FFIC Flushing Financial Corporation

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.”

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

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

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%

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:

• 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

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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
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⁽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
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST INCOME AND NET INTEREST MARGIN
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