 4Q18, and $5.4 million in 3Q18 and non-accrual performing TDR commercial business loans totaling $1.0 million in 3Q19. | ||||||||||||||||||||
Net Charge-Offs (Recoveries) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
(In thousands) | 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
Multi-family residential | $ | 183 | $ | (10 | ) | $ | (13 | ) | $ | (4 | ) | $ | 18 | |||||||
Commercial real estate | - | (7 | ) | - | - | - | ||||||||||||||
One-to-four family – mixed-use property | (140 | ) | (2 | ) | (85 | ) | (18 | ) | (36 | ) | ||||||||||
One-to-four family – residential | (3 | ) | 110 | (4 | ) | (199 | ) | (258 | ) | |||||||||||
Small Business Administration | (32 | ) | (16 | ) | (4 | ) | 170 | 134 | ||||||||||||
Taxi medallion | - | (50 | ) | (84 | ) | (143 | ) | 40 | ||||||||||||
Commercial business and other | 150 | 954 | 1,092 | (20 | ) | 13 | ||||||||||||||
Total net loan charge-offs (recoveries) | $ | 158 | $ | 979 | $ | 902 | $ | (214 | ) | $ | (89 | ) | ||||||||
Non-cash Fair Value Adjustments to GAAP Earnings
During the current year, core earnings were higher than GAAP earnings primarily due to the impact of non-cash net losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates. As the swaps get closer to maturity the volatility in fair value adjustments will dissipate. Overall, the interest movement of the swaps is benefitting the core net interest margin while the fair value adjustments are offsetting the benefit. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve the loss position would experience an improvement.
Core Diluted EPS, Core ROAE, Core ROAA, Core Net Interest Income, Core Yield on Total Loans, Core Net Interest Margin and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.
These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | ||||||||||||||||
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN | ||||||||||||||||
To CORE NET INTEREST INCOME and NET INTEREST MARGIN | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||
2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||
GAAP net interest income | $ | 38,949 | $ | 40,009 | $ | 41,521 | $ | 120,761 | $ | 126,770 | ||||||
Net losses from fair value adjustments on qualifying hedges | 1,262 | 818 | - | 2,717 | - | |||||||||||
Core net interest income | $ | 40,211 | $ | 40,827 | $ | 41,521 | $ | 123,478 | $ | 126,770 | ||||||
GAAP interest income on total loans, net | $ | 62,825 | $ | 62,273 | $ | 59,658 | $ | 187,428 | $ | 171,997 | ||||||
Net losses from fair value adjustments on qualifying hedges | 1,262 | 818 | - | 2,717 | - | |||||||||||
Prepayment penalties received on loans | (1,697 | ) | (1,120 | ) | (1,944 | ) | (3,622 | ) | (4,308 | ) | ||||||
Net recoveries of interest from non-accrual loans | (292 | ) | (519 | ) | (1,066 | ) | (1,525 | ) | (1,480 | ) | ||||||
Core interest income on total loans, net | $ | 62,098 | $ | 61,452 | $ | 56,648 | $ | 184,998 | $ | 166,209 | ||||||
Average total loans, net | $ | 5,645,503 | $ | 5,565,057 | $ | 5,280,172 | $ | 5,585,445 | $ | 5,276,039 | ||||||
Core yield on total loans | 4.40 | % | 4.42 | % | 4.29 | % | 4.42 | % | 4.20 | % | ||||||
Net interest income tax equivalent | $ | 39,097 | $ | 40,134 | $ | 41,747 | $ | 121,159 | $ | 127,451 | ||||||
Net losses from fair value adjustments on qualifying hedges | 1,262 | 818 | - | 2,717 | - | |||||||||||
Prepayment penalties received on loans and securities | (1,697 | ) | (1,120 | ) | (1,944 | ) | (3,622 | ) | (4,410 | ) | ||||||
Net recoveries of interest from non-accrual loans | (292 | ) | (519 | ) | (1,066 | ) | (1,525 | ) | (1,480 | ) | ||||||
Net interest income used in calculation of Core net interest margin | $ | 38,370 | $ | 39,313 | $ | 38,737 | $ | 118,729 | $ | 121,561 | ||||||
Total average interest-earning assets | $ | 6,589,498 | $ | 6,540,134 | $ | 6,130,422 | $ | 6,550,509 | $ | 6,136,887 | ||||||
Core net interest margin | 2.33 | % | 2.40 | % | 2.53 | % | 2.42 | % | 2.64 | % |
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES | ||||||||||
CALCULATION OF TANGIBLE STOCKHOLDERS’ | ||||||||||
COMMON EQUITY to TANGIBLE ASSETS | ||||||||||
(Unaudited) | ||||||||||
September 30, | December 31, | September 30, | ||||||||
(Dollars in thousands) | 2019 | 2018 | 2018 | |||||||
Total Equity | $ | 568,392 | $ | 549,464 | $ | 541,756 | ||||
Less: | ||||||||||
Goodwill | (16,127 | ) | (16,127 | ) | (16,127 | ) | ||||
Intangible deferred tax liabilities | 286 | 290 | 291 | |||||||
Tangible Stockholders' Common Equity | $ | 552,551 | $ | 533,627 | $ | 525,920 | ||||
Total Assets | $ | 7,110,895 | $ | 6,834,176 | $ | 6,539,543 | ||||
Less: | ||||||||||
Goodwill | (16,127 | ) | (16,127 | ) | (16,127 | ) | ||||
Intangible deferred tax liabilities | 286 | 290 | 291 | |||||||
Tangible Assets | $ | 7,095,054 | $ | 6,818,339 | $ | 6,523,707 | ||||
Tangible Stockholders' Common Equity to Tangible Assets | 7.79 | % | 7.83 | % | 8.06 | % | ||||
__________________________________
1 See the tables entitled “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Income and Net Interest Margin to Core Net Interest Income and Net Interest Margin.”
Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer
Flushing Financial Corporation
(718) 961-5400