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Flushing Financial Corporation Reports 3Q22 GAAP EPS of $0.76 and Core EPS of $0.62
Source: Nasdaq GlobeNewswire / 25 Oct 2022 17:30:02 America/New_York
Loan Growth Despite Rising Rates
John R. Buran, President and CEO Commentary
UNIONDALE, N.Y., Oct. 25, 2022 (GLOBE NEWSWIRE) -- The Company reported third quarter 2022 GAAP EPS of $0.76, down 6.2% YoY, with a ROAA of 1.11%, and ROAE of 13.91%. Core 3Q22 EPS was $0.62, a decrease of 29.5% YoY, with a ROAA of 0.90% and the ROAE of 11.24%.
“We supported customers by achieving loan growth of 3.1% QoQ, excluding the impact of PPP loans, while increasing the origination yield by 68 bps for the quarter, as the quarter was dominated by Fed rate increases. Credit quality, a hallmark of the Company, remained solid with only 2 bps of net charge-offs this quarter. The Company opportunistically raised $65 million of subordinated debt capital to lock in funding at an attractive rate. The Fed rate movements resulted in the NIM compressing 28 bps during the third quarter given the rapid rise in rates. Despite the NIM pressure in the short term, loans are expected to reprice higher over time. Approximately $1.0 billion or 15% of loans reprice within 90 days of index changes and $1.9 billion or 27% of loans are expected to contractually reprice higher by 200 bps through the end of 2024. There are over $500 million of funding swaps that have attractive rates now and will reprice lower by approximately 70 bps through 2023. Our community focus continued to shine this quarter as we supported several events, including the Flushing and Port Jefferson Dragon Boat festivals and our Harvest Moon Reception.”
- John R. Buran, President and CEOLoan Closings up 90.1% YoY; NIM Declined QoQ. Period end net loans, excluding PPP, increased 3.1% QoQ, with balanced growth between real estate and commercial business and other loans. Loan closings, excluding PPP, were up 90.1% YoY, while repayment speeds declined both YoY and QoQ. Despite the loan closings increasing, net interest income of $61.2 million decreased 3.4% YoY and 5.4% QoQ, primarily due to the increased funding costs. NIM FTE was 3.07% in 3Q22 compared to 3.35% in 2Q22 and 3.34% a year ago. Core NIM FTE decreased by 24 bps to 3.03% YoY and 30 bps QoQ. The Company hired 46 people, including 20 revenue producers, since March 31, 2021 from institutions involved with bank mergers.
Returned 40% of Earnings in 3Q22; Tangible Book Value Per Share Increased 3% YoY. The Company repurchased 131,174 shares of common stock at an average price of $20.47 during the quarter. Book value and tangible book value per share were $22.47 and $21.81, respectively, while TCE/TA1 was 7.62% at September 30, 2022 compared to 7.82% at June 30, 2022.Key Financial Metrics2 3Q22 2Q22 1Q22 4Q21 3Q21 GAAP: EPS $0.76 $0.81 $0.58 $0.58 $0.81 ROAA (%) 1.11 1.22 0.91 0.89 1.26 ROAE (%) 13.91 15.00 10.83 10.77 15.42 NIM FTE3 (%) 3.07 3.35 3.36 3.29 3.34 Core: EPS $0.62 $0.70 $0.61 $0.67 $0.88 ROAA (%) 0.90 1.05 0.94 1.04 1.38 ROAE (%) 11.24 12.90 11.27 12.49 16.88 Core NIM FTE (%) 3.03 3.33 3.31 3.21 3.27 Credit Quality: NPAs/Loans&REO (%) 0.72 0.72 0.21 0.23 0.31 ACLs/Loans (%) 0.59 0.58 0.57 0.56 0.55 ACLs/NPLs (%) 142.29 141.06 266.12 248.66 179.86 NCOs/Avg Loans (%) 0.02 (0.03 ) 0.06 - (0.04 ) Balance Sheet: Avg Loans ($B) $6.9 $6.6 $6.6 $6.6 $6.6 Avg Dep ($B) $6.3 $6.4 $6.4 $6.5 $6.4 Book Value/Share $22.47 $22.38 $22.26 $22.26 $21.78 Tangible BV/Share $21.81 $21.71 $21.61 $21.61 $21.13 TCE/TA (%) 7.62 7.82 8.05 8.22 8.04 1 Tangible Common Equity (“TCE”)/Total Assets (“TA”) 2 See “Reconciliation of GAAP Earnings and Core Earnings”, “Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue”, and “Reconciliation of GAAP Net Interest Margin to Core Net Interest Income and Net Interest Margin.” 3 Net Interest Margin (“NIM”) Fully Taxable Equivalent (“FTE”)
3Q22 Highlights - Period end net loans, excluding PPP, increased 3.1% QoQ and 6.8% YoY; loan closings were $463.7 million at 4.60% in 3Q22, down 8.0% from record levels QoQ, but up 90.1% YoY while the yield increased 68 bps QoQ and 96 bps YoY
- Loan pipeline decreased 41.8% YoY to $309.1 million as we become more selective in terms of rate and collateral type and borrowers adjusted to higher rates
- Issued $65 million of subordinated notes at 6.00% during the 3Q22
- NPAs increased to $50.0 million from $48.9 million at 2Q22 and from $20.2 million at 3Q21
- Provision for credit losses was $2.1 million in 3Q22 compared to a benefit for credit losses of $6.9 million in 3Q21; net charge-offs were $0.3 million in 3Q22 compared to net recoveries of $0.6 million in 3Q21
- Net interest income decreased 5.4% QoQ and 3.4% YoY to $61.2 million; Core net interest income declined 6.2% QoQ and 2.7% YoY to $60.4 million
- Net interest margin FTE decreased 28 bps QoQ and 27 bps YoY to 3.07%; Core net interest margin FTE decreased 30 bps QoQ and 24 bps YoY to 3.03%; The decline in GAAP and Core NIM QoQ was primarily driven by our liability sensitive balance sheet resulting in liabilities repricing faster than assets over the near term but reversing as loans reprice over the next couple of years
- Average deposits, including mortgage escrow, decreased 2.6% QoQ and 2.1% YoY to $6.3 billion, with core deposits comprising 83.1% of total average deposits
- Signed a lease to open a new branch in Brooklyn expanding our Asian banking footprint
- Tangible Common Equity to Tangible Assets was 7.62% down from 7.82% at 2Q22; the change in accumulated other comprehensive loss, net of taxes (primarily from rising rates) impacted this ratio by 18 bps in 3Q22 compared to 2Q22
- Repurchased 131,174 shares at an average price of $20.47; dividends and share repurchases were 40% of net income in 3Q22
Income Statement Highlights YoY QoQ ($000s, except EPS) 3Q22 2Q22 1Q22 4Q21 3Q21 Change Change Net Interest Income $61,206 $64,730 $63,479 $62,674 $63,364 (3.4 ) % (5.4 ) % Provision (Benefit) for Credit Losses 2,145 1,590 1,358 761 (6,927 ) (131.0 ) 34.9 Noninterest Income (Loss) 8,995 7,353 1,313 (280 ) 866 938.7 22.3 Noninterest Expense 35,634 35,522 38,794 38,807 36,345 (2.0 ) 0.3 Income Before Income Taxes 32,422 34,971 24,640 22,826 34,812 (6.9 ) (7.3 ) Provision for Income Taxes 8,980 9,936 6,421 4,743 9,399 (4.5 ) (9.6 ) Net Income $23,442 $25,035 $18,219 $18,083 $25,413 (7.8 ) (6.4 ) Diluted EPS $0.76 $0.81 $0.58 $0.58 $0.81 (6.2 ) (6.2 ) Avg. Diluted Shares (000s) 30,695 30,937 31,254 31,353 31,567 (2.8 ) (0.8 ) Core Net Income1 $18,953 $21,518 $18,969 $20,968 $27,829 (31.9 ) (11.9 ) Core EPS1 $0.62 $0.70 $0.61 $0.67 $0.88 (29.5 ) (11.4 ) 1 See Reconciliation of GAAP Earnings and Core Earnings
Net interest income totaled $61.2 million in 3Q22 compared to $64.7 million in 2Q22, $63.5 million in 1Q22, $62.7 million in 4Q21, and $63.4 million in 3Q21.
- Net interest margin, FTE (“NIM”) of 3.07% decreased 27 bps YoY and 28 bps QoQ
- Prepayment penalty income from loans and securities, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $2.2 million (11 bps to the NIM) in 3Q22 compared to $2.6 million (13 bps) in 2Q22, $2.6 million (14 bps) in 1Q22, $3.1 million (16 bps) in 4Q21, and $3.4 million (19 bps) in 3Q21
- Excluding the items in the previous bullet, net interest margin was 2.96% in 3Q22, 3.22% in 2Q22 and in 1Q22, 3.13% in 4Q21, and 3.15% in 3Q21
The Company recorded a provision for credit losses of $2.1 million in 3Q22, $1.6 million in 2Q22, $1.4 million in 1Q22, and $0.8 million in 4Q21 compared to a benefit for credit losses of $6.9 million in 3Q21.
- 3Q22 provision for credit losses of $2.1 million was primarily due to increased reserves on two previously identified credits and loan growth
- Net charge-offs (recoveries) were $0.3 million in 3Q22 (2 bps of average loans), $(0.5) million in 2Q22 ((3) bps of average loans), $0.9 million in 1Q22 (6 bps of average loans), $(29) thousand in 4Q21 (negligible as compared to average loans), and $(0.6) million in 3Q21 ((4) bps of average loans)
Noninterest income (loss) was $9.0 million in 3Q22, $7.4 million in 2Q22, $1.3 million in 1Q22, $(0.3) million in 4Q21, and $0.9 million in 3Q21.
- Noninterest income included net gains (losses) from fair value adjustments of $5.6 million in 3Q22 or $0.13 per share, net of tax, $2.5 million in 2Q22 or $0.06 per share, net of tax, $(1.8) million in 1Q22 or $(0.04) per share, net of tax, $(5.1) million in 4Q21 or $(0.13) per share, net of tax, and $(2.3) million in 3Q21 or $(0.05) per share, net of tax
- Life insurance proceeds were $1.5 million ($0.05 per share) in 2Q22
- Absent all above items and other immaterial adjustments, core noninterest income was $3.4 million in 3Q22, up 6.4% YoY, and 2.6% QoQ
- Included in 4Q21 core noninterest income was a one-time $2.0 million ($0.05 per share, net of tax) dividend received on retirement plan investments
Noninterest expense totaled $35.6 million in 3Q22 (a decrease of 2.0% YoY, but an increase of 0.3% QoQ) compared to $35.5 million in 2Q22, $38.8 million in 1Q22, $38.8 million in 4Q21, and $36.3 million in 3Q21.
- Other operating expenses include $0.6 million reduction in reserves for unfunded commitments in 3Q22
- Included in 1Q22 noninterest expense was $4.3 million of seasonal compensation expense; 4Q21 noninterest expense included a one-time $4.3 million ($0.11 per share, net of tax) of increased compensation and benefits for all employees due to a record year of earnings in 2021 and employee performance through the pandemic
- Noninterest expense included $17 thousand pre-tax merger benefit (<$0.01 per share, net of tax) in 4Q21 and $2.1 million of pre-tax merger charges ($0.05 per share, net of tax) in 3Q21
- Excluding the effects of the merger and other immaterial adjustments, core operating expenses were $35.5 million in 3Q22, up 4.1% YoY and 0.3% QoQ
- GAAP noninterest expense to average assets was 1.69% in 3Q22, 1.73% in 2Q22, 1.93% in 1Q22, 1.92%in 4Q21, and 1.80% in 3Q21
The provision for income taxes was $9.0 million in 3Q22 compared to $9.9 million in 2Q22, $6.4 million in 1Q22, $4.7 million in 4Q21, and $9.4 million in 3Q21.
- The effective tax rate was 27.7% in 3Q22, 28.4% in 2Q22, 26.1% in 1Q22, 20.8% in 4Q21, and 27.0% in 3Q21
- The 2Q22 effective tax rate includes a loss of a certain state and city tax deductions and a resolution of certain examinations by taxing authorities
- The 4Q21 effective tax rate declined due to lower levels of taxable state income and higher percentage of permanent differences
Balance Sheet, Credit Quality, and Capital Highlights YoY QoQ 3Q22 2Q22 1Q22 4Q21 3Q21 Change Change Average Loans And Deposits ($MM) Loans $6,861 $6,640 $6,579 $6,558 $6,633 3.4 % 3.3 % Deposits 6,277 6,441 6,410 6,459 6,408 (2.1 ) (2.6 ) Credit Quality ($000s) Nonperforming Loans $29,003 $27,948 $14,066 $14,934 $20,217 43.5 % 3.8 % Nonperforming Assets 49,984 48,929 14,066 14,934 20,217 147.2 2.2 Criticized and Classified Loans 61,684 57,145 59,548 57,650 68,913 (10.5 ) 7.9 Criticized and Classified Assets 82,665 78,125 80,527 78,628 89,889 (8.0 ) 5.8 Troubled Debt Restructured Loans 14,757 14,758 15,124 12,714 13,097 12.7 (0.0 ) Allowance for Credit Losses/Loans (%) 0.59 0.58 0.57 0.56 0.55 4 bps 1 bp Capital Book Value/Share $22.47 $22.38 $22.26 $22.26 $21.78 3.2 % 0.4 % Tangible Book Value/Share 21.81 21.71 21.61 21.61 21.13 3.2 0.5 Tang. Common Equity/Tang. Assets (%) 7.62 7.82 8.05 8.22 8.04 (42 ) bps (20 ) bps Leverage Ratio (%) 8.74 8.91 9.05 8.98 8.83 (9 ) (17 )
Average loans were $6.9 billion, an increase of 3.4% YoY and 3.3% QoQ.- Period end net loans, excluding PPP loans, totaled $6.9 billion, up 6.8% YoY and 3.1% QoQ
- Total loan closings were $463.7 million in 3Q22, $503.8 million in 2Q22, $329.3 million in 1Q22, $362.7 million in 4Q21, and $243.9 million in 3Q21
- The loan pipeline was $309.1 million at September 30, 2022, down 41.8% YoY and 46.9% QoQ
Average Deposits totaled $6.3 billion, decreasing 2.1% YoY and 2.6% QoQ.
- Average core deposits (non-CD deposits) were 83.1% of total average deposits (including escrow deposits) in 3Q22, compared to 83.8% a year ago
- Average noninterest bearing deposits increased 12.5% YoY and 0.5% QoQ and comprised 16.7% of total average deposits (including escrow deposits) in 3Q22 compared to 14.6% a year ago
Credit Quality: Nonperforming loans held at the end of each quarter totaled $29.0 million at 3Q22, $27.9 million at 2Q22, $14.1 million at 1Q22, $14.9 million at 4Q21, and $20.2 million at 3Q21.
- Criticized and classified were 89 bps of loans at 3Q22 compared to 85 bps at 2Q22, 90 bps at 1Q22, 87 bps at 4Q21, and 104 bps at 3Q21
- Criticized and classified assets are composed of criticized and classified loans, as detailed above, plus one criticized investment security totaling $21.0 million in each quarter of 3Q22, 2Q22, 1Q22, 4Q21, and 3Q21
- Over 88% of gross loans are collateralized by real estate with an average loan-to-value ratio of <37% as of September 30, 2022
- Allowance for credit losses were 142.3% of nonperforming loans at 3Q22 compared to 141.1% at 2Q22 and 179.9% a year ago
Capital: Book value per common share was $22.47 at 3Q22, up 0.4% QoQ and 3.2% YoY; tangible book value per common share, a non-GAAP measure, was $21.81 at 3Q22, up 0.5% QoQ and 3.2% YoY.
- The Company paid a dividend of $0.22 per share and repurchased 131,174 shares at an average price of $20.47 in 3Q22
- At the end of 3Q22, 969,324 shares remain subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
- Tangible common equity to tangible assets was 7.62% at 3Q22 compared to 7.82% at 2Q22 and 8.04% at 3Q21
- The Company and the Bank remain well capitalized under all applicable regulatory requirements
- The leverage ratio was 8.74% at 3Q22 compared to 8.91% at 2Q22 and 8.83% at 3Q21
Conference Call Information And Fourth Quarter Earnings Release Date Conference Call Information:
- John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer and Treasurer, will host a conference call on Wednesday, October 26, 2022, at 9:30 AM (ET) to discuss the Company’s third quarter 2022 results and strategy.
- Dial-in for Live Call: 1-877-509-5836; Canada 855-669-9657
- Webcast: https://services.choruscall.com/mediaframe/webcast.html?webcastid=xiCFFixk
- Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658
- Replay Access Code: 8005279
- The conference call will be simultaneously webcast and archived
Fourth Quarter 2022 Earnings Release Date:
The Company plans to release Fourth Quarter and full year 2022 financial results after the market close on January 24, 2023; followed by a conference call at 9:30 AM (ET) on January 25, 2023.
A detailed announcement will be issued prior to the fourth quarter’s close confirming the date and time of the earnings release.
About Flushing Financial Corporation
Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, an FDIC insured, New York State—chartered commercial bank that operates banking offices in Queens, Brooklyn, Manhattan, and on Long Island. The Bank has been building relationships with families, business owners, and communities since 1929. Today, it offers the products, services, and conveniences associated with large commercial banks, including a full complement of deposit, loan, equipment finance, and cash management services. Rewarding customers with personalized attention and bankers that can communicate in the languages prevalent within these multicultural markets is what makes the Bank uniquely different. As an Equal Housing Lender and leader in real estate lending, the Bank’s experienced lending teams create mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also fosters relationships with consumers nationwide through its online banking division with the iGObanking® and BankPurely® brands.
Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at FlushingBank.com. Flushing Financial Corporation’s earnings release and presentation slides will be available prior to the conference call at www.FlushingBank.com under Investor Relations.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 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
#FF
- Statistical Tables Follow -
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)At or for the three months ended At or for the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (Dollars in thousands, except per share data) 2022 2022 2022 2021 2021 2022 2021 Performance Ratios (1) Return on average assets 1.11 % 1.22 % 0.91 % 0.89 % 1.26 % 1.08 % 1.04 % Return on average equity 13.91 15.00 10.83 10.77 15.42 13.24 13.24 Yield on average interest-earning assets (2) 4.10 3.85 3.77 3.77 3.84 3.91 3.77 Cost of average interest-bearing liabilities 1.25 0.60 0.50 0.58 0.61 0.79 0.65 Cost of funds 1.08 0.52 0.43 0.50 0.53 0.68 0.57 Net interest rate spread during period (2) 2.85 3.25 3.27 3.19 3.23 3.12 3.12 Net interest margin (2) 3.07 3.35 3.36 3.29 3.34 3.26 3.22 Noninterest expense to average assets 1.69 1.73 1.93 1.92 1.80 1.78 1.77 Efficiency ratio (3) 55.68 52.27 58.87 58.66 52.28 55.57 54.72 Average interest-earning assets to
average interest-bearing liabilities1.22 X 1.22 X 1.22 X 1.22 X 1.21 X 1.22 X 1.19 X Average Balances Total loans, net $ 6,861,463 $ 6,640,331 $ 6,578,680 $ 6,558,285 $ 6,633,301 $ 6,694,528 $ 6,673,309 Total interest-earning assets 7,979,070 7,740,683 7,570,373 7,627,256 7,608,317 7,764,873 7,688,354 Total assets 8,442,657 8,211,763 8,049,470 8,090,701 8,072,918 8,236,070 8,161,121 Total due to depositors 5,157,715 5,298,855 5,336,983 5,397,802 5,406,423 5,263,861 5,422,158 Total interest-bearing liabilities 6,553,087 6,337,374 6,220,510 6,276,221 6,310,859 6,371,542 6,439,928 Stockholders' equity 674,282 667,456 673,012 671,474 659,288 671,588 641,354 Per Share Data Book value per common share (4) $ 22.47 $ 22.38 $ 22.26 $ 22.26 $ 21.78 $ 22.47 $ 27.78 Tangible book value per common share (5) $ 21.81 $ 21.71 $ 21.61 $ 21.61 $ 21.13 $ 21.81 $ 21.13 Stockholders' Equity Stockholders' equity $ 670,719 $ 670,812 $ 675,813 $ 679,628 $ 668,096 $ 670,719 $ 668,096 Tangible stockholders' equity 650,936 650,894 656,085 659,758 648,039 650,936 648,039 Consolidated Regulatory Capital Ratios Tier 1 capital $ 749,526 $ 739,776 $ 731,536 $ 726,174 $ 711,276 $ 749,526 $ 711,276 Common equity Tier 1 capital 701,532 686,258 675,434 671,494 661,340 701,532 661,340 Total risk-based capital 979,021 903,047 892,861 885,469 832,255 979,021 832,255 Risk Weighted Assets 6,689,284 6,522,710 6,232,020 6,182,095 6,194,207 6,689,284 6,194,207 Tier 1 leverage capital
(well capitalized = 5%)8.74 % 8.91 % 9.05 % 8.98 % 8.83 % 8.74 % 8.83 % Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 10.49 10.52 10.84 10.86 10.68 10.49 10.68 Tier 1 risk-based capital
(well capitalized = 8.0%)11.20 11.34 11.74 11.75 11.48 11.20 11.48 Total risk-based capital
(well capitalized = 10.0%)14.64 13.84 14.33 14.32 13.44 14.64 13.44 Capital Ratios Average equity to average assets 7.99 % 8.13 % 8.36 % 8.30 % 8.17 % 8.15 % 7.86 % Equity to total assets 7.84 8.04 8.27 8.45 8.27 7.84 8.27 Tangible common equity to tangible assets (6) 7.62 7.82 8.05 8.22 8.04 7.62 8.04 Asset Quality Nonaccrual loans (7) $ 27,003 $ 27,848 $ 14,066 $ 14,933 $ 18,292 $ 27,003 $ 18,292 Nonperforming loans 29,003 27,948 14,066 14,933 20,217 29,003 20,217 Nonperforming assets 49,984 48,929 14,066 14,933 20,217 49,984 20,217 Net charge-offs (recoveries) 290 (501 ) 935 (29 ) (619 ) 724 3,148 Asset Quality Ratios Nonperforming loans to gross loans 0.42 % 0.41 % 0.21 % 0.23 % 0.31 % 0.42 % 0.31 % Nonperforming assets to total assets 0.58 0.59 0.17 0.19 0.25 0.58 0.25 Allowance for credit losses to gross loans 0.59 0.58 0.57 0.56 0.55 0.59 0.55 Allowance for credit losses to
nonperforming assets82.56 80.57 266.12 248.66 179.86 82.56 179.86 Allowance for credit losses to
nonperforming loans142.29 141.06 266.12 248.66 179.86 142.29 179.86 Net charge-offs (recoveries) to average loans 0.02 (0.03 ) 0.06 — (0.04 ) 0.01 0.06 Full-service customer facilities 25 25 24 24 24 25 24 ____________
(1) Ratios are presented on an annualized basis, where appropriate.
(2) Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
(3) Efficiency ratio, a non-GAAP measure, was calculated by dividing noninterest 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 noninterest 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 nonaccrual TDR loans.FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (In thousands, except per share data) 2022 2022 2022 2021 2021 2022 2021 Interest and Dividend Income Interest and fees on loans $ 75,546 $ 69,192 $ 67,516 $ 68,113 $ 69,198 $ 212,254 $ 206,218 Interest and dividends on securities: Interest 5,676 4,929 3,745 3,536 3,706 14,350 10,463 Dividends 17 11 8 7 7 36 22 Other interest income 506 159 51 74 42 716 129 Total interest and dividend income 81,745 74,291 71,320 71,730 72,953 227,356 216,832 Interest Expense Deposits 11,965 4,686 3,408 3,975 4,705 20,059 16,349 Other interest expense 8,574 4,875 4,433 5,081 4,884 17,882 15,188 Total interest expense 20,539 9,561 7,841 9,056 9,589 37,941 31,537 Net Interest Income 61,206 64,730 63,479 62,674 63,364 189,415 185,295 Provision (benefit) for credit losses 2,145 1,590 1,358 761 (6,927 ) 5,093 (5,705 ) Net Interest Income After Provision (Benefit)
for Credit Losses59,061 63,140 62,121 61,913 70,291 184,322 191,000 Noninterest Income (Loss) Banking services fee income 1,351 1,166 1,374 1,142 865 3,891 4,823 Net gain (loss) on sale of securities — — — — (10 ) — 113 Net gain on sale of loans — 73 — 46 131 73 289 Net gain on disposition of assets — — — — — — 621 Net gain (loss) from fair value adjustments 5,626 2,533 (1,809 ) (5,140 ) (2,289 ) 6,350 (7,855 ) Federal Home Loan Bank of New York
stock dividends538 407 397 417 491 1,342 1,680 Life insurance proceeds — 1,536 — — — 1,536 — Bank owned life insurance 1,132 1,115 1,114 1,023 1,015 3,361 3,021 Other income 348 523 237 2,232 663 1,108 1,275 Total noninterest income (loss) 8,995 7,353 1,313 (280 ) 866 17,661 3,967 Noninterest Expense Salaries and employee benefits 21,438 21,109 23,649 25,223 20,544 66,196 63,087 Occupancy and equipment 3,541 3,760 3,604 3,579 3,534 10,905 10,423 Professional services 2,570 2,285 2,222 1,152 1,899 7,077 6,287 FDIC deposit insurance 738 615 420 391 618 1,773 2,560 Data processing 1,367 1,383 1,424 1,757 1,759 4,174 5,287 Depreciation and amortization 1,488 1,447 1,460 1,521 1,627 4,395 4,904 Other real estate owned/foreclosure expense 143 32 84 129 182 259 194 Other operating expenses 4,349 4,891 5,931 5,055 6,182 15,171 15,773 Total noninterest expense 35,634 35,522 38,794 38,807 36,345 109,950 108,515 Income Before Provision for Income Taxes 32,422 34,971 24,640 22,826 34,812 92,033 86,452 Provision for Income Taxes 8,980 9,936 6,421 4,743 9,399 25,337 22,742 Net Income $ 23,442 $ 25,035 $ 18,219 $ 18,083 $ 25,413 $ 66,696 $ 63,710 Basic earnings per common share $ 0.76 $ 0.81 $ 0.58 $ 0.58 $ 0.81 $ 2.15 $ 2.02 Diluted earnings per common share $ 0.76 $ 0.81 $ 0.58 $ 0.58 $ 0.81 $ 2.15 $ 2.02 Dividends per common share $ 0.22 $ 0.22 $ 0.22 $ 0.21 $ 0.21 $ 0.66 $ 0.63 Basic average shares 30,695 30,937 31,254 31,353 31,567 30,960 31,616 Diluted average shares 30,695 30,937 31,254 31,353 31,567 30,960 31,616 FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)September 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 ASSETS Cash and due from banks $ 164,693 $ 137,026 $ 186,407 $ 81,723 $ 178,598 Securities held-to-maturity: Mortgage-backed securities 7,880 7,885 7,890 7,894 7,899 Other securities 66,032 66,230 66,327 49,974 49,989 Securities available for sale: Mortgage-backed securities 468,366 510,934 553,828 572,184 584,145 Other securities 351,495 346,720 286,041 205,052 212,654 Loans 6,956,674 6,760,393 6,607,264 6,638,105 6,630,354 Allowance for credit losses (41,268 ) (39,424 ) (37,433 ) (37,135 ) (36,363 ) Net loans 6,915,406 6,720,969 6,569,831 6,600,970 6,593,991 Interest and dividends receivable 42,571 38,811 37,308 38,698 40,912 Bank premises and equipment, net 22,376 22,285 22,752 23,338 24,018 Federal Home Loan Bank of New York stock 62,489 50,017 33,891 35,937 36,158 Bank owned life insurance 212,353 211,220 211,867 210,754 184,730 Goodwill 17,636 17,636 17,636 17,636 17,636 Core deposit intangibles 2,147 2,282 2,420 2,562 2,708 Right of use asset 44,885 46,687 48,475 50,200 50,155 Other assets 179,090 160,885 125,160 148,989 93,741 Total assets $ 8,557,419 $ 8,339,587 $ 8,169,833 $ 8,045,911 $ 8,077,334 LIABILITIES Deposits $ 6,054,761 $ 6,350,000 $ 6,373,400 $ 6,333,532 $ 6,421,391 Mortgagors' escrow deposits 70,544 57,577 79,495 51,913 67,207 Borrowed funds 1,572,830 1,089,621 877,122 815,544 752,925 Operating lease liability 48,330 50,346 52,292 54,155 54,239 Other liabilities 140,235 121,231 111,711 111,139 113,476 Total liabilities 7,886,700 7,668,775 7,494,020 7,366,283 7,409,238 STOCKHOLDERS' EQUITY Preferred stock (5,000,000 shares authorized; none issued) — — — — — Common stock ($0.01 par value; 100,000,000 shares authorized) 341 341 341 341 341 Additional paid-in capital 263,755 262,860 261,837 263,375 262,009 Treasury stock (90,977 ) (88,342 ) (79,834 ) (75,293 ) (71,738 ) Retained earnings 543,894 527,217 508,973 497,889 486,418 Accumulated other comprehensive loss, net of taxes (46,294 ) (31,264 ) (15,504 ) (6,684 ) (8,934 ) Total stockholders' equity 670,719 670,812 675,813 679,628 668,096 Total liabilities and stockholders' equity $ 8,557,419 $ 8,339,587 $ 8,169,833 $ 8,045,911 $ 8,077,334 (In thousands) Issued shares 34,088 34,088 34,088 34,088 34,088 Outstanding shares 29,851 29,980 30,367 30,526 30,676 Treasury shares 4,237 4,108 3,721 3,561 3,412 FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited)For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (In thousands) 2022 2022 2022 2021 2021 2022 2021 Interest-earning Assets: Mortgage loans, net $ 5,340,694 $ 5,178,029 $ 5,152,070 $ 5,140,233 $ 5,158,213 $ 5,224,289 $ 5,148,204 Other loans, net 1,520,769 1,462,302 1,426,610 1,418,052 1,475,088 1,470,239 1,525,105 Total loans, net 6,861,463 6,640,331 6,578,680 6,558,285 6,633,301 6,694,528 6,673,309 Taxable securities: Mortgage-backed securities 568,854 594,923 580,670 595,538 590,732 581,439 534,836 Other securities 362,629 333,158 226,744 207,482 217,763 308,008 249,899 Total taxable securities 931,483 928,081 807,414 803,020 808,495 889,447 784,735 Tax-exempt securities: Other securities 67,211 67,315 57,611 50,834 50,832 64,081 50,830 Total tax-exempt securities 67,211 67,315 57,611 50,834 50,832 64,081 50,830 Interest-earning deposits and federal funds sold 118,913 104,956 126,668 215,117 115,689 116,817 179,480 Total interest-earning assets 7,979,070 7,740,683 7,570,373 7,627,256 7,608,317 7,764,873 7,688,354 Other assets 463,587 471,080 479,097 463,445 464,601 471,197 472,767 Total assets $ 8,442,657 $ 8,211,763 $ 8,049,470 $ 8,090,701 $ 8,072,918 $ 8,236,070 $ 8,161,121 Interest-bearing Liabilities: Deposits: Savings accounts $ 154,545 $ 156,785 $ 156,592 $ 154,471 $ 153,120 $ 155,966 $ 158,708 NOW accounts 1,808,608 2,089,851 2,036,914 2,115,619 2,107,866 1,977,621 2,182,660 Money market accounts 2,136,829 2,231,743 2,253,630 2,177,928 2,107,473 2,206,973 2,019,497 Certificate of deposit accounts 1,057,733 820,476 889,847 949,784 1,037,964 923,301 1,061,293 Total due to depositors 5,157,715 5,298,855 5,336,983 5,397,802 5,406,423 5,263,861 5,422,158 Mortgagors' escrow accounts 68,602 97,496 71,509 84,617 68,562 79,192 75,171 Total interest-bearing deposits 5,226,317 5,396,351 5,408,492 5,482,419 5,474,985 5,343,053 5,497,329 Borrowings 1,326,770 941,023 812,018 793,802 835,874 1,028,489 942,599 Total interest-bearing liabilities 6,553,087 6,337,374 6,220,510 6,276,221 6,310,859 6,371,542 6,439,928 Noninterest-bearing demand deposits 1,050,296 1,044,553 1,001,571 976,803 933,443 1,032,319 904,522 Other liabilities 164,992 162,380 154,377 166,203 169,328 160,621 175,317 Total liabilities 7,768,375 7,544,307 7,376,458 7,419,227 7,413,630 7,564,482 7,519,767 Equity 674,282 667,456 673,012 671,474 659,288 671,588 641,354 Total liabilities and equity $ 8,442,657 $ 8,211,763 $ 8,049,470 $ 8,090,701 $ 8,072,918 $ 8,236,070 $ 8,161,121 Net interest-earning assets $ 1,425,983 $ 1,403,309 $ 1,349,863 $ 1,351,035 $ 1,297,458 $ 1,393,331 $ 1,248,426 FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST INCOME AND NET INTEREST MARGIN
(Unaudited)For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 2022 2021 Interest Income: Mortgage loans, net $ 58,374 $ 54,775 $ 53,970 $ 54,260 $ 55,114 $ 167,119 $ 163,320 Other loans, net 17,172 14,417 13,546 13,853 14,084 45,135 42,898 Total loans, net 75,546 69,192 67,516 68,113 69,198 212,254 206,218 Taxable securities: Mortgage-backed securities 2,466 2,356 2,167 2,125 2,279 6,989 6,210 Other securities 2,839 2,090 1,119 993 1,008 6,048 3,008 Total taxable securities 5,305 4,446 3,286 3,118 3,287 13,037 9,218 Tax-exempt securities: Other securities 492 625 591 538 539 1,708 1,604 Total tax-exempt securities 492 625 591 538 539 1,708 1,604 Interest-earning deposits and federal funds sold 506 159 51 74 42 716 129 Total interest-earning assets 81,849 74,422 71,444 71,843 73,066 227,715 217,169 Interest Expense: Deposits: Savings accounts $ 53 $ 50 $ 49 $ 53 $ 61 $ 152 $ 202 NOW accounts 3,640 1,405 793 1,021 1,227 5,838 4,432 Money market accounts 5,280 1,952 1,275 1,428 1,683 8,507 5,843 Certificate of deposit accounts 2,948 1,273 1,289 1,471 1,734 5,510 5,869 Total due to depositors 11,921 4,680 3,406 3,973 4,705 20,007 16,346 Mortgagors' escrow accounts 44 6 2 2 — 52 3 Total interest-bearing deposits 11,965 4,686 3,408 3,975 4,705 20,059 16,349 Borrowings 8,574 4,875 4,433 5,081 4,884 17,882 15,188 Total interest-bearing liabilities 20,539 9,561 7,841 9,056 9,589 37,941 31,537 Net interest income- tax equivalent $ 61,310 $ 64,861 $ 63,603 $ 62,787 $ 63,477 $ 189,774 $ 185,632 Included in net interest income above: Prepayment penalties received on loans and securities and net of reversals and recovered interest from nonaccrual loans $ 1,368 $ 2,281 $ 1,716 $ 1,497 $ 2,136 $ 5,365 $ 5,130 Net gains/(losses) from fair value adjustments on qualifying hedges included in loan interest income 28 (60 ) (129 ) 1,122 194 (161 ) 957 Purchase accounting adjustments 775 367 1,058 462 1,100 2,200 2,587 Interest-earning Assets Yields: Mortgage loans, net 4.37 % 4.23 % 4.19 % 4.22 % 4.27 % 4.27 % 4.23 % Other loans, net 4.52 3.94 3.80 3.91 3.82 4.09 3.75 Total loans, net 4.40 4.17 4.11 4.15 4.17 4.23 4.12 Taxable securities: Mortgage-backed securities 1.73 1.58 1.49 1.43 1.54 1.60 1.55 Other securities 3.13 2.51 1.97 1.91 1.85 2.62 1.60 Total taxable securities 2.28 1.92 1.63 1.55 1.63 1.95 1.57 Tax-exempt securities: (1) Other securities 2.93 3.71 4.10 4.23 4.24 3.55 4.21 Total tax-exempt securities 2.93 3.71 4.10 4.23 4.24 3.55 4.21 Interest-earning deposits and federal funds sold 1.70 0.61 0.16 0.14 0.15 0.82 0.10 Total interest-earning assets 4.10 % 3.85 % 3.77 % 3.77 % 3.84 % 3.91 % 3.77 % Interest-bearing Liabilities Yields: Deposits: Savings accounts 0.14 % 0.13 % 0.13 % 0.14 % 0.16 % 0.13 % 0.17 % NOW accounts 0.81 0.27 0.16 0.19 0.23 0.39 0.27 Money market accounts 0.99 0.35 0.23 0.26 0.32 0.51 0.39 Certificate of deposit accounts 1.11 0.62 0.58 0.62 0.67 0.80 0.74 Total due to depositors 0.92 0.35 0.26 0.29 0.35 0.51 0.40 Mortgagors' escrow accounts 0.26 0.02 0.01 0.01 — 0.09 0.01 Total interest-bearing deposits 0.92 0.35 0.25 0.29 0.34 0.50 0.40 Borrowings 2.58 2.07 2.18 2.56 2.34 2.32 2.15 Total interest-bearing liabilities 1.25 % 0.60 % 0.50 % 0.58 % 0.61 % 0.79 % 0.65 % Net interest rate spread
(tax equivalent)2.85 % 3.25 % 3.27 % 3.19 % 3.23 % 3.12 % 3.12 % Net interest margin (tax equivalent) 3.07 % 3.35 % 3.36 % 3.29 % 3.34 % 3.26 % 3.22 % Ratio of interest-earning assets to interest-bearing liabilities 1.22 X 1.22 X 1.22 X 1.22 X 1.21 X 1.22 X 1.19 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
September 2022 vs. September 2022 vs. September 30, June 30, March 31, December 31, September 30, June 2022 September 2021 (Dollars in thousands) 2022 2022 2022 2021 2021 % Change % Change Noninterest bearing $ 992,378 $ 1,081,208 $ 1,041,027 $ 967,621 $ 941,259 (8.2 ) % 5.4 % Interest bearing: Certificate of deposit accounts 1,036,107 906,943 886,317 946,575 1,040,098 14.2 (0.4 ) Savings accounts 150,552 154,670 158,542 156,554 152,306 (2.7 ) (1.2 ) Money market accounts 2,113,256 2,229,993 2,362,390 2,342,003 2,152,085 (5.2 ) (1.8 ) NOW accounts 1,762,468 1,977,186 1,925,124 1,920,779 2,135,643 (10.9 ) (17.5 ) Total interest-bearing deposits 5,062,383 5,268,792 5,332,373 5,365,911 5,480,132 (3.9 ) (7.6 ) Total deposits $ 6,054,761 $ 6,350,000 $ 6,373,400 $ 6,333,532 $ 6,421,391 (4.6 ) % (5.7 ) %
Loan CompositionSeptember 2022 vs. September 2022 vs. September 30, June 30, March 31, December 31, September 30, June 2022 September 2021 (Dollars in thousands) 2022 2022 2022 2021 2021 % Change % Change Multifamily residential $ 2,608,192 $ 2,531,858 $ 2,500,570 $ 2,517,026 $ 2,498,980 3.0 % 4.4 % Commercial real estate 1,914,326 1,864,507 1,764,927 1,775,629 1,745,855 2.7 9.6 One-to-four family ― mixed-use property 560,885 561,100 563,679 571,795 579,100 — (3.1 ) One-to-four family ― residential 233,469 242,729 248,226 268,255 280,343 (3.8 ) (16.7 ) Co-operative apartments 7,015 8,130 8,248 8,316 7,804 (13.7 ) (10.1 ) Construction 63,651 72,148 68,488 59,761 71,464 (11.8 ) (10.9 ) Mortgage Loans 5,387,538 5,280,472 5,154,138 5,200,782 5,183,546 2.0 3.9 Small Business Administration (1) 27,712 40,572 59,331 93,811 148,855 (31.7 ) (81.4 ) Commercial business and other 1,532,497 1,431,417 1,387,155 1,339,273 1,294,688 7.1 18.4 Nonmortgage loans 1,560,209 1,471,989 1,446,486 1,433,084 1,443,543 6.0 8.1 Net unamortized premiums and unearned loan fees (2) 8,927 7,932 6,640 4,239 3,265 12.5 173.4 Allowance for credit losses (41,268 ) (39,424 ) (37,433 ) (37,135 ) (36,363 ) 4.7 13.5 Net loans $ 6,915,406 $ 6,720,969 $ 6,569,831 $ 6,600,970 $ 6,593,991 2.9 % 4.9 % ____________
(1) Includes $9.6 million, $22.2 million, $43.2 million, $77.4 million, and $130.8 million of PPP loans at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.
(2) Includes $5.8 million, $6.6 million, $6.9 million, $8.0 million, and $8.6 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOAN CLOSINGS and RATES
(Unaudited)Loan Closings
For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (In thousands) 2022 2022 2022 2021 2021 2022 2021 Multifamily residential $ 173,980 $ 136,902 $ 98,180 $ 79,648 $ 41,850 $ 409,062 $ 167,316 Commercial real estate 77,777 164,826 45,102 64,916 48,447 287,705 103,566 One-to-four family – mixed-use property 12,383 12,228 8,498 12,440 12,823 33,109 28,670 One-to-four family – residential 4,102 4,211 9,237 5,162 2,761 17,550 65,386 Co-operative apartments — — 24 413 — 24 — Construction 7,170 8,319 8,802 17,033 8,687 24,291 21,091 Mortgage Loans 275,412 326,486 169,843 179,612 114,568 771,741 386,029 Small Business Administration (1) 46 2,750 — 270 415 2,796 143,093 Commercial business and other 188,202 174,551 159,476 182,858 128,946 522,229 362,100 Nonmortgage Loans 188,248 177,301 159,476 183,128 129,361 525,025 505,193 Total Closings $ 463,660 $ 503,787 $ 329,319 $ 362,740 $ 243,929 $ 1,296,766 $ 891,222 ____________
(1) Includes $138.7 million of PPP closings for the nine months ended September 30, 2021.Weighted Average Rate on Loan Closings
For the three months ended September 30, June 30, March 31, December 31, September 30, Loan type 2022 2022 2022 2021 2021 Mortgage loans 4.37 % 3.76 % 3.61 % 3.77 % 3.80 % Nonmortgage loans 4.93 4.21 3.27 3.24 3.49 Total loans 4.60 % 3.92 % 3.44 % 3.51 % 3.64 % FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ASSET QUALITY
(Unaudited)
Allowance for Credit LossesFor the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 2022 2021 Allowance for credit losses Beginning balances $ 39,424 $ 37,433 $ 37,135 $ 36,363 $ 42,670 37,135 45,153 Net loan charge-off (recoveries): Multifamily residential — (1 ) — — — $ (1 ) $ 33 Commercial real estate — — — — — — 64 One-to-four family – mixed-use property — — — 1 (123 ) — (101 ) One-to-four family – residential 2 (2 ) (2 ) (3 ) (147 ) (2 ) (154 ) Small Business Administration (12 ) 13 1,015 (7 ) (8 ) 1,016 (27 ) Taxi medallion — (435 ) (12 ) — (1,235 ) (447 ) 1,301 Commercial business and other 300 (76 ) (66 ) (20 ) 894 158 2,032 Total 290 (501 ) 935 (29 ) (619 ) 724 3,148 Provision (benefit) for loan losses 2,134 1,490 1,233 743 (6,926 ) 4,857 (5,642 ) Ending balance $ 41,268 $ 39,424 $ 37,433 $ 37,135 $ 36,363 $ 41,268 $ 36,363 Gross charge-offs $ 324 $ 50 $ 1,036 $ 7 $ 1,019 $ 1,410 $ 5,127 Gross recoveries 34 551 101 36 1,638 686 1,979 Allowance for credit losses to gross loans 0.59 % 0.58 % 0.57 % 0.56 % 0.55 % 0.59 % 0.55 % Net loan charge-offs (recoveries) to average loans 0.02 (0.03 ) 0.06 — (0.04 ) 0.01 0.06
Nonperforming AssetsSeptember 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 Loans 90 Days Or More Past Due and Still Accruing: Commercial real estate $ 2,000 $ — $ — $ — $ — Construction — — — — 873 Commercial business and other — 100 — — 1,052 Total 2,000 100 — — 1,925 Nonaccrual Loans: Multifamily residential 3,414 3,414 3,414 2,431 4,192 Commercial real estate 1,851 242 5 613 613 One-to-four family - mixed-use property (1) 790 790 790 1,309 2,204 One-to-four family - residential 4,655 5,055 7,387 7,725 7,807 Construction — 856 — — — Small Business Administration 937 937 937 937 976 Commercial business and other(1) 15,356 16,554 1,533 1,918 2,500 Total 27,003 27,848 14,066 14,933 18,292 Total Nonperforming Loans (NPLs) 29,003 27,948 14,066 14,933 20,217 Total Nonaccrual HTM Securities 20,981 20,981 — — — Total Nonperforming Assets $ 49,984 $ 48,929 $ 14,066 $ 14,933 $ 20,217 Nonperforming Assets to Total Assets 0.58 % 0.59 % 0.17 % 0.19 % 0.25 % Allowance for Credit Losses to NPLs 142.3 % 141.1 % 266.1 % 248.7 % 179.9 % ____________
(1) Not included in the above analysis are nonaccrual performing TDR one-to-four family - mixed use property loans totaling $0.2 million in 3Q22 and $0.3 million each in 2Q22, 1Q22, 4Q21, and 3Q21; nonaccrual performing TDR commercial business loans totaling $2.9 million in 3Q22, $2.8 million in 2Q22 and 1Q22, less than $0.1 million each in 4Q21 and 3Q21.FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGSNon-cash Fair Value Adjustments to GAAP Earnings
The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to borrowings carried at fair value under the fair value option and swaps designated to protect against rising rates. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position.
Core Net Income, Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income FTE, Core Net Interest Margin FTE, Core Interest Income and Yield on Total Loans, Core Noninterest Income, Core Noninterest Expense and Tangible Book Value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and noninterest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per common share is useful for both investors and management as 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)For the three months ended For the nine months ended (Dollars in thousands, September 30, June 30, March 31, December 31, September 30, September 30, September 30, except per share data) 2022 2022 2022 2021 2021 2022 2021 GAAP income before income taxes $ 32,422 $ 34,971 $ 24,640 $ 22,826 $ 34,812 $ 92,033 $ 86,452 Net (gain) loss from fair value adjustments (Noninterest income (loss)) (5,626 ) (2,533 ) 1,809 5,140 2,289 (6,350 ) 7,855 Net (gain) loss on sale of securities (Noninterest income (loss)) — — — — 10 — (113 ) Life insurance proceeds
(Noninterest income (loss))— (1,536 ) — — — (1,536 ) — Net gain on disposition of assets (Noninterest income (loss)) — — — — — — (621 ) Net (gain) loss from fair value adjustments on qualifying hedges
(Interest and fees on loans)(28 ) 60 129 (1,122 ) (194 ) 161 (957 ) Net amortization of purchase accounting adjustments (Various) (650 ) (237 ) (924 ) (324 ) (958 ) (1,811 ) (2,165 ) Merger (benefit) expense (Various) — — — (17 ) 2,096 — 2,579 Core income before taxes 26,118 30,725 25,654 26,503 38,055 82,497 93,030 Provision for income taxes for core income 7,165 9,207 6,685 5,535 10,226 23,057 25,234 Core net income $ 18,953 $ 21,518 $ 18,969 $ 20,968 $ 27,829 $ 59,440 $ 67,796 GAAP diluted earnings per common share $ 0.76 $ 0.81 $ 0.58 $ 0.58 $ 0.81 $ 2.15 $ 2.02 Net (gain) loss from fair value adjustments, net of tax (0.13 ) (0.06 ) 0.04 0.13 0.05 (0.15 ) 0.18 Net loss on sale of securities, net of tax — — — — — — — Life insurance proceeds — (0.05 ) — — — (0.05 ) — Net gain on disposition of assets, net of tax — — — — — — (0.01 ) Net (gain) loss from fair value adjustments on qualifying hedges, net of tax — — — (0.03 ) — — (0.02 ) Net amortization of purchase accounting adjustments, net of tax (0.02 ) (0.01 ) (0.02 ) (0.01 ) (0.02 ) (0.04 ) (0.05 ) Merger (benefit) expense, net of tax — — — — 0.05 — 0.06 NYS tax change — — — — — — (0.02 ) Core diluted earnings per common share(1) $ 0.62 $ 0.70 $ 0.61 $ 0.67 $ 0.88 $ 1.92 $ 2.14 Core net income, as calculated above $ 18,953 $ 21,518 $ 18,969 $ 20,968 $ 27,829 $ 59,440 $ 67,796 Average assets 8,442,657 8,211,763 8,049,470 8,090,701 8,072,918 8,236,070 8,161,121 Average equity 674,282 667,456 673,012 671,474 659,288 671,588 641,354 Core return on average assets(2) 0.90 % 1.05 % 0.94 % 1.04 % 1.38 % 0.96 % 1.11 % Core return on average equity(2) 11.24 % 12.90 % 11.27 % 12.49 % 16.88 % 11.80 % 14.09 % ____________
(1) Core diluted earnings per common share may not foot due to rounding.
(2) Ratios are calculated on an annualized basis.FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP REVENUE and PRE-PROVISION
PRE-TAX NET REVENUE
(Unaudited)For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 2022 2021 GAAP Net interest income $ 61,206 $ 64,730 $ 63,479 $ 62,674 $ 63,364 $ 189,415 $ 185,295 Net (gain) loss from fair value adjustments on qualifying hedges (28 ) 60 129 (1,122 ) (194 ) 161 (957 ) Net amortization of purchase accounting adjustments (775 ) (367 ) (1,058 ) (462 ) (1,100 ) (2,200 ) (2,587 ) Core Net interest income $ 60,403 $ 64,423 $ 62,550 $ 61,090 $ 62,070 $ 187,376 $ 181,751 GAAP Noninterest income (loss) $ 8,995 $ 7,353 $ 1,313 $ (280 ) $ 866 $ 17,661 $ 3,967 Net (gain) loss from fair value adjustments (5,626 ) (2,533 ) 1,809 5,140 2,289 (6,350 ) 7,855 Net gain (loss) on sale of securities — — — — 10 — (113 ) Life insurance proceeds — (1,536 ) — — — (1,536 ) — Net gain on sale of assets — — — — — — (621 ) Core Noninterest income $ 3,369 $ 3,284 $ 3,122 $ 4,860 $ 3,165 $ 9,775 $ 11,088 GAAP Noninterest expense $ 35,634 $ 35,522 $ 38,794 $ 38,807 $ 36,345 $ 109,950 $ 108,515 Net amortization of purchase accounting adjustments (125 ) (130 ) (134 ) (138 ) (142 ) (389 ) (422 ) Merger expense (benefit) — — — 17 (2,096 ) — (2,579 ) Core Noninterest expense $ 35,509 $ 35,392 $ 38,660 $ 38,686 $ 34,107 $ 109,561 $ 105,514 Net interest income $ 61,206 $ 64,730 $ 63,479 $ 62,674 $ 63,364 $ 189,415 $ 185,295 Noninterest income (loss) 8,995 7,353 1,313 (280 ) 866 17,661 3,967 Noninterest expense (35,634 ) (35,522 ) (38,794 ) (38,807 ) (36,345 ) (109,950 ) (108,515 ) Pre-provision pre-tax net revenue $ 34,567 $ 36,561 $ 25,998 $ 23,587 $ 27,885 $ 97,126 $ 80,747 Core: Net interest income $ 60,403 $ 64,423 $ 62,550 $ 61,090 $ 62,070 $ 187,376 $ 181,751 Noninterest income 3,369 3,284 3,122 4,860 3,165 9,775 11,088 Noninterest expense (35,509 ) (35,392 ) (38,660 ) (38,686 ) (34,107 ) (109,561 ) (105,514 ) Pre-provision pre-tax net revenue $ 28,263 $ 32,315 $ 27,012 $ 27,264 $ 31,128 $ 87,590 $ 87,325 Efficiency Ratio 55.7 % 52.3 % 58.9 % 58.7 % 52.3 % 55.6 % 54.7 % FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
to CORE NET INTEREST INCOME
(Unaudited)For the three months ended For the nine months ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 2022 2021 GAAP net interest income $ 61,206 $ 64,730 $ 63,479 $ 62,674 $ 63,364 $ 189,415 $ 185,295 Net (gain) loss from fair value adjustments on qualifying hedges (28 ) 60 129 (1,122 ) (194 ) 161 (957 ) Net amortization of purchase accounting adjustments (775 ) (367 ) (1,058 ) (462 ) (1,100 ) (2,200 ) (2,587 ) Tax equivalent adjustment 104 131 124 113 113 359 337 Core net interest income FTE $ 60,507 $ 64,554 $ 62,674 $ 61,203 $ 62,183 $ 187,735 $ 182,088 Total average interest-earning assets (1) $ 7,984,558 $ 7,746,640 $ 7,577,053 $ 7,634,601 $ 7,616,332 $ 7,770,910 $ 7,697,229 Core net interest margin FTE 3.03 % 3.33 % 3.31 % 3.21 % 3.27 % 3.22 % 3.15 % GAAP interest income on total loans, net $ 75,546 $ 69,192 $ 67,516 $ 68,113 $ 69,198 $ 212,254 $ 206,218 Net (gain) loss from fair value adjustments on qualifying hedges (28 ) 60 129 (1,122 ) (194 ) 161 (957 ) Net amortization of purchase accounting adjustments (783 ) (357 ) (1,117 ) (535 ) (1,126 ) (2,256 ) (2,478 ) Core interest income on total loans, net $ 74,735 $ 68,895 $ 66,528 $ 66,456 $ 67,878 $ 210,159 $ 202,783 Average total loans, net (1) $ 6,867,758 $ 6,647,131 $ 6,586,253 $ 6,566,654 $ 6,642,434 $ 6,701,413 $ 6,683,412 Core yield on total loans 4.35 % 4.15 % 4.04 % 4.05 % 4.09 % 4.18 % 4.05 % ____________
(1) Excludes purchase accounting average balances for all periods presented.FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)September 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2022 2022 2022 2021 2021 Total Equity $ 670,719 $ 670,812 $ 675,813 $ 679,628 $ 668,096 Less: Goodwill (17,636 ) (17,636 ) (17,636 ) (17,636 ) (17,636 ) Core deposit Intangibles (2,147 ) (2,282 ) (2,420 ) (2,562 ) (2,708 ) Intangible deferred tax liabilities — — 328 328 287 Tangible Stockholders' Common Equity $ 650,936 $ 650,894 $ 656,085 $ 659,758 $ 648,039 Total Assets $ 8,557,419 $ 8,339,587 $ 8,169,833 $ 8,045,911 $ 8,077,334 Less: Goodwill (17,636 ) (17,636 ) (17,636 ) (17,636 ) (17,636 ) Core deposit Intangibles (2,147 ) (2,282 ) (2,420 ) (2,562 ) (2,708 ) Intangible deferred tax liabilities — — 328 328 287 Tangible Assets $ 8,537,636 $ 8,319,669 $ 8,150,105 $ 8,026,041 $ 8,057,277 Tangible Stockholders' Common Equity to Tangible Assets 7.62 % 7.82 % 8.05 % 8.22 % 8.04 % 
