UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172022
Commission file number 001-33013
FLUSHING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
11-3209278
(I.R.S. Employer Identification No.)
220 RXR Plaza, Uniondale, New York11556
(Address of principal executive offices)
(718)961-5400
(Registrant'sRegistrant’s telephone number, including area code)
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. XYes __ No__No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). XYes __ No__No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer” ,“smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
| |
Large accelerated filer __
| Accelerated filer X |
Non-accelerated filer __ | Smaller reporting company __ |
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.__act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). __Yes __ Yes XNo
The number of shares of the registrant’s Common Stock outstanding as of October 31, 2017July 29, 2022 was 28,819,891.29,982,205.
TABLE OF CONTENTS
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i
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except share data) | September 30, 2017 | December 31, 2016 | ||||||
ASSETS | ||||||||
Cash and due from banks | $ | 60,161 | $ | 35,857 | ||||
Securities held-to-maturity: | ||||||||
Mortgage-backed securities (none pledged) (fair value of $7,839 at September 30, 2017) | 7,978 | - | ||||||
Other securities (none pledged) (fair value of $21,542 and $35,408 at September 30, 2017 and December 31, 2016, respectively) | 22,952 | 37,735 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities (including assets pledged of $94,414 and $145,860 at September 30, 2017 and December 31, 2016, respectively; $1,696 and $2,016 at fair value pursuant to the fair value option at September 30, 2017 and December 31, 2016, respectively) | 519,861 | 516,476 | ||||||
Other securities (including assets pledged of $45,921 and $82,064 at September 30, 2017 and December 31, 2016, respectively; $19,712 and $28,429 at fair value pursuant to the fair value option at September 30, 2017 and December 31, 2016, respectively) | 276,698 | 344,905 | ||||||
Loans: | ||||||||
Multi-family residential | 2,236,173 | 2,178,504 | ||||||
Commercial real estate | 1,352,775 | 1,246,132 | ||||||
One-to-four family ― mixed-use property | 556,723 | 558,502 | ||||||
One-to-four family ― residential | 177,578 | 185,767 | ||||||
Co-operative apartments | 7,035 | 7,418 | ||||||
Construction | 15,811 | 11,495 | ||||||
Small Business Administration | 14,485 | 15,198 | ||||||
Taxi medallion | 18,165 | 18,996 | ||||||
Commercial business and other | 674,706 | 597,122 | ||||||
Net unamortized premiums and unearned loan fees | 16,925 | 16,559 | ||||||
Allowance for loan losses | (25,269 | ) | (22,229 | ) | ||||
Net loans | 5,045,107 | 4,813,464 | ||||||
Interest and dividends receivable | 21,076 | 20,228 | ||||||
Bank premises and equipment, net | 28,389 | 26,561 | ||||||
Federal Home Loan Bank of New York stock | 55,228 | 59,173 | ||||||
Bank owned life insurance | 131,047 | 132,508 | ||||||
Goodwill | 16,127 | 16,127 | ||||||
Other assets | 76,758 | 55,453 | ||||||
Total assets | $ | 6,261,382 | $ | 6,058,487 | ||||
LIABILITIES | ||||||||
Due to depositors: | ||||||||
Non-interest bearing | $ | 362,509 | $ | 333,163 | ||||
Interest-bearing: | ||||||||
Certificate of deposit accounts | 1,404,555 | 1,372,115 | ||||||
Savings accounts | 323,186 | 254,283 | ||||||
Money market accounts | 991,706 | 843,370 | ||||||
NOW accounts | 1,308,821 | 1,362,484 | ||||||
Total interest-bearing deposits | 4,028,268 | 3,832,252 | ||||||
Mortgagors' escrow deposits | 53,671 | 40,216 | ||||||
Borrowed funds | ||||||||
Federal Home Loan Bank advances | 1,090,989 | 1,159,190 | ||||||
Subordinated debentures | 73,622 | 73,414 | ||||||
Junior subordinated debentures, at fair value | 36,071 | 33,959 | ||||||
Total borrowed funds | 1,200,682 | 1,266,563 | ||||||
Other liabilities | 76,643 | 72,440 | ||||||
Total liabilities | 5,721,773 | 5,544,634 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock ($0.01 par value; 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, 2017 and December 31, 2016; 28,819,891 shares and 28,632,904 shares outstanding at September 30, 2017 and December 31, 2016, respectively) | 315 | 315 | ||||||
Additional paid-in capital | 216,929 | 214,462 | ||||||
Treasury stock, at average cost (2,710,704 shares and 2,897,691 shares at September 30, 2017 and December 31, 2016, respectively) | (51,287 | ) | (53,754 | ) | ||||
Retained earnings | 380,316 | 361,192 | ||||||
Accumulated other comprehensive loss, net of taxes | (6,664 | ) | (8,362 | ) | ||||
Total stockholders' equity | 539,609 | 513,853 | ||||||
Total liabilities and stockholders' equity | $ | 6,261,382 | $ | 6,058,487 |
| | | | | | |
| | June 30, | | December 31, | ||
| | 2022 | | 2021 | ||
| | (Unaudited) | | | | |
| | (Dollars in thousands, except per share data) | ||||
Assets |
| |
|
| |
|
Cash and due from banks | | $ | 137,026 | | $ | 81,723 |
Securities held-to-maturity: | |
|
| |
|
|
Mortgage-backed securities (include assets pledged of $4,880 and $5,643 at June 30, 2022 and December 31, 2021, respectively; fair value of $7,496 and $8,667 at June 30, 2022 and December 31, 2021, respectively) | |
| 7,885 | |
| 7,894 |
Other securities, net of allowance of $1,085 and $862 at June 30, 2022 and December 31, 2021 respectively; (NaN pledged; fair value of $57,064 and $53,362 at June 30, 2022 and December 31, 2021, respectively) | |
| 66,230 | |
| 49,974 |
Securities available for sale, at fair value: | |
|
| |
|
|
Mortgage-backed securities (including assets pledged of $278,332 and $212,388 at June 30, 2022 and December 31, 2021, respectively; $339 and $388 at fair value pursuant to the fair value option at June 30, 2022 and December 31, 2021, respectively) | |
| 510,934 | |
| 572,184 |
Other securities (including NaN pledged; $13,235 and $14,180 at fair value pursuant to the fair value option at June 30, 2022 and December 31, 2021, respectively) | |
| 346,720 | |
| 205,052 |
Loans: | |
| | |
| |
Multi-family residential | | | 2,531,858 | | | 2,517,026 |
Commercial real estate | | | 1,864,507 | | | 1,775,629 |
One-to-four family --- mixed used property | | | 561,100 | | | 571,795 |
One-to-four family --- residential | | | 250,859 | | | 276,571 |
Construction | | | 72,148 | | | 59,761 |
Small Business Administration | | | 40,572 | | | 93,811 |
Commercial business and other | | | 1,431,417 | | | 1,339,273 |
Net unamortized premiums and unearned loan fees | | | 7,932 | | | 4,239 |
Less: Allowance for credit losses | |
| (39,424) | |
| (37,135) |
Net loans | |
| 6,720,969 | |
| 6,600,970 |
Interest and dividends receivable | |
| 38,811 | |
| 38,698 |
Bank premises and equipment, net | |
| 22,285 | |
| 23,338 |
Federal Home Loan Bank of New York stock, at cost | |
| 50,017 | |
| 35,937 |
Bank owned life insurance | |
| 211,220 | |
| 210,754 |
Goodwill | |
| 17,636 | |
| 17,636 |
Core deposit intangibles | | | 2,282 | | | 2,562 |
Right of use asset | | | 46,687 | |
| 50,200 |
Other assets | |
| 160,885 | |
| 148,989 |
Total assets | | $ | 8,339,587 | | $ | 8,045,911 |
| | | | | | |
Liabilities | |
|
| |
|
|
Due to depositors: | |
|
| |
|
|
Non-interest bearing | | $ | 1,081,208 | | $ | 967,621 |
Interest-bearing | |
| 5,268,792 | |
| 5,365,911 |
Total Due to depositors | | | 6,350,000 | | | 6,333,532 |
Mortgagors' escrow deposits | |
| 57,577 | |
| 51,913 |
Borrowed funds: | |
|
| |
|
|
Federal Home Loan Bank advances and other borrowings | |
| 911,186 | |
| 636,187 |
Subordinated debentures | |
| 123,083 | |
| 122,885 |
Junior subordinated debentures, at fair value | |
| 55,352 | |
| 56,472 |
Total borrowed funds | |
| 1,089,621 | |
| 815,544 |
Operating lease liability | | | 50,346 | | | 54,155 |
Other liabilities | |
| 121,231 | |
| 111,139 |
Total liabilities | |
| 7,668,775 | |
| 7,366,283 |
| | | | | | |
Stockholders' Equity | |
|
| |
|
|
Preferred stock ($0.01 par value; 5,000,000 shares authorized; NaN issued) | |
| — | |
| — |
Common stock ($0.01 par value; 100,000,000 shares authorized; 34,087,623 shares issued at both June 30, 2022 and December 31, 2021; 29,980,104 shares and 30,526,353 shares outstanding at June 30, 2022 and December 31, 2021, respectively) | |
| 341 | |
| 341 |
Additional paid-in capital | |
| 262,860 | |
| 263,375 |
Treasury stock, at average cost (4,107,519 shares and 3,561,270 shares at June 30, 2022 and December 31, 2021, respectively) | |
| (88,342) | |
| (75,293) |
Retained earnings | |
| 527,217 | |
| 497,889 |
Accumulated other comprehensive loss, net of taxes | |
| (31,264) | |
| (6,684) |
Total stockholders' equity | |
| 670,812 | |
| 679,628 |
| | | | | | |
Total liabilities and stockholders' equity | | $ | 8,339,587 | | $ | 8,045,911 |
The accompanying notes are an integral part of these consolidated financial statements.
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
(Dollars in thousands, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest and dividend income | ||||||||||||||||
Interest and fees on loans | $ | 53,318 | $ | 49,181 | $ | 155,834 | $ | 145,152 | ||||||||
Interest and dividends on securities: | ||||||||||||||||
Interest | 5,850 | 6,173 | 18,377 | 19,275 | ||||||||||||
Dividends | 30 | 121 | 274 | 360 | ||||||||||||
Other interest income | 121 | 49 | 403 | 191 | ||||||||||||
Total interest and dividend income | 59,319 | 55,524 | 174,888 | 164,978 | ||||||||||||
Interest expense | ||||||||||||||||
Deposits | 10,655 | 8,520 | 29,145 | 24,590 | ||||||||||||
Other interest expense | 5,623 | 5,291 | 15,696 | 15,653 | ||||||||||||
Total interest expense | 16,278 | 13,811 | 44,841 | 40,243 | ||||||||||||
Net interest income | 43,041 | 41,713 | 130,047 | 124,735 | ||||||||||||
Provision for loan losses | 3,266 | - | 3,266 | - | ||||||||||||
Net interest income after provision for loan losses | 39,775 | 41,713 | 126,781 | 124,735 | ||||||||||||
Non-interest income | ||||||||||||||||
Banking services fee income | 885 | 826 | 2,773 | 2,775 | ||||||||||||
Net (loss) gain on sale of securities | (186 | ) | - | (186 | ) | 2,363 | ||||||||||
Net gain on sale of loans | 152 | 240 | 396 | 584 | ||||||||||||
Net gain on sale of buildings | - | - | - | 33,814 | ||||||||||||
Net loss from fair value adjustments | (1,297 | ) | (823 | ) | (2,834 | ) | (2,925 | ) | ||||||||
Federal Home Loan Bank of New York stock dividends | 740 | 665 | 2,206 | 1,870 | ||||||||||||
Gain from life insurance proceeds | 238 | 47 | 1,405 | 458 | ||||||||||||
Bank owned life insurance | 816 | 707 | 2,418 | 2,096 | ||||||||||||
Other income | 313 | 191 | 1,120 | 1,075 | ||||||||||||
Total non-interest income | 1,661 | 1,853 | 7,298 | 42,110 | ||||||||||||
Non-interest expense | ||||||||||||||||
Salaries and employee benefits | 15,310 | 14,795 | 47,838 | 45,024 | ||||||||||||
Occupancy and equipment | 2,502 | 2,576 | 7,652 | 7,298 | ||||||||||||
Professional services | 1,763 | 1,730 | 5,678 | 5,907 | ||||||||||||
FDIC deposit insurance | 499 | 536 | 1,328 | 2,380 | ||||||||||||
Data processing | 1,349 | 939 | 3,873 | 3,229 | ||||||||||||
Depreciation and amortization | 1,173 | 1,169 | 3,493 | 3,263 | ||||||||||||
Other real estate owned/foreclosure expense | 121 | 273 | 376 | 831 | ||||||||||||
Prepayment penalty on borrowings | - | - | - | 2,082 | ||||||||||||
Other operating expenses | 3,249 | 4,259 | 11,357 | 13,214 | ||||||||||||
Total non-interest expense | 25,966 | 26,277 | 81,595 | 83,228 | ||||||||||||
Income before income taxes | 15,470 | 17,289 | 52,484 | 83,617 | ||||||||||||
Provision for income taxes | ||||||||||||||||
Federal | 4,680 | 5,568 | 15,005 | 25,518 | ||||||||||||
State and local | 611 | 1,087 | 2,315 | 7,469 | ||||||||||||
Total taxes | 5,291 | 6,655 | 17,320 | 32,987 | ||||||||||||
Net income | $ | 10,179 | $ | 10,634 | $ | 35,164 | $ | 50,630 | ||||||||
Basic earnings per common share | $ | 0.35 | $ | 0.37 | $ | 1.21 | $ | 1.75 | ||||||||
Diluted earnings per common share | $ | 0.35 | $ | 0.37 | $ | 1.21 | $ | 1.75 | ||||||||
Dividends per common share | $ | 0.18 | $ | 0.17 | $ | 0.54 | $ | 0.51 |
The accompanying notes are an integral part of these consolidated financial statements.
-1-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 10,179 | $ | 10,634 | $ | 35,164 | $ | 50,630 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Amortization of actuarial losses, net of taxes of ($64) and ($82) for the three months ended September 30, 2017 and 2016, respectively and of ($192) and ($247) for the nine months ended September 30, 2017 and 2016, respectively. | 88 | 110 | 262 | 329 | ||||||||||||
Amortization of prior service credits, net of taxes of $5 and $4 for the three months ended September 30, 2017 and 2016, respectively and $14 for each of the nine months ended September 30, 2017 and 2016. | (7 | ) | (7 | ) | (20 | ) | (20 | ) | ||||||||
Reclassification adjustment for net gains included in income, net of taxes of ($78) for the three and nine months ended September 30, 2017 and $1,013 for the nine months ended September 30, 2016. | 108 | - | 108 | (1,350 | ) | |||||||||||
Net unrealized (losses) gains on securities, net of taxes of $241 and $2,177 for the three months ended September 30, 2017 and 2016, respectively and of ($1,006) and ($5,103) for the nine months ended September 30, 2017 and 2016, respectively. | (333 | ) | (2,942 | ) | 1,416 | 6,852 | ||||||||||
Net unrealized gain (loss) on cash flow hedges, net of taxes of ($41) and $49 for the three and nine months ended September 30, 2017, respectively. | 56 | - | (68 | ) | - | |||||||||||
Total other comprehensive income (loss), net of tax | (88 | ) | (2,839 | ) | 1,698 | 5,811 | ||||||||||
Comprehensive income | $ | 10,091 | $ | 7,795 | $ | 36,862 | $ | 56,441 |
The accompanying notes are an integral part of these consolidated financial statements.
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
|
| June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | | (In thousands, except per share data) | |||||||||
Interest and dividend income | | | | | | | | | | | | |
Interest and fees on loans | | $ | 69,192 | | $ | 67,999 | | $ | 136,708 | | $ | 137,020 |
Interest and dividends on securities: | |
|
| |
|
| |
|
| |
|
|
Interest | |
| 4,929 | | | 3,685 | |
| 8,674 | | | 6,757 |
Dividends | |
| 11 | |
| 7 | |
| 19 | |
| 15 |
Other interest income | | | 159 | |
| 51 | | | 210 | |
| 87 |
Total interest and dividend income | |
| 74,291 | |
| 71,742 | |
| 145,611 | |
| 143,879 |
Interest expense | |
|
| |
|
| |
|
| |
|
|
Deposits | |
| 4,686 | |
| 5,539 | |
| 8,094 | |
| 11,644 |
Other interest expense | |
| 4,875 | |
| 5,164 | |
| 9,308 | |
| 10,304 |
Total interest expense | |
| 9,561 | |
| 10,703 | |
| 17,402 | |
| 21,948 |
Net interest income | |
| 64,730 | |
| 61,039 | |
| 128,209 | |
| 121,931 |
Provision (benefit) for credit losses | |
| 1,590 | |
| (1,598) | |
| 2,948 | |
| 1,222 |
Net interest income after provision (benefit) for credit losses | |
| 63,140 | |
| 62,637 | |
| 125,261 | |
| 120,709 |
Non-interest income (loss) | |
|
| |
|
| |
|
| |
|
|
Banking services fee income | |
| 1,166 | |
| 1,233 | |
| 2,540 | |
| 3,958 |
Net gain on sale of loans | |
| 73 | |
| 127 | |
| 73 | |
| 158 |
Net gain on disposition of assets | | | — | | | — | | | — | | | 621 |
Net gain on sale of securities | |
| — | |
| 123 | |
| — | |
| 123 |
Net gain (loss) from fair value adjustments | |
| 2,533 | |
| (6,548) | |
| 724 | |
| (5,566) |
Federal Home Loan Bank of New York stock dividends | |
| 407 | |
| 500 | |
| 804 | |
| 1,189 |
Life insurance proceeds | |
| 1,536 | |
| — | |
| 1,536 | |
| — |
Bank owned life insurance | |
| 1,115 | |
| 1,009 | |
| 2,229 | |
| 2,006 |
Other income | |
| 523 | |
| 346 | |
| 760 | |
| 612 |
Total non-interest income (loss) | |
| 7,353 | |
| (3,210) | |
| 8,666 | |
| 3,101 |
Non-interest expense | |
| | | | | |
| | | | |
Salaries and employee benefits | |
| 21,109 | |
| 19,879 | |
| 44,758 | |
| 42,543 |
Occupancy and equipment | |
| 3,760 | |
| 3,522 | |
| 7,364 | |
| 6,889 |
Professional services | |
| 2,285 | |
| 1,988 | |
| 4,507 | |
| 4,388 |
FDIC deposit insurance | |
| 615 | |
| 729 | |
| 1,035 | |
| 1,942 |
Data processing | |
| 1,383 | |
| 1,419 | |
| 2,807 | |
| 3,528 |
Depreciation and amortization of bank premises and equipment | |
| 1,447 | |
| 1,638 | |
| 2,907 | |
| 3,277 |
Other real estate owned / foreclosure expense | |
| 32 | |
| 22 | |
| 116 | |
| 12 |
Other operating expenses | |
| 4,891 | |
| 4,814 | |
| 10,822 | |
| 9,591 |
Total non-interest expense | |
| 35,522 | |
| 34,011 | |
| 74,316 | |
| 72,170 |
Income before income taxes | |
| 34,971 | |
| 25,416 | |
| 59,611 | |
| 51,640 |
Provision for income taxes | | | | | | | | | | | | |
Federal | |
| 5,609 | |
| 4,857 | |
| 10,259 | |
| 9,928 |
State and local | |
| 4,327 | |
| 1,301 | |
| 6,098 | |
| 3,415 |
Total provision for income taxes | |
| 9,936 | |
| 6,158 | |
| 16,357 | |
| 13,343 |
Net income | | $ | 25,035 | | $ | 19,258 | | $ | 43,254 | | $ | 38,297 |
| | | | | | | | | | | | |
Basic earnings per common share | | $ | 0.81 | | $ | 0.61 | | $ | 1.39 | | $ | 1.21 |
Diluted earnings per common share | | $ | 0.81 | | $ | 0.61 | | $ | 1.39 | | $ | 1.21 |
Dividends per common share | | $ | 0.22 | | $ | 0.21 | | $ | 0.44 | | $ | 0.42 |
For the nine months ended | ||||||||
September 30, | ||||||||
(In thousands) | 2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 35,164 | $ | 50,630 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 3,266 | - | ||||||
Depreciation and amortization of bank premises and equipment | 3,493 | 3,263 | ||||||
Amortization of premium, net of accretion of discount | 5,716 | 6,344 | ||||||
Net loss from fair value adjustments | 2,834 | 2,925 | ||||||
Net gain from sale of loans | (396 | ) | (584 | ) | ||||
Net loss (gain) from sale of securities | 186 | (2,363 | ) | |||||
Net gain from sale of buildings | - | �� | (33,814 | ) | ||||
Net (gain) loss from sale of OREO | (50 | ) | 1,726 | |||||
Income from bank owned life insurance | (2,418 | ) | (2,096 | ) | ||||
Gain from life insurance proceeds | (1,405 | ) | (458 | ) | ||||
Stock-based compensation expense | 5,092 | 4,169 | ||||||
Deferred compensation | (3,322 | ) | (3,140 | ) | ||||
Excess tax benefit from stock-based payment arrangements | - | (470 | ) | |||||
Deferred income tax benefit | (1,806 | ) | (1,228 | ) | ||||
Increase in other liabilities | 6,810 | 7,680 | ||||||
(Increase) decrease in other assets | (68 | ) | 4,823 | |||||
Net cash provided by operating activities | 53,096 | 37,407 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of bank premises and equipment | (5,321 | ) | (4,159 | ) | ||||
Net redemptions (purchases) of Federal Home Loan Bank of New York shares | 3,945 | (9,119 | ) | |||||
Purchases of securities held-to-maturity | (8,030 | ) | (35,705 | ) | ||||
Proceeds from maturities of securities held-to-maturity | 14,830 | 8,475 | ||||||
Purchases of securities available for sale | (152,121 | ) | (59,678 | ) | ||||
Proceeds from sales and calls of securities available for sale | 155,999 | 66,996 | ||||||
Proceeds from maturities and prepayments of securities available for sale | 60,573 | 85,829 | ||||||
Proceeds from bank owned life insurance | 4,646 | 2,236 | ||||||
Proceeds from sale of buildings | - | 34,332 | ||||||
Net originations of loans | (234,227 | ) | (210,506 | ) | ||||
Purchases of loans | (75,832 | ) | (137,994 | ) | ||||
Proceeds from sale of real estate owned | 583 | 853 | ||||||
Proceeds from sale of loans | 54,990 | 11,499 | ||||||
Net cash used in investing activities | (179,965 | ) | (246,941 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net increase in non-interest bearing deposits | 29,346 | 50,591 | ||||||
Net increase in interest-bearing deposits | 195,552 | 85,616 | ||||||
Net increase in mortgagors' escrow deposits | 13,455 | 12,432 | ||||||
Net (repayments) proceeds from short-term borrowed funds | (43,500 | ) | 150,000 | |||||
Proceeds from long-term borrowings | 180,000 | 200,000 | ||||||
Repayment of long-term borrowings | (205,049 | ) | (260,301 | ) | ||||
Purchases of treasury stock | (2,902 | ) | (9,102 | ) | ||||
Excess tax benefit from stock-based payment arrangements | - | 470 | ||||||
Proceeds from issuance of common stock upon exercise of stock options | - | 132 | ||||||
Cash dividends paid | (15,729 | ) | (14,787 | ) | ||||
Net cash provided by financing activities | 151,173 | 215,051 | ||||||
Net increase in cash and cash equivalents | 24,304 | 5,517 | ||||||
Cash and cash equivalents, beginning of period | 35,857 | 42,363 | ||||||
Cash and cash equivalents, end of period | $ | 60,161 | $ | 47,880 | ||||
SUPPLEMENTAL CASHFLOW DISCLOSURE | ||||||||
Interest paid | $ | 42,543 | $ | 39,792 | ||||
Income taxes paid | 16,906 | 28,610 | ||||||
Taxes paid if excess tax benefits were not tax deductible | 16,906 | 29,080 | ||||||
Non-cash activities: | ||||||||
Securities purchased not yet settled | - | 2,000 | ||||||
Loans transferred to Other Real Estate Owned | - | 486 | ||||||
Loans held for investment transferred to loans available for sale | 30,565 | - |
The accompanying notes are an integral part of these consolidated financial statements.
- 4 -
-2-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ EquityComprehensive Income
For the nine months ended September 30, 2017 and 2016
(Unaudited)
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | | | | | | | (In thousands) | ||||
| | | | | | | | | | | | |
Net income | | $ | 25,035 | | $ | 19,258 | | $ | 43,254 | | $ | 38,297 |
Other comprehensive income (loss), net of tax: | |
|
| |
|
| |
|
| |
|
|
Amortization of actuarial (gains) losses, net of taxes of ($5) and ($41) for the three months ended June 30, 2022 and 2021, respectively, and of ($3) and ($77) for the six months ended June 30, 2022 and 2021, respectively. | |
| (11) | |
| 92 | |
| (15) | |
| 173 |
Amortization of prior service credits, net of taxes of ($4) and $6 for the three months ended June 30, 2022 and 2021, respectively, and of ($2) and $13 for the six months ended June 30, 2022 and 2021, respectively. | |
| (11) | |
| (15) | |
| (16) | |
| (30) |
Net unrealized (losses) gains on securities, net of taxes of $8,767 and ($664) for the three months ended June 30, 2022 and 2021, respectively, and of $19,659 and $322 for the six months ended June 30, 2022 and 2021, respectively. | |
| (20,434) | |
| 1,497 | |
| (43,861) | |
| (720) |
Reclassification adjustment for net losses included in income, net of taxes of $38 for the three and six months ended June 30, 2021, respectively. | |
| — | |
| (85) | |
| — | |
| (85) |
Net unrealized gains on cash flow hedges, net of taxes of ($2,018) and ($120) for the three months ended June 30, 2022 and 2021 respectively, and of ($8,876) and ($3,574) for the six months ended June 30, 2022 and 2021 respectively. | |
| 4,915 | |
| 521 | |
| 19,666 | |
| 8,319 |
Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of $142 and ($147) for the three months ended June 30, 2022 and 2021, respectively, and of $205 and ($112) for the six months ended June 30, 2022 and 2021, respectively. | |
| (219) | |
| 276 | |
| (354) | |
| 192 |
| | | | | | | | | | | | |
Total other comprehensive income (loss), net of tax | |
| (15,760) | |
| 2,286 | |
| (24,580) | |
| 7,849 |
| | | | | | | | | | | | |
Comprehensive net income | | $ | 9,275 | | $ | 21,544 | | $ | 18,674 | | $ | 46,146 |
(Dollars in thousand, except per share data) | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||
Balance at December 31, 2016 | $ | 513,853 | $ | 315 | $ | 214,462 | $ | 361,192 | $ | (53,754 | ) | $ | (8,362 | ) | ||||||||||
Net Income | 35,164 | - | - | 35,164 | - | - | ||||||||||||||||||
Award of common shares released from Employee Benefit Trust (114,754 shares) | 2,433 | - | 2,433 | - | - | - | ||||||||||||||||||
Vesting of restricted stock unit awards (284,595 shares) | - | - | (5,052 | ) | (271 | ) | 5,323 | - | ||||||||||||||||
Exercise of stock options (4,400 shares) | - | - | (6 | ) | (40 | ) | 46 | - | ||||||||||||||||
Stock-based compensation expense | 5,092 | - | 5,092 | - | - | - | ||||||||||||||||||
Purchase of treasury shares (10,000 shares) | (278 | ) | - | - | - | (278 | ) | - | ||||||||||||||||
Repurchase of shares to satisfy tax obligation (90,779 shares) | (2,624 | ) | - | - | - | (2,624 | ) | - | ||||||||||||||||
Dividends on common stock ($0.54 per share) | (15,729 | ) | - | - | (15,729 | ) | - | - | ||||||||||||||||
Other comprehensive income | 1,698 | - | - | - | - | 1,698 | ||||||||||||||||||
Balance at September 30, 2017 | $ | 539,609 | $ | 315 | $ | 216,929 | $ | 380,316 | $ | (51,287 | ) | $ | (6,664 | ) | ||||||||||
Balance at December 31, 2015 | $ | 473,067 | $ | 315 | $ | 210,652 | $ | 316,530 | $ | (48,868 | ) | $ | (5,562 | ) | ||||||||||
Net Income | 50,630 | - | - | 50,630 | - | - | ||||||||||||||||||
Award of common shares released from Employee Benefit Trust (138,519 shares) | 1,984 | - | 1,984 | - | - | - | ||||||||||||||||||
Vesting of restricted stock unit awards (245,311 shares) | - | - | (4,049 | ) | (397 | ) | 4,446 | - | ||||||||||||||||
Exercise of stock options (41,670 shares) | 132 | - | 15 | (34 | ) | 151 | - | |||||||||||||||||
Stock-based compensation expense | 4,416 | - | 4,416 | - | - | - | ||||||||||||||||||
Stock-based income tax benefit | 470 | - | 470 | - | - | - | ||||||||||||||||||
Purchase of treasury shares (378,695 shares) | (7,492 | ) | - | - | - | (7,492 | ) | - | ||||||||||||||||
Repurchase of shares to satisfy tax obligation (77,994 shares) | (1,610 | ) | - | - | - | (1,610 | ) | - | ||||||||||||||||
Dividends on common stock ($0.51 per share) | (14,787 | ) | - | - | (14,787 | ) | - | - | ||||||||||||||||
Other comprehensive income | 5,811 | - | - | - | - | 5,811 | ||||||||||||||||||
Balance at September 30, 2016 | $ | 512,621 | $ | 315 | $ | 213,488 | $ | 351,942 | $ | (53,373 | ) | $ | 249 |
The accompanying notes are an integral part of these consolidated financial statements.statements.
- 5 -
-3-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | |
| | For the six months ended June 30, | ||||
|
| 2022 |
| 2021 | ||
| | (In thousands) | ||||
Operating Activities | | | | | | |
Net income | | $ | 43,254 | | $ | 38,297 |
Adjustments to reconcile net income to net cash provided by operating activities: | |
|
| |
|
|
Provision for credit losses | |
| 2,948 | |
| 1,222 |
Depreciation and amortization of premises and equipment | |
| 2,907 | |
| 3,277 |
Net gain on sales of loans | |
| (73) | |
| (158) |
Net amortization of premiums and (accretion) of discounts | |
| 568 | |
| (190) |
Net gain from disposition of assets | |
| 0 | |
| (621) |
Net gain from sale of securities | | | 0 | | | (123) |
Deferred income tax provision (benefit) | |
| 3,191 | |
| (762) |
Gain from life insurance proceeds | | | (1,536) | | | 0 |
Net loss (gain) from fair value adjustments of qualifying hedges | |
| 129 | |
| (763) |
Net (gain) loss from fair value adjustments | | | (724) | | | 5,566 |
Income from bank owned life insurance | |
| (2,229) | |
| (2,006) |
Stock-based compensation expense | |
| 5,255 | |
| 4,539 |
Deferred compensation | |
| (3,627) | |
| (2,057) |
Amortization of core deposit intangibles | | | 280 | | | 313 |
Decrease (increase) in other assets | |
| 9,303 | |
| (5,175) |
Decrease in other liabilities | |
| (15,004) | |
| (5,384) |
Net cash provided by operating activities | | | 44,642 | | | 35,975 |
Investing Activities | |
|
| |
|
|
Purchases of premises and equipment | |
| (1,854) | |
| (1,536) |
Net (purchases) redemptions of Federal Home Loan Bank-NY shares | |
| (14,080) | |
| 1,809 |
Purchases of securities held-to-maturity | |
| (16,476) | |
| 0 |
Proceeds from life insurance | |
| 2,727 | |
| 0 |
Purchases of securities available for sale | |
| (210,261) | |
| (478,155) |
Proceeds from sales and calls of securities available for sale | |
| 0 | |
| 38,623 |
Change in cash collateral | | | 34,365 | | | 0 |
Proceeds from maturities and prepayments of securities available for sale | |
| 64,227 | |
| 263,640 |
Net (originations) and repayments of loans | |
| (69,676) | |
| 89,937 |
Purchases of loans | |
| (111,028) | |
| (130,706) |
Proceeds from sale of loans | |
| 18,565 | |
| 18,584 |
Net cash used in investing activities | | | (303,491) | | | (197,804) |
-4-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows (Contd.)
(Unaudited)
| | | | | | | |
|
| | | | | | |
| | For the six months ended June 30, | |||||
| | | 2022 | | | 2021 | |
| | (In thousands) | |||||
Financing Activities | | | | | | | |
Net increase in non-interest bearing deposits | | $ | 113,587 | | $ | 166,819 | |
Net increase (decrease) in interest-bearing deposits | |
| (47,067) | |
| 41,312 | |
Net increase in mortgagors' escrow deposits | |
| 5,664 | |
| 12,608 | |
Net proceeds from short-term borrowed funds | |
| 325,000 | |
| 150,000 | |
Repayment of long-term borrowings | |
| (50,000) | |
| (205,647) | |
Purchases of treasury stock | |
| (19,396) | |
| (1,375) | |
Cash dividends paid | |
| (13,636) | |
| (13,305) | |
Net cash provided by financing activities | |
| 314,152 | |
| 150,412 | |
Net increase in cash and cash equivalents | |
| 55,303 | |
| (11,417) | |
Cash and cash equivalents, beginning of period | |
| 81,723 | |
| 157,388 | |
Cash and cash equivalents, end of period | | $ | 137,026 | | $ | 145,971 | |
Supplemental Cash Flow Disclosure | |
|
| |
|
| |
Interest paid | | $ | 16,612 | | $ | 22,217 | |
Income taxes paid | |
| 16,215 | |
| 10,207 | |
Taxes paid if excess tax benefits on stock-based compensation were not tax deductible | |
| 16,385 | |
| 9,877 | |
The accompanying notes are an integral part of these consolidated financial statements.
-5-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| Additional |
| |
| | |
| Accumulated Other | |||
| | | | | Common | | Paid-in | | Retained | | Treasury | | Comprehensive | |||||
(Dollars in thousands, except per share data) | | Total | | Stock | | Capital | | Earnings | | Stock | | Income (Loss) | ||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 | | $ | 679,628 | | $ | 341 | | $ | 263,375 | | $ | 497,889 | | $ | (75,293) | | $ | (6,684) |
| | | | | | | | | | | | | | | | | | |
Net income | |
| 18,219 | |
| — | |
| — | |
| 18,219 | |
| — | |
| — |
Award of common shares released from Employee Benefit Trust (17,964 shares) | |
| 287 | |
| — | |
| 287 | |
| — | |
| — | |
| — |
Vesting of restricted stock unit awards (297,626 shares) | |
| — | |
| — | |
| (6,019) | |
| (285) | |
| 6,304 | |
| — |
Purchase of treasury shares (360,000 shares) | |
| (8,469) | |
| — | |
| — | |
| — | |
| (8,469) | |
| — |
Stock-based compensation expense | |
| 4,194 | |
| — | |
| 4,194 | |
| — | |
| — | |
| — |
Repurchase of shares to satisfy tax obligation (97,435 shares) | |
| (2,376) | |
| — | |
| — | |
| — | |
| (2,376) | |
| — |
Dividends on common stock ($0.22 per share) | |
| (6,850) | |
| — | |
| — | |
| (6,850) | |
| — | |
| — |
Other comprehensive loss | |
| (8,820) | |
| — | |
| — | |
| — | |
| — | |
| (8,820) |
Balance at March 31, 2022 | | $ | 675,813 | | $ | 341 | | $ | 261,837 | | $ | 508,973 | | $ | (79,834) | | $ | (15,504) |
Net income | |
| 25,035 | |
| — | | | — | | | 25,035 | | | — | | | — |
Purchase of treasury shares (387,689 shares) | |
| (8,534) | |
| — | | | — | | | — | | | (8,534) | | | — |
Vesting of restricted stock unit awards (2,015 shares) | |
| — | |
| — | | | (38) | | | (5) | | | 43 | | | — |
Stock-based compensation expense | |
| 1,061 | |
| — | | | 1,061 | | | — | | | — | | | — |
Repurchase of shares to satisfy tax obligation (766 shares) | |
| (17) | |
| — | | | — | | | — | | | (17) | | | — |
Dividends on common stock ($0.22 per share) | |
| (6,786) | |
| — | | | — | | | (6,786) | | | — | | | — |
Other comprehensive loss | | | (15,760) | | | | | | | | | | | | | | | (15,760) |
Balance at June 30, 2022 | | $ | 670,812 | | $ | 341 | | $ | 262,860 | | $ | 527,217 | | $ | (88,342) | | $ | (31,264) |
| | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| Additional |
| | |
| | |
| Accumulated Other | ||
| | | | | Common | | Paid-in | | Retained | | Treasury | | Comprehensive | |||||
(Dollars in thousands, except per share data) | | Total | | Stock | | Capital | | Earnings | | Stock | | Income (Loss) | ||||||
Balance at December 31, 2020 | | $ | 618,997 | | $ | 341 | | $ | 261,533 | | $ | 442,789 | | $ | (69,400) | | $ | (16,266) |
| | | | | | | | | | | | | | | | | | |
Net Income | |
| 19,039 | |
| — | |
| — | |
| 19,039 | |
| — | |
| — |
Award of common shares released from Employee Benefit Trust (5,682 shares) | |
| 74 | |
| — | |
| 74 | |
| — | |
| — | |
| — |
Vesting of restricted stock unit awards (248,896 shares) | |
| — | |
| — | |
| (5,058) | |
| (153) | |
| 5,211 | |
| — |
Stock-based compensation expense | |
| 3,470 | |
| — | |
| 3,470 | |
| — | |
| — | |
| — |
Repurchase of shares to satisfy tax obligation (70,292 shares) | |
| (1,290) | |
| — | |
| — | |
| — | |
| (1,290) | |
| — |
Dividends on common stock ($0.21 per share) | | | (6,652) | | | — | |
| — | |
| (6,652) | |
| — | |
| — |
Other comprehensive income | |
| 5,563 | |
| — | |
| — | |
| — | |
| — | |
| 5,563 |
Balance at March 31, 2021 | | $ | 639,201 | | $ | 341 | | $ | 260,019 | | $ | 455,023 | | $ | (65,479) | | $ | (10,703) |
Net Income | | | 19,258 | | | — | | | — | | | 19,258 | | | — | | | — |
Award of common shares released from Employee Benefit Trust (6,445 shares) | | | 91 | | | — | | | 91 | | | — | | | | | | — |
Vesting of restricted stock unit awards (10,932 shares) | | | — | | | — | | | (221) | | | (8) | | | 229 | | | — |
Stock-based compensation expense | | | 1,069 | | | — | | | 1,069 | | | — | | | — | | | — |
Repurchase of shares to satisfy tax obligation (3,886 shares) | | | (85) | | | — | | | — | | | — | | | (85) | | | — |
Dividends on common stock ($0.21 per share) | | | (6,653) | | | — | | | — | | | (6,653) | | | — | | | — |
Other comprehensive income | | | 2,286 | | | — | | | — | | | — | | | — | | | 2,286 |
Balance at June 30, 2021 | | $ | 655,167 | | $ | 341 | | $ | 260,958 | | $ | 467,620 | | $ | (65,335) | | $ | (8,417) |
The accompanying notes are an integral part of these consolidated financial statements.
-6-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation |
The primary business of Flushing Financial Corporation (the “Holding Company”), a Delaware corporation, is the operation of its wholly owned subsidiary, Flushing Bank (the “Bank”).
The unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q (“Quarterly Report”) include the collective results of the Holding Company and its direct and indirect wholly-owned subsidiaries, including the Bank, Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, Flushing Service Corporation, and FSB Properties Inc.,which was dissolved as of June 30, 2021, which are collectively herein referred to as “we,” “us,” “our” and the “Company.”
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts. The Trusts are not included in the Company’s consolidated financial statements, as the Company would not absorb the losses of the Trusts if any losses were to occur.
The accompanying unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such presented periods of the Company. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report. All inter-company balances and transactions have been eliminated in consolidation. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for the full year.
The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
2021.
When necessary, certain reclassifications were made to prior-year amounts to conform to the current-year presentation.
Such reclassifications had no effect on prior period net income or shareholders’ equity and were insignificant amounts.
2. Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for loancredit losses, (“ALLL”), the evaluation of goodwill for impairment, the review of the need for a valuation allowance of the Company’s deferred tax assets and the fair value of financial instrumentsinstruments.
-7-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and the evaluation of other-than-temporary impairment (“OTTI”) on securities. Actual results could differ from these estimates.SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
3. Earnings Per Share |
Earnings per common share have been computed based on the following:
| | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | (Dollars in thousands, except per share data) | |||||||||||
Net income, as reported | | $ | 25,035 | | $ | 19,258 | | $ | 43,254 | | $ | 38,297 | |
Divided by: | |
|
| |
|
| |
|
| |
|
| |
Total weighted average common shares outstanding and common stock equivalents (1) | |
| 30,937 | |
| 31,677 | |
| 31,095 | |
| 31,641 | |
Basic earnings per common share | | $ | 0.81 | | $ | 0.61 | | $ | 1.39 | | $ | 1.21 | |
Diluted earnings per common share | | $ | 0.81 | | $ | 0.61 | | $ | 1.39 | | $ | 1.21 | |
Dividend Payout ratio | |
| 27.2 | % |
| 34.4 | % |
| 31.7 | % |
| 34.7 | % |
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Net income, as reported | $ | 10,179 | $ | 10,634 | $ | 35,164 | $ | 50,630 | ||||||||
Divided by: | ||||||||||||||||
Weighted average common shares outstanding | 29,120 | 28,861 | 29,092 | 28,993 | ||||||||||||
Weighted average common stock equivalents | 1 | 14 | 2 | 13 | ||||||||||||
Total weighted average common shares outstanding and common stock equivalents | 29,121 | 28,875 | 29,094 | 29,006 | ||||||||||||
Basic earnings per common share | $ | 0.35 | $ | 0.37 | $ | 1.21 | $ | 1.75 | ||||||||
Diluted earnings per common share (1) | $ | 0.35 | $ | 0.37 | $ | 1.21 | $ | 1.75 | ||||||||
Dividend payout ratio | 51.4 | % | 45.9 | % | 44.6 | % | 29.1 | % |
(1) | For the three and |
equivalents. |
- 6 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
4. Securities
The Company did not0t hold any trading securities at SeptemberJune 30, 20172022 and December 31, 2016.2021. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.
The following table summarizes the Company’s portfolio of securities held-to-maturity at SeptemberJune 30, 2017:2022:
| | | | | | | | | | | | |
| | | | | | | | Gross | | Gross | ||
| | Amortized | | | | | Unrecognized | | Unrecognized | |||
|
| Cost |
| Fair Value |
| Gains | | Losses | ||||
| | (In thousands) | ||||||||||
Securities held-to-maturity: |
| |
|
| |
|
| |
| | |
|
Municipals | | $ | 67,315 | | $ | 57,064 | | $ | — | | $ | 10,251 |
Total municipals | |
| 67,315 | |
| 57,064 | |
| — | |
| 10,251 |
| | | | | | | | | | | | |
FNMA | |
| 7,885 | |
| 7,496 | |
| — | |
| 389 |
Total mortgage-backed securities | |
| 7,885 | |
| 7,496 | |
| — | |
| 389 |
| | | | | | | | | | | | |
Allowance for Credit Losses | | | (1,085) | | | — | | | — | | | — |
Total | | $ | 74,115 | | $ | 64,560 | | $ | — | | $ | 10,640 |
-8-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
Securities held-to-maturity: | ||||||||||||||||
Municipals | $ | 22,952 | $ | 21,542 | $ | - | $ | 1,410 | ||||||||
Total other securities | 22,952 | 21,542 | - | 1,410 | ||||||||||||
FNMA | 7,978 | 7,839 | - | 139 | ||||||||||||
Total mortgage-backed securities | 7,978 | 7,839 | - | 139 | ||||||||||||
Total | $ | 30,930 | $ | 29,381 | $ | - | $ | 1,549 |
The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2016:2021:
| | | | | | | | | | | | |
| | | | | | | | Gross | | Gross | ||
| | Amortized | | | | | Unrecognized | | Unrecognized | |||
|
| Cost |
| Fair Value |
| Gains | | Losses | ||||
| | (In thousands) | ||||||||||
Securities held-to-maturity: |
| |
|
| |
|
| |
| | |
|
Municipals | | $ | 50,836 | | $ | 53,362 | | $ | 2,526 | | $ | — |
Total municipals | |
| 50,836 | |
| 53,362 | |
| 2,526 | |
| — |
| | | | | | | | | | | | |
FNMA | |
| 7,894 | |
| 8,667 | |
| 773 | |
| — |
Total mortgage-backed securities | |
| 7,894 | |
| 8,667 | |
| 773 | |
| — |
| | | | | | | | | | | | |
Allowance for Credit Losses | | | (862) | | | — | | | — | | | — |
Total | | $ | 57,868 | | $ | 62,029 | | $ | 3,299 | | $ | — |
Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
Securities held-to-maturity: | ||||||||||||||||
Municipals | $ | 37,735 | $ | 35,408 | $ | - | $ | 2,327 | ||||||||
Total | $ | 37,735 | $ | 35,408 | $ | - | $ | 2,327 |
- 7 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s portfolio of securities available for sale at SeptemberJune 30, 2017:2022:
| | | | | | | | | | | | |
| | | | | | | | Gross | | Gross | ||
| | Amortized | | | | | Unrealized | | Unrealized | |||
|
| Cost |
| Fair Value |
| Gains |
| Losses | ||||
| | (In thousands) | ||||||||||
U.S. government agencies | | $ | 84,463 | | $ | 83,039 | | $ | 10 | | $ | 1,434 |
Corporate | | | 133,927 | | | 124,468 | | | 72 | | | 9,531 |
Mutual funds | |
| 11,573 | |
| 11,573 | |
| 0 | |
| 0 |
Collateralized loan obligations | |
| 131,094 | |
| 125,978 | |
| 0 | |
| 5,116 |
Other | |
| 1,662 | |
| 1,662 | |
| 0 | |
| 0 |
Total other securities | |
| 362,719 | |
| 346,720 | |
| 82 | |
| 16,081 |
REMIC and CMO | |
| 187,243 | |
| 169,144 | |
| 6 | |
| 18,105 |
GNMA | |
| 9,638 | |
| 8,257 | |
| 12 | |
| 1,393 |
FNMA | |
| 209,747 | |
| 189,975 | |
| 5 | |
| 19,777 |
FHLMC | |
| 161,015 | |
| 143,558 | |
| 21 | |
| 17,478 |
Total mortgage-backed securities | |
| 567,643 | |
| 510,934 | |
| 44 | |
| 56,753 |
Total securities available for sale | | $ | 930,362 | | $ | 857,654 | | $ | 126 | | $ | 72,834 |
-9-
Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
Corporate | $ | 110,000 | $ | 103,126 | $ | - | $ | 6,874 | ||||||||
Municipals | 102,226 | 104,979 | 2,753 | - | ||||||||||||
Mutual funds | 18,629 | 18,629 | - | - | ||||||||||||
Collateralized loan obligations | 48,398 | 48,881 | 483 | - | ||||||||||||
Other | 1,083 | 1,083 | - | - | ||||||||||||
Total other securities | 280,336 | 276,698 | 3,236 | 6,874 | ||||||||||||
REMIC and CMO | 330,593 | 330,459 | 1,953 | 2,087 | ||||||||||||
GNMA | 1,096 | 1,184 | 88 | - | ||||||||||||
FNMA | 138,995 | 138,781 | 547 | 761 | ||||||||||||
FHLMC | 49,557 | 49,437 | 23 | 143 | ||||||||||||
Total mortgage-backed securities | 520,241 | 519,861 | 2,611 | 2,991 | ||||||||||||
Total securities available for sale | $ | 800,577 | $ | 796,559 | $ | 5,847 | $ | 9,865 |
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2016:2021:
| | | | | | | | | | | | |
| | | | | | | | Gross | | Gross | ||
| | Amortized | | | | | Unrealized | | Unrealized | |||
|
| Cost |
| Fair Value |
| Gains |
| Losses | ||||
| | (In thousands) | ||||||||||
U.S. government agencies | | $ | 5,599 | | $ | 5,590 | | $ | 0 | | $ | 9 |
Corporate | | | 107,423 | | | 104,370 | | | 136 | | | 3,189 |
Mutual funds | |
| 12,485 | |
| 12,485 | |
| 0 | |
| 0 |
Collateralized loan obligations | |
| 81,166 | |
| 80,912 | |
| 1 | |
| 255 |
Other | |
| 1,695 | |
| 1,695 | |
| 0 | |
| 0 |
Total other securities | |
| 208,368 | |
| 205,052 | |
| 137 | |
| 3,453 |
REMIC and CMO | |
| 210,948 | |
| 208,509 | |
| 1,217 | |
| 3,656 |
GNMA | |
| 10,572 | |
| 10,286 | |
| 30 | |
| 316 |
FNMA | |
| 203,777 | |
| 202,938 | |
| 1,321 | |
| 2,160 |
FHLMC | |
| 152,760 | |
| 150,451 | |
| 326 | |
| 2,635 |
Total mortgage-backed securities | |
| 578,057 | |
| 572,184 | |
| 2,894 | |
| 8,767 |
Total securities available for sale | | $ | 786,425 | | $ | 777,236 | | $ | 3,031 | | $ | 12,220 |
Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
Corporate | $ | 110,000 | $ | 102,910 | $ | - | $ | 7,090 | ||||||||
Municipals | 124,984 | 126,903 | 1,983 | 64 | ||||||||||||
Mutual funds | 21,366 | 21,366 | - | - | ||||||||||||
Collateralized loan obligations | 85,470 | 86,365 | 895 | - | ||||||||||||
Other | 7,363 | 7,361 | - | 2 | ||||||||||||
Total other securities | 349,183 | 344,905 | 2,878 | 7,156 | ||||||||||||
REMIC and CMO | 402,636 | 401,370 | 1,607 | 2,873 | ||||||||||||
GNMA | 1,319 | 1,427 | 108 | - | ||||||||||||
FNMA | 109,493 | 108,351 | 463 | 1,605 | ||||||||||||
FHLMC | 5,378 | 5,328 | 35 | 85 | ||||||||||||
Total mortgage-backed securities | 518,826 | 516,476 | 2,213 | 4,563 | ||||||||||||
Total securities available for sale | $ | 868,009 | $ | 861,381 | $ | 5,091 | $ | 11,719 |
Mortgage-backed securities shown in the table above include one private issue collateralized mortgage obligation (“CMO”) that is collateralized by commercial real estate mortgages with an amortized cost and market value of $0.1 million and $0.2 million at September 30, 2017 and December 31, 2016.
The corporate securities held by the Company at SeptemberJune 30, 20172022 and December 31, 20162021 are issued by U.S. banking institutions. The CMOs held by the Company at June 30, 2022 and December 31, 2021 are either fully guaranteed or issued by a government sponsored enterprise.
- 8 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at SeptemberJune 30, 2017,2022, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| | | | | | |
|
| Amortized | | | | |
Securities held-to-maturity: |
| Cost |
| Fair Value | ||
|
| (In thousands) | ||||
Due after ten years | | $ | 67,315 | | $ | 57,064 |
Total other securities | | | 67,315 | | | 57,064 |
Mortgage-backed securities | | | 7,885 | | | 7,496 |
| | | 75,200 | | | 64,560 |
| | | | | | |
Allowance for credit losses | | | (1,085) | | | - |
Total securities held-to-maturity |
| $ | 74,115 |
| $ | 64,560 |
| | | | | | | ||||||||
| | Amortized | | | | |||||||||
Securities available for sale: |
| Cost |
| Fair Value | ||||||||||
Amortized | ||||||||||||||
Securities held-to-maturity: | Cost | Fair Value | ||||||||||||
(In thousands) | ||||||||||||||
| | (In thousands) | ||||||||||||
Due in one year or less | $ | 1,085 | $ | 1,085 |
| $ | 10,026 |
| $ | 9,920 | ||||
Due after one year through five years | | | 99,429 | | | 96,645 | ||||||||
Due after five years through ten years | |
| 205,672 | |
| 193,191 | ||||||||
Due after ten years | 21,867 | 20,457 | | | 36,019 | | | 35,391 | ||||||
Total other securities | 22,952 | 21,542 | |
| 351,146 | |
| 335,147 | ||||||
Mutual funds | |
| 11,573 | |
| 11,573 | ||||||||
Mortgage-backed securities | 7,978 | 7,839 | |
| 567,643 | |
| 510,934 | ||||||
Total | $ | 30,930 | $ | 29,381 | ||||||||||
Total securities available for sale | | $ | 930,362 | | $ | 857,654 |
Securities available for sale: | Amortized Cost | Fair Value | ||||||
(In thousands) | ||||||||
Due in one year or less | $ | - | $ | - | ||||
Due after one year through five years | 4,335 | 4,443 | ||||||
Due after five years through ten years | 159,666 | 153,369 | ||||||
Due after ten years | 97,706 | 100,257 | ||||||
Mutual funds | 18,629 | 18,629 | ||||||
Total other securities | 280,336 | 276,698 | ||||||
Mortgage-backed securities | 520,241 | 519,861 | ||||||
Total | $ | 800,577 | $ | 796,559 |
- 9 -
-10-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:
| | | | | | | | | | | | | | | | | | | | |
| | At June 30, 2022 | ||||||||||||||||||
| | | | Total | | Less than 12 months | | 12 months or more | ||||||||||||
| | | | | | | Unrealized | | | | | Unrealized | | | | | Unrealized | |||
|
| Count |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
| | (Dollars in thousands) | ||||||||||||||||||
Held-to-maturity securities |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | | | | | | |
Municipals |
| 3 | | $ | 57,064 | | $ | 10,251 | | $ | 57,064 | | $ | 10,251 | | $ | 0 | | $ | 0 |
Total other securities |
| 3 | |
| 57,064 | |
| 10,251 | |
| 57,064 | |
| 10,251 | |
| 0 | |
| 0 |
| | | | | | | | | | | | | | | | | | | | |
FNMA |
| 1 | |
| 7,496 | |
| 389 | |
| 7,496 | |
| 389 | |
| 0 | |
| 0 |
Total mortgage-backed securities |
| 1 | |
| 7,496 | |
| 389 | |
| 7,496 | |
| 389 | |
| 0 | |
| 0 |
| | | | | | | | | | | | | | | | | | | | |
Total |
| 4 | | $ | 64,560 | | $ | 10,640 | | $ | 64,560 | | $ | 10,640 | | $ | 0 | | $ | 0 |
| | | | | | | | | | | | | | | | | | | | |
Available for sale securities |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
U.S. government agencies |
| 7 | | $ | 79,004 | | $ | 1,434 | | $ | 79,004 | | $ | 1,434 | | $ | 0 | | $ | 0 |
Corporate |
| 18 | |
| 115,395 | |
| 9,531 | |
| 85,515 | |
| 6,917 | |
| 29,880 | |
| 2,614 |
CLO |
| 19 | |
| 125,978 | |
| 5,116 | |
| 105,745 | |
| 4,082 | |
| 20,233 | |
| 1,034 |
Total other securities |
| 44 | |
| 320,377 | |
| 16,081 | |
| 270,264 | |
| 12,433 | |
| 50,113 | |
| 3,648 |
| | | | | | | | | | | | | | | | | | | | |
REMIC and CMO |
| 45 | |
| 167,535 | |
| 18,105 | |
| 112,167 | |
| 9,561 | |
| 55,368 | |
| 8,544 |
GNMA |
| 4 | |
| 7,964 | |
| 1,393 | |
| 276 | |
| 15 | |
| 7,688 | |
| 1,378 |
FNMA |
| 48 | |
| 189,798 | |
| 19,777 | |
| 146,971 | |
| 13,508 | |
| 42,827 | |
| 6,269 |
FHLMC |
| 25 | |
| 141,019 | |
| 17,478 | |
| 77,799 | |
| 6,218 | |
| 63,220 | |
| 11,260 |
Total mortgage-backed securities |
| 122 | |
| 506,316 | |
| 56,753 | |
| 337,213 | |
| 29,302 | |
| 169,103 | |
| 27,451 |
Total |
| 166 | | $ | 826,693 | | $ | 72,834 | | $ | 607,477 | | $ | 41,735 | | $ | 219,216 | | $ | 31,099 |
| | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||
| | At December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| | | | Total | | Less than 12 months | | 12 months or more | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | Unrealized | | | | | Unrealized | | | | | Unrealized | |||||||||||||||||||||||||||||||
|
| Count |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||||||||||||||||||||||||||||||
At September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | Less than 12 months | 12 months or more | ||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||||||||||||||||||||||||||
Count | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Municipals | 1 | $ | 20,457 | $ | 1,410 | $ | 20,457 | $ | 1,410 | $ | - | $ | - | |||||||||||||||||||||||||||||||||||
| | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
Available for sale securities |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||
U.S. government agencies |
| 2 | | $ | 5,577 | | $ | 9 | | $ | 1,130 | | $ | 5 | | $ | 4,447 | | $ | 4 | ||||||||||||||||||||||||||||
Corporate |
| 13 | |
| 94,234 | |
| 3,189 | |
| 65,453 | |
| 1,970 | |
| 28,781 | |
| 1,219 | ||||||||||||||||||||||||||||
CLO |
| 4 | |
| 31,012 | |
| 255 | |
| 10,000 | |
| 1 | |
| 21,012 | |
| 254 | ||||||||||||||||||||||||||||
Total other securities | 1 | 20,457 | 1,410 | 20,457 | 1,410 | - | - |
| 19 | |
| 130,823 | |
| 3,453 | |
| 76,583 | |
| 1,976 | |
| 54,240 | |
| 1,477 | |||||||||||||||||||||
FNMA | 1 | 7,839 | 139 | 7,839 | 139 | - | - | |||||||||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | 1 | 7,839 | 139 | 7,839 | 139 | - | - | |||||||||||||||||||||||||||||||||||||||||
Total | 2 | $ | 28,296 | $ | 1,549 | $ | 28,296 | $ | 1,549 | $ | - | $ | - | |||||||||||||||||||||||||||||||||||
Available for sale securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate | 14 | $ | 103,126 | $ | 6,874 | $ | 19,154 | $ | 846 | $ | 83,972 | $ | 6,028 | |||||||||||||||||||||||||||||||||||
Total other securities | 14 | 103,126 | 6,874 | 19,154 | 846 | 83,972 | 6,028 | |||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||
REMIC and CMO | 23 | 149,238 | 2,087 | 133,091 | 1,449 | 16,147 | 638 |
| 15 | |
| 124,131 | |
| 3,656 | |
| 105,959 | |
| 2,800 | |
| 18,172 | |
| 856 | |||||||||||||||||||||
GNMA |
| 4 | |
| 9,924 | |
| 316 | |
| 1,138 | |
| 16 | |
| 8,786 | |
| 300 | ||||||||||||||||||||||||||||
FNMA | 11 | 90,337 | 761 | 81,621 | 595 | 8,716 | 166 |
| 25 | |
| 171,109 | |
| 2,160 | |
| 153,657 | |
| 1,587 | |
| 17,452 | |
| 573 | |||||||||||||||||||||
FHLMC | 2 | 48,400 | 143 | 48,400 | 143 | - | - |
| 18 | |
| 129,115 | |
| 2,635 | |
| 98,297 | |
| 1,448 | |
| 30,818 | |
| 1,187 | |||||||||||||||||||||
Total mortgage-backed securities | 36 | 287,975 | 2,991 | 263,112 | 2,187 | 24,863 | 804 |
| 62 | |
| 434,279 | |
| 8,767 | |
| 359,051 | |
| 5,851 | |
| 75,228 | |
| 2,916 | |||||||||||||||||||||
Total | 50 | $ | 391,101 | $ | 9,865 | $ | 282,266 | $ | 3,033 | $ | 108,835 | $ | 6,832 |
| 81 | | $ | 565,102 | | $ | 12,220 | | $ | 435,634 | | $ | 7,827 | | $ | 129,468 | | $ | 4,393 |
At December 31, 2016 | ||||||||||||||||||||||||||||
Total | Less than 12 months | 12 months or more | ||||||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||||||
Count | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||||||
Municipals | 1 | $ | 19,538 | $ | 2,327 | $ | 19,538 | $ | 2,327 | $ | - | $ | - | |||||||||||||||
Total | 1 | $ | 19,538 | $ | 2,327 | $ | 19,538 | $ | 2,327 | $ | - | $ | - | |||||||||||||||
Available for sale securities | ||||||||||||||||||||||||||||
Corporate | 14 | $ | 102,910 | $ | 7,090 | $ | 28,476 | $ | 1,524 | $ | 74,434 | $ | 5,566 | |||||||||||||||
Collateralized loan obligations | 4 | 16,047 | 64 | 16,047 | 64 | - | - | |||||||||||||||||||||
Other | 1 | 298 | 2 | - | - | 298 | 2 | |||||||||||||||||||||
Total | 19 | 119,255 | 7,156 | 44,523 | 1,588 | 74,732 | 5,568 | |||||||||||||||||||||
REMIC and CMO | 35 | 222,807 | 2,873 | 208,827 | 2,268 | 13,980 | 605 | |||||||||||||||||||||
FNMA | 18 | 80,924 | 1,605 | 74,972 | 1,250 | 5,952 | 355 | |||||||||||||||||||||
FHLMC | 1 | 3,993 | 85 | 3,993 | 85 | - | - | |||||||||||||||||||||
Total mortgage-backed securities | 54 | 307,724 | 4,563 | 287,792 | 3,603 | 19,932 | 960 | |||||||||||||||||||||
Total | 73 | $ | 426,979 | $ | 11,719 | $ | 332,315 | $ | 5,191 | $ | 94,664 | $ | 6,528 |
OTTI losses on impaired securities must be fully recognized in earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security in an unrealized loss position, the investor must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss has occurred, only the amount of impairment associated with the credit loss is recognized in earnings in the Consolidated Statements of Income. Amounts relating to factors other than credit losses are recorded in accumulated other comprehensive loss (“AOCL”) within Stockholders’ Equity. Unrealized losses on available for sale securities, that are deemed to be temporary, are recorded in AOCL, net of tax.
- 10 -
-11-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company reviewed each investmentavailable for sale security that had an unrealized loss at SeptemberJune 30, 20172022 and December 31, 2016. The unrealized losses in municipal securities held-to-maturity at September 30, 2017 and December 31, 2016 were caused by illiquidity in the market and movements in interest rates. The unrealized losses in FNMA securities held-to-maturity at September 30, 2017 were caused by movements in interest rates. The unrealized losses in securities available for sale at September 30, 2017 and December 31, 2016 were caused by movements in interest rates.
It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms.2021. The Company does not have the intent to sell these securities, and it is more likely than not the Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusionIf the Company evaluates any decline in the fair value due to credit loss factors and this evaluation indicates that a credit loss exists, then the present value of cash flows that is based upon consideringexpected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. All of these securities are rated investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s cash and working capital requirements and contractual and regulatory obligations, noneinvestment.
In determining the risk of whichloss for available for sale securities, the Company believes would causeconsidered that mortgage-backed securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to U.S. government, the saletranche of the securities. Therefore,purchased collateralized loan obligations (“CLO”) and the issuer of Corporate securities are global systematically important banks. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and 0 allowance for credit loss was recorded.
The Company did not consider these investments to be other-than-temporarily impairedreviewed each held-to-maturity security that had an unrealized loss at SeptemberJune 30, 20172022 as part of its quarterly Current Expected Credit Loss (“CECL”) process, with an allowance for credit losses of $1.1 million and $0.9 million at June 30, 2022 and December 31, 2016.2021, respectively.
Accrued interest receivable on held-to-maturity securities totaled $0.1 million each at June 30, 2022 and December 31, 2021, and is excluded from estimates of credit losses. Accrued interest receivable on available for sale debt securities totaled $2.5 million and $1.5 million at June 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.
The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity.
| | | | | | | | | | | | |
| | Other Securities | ||||||||||
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
| | (In thousands) | ||||||||||
Beginning balance | | $ | 986 | | $ | 915 | | $ | 862 | | $ | 907 |
Provision (benefit) | |
| 99 | |
| (71) | |
| 223 | |
| (63) |
Allowance for credit losses | | $ | 1,085 | | $ | 844 | | $ | 1,085 | | $ | 844 |
Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold available for sale securities totaling $112.4 million during the three months ended September 30, 2017. The Company did not0t sell any available for sale securities during the three and six months ended SeptemberJune 30, 2016.2022. The Company sold available for sale$25.0 million in corporate securities totaling $112.4 million and $64.6 million during the ninethree and six months ended SeptemberJune 30, 20172021.
-12-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and 2016, respectively.SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table represents the gross gains and gross losses realized from the sale of securities available for sale securities for the periods indicated:
| | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | | | | | | | | | | | | |
Gross gains from the sale of securities | | $ | — | | $ | 123 | | $ | — | | $ | 123 | |
Gross losses from the sale of securities | |
| — | |
| — | |
| — | |
| — | |
Net gains from the sale of securities | | $ | — | | $ | 123 | | $ | — | | $ | 123 | |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Gross gains from the sale of securities | $ | 401 | $ | - | $ | 401 | $ | 2,370 | ||||||||
Gross losses from the sale of securities | (587 | ) | - | (587 | ) | (7 | ) | |||||||||
Net (losses) gains from the sale of securities | $ | (186 | ) | $ | - | $ | (186 | ) | $ | 2,363 |
5. Loans
Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.
Interest on loans is recognized on the accrual basis. Accrued interest receivable totaled $33.5 million and $35.8 million at June 30, 2022 and December 31, 2021, respectively, and was reported in “Interest and dividends receivable” on the Consolidated Statements of Financial Condition. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur.
At June 30, 2022, we had 5 active forbearances which were granted under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) for loans with an aggregate outstanding loan balance of approximately $26.7 million resulting in total deferment of $1.6 million in principal, interest and escrow, down from 20 active forbearances for loans with an aggregate outstanding loan balance of $71.9 million at December 31, 2021. These loans are considered current and continue to accrue interest at their original contractual terms until the completion of the applicable deferral periods, following which the borrowers will resume making payments and normal delinquency-based non-accrual policies will apply. The Company actively participated in the Paycheck Protection Program (“PPP”), under the CARES Act, closing $310.3 million of these loans since the beginning of the program, with $288.1 million forgiven by the SBA as of June 30, 2022, of which $21.0 million were forgiven during the recent quarter.
- 11 - Allowance for credit losses
The allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis of credit risk.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses,
-13-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes.
The Company recognizes a loan as non-performing whenDuring the borrower has demonstrated the inability to bring the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due 90 days or more, are classified as non-accrual unless there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Prior to a loan becoming 90 days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.
A loan is considered impaired when, based upon current information,three months ended June 30, 2022, the Company believes it is probable that it will be unable to collect all amounts due, both principal and interest, in accordance with the original terms of the loan. Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or, as a practical expedient, the fair value of the collateral if the loan is collateral dependent. All non-accrual loans are considered impaired.
The Company maintains an allowance for loan losses at an amount, which, in management’s judgment, is adequate to absorb probable estimated losses inherent in the loan portfolio. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectability of loans. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available. An unallocated component may at times be maintained to cover uncertainties that could affect management's estimate of probable losses. When necessary an unallocated component of the allowance will reflect the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. The allowance is established through charges to earnings in the form ofrecorded a provision for credit losses on loans totaling $1.5 million, compared to a benefit for credit losses on loans totaling $1.5 million for the three months ended June 30, 2021. The Company recorded a provision for credit losses on loans totaling $2.7 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively. The provision recorded during the six months ended June 30, 2022 was driven by loan growth coupled with the ongoing environmental uncertainty resulting from high and rising inflation and increasing interest rates. The Company made no changes to the reasonable and supportable forecast period and decreased the reversion period from six quarters to four quarters at June 30, 2022, in order to revert back to our historical losses based on management’s evaluation ofsooner as the risk inherenteconomic forecast in the various components of the loan portfolio and other factors, including historical loan loss experience (whichmodel is updated quarterly), current economic conditions, delinquency and non-accrual trends, classified loan levels, risk in the portfolio and volumes and trends in loan types, recent trends in charge-offs, changes in underwriting standards, experience, ability and depth of the Company’s lenders, collection policies and experience, internal loan review function and other external factors. Increases and decreases in the allowance othermore favorable than charge-offs and recoveries are included in the provision for loan losses. When a loan or a portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.
The determination of the amount of the allowance for loan losses includes estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and local economic conditions and other factors. We review our loan portfolio by separate categories with similar risk and collateral characteristics. Impaired loans are segregated and reviewed separately.
The Company reviews each impaired loan on an individual basis to determine if either a charge-off or a valuation allowance needs to be allocated to the loan. The Company does not charge-off or allocate a valuation allowance to loans for which management has concluded the current value of the underlying collateral will allow for recovery of the loan balance either through the sale of the loan or by foreclosure and sale of the property.
conditions. The loan balances of collateral dependent impairedACL - loans aretotaled $39.4 million at June 30, 2022 compared to the property’s updated fair value. The Company considers fair value of collateral dependent loans to be 85% of the appraised or internally estimated value of the property. The balance which exceeds fair value is generally charged-off, except for taxi medallion loans. The 85% is based on the actual net proceeds the Bank has received from the sale of other real estate owned (“OREO”) as a percentage of OREO’s appraised value. Taxi medallion loans with a loan-to-value greater than 100% are allocated a portion of the allowance for loan losses in the amount of the excess of the loan-to-value over the loan’s principal balance. The fair value of the underlying collateral of taxi medallion loans is the value of the underlying medallion based upon the most recently reported arm’s length transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates. All taxi medallion loans are classified as impaired and allocated a portion of the allowance in the amount of the excess of the loan-to-value over the loan’s principal balance.
The Company segregated its loans into two portfolios based on year of origination. One portfolio was reviewed for loans originated after$37.1 million at December 31, 2009 and a second portfolio for2021. At June 30, 2022, the ACL - loans originated prior to January 1, 2010. Our decision to segregate the portfolio based upon origination dates was based on changes made in our underwriting standards during 2009. By the endrepresented 0.58% of 2009, all loans were being underwritten based on revised and tightened underwriting standards. Loans originated prior to 2010 have a higher delinquency rate and loss history. Each of the years in the portfolio for loans originated prior to 2010 has a similar delinquency rate. The Company’s Board of Directors reviews and approves management’s evaluation of the adequacy of the allowance for loan losses on a quarterly basis.
- 12 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company evaluates the underlying collateral through a third party appraisal, or when a third party appraisal is not available, the Company will use an internal evaluation. The internal evaluations are prepared using an income approach or a sales approach. The income approach is used for income producing properties and uses current revenues less operating expenses to determine the net cash flow of the property. Once the net cash flow is determined, the value of the property is calculated using an appropriate capitalization rate for the property. The sales approach uses comparable sales prices in the market. When an internal evaluation is used, we place greater reliance on the income approach to value the collateral.
In preparing internal evaluations of property values, the Company seeks to obtain current data on the subject property from various sources, including: (1) the borrower; (2) copies of existing leases; (3) local real estate brokers and appraisers; (4) public records (such as for real estate taxes and water and sewer charges); (5) comparable sales and rental data in the market; (6) an inspection of the property and (7) interviews with tenants. These internal evaluations primarily focus on the income approach and comparable sales data to value the property.
As of September 30, 2017, we utilized recent third party appraisals of the collateral to measure impairment for $39.2 million, or 82.9%, of collateral dependent impairedgross loans and used internal evaluations141.1% of non-performing loans. At December 31, 2021, the property’s value for $8.1 million, or 17.1%,ACL - loans represented 0.56% of collateral dependent impairedgross loans and 248.7% of non-performing loans.
The Company may restructure a loanloans to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. This restructure may include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as Troubled Debt Restructured (“TDR”).
These restructurings have not included a reduction of principal balance. The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. All loans classified as TDR are considered impaired,individually evaluated, however TDR loans which have been current for six consecutive months at the time they are restructured as TDR remain on accrual status and are not included as part of non-performing loans. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-accrual performing TDR loans until they have made timely payments for six consecutive months.
These restructurings have not included a reduction of principal balance.
The allocation of a portion of the allowance for loan lossesACL for a performing TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate, or for a non-performing TDR loan which is collateral dependent, the fair value of the collateral. At SeptemberJune 30, 2017,2022, there were no0 commitments to lend additional funds to borrowers whose loans were modified to a TDR. The modification of loans to a TDR did not have a significant effect on our operating results, nor did it require a significant allocation of the allowance for loan losses.ACL.
During the three and six months ended June 30, 2022, 2 commercial business and other loans classified as TDRs totaling $2.5 million defaulted within 12 months of its modification date. During the three and six months ended June 30, 2021, there were 0 TDRs that defaulted within 12 months of its modification date.
-14-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tablestable shows loans modified and classified as TDR during the periodsperiod indicated:
| | For the three months ended September 30, 2017 | ||||||||||||||||
| | | | | | | | | ||||||||||
| | For the three months ended | ||||||||||||||||
| | June 30, 2022 | | |||||||||||||||
(Dollars in thousands) | Number | Balance | Modification description |
| Number |
| Balance |
| Modification description |
| ||||||||
Taxi medallion | 4 | $ | 1,306 | Loan amortization extension | ||||||||||||||
| | | | | | | | | ||||||||||
Commercial business and other |
| 2 | | $ | 2,453 |
| Two loans had loan extensions |
| ||||||||||
Total | 4 | $ | 1,306 |
| 2 | | $ | 2,453 |
|
|
|
| | | | | | | | |
| | For the three months ended | ||||||
| | June 30, 2021 | | |||||
(Dollars in thousands) |
| Number |
| Balance |
| Modification description |
| |
Commercial real estate | | 2 | | $ | 674 | | Two loans had loan extensions | |
Total |
| 2 | | $ | 674 |
|
|
|
| | | | | | | | |
| | | ||||||
| | For the six months ended | ||||||
| | June 30, 2022 | | |||||
(Dollars in thousands) |
| Number |
| Balance |
| Modification description |
| |
Small Business Administration | | 1 | | $ | 271 | | Loan amortization extension | |
Commercial business and other |
| 4 | | | 5,222 |
| One loan received a below market interest rate and three loans had an amortization extension |
|
Total |
| 5 | | $ | 5,493 |
|
|
|
| | | | | | | | |
| | For the six months ended | ||||||
| | June 30, 2021 | | |||||
(Dollars in thousands) |
| Number |
| Balance |
| Modification description |
| |
Commercial real estate | | 2 | | $ | 674 | | Two loans had loan extensions | |
Total |
| 2 | | $ | 674 |
|
|
|
- 13 -
-15-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended | ||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||
(Dollars in thousands) | Number | Balance | Modification description | Number | Balance | Modification description | ||||||||||||||
One-to-four family - residential | - | $ | - | 2 | $ | 263 | Received below market interest rates and the amortizations were extended | |||||||||||||
Commercial business and other | - | - | 2 | 739 | One received an amortization extension and one received a below market interest rate and an amortization extension | |||||||||||||||
Taxi medallion | 9 | 5,595 | All loans amortizations were extended, with three loans also receiving a below market interest rate | - | - | |||||||||||||||
Total | 9 | $ | 5,595 | 4 | $ | 1,002 |
The Company did not modify and classify any loans as TDR during the three months ended September 30, 2016.
The recorded investment of the loans modified and classified as TDR presented in the tables above, were unchanged as there was no principal forgiven in these modifications.
The following table shows our recorded investment for loans classified as TDR at amortized cost that are performing according to their restructured terms at the periods indicated:
| | | | | | | | | | |
| | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 | ||||||
| | Number | | Amortized | | Number | | Amortized | ||
(Dollars in thousands) |
| of contracts |
| Cost | | of contracts |
| Cost | ||
Multi-family residential |
| 6 | | $ | 1,656 | | 6 | | $ | 1,690 |
Commercial real estate | | 1 | | | 7,572 | | 1 | | | 7,572 |
One-to-four family - mixed-use property (1) |
| 4 | |
| 1,254 | | 5 | |
| 1,636 |
One-to-four family - residential |
| 1 | |
| 260 | | 3 | |
| 483 |
Small Business Administration | | 1 | | | 269 | | — | | | — |
Commercial business and other (1) |
| 7 | |
| 3,771 | | 5 | |
| 1,381 |
Total performing |
| 20 | | $ | 14,782 | | 20 | | $ | 12,762 |
(1) | These loans continue to pay as agreed, however the Company records interest received on a cash basis. |
September 30, 2017 | December 31, 2016 | |||||||||||||||
(Dollars in thousands) | | Number of contracts | | Recorded investment | | Number of contracts | | Recorded investment | ||||||||
Multi-family residential | 9 | $ | 2,533 | 9 | $ | 2,572 | ||||||||||
Commercial real estate | 2 | 2,031 | 2 | 2,062 | ||||||||||||
One-to-four family - mixed-use property | 5 | 1,765 | 5 | 1,800 | ||||||||||||
One-to-four family - residential | 3 | 577 | 3 | 591 | ||||||||||||
Taxi medallion | 21 | 15,074 | 12 | 9,735 | ||||||||||||
Commercial business and other | 2 | 517 | 2 | 675 | ||||||||||||
Total performing troubled debt restructured | 42 | $ | 22,497 | 33 | $ | 17,435 |
- 14 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our recorded investment for loans classified as TDR at amortized cost that arewere not performing according to their restructured terms at the periods indicated:
| | | | | | |
| | June 30, 2022 | | |||
| | Number | | Amortized | | |
(Dollars in thousands) |
| of contracts |
| Cost | | |
Commercial business and other |
| 2 | | $ | 2,453 | |
Total non-performing |
| 2 | | $ | 2,453 | |
September 30, 2017 | December 31, 2016 | |||||||||||||||
(Dollars in thousands) | Number of contracts | Recorded investment | Number of contracts | Recorded investment | ||||||||||||
Multi-family residential | 1 | $ | 377 | 1 | $ | 396 | ||||||||||
Total troubled debt restructurings that subsequently defaulted | 1 | $ | 377 | 1 | $ | 396 |
There were 0 loans classified as TDR that were not performing according to their modified agreement as of December 31, 2021.
During
-16-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our non-accrual loans at amortized cost with no related allowance and interest income recognized for loans ninety days or more past due and still accruing for the three and nine months ended September 30, 2017 and 2016 there were no TDR loans transferred to non-performing status.period shown below:
| | | | | | | | | | | | | | | |
| | At or for the six months ended June 30, 2022 | |||||||||||||
(In thousands) | | | Non-accrual amortized cost beginning of the reporting period | | | Non-accrual amortized cost end of the reporting period | | | Non-accrual with no related allowance | | | Interest income recognized | | | Loans ninety days or more past due and still accruing |
Multi-family residential | | $ | 2,652 | | $ | 3,707 | | $ | 3,707 | | $ | — | | $ | — |
Commercial real estate | | | 640 | | | 273 | | | 273 | | | — | | | — |
One-to-four family - mixed-use property (1) | | | 1,582 | | | 1,049 | | | 1,049 | | | — | | | — |
One-to-four family - residential | | | 7,482 | | | 4,708 | | | 4,708 | | | — | | | — |
Small Business Administration | | | 952 | | | 951 | | | 951 | | | — | | | — |
Construction | | | — | | | 856 | | | 856 | | | — | | | — |
Commercial business and other (1) | | | 1,945 | | | 19,373 | | | 3,330 | | | 139 | | | 100 |
Total | | $ | 15,253 | | $ | 30,917 | | $ | 14,874 | | $ | 139 | | $ | 100 |
(1) | Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million. Commercial business and other contains a non-accrual performing TDR totaling $2.8 million. |
The following table shows our non-performingnon-accrual loans at amortized cost with no related allowance and interest income recognized for loans ninety days or more past due and still accruing for the periods indicated:period shown below:
| | | | | | | | | | | | | | | |
| | At or for the year ended December 31, 2021 | |||||||||||||
(In thousands) | | | Non-accrual amortized cost beginning of the reporting period | | | Non-accrual amortized cost end of the reporting period | | | Non-accrual with no related allowance | | | Interest income recognized | | | Loans ninety days or more past due and still accruing |
Multi-family residential | | $ | 2,576 | | $ | 2,652 | | $ | 2,652 | | $ | 19 | | $ | — |
Commercial real estate | | | 1,766 | | | 640 | | | 640 | | | — | | | — |
One-to-four family - mixed-use property (1) | | | 1,706 | | | 1,582 | | | 1,582 | | | 6 | | | — |
One-to-four family - residential | | | 5,313 | | | 7,482 | | | 7,482 | | | 1 | | | — |
Small Business Administration | | | 1,168 | | | 952 | | | 952 | | | — | | | — |
Taxi medallion(2) | | | 2,758 | | | — | | | — | | | — | | | — |
Commercial business and other(1) | | | 5,660 | | | 1,945 | | | 305 | | | 78 | | | — |
Total | | $ | 20,947 | | $ | 15,253 | | $ | 13,613 | | $ | 104 | | $ | — |
(In thousands) | September 30, 2017 | December 31, 2016 | ||||||
Loans ninety days or more past due and still accruing: | ||||||||
Multi-family residential | $ | 415 | $ | - | ||||
Commercial real estate | 38 | - | ||||||
One-to-four family - mixed-use property | 129 | 386 | ||||||
Taxi medallion | 1,147 | - | ||||||
Total | 1,729 | 386 | ||||||
Non-accrual mortgage loans: | ||||||||
Multi-family residential | 1,309 | 1,837 | ||||||
Commercial real estate | 1,147 | 1,148 | ||||||
One-to-four family - mixed-use property | 2,217 | 4,025 | ||||||
One-to-four family - residential | 7,434 | 8,241 | ||||||
Total | 12,107 | 15,251 | ||||||
Non-accrual non-mortgage loans: | ||||||||
Small Business Administration | 50 | 1,886 | ||||||
Taxi medallion | - | 3,825 | ||||||
Commercial business and other | 4 | 68 | ||||||
Total | 54 | 5,779 | ||||||
Total non-accrual loans | 12,161 | 21,030 | ||||||
Total non-performing loans | $ | 13,890 | $ | 21,416 |
(1) | Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million. |
(2) | Taxi medallions were completely charged-off during the year ended December 31, 2021. |
- 15 -
-17-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
During the three and nine months ended September 30, 2017, we did not foreclose on any consumer mortgages through in-substance repossession. We did not hold any foreclosed residential real estate properties at September 30, 2017. At December 31, 2016, we held one foreclosed residential real estate property for $0.5 million. Included within net loans as of September 30, 2017 and December 31, 2016 was a recorded investment of $8.7 million and $11.4 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the periods indicated:
| | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
(In thousands) | | | | | | | | | | | | | |
Interest income that would have been recognized had the loans performed in accordance with their original terms | | $ | 588 | | $ | 453 | | $ | 960 | | $ | 915 | |
Less: Interest income included in the results of operations | |
| 282 | |
| 163 | |
| 437 | |
| 323 | |
Total foregone interest | | $ | 306 | | $ | 290 | | $ | 523 | | $ | 592 | |
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Interest income that would have been recognized had the loans performed in accordance with their original terms | $ | 401 | $ | 468 | $ | 1,249 | $ | 1,405 | ||||||||
Less: Interest income included in the results of operations | 166 | 99 | 434 | 391 | ||||||||||||
Total foregone interest | $ | 235 | $ | 369 | $ | 815 | $ | 1,014 |
The following tables show an age analysisthe aging of our recorded investmentthe amortized cost basis in past-due loans including loans past maturity, at the periods indicated:period indicated by class of loans:
| | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | ||||||||||||||||
| | | | | | | | Greater | | | | | | | | | | |
| | 30 - 59 Days | | 60 - 89 Days | | than | | Total Past | | | | | | | ||||
(In thousands) |
| Past Due |
| Past Due |
| 90 Days |
| Due |
| Current |
| Total Loans | ||||||
Multi-family residential | | $ | 2,413 | | $ | 0 | | $ | 3,707 | | $ | 6,120 | | $ | 2,529,067 | | $ | 2,535,187 |
Commercial real estate | |
| 337 | |
| 0 | |
| 273 | |
| 610 | |
| 1,865,773 | |
| 1,866,383 |
One-to-four family - mixed-use property | |
| 3,937 | |
| 0 | |
| 795 | |
| 4,732 | |
| 559,401 | |
| 564,133 |
One-to-four family - residential | |
| 1,196 | |
| 77 | |
| 4,708 | |
| 5,981 | |
| 246,128 | |
| 252,109 |
Construction | |
| 0 | |
| 0 | |
| 856 | |
| 856 | |
| 71,105 | |
| 71,961 |
Small Business Administration | |
| 40 | |
| 1,991 | |
| 951 | |
| 2,982 | |
| 37,029 | |
| 40,011 |
Commercial business and other | |
| 93 | |
| 3 | |
| 3,580 | |
| 3,676 | |
| 1,426,933 | |
| 1,430,609 |
Total | | $ | 8,016 | | $ | 2,071 | | $ | 14,870 | | $ | 24,957 | | $ | 6,735,436 | | $ | 6,760,393 |
September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | | Greater | | | | | | | | | | |||||||||||||||||||||||||
| | 30 - 59 Days | | 60 - 89 Days | | than | | Total Past | | | | | | | ||||||||||||||||||||||||||||
(In thousands) | 30 - 59 Days Past Due | 60 - 89 Days Past Due | Greater than 90 Days | Total Past Due | Current | Total Loans |
| Past Due |
| Past Due |
| 90 Days |
| Due |
| Current |
| Total Loans | ||||||||||||||||||||||||
Multi-family residential | $ | 6,115 | $ | 155 | $ | 1,724 | $ | 7,994 | $ | 2,228,179 | $ | 2,236,173 | | $ | 3,652 | | $ | 4,193 | | $ | 2,652 | | $ | 10,497 | | $ | 2,508,730 | | $ | 2,519,227 | ||||||||||||
Commercial real estate | 3,455 | 481 | 1,185 | 5,121 | 1,347,654 | 1,352,775 | |
| 5,743 | |
| 0 | |
| 640 | |
| 6,383 | |
| 1,770,992 | |
| 1,777,375 | ||||||||||||||||||
One-to-four family - mixed-use property | 3,577 | 112 | 2,346 | 6,035 | 550,688 | 556,723 | |
| 2,319 | |
| 0 | |
| 1,321 | |
| 3,640 | |
| 571,296 | |
| 574,936 | ||||||||||||||||||
One-to-four family - residential | 3,646 | 43 | 7,246 | 10,935 | 166,643 | 177,578 | |
| 163 | |
| 224 | |
| 7,482 | |
| 7,870 | |
| 269,942 | |
| 277,812 | ||||||||||||||||||
Co-operative apartments | - | - | - | - | 7,035 | 7,035 | ||||||||||||||||||||||||||||||||||||
Construction loans | - | - | - | - | 15,811 | 15,811 | ||||||||||||||||||||||||||||||||||||
Construction | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 59,473 | |
| 59,473 | ||||||||||||||||||||||||
Small Business Administration | - | 245 | - | 245 | 14,240 | 14,485 | |
| 0 | |
| 0 | |
| 952 | |
| 952 | |
| 90,884 | |
| 91,836 | ||||||||||||||||||
Taxi medallion | - | - | 1,147 | 1,147 | 17,018 | 18,165 | ||||||||||||||||||||||||||||||||||||
Commercial business and other | - | - | 4 | 4 | 674,702 | 674,706 | |
| 101 | |
| 40 | |
| 1,386 | |
| 1,527 | |
| 1,335,919 | |
| 1,337,446 | ||||||||||||||||||
Total | $ | 16,793 | $ | 1,036 | $ | 13,652 | $ | 31,481 | $ | 5,021,970 | $ | 5,053,451 | | $ | 11,978 | | $ | 4,457 | | $ | 14,433 | | $ | 30,869 | | $ | 6,607,236 | | $ | 6,638,105 |
December 31, 2016 | ||||||||||||||||||||||||
(In thousands) | 30 - 59 Days Past Due | 60 - 89 Days Past Due | Greater than 90 Days | Total Past Due | Current | Total Loans | ||||||||||||||||||
Multi-family residential | $ | 2,575 | $ | 287 | $ | 1,837 | $ | 4,699 | $ | 2,173,805 | $ | 2,178,504 | ||||||||||||
Commercial real estate | 3,363 | 22 | 1,148 | 4,533 | 1,241,599 | 1,246,132 | ||||||||||||||||||
One-to-four family - mixed-use property | 4,671 | 762 | 4,411 | 9,844 | 548,658 | 558,502 | ||||||||||||||||||
One-to-four family - residential | 3,831 | 194 | 8,047 | 12,072 | 173,695 | 185,767 | ||||||||||||||||||
Co-operative apartments | - | - | - | - | 7,418 | 7,418 | ||||||||||||||||||
Construction loans | - | - | - | - | 11,495 | 11,495 | ||||||||||||||||||
Small Business Administration | 13 | - | 1,814 | 1,827 | 13,371 | 15,198 | ||||||||||||||||||
Taxi medallion | - | - | 3,825 | 3,825 | 15,171 | 18,996 | ||||||||||||||||||
Commercial business and other | 22 | 1 | - | 23 | 597,099 | 597,122 | ||||||||||||||||||
Total | $ | 14,475 | $ | 1,266 | $ | 21,082 | $ | 36,823 | $ | 4,782,311 | $ | 4,819,134 |
- 16 -
-18-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the activity in the allowance for loan lossesACL on loans for the three month periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | |||||||||||||||||||||||||
|
| | |
| | |
| One-to-four |
| | |
| | |
| | |
| | |
| | |
| | | |
| | | | | | | | family - | | One-to-four | | | | | | | | | | | Commercial | | | | |||
| | Multi-family | | Commercial | | mixed-use | | family - | | Construction | | Small Business | | Taxi | | business and | | | | ||||||||
(In thousands) | | residential | | real estate | | property | | residential | | loans | | Administration | | medallion | | other | | Total | |||||||||
Allowance for credit losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 8,561 | | $ | 7,716 | | $ | 1,864 | | $ | 766 | | $ | 268 | | $ | 1,837 | | $ | — | | $ | 16,421 | | $ | 37,433 |
Charge-offs | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| — | |
| (24) | |
| (50) |
Recoveries | |
| 1 | |
| — | |
| — | |
| 2 | |
| — | |
| 14 | |
| 435 | |
| 99 | |
| 551 |
Provision (benefit) | |
| 843 | |
| 727 | |
| 95 | |
| 98 | |
| 32 | |
| 293 | |
| (435) | |
| (163) | |
| 1,490 |
Ending balance | | $ | 9,405 | | $ | 8,443 | | $ | 1,959 | | $ | 866 | | $ | 300 | | $ | 2,118 | | $ | — | | $ | 16,333 | | $ | 39,424 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | |||||||||||||||||||||||||
|
| | |
| | |
| One-to-four |
| | |
| | |
| | |
| | |
| | |
| | | |
| | | | | | | | family - | | One-to-four | | | | | | | | | | | Commercial | | | | |||
| | Multi-family | | Commercial | | mixed-use | | family - | | Construction | | Small Business | | Taxi | | business and | | | | ||||||||
(In thousands) | | residential | | real estate | | property | | residential | | loans | | Administration | | medallion | | other | | Total | |||||||||
Allowance for credit losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 7,144 | | $ | 8,356 | | $ | 1,873 | | $ | 710 | | $ | 750 | | $ | 2,127 | | $ | — | | $ | 24,139 | | $ | 45,099 |
Charge-offs | |
| — | |
| — | |
| (3) | |
| — | |
| — | |
| — | |
| — | |
| (1,183) | |
| (1,186) |
Recoveries | |
| — | |
| — | |
| — | |
| 2 | |
| — | |
| 9 | |
| 222 | |
| 51 | |
| 284 |
Provision (benefit) | |
| (585) | |
| (2,488) | |
| (378) | |
| 4 | |
| (565) | |
| 166 | |
| (222) | |
| 2,541 | |
| (1,527) |
Ending balance | | $ | 6,559 | | $ | 5,868 | | $ | 1,492 | | $ | 716 | | $ | 185 | | $ | 2,302 | | $ | — | | $ | 25,548 | | $ | 42,670 |
September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family - residential | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Unallocated | Total | ||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 5,917 | $ | 4,688 | $ | 2,568 | $ | 990 | $ | 130 | $ | 306 | $ | 2,330 | $ | 4,668 | $ | 560 | $ | 22,157 | ||||||||||||||||||||
Charge-off's | (290 | ) | - | (1 | ) | - | - | - | - | (33 | ) | - | (324 | ) | ||||||||||||||||||||||||||
Recoveries | 66 | 25 | - | 58 | - | 17 | - | 4 | - | 170 | ||||||||||||||||||||||||||||||
Provision (Benefit) | 43 | (86 | ) | (49 | ) | (90 | ) | (13 | ) | 70 | 3,661 | 290 | (560 | ) | 3,266 | |||||||||||||||||||||||||
Ending balance | $ | 5,736 | $ | 4,627 | $ | 2,518 | $ | 958 | $ | 117 | $ | 393 | $ | 5,991 | $ | 4,929 | $ | - | $ | 25,269 |
September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family - residential | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Unallocated | Total | ||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 6,177 | $ | 4,445 | $ | 3,326 | $ | 1,044 | $ | 75 | $ | 574 | $ | 1,042 | $ | 4,669 | $ | 846 | $ | 22,198 | ||||||||||||||||||||
Charge-off's | (90 | ) | - | (71 | ) | - | - | (361 | ) | - | (19 | ) | - | (541 | ) | |||||||||||||||||||||||||
Recoveries | 11 | 11 | 47 | - | - | 44 | - | 25 | - | 138 | ||||||||||||||||||||||||||||||
Provision (Benefit) | (103 | ) | 60 | (234 | ) | (27 | ) | 15 | 151 | 1,290 | (477 | ) | (675 | ) | - | |||||||||||||||||||||||||
Ending balance | $ | 5,995 | $ | 4,516 | $ | 3,068 | $ | 1,017 | $ | 90 | $ | 408 | $ | 2,332 | $ | 4,198 | $ | 171 | $ | 21,795 |
- 17 -
-19-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the activity in the allowance for loan lossesACL on loans for the ninesix month periods indicated:
September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family - residential | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Unallocated | Total | ||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 5,923 | $ | 4,487 | $ | 2,903 | $ | 1,015 | $ | 92 | $ | 481 | $ | 2,243 | $ | 4,492 | $ | 593 | $ | 22,229 | ||||||||||||||||||||
Charge-off's | (452 | ) | (4 | ) | (36 | ) | (170 | ) | - | (89 | ) | (54 | ) | (48 | ) | - | (853 | ) | ||||||||||||||||||||||
Recoveries | 297 | 93 | 68 | 58 | - | 66 | - | 45 | - | 627 | �� | |||||||||||||||||||||||||||||
Provision (Benefit) | (32 | ) | 51 | (417 | ) | 55 | 25 | (65 | ) | 3,802 | 440 | (593 | ) | 3,266 | ||||||||||||||||||||||||||
Ending balance | $ | 5,736 | $ | 4,627 | $ | 2,518 | $ | 958 | $ | 117 | $ | 393 | $ | 5,991 | $ | 4,929 | $ | - | $ | 25,269 |
September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family - residential | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Unallocated | Total | ||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 6,718 | $ | 4,239 | $ | 4,227 | $ | 1,227 | $ | 50 | $ | 262 | $ | 343 | $ | 4,469 | $ | - | $ | 21,535 | ||||||||||||||||||||
Charge-off's | (155 | ) | - | (139 | ) | (74 | ) | - | (362 | ) | - | (59 | ) | - | (789 | ) | ||||||||||||||||||||||||
Recoveries | 230 | 11 | 252 | 366 | - | 118 | - | 72 | - | 1,049 | ||||||||||||||||||||||||||||||
Provision (Benefit) | (798 | ) | 266 | (1,272 | ) | (502 | ) | 40 | 390 | 1,989 | (284 | ) | 171 | - | ||||||||||||||||||||||||||
Ending balance | $ | 5,995 | $ | 4,516 | $ | 3,068 | $ | 1,017 | $ | 90 | $ | 408 | $ | 2,332 | $ | 4,198 | $ | 171 | $ | 21,795 |
- 18 -
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | |||||||||||||||||||||||||
|
| | |
| | |
| One-to-four |
| | |
| | |
| | |
| | |
| | |
| | | |
| | | | | | | | family - | | One-to-four | | | | | | | | | | | Commercial | | | | |||
| | Multi-family | | Commercial | | mixed-use | | family - | | Construction | | Small Business | | Taxi | | business and | | | | ||||||||
(In thousands) | | residential | | real estate | | property | | residential | | loans | | Administration | | medallion | | other | | Total | |||||||||
Allowance for credit losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 8,185 | | $ | 7,158 | | $ | 1,755 | | $ | 784 | | $ | 186 | | $ | 1,209 | | $ | — | | $ | 17,858 | | $ | 37,135 |
Charge-offs | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (1,054) | |
| — | |
| (32) | |
| (1,086) |
Recoveries | |
| 1 | |
| — | |
| — | |
| 4 | |
| — | |
| 27 | |
| 447 | |
| 173 | |
| 652 |
Provision (benefit) | |
| 1,219 | |
| 1,285 | |
| 204 | |
| 78 | |
| 114 | |
| 1,936 | |
| (447) | |
| (1,666) | |
| 2,723 |
Ending balance | | $ | 9,405 | | $ | 8,443 | | $ | 1,959 | | $ | 866 | | $ | 300 | | $ | 2,118 | | $ | — | | $ | 16,333 | | $ | 39,424 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | |||||||||||||||||||||||||
|
| | |
| | |
| One-to-four |
| | |
| | |
| | |
| | |
| | |
| | | |
| | | | | | | | family - | | One-to-four | | | | | | | | | | | Commercial | | | | |||
| | Multi-family | | Commercial | | mixed-use | | family - | | Construction | | Small Business | | Taxi | | business and | | | | ||||||||
(In thousands) | | residential | | real estate | | property | | residential | | loans | | Administration | | medallion | | other | | Total | |||||||||
Allowance for credit losses: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Beginning balance | | $ | 6,557 | | $ | 8,327 | | $ | 1,986 | | $ | 869 | | $ | 497 | | $ | 2,251 | | $ | — | | $ | 24,666 | | $ | 45,153 |
Charge-offs | |
| (43) | |
| (64) | |
| (32) | |
| — | |
| — | |
| — | |
| (2,758) | |
| (1,211) | |
| (4,108) |
Recoveries | |
| 10 | |
| — | |
| 10 | |
| 7 | |
| — | |
| 19 | |
| 222 | |
| 73 | |
| 341 |
Provision (Benefit) | |
| 35 | |
| (2,395) | |
| (472) | |
| (160) | |
| (312) | |
| 32 | |
| 2,536 | |
| 2,020 | |
| 1,284 |
Ending balance | | $ | 6,559 | | $ | 5,868 | | $ | 1,492 | | $ | 716 | | $ | 185 | | $ | 2,302 | | $ | — | | $ | 25,548 | | $ | 42,670 |
-20-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the manner in which loans were evaluated for impairment at the periods indicated:
September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family- residential | Co-operative apartments | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Total | ||||||||||||||||||||||||||||||
Financing Receivables: | ||||||||||||||||||||||||||||||||||||||||
Ending Balance | $ | 2,236,173 | $ | 1,352,775 | $ | 556,723 | $ | 177,578 | $ | 7,035 | $ | 15,811 | $ | 14,485 | $ | 18,165 | $ | 674,706 | $ | 5,053,451 | ||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 4,721 | $ | 6,798 | $ | 6,317 | $ | 10,079 | $ | - | $ | 1,178 | $ | 370 | $ | 18,165 | $ | 748 | $ | 48,376 | ||||||||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 2,231,452 | $ | 1,345,977 | $ | 550,406 | $ | 167,499 | $ | 7,035 | $ | 14,633 | $ | 14,115 | $ | - | $ | 673,958 | $ | 5,005,075 | ||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 217 | $ | 154 | $ | 206 | $ | 56 | $ | - | $ | - | $ | - | $ | 5,991 | $ | 8 | $ | 6,632 | ||||||||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 5,519 | $ | 4,473 | $ | 2,312 | $ | 902 | $ | - | $ | 117 | $ | 393 | $ | - | $ | 4,921 | $ | 18,637 |
December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Multi-family residential | Commercial real estate | One-to-four family - mixed-use property | One-to-four family- residential | Co-operative apartments | Construction loans | Small Business Administration | Taxi medallion | Commercial business and other | Unallocated | Total | |||||||||||||||||||||||||||||||||
Financing Receivables: | ||||||||||||||||||||||||||||||||||||||||||||
Ending Balance | $ | 2,178,504 | $ | 1,246,132 | $ | 558,502 | $ | 185,767 | $ | 7,418 | $ | 11,495 | $ | 15,198 | $ | 18,996 | $ | 597,122 | $ | - | $ | 4,819,134 | ||||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 5,923 | $ | 6,551 | $ | 8,809 | $ | 9,989 | $ | - | $ | - | $ | 1,937 | $ | 16,282 | $ | 2,492 | $ | - | $ | 51,983 | ||||||||||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 2,172,581 | $ | 1,239,581 | $ | 549,693 | $ | 175,778 | $ | 7,418 | $ | 11,495 | $ | 13,261 | $ | 2,714 | $ | 594,630 | $ | - | $ | 4,767,151 | ||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 232 | $ | 179 | $ | 417 | $ | 60 | $ | - | $ | - | $ | 90 | $ | 2,236 | $ | 12 | $ | - | $ | 3,226 | ||||||||||||||||||||||
Ending balance: collectively evaluated for impairment | $ | 5,691 | $ | 4,308 | $ | 2,486 | $ | 955 | $ | - | $ | 92 | $ | 391 | $ | 7 | $ | 4,480 | $ | 593 | $ | 19,003 |
- 19 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for impaired loans at the periods indicated:
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | Related Allowance | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Multi-family residential | $ | 2,489 | $ | 2,935 | $ | - | $ | 3,660 | $ | 3,796 | $ | - | ||||||||||||
Commercial real estate | 4,767 | 4,767 | - | 4,489 | 4,516 | - | ||||||||||||||||||
One-to-four family mixed-use property | 5,079 | 5,454 | - | 6,435 | 6,872 | - | ||||||||||||||||||
One-to-four family residential | 9,661 | 10,696 | - | 9,560 | 11,117 | - | ||||||||||||||||||
Co-operative apartments | - | - | - | - | - | - | ||||||||||||||||||
Construction | 1,178 | 1,178 | - | - | - | - | ||||||||||||||||||
Non-mortgage loans: | ||||||||||||||||||||||||
Small Business Administration | 370 | 386 | - | 416 | 509 | - | ||||||||||||||||||
Taxi medallion | 2,608 | 2,608 | - | 2,334 | 2,476 | - | ||||||||||||||||||
Commercial business and other | 380 | 749 | - | 2,072 | 2,443 | - | ||||||||||||||||||
Total loans with no related allowance recorded | 26,532 | 28,773 | - | 28,966 | 31,729 | - | ||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Multi-family residential | 2,232 | 2,232 | 217 | 2,263 | 2,263 | 232 | ||||||||||||||||||
Commercial real estate | 2,031 | 2,031 | 154 | 2,062 | 2,062 | 179 | ||||||||||||||||||
One-to-four family mixed-use property | 1,238 | 1,238 | 206 | 2,374 | 2,376 | 417 | ||||||||||||||||||
One-to-four family residential | 418 | 418 | 56 | 429 | 429 | 60 | ||||||||||||||||||
Co-operative apartments | - | - | - | - | - | - | ||||||||||||||||||
Construction | - | - | - | - | - | - | ||||||||||||||||||
Non-mortgage loans: | ||||||||||||||||||||||||
Small Business Administration | - | - | - | 1,521 | 1,909 | 90 | ||||||||||||||||||
Taxi medallion | 15,557 | 15,557 | 5,991 | 13,948 | 13,948 | 2,236 | ||||||||||||||||||
Commercial business and other | 368 | 368 | 8 | 420 | 420 | 12 | ||||||||||||||||||
Total loans with an allowance recorded | 21,844 | 21,844 | 6,632 | 23,017 | 23,407 | 3,226 | ||||||||||||||||||
Total Impaired Loans: | ||||||||||||||||||||||||
Total mortgage loans | $ | 29,093 | $ | 30,949 | $ | 633 | $ | 31,272 | $ | 33,431 | $ | 888 | ||||||||||||
Total non-mortgage loans | $ | 19,283 | $ | 19,668 | $ | 5,999 | $ | 20,711 | $ | 21,705 | $ | 2,338 |
- 20 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our average recorded investment and interest income recognized for impaired loans for the three months ended September 30, 2017 and 2016:
September 30, 2017 | September 30, 2016 | |||||||||||||||
| | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | ||||||||
(In thousands) | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Multi-family residential | $ | 2,451 | $ | 12 | $ | 4,639 | $ | 23 | ||||||||
Commercial real estate | 5,142 | 60 | 4,661 | 55 | ||||||||||||
One-to-four family mixed-use property | 5,269 | 45 | 8,234 | 37 | ||||||||||||
One-to-four family residential | 10,023 | 29 | 10,204 | 19 | ||||||||||||
Co-operative apartments | - | - | - | - | ||||||||||||
Construction | 890 | 15 | 285 | - | ||||||||||||
Non-mortgage loans: | ||||||||||||||||
Small Business Administration | 260 | 5 | 404 | 13 | ||||||||||||
Taxi medallion | 3,177 | 19 | 5,053 | 52 | ||||||||||||
Commercial business and other | 1,254 | 6 | 2,211 | 45 | ||||||||||||
Total loans with no related allowance recorded | 28,466 | 191 | 35,691 | 244 | ||||||||||||
With an allowance recorded: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Multi-family residential | 2,242 | 28 | 2,279 | 29 | ||||||||||||
Commercial real estate | 2,040 | 24 | 2,080 | 24 | ||||||||||||
One-to-four family mixed-use property | 1,445 | 16 | 2,567 | 35 | ||||||||||||
One-to-four family residential | 422 | 4 | 435 | 4 | ||||||||||||
Co-operative apartments | - | - | - | - | ||||||||||||
Construction | - | - | - | - | ||||||||||||
Non-mortgage loans: | ||||||||||||||||
Small Business Administration | - | - | 397 | 1 | ||||||||||||
Taxi medallion | 14,716 | 73 | 6,459 | 17 | ||||||||||||
Commercial business and other | 385 | 5 | 448 | 7 | ||||||||||||
Total loans with an allowance recorded | 21,250 | 150 | 14,665 | 117 | ||||||||||||
Total Impaired Loans: | ||||||||||||||||
Total mortgage loans | $ | 29,924 | $ | 233 | $ | 35,384 | $ | 226 | ||||||||
Total non-mortgage loans | $ | 19,792 | $ | 108 | $ | 14,972 | $ | 135 |
- 21 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table shows our average recorded investment and interest income recognized for impaired loans for the nine months ended September 30, 2017 and 2016:
September 30, 2017 | September 30, 2016 | |||||||||||||||
| | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | ||||||||
(In thousands) | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Multi-family residential | $ | 2,650 | $ | 57 | $ | 5,129 | $ | 69 | ||||||||
Commercial real estate | 5,881 | 214 | 4,841 | 162 | ||||||||||||
One-to-four family mixed-use property | 5,399 | 123 | 8,407 | 119 | ||||||||||||
One-to-four family residential | 10,062 | 85 | 10,457 | 69 | ||||||||||||
Co-operative apartments | - | - | - | - | ||||||||||||
Construction | 794 | 22 | 380 | - | ||||||||||||
Non-mortgage loans: | ||||||||||||||||
Small Business Administration | 230 | 9 | 353 | 38 | ||||||||||||
Taxi medallion | 3,771 | 74 | 3,369 | 155 | ||||||||||||
Commercial business and other | 1,584 | 93 | 2,265 | 136 | ||||||||||||
Total loans with no related allowance recorded | 30,371 | 677 | 35,201 | 748 | ||||||||||||
With an allowance recorded: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Multi-family residential | 2,391 | 107 | 2,284 | 87 | ||||||||||||
Commercial real estate | 2,039 | 72 | 2,173 | 73 | ||||||||||||
One-to-four family mixed-use property | 1,379 | 50 | 2,622 | 107 | ||||||||||||
One-to-four family residential | 422 | 12 | 403 | 10 | ||||||||||||
Co-operative apartments | - | - | - | - | ||||||||||||
Construction | - | - | - | - | ||||||||||||
Non-mortgage loans: | ||||||||||||||||
Small Business Administration | - | - | 315 | 4 | ||||||||||||
Taxi medallion | 14,663 | 166 | 5,009 | 91 | ||||||||||||
Commercial business and other | 383 | 17 | 962 | 20 | ||||||||||||
Total loans with an allowance recorded | 21,277 | 424 | 13,768 | 392 | ||||||||||||
Total Impaired Loans: | ||||||||||||||||
Total mortgage loans | $ | 31,017 | $ | 742 | $ | 36,696 | $ | 696 | ||||||||
Total non-mortgage loans | $ | 20,631 | $ | 359 | $ | 12,273 | $ | 444 |
- 22 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does not fall within one of the previouspreviously mentioned categories and management believes weakness is evident then we designate the loan as “Watch”; all other loans would be considered “Pass.” Loans that are non-accrual are designated as Substandard, Doubtful or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that jeopardizesmay jeopardize the orderly liquidation of the debt. We designate a loan as Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for LoanCredit Losses. We designate a loan as Special Mention if the asset does not warrant classification within one of the other classifications but does contain a potential weakness that deserves closer attention.
-21-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forthsummarizes the recorded investmentrisk category of mortgage and non-mortgage loans by loan portfolio segments and class of loans by year of origination at June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | Revolving Loans | | | Revolving Loans | | | |
| | | | | | | | | | | | | | | | | | | | | Amortized Cost | | | converted to | | | |
(In thousands) | | | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | Prior | | | Basis | | | term loans | | | Total |
1-4 Family Residential | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 10,310 | | $ | 8,806 | | $ | 19,533 | | $ | 43,660 | | $ | 29,373 | | $ | 108,148 | | $ | 10,578 | | $ | 13,345 | | $ | 243,753 |
Watch | | | — | | | 293 | | | — | | | 730 | | | — | | | 933 | | | 120 | | | 1,354 | | | 3,430 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 30 | | | 30 |
Substandard | | | — | | | — | | | — | | | — | | | — | | | 4,450 | | | — | | | 446 | | | 4,896 |
Total 1-4 Family Residential | | $ | 10,310 | | $ | 9,099 | | $ | 19,533 | | $ | 44,390 | | $ | 29,373 | | $ | 113,531 | | $ | 10,698 | | $ | 15,175 | | $ | 252,109 |
1-4 Family Mixed-Use | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 26,273 | | $ | 45,047 | | $ | 33,924 | | $ | 66,003 | | $ | 67,908 | | $ | 313,365 | | $ | — | | $ | — | | $ | 552,520 |
Watch | | | — | | | — | | | 892 | | | 744 | | | — | | | 7,950 | | | — | | | — | | | 9,586 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | 786 | | | — | | | — | | | 786 |
Substandard | | | — | | | — | | | — | | | — | | | — | | | 1,241 | | | — | | | — | | | 1,241 |
Total 1-4 Family Mixed Use | | $ | 26,273 | | $ | 45,047 | | $ | 34,816 | | $ | 66,747 | | $ | 67,908 | | $ | 323,342 | | $ | — | | $ | — | | $ | 564,133 |
Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 211,255 | | $ | 185,731 | | $ | 158,206 | | $ | 234,777 | | $ | 248,456 | | $ | 751,222 | | $ | — | | $ | — | | $ | 1,789,647 |
Watch | | | — | | | 1,645 | | | — | | | 10,605 | | | 6,826 | | | 57,379 | | | — | | | — | | | 76,455 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Substandard | | | — | | | — | | | — | | | — | | | — | | | 281 | | | — | | | — | | | 281 |
Total Commercial Real Estate | | $ | 211,255 | | $ | 187,376 | | $ | 158,206 | | $ | 245,382 | | $ | 255,282 | | $ | 808,882 | | $ | — | | $ | — | | $ | 1,866,383 |
Construction | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,984 | | $ | 14,741 | | $ | 13,142 | | $ | 14,802 | | | — | | $ | — | | $ | 17,559 | | $ | — | | $ | 62,228 |
Watch | | | — | | | — | | | — | | | — | | | 6,279 | | | — | | | — | | | — | | | 6,279 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | 2,598 | | | — | | | — | | | 2,598 |
Substandard | | | — | | | — | | | — | | | — | | | 856 | | | — | | | — | | | — | | | 856 |
Total Construction | | $ | 1,984 | | $ | 14,741 | | $ | 13,142 | | $ | 14,802 | | $ | 7,135 | | $ | 2,598 | | $ | 17,559 | | $ | — | | $ | 71,961 |
Multi-family | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 251,810 | | $ | 292,720 | | $ | 231,194 | | $ | 323,125 | | $ | 402,032 | | $ | 998,034 | | $ | 5,933 | | $ | — | | $ | 2,504,848 |
Watch | | | — | | | 1,117 | | | 1,467 | | | — | | | 12,050 | | | 10,666 | | | — | | | — | | | 25,300 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | 567 | | | — | | | — | | | 567 |
Substandard | | | — | | | — | | | — | | | — | | | 2,889 | | | 1,583 | | | — | | | — | | | 4,472 |
Total Multi-family | | $ | 251,810 | | $ | 293,837 | | $ | 232,661 | | $ | 323,125 | | $ | 416,971 | | $ | 1,010,850 | | $ | 5,933 | | $ | — | | $ | 2,535,187 |
Commercial Business - Secured by RE | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 127,888 | | $ | 145,394 | | $ | 90,463 | | $ | 34,613 | | $ | 56,739 | | $ | 99,065 | | $ | — | | $ | — | | $ | 554,162 |
Watch | | | — | | | — | | | 21,757 | | | 48,439 | | | 18,661 | | | 57,978 | | | — | | | — | | | 146,835 |
Special Mention | | | — | | | — | | | — | | | 576 | | | — | | | — | | | — | | | — | | | 576 |
Substandard | | | — | | | — | | | — | | | 1,847 | | | — | | | 3,554 | | | — | | | — | | | 5,401 |
Total Commercial Business - Secured by RE | | $ | 127,888 | | $ | 145,394 | | $ | 112,220 | | $ | 85,475 | | $ | 75,400 | | $ | 160,597 | | $ | — | | $ | — | | $ | 706,974 |
Commercial Business | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 88,248 | | $ | 115,221 | | $ | 46,969 | | $ | 43,504 | | $ | 48,621 | | $ | 62,638 | | $ | 217,817 | | $ | — | | $ | 623,018 |
Watch | | | — | | | 2,476 | | | 523 | | | 22,487 | | | 16,196 | | | 18,834 | | | 5,960 | | | — | | | 66,476 |
Special Mention | | | — | | | 1,483 | | | 6,074 | | | 39 | | | 2,063 | | | 545 | | | 846 | | | — | | | 11,050 |
Substandard | | | — | | | — | | | 87 | | | 31 | | | 5,265 | | | 3,781 | | | 12,711 | | | — | | | 21,875 |
Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | 996 | | | — | | | 996 |
Total Commercial Business | | $ | 88,248 | | $ | 119,180 | | $ | 53,653 | | $ | 66,061 | | $ | 72,145 | | $ | 85,798 | | $ | 238,330 | | $ | — | | $ | 723,415 |
Small Business Administration | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,728 | | $ | 21,712 | | $ | 4,839 | | $ | 720 | | $ | 1,319 | | $ | 2,259 | | $ | — | | $ | — | | $ | 33,577 |
Watch | | | — | | | — | | | — | | | 54 | | | 2,539 | | | 2,575 | | | — | | | — | | | 5,168 |
Special Mention | | | — | | | — | | | — | | | — | | | — | | | 46 | | | — | | | — | | | 46 |
Substandard | | | — | | | — | | | — | | | — | | | — | | | 1,220 | | | — | | | — | | | 1,220 |
Total Small Business Administration | | $ | 2,728 | | $ | 21,712 | | $ | 4,839 | | $ | 774 | | $ | 3,858 | | $ | 6,100 | | $ | — | | $ | — | | $ | 40,011 |
Other | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 140 | | $ | 80 | | $ | — | | $ | 220 |
Total Other | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 140 | | $ | 80 | | $ | — | | $ | 220 |
Total by Loan Type | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Pass | | $ | 720,496 | | $ | 829,372 | | $ | 598,270 | | $ | 761,204 | | $ | 854,448 | | $ | 2,334,871 | | $ | 251,967 | | $ | 13,345 | | $ | 6,363,973 |
Total Watch | | | — | | | 5,531 | | | 24,639 | | | 83,059 | | | 62,551 | | | 156,315 | | | 6,080 | | | 1,354 | | | 339,529 |
Total Special Mention | | | — | | | 1,483 | | | 6,074 | | | 615 | | | 2,063 | | | 4,542 | | | 846 | | | 30 | | | 15,653 |
Total Substandard | | | — | | | — | | | 87 | | | 1,878 | | | 9,010 | | | 16,110 | | | 12,711 | | | 446 | | | 40,242 |
Total Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | 996 | | | — | | | 996 |
Total Loans | | $ | 720,496 | | $ | 836,386 | | $ | 629,070 | | $ | 846,756 | | $ | 928,072 | | $ | 2,511,838 | | $ | 272,600 | | $ | 15,175 | | $ | 6,760,393 |
-22-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Included within net loans as of June 30, 2022 and December 31, 2021 were $5.4 million and $8.7 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
A loan is considered collateral dependent when the borrower is experiencing financial difficulties and repayment is expected to be substantially provided by the operation or sale of the collateral. The following table presents types of collateral-dependent loans designatedby class of loans as Criticized or Classified atof the periods indicated:
| | | | | | | | | | | | |
| | | ||||||||||
| | Collateral Type | ||||||||||
| | June 30, 2022 | | December 31, 2021 | ||||||||
(In thousands) | | | Real Estate | | | Business Assets | | | Real Estate | | | Business Assets |
Multi-family residential | | $ | 3,707 | | $ | — | | $ | 2,652 | | $ | — |
Commercial real estate | | | 775 | | | — | | | 1,158 | | | — |
One-to-four family - mixed-use property | | | 1,049 | | | — | | | 1,582 | | | — |
One-to-four family - residential | | | 4,708 | | | — | | | 7,482 | | | — |
Construction | | | 856 | | | — | | | — | | | — |
Small Business Administration | | | — | | | 951 | | | — | | | 952 |
Commercial business and other | | | — | | | 18,871 | | | — | | | 1,427 |
Total | | $ | 11,095 | | $ | 19,822 | | $ | 12,874 | | $ | 2,379 |
| | | | | | | | | | | | |
September 30, 2017 | ||||||||||||||||||||
(In thousands) | Special Mention | Substandard | Doubtful | Loss | Total | |||||||||||||||
Multi-family residential | $ | 9,333 | $ | 2,188 | $ | - | $ | - | $ | 11,521 | ||||||||||
Commercial real estate | 1,015 | 4,767 | - | - | 5,782 | |||||||||||||||
One-to-four family - mixed-use property | 1,700 | 4,551 | - | - | 6,251 | |||||||||||||||
One-to-four family - residential | 915 | 9,503 | - | - | 10,418 | |||||||||||||||
Co-operative apartments | - | - | - | - | - | |||||||||||||||
Construction loans | - | 1,178 | - | - | 1,178 | |||||||||||||||
Small Business Administration | 585 | 215 | - | - | 800 | |||||||||||||||
Taxi medallion | - | 18,165 | - | - | 18,165 | |||||||||||||||
Commercial business and other | 17,694 | 748 | - | - | 18,442 | |||||||||||||||
Total loans | $ | 31,242 | $ | 41,315 | $ | - | $ | - | $ | 72,557 |
Off-Balance Sheet Credit Losses
December 31, 2016 | ||||||||||||||||||||
(In thousands) | Special Mention | Substandard | Doubtful | Loss | Total | |||||||||||||||
Multi-family residential | $ | 7,133 | $ | 3,351 | $ | - | $ | - | $ | 10,484 | ||||||||||
Commercial real estate | 2,941 | 4,489 | - | - | 7,430 | |||||||||||||||
One-to-four family - mixed-use property | 4,197 | 7,009 | - | - | 11,206 | |||||||||||||||
One-to-four family - residential | 1,205 | 9,399 | - | - | 10,604 | |||||||||||||||
Co-operative apartments | - | - | - | - | - | |||||||||||||||
Construction loans | - | - | - | - | - | |||||||||||||||
Small Business Administration | 540 | 436 | - | - | 976 | |||||||||||||||
Taxi medallion | 2,715 | 16,228 | 54 | - | 18,997 | |||||||||||||||
Commercial business and other | 9,924 | 2,493 | - | - | 12,417 | |||||||||||||||
Total loans | $ | 28,655 | $ | 43,405 | $ | 54 | $ | - | $ | 72,114 |
Also included within scope of the CECL standard are off-balance sheet loan commitments, which includes the unfunded portion of committed lines of credit and commitments “in-process”. Commitments “in‐process” reflect loans not in the Company’s books but rather negotiated loan / line of credit terms and rates that the Company has offered to customers and is committed to honoring. In reference to “in‐process” credits, the Company defines an unfunded commitment as a credit that has been offered to and accepted by a borrower, which has not closed and by which the obligation is not unconditionally cancellable.
Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) amounted to $94.7totaled $542.6 million and $229.0$472.9 million respectively, at SeptemberJune 30, 2017.
2022 and December 31, 2021, respectively.
The following table presents the activity in the allowance for off balance sheet credit losses for the three and six months ended June 30, 2022 and 2021.
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (In thousands) | ||||||||||
Balance at beginning of period | | $ | 1,589 | | $ | 1,304 | | $ | 1,209 | | $ | 1,815 |
Off-Balance Sheet- Provision (Benefit) | | | (145) | | | 266 | | | 235 | | | (245) |
Allowance for Off-Balance Sheet - Credit losses (1) | | $ | 1,444 | | $ | 1,570 | | $ | 1,444 | | $ | 1,570 |
(1) | Included in “Other liabilities” on the Consolidated Statements of Financial Condition. |
- 23 -
-23-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
6. Loans held for sale
Loans held for sale are carried at the lower of cost or estimated fair value. At SeptemberJune 30, 20172022 and December 31, 2016,2021, the Bank did not have any loans held for sale.
The Company has implemented a strategy of selling certain delinquent and non-performing loans. Once the Company has decided to sell a loan, the sale usually closes in a short period of time, generally within the same quarter. Loans designated held for sale are reclassified from loans held for investment to loans held for sale. Terms of sale include cash due upon the closing of the sale, no contingencies or recourse to the Company and servicing is released to the buyer. Additionally, at times the Company may sell participating interests in performing loans.
The following table shows loans sold during the periodperiods indicated:
| | | | | | | | | | | |
| | For the three and six months ended June 30, 2022 | |||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Performing loans |
|
|
| |
|
| |
|
| |
|
Multi-family residential |
| 4 | | $ | 10,136 | | $ | — | | $ | — |
Commercial | | 1 | |
| 4,312 | |
| — | |
| — |
Total |
| 5 | | $ | 14,448 | | $ | — | | $ | — |
| | | | | | | | | | | |
Delinquent and non-performing loans |
|
|
| |
|
| |
|
| |
|
Commercial |
| 1 | | | 3,687 | | | — | | | 73 |
One-to-four family - mixed-use property |
| 1 | |
| 430 | |
| — | |
| — |
Total |
| 2 | | $ | 4,117 | | $ | — | | $ | 73 |
| | | | | | | | | | | |
| | For the three months ended June 30, 2021 | |||||||||
| | | |
| | | Net | |
| | |
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| charge-offs |
| Net gain | |||
Delinquent and non-performing loans |
|
|
| |
|
| |
|
| |
|
Multi-family residential |
| 3 | | $ | 7,846 | | $ | — | | $ | 58 |
One-to-four family - mixed-use property |
| 4 | |
| 2,488 | |
| — | |
| 69 |
Total |
| 7 | | $ | 10,334 | | $ | — | | $ | 127 |
| | | | | | | | | | | |
| | For the six months ended June 30, 2021 | |||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Delinquent and non-performing loans |
|
|
| |
|
| |
|
| |
|
Multi-family residential |
| 8 | | $ | 10,752 | | $ | (43) | | $ | 63 |
Commercial | | 3 | |
| 3,036 | |
| (64) | |
| 17 |
One-to-four family - mixed-use property |
| 10 | |
| 4,796 | |
| (14) | |
| 78 |
Total |
| 21 | | $ | 18,584 | | $ | (121) | | $ | 158 |
| | For the three months ended September 30, 2017 | ||||||||||
(Dollars in thousands) | Loans sold | Proceeds | Net gain (loss) | |||||||||
Delinquent and non-performing loans | ||||||||||||
Multi-family residential | 2 | $ | 707 | $ | 30 | |||||||
Commercial real estate | 3 | 1,118 | 34 | |||||||||
One-to-four family - mixed-use property | 3 | 913 | 115 | |||||||||
Total | 8 | $ | 2,738 | $ | 179 | |||||||
Performing loans | ||||||||||||
Multi-family residential | 10 | $ | 12,704 | $ | (22 | ) | ||||||
Commercial real estate | 2 | 17,832 | (7 | ) | ||||||||
Small Business Administration | 1 | 142 | 2 | |||||||||
Total | 13 | $ | 30,678 | $ | (27 | ) |
| | For the three months ended September 30, 2016 | ||||||||||
(Dollars in thousands) | Loans sold | Proceeds | Net gain | |||||||||
Delinquent and non-performing loans | ||||||||||||
Multi-family residential | 3 | $ | 632 | $ | 1 | |||||||
One-to-four family - mixed-use property | 8 | 2,507 | 239 | |||||||||
Total | 11 | $ | 3,139 | $ | 240 |
| | For the nine months ended September 30, 2017 | ||||||||||||||
(Dollars in thousands) | Loans sold | Proceeds | Net charge-offs | Net gain (loss) | ||||||||||||
Delinquent and non-performing loans | ||||||||||||||||
Multi-family residential | 2 | $ | 707 | $ | - | $ | 30 | |||||||||
Commercial real estate | 4 | 1,453 | (4 | ) | 35 | |||||||||||
One-to-four family - mixed-use property | 8 | 2,703 | (33 | ) | 143 | |||||||||||
Total | 14 | $ | 4,863 | $ | (37 | ) | $ | 208 | ||||||||
Performing loans | ||||||||||||||||
Multi-family residential | 12 | $ | 18,784 | $ | - | $ | (36 | ) | ||||||||
Commercial real estate | 7 | 26,283 | - | (28 | ) | |||||||||||
Small Business Administration | 8 | 5,061 | - | 252 | ||||||||||||
Total | 27 | $ | 50,128 | $ | - | $ | 188 |
- 24 -
-24-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
7. Leases
The Company has 28 operating leases for branches (including headquarters) and office spaces, 10 operating leases for vehicles, and 1 operating lease for equipment. Our leases have remaining lease terms ranging from six months to approximately 14 years, none of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.
| | For the nine months ended September 30, 2016 | ||||||||||||||
(Dollars in thousands) | Loans sold | Proceeds | Net charge-offs | Net gain | ||||||||||||
Delinquent and non-performing loans | ||||||||||||||||
Multi-family residential | 9 | $ | 2,680 | $ | (8 | ) | $ | 3 | ||||||||
Commercial real estate | 2 | 192 | - | - | ||||||||||||
One-to-four family - mixed use | 15 | 5,093 | - | 262 | ||||||||||||
Total | 26 | $ | 7,965 | $ | (8 | ) | $ | 265 | ||||||||
Performing loans | ||||||||||||||||
Small Business Administration | 6 | 3,534 | - | 319 | ||||||||||||
Total | 6 | $ | 3,534 | $ | - | $ | 319 |
The Company has elected the short-term lease recognition exemption such that the Company will not recognize Right of Use (“ROU”) assets or lease liabilities for leases with a term of less than 12 months from the commencement date. The Company has two agreements in 2022 and one agreement in 2021 that qualified as short-term leases. Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-cancelable operating lease agreements expire through 2036.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | |
(Dollars in thousands) | | June 30, 2022 | | December 31, 2021 | | ||
| | | | | | | |
Operating lease ROU asset | | $ | 46,687 | | $ | 50,200 | |
| | | | | | | |
Operating lease liability | | $ | 50,346 | | $ | 54,155 | |
| | | | | | | |
Weighted-average remaining lease term-operating leases | |
| 7.0 years | | | 7.4 years | |
Weighted average discount rate-operating leases | |
| 3.1 | % | | 3.1 | % |
The components of lease expense and cash flow information related to leases were as follows:
| | | | | | | | |
| | |
| For the three months ended | ||||
(Dollars in thousands) | | Line Item Presented | | June 30, 2022 | | June 30, 2021 | ||
| | | | | | | | |
Lease Cost | | | |
|
| |
|
|
Operating lease cost | | Occupancy and equipment | | $ | 2,099 | | $ | 2,224 |
Operating lease cost | | Other operating expenses | | | 26 | | | 20 |
Short-term lease cost | | Professional Services and Other operating expenses | |
| 36 | |
| 60 |
Variable lease cost | | Occupancy and equipment | |
| 238 | |
| 298 |
Total lease cost | | | | $ | 2,399 | | $ | 2,602 |
| | | | | | | | |
Other information | | | |
|
| |
|
|
Cash paid for amounts included in the measurement of lease liabilities | | | |
|
| |
|
|
Operating cash flows from operating leases | | | | $ | 2,343 | | $ | 4,769 |
-25-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
7.
| | | | | | | | |
| | |
| For the six months ended | ||||
(Dollars in thousands) | | Line Item Presented | | June 30, 2022 | | June 30, 2021 | ||
| | | | | | | | |
Lease Cost | | | |
|
| |
|
|
Operating lease cost | | Occupancy and equipment | | $ | 4,198 | | $ | 4,306 |
Operating lease cost | | Other operating expenses | | | 48 | | | 42 |
Short-term lease cost | | Professional Services and Other operating expenses | |
| 97 | |
| 95 |
Variable lease cost | | Occupancy and equipment | |
| 438 | |
| 596 |
Total lease cost | | | | $ | 4,781 | | $ | 5,039 |
| | | | | | | | |
Other information | | | |
|
| |
|
|
Cash paid for amounts included in the measurement of lease liabilities | | | |
|
| |
|
|
Operating cash flows from operating leases | | | | $ | 4,769 | | $ | 8,048 |
Right-of-use assets obtained in exchange for new operating lease liabilities | | | | $ | 47 | | $ | — |
The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows as of June 30, 2022:
| | | |
| | Minimum Rental | |
| | (In thousands) | |
Years ended December 31: | | | |
2022 | | $ | 4,485 |
2023 | | | 9,502 |
2024 | | | 9,336 |
2025 | | | 8,662 |
2026 | | | 7,769 |
Thereafter | | | 16,277 |
Total minimum payments required | | | 56,031 |
Less: implied interest | | | 5,685 |
Total lease obligations | | $ | 50,346 |
8. Stock-Based Compensation
The Company has a long-term incentive compensation program for certain Company executive officers that includes grants of performance-based restricted stock units (“PRSUs”) in addition to time-based restricted stock units (“RSU”). Under the terms of the PRSU Agreement, the number of PRSUs that may be earned depends on the extent to which performance goals for the award are achieved over a three-year performance period, as determined by the Compensation Committee of the Board. As of June 30, 2022, PRSUs granted in 2022 and 2020 are being accrued at target and PRSUs granted in 2021 are being accrued above target. The different levels of accrual are commensurate with the projected performance of the respective grant.
-26-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
On May 18, 2021, stockholders approved an amendment to the 2014 Omnibus Plan (the “Amendment”) authorizing an additional 1,100,000 shares available for future issuance. Including the additional shares authorized from the Amendment, 966,785 shares were available for future issuance under the 2014 Omnibus Plan at June 30, 2022.
For the three months ended SeptemberJune 30, 20172022 and 2016,2021, the Company’s net income, as reported, includesincluded $0.9 million and $1.1 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and $0.4$0.3 million of income tax benefitsbenefit for each period, related to the stock-based compensation plans in each of the periods.plans. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company’s net income, as reported, includes $5.2included $4.9 million and $4.7$5.2 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and $1.7$1.3 million and $1.8$1.4 million respectively, of income tax benefitsbenefit, respectively, related to the stock-based compensation plans. The Company did not issue any restricted stock units during
During the three months ended SeptemberJune 30, 20172022 and 2016. 2021, the Company did 0t grant any RSU or PRSUs. During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company granted 276,900212,811 and 337,175 restricted stock units,238,985 RSU awards and 63,250 and 62,790 PRSU awards, respectively. The Company has not granted stock options since 2009. At September 30, 2017, the Company had 1,200 stock options, all 100% vested, outstanding.
The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight-line method.
The 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) became effective on May 20, 2014 after adoption by the Board of Directors and approval by the stockholders. The 2014 Omnibus Plan authorizes the Compensation Committee of the Company’s Board of Directors to grant a variety of equity compensation awards as well as long-term and annual cash incentive awards, all of which can, but need not, be structured so as to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended. On May 31, 2017, stockholders approved an amendment to the 2014 Omnibus Plan (the “Amendment”) authorizing an additional 672,000 shares available for future issuance. In addition, to increasing the number of shares for future grants, the Amendment eliminates, Forfeitures are recorded in the case of stock options and SARs, the ability to recycle shares used to satisfy the exercise price or taxes for such awards. No other amendments to the 2014 Omnibus Plan were made. Including the additional shares authorized from the Amendment, 953,268 shares are available for future issuance under the 2014 Omnibus Plan at September 30, 2017.
- 25 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
period they occur.
The following table summarizes the Company’s restricted stock unit (“RSU”)RSU and PRSU awards at or for the ninesix months ended SeptemberJune 30, 2017:2022:
| | | | | | | | | | |
|
| RSU Awards |
| PRSU Awards | ||||||
| | |
| Weighted-Average | | |
| Weighted-Average | ||
| | |
| Grant-Date | | |
| Grant-Date | ||
|
| Shares |
| Fair Value |
| Shares |
| Fair Value | ||
| | | | | | | | | | |
Non-vested at December 31, 2021 |
| 310,430 | | $ | 21.49 |
| 102,920 | | $ | 20.02 |
Granted |
| 212,811 | |
| 24.83 |
| 63,250 | |
| 25.11 |
Vested |
| (219,835) | |
| 23.62 |
| (71,390) | |
| 23.48 |
Forfeited |
| (1,695) | |
| 23.87 |
| — | |
| — |
Non-vested at June 30, 2022 |
| 301,711 | | $ | 22.28 |
| 94,780 | | $ | 20.81 |
Vested but unissued at June 30, 2022 |
| 231,008 | | $ | 22.38 |
| 118,245 | | $ | 20.76 |
Shares | Weighted-Average Grant-Date Fair Value | |||||||
Non-vested at December 31, 2016 | 488,779 | $ | 18.99 | |||||
Granted | 276,900 | 28.21 | ||||||
Vested | (244,762 | ) | 21.93 | |||||
Forfeited | (22,860 | ) | 23.61 | |||||
Non-vested at September 30, 2017 | 498,057 | $ | 22.46 | |||||
Vested but unissued at September 30, 2017 | 244,077 | $ | 22.67 |
As of SeptemberJune 30, 2017,2022, there was $8.7$6.2 million of total unrecognized compensation cost related to RSU and PRSU awards granted. That cost is expected to be recognized over a weighted-average period of 3.12.6 years. The total fair value of awards vested for the three months ended SeptemberJune 30, 20172022 and 20162021 was $14,000$0.5 million and $4,000,$0.2 million, respectively. The total fair value of awards vested for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 was $7.0$7.1 million and $4.8$5.0 million, respectively. The vested but unissued RSU and PRSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates.
Cash proceeds, fair value received, tax benefits, and intrinsic value related to stock options exercised, and the weighted average grant date fair value for options granted, during the three and nine months ended September 30, 2017 and 2016 are provided in the following table:
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Proceeds from stock options exercised | $ | - | $ | 5 | $ | - | $ | 132 | ||||||||
Fair value of shares received upon exercise of stock options | - | 262 | 37 | 612 | ||||||||||||
Tax benefit (expense) related to stock options exercised | - | (10 | ) | 39 | (12 | ) | ||||||||||
Intrinsic value of stock options exercised | - | 44 | 96 | 156 |
Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its profit sharingprofit-sharing plan for officers who have achieved the designated level and completed one year of service. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.
- 26 -
-27-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Phantom Stock Plan at or for the ninesix months ended SeptemberJune 30, 2017:2022:
| | | | | |
Phantom Stock Plan |
| Shares |
| Fair Value | |
Outstanding at December 31, 2021 |
| 128,881 | | $ | 24.30 |
Granted |
| 27,001 | |
| 24.24 |
Distributions |
| (723) | |
| 24.31 |
Outstanding at June 30, 2022 |
| 155,159 | | $ | 21.26 |
Vested at June 30, 2022 |
| 154,823 | | $ | 21.26 |
Phantom Stock Plan | Shares | Fair Value | ||||||
Outstanding at December 31, 2016 | 89,339 | $ | 29.39 | |||||
Granted | 7,889 | 27.42 | ||||||
Forfeited | (10 | ) | 28.95 | |||||
Distributions | (8,471 | ) | 28.69 | |||||
Outstanding at September 30, 2017 | 88,747 | $ | 29.72 | |||||
Vested at September 30, 2017 | 88,431 | $ | 29.72 |
The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of $0.2($0.1) million and $0.4$0.1 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The total fair value of the distributions from the Phantom Stock Plan was $0.2 million$2,000 for each of the three months ended SeptemberJune 30, 2017. There were no distributions for the three months ended September 30, 2016.2022 and 2021.
For the nine months ended September 30, 2017 and 2016, theThe Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of $0.1($0.4) million and $0.2$0.6 million for the six months ended June 30, 2022 and 2021, respectively. The total fair value of the distributions from the Phantom Stock Plan duringwas $18,000 and $25,000 for the ninesix months ended SeptemberJune 30, 20172022, and 2016 was $0.2 million and $28,000,2021, respectively.
8.9. Pension and Other Postretirement Benefit Plans
The following table sets forth information regarding the components of net expense for the pension and other postretirement benefit plans.
| | | | | | | | | | | | |
|
| Three months ended |
| Six months ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | | | | | | | | | | | |
Employee Pension Plan: |
| |
|
| |
|
| |
|
| |
|
Interest cost | | $ | 138 | | $ | 128 | | $ | 276 | | $ | 256 |
Amortization of unrecognized loss | |
| 1 | |
| 122 | |
| 2 | |
| 244 |
Expected return on plan assets | |
| (258) | |
| (274) | |
| (515) | |
| (548) |
Net employee pension benefit | | $ | (119) | | $ | (24) | | $ | (237) | | $ | (48) |
| | | | | | | | | | | | |
Outside Director Pension Plan: | |
|
| |
|
| |
|
| |
|
|
Service cost | | $ | 3 | | $ | 4 | | $ | 6 | | $ | 8 |
Interest cost | |
| 12 | |
| 12 | |
| 23 | |
| 24 |
Amortization of unrecognized gain | |
| (7) | |
| (5) | |
| (14) | |
| (10) |
Net outside director pension expense | | $ | 8 | | $ | 11 | | $ | 15 | | $ | 22 |
| | | | | | | | | | | | |
Other Postretirement Benefit Plans: | |
|
| |
|
| |
|
| |
|
|
Service cost | | $ | 67 | | $ | 73 | | $ | 134 | | $ | 146 |
Interest cost | |
| 69 | |
| 58 | |
| 139 | |
| 116 |
Amortization of actuarial gain | | | — | | | 16 | | | — | | | 16 |
Amortization of past service credit | |
| (7) | |
| (21) | |
| (14) | |
| (43) |
Net other postretirement expense | | $ | 129 | | $ | 126 | | $ | 259 | | $ | 235 |
-28-
| | Three months ended September 30, | | Nine months ended September 30, | ||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Employee Pension Plan: | ||||||||||||||||
Interest cost | $ | 216 | $ | 226 | $ | 648 | $ | 678 | ||||||||
Amortization of unrecognized loss | 174 | 201 | 523 | 604 | ||||||||||||
Expected return on plan assets | (348 | ) | (348 | ) | (1,044 | ) | (1,044 | ) | ||||||||
Net employee pension expense | $ | 42 | $ | 79 | $ | 127 | $ | 238 | ||||||||
Outside Director Pension Plan: | ||||||||||||||||
Service cost | $ | 10 | $ | 11 | $ | 30 | $ | 33 | ||||||||
Interest cost | 23 | 24 | 69 | 72 | ||||||||||||
Amortization of unrecognized gain | (23 | ) | (21 | ) | (69 | ) | (65 | ) | ||||||||
Amortization of past service liability | 10 | 9 | 30 | 30 | ||||||||||||
Net outside director pension expense | $ | 20 | $ | 23 | $ | 60 | $ | 70 | ||||||||
Other Postretirement Benefit Plans: | ||||||||||||||||
Service cost | $ | 79 | $ | 90 | $ | 237 | $ | 270 | ||||||||
Interest cost | 76 | 80 | 228 | 240 | ||||||||||||
Amortization of unrecognized loss | - | 12 | - | 36 | ||||||||||||
Amortization of past service credit | (21 | ) | (22 | ) | (64 | ) | (64 | ) | ||||||||
Net other postretirement expense | $ | 134 | $ | 160 | $ | 401 | $ | 482 |
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company previously disclosed in its Consolidated Financial Statements for the year ended December 31, 20162021 that it expects to contribute $0.3 million and $0.2 million to each of the Outside Director Pension Plan (the “Outside Director Pension Plan”) and the other postretirement benefit plans (the “Other Postretirement Benefit Plans”), respectively, during the year ending December 31, 2017.2022. The Company does not0t expect to make a contribution to the Employee Pension Plan (the “Employee Pension Plan”). As of SeptemberJune 30, 2017,2022, the Company hashad contributed $108,000$72,000 to the Outside Director Pension Plan and $60,000 in contributions were made to$21,000 tto the Other Postretirement Benefit Plans. As of SeptemberJune 30, 2017,2022, the Company has not revised its expected contributions for the year ending December 31, 2017.
2022.
- 27 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
9.10. Fair Value of Financial Instruments
The Company carries certain financial assets and financial liabilities at fair value in accordance with GAAP which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, establishes a framework for measuring fair value and expands disclosures about fair value measurements.date. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. At SeptemberJune 30, 2017,2022, the Company carried financial assets and financial liabilities under the fair value option with fair values of $21.4$13.6 million and $36.1$55.4 million, respectively. At December 31, 2016,2021, the Company carried financial assets and financial liabilities under the fair value option with fair values of $30.4$14.6 million and $34.0$56.5 million, respectively. The Company did not elect to carry any additional financial assets or financial liabilities under the fair value option during the ninethree and six months ended SeptemberJune 30, 2017.
2022 and 2021.
The following table presents the financial assets and financial liabilities reported at fair value under the fair value option, and the changes in fair value included in the Consolidated Statement of Income – Net gain (loss) from fair value adjustments, at or for the periods ended as indicated:
| | | | | | | | | | | | | | | | | | |
| | Fair Value | | Fair Value | | Changes in Fair Values For Items Measured at Fair Value | ||||||||||||
| | Measurements | | Measurements | | Pursuant to Election of the Fair Value Option | ||||||||||||
|
| at June 30, |
| at December 31, | | Three Months Ended | | Six Months Ended | ||||||||||
Description |
| 2022 |
| 2021 | | June 30, 2022 |
| June 30, 2021 |
| June 30, 2022 |
| June 30, 2021 | ||||||
(In thousands) |
| |
|
| |
| | |
|
| |
|
| |
|
| |
|
Mortgage-backed securities | | $ | 339 | | $ | 388 | | $ | (8) | | $ | (1) | | $ | (12) | | $ | (2) |
Other securities | |
| 13,235 | |
| 14,180 | |
| (484) | |
| 176 | |
| (1,020) | |
| 1 |
Borrowed funds | |
| 55,352 | |
| 56,472 | |
| 3,025 | |
| (5,528) | |
| 1,756 | |
| (6,988) |
Net gain (loss) from fair value adjustments (1) | | | | | | | | $ | 2,533 | | $ | (5,353) | | $ | 724 | | $ | (6,989) |
Fair Value | Fair Value | Changes in Fair Values For Items Measured at Fair Value | ||||||||||||||||||||||
Measurements | Measurements | Pursuant to Election of the Fair Value Option | ||||||||||||||||||||||
at September 30, | at December 31, | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||||||
Mortgage-backed securities | $ | 1,696 | $ | 2,016 | $ | (5 | ) | $ | (6 | ) | $ | (15 | ) | $ | (4 | ) | ||||||||
Other securities | 19,712 | 28,429 | 40 | (30 | ) | 184 | 156 | |||||||||||||||||
Borrowed funds | 36,071 | 33,959 | (925 | ) | (296 | ) | (2,090 | ) | 1,250 | |||||||||||||||
Net gain (loss) from fair value adjustments (1) (2) | $ | (890 | ) | $ | (332 | ) | $ | (1,921 | ) | $ | 1,402 |
(1) | The net gain (loss) from fair value adjustments presented in the above table does not include net |
Included in the fair value of the financial assets and financial liabilities selected for the fair value option is the accrued interest receivable or payable for the related instrument. The Company reports as interest income or interest expense in the Consolidated Statement of Income, the interest receivable or payable on the financial instruments selected for the fair value option at their respective contractual rates.
The borrowed funds had a contractual principal amount of $61.9 million at both SeptemberJune 30, 20172022 and December 31, 2016.2021. The fair value of borrowed funds includes accrued interest payable of $0.2 million and $0.1 million at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.
The Company generally holds its earning assets other than securities available for sale, to maturity and settles its liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market information. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and prepayments, fair value estimates change, and these amounts may not necessarily be realized in an immediate sale.
-29-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Disclosure of fair value does not require fair value information for items that do not meet the definition of a financial instrument or certain other financial instruments specifically excluded from its requirements. These items include core deposit intangibles and other customer relationships, premises and equipment, leases, income taxes and equity.
- 28 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Further, fair value disclosure does not attempt to value future income or business. These items may be material and accordingly, the fair value information presented does not purport to represent, nor should it be construed to represent, the underlying “market” or franchise value of the Company.
Financial assets and financial liabilities reported at fair value are required to be measured based on either: (1) quoted prices in active markets for identical financial instruments (Level 1); (2) significant other observable inputs (Level 2); or (3) significant unobservable inputs (Level 3).
A description of the methods and significant assumptions utilized in estimating the fair value of the Company’s financial assets and liabilities that are carried at fair value on a recurring basis are as follows:
Level 1 – wherewhen quoted market prices are available in an active market. At SeptemberJune 30, 2017,2022 and December 31, 2021, Level 1 included one mutual fund. At December 31, 2016, the Company did not value any of its assets or liabilities that are carried at fair value on a recurring basis as Level 1.
Level 2 – when quoted market prices are not available, fair value is estimated using quoted market prices for similar financial instruments and adjusted for differences between the quoted instrument and the instrument being valued. Fair value can also be estimated by using pricing models, or discounted cash flows. Pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices and credit spreads. In addition to observable market information, models also incorporate maturity and cash flow assumptions. At SeptemberJune 30, 20172022 and December 31, 2016,2021, Level 2 included mortgage relatedmortgage-backed securities, CLOs, corporate debt, municipals, and interest rate swaps.
Level 3 – when there is limited activity or less transparency around inputs to the valuation, financial instruments are classified as Level 3. At SeptemberJune 30, 2017,2022 and December 31, 2021, Level 3 included trust preferred securities owned, and junior subordinated debentures issued by the Company. At December 31, 2016, Level 3 included trust preferred securities owned and junior subordinated debentures issued by the Company and a single issuer trust preferred security.
The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values. While the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies, assumptions, and models to determine fair value of certain financial instruments could produce different estimates of fair value at the reporting date.
-30-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a recurring basis, including those reported at fair value under the fair value option, and the methodlevel that was used to determine their fair value, at SeptemberJune 30, 20172022 and December 31, 2016:2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted Prices | | | | | | | | | | | | | | | | | | | ||||
| | in Active Markets | | Significant Other | | Significant Other | | | | | | | ||||||||||||
| | for Identical Assets | | Observable Inputs | | Unobservable Inputs | | Total carried at fair value | ||||||||||||||||
| | (Level 1) | | (Level 2) | | (Level 3) | | on a recurring basis | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
|
| (In thousands) | ||||||||||||||||||||||
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Securities available for sale | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgage-backed |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Securities | | $ | — | | $ | — | | $ | 510,934 | | $ | 572,184 | | $ | — | | $ | — | | $ | 510,934 | | $ | 572,184 |
Other securities | |
| 11,573 | |
| 12,485 | |
| 333,485 | |
| 190,872 | |
| 1,662 | |
| 1,695 | |
| 346,720 | |
| 205,052 |
Interest rate swaps | |
| — | |
| — | |
| 53,985 | |
| 10,683 | |
| — | |
| — | |
| 53,985 | |
| 10,683 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 11,573 | | $ | 12,485 | | $ | 898,404 | | $ | 773,739 | | $ | 1,662 | | $ | 1,695 | | $ | 911,639 | | $ | 787,919 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Borrowings | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 55,352 | | $ | 56,472 | | $ | 55,352 | | $ | 56,472 |
Interest rate swaps | |
| — | |
| — | |
| 13,258 | |
| 25,071 | |
| — | |
| — | |
| 13,258 | |
| 25,071 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | $ | — | | $ | — | | $ | 13,258 | | $ | 25,071 | | $ | 55,352 | | $ | 56,472 | | $ | 68,610 | | $ | 81,543 |
Quoted Prices | ||||||||||||||||||||||||||||||||
in Active Markets | Significant Other | Significant Other | ||||||||||||||||||||||||||||||
for Identical Assets | Observable Inputs | Unobservable Inputs | Total carried at fair value | |||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | on a recurring basis | |||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Mortgage-backed Securities | $ | - | $ | - | $ | 519,861 | $ | 516,476 | $ | - | $ | - | $ | 519,861 | $ | 516,476 | ||||||||||||||||
Other securities | 11,589 | - | 264,026 | 337,544 | 1,083 | 7,361 | 276,698 | 344,905 | ||||||||||||||||||||||||
Interest rate swaps | - | - | 5,410 | 6,350 | - | - | 5,410 | 6,350 | ||||||||||||||||||||||||
Total assets | $ | 11,589 | $ | - | $ | 789,297 | $ | 860,370 | $ | 1,083 | $ | 7,361 | $ | 801,969 | $ | 867,731 | ||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Borrowings | $ | - | $ | - | $ | - | $ | - | $ | 36,071 | $ | 33,959 | $ | 36,071 | $ | 33,959 | ||||||||||||||||
Interest rate swaps | - | - | 4,645 | 3,386 | - | - | 4,645 | 3,386 | ||||||||||||||||||||||||
Total liabilities | $ | - | $ | - | $ | 4,645 | $ | 3,386 | $ | 36,071 | $ | 33,959 | $ | 40,716 | $ | 37,345 |
- 29 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the Company'sCompany’s assets and liabilities that are carried at fair value on a recurring basis, classified within Level 3 of the valuation hierarchy for the periodperiods indicated:
| | | | | | | | | | | | |
|
| For the three months ended | ||||||||||
| | June 30, 2022 | | June 30, 2021 | ||||||||
| | Trust preferred | | Junior subordinated | | Trust preferred | | Junior subordinated | ||||
|
| securities |
| debentures |
| securities |
| debentures | ||||
|
| (In thousands) | ||||||||||
Beginning balance | | $ | 1,740 | | $ | 57,955 | | $ | 1,342 | | $ | 44,712 |
Net (loss) gain from fair value adjustment of financial assets (1) | |
| (80) | |
| — | |
| 153 | |
| — |
Net (gain) loss from fair value adjustment of financial liabilities (1) | |
| — | |
| (3,025) | |
| — | |
| 5,528 |
Increase (Decrease) in accrued interest | |
| 2 | |
| 61 | |
| — | |
| (3) |
Change in unrealized (gains) losses included in other comprehensive loss | |
| — | |
| 361 | |
| — | |
| (423) |
Ending balance | | $ | 1,662 | | $ | 55,352 | | $ | 1,495 | | $ | 49,814 |
Changes in unrealized gains held at period end | | $ | — | | $ | 2,775 | | $ | — | | $ | 2,973 |
For the three months ended | ||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||
| | Trust preferred securities | | Junior subordinated debentures | | Trust preferred securities | | Junior subordinated debentures | ||||||||
(In thousands) | ||||||||||||||||
Beginning balance | $ | 7,444 | $ | 35,137 | $ | 7,167 | $ | 27,485 | ||||||||
Security call | (6,300 | ) | - | - | - | |||||||||||
Net gain from fair value adjustment of financial assets (1) | 28 | - | 23 | - | ||||||||||||
Net loss from fair value adjustment of financial liabilities (1) | - | 925 | - | 296 | ||||||||||||
Decrease in accrued interest receivable | (89 | ) | - | - | - | |||||||||||
Increase in accrued interest payable | - | 9 | - | 10 | ||||||||||||
Change in unrealized gains included in other comprehensive income | - | - | 1 | - | ||||||||||||
Ending balance | $ | 1,083 | $ | 36,071 | $ | 7,191 | $ | 27,791 | ||||||||
Changes in unrealized gains held at period end | $ | - | $ | - | $ | 1 | $ | - |
(1) | Totals in the |
The following table sets forth the Company's assets and liabilities that are carried at fair value on a recurring basis, classified within Level 3 of the valuation hierarchy for the period indicated:
For the nine months ended | ||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||
| | Trust preferred securities | | Junior subordinated debentures | | Trust preferred securities | | Junior subordinated debentures | ||||||||
(In thousands) | ||||||||||||||||
Beginning balance | $ | 7,361 | $ | 33,959 | $ | 7,212 | $ | 29,018 | ||||||||
Security call | (6,300 | ) | - | - | - | |||||||||||
Net gain (loss) from fair value adjustment of financial assets (1) | 108 | - | (23 | ) | - | |||||||||||
Net loss (gain) from fair value adjustment of financial liabilities (1) | - | 2,090 | - | (1,250 | ) | |||||||||||
Decrease in accrued interest receivable | (88 | ) | - | - | - | |||||||||||
Increase in accrued interest payable | - | 22 | 1 | 23 | ||||||||||||
Change in unrealized gains included in other comprehensive income | 2 | - | 1 | - | ||||||||||||
Ending balance | $ | 1,083 | $ | 36,071 | $ | 7,191 | $ | 27,791 | ||||||||
Changes in unrealized gains held at period end | $ | - | $ | - | $ | 1 | $ | - |
During the three and nine months ended September 30, 2017, one mutual fund security for $11.6 million was transferred from Level 2 into Level 1. There were no transfers between Levels 1, 2 and 3 during the three and nine months ended September 30, 2016.
- 30 -
-31-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | |
|
| For the six months ended | ||||||||||
| | June 30, 2022 | | June 30, 2021 | ||||||||
| | Trust preferred | | Junior subordinated | | Trust preferred | | Junior subordinated | ||||
|
| securities |
| debentures |
| securities |
| debentures | ||||
|
| (In thousands) | ||||||||||
Beginning balance | | $ | 1,695 | | $ | 56,472 | | $ | 1,295 | | $ | 43,136 |
Net (loss) gain from fair value adjustment of financial assets (1) | |
| (35) | |
| — | |
| 200 | |
| — |
Net (gain) loss from fair value adjustment of financial liabilities (1) | |
| — | |
| (1,757) | |
| — | |
| 6,987 |
Decrease in accrued interest | |
| 2 | |
| 78 | |
| — | |
| (6) |
Change in unrealized (gains) losses included in other comprehensive loss | |
| — | |
| 559 | |
| — | |
| (303) |
Ending balance | | $ | 1,662 | | $ | 55,352 | | $ | 1,495 | | $ | 49,814 |
Changes in unrealized gains held at period end | | $ | — | | $ | 2,775 | | $ | — | | $ | 2,973 |
The following tables present the quantitative information about recurring Level 3 fair value of financial instruments and the fair value measurements at the periods indicated:
| | | | | | | | | | | | |
| | June 30, 2022 |
| |||||||||
|
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average | | |
|
| | (Dollars in thousands) | | ||||||||
Assets: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Trust preferred securities | | $ | 1,662 |
| Discounted cash flows |
| Discount rate |
| n/a |
| 2.5 | % |
| | | | | | | | | | | | |
Liabilities: | |
|
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | | |
Junior subordinated debentures | | $ | 55,352 |
| Discounted cash flows |
| Discount rate |
| n/a |
| 2.5 | % |
| | | | | | | | | | | | | ||||||||||||||||
|
| December 31, 2021 |
| |||||||||||||||||||||||||
|
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| |||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
|
| (Dollars in thousands) | | |||||||||||||||||||||||||
Assets: |
| |
|
|
|
|
|
|
|
|
| | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Trust preferred securities | $ | 1,083 | Discounted cash flows | Discount rate | n/a | 5.9 | % | | $ | 1,695 |
| Discounted cash flows |
| Discount rate |
| n/a |
| 2.2 | % | |||||||||
| | | | | | | | | | | | | ||||||||||||||||
Liabilities: | |
|
|
|
|
|
|
|
|
|
| | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Junior subordinated debentures | $ | 36,071 | Discounted cash flows | Discount rate | n/a | 5.9 | % | | $ | 56,472 |
| Discounted cash flows |
| Discount rate |
| n/a |
| 2.2 | % |
December 31, 2016 | ||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Assets: | ||||||||||||||||||
Trust preferred securities | $ | 7,191 | Discounted cash flows | Discount rate | 6.3% | - | 7.1% | 7.0 | % | |||||||||
Liabilities: | ||||||||||||||||||
Junior subordinated debentures | $ | 33,959 | Discounted cash flows | Discount rate | n/a | 6.3 | % |
The significant unobservable inputs used in the fair value measurement of the Company’s trust preferred securities and junior subordinated debentures valued under Level 3 at SeptemberJune 30, 20172022 and December 31, 2016,2021, are the effective yields used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a significantly lower or higher fair value measurement.
-32-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a non-recurring basis and the methodlevel that was used to determine their fair value at SeptemberJune 30, 20172022 and December 31, 2016:2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted Prices |
| | | | | |
| | |
| | |
| | |
| | | ||||
| | in Active Markets | | Significant Other | | Significant Other | | | | | | | ||||||||||||
| | for Identical Assets | | Observable Inputs | | Unobservable Inputs | | Total carried at fair value | ||||||||||||||||
| | (Level 1) | | (Level 2) | | (Level 3) | | on a non-recurring basis | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
|
| (In thousands) | ||||||||||||||||||||||
Assets: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Non-accrual loans | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 22,502 | | $ | 11,026 | | $ | 22,502 | | $ | 11,026 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 22,502 | | $ | 11,026 | | $ | 22,502 | | $ | 11,026 |
Quoted Prices | ||||||||||||||||||||||||||||||||
in Active Markets | Significant Other | Significant Other | ||||||||||||||||||||||||||||||
for Identical Assets | Observable Inputs | Unobservable Inputs | Total carried at fair value | |||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | on a recurring basis | |||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Impaired loans | $ | - | $ | - | $ | - | $ | - | $ | 20,159 | $ | 14,968 | $ | 20,159 | $ | 14,968 | ||||||||||||||||
Other real estate owned | - | - | - | - | - | 533 | - | 533 | ||||||||||||||||||||||||
Total assets | $ | - | $ | - | $ | - | $ | - | $ | 20,159 | $ | 15,501 | $ | 20,159 | $ | 15,501 |
- 31 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables present the qualitative information about non-recurring Level 3 fair value of financial instruments and the fair value measurements at the periods indicated:
| | | | | | | | | | | | |
|
| At June 30, 2022 |
| |||||||||
|
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| |
| | (Dollars in thousands) |
| |||||||||
Assets: |
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | | |
Non-accrual loans | | $ | 22,140 |
| Sales approach |
| Reduction for planned expedited disposal | | 8.0% to 15.0 | % | 12.0 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Non-accrual loans | | $ | 362 |
| Discounted Cashflow |
| Discount Rate |
| 4.3 | % | 4.3 | % |
| | | | | | | Probability of Default | | 35.0 | % | 35.0 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| At December 31, 2021 |
| |||||||||
|
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| |
| | (Dollars in thousands) |
| |||||||||
Assets: |
| |
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | | |
Non-accrual loans | | $ | 10,579 |
| Sales approach |
| Reduction for planned expedited disposal | | 8.0% to 15.0 | % | 11.9 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Non-accrual loans | | $ | 447 |
| Discounted Cashflow |
| Discount Rate |
| 4.3 | % | 4.3 | % |
| | | | | | | Probability of Default | | 35.0 | % | 35.0 | % |
| | | | | | | | | | | | |
September 30, 2017 | ||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Assets: | ||||||||||||||||||
Impaired loans | $ | 1,566 | Income approach | Capitalization rate | 6.5% | to | 7.5% | 7.0 | % | |||||||||
Reduction for planned expedited disposal | 15.0% | 15.0 | % | |||||||||||||||
Impaired loans | $ | 13,852 | Sales approach | Adjustment to sales comparison value to reconcile differences between comparable sales | -50.0% | to | 16.2% | -0.6 | % | |||||||||
Reduction for planned expedited disposal | 0.0% | to | 15.0% | 3.7 | % | |||||||||||||
Impaired loans | $ | 4,741 | Blended income and sales approach | Adjustment to sales comparison value to reconcile differences between comparable sales | -30.0% | to | 25.0% | -0.8 | % | |||||||||
Capitalization rate | 5.0% | to | 9.8% | 7.5 | % | |||||||||||||
Reduction for planned expedited disposal | 14.5% | to | 15.0% | 15.0 | % |
December 31, 2016 | ||||||||||||||||||
Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Assets: | ||||||||||||||||||
Impaired loans | $ | 2,007 | Income approach | Capitalization rate | 6.0% | to | 7.5% | 7.0 | % | |||||||||
Reduction planned for expedited disposal | 15.0% | 15.0 | % | |||||||||||||||
Impaired loans | $ | 8,703 | Sales approach | Adjustment to sales comparison value to reconcile differences between comparable sales | -40.0% | to | 16.2% | -1.5 | % | |||||||||
Reduction planned for expedited disposal | 0% | to | 15.0% | 7.7 | % | |||||||||||||
Impaired loans | $ | 4,258 | Blended income and sales approach | Adjustment to sales comparison value to reconcile differences between comparable sales | -50.0% | to | 25.0% | -0.6 | % | |||||||||
Capitalization rate | 5.3% | to | 9.5% | 7.2 | % | |||||||||||||
Reduction planned for expedited disposal | 15.0% | 15.0 | % | |||||||||||||||
Other real estate owned | $ | 533 | Sales approach | Adjustment to sales comparison value to reconcile differences between comparable sales | 3.3% | to | 18.6% | 11.0 | % |
The Company did not0t have any liabilities that were carried at fair value on a non-recurring basis at SeptemberJune 30, 20172022 and December 31, 2016.2021.
- 32 -
-33-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The methods and assumptions used to estimate fair value at SeptemberJune 30, 20172022 and December 31, 20162021 are as follows:
Cash and Due from Banks, Overnight Interest-Earning Deposits and Federal Funds Sold:
The fair values of financial instruments that are short-term or reprice frequently and have little or no risk are considered to have a fair value that approximates carrying value.
FHLB-NY stock:
The fair value is based upon the par value of the stock, which equals its carrying value.
Securities:
The fair values of securities are contained in Note 4 (“Securities”) of the Notes to Consolidated Financial Statements. Fair value is based upon quoted market prices, where available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and the instrument being valued. When there is limited activity or less transparency around inputs to the valuation, securities are valued using discounted cash flows.
Loans held for sale:
The fair value of non-performing loans held for sale is estimated through a negotiated sales price.
Non-accrual Loans:
The fair value of loans is estimated by discounting the expected future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities.
For non-accruing loans, fair value is generally estimated by discounting management’s estimate of future cash flows with a discount rate commensurate with the risk associated with such assets or, for collateral dependent loans, 85% of the appraised or internally estimated value of the property, except for taxi medallion loans. The fair valueproperty. See Note 5 (“Loans”) of the underlying collateral of taxi medallion loans is the most recent reported arm’s length transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates.
Other Real Estate Owned:
OREO are carried at fair value less selling costs. The fair value is based on appraised value through a current appraisal, or sometimes through an internal review, additionally adjusted by the estimated costs to sell the property.
Accrued Interest Receivable:
The carrying amount is a reasonable estimate of fair value due to its short-term nature and is valued at the input level for its underlying financial asset.
Due to Depositors:
The fair values of demand, passbook savings, NOW, money market deposits and escrow deposits are, by definition, equalNotes to the amount payable on demand at the reporting dates (i.e. their carrying value). The fair value of certificates of deposits are estimated by discounting the expected future cash flows using the rates currently offered for deposits of similar remaining maturities.Consolidated Financial Statements.
Junior Subordinated Debentures:
Borrowings:
The fair value of borrowings is estimated by discounting the contractual cash flows using interest rates in effect for borrowings with similar maturities and collateral requirements or using a market-standard model. The fair value of the junior subordinated debentures was developed using a credit spread based on thestated spreads for recently issued subordinated debt issued byinstruments for issuers of similar asset size and credit quality of the Company and with similar durations adjusting for differences in the junior subordinated debt’s credit rating, liquidity, and time to maturity.
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes The unrealized net gain/loss attributable to Consolidated Financial Statements
(Unaudited)
Accrued Interest Payable:
The carrying amount is a reasonable estimate ofchanges in our own credit risk was determined by adjusting the fair value due to its short-term natureas determined in the proceeding sentence by the average rate of default on debt instruments with a similar debt rating as our junior subordinated debentures, with the difference from the original calculation and is valued atthis calculation resulting in the input level for its underlying financial liability.
instrument-specific unrealized gain/loss.
Interest Rate Swaps:
The fair value of interest rate swaps is based upon broker quotes.
-34-
OtherPART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Instruments:Statements
(Unaudited)
The fair values of commitments to sell, lend or borrow are estimated using the fees currently charged or paid to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties or on the estimated cost to terminate them or otherwise settle with the counterparties at the reporting date. For fixed-rate loan commitments to sell, lend or borrow, fair values also consider the difference between current levels of interest rates and committed rates (where applicable). At September 30, 2017 and December 31, 2016, the fair values of the above financial instruments approximate the recorded amounts of the related fees and were not considered to be material.
The following tables set forth the carrying amounts and estimated fair values of selected financial instruments based on the assumptions described above used by the Company in estimating fair value at the periods indicated:
| | | | | | | | | | | | | | | |
|
| June 30, 2022 | |||||||||||||
| | Carrying | | Fair | | | | | | | | | | ||
|
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
|
| (In thousands) | |||||||||||||
Assets: |
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 137,026 | | $ | 137,026 | | $ | 137,026 | | $ | — | | $ | — |
Securities held-to-maturity | |
|
| |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | |
| 7,885 | |
| 7,496 | |
| — | |
| 7,496 | |
| — |
Other securities | |
| 67,315 | |
| 57,064 | |
| — | |
| — | |
| 57,064 |
Securities available for sale | |
|
| |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | |
| 510,934 | |
| 510,934 | |
| — | |
| 510,934 | |
| — |
Other securities | |
| 346,720 | |
| 346,720 | |
| 11,573 | |
| 333,485 | |
| 1,662 |
Loans | |
| 6,760,393 | |
| 6,720,653 | |
| — | |
| — | |
| 6,720,653 |
FHLB-NY stock | |
| 50,017 | |
| 50,017 | |
| — | |
| 50,017 | |
| — |
Accrued interest receivable | |
| 38,811 | |
| 38,811 | |
| 37 | |
| 2,532 | |
| 36,242 |
Interest rate swaps | |
| 53,985 | |
| 53,985 | |
| — | |
| 53,985 | |
| — |
| | | | | | | | | | | | | | | |
Liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | |
Deposits | | $ | 6,407,577 | | $ | 6,392,190 | | $ | 5,500,634 | | $ | 891,556 | | $ | — |
Borrowed Funds | |
| 1,089,621 | |
| 1,075,154 | |
| — | |
| 1,019,802 | |
| 55,352 |
Accrued interest payable | |
| 5,637 | |
| 5,637 | |
| — | |
| 5,637 | |
| — |
Interest rate swaps | |
| 13,258 | |
| 13,258 | |
| — | |
| 13,258 | |
| — |
| | | | | | | | | | | | | | | |
|
| December 31, 2021 | |||||||||||||
| | Carrying | | Fair | | | | | | | | | | ||
|
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
| | (In thousands) | |||||||||||||
Assets: |
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 81,723 | | $ | 81,723 | | $ | 81,723 | | $ | — | | $ | — |
Securities held-to-maturity | |
|
| |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | |
| 7,894 | |
| 8,667 | |
| — | |
| 8,667 | |
| — |
Other securities | |
| 49,974 | |
| 53,362 | |
| — | |
| — | |
| 53,362 |
Securities available for sale | |
|
| |
|
| |
|
| |
|
| |
|
|
Mortgage-backed securities | |
| 572,184 | |
| 572,184 | |
| — | |
| 572,184 | |
| — |
Other securities | |
| 205,052 | |
| 205,052 | |
| 12,485 | |
| 190,872 | |
| 1,695 |
Loans | |
| 6,638,105 | |
| 6,687,125 | |
| — | |
| — | |
| 6,687,125 |
FHLB-NY stock | |
| 35,937 | |
| 35,937 | |
| — | |
| 35,937 | |
| — |
Accrued interest receivable | |
| 38,698 | |
| 38,698 | |
| — | |
| 1,574 | |
| 37,124 |
Interest rate swaps | |
| 10,683 | |
| 10,683 | |
| — | |
| 10,683 | |
| — |
| | | | | | | | | | | | | | | |
Liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | | | | | | | | | | | |
Deposits | | $ | 6,385,445 | | $ | 6,385,276 | | $ | 5,438,870 | | $ | 946,406 | | $ | — |
Borrowed Funds | |
| 815,544 | |
| 816,012 | |
| — | |
| 759,540 | |
| 56,472 |
Accrued interest payable | |
| 4,777 | |
| 4,777 | |
| — | |
| 4,777 | |
| — |
Interest rate swaps | |
| 25,071 | |
| 25,071 | |
| — | |
| 25,071 | |
| — |
September 30, 2017 | ||||||||||||||||||||
Carrying | Fair | |||||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and due from banks | $ | 60,161 | $ | 60,161 | $ | 60,161 | $ | - | $ | - | ||||||||||
Securities held-to-maturity | ||||||||||||||||||||
Mortgage-backed securities | 7,978 | 7,839 | - | 7,839 | - | |||||||||||||||
Other securities | 22,952 | 21,542 | - | - | 21,542 | |||||||||||||||
Securities available for sale | ||||||||||||||||||||
Mortgage-backed securities | 519,861 | 519,861 | - | 519,861 | - | |||||||||||||||
Other securities | 276,698 | 276,698 | 11,589 | 264,026 | 1,083 | |||||||||||||||
Loans | 5,070,376 | 5,058,558 | - | - | 5,058,558 | |||||||||||||||
FHLB-NY stock | 55,228 | 55,228 | - | 55,228 | - | |||||||||||||||
Accrued interest receivable | 21,076 | 21,076 | - | 21,076 | - | |||||||||||||||
Interest rate swaps | 5,410 | 5,410 | - | 5,410 | - | |||||||||||||||
Total assets | $ | 6,039,740 | $ | 6,026,373 | $ | 71,750 | $ | 873,440 | $ | 5,081,183 | ||||||||||
Liabilities: | ||||||||||||||||||||
Deposits | $ | 4,444,448 | $ | 4,445,811 | $ | 3,039,893 | $ | 1,405,918 | $ | - | ||||||||||
Borrowings | 1,200,682 | 1,196,962 | - | 1,160,891 | 36,071 | |||||||||||||||
Accrued interest payable | 3,512 | 3,512 | - | 3,512 | - | |||||||||||||||
Interest rate swaps | 4,645 | 4,645 | - | 4,645 | - | |||||||||||||||
Total liabilities | $ | 5,653,287 | $ | 5,650,930 | $ | 3,039,893 | $ | 2,574,966 | $ | 36,071 |
- 34 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 2016 | ||||||||||||||||||||
Carrying | Fair | |||||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and due from banks | $ | 35,857 | $ | 35,857 | $ | 35,857 | $ | - | $ | - | ||||||||||
Securities held-to-maturity | ||||||||||||||||||||
Other securities | 37,735 | 35,408 | - | - | 35,408 | |||||||||||||||
Securities available for sale | ||||||||||||||||||||
Mortgage-backed securities | 516,476 | 516,476 | - | 516,476 | - | |||||||||||||||
Other securities | 344,905 | 344,905 | - | 337,544 | 7,361 | |||||||||||||||
Loans | 4,835,693 | 4,814,840 | - | - | 4,814,840 | |||||||||||||||
FHLB-NY stock | 59,173 | 59,173 | - | 59,173 | - | |||||||||||||||
Interest rate swaps | 6,350 | 6,350 | - | 6,350 | - | |||||||||||||||
Total assets | $ | 5,836,189 | $ | 5,813,009 | $ | 35,857 | $ | 919,543 | $ | 4,857,609 | ||||||||||
Liabilities: | ||||||||||||||||||||
Deposits | $ | 4,205,631 | $ | 4,213,714 | $ | 2,833,516 | $ | 1,380,198 | $ | - | ||||||||||
Borrowings | 1,266,563 | 1,255,283 | - | 1,221,324 | 33,959 | |||||||||||||||
Interest rate swaps | 3,386 | 3,386 | - | 3,386 | - | |||||||||||||||
Total liabilities | $ | 5,475,580 | $ | 5,472,383 | $ | 2,833,516 | $ | 2,604,908 | $ | 33,959 |
10.11. Derivative Financial Instruments
At SeptemberJune 30, 20172022 and December 31, 2016,2021, the Company’s derivative financial instruments consistconsisted of interest rate swaps. The Company’s interest rate swaps are used for three purposes: 1) to mitigate the Company’s exposure to rising interest rates on a portion ($18.0 million) of its floating rate junior subordinated debentures that have a contractual value of $61.9 million, at September 30, 2017 and December 31, 2016; 2) mitigate the Company’s exposure to rising interest rates on certain fixed rate loans totaling $279.5$289.2 million and $235.4$299.6 million at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively; 2) to facilitate risk management strategies for our loan customers with $224.6 million of swaps outstanding,
-35-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
which include $112.3 million with customers and $112.3 million with bank counterparties at June 30, 2022 and $228.0 million of swaps outstanding, which include $114.0 million with customers and $114.0 million with bank counterparties at December 31, 2021; and 3) to mitigate exposure to rising interest rates on certain short-term advances and brokered deposits totaling $50.0$871.5 million at SeptemberJune 30, 2017.
2022, and $996.5 at December 31, 2021.
At SeptemberJune 30, 2017,2022 and December 31, 2021, we held derivatives designated as cash flow hedges, fair value hedges and certain derivatives not designated as hedges. At December 31, 2016, we held fair value hedges and certain derivatives not designated as hedges.
The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of Other Assets for derivatives with positive fair values and Other Liabilities for derivatives with negative fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.
At SeptemberJune 30, 20172022 and December 31, 2016,2021, derivatives with a combined notional amount of $36.3$224.6 million and $228.0 million, respectively, were not designated as hedges. At SeptemberJune 30, 20172022 and December 31, 2016,2021, derivatives with a combined notional amount of $261.2$289.2 million and $217.1$299.6 million, respectively, were designated as fair value hedges. At SeptemberJune 30, 2017,2022 and December 31, 2021, derivatives with a combined notional amount of $50.0$871.5 million and $996.5 million, respectively, were designated as cash flow hedges. At December 31, 2016, the Company did not have any cash flow hedges.
For cash flow hedges, the effective portion of changes in the fair value of the derivative isare reported in AOCL,accumulated other comprehensive income (loss), net of tax, but the ineffective portion of changestax. Amounts in accumulated other comprehensive loss are reclassified into earnings in the fair valuesame period during which the hedged forecasted transaction effects earnings. During the three months ended June 30, 2022 and 2021, $2.4 million and $2.6 million, respectively, was reclassified from accumulated other comprehensive loss to interest expense. The estimated amount to be reclassified in the next 12 months out of the derivativeaccumulated other comprehensive loss is recognized directly in earnings. $5.7 million.
Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net gain/lossgain (loss) from fair value adjustments” in the Consolidated Statements of Income.
- 35 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:
| | | | | | | | | | | | |
|
| June 30, 2022 |
| December 31, 2021 | ||||||||
| | Notional | | | | | Notional | | | | ||
|
| Amount |
| Fair Value (1) |
| Amount |
| Fair Value (1) | ||||
| | (In thousands) | ||||||||||
Interest rate swaps (cash flow hedge) | | $ | 871,500 | | $ | 26,483 | | $ | 355,000 | | $ | 7,328 |
Interest rate swaps (fair value hedge) | |
| 279,615 | |
| 14,274 | |
| — | |
| — |
Interest rate swaps (non-hedge) | | | 112,293 | | | 13,228 | | | 113,988 | | | 3,355 |
| | | | | | | | | | | | |
Interest rate swaps (fair value hedge) | |
| 9,585 | |
| (30) | |
| 299,555 | |
| (12,329) |
Interest rate swaps (cash flow hedge) | |
| — | |
| — | |
| 641,500 | |
| (9,387) |
Interest rate swaps (non-hedge) | |
| 112,293 | |
| (13,228) | |
| 113,988 | |
| (3,355) |
Total derivatives | | $ | 1,385,286 | | $ | 40,727 | | $ | 1,524,031 | | $ | (14,388) |
-36-
September 30, 2017 | December 31, 2016 | |||||||||||||||
Notional | Net Carrying | Notional | Net Carrying | |||||||||||||
Amount | Value (1) | Amount | Value (1) | |||||||||||||
Interest rate swaps (fair value hedge) | $ | 176,408 | $ | 5,410 | $ | 182,177 | $ | 6,350 | ||||||||
Interest rate swaps (fair value hedge) | 84,774 | (1,482 | ) | 34,916 | (658 | ) | ||||||||||
Interest rate swaps (non-hedge) | 36,321 | (3,045 | ) | 36,321 | (2,728 | ) | ||||||||||
Interest rate swaps (cash flow hedge) | 50,000 | (118 | ) | - | - | |||||||||||
Total derivatives | $ | 347,503 | $ | 765 | $ | 253,414 | $ | 2,964 |
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents information regarding the Company’s fair value hedged items for the periods indicated:
| | | | | | | | | | | | |
| | | | | | | | | Cumulative Amount | |||
| | | | | | | | | of the Fair Hedging Adjustment | |||
Line Item in the Consolidated Statement | | | Carrying Amount of the | | | Included in the Carrying Amount of | ||||||
of Financial Condition in Which | | | Hedged | | | the Hedged | ||||||
the Hedged Item Is Included | | | Assets/(Liabilities) | | | Assets/(Liabilities) | ||||||
(In thousands) | | | June 30, 2022 | | | December 31, 2021 | | | June 30, 2022 | | | December 31, 2021 |
Loans | | | | | | | | | | | | |
Multi-family residential | | $ | 98,970 | | $ | 113,730 | | $ | (5,819) | | $ | 7,608 |
Commercial real estate | | | 176,894 | | | 192,694 | | | (9,749) | | | 3,477 |
Commercial business and other | | | — | | | 6,298 | | | — | | | 122 |
Total | | $ | 275,864 | | $ | 312,722 | | $ | (15,568) | | $ | 11,207 |
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:
| | | | | | | | | | | | | |
| |
| For the three months ended |
| For the six months ended | ||||||||
| | | June 30, | | June 30, | ||||||||
(In thousands) | Affected Line Item in the Statements Where Net Income is Presented |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Financial Derivatives: | |
| |
|
| |
|
| |
|
| |
|
| Other interest expense | | $ | — | | $ | (138) | | $ | — | | $ | (272) |
| Net gain (loss) from fair value adjustments | | | — | | | (1,195) | | | — | | | 1,423 |
Interest rate swaps (non-hedge) | | | | — | | | (1,333) | | | — | | | 1,151 |
| | | | | | | | | | | | | |
Interest rate swaps (fair value hedge) | Interest and fees on loans | | | (886) | | | (2,062) | | | (2,321) | | | (2,025) |
| | | | | | | | | | | | | |
| Other interest expense | |
| (1,489) | |
| (2,619) | |
| (3,954) | | | (5,205) |
| Deposit | | | 104 | | | — | | | 49 | | | — |
Interest rate swaps (cash flow hedge) | | | | (1,385) | | | (2,619) | | | (3,905) | | | (5,205) |
| | | | | | | | | | | | | |
Net loss | | | $ | (2,271) | | $ | (6,014) | | $ | (6,226) | | $ | (6,079) |
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Financial Derivatives: | ||||||||||||||||
Interest rate swaps (non-hedge) | $ | (56 | ) | $ | (111 | ) | $ | (316 | ) | $ | (3,532 | ) | ||||
Interest rate swaps (fair value hedge) | (351 | ) | (380 | ) | (597 | ) | (795 | ) | ||||||||
Net loss (1) | $ | (407 | ) | $ | (491 | ) | $ | (913 | ) | $ | (4,327 | ) |
During the three months and nine months ended September 30, 2017 and 2016, the Company did not record any hedge ineffectiveness.
The Company’s interest rate swaps are subject to master netting arrangements between the Company and its twothree designated counterparties. The Company has not made a policy election to offset its derivative positions.
- 36 -
-37-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables present the effect of the master netting arrangements on the presentation of the derivative assets and liabilities in the Consolidated Statements of Financial Condition as of the dates indicated:
| | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | ||||||||||||||||
| | | | | | | | | | | Gross Amounts Not Offset in the | | | | ||||
| | | | | | | | | | | Consolidated Statements of | | | | ||||
| | | | | Gross Amount Offset in | | Net Amount of Assets | | Financial Condition | | | | ||||||
| | Gross Amount of | | the Statements | | Presented in the | | Financial | | Cash Collateral | | | | |||||
(In thousands) |
| Recognized Assets |
| of Condition |
| Statements of Condition |
| Instruments |
| Received |
| Net Amount | ||||||
| | | | | | | | | | | | | | | |
| | |
Interest rate swaps | | $ | 53,985 | | $ | 0 | | $ | 53,985 | | $ | 0 | | $ | 38,972 |
| $ | 15,013 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Gross Amounts Not Offset in the | | | | ||||
| | | | | | | | | | | Consolidated Statements of | | | | ||||
| | Gross Amount of | | Gross Amount Offset in | | Net Amount of Liabilities | | Financial Condition | | | | |||||||
| | Recognized | | the Statements | | Presented in the | | Financial | | Cash Collateral | | | ||||||
(In thousands) |
| Liabilities |
| of Condition |
| Statements of Condition |
| Instruments |
| Pledged |
| Net Amount | ||||||
| | | | | | | | | | | | | | | |
| | |
Interest rate swaps | | $ | 13,258 | | $ | 0 | | $ | 13,258 | | $ | 0 | | $ | 0 |
| $ | 13,258 |
| | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||||||||
| | | | | | | | | | | Gross Amounts Not Offset in the | | | | ||||
| | | | | | | | | | | Consolidated Statements of | | | | ||||
| | | | | Gross Amount Offset in | | Net Amount of Assets | | Financial Condition | | | | ||||||
| | Gross Amount of | | the Statements | | Presented in the | | Financial | | Cash Collateral | | | | |||||
(In thousands) |
| Recognized Assets |
| of Condition |
| Statements of Condition |
| Instruments |
| Received |
| Net Amount | ||||||
| | | | | | | | | | | | | | | |
| | |
Interest rate swaps | | $ | 10,683 | | $ | 0 | | $ | 10,683 | | $ | 0 | | $ | — |
| $ | 10,683 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Gross Amounts Not Offset in the | | | | ||||
| | | | | | | | | | | Consolidated Statements of | | | | ||||
| | Gross Amount of | | Gross Amount Offset in | | Net Amount of Liabilities | | Financial Condition | | | | |||||||
| | Recognized | | the Statements | | Presented in the | | Financial | | Cash Collateral | | | ||||||
(In thousands) |
| Liabilities |
| of Condition |
| Statements of Condition |
| Instruments |
| Pledged |
| Net Amount | ||||||
| | | | | | | | | | | | | | | |
| | |
Interest rate swaps | | $ | 25,071 | | $ | 0 | | $ | 25,071 | | $ | 0 | | $ | 21,527 |
| $ | 3,544 |
September 30, 2017 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the Consolidated Statement of Condition | ||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Assets | Gross Amount Offset in the Statement of Condition | Net Amount of Assets Presented in the Statement of Condition | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||
Interest rate swaps | $ | 5,410 | $ | - | $ | 5,410 | $ | - | $ | 670 | $ | 4,740 |
Gross Amounts Not Offset in the Consolidated Statement of Condition | ||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Liabilities | Gross Amount Offset in the Statement of Condition | Net Amount of Liabilities Presented in the Statement of Condition | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
Interest rate swaps | $ | 4,645 | $ | - | $ | 4,645 | $ | 1,105 | $ | - | $ | 3,540 |
December 31, 2016 | ||||||||||||||||||||||||
Gross Amounts Not Offset in the Consolidated Statement of Condition | ||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Assets | Gross Amount Offset in the Statement of Condition | Net Amount of Assets Presented in the Statement of Condition | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||
Interest rate swaps | $ | 6,350 | $ | - | $ | 6,350 | $ | - | $ | 2,964 | $ | 3,386 |
Gross Amounts Not Offset in the Consolidated Statement of Condition | ||||||||||||||||||||||||
(In thousands) | Gross Amount of Recognized Liabilities | Gross Amount Offset in the Statement of Condition | Net Amount of Liabilities Presented in the Statement of Condition | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
Interest rate swaps | $ | 3,386 | $ | - | $ | 3,386 | $ | - | $ | - | $ | 3,386 |
- 37 -
-38-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
11. Income Taxes
Flushing Financial Corporation files consolidated Federal and combined New York State and New York City income tax returns with its subsidiaries, with the exception of the Company’s trusts, which file separate Federal income tax returns as trusts, and Flushing Preferred Funding Corporation, which files a separate Federal income tax return as a real estate investment trust. Additionally, the Bank files New Jersey State tax returns.
Income tax provisions are summarized as follows:
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Federal: | ||||||||||||||||
Current | $ | 6,703 | $ | 6,474 | $ | 16,308 | $ | 26,362 | ||||||||
Deferred | (2,023 | ) | (906 | ) | (1,303 | ) | (844 | ) | ||||||||
Total federal tax provision | 4,680 | 5,568 | 15,005 | 25,518 | ||||||||||||
State and Local: | ||||||||||||||||
Current | 1,398 | 1,492 | 2,817 | 7,853 | ||||||||||||
Deferred | (787 | ) | (405 | ) | (502 | ) | (384 | ) | ||||||||
Total state and local tax provision | 611 | 1,087 | 2,315 | 7,469 | ||||||||||||
Total income tax provision | $ | 5,291 | $ | 6,655 | $ | 17,320 | $ | 32,987 |
- 38 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
12. Accumulated Other Comprehensive Income (Loss):
The following table sets forth the changes in accumulated other comprehensive loss by component for the three months ended September 30, 2017:
Unrealized Gains (Losses) on Available for Sale Securities | Unrealized Gains (Losses) on Cash flow Hedges | Defined Benefit Pension Items | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Beginning balance, net of tax | $ | (2,110 | ) | $ | (124 | ) | $ | (4,342 | ) | $ | (6,576 | ) | ||||
Other comprehensive income before reclassifications, net of tax | (333 | ) | 56 | - | (277 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | 108 | - | 81 | 189 | ||||||||||||
Net current period other comprehensive income, net of tax | (225 | ) | 56 | 81 | (88 | ) | ||||||||||
Ending balance, net of tax | $ | (2,335 | ) | $ | (68 | ) | $ | (4,261 | ) | $ | (6,664 | ) |
The following table sets forth the changes in accumulated other comprehensive loss by component for the three months ended September 30, 2016:
Unrealized Gains (Losses) on Available for Sale Securities | Defined Benefit Pension Items | Total | ||||||||||
(In thousands) | ||||||||||||
Beginning balance, net of tax | $ | 7,923 | $ | (4,835 | ) | $ | 3,088 | |||||
Other comprehensive income before reclassifications, net of tax | (2,942 | ) | - | (2,942 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | - | 103 | 103 | |||||||||
Net current period other comprehensive income, net of tax | (2,942 | ) | 103 | (2,839 | ) | |||||||
Ending balance, net of tax | $ | 4,981 | $ | (4,732 | ) | $ | 249 |
- 39 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2017:
Unrealized Gains (Losses) on Available for Sale Securities | Unrealized Gains (Losses) on Cash flow Hedges | Defined Benefit Pension Items | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Beginning balance, net of tax | $ | (3,859 | ) | $ | - | $ | (4,503 | ) | $ | (8,362 | ) | |||||
Other comprehensive income before reclassifications, net of tax | 1,416 | (68 | ) | - | 1,348 | |||||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | 108 | - | 242 | 350 | ||||||||||||
Net current period other comprehensive income, net of tax | 1,524 | (68 | ) | 242 | 1,698 | |||||||||||
Ending balance, net of tax | $ | (2,335 | ) | $ | (68 | ) | $ | (4,261 | ) | $ | (6,664 | ) |
The following table setstables set forth the changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2016:periods indicated:
Unrealized Gains (Losses) on Available for Sale Securities | Defined Benefit Pension Items | Total | ||||||||||
(In thousands) | ||||||||||||
Beginning balance, net of tax | $ | (521 | ) | $ | (5,041 | ) | $ | (5,562 | ) | |||
Other comprehensive income before reclassifications, net of tax | 6,852 | - | 6,852 | |||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | (1,350 | ) | 309 | (1,041 | ) | |||||||
Net current period other comprehensive income, net of tax | 5,502 | 309 | 5,811 | |||||||||
Ending balance, net of tax | $ | 4,981 | $ | (4,732 | ) | $ | 249 |
- 40 -
| | | | | | | | | | | | | | | |
|
| For the three months ended June 30, 2022 | |||||||||||||
|
| Unrealized Gains |
| Unrealized Gains | | | | | | | | | | ||
|
| (Losses) on |
| (Losses) on | | | |
| Fair Value | | | | |||
|
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | | | | ||||
|
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | |||||
|
| (In thousands) | |||||||||||||
| | | | | | | | | | | | | | | |
Beginning balance, net of tax | | $ | (29,699) | | $ | 13,345 | | $ | (1,291) | | $ | 2,141 | | $ | (15,504) |
| | | | | | | | | | | | | | | |
Other comprehensive income before reclassifications, net of tax | |
| (20,434) | |
| 3,285 | |
| 0 | |
| (219) | |
| (17,368) |
| | | | | | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income, net of tax | |
| 0 | |
| 1,630 | |
| (22) | |
| 0 | |
| 1,608 |
| | | | | | | | | | | | | | | |
Net current period other comprehensive income, net of tax | |
| (20,434) | |
| 4,915 | |
| (22) | |
| (219) | |
| (15,760) |
| | | | | | | | | | | | | | | |
Ending balance, net of tax | | $ | (50,133) | | $ | 18,260 | | $ | (1,313) | | $ | 1,922 | | $ | (31,264) |
-39-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | | | | |
|
| For the three months ended June 30, 2021 | |||||||||||||
|
| Unrealized Gains |
| Unrealized Gains | | | | | | | | | | ||
|
| (Losses) on |
| (Losses) on | | | |
| Fair Value | | | | |||
|
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | | | | ||||
|
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | |||||
|
| (In thousands) | |||||||||||||
| | | | | | | | | | | | | | | |
Beginning balance, net of tax | | $ | (927) | | $ | (9,723) | | $ | (1,818) | | $ | 1,765 | | $ | (10,703) |
| | | | | | | | | | | | | | | |
Other comprehensive income before reclassifications, net of tax | |
| 1,497 | |
| (1,267) | |
| 0 | |
| 276 | |
| 506 |
| | | | | | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income, net of tax | |
| (85) | |
| 1,788 | |
| 77 | |
| 0 | |
| 1,780 |
| | | | | | | | | | | | | | | |
Net current period other comprehensive income (loss), net of tax | |
| 1,412 | |
| 521 | |
| 77 | |
| 276 | |
| 2,286 |
| | | | | | | | | | | | | | | |
Ending balance, net of tax | | $ | 485 | | $ | (9,202) | | $ | (1,741) | | $ | 2,041 | | $ | (8,417) |
| | | | | | | | | | | | | | | |
|
| For the six months ended June 30, 2022 | |||||||||||||
|
| Unrealized Gains |
| Unrealized Gains | | | | | | | | | | ||
|
| (Losses) on |
| (Losses) on | | | |
| Fair Value | | | | |||
|
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | | | | ||||
|
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | |||||
|
| (In thousands) | |||||||||||||
| | | | | | | | | | | | | | | |
Beginning balance, net of tax | | $ | (6,272) | | $ | (1,406) | | $ | (1,282) | | $ | 2,276 | | $ | (6,684) |
| | | | | | | | | | | | | | | |
Other comprehensive income before reclassifications, net of tax | |
| (43,861) | |
| 16,177 | |
| — | |
| (354) | |
| (28,038) |
| | | | | | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income, net of tax | |
| — | |
| 3,489 | |
| (31) | |
| — | |
| 3,458 |
| | | | | | | | | | | | | | | |
Net current period other comprehensive income (loss), net of tax | |
| (43,861) | |
| 19,666 | |
| (31) | |
| (354) | |
| (24,580) |
| | | | | | | | | | | | | | | |
Ending balance, net of tax | | $ | (50,133) | | $ | 18,260 | | $ | (1,313) | | $ | 1,922 | | $ | (31,264) |
-40-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | | | | |
|
| For the six months ended June 30, 2021 | |||||||||||||
|
| Unrealized Gains |
| Unrealized Gains | | | | | | | | | | ||
|
| (Losses) on |
| (Losses) on | | | |
| Fair Value | | | | |||
|
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | | | | ||||
|
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | |||||
|
| (In thousands) | |||||||||||||
| | | | | | | | | | | | | | | |
Beginning balance, net of tax | | $ | 1,290 | | $ | (17,521) | | $ | (1,884) | | $ | 1,849 | | $ | (16,266) |
| | | | | | | | | | | | | | | |
Other comprehensive income before reclassifications, net of tax | |
| (720) | |
| 4,706 | |
| — | |
| 192 | |
| 4,178 |
| | | | | | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income, net of tax | |
| (85) | |
| 3,613 | |
| 143 | |
| — | |
| 3,671 |
| | | | | | | | | | | | | | | |
Net current period other comprehensive income (loss), net of tax | |
| (805) | |
| 8,319 | |
| 143 | |
| 192 | |
| 7,849 |
| | | | | | | | | | | | | | | |
Ending balance, net of tax | | $ | 485 | | $ | (9,202) | | $ | (1,741) | | $ | 2,041 | | $ | (8,417) |
-41-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth significant amounts reclassified from accumulated other comprehensive lossincome (loss) by component for the periods indicated:
| | | | | |
For the three months ended June 30, 2022 | |||||
|
| Amounts Reclassified from | | | |
Details about Accumulated Other |
| Accumulated Other | | Affected Line Item in the Statement | |
Comprehensive Loss Components |
| Comprehensive Loss |
| Where Net Income is Presented | |
(In thousands) | |||||
Cash flow hedges: | |
|
| |
|
Interest rate swaps | | $ | (2,364) | | Interest expense |
| |
| 734 | | Provision for income taxes |
| | $ | (1,630) | | Net of tax |
Amortization of defined benefit pension items: | |
|
| |
|
Actuarial losses | | $ | 6 | (1) | Other expense |
Prior service credits | |
| 7 | (1) | Other expense |
| |
| 13 | | Total before tax |
| |
| 9 | | Provision for income taxes |
| | $ | 22 | | Net of tax |
For the three months ended September 30, 2017 | ||||||||
Amounts Reclassified from | ||||||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | ||||||
Comprehensive Loss Components | Comprehensive Loss | Where Net Income is Presented | ||||||
(In thousands) | ||||||||
Unrealized losses on available for sale securities: | $ | (186 | ) | Net loss on sale of securities | ||||
78 | Tax benefit | |||||||
$ | (108 | ) | Net of tax | |||||
Amortization of defined benefit pension items: | ||||||||
Actuarial losses | $ | (152 | ) | (1) | Other operating expense | |||
Prior service credits | 12 | (1) | Other operating expense | |||||
(140 | ) | Total before tax | ||||||
59 | Tax benefit | |||||||
$ | (81 | ) | Net of tax |
For the three months ended September 30, 2016 | ||||||||
Amounts Reclassified from | ||||||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | ||||||
Comprehensive Loss Components | Comprehensive Loss | Where Net Income is Presented | ||||||
(In thousands) | ||||||||
Amortization of defined benefit pension items: | ||||||||
Actuarial losses | $ | (192 | ) | (1) | Other operating expense | |||
Prior service credits | 11 | (1) | Other operating expense | |||||
(181 | ) | Total before tax | ||||||
78 | Tax benefit | |||||||
$ | (103 | ) | Net of tax |
- 41 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2017 | ||||||||
Amounts Reclassified from | ||||||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | ||||||
Comprehensive Loss Components | Comprehensive Loss | Where Net Income is Presented | ||||||
(In thousands) | ||||||||
Unrealized losses on available for sale securities: | $ | (186 | ) | Net loss on sale of securities | ||||
78 | Tax benefit | |||||||
$ | (108 | ) | Net of tax | |||||
Amortization of defined benefit pension items: | ||||||||
Actuarial losses | $ | (454 | ) | (1) | Other operating expense | |||
Prior service credits | 34 | (1) | Other operating expense | |||||
(420 | ) | Total before tax | ||||||
178 | Tax benefit | |||||||
$ | (242 | ) | Net of tax |
For the nine months ended September 30, 2016 | ||||||||
Amounts Reclassified from | ||||||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | ||||||
Comprehensive Loss Components | Comprehensive Loss | Where Net Income is Presented | ||||||
(In thousands) | ||||||||
Unrealized gains on available for sale securities: | $ | 2,363 | Net gain on sale of securities | |||||
(1,013 | ) | Tax expense | ||||||
$ | 1,350 | Net of tax | ||||||
Amortization of defined benefit pension items: | ||||||||
Actuarial losses | $ | (575 | ) | (1) | Other operating expense | |||
Prior service credits | 33 | (1) | Other operating expense | |||||
(542 | ) | Total before tax | ||||||
233 | Tax benefit | |||||||
$ | (309 | ) | Net of tax |
(1) | These accumulated other comprehensive |
| | | | | |
For the three months ended June 30, 2021 | |||||
|
| Amounts Reclassified from | | | |
Details about Accumulated Other |
| Accumulated Other |
| Affected Line Item in the Statement | |
Comprehensive Loss Components |
| Comprehensive Loss | | Where Net Income is Presented | |
(In thousands) | |||||
| | | | | |
Unrealized losses on available for sale securities | | $ | 123 | | Net loss on sale of securities |
| |
| (38) | | Provision for income taxes |
| | $ | 85 | | Net of tax |
| | | | |
|
Cash flow hedges: |
| |
| | |
Interest rate swaps | | $ | (2,605) | | Interest expense |
| |
| 817 | | Provision for income taxes |
| | $ | (1,788) | | Net of tax |
| | | | | |
Amortization of defined benefit pension items: | |
|
| | |
Actuarial losses | | $ | (133) | (1) | Other operating expenses |
Prior service credits | |
| 21 | (1) | Other operating expenses |
| |
| (112) | | Total before tax |
| |
| 35 | | Provision for income taxes |
| | $ | (77) | | Net of tax |
(1) | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9 (“Pension and Other Postretirement Benefit Plans”) for additional information |
-42-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | |
For the six months ended June 30, 2022 | |||||
|
| Amounts Reclassified from | | | |
Details about Accumulated Other |
| Accumulated Other | | Affected Line Item in the Statement | |
Comprehensive Loss Components |
| Comprehensive Loss |
| Where Net Income is Presented | |
(In thousands) | |||||
Cash flow hedges: | |
|
| |
|
Interest rate swaps | | $ | (5,087) | | Interest expense |
| |
| 1,598 | | Provision for income taxes |
| | $ | (3,489) | | Net of tax |
Amortization of defined benefit pension items: | |
|
| |
|
Actuarial losses | | $ | 12 | (1) | Other expense |
Prior service credits | |
| 14 | (1) | Other expense |
| |
| 26 | | Total before tax |
| |
| 5 | | Provision for income taxes |
| | $ | 31 | | Net of tax |
(1) | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9 (“Pension and Other Postretirement Benefit Plans”) for additional information |
| | | | | |
For the six months ended June 30, 2021 | |||||
|
| Amounts Reclassified from | | | |
Details about Accumulated Other |
| Accumulated Other |
| Affected Line Item in the Statement | |
Comprehensive Loss Components |
| Comprehensive Loss | | Where Net Income is Presented | |
(In thousands) | |||||
| | | | | |
Unrealized losses on available for sale securities | | $ | 123 | | Net loss on sale of securities |
| |
| (38) | | Provision for income taxes |
| | $ | 85 | | Net of tax |
| | | | | |
Cash flow hedges: |
| |
| | |
Interest rate swaps | | $ | (5,242) | | Interest expense |
| |
| 1,629 | | Provision for income taxes |
| | $ | (3,613) | | Net of tax |
| | | | | |
Amortization of defined benefit pension items: | |
|
| | |
Actuarial losses | | $ | (250) | (1) | Other operating expenses |
Prior service credits | |
| 43 | (1) | Other operating expenses |
| |
| (207) | | Total before tax |
| |
| 64 | | Provision for income taxes |
| | $ | (143) | | Net of tax |
(1) | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9 (“Pension and Other Postretirement Benefit Plans”) for additional information |
-43-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
13.Regulatory Capital
Under current capital regulations, the Bank is required to comply with four separate capital adequacy standards.standards and a Capital Conservation Buffer (“CCB”). As of SeptemberJune 30, 2017,2022, the Bank continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. In 2016, a Capital Conservation Buffer (“CCB”) requirement became effective for banks. The CCB is designed to establish a capital range above minimum capital requirements and impose constraints on dividends, share buybacks and discretionary bonus payments when capital levels fall below prescribed levels. The minimum CCB in 2017 is 1.25% and increases 0.625% annually through 2019 to 2.5%. The CCB for the Bank was 5.67% and 6.13% at SeptemberJune 30, 2017 was 6.60%.
2022 and December 31, 2021, respectively.
Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.
| | | | | | | | | | | |
|
| June 30, 2022 |
| December 31, 2021 |
| ||||||
| | | | | Percent of | | | | | Percent of |
|
|
| Amount |
| Assets |
| Amount |
| Assets |
| ||
|
| (Dollars in thousands) | | ||||||||
Tier I (leverage) capital: |
| |
|
|
|
| |
|
|
| |
Capital level | | $ | 853,721 |
| 10.28 | % | $ | 840,105 |
| 10.39 | % |
Requirement to be well-capitalized | |
| 415,167 |
| 5.00 | |
| 404,366 |
| 5.00 | |
Excess | |
| 438,554 |
| 5.28 | |
| 435,739 |
| 5.39 | |
| | | | | | | | | | | |
Common Equity Tier I risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 853,721 |
| 13.09 | % | $ | 840,105 |
| 13.58 | % |
Requirement to be well-capitalized | |
| 423,985 |
| 6.50 | |
| 402,100 |
| 6.50 | |
Excess | |
| 429,736 |
| 6.59 | |
| 438,005 |
| 7.08 | |
| | | | | | | | | | | |
Tier I risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 853,721 |
| 13.09 | % | $ | 840,105 |
| 13.58 | % |
Requirement to be well-capitalized | |
| 521,828 |
| 8.00 | |
| 494,892 |
| 8.00 | |
Excess | |
| 331,893 |
| 5.09 | |
| 345,213 |
| 5.58 | |
| | | | | | | | | | | |
Total risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 891,992 |
| 13.67 | % | $ | 874,400 |
| 14.13 | % |
Requirement to be well-capitalized | |
| 652,285 |
| 10.00 | |
| 618,615 |
| 10.00 | |
Excess | |
| 239,707 |
| 3.67 | |
| 255,785 |
| 4.13 | |
- 42 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2017 | December 31, 2016 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Amount | Assets | Amount | Assets | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Tier I (leverage) capital: | ||||||||||||||||
Capital level | $ | 629,748 | 10.10 | % | $ | 607,033 | 10.12 | % | ||||||||
Requirement to be well capitalized | 311,625 | 5.00 | 299,848 | 5.00 | ||||||||||||
Excess | 318,123 | 5.10 | 307,185 | 5.12 | ||||||||||||
Common Equity Tier I risk-based capital: | ||||||||||||||||
Capital level | $ | 629,748 | 14.04 | % | $ | 607,033 | 14.12 | % | ||||||||
Requirement to be well capitalized | 291,614 | 6.50 | 279,443 | 6.50 | ||||||||||||
Excess | 338,134 | 7.54 | 327,590 | 7.62 | ||||||||||||
Tier 1 risk-based capital: | ||||||||||||||||
Capital level | $ | 629,748 | 14.04 | % | $ | 607,033 | 14.12 | % | ||||||||
Requirement to be well capitalized | 358,910 | 8.00 | 343,930 | 8.00 | ||||||||||||
Excess | 270,838 | 6.04 | 263,103 | 6.12 | ||||||||||||
Total risk-based capital: | ||||||||||||||||
Capital level | $ | 655,017 | 14.60 | % | $ | 629,262 | 14.64 | % | ||||||||
Requirement to be well capitalized | 448,637 | 10.00 | 429,913 | 10.00 | ||||||||||||
Excess | 206,380 | 4.60 | 199,349 | 4.64 |
- 43 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Holding Company is subject to the same regulatory capital requirements as the Bank. As of SeptemberJune 30, 2017,2022, the Holding Company continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. The CCB for the Holding Company at SeptemberJune 30, 20172022 and December 31, 2021 was 6.61%.5.34% and 5.75%, respectively.
-44-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.
| | | | | | | | | | | |
|
| June 30, 2022 |
| December 31, 2021 |
| ||||||
| | | | | Percent of | | | | | Percent of |
|
|
| Amount |
| Assets |
| Amount |
| Assets |
| ||
| | (Dollars in thousands) |
| ||||||||
Tier I (leverage) capital: |
| |
|
|
|
| |
|
|
| |
Capital level | | $ | 739,776 |
| 8.91 | % | $ | 726,174 |
| 8.98 | % |
Requirement to be well-capitalized | |
| 415,221 |
| 5.00 | |
| 404,422 |
| 5.00 | |
Excess | |
| 324,555 |
| 3.91 | |
| 321,752 |
| 3.98 | |
| | | | | | | | | | | |
Common Equity Tier I risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 686,258 |
| 10.52 | % | $ | 671,494 |
| 10.86 | % |
Requirement to be well-capitalized | |
| 423,976 |
| 6.50 | |
| 401,836 |
| 6.50 | |
Excess | |
| 262,282 |
| 4.02 | |
| 269,658 |
| 4.36 | |
| | | | | | | | | | | |
Tier I risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 739,776 |
| 11.34 | % | $ | 726,174 |
| 11.75 | % |
Requirement to be well-capitalized | |
| 521,817 |
| 8.00 | |
| 494,568 |
| 8.00 | |
Excess | |
| 217,959 |
| 3.34 | |
| 231,606 |
| 3.75 | |
| | | | | | | | | | | |
Total risk-based capital: | |
|
|
|
| |
|
|
|
| |
Capital level | | $ | 903,047 |
| 13.84 | % | $ | 885,469 |
| 14.32 | % |
Requirement to be well-capitalized | |
| 652,271 |
| 10.00 | |
| 618,210 |
| 10.00 | |
Excess | |
| 250,776 |
| 3.84 | |
| 267,259 |
| 4.32 | |
September 30, 2017 | December 31, 2016 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Amount | Assets | Amount | Assets | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Tier I (leverage) capital: | ||||||||||||||||
Capital level | $ | 565,265 | 9.07 | % | $ | 539,228 | 9.00 | % | ||||||||
Requirement to be well capitalized | 311,475 | 5.00 | 299,654 | 5.00 | ||||||||||||
Excess | 253,790 | 4.07 | 239,574 | 4.00 | ||||||||||||
Common Equity Tier I risk-based capital: | ||||||||||||||||
Capital level | $ | 530,442 | 11.84 | % | $ | 506,432 | 11.79 | % | ||||||||
Requirement to be well capitalized | 291,325 | 6.50 | 279,121 | 6.50 | ||||||||||||
Excess | 239,117 | 5.34 | 227,311 | 5.29 | ||||||||||||
Tier 1 risk-based capital: | ||||||||||||||||
Capital level | $ | 565,265 | 12.61 | % | $ | 539,228 | 12.56 | % | ||||||||
Requirement to be well capitalized | 358,554 | 8.00 | 343,534 | 8.00 | ||||||||||||
Excess | 206,711 | 4.61 | 195,694 | 4.56 | ||||||||||||
Total risk-based capital: | ||||||||||||||||
Capital level | $ | 665,534 | 14.85 | % | $ | 636,457 | 14.82 | % | ||||||||
Requirement to be well capitalized | 448,193 | 10.00 | 429,417 | 10.00 | ||||||||||||
Excess | 217,341 | 4.85 | 207,040 | 4.82 |
- 44 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
14. New Authoritative Accounting Pronouncements
Accounting Standards Pending Adoption:
In August 2017,March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-12, “Derivatives and Hedging (Topic 815)”providing targeted improvements to the accounting for hedging activities, which is effective January 1, 2019, with early adoption permitted in any interim period or fiscal year before the effective date. The guidance introduces a number of amendments, several of which are optional, that are designed to simplify the application of hedge accounting, improve financial statement transparency and more closely align hedge accounting with an entity’s risk management strategies. We are currently evaluating the impact of adopting this new guidance on our consolidated results of operations, financial condition and cash flows.
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities” which shortens the amortization period for premiums on purchased callable debt securities to the earliest call date, rather than amortizing over the full contractual term. The ASU does not change the accounting for securities held at a discount. The amendments in this ASU require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. If the security has additional future call dates, any excess of the amortized cost basis over the amount repayable by the issuer at the next call date should be amortized to the next call date. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance is not expected to have an impact on the Company's financial positions, results of operations or disclosures as we currently amortize our callable debt securities to the first call date.
In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which requires that an employer disaggregate the service cost component from the other components of net benefit cost, as follows:
The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted as of the beginning of an annual period. The guidance is not expected to have a significant impact on the Company's financial positions, results of operations or disclosures.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The guidance is not expected to have a significant impact on the Company's financial positions, results of operations or disclosures.
In August 2016, the FASB issued ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments”, to clarify how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are intended to reduce diversity in practice by clarifying whether the following items should be categorized as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) policies, (vi) distributions from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) receipts and payments with aspects of more than one class of cash flows. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company does not expect adoption of this ASU will have a material effect on its consolidated financial statements.
- 45 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
In June 2016, the FASB issued ASU No. 2016-13,2022-02, “Financial Instruments – Credit Losses”Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (Topic 326), which sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the recognition and measurement guidance related to TDRs for creditors that have adopted ASC Topic 326 (commonly referred to as “CECL”) with the recognition and measurement guidance contained in ASC 310-20 to determine whether a modification results in a new loan or a continuation of an existing incurred loss model and will apply to the measurement of credit losses on financial assets measured at amortized cost and to some off-balance sheet credit exposures.loan. This ASU will be effectivealso enhances disclosures about loan modifications for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.borrowers who are experiencing financial difficulty. The Company has begun collecting and evaluating data and system requirementsguidance also requires public business entities to implement this standard. The adoptionpresent gross write-offs by year of this update could have a material impact on the Company’s consolidated results of operations and financial condition. The extent of the impact is still unknown and will depend on many factors, such as the composition of the Company’s loan portfolio and expected loss history at adoption. Management has developed committees to evaluate and implement CECL.
In February 2016, the FASB issuedorigination in their vintage disclosures. ASU No. 2016-02, “Leases”. From the lessee's perspective, the new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for a lessee. From the lessor's perspective, the new standard requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The new standard2022-02 is effective for fiscal years beginning after December 15, 2018,2022, including interim periods within those fiscal years. AThe amendments in this ASU should be applied on a prospective basis; however, institutions have the option to apply a modified retrospective transition approach is requiredmethod as it relates to the recognition and measurement of TDRs, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. We are evaluating the impact of this ASU and have not yet determined whether this will have material effect on our business operations and consolidated financial statements.
In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform” (Topic 848), which clarifies that certain optional expedients and exceptions in ASC 848 for lessees for capitalcontract modifications and operating leases existing at, or entered into after,hedge accounting apply to derivatives that are affected by the beginningdiscounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the earliest comparative period presented inscope clarification and to tailor the financial statements, with certain practicalexisting guidance to derivative instruments affected by discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients available. A modified retrospective transition approach is requiredand exceptions for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has not adopted a new accounting policy as of the filing date. Management is continuingapplying GAAP to evaluate the standard, but the effects of recognizing most operating leases on the Consolidated Statements of Financial Condition is expected to be material. The Company expects to recognize right-of-use assetsloan and lease liabilities for substantially all of its operating lease commitments based onagreements, derivative contracts, and other transactions affected by the present value of unpaid lease payments as of the date of adoption.
- 46 - anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions
-45-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Inthat are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or re-measurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity could elect to apply ASU 2020-04 for contract modifications as of January 2016, FASB issued ASU No. 2016-01 “Financial Instruments” which requires1, 2020, or prospectively from a date within an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive incomeinterim period that includes or is subsequent to March 12, 2020, up to the changes in instrument-specific credit riskdate that the financial statements are available to be issued. Once elected for financial liabilities measured usinga Topic or an Industry Subtopic within the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculateCodification, the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available for sale debt securities in combination with other deferred tax assets. The ASU provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The ASU also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The amendments are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We do not believe the adoption of this standard will have a material impact on the Company’s consolidated results of operations, financial condition or cash flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This ASU establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. The guidance in this ASU must be applied prospectively for public companies is effectiveall eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the annual periods beginning afterselected start date (yet to be determined) and December 15, 2016, including interim periods therein.31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We are evaluating the impacts of this ASU 2014-09 doesand have not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements. The amendments in this update apply to contract modifications that replace a reference rate reform and contemporaneous modifications of other terms related to the majority of our revenue streams. In August 2015, the FASB approved a one-year delayreplacement of the effective date of this standard. The deferral would require public entities to apply the standard for annual reporting periods beginning after December 15, 2017. Public companies would be permitted to elect to early adopt for annual reporting periods beginning after December 15, 2016. The Company has completed a review of its income streams determining that a significant portion of its income is derived from sources scoped out of this guidance, therefore, we do not believe the adoption of this standard will have a material impact on the Company’s consolidated results of operations, financial condition or cash flows.
reference rate.
- 47 -
-46-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report should be read in conjunction with the more detailed and comprehensive disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2016.2021. In addition, please read this section in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein.
As used in this Quarterly Report, the words “we,” “us,” “our” and the “Company” are used to refer to Flushing Financial Corporation and its direct and indirect wholly owned subsidiaries, Flushing Bank (the “Bank”), Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, Flushing Service Corporation, and FSB Properties Inc.which was dissolved as of June 30, 2021.
Statements contained in this Quarterly Report relating to plans, strategies, objectives, 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 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, factors discussed elsewhere in this Quarterly Report and in other documents filed by us with the Securities and Exchange Commission from time to time, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2016.2021. 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. We have no obligation to update these forward-looking statements.
-47-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
Executive Summary
We are a Delaware corporation organized in May 1994. The Bank was organized in 1929 and becameas a federally chartered stockNew York State-chartered mutual savings bank on November 21, 1995, at which time Flushing Financial Corporation acquired all ofbank. Today the stock of the Bank. In 2013, the Bank’s charter was changed toBank operates as a full-service New York State charteredState-chartered commercial bank. The Bank’s primary regulator is the New York State Department of Financial Services, and its primary federal regulator is the Federal Deposit Insurance Corporation (“FDIC”). Deposits are insured to the maximum allowable amount by the FDIC. Additionally, the Bank is a member of the Federal Home Loan Bank system. The primary business of Flushing Financial Corporation has been the operation of the Bank. TheAt June 30, 2022, the Bank owns threetwo subsidiaries: Flushing Preferred Funding Corporation, Flushing Service Corporation, and FSB Properties Inc. The Bank also operates an internet branch, which operates under the brands of iGObanking.com® iGObanking.com® and BankPurely® (the “Internet Branch”). The activities of Flushing Financial Corporation are primarily funded by dividends, if any, received from the Bank, issuances of subordinated debt, junior subordinated debt, and issuances of equity securities. Flushing Financial Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol “FFIC.”
Our principal business is attracting retail deposits from the general public and investing those deposits together with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family residential loans, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-to-four family loans (focusing on mixed-use properties, which are properties that contain both residential dwelling units and commercial units); (2) Small Business Administration (“SBA”) loans and other small business loans; (3) construction loans, primarily for residential properties;loans; (4) mortgage loan surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. Our results of operations depend primarily on net interest income, which is the difference between the income earned on our interest-earning assets and the cost of our interest-bearing liabilities. Net interest income is the result of our net interest rate margin, which is the difference between the average yield earned on interest-earning assets and the average cost of interest-bearing liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the average balance of interest-bearing liabilities. We also generate non-interest income primarily from loan fees, service charges on deposit accounts, mortgage servicing fees, and other fees, income earned on Bank Owned Life Insurance (“BOLI”), dividends on Federal Home Loan Bank of New York (“FHLB-NY”) stock and net gains and losses on sales of securities and loans. Our operating expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and administrative expenses and income tax expense. Our results of operations also can be significantly affected by changes in the fair value of financial assets and financial liabilities for which changes in value are recorded through earnings and our periodic provision for loan losses and specific provision for losses on real estate owned.
- 48 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Our strategy is to continue our focus on being an institution serving consumers, businesses, and governmental units in our local markets. In furtherance of this objective, we intend to:
There can be no assurance that we will be able to effectively implement this strategy. Our strategy is subject to change by the Board of Directors.
credit losses.
Our investment policy, which is approved by the Board of Directors, is designed primarily to manage the interest rate sensitivity of our overall assets and liabilities, to generate a favorable return without incurring undue interest rate risk and credit risk, to complement our lending activities and to provide and maintain liquidity. In establishing our investment strategies, we consider our business and growth strategies, the economic environment, our interest rate risk exposure, our interest rate sensitivity “gap” position, the types of securities to be held and other factors. We classify our investment securities as available for sale or held-to-maturity.
-48-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
We carry a portion of our financial assets and financial liabilities atunder the fair value option and record changes in their fair value through earnings in non-interest income on our Consolidated Statements of Income and Comprehensive Income. A description of the financial assets and financial liabilities that are carried at fair value through earnings can be found in Note 910 (“Fair Value of Financial Instruments”) of the Notes to the Consolidated Financial Statements.
For the three months ended June 30, 2022 we reported net income of $25.0 million, or $0.81 per diluted common share, and reported record net interest income totaling $64.7 million. The record net interest income was driven by a $170.3 million increase in average earning assets during the quarter as the net interest margin declined one basis point compared to the three months ended March 31, 2022.
During the third quarter of 2017, we continued our strategy of focusing our origination efforts on higher yielding loans. Loan originations and purchases for the ninethree months ended SeptemberJune 30, 2017 totaled $710.7 million, with multi-family real estate, commercial real estate and commercial business loans accounting for 89.3%2022, the yield on interest-earning assets increased eight basis points, while the cost of originations and purchases. Our total loan portfolio grew 5% duringinterest-bearing liabilities increased 10 basis points from the ninethree months ended September 30, 2017 while holding our strong underwriting standards. Loan applicationsMarch 31, 2022, which resulted in process strengtheneda decrease of one basis point in net interest margin to $417.0 million at September 30, 2017, compared to $279.1 million at June 30, 2017 and $289.3 million at September 30, 2016.
The yield on loan production increased 21 basis points to 4.25%3.35% from 3.36% for the three months ended September 30, 2017,March 31, 2022. Excluding net gains (losses) from 4.04%qualifying hedges and purchase accounting adjustments, the net interest margin increased two basis points to 3.33% for the three months ended June 30, 2017 and 51 basis points2022 from 3.74% for the comparable quarter of 2016. This marks the first quarter since the quarter ended December 31, 2008 that our yield from new loan originations and purchases exceeded the yield of our total loan portfolio, after excluding prepayment penalty income and recovered interest from delinquent loans.
Our net interest margin3.31% for the three months ended SeptemberMarch 31, 2022.
Our loan portfolio is greater than 87% collateralized by real estate with an average loan to value of less than 38%. We have a long history and foundation built upon disciplined underwriting, good credit quality, and a resilient seasoned loan portfolio with strong asset protection. At June 30, 2017 was 2.90%, a decrease of five2022, our allowance for credit losses (“ACL”) - loans stood at 58 basis points from the trailing quarterof gross loans and four basis points from the comparable prior year period. At141.1% of non-performing loans. Non-performing assets at the end of the second quarter of 2017, in order to remain competitive in our market, we increased the rates paid on our government deposits by a weighted average of 33were 59 basis points. At the same time, we expanded BankPurely®, our eco-friendly, socially conscious, healthier lifestyle community internet brand, by offering a premium savings account. The full impact of these initiatives was experienced in the most recent quarter, as the costpoints of total deposits increased 14 basis points from the second quarter of 2017. Additionally, this quarter’s net-interest margin was negatively impacted by seasonal government deposit outflows, which were replaced with short-term borrowings costing an additional 30 basis points to 65 basis points.
We continued our discipline regarding non-interest expense and credit quality continued to improve, as our non-performing assets have decreased by 37% since the end of 2016 and net charge-offs remain minimal. However, during the recent quarter, we recorded a provision for loan losses for the first time since the fourth quarter of 2015, of $3.3 million. The provision was the result of a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio. At September 30, 2017, we have allocated $6.0 million of our allowance for taxi medallion loans which equals 33.0% of the outstanding principal.
- 49 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
assets.
The Bank and Company remain well-capitalized under current capital regulations and are subject to the same regulatory capital requirements. See Note 13 (“Regulatory Capital”) of the Notes to the Consolidated Financial Statements “Regulatory Capital”.
Statements.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 20172022 AND 20162021
General.Net income for the three months ended SeptemberJune 30, 20172022 was $10.2$25.0 million, a decreasean increase of $0.5$5.8 million, or 4.3%30.0%, compared to $10.6from $19.3 million for the three months ended SeptemberJune 30, 2016.2021. Diluted earnings per common share were $0.35$0.81 for the three months ended SeptemberJune 30, 2017, a decrease2022, an increase of $0.02,$0.20, or 5.4%32.8%, from $0.37$0.61 for the three months ended SeptemberJune 30, 2016.
2021.
Return on average equity decreased to 7.6%was 15.00% for the three months ended SeptemberJune 30, 2017 from 8.4%2022 compared to 11.95% for the three months ended SeptemberJune 30, 2016.2021. Return on average assets was 0.7%1.22% for the three months ended SeptemberJune 30, 2017 and 2016.2022 compared to 0.93% for the three months ended June 30, 2021.
Interest Income.Interest and dividend income increased $3.8$2.5 million, or 6.8%3.6%, to $59.3$74.3 million for the three months ended SeptemberJune 30, 20172022 from $55.5$71.7 million for the three months ended SeptemberJune 30, 2016.2021. The increase in interest income was primarily attributable to an increase of $251.7 million in the average balance of interest-earning assets to $5,936.1 million for the three months ended September 30, 2017 from $5,684.4 million for the comparable prior year period, combined with an increase of nine16 basis points in the yield of interest-earning assets to 4.00% for the three months ended September 30, 2017 from 3.91% in the comparable prior year period. Thepoint increase in the yield on interest-earning assets of nine basis points was primarily due to an increase of $347.1 million in the average balance of total loans, net, which have a higher yield than the yield of total interest-earning assets, combined with a decrease of $94.3 million in the average balance of total securities, which have a lower yield than the yield of total interest-earning assets. The yield of interest-earning assets also improved due to increases of four basis points and 12 basis points, respectively, in the yields of total loans, net and taxable securities3.85% for the three months ended SeptemberJune 30, 2017 from2022 compared to 3.69% for the comparable prior year period. Additionally, the yield of interest-earning deposits and federal funds sold increased 60 basis points for the three months ended September 30, 2017 from the comparable prior year period due to increases in the Federal Funds rate. The increases of four basis points in the yield on the total loans, net and 12 basis points in the yield of taxable securities were primarily due to the loans being originated and loans and securities being purchased at higher yields than the existing portfolio yield. Excluding prepayment penalty income and recoveredfrom loans, net recoveries/reversals of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting adjustments, the yield on total loans, net, would have increased fourseven basis points to 4.09%4.01% for the three months ended SeptemberJune 30, 20172022 from 4.05%3.94% for the three months ended SeptemberJune 30, 2016.2021.
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
Interest Expense.Interest expense increased $2.5decreased $1.1 million, or 17.9%10.7%, to $16.3$9.6 million for the three months ended SeptemberJune 30, 20172022 from $13.8$10.7 million for the three months ended SeptemberJune 30, 2016.2021. The increasedecrease in interest expense was primarily due to an increasea decline of 14six basis points in the average cost of interest-bearing liabilities to 1.23%0.60% for the three months ended SeptemberJune 30, 20172022 from 1.09%0.66% for the three months ended SeptemberJune 30, 2016, combined with an increase2021 and the decrease of $216.3$195.5 million in the average balance of interest-bearing liabilities to $5,275.9$6,337.4 million for the three months ended SeptemberJune 30, 2017,2022 from $5,059.6 million for the comparable prior year period. The 14 basis point increase in the cost of interest-bearing liabilities was primarily due to the Bank raising the rates we pay on some of our deposit products to stay competitive within our market. This increase in rates was partially offset by an improvement in our funding mix, as the combined average balance of lower costing savings, NOW and money market deposits increased $352.7 million to $2,597.6 million for the three months ended September 30, 2017 from $2,245.0 million for the comparable prior year period, while the combined average balance of higher costing certificates of deposit and borrowed funds decreased $141.7 million to $2,624.1 million for the three months ended September 30, 2017 from $2,765.8$6,532.9 million for the comparable prior year period.
Net Interest Income. ForNet interest income for the three months ended SeptemberJune 30, 2017, net interest income2022 was $43.0$64.7 million, an increase of $1.3$3.7 million, or 3.2%6.0%, from $41.7$61.0 million for the three months ended SeptemberJune 30, 2016.2021. The increase in net interest income was primarily due to net interest-earning assets growing $146.0 million year over year to $1,403.3 million for the quarter ended June 30, 2022, and an increase of 21 basis points in the net interest margin to 3.35% during the same period. Included in net interest income was prepayment penalty income, net of reversals and recovered interest from non-accrual loans totaling $2.3 million and $2.0 million for the three months ended June 30, 2022 and 2021, respectively, net losses from fair value adjustments on qualifying hedges totaling $60,000 and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and purchase accounting income adjustments of $0.4 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively. Excluding all of these items, the net interest margin for the three months ended June 30, 2022 was 3.22%, an increase of 18 basis points, from 3.04% for the three months ended June 30, 2021.
Provision (Benefit) for Credit Losses. During the three months ended June 30, 2022, the provision for credit losses was $1.6 million compared to a benefit for credit losses of $1.6 million for the three months ended June 30, 2021. During the three months ended June 30, 2022, non-performing assets increased $34.8 million to $48.9 million, at June 30, 2022. The increase in non-performing assets primarily resulted from the addition of one non-accrual investment security which was collateralized by real estate and three non-accrual commercial business loans. The current average loan-to-value ratio for our non-performing assets collateralized by real estate was 50.7% at June 30, 2022. The Bank continues to maintain conservative underwriting standards.
Non-Interest Income (Loss). Non-interest income for the three months ended June 30, 2022 was $7.4 million, an increase of $10.6 million from a loss of $3.2 million in the prior year comparable period. The increase was primarily due to the prior year period including net losses from fair value adjustments totaling $6.5 million compared to net gains totaling $2.5 million recorded during the three months ended June 30, 2022. Additionally, non-interest income for the three months ended June 30, 2022 included life insurance proceeds totaling $1.5 million compared to none recorded in the prior year comparable period.
Non-Interest Expense. Non-interest expense for the three months ended June 30, 2022 was $35.5 million, an increase of $1.5 million, or 4.4%, from $34.0 million for the three months ended June 30, 2021. The increase in non-interest expense was primarily due to the growth of the Company.
Income before Income Taxes. Income before income taxes for the three months ended June 30, 2022 was $35.0 million, an increase of $9.6 million, or 37.6%, from $25.4 million for the three months ended June 30, 2021 for the previously discussed reasons.
Provision for Income Taxes. The provision for income taxes was $9.9 million for the three months ended June 30, 2022, an increase of $3.8 million, or 61.4%, from $6.2 million for the three months ended June 30, 2021. The increase was primarily due to growth in income before income taxes and an increase in the effective tax rate. The effective tax rate for three months ended June 30, 2022 was 28.4% compared to 24.2% for the three months ended June 30, 2021. The increase in the effective tax rate was primarily due to the loss of certain New York State and City tax deductions in 2022.
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
General. Net income for the six months ended June 30, 2022 was $43.3 million, an increase of $5.0 million, or 12.9%, from $38.3 million for the six months ended June 30, 2021. Diluted earnings per common share were $1.39 for the six months ended June 30, 2022, an increase of $0.18, or 14.9%, from $1.21 for the six months ended June 30, 2021.
Return on average equity was 12.91% for the six months ended June 30, 2022 compared to 12.11% for the six months ended June 30, 2021. Return on average assets was 1.06% for the six months ended June 30, 2022 compared to 0.93% for the six months ended June 30, 2021.
Interest Income. Interest and dividend income increased $1.7 million, or 1.2%, to $145.6 million for the six months ended June 30, 2022 from $143.9 million for the six months ended June 30, 2021. The increase in interest income was primarily attributable to the 8 basis points increase in the yield on interest-earning assets to 3.81%, for the six months ended June 30, 2022, compared to 3.73% for the comparable prior year period. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting adjustments, the yield on total loans, net, increased three basis points to 3.97% for the six months ended June 30, 2022 from 3.94% for the six months ended June 30, 2021.
Interest Expense. Interest expense decreased $4.5 million, or 20.7%, to $17.4 million for the six months ended June 30, 2022 from $21.9 million for the six months ended June 30, 2021. The decrease in interest expense was primarily due to a decline of 12 basis points in the average cost of interest-bearing liabilities to 0.55% for the six months ended June 30, 2022 from 0.67% for the six months ended June 30, 2021 and the decrease of $226.3 million in the average balance of interest-bearing liabilities to $6,279.3 million for the six months ended June 30, 2022 from $6,505.5 million for the comparable prior year period.
Net Interest Income. Net interest income for the six months ended June 30, 2022 was $128.2 million, an increase of $6.3 million, or 5.1%, from $121.9 million for the six months ended June 30, 2021. The increase in net interest income was primarily due to an increase of $251.7 million20 basis points in the average balance ofnet interest margin to 3.36% during the six months ended June 30, 2022 and an increase in net interest-earning assets of $153.2 million to $5,936.1$1.376.7 million for the three months ended September 30, 2017 from $5,684.4 million for the comparable prior yearsame period. The yield earned on interest-earning assets increased nine basis points to 4.00% for the three months ended September 30, 2017 from 3.91% for the comparable prior year period. The cost of interest-bearing liabilities increased 14 basis points to 1.23% for the three months ended September 30, 2017 as compared to 1.09% for the three months ended September 30, 2016. The effects of the above on both the net interest spread and net interest margin were decreases of five basis points to 2.77% and four basis points to 2.90%, respectively, for the quarter ended September 30, 2017, compared to the quarter ended September 30, 2016. Included in net interest income was prepayment penalty income, from loans for the three months ended September 30, 2017 and 2016 totaling $1.6 million and $1.5 million, respectively,net of reversals and recovered interest from non-accrual loans totaling $0.3$4.0 million and $3.0 million for each of the threesix months ended SeptemberJune 30, 20172022 and 2016. Without2021, respectively, net (losses) gains from fair value adjustments on qualifying hedges totaling $(0.2) million and $0.8 million for the prepayment penaltysix months ended June 30, 2022 and 2021, respectively, and purchase accounting income adjustments of $1.4 million and recovered interest,$1.5 million for the six months ended June 30, 2022 and 2021, respectively. Excluding all of these items, the net interest margin for the threesix months ended SeptemberJune 30, 2017 would have been 2.77%2022 was 3.22%, a decreasean increase of four20 basis points, as compared to 2.81%from 3.02% for the threesix months ended SeptemberJune 30, 2016.2021.
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Provision for LoanCredit Losses.During the threesix months ended SeptemberJune 30, 2017, a2022, the provision for loancredit losses was recorded for $3.3$2.9 million, compared to none$1.2 million for the comparable prior year period.six months ended June 30, 2021. The provision recorded during the six months ended June 30, 2022 was the resultgreater than net charge-offs of a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio.$0.4 million. During the threesix months ended SeptemberJune 30, 2017, the Bank recorded net charge-offs totaling $0.2 million and non-accrual loans decreased $2.02022, nonperforming assets increased $34.0 million to $12.2$48.9 million from $14.1$14.9 million at June 30, 2017.December 31, 2021. The increase in non-performing assets primarily resulted from the addition of one non-accrual investment security which was collateralized by real estate and three non-accrual commercial business loans. The current average loan-to-value ratio for our non-performing loansassets collateralized by real estate was 34.9%50.7% at SeptemberJune 30, 2017.2022. The Bank continues to maintain conservative underwriting standards. We anticipate that we will continue to see low loss content in our loan portfolio. See Note 5 of the Notes to the Consolidated Financial Statements “Loans” and “ALLOWANCE FOR LOAN LOSSES.”
Non-Interest Income.Non-interest income for the threesix months ended SeptemberJune 30, 20172022 was $1.7$8.7 million, a decrease of $0.2 million, or 10.4%, from $1.9 million for the three months ended September 30, 2016. The decrease in non-interest income was primarily due to an increase of $0.5$5.6 million in net losses from fair value adjustments, partially offset by an increase of $0.3$3.1 million in income from bank owned life insurance as compared to the prior year comparable period.
Non-Interest Expense. Non-interest expense was $26.0 million for the three months ended September 30, 2017, a decrease of $0.3 million, or 1.2%, from $26.3 million for the three months ended September 30, 2016. The decrease in non-interest expenseincrease was primarily due to the prior year period including a write-down of $0.8net losses from fair value adjustments totaling $5.6 million on one OREOcompared to net gains totaling $0.7 million recorded during the six months ended June 30, 2022. Additionally, non-interest income for the six months ended June 30, 2022 included life insurance proceeds totaling $1.5 million compared to none recorded in the prior year comparable period. These increases were partially offset by an increasea decline in salaries and benefits expense, primarilyloan swap income during the six months ended June 30, 2022 compared to the six month ended June 30, 2021, due to annual salary increases and additionslower activity in staffing to support the growth of the Bank.
Income before Income Taxes. Income before the provision for income taxes decreased $1.8 million, or 10.5%, to $15.5 million for the three months ended September 30, 2017 from $17.3 million for the three months ended September 30, 2016 for the reasons discussed above.
Provision for Income Taxes. The provision for income taxes was $5.3 million for the three months ended September 30, 2017, a decrease of $1.4 million, or 20.5%, from $6.7 million for the three months ended September 30, 2016. The effective tax rate decreased to 34.2% for the three months ended September 30, 2017 from 38.5% in the comparable prior year period due to the impact of preferential tax items.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
General. Net income for the nine months ended September 30, 2017 was $35.2 million, a decrease of $15.5 million, or 30.5%, compared to $50.6 million for the nine months ended September 30, 2016. Diluted earnings per common share were $1.21 for the nine months ended September 30, 2017, a decrease of $0.54, or 30.9%, from $1.75 for the nine months ended September 30, 2016.
The nine months ended September 30, 2016, included a net after-tax gain on the sale of buildings of $19.6 million, or $0.67 per diluted common share. The nine months ended September 30, 2017 did not include any net gains on sale of buildings.
Return on average equity decreased to 8.9% for the nine months ended September 30, 2017 from 13.7% for the nine months ended September 30, 2016. Return on average assets decreased to 0.8% for the nine months ended September 30, 2017 from 1.2% for the nine months ended September 30, 2016.
- 51 - 2022.
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
Interest Income. Total interest and dividend income increased $9.9 million, or 6.0%, to $174.9 millionNon-Interest Expense. Non-interest expense for the ninesix months ended SeptemberJune 30, 2017 from $165.0 million for the nine months ended September 30, 2016. The increase in interest income2022 was primarily attributable to an increase of $313.5 million in the average balance of interest-earning assets to $5,909.9 million for the nine months ended September 30, 2017 from $5,596.3 million for the comparable prior year period. The yield on interest-earning assets increased two basis points to 3.95% for the nine months ended September 30, 2017 from 3.93% in the comparable prior year period. The increase in the yield on interest-earning assets of two basis points was primarily due to the yield on interest-earning assets being positively impacted by an increase of $407.3 million in the average balance of higher yielding total loans, net to $4,955.4 million for the nine months ended September 30, 2017 from $4,548.2 million for the comparable prior year period. Additionally, the yield on the securities portfolio increased 15 basis points to 2.80% for nine months ended September 30, 2017, from 2.65% for the comparable prior year period and the yield on interest-earning deposits increased 40 basis points to 0.81% for the nine months ended September 30, 2017 from 0.41% for the nine months ended September 30, 2016. The seven basis point decrease in the yield on total loans, net was primarily due to the decline in the rates earned on new loan originations and purchases, as compared to the existing portfolio, loans modifying to lower rates, and higher yielding loans prepaying. Excluding prepayment penalty income and recovered interest from loans, the yield on total loans, net, would have decreased two basis points to 4.07% for the nine months ended September 30, 2017 from 4.09% for the nine months ended September 30, 2016. The 15 basis point increase in the yield on the securities portfolio was primarily due to the net impact in the current year from $160.0 million in purchases at an average yield on 2.94% with $112.4 million in sales at an average yield of 2.21%.
Interest Expense. Interest expense increased $4.6 million, or 11.4%, to $44.8 million for the nine months ended September 30, 2017 from $40.2 million for the nine months ended September 30, 2016. The increase in interest expense was primarily due to an increase of $250.9 million in the average balance of interest-bearing liabilities to $5,272.8 million for the nine months ended September 30, 2017, from $5,021.9 million for the comparable prior year period. Additionally, the increase was due to an increase of six basis points in the cost of total interest-bearing liabilities to 1.13% for the nine months ended September 30, 2017 from 1.07% for the comparable prior year period. The six basis point increase in the cost of interest-bearing liabilities was primarily due to the Bank raising the rates we pay on some of our deposit products to stay competitive within our market. This increase in rates was partially offset by an improvement in our funding mix, as the combined average balance of lower costing savings, NOW and money market deposits increased $329.1 million to $2,645.2 million for the nine months ended September 30, 2017 from $2,316.1 million for the comparable prior year period, while the combined average balance of higher costing certificates of deposit and borrowed funds decreased $83.6 million to $2,566.8 million for the nine months ended September 30, 2017 from $2,650.4 million for the comparable prior year period.
Net Interest Income. For the nine months ended September 30, 2017, net interest income was $130.0$74.3 million, an increase of $5.3$2.1 million, or 4.3%3.0%, from $124.7$72.2 million for the ninesix months ended SeptemberJune 30, 2016.2021. The increase in net interest income was primarily due to an increase of $313.5 million in the average balance of interest-earning assets to $5,909.9 million for the nine months ended September 30, 2017 from the comparable prior year period. The yield earned on interest-earning assets increased two basis points to 3.95% for the nine months ended September 30, 2017. The cost of interest-bearing liabilities increased six basis points to 1.13% for the nine months ended September 30, 2017 as compared to 1.07% for the nine months ended September 30, 2016. The effects of the above on both the net interest spread and net interest margin were decreases of four basis points to 2.82% and 2.93%, respectively, for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. Included in net interest income was prepayment penalty income from loans for the nine months ended September 30, 2017 and 2016 totaling $3.6 million and $5.0 million, respectively, recovered interest from non-accrual loans totaling $1.1 million and $0.5 million, respectively, and accelerated accretion of discount upon the call of CLO securities totaling $0.4 million and $26,000, respectively. Without the prepayment penalty income, recovered interest and accelerated discount upon call, the net interest margin for the nine months ended September 30, 2017 would have been 2.82%, a decrease of two basis points, as compared to 2.84% for the nine months ended September 30, 2016.
Provision for Loan Losses. During the nine months ended September 30, 2017, a provision for loan losses was recorded for $3.3 million, compared to none for the comparable prior year period. The provision was the result of a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio. During the nine months ended September 30, 2017, the Bank recorded net charge-offs totaling $0.2 million and non-accrual loans decreased $8.9 million to $12.2 million from $21.0 million at December 31, 2016. The current average loan-to-value ratio for our non-performing loans collateralized by real estate was 34.9% at September 30, 2017. The Bank continues to maintain conservative underwriting standards. We anticipate that we will continue to see low loss content in our loan portfolio. See Note 5 of the Notes to the Consolidated Financial Statements “Loans” and “ALLOWANCE FOR LOAN LOSSES.”
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Non-Interest Income. Non-interest income for the nine months ended September 30, 2017 was $7.3 million, a decrease of $34.8 million, or 82.7%, from $42.1 million for the nine months ended September 30, 2016. The decrease in non-interest income was primarily due to the prior year period including $33.8 million in net gains on sale of buildings and $2.4 million in net gains on sale of securities compared to no building sales and a net loss of $0.2 million in sales of securities recorded during the nine months ended September 30, 2017. These decreases were partially offset by an increase in the gain from life insurance proceeds of $0.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.
Non-Interest Expense. Non-interest expense was $81.6 million for the nine months ended September 30, 2017, a decrease of $1.6 million, or 2.0%, from $83.2 million for the nine months ended September 30, 2016. The decrease in non-interest expense was primarily due to the nine months ended September 30, 2016 including a penalty of $2.1 million on the prepayment of $38.0 million in repurchase agreements and $1.7 million in net losses from the sale of OREO compared to no prepayment penalties on borrowings and a net gain on the sale of OREO totaling $50,000 recorded during the nine months ended September 30, 2017. In addition, the nine months ended September 30, 2017 had decreases of $1.1 million in FDIC insurance expense due to lower assessment rates and $0.4 million in foreclosure expense due to improved credit conditions. These reductions in non-interest expense were partially offset by an increase of $2.8 million in salaries and benefits primarily due to annual salary increases and additions in staffing to support the growth of the Bank.Company.
Income before Income Taxes. Income before the provision for income taxes decreased $31.1for the six months ended June 30, 2022 was $59.6 million, an increase of $8.0 million, or 37.2%15.4%, to $52.5from $51.6 million for the ninesix months ended SeptemberJune 30, 2017 from $83.6 million2021 for the nine months ended September 30, 2016 for the reasonspreviously discussed above.reasons.
Provision for Income Taxes.The provision for income taxes for the nine months ended September 30, 2017 was $17.3 million, a decrease of $15.7 million, or 47.5%, from $33.0$16.4 million for the comparable prior year period.six months ended June 30, 2022, an increase of $3.0 million, or 22.6%, from $13.3 million for the six months ended June 30, 2021. The decreaseincrease was primarily due to a decrease of $31.1 millionthe growth in income before income taxes, and a decreasean increase in the effective tax rate. The effective tax rate for six months ended June 30, 2022 was 27.4% compared to 25.8% for the six months ended June 30, 2021. The increase in the effective tax rate was primarily due to 33.0% for the nine months ended September 30, 2017 from 39.5%loss of certain New York State and City tax deductions in the comparable prior year period. The decrease in the effective tax rate reflects the impact of a change in the accounting treatment of deductible stock compensation expense from prior years. Additionally, the nine months ended September 30, 2016, effective tax rate reflected the impact of preferential tax items because of that period including the gain on sale buildings.2022.
FINANCIAL CONDITION
Assets.Total assets at SeptemberJune 30, 20172022 were $6,261.4$8,339.6 million, an increase of $202.9$293.7 million, or 3.3%3.7%, from $6,058.5$8,045.9 million at December 31, 2016.2021. Total loans net increased $231.6$120.0 million, or 4.8%1.8%, during the ninesix months ended SeptemberJune 30, 20172022, to $5,045.1$6,721.0 million from $4,813.5$6,601.0 million at December 31, 2016.2021. The increase was primarily due to loan originations which exceeded satisfactions. Loan originations and purchases were $710.7$833.1 million for the ninesix months ended SeptemberJune 30, 2017, a decrease2022, an increase of $139.7$185.8 million, or 16.4%28.7%, from $850.3$647.3 million for the ninesix months ended SeptemberJune 30, 2016. During the nine months ended September 30, 2017, we continued2021. We continue to focus on the origination of multi-family residential, commercial real estate and commercial business loans with a full banking relationship. The loan pipeline totaled $417.0was $582.6 million at SeptemberJune 30, 20172022, compared to $310.9$429.3 million at December 31, 2016.
2021.
The following table shows loan originations and purchases for the periods indicated:
| | | | | | | | | | | | |
|
| For the three months |
| For the six months | ||||||||
|
| ended June 30, |
| ended June 30, | ||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Multi-family residential | | $ | 136,902 | | $ | 66,913 |
| $ | 235,082 | | $ | 125,466 |
Commercial real estate | |
| 164,826 | |
| 37,963 |
| | 209,928 | |
| 55,119 |
One-to-four family – mixed-use property | |
| 12,228 | |
| 7,135 |
| | 20,726 | |
| 15,847 |
One-to-four family – residential | |
| 4,211 | |
| 59,494 |
| | 13,472 | |
| 62,625 |
Construction (1) | |
| 8,319 | |
| 5,281 |
| | 17,121 | |
| 12,404 |
Small Business Administration (2) | |
| 2,750 | |
| 17,585 |
| | 2,750 | |
| 142,678 |
Commercial business and other (3) | |
| 174,551 | |
| 130,036 |
| | 334,027 | |
| 233,154 |
Total | | $ | 503,787 | | $ | 324,407 | | $ | 833,106 | | $ | 647,293 |
| | For the three months ended September 30, | | For the nine months ended September 30, | ||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Multi-family residential (1) | $ | 64,551 | $ | 61,378 | $ | 254,728 | $ | 293,385 | ||||||||
Commercial real estate (2) | 25,385 | 68,970 | 184,676 | 245,114 | ||||||||||||
One-to-four family – mixed-use property | 13,136 | 12,618 | 45,334 | 42,493 | ||||||||||||
One-to-four family – residential | 5,843 | 3,362 | 16,623 | 17,050 | ||||||||||||
Co-operative apartments | 232 | - | 232 | 470 | ||||||||||||
Construction | 148 | 1,920 | 7,121 | 6,034 | ||||||||||||
Small Business Administration | 4,276 | 470 | 6,787 | 6,785 | ||||||||||||
Commercial business and other (3) | 69,354 | 84,525 | 195,150 | 239,015 | ||||||||||||
Total | $ | 182,925 | $ | 233,243 | $ | 710,651 | $ | 850,346 |
(1) | Includes purchases of |
(2) | Includes $15.5 million and $138.7 million of SBA PPP loans for the three and six months ended June 30, 2021, respectively. |
(3) | Includes purchases of $55.8 million and $43.2 million for the three months ended |
2022 and 2021, respectively. Includes purchases of |
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PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The Bank maintains its conservative underwriting standards that include, among other things, a loan-to-value ratio of 75% or less and a debt coverage ratio of at least 125%. Multi-family residential (excluding underlying co-operative mortgages), commercial real estate and one-to-four family mixed-use property mortgage loans originated and purchased during the third quarter of 2017six months ended June 30, 2022 had an average loan-to-value ratio of 41.2%56.6% and an average debt coverage ratio of 187%170%.
-52-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The Bank’s non-performing assets totaled $13.9$48.9 million at SeptemberJune 30, 2017, a decrease2022, an increase of $8.1$34.0 million, or 36.7%227.7%, from $21.9 million at December 31, 2016.2021. Total non-performing assets as a percentage of total assets were 0.22%0.59% at SeptemberJune 30, 2017 compared to 0.36%2022 and 0.19% at December 31, 2016.2021. The ratio of allowance for loan lossesACL - loans to total non-performing loans was 181.9%141.1% at SeptemberJune 30, 20172022 and 103.8%248.7% at December 31, 2016.
2021.
During the ninesix months ended SeptemberJune 30, 2017,2022, mortgage-backed securities including held-to-maturity increased $11.4decreased $61.3 million, or 2.2%10.6%, to $527.8$518.8 million from $516.5$580.1 million at December 31, 2016.2021. The increasedecrease in mortgage-backed securities during the ninesix months ended SeptemberJune 30, 20172022 was primarily due to the principal repayment of securities totaling $63.7 million and the decrease in the fair value of the securities totaling $50.8 million partially offset by the purchase of securities totaling $54.5 million at an average rate of 2.67%.
During the six months ended June 30, 2022, other securities increased $157.9 million, or 61.9%, to $413.0 million from $255.0 million at December 31, 2021. The increase in other securities during the six months ended June 30, 2022, was primarily due to purchases of $149.9$172.3 million at an average yieldrate of 2.88%, partially offset by sales of $78.7 million at an average yield on 2.09% and principal repayments of $60.6 million.
During the nine months ended September 30, 2017, other securities including held-to-maturity, decreased $83.0 million, or 21.7%, to $299.7 million from $382.6 million at December 31, 2016. The decrease in other securities during the nine months ended September 30, 2017 was primarily due to $43.1 million in calls of CLO securities and one private issue trust preferred security, sales totaling $33.7 million at an average yield of 2.49% and $14.8 million in maturities of municipal securities,2.98% partially offset by a purchasedecrease in the fair value of $10.0other securities totaling $13.6 million, corporate bond at an average yield on 3.86%. Otherand maturities, sales and calls totaling $0.9 million. At June 30, 2022, other securities primarily consistconsisted of securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds, collateralized loan obligationscorporate bonds, and corporate bonds.CLOs.
Liabilities. Total liabilities were $5,721.8$7,668.8 million at SeptemberJune 30, 2017,2022, an increase of $177.1$302.5 million, or 3.2%4.1%, from $5,544.6$7,366.3 million at December 31, 2016.2021. During the ninesix months ended SeptemberJune 30, 2017,2022, due to depositors increased $225.4$16.5 million, or 5.4%0.3%, to $4,390.8$6,350.0 million due to increasesan increase of $192.9$113.6 million in corenon-interest bearing deposits, and $32.4 million in certificates of deposit. The increase in core deposits was due to increases of $148.3 million, $68.9 million and $29.3 million in money market, savings and demand accounts, respectively, partially offset by a decrease of $53.7$97.1 million in NOW, accounts. Borrowed funds decreased $65.9 million during the nine months ended September 30, 2017.money market accounts and certificates of deposit. The decrease in borrowed fundsNOW, money market accounts and certificates of deposit was primarily due to a decreasemanagement’s decision to allow these deposits to mature and replace with lower cost funding. Included in FHLB short-term borrowings as funding needsdeposits were provided by increased deposits.
Equity. Total stockholders’ equity increased $25.8brokered deposits totaling $1,028.4 million, or 5.0%, to $539.6an increase of $402.1 million at September 30, 2017 from $513.9$626.3 million at December 31, 2016.2021. Borrowed funds increased $274.1 million during the six months ended June 30, 2022.
Equity. Total stockholders’ equity decreased $8.8 million, or 1.3%, to $670.8 million at June 30, 2022, from $679.6 million at December 31, 2021. Stockholders’ equity increased primarilydecreased due to net income of $35.2 million, the net impact totaling $4.9 million from the vesting and exercising of shares of employee and director stock plans anda decline in accumulated other comprehensive income totaling $1.7of $24.6 million, primarily due to an increase in the fair value of the securities portfolio. These increases were partially offset by the declaration and payment of dividends on the Company’s common stock of $0.54$0.44 per common share totaling $15.7$13.6 million and the purchase747,689 shares repurchased totaling $17.0 million. These decreases were partially offset by net income of 10,000 treasury shares, at an average cost of $27.80 per share, totaling $0.3$43.3 million. Book value per common share was $18.72increased to $22.38 at SeptemberJune 30, 20172022 compared to $17.95$22.26 at December 31, 2016.2021.
Liquidity. Liquidity is the ability to economically meet current and future financial obligations. The Company’s primary objectives in terms of managing liquidity is to maintain the ability to originate and purchase loans, repay borrowings as they mature, satisfy financial obligations that arise in the normal course of business and meet our customer’s deposit withdrawal needs. Our primary sources of funds are deposits, borrowings, principal and interest payments on loans, mortgage-backed and other securities, and proceeds from sales of securities and loans. Deposit flows and mortgage prepayments, however, are greatly influenced by general interest rates, economic conditions, and competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits and other types of borrowings.
Cash flow.Liquidity management is both a short and long-term function of business management. During the nine months ended September 30, 2017,2021, funds were provided by the Company'sCompany’s operating activities, amounted to $53.1 million. These funds, combined with $151.2 million provided from financing activities,which were utilizedused to fund netour investing and financing activities. Our most liquid assets are cash and cash equivalents, which include cash and due from banks, overnight interest-earning deposits and federal funds sold with original maturities of 90 days or less. The level of these assets is dependent on our operating, financing, lending, and investing activities during any given period. At June 30, 2022, cash and cash equivalents totaled $137.0 million, an increase of $180.0 million. The Company's primary business objective is the origination and purchase of multi-family residential loans, commercial business loans and commercial real estate mortgage loans and to a lesser extent one-to-four family (including mixed-use properties) and SBA loans. During the nine months ended September 30, 2017, the net total of loan originations and purchases less loan repayments and sales was $255.1 million. During the nine months ended September 30, 2017, the Company$55.3 million from December 31, 2021. We also funded $152.1 million in purchases ofheld unencumbered securities available for sale and $8.0totaling $546.4 million of securities held-to-maturity. During the nine months ended Septemberat June 30, 2017, funds were provided by long-term borrowed funds totaling $180.0 million and a net increase in total deposits of $238.4 million. Additionally, $216.6 million in proceeds from maturities, sales, calls and prepayments of securities available for sale and $14.8 million in maturities of securities held-to-maturity provided funds. In addition to funding loan growth, these funds were used to repay $205.0 million in long-term borrowings and $43.5 million in net short-term borrowings. The Company also used funds of $15.7 million and $2.9 million for dividend payments and purchases of treasury stock, respectively, during the nine months ended September 30, 2017.
- 54 - 2022.
-53-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
At June 30, 2022, the Bank was able to borrow up to $3,675.0 million from the FHLB-NY in Federal Home Loan Bank advances and letters of credit. As of June 30, 2022, the Bank had $1,655.4 million outstanding in combined balances of FHLB-NY advances and letters of credit. At June 30, 2022, the Bank also had unsecured lines of credit with other commercial banks totaling $695.0 million, with no outstanding amount. In addition, at June 30, 2022, the Holding Company had subordinated debentures with a principal balance totaling $125.0 million and junior subordinated debentures with a face amount of $61.9 million and a carrying amount of $55.4 million. Management believes its available sources of funds are sufficient to fund current operations.
INTEREST RATE RISK
Economic Value of Equity Analysis. The Consolidated Statements of Financial Position have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in fair value of certain investments due to changes in interest rates. Generally, the fair value of financial investments such as loans and securities fluctuatesfluctuate inversely with changes in interest rates. As a result, increases in interest rates could result in decreases in the fair value of the Company’s interest-earning assets which could adversely affect the Company’s results of operations if such assets were sold, or, in the case of securities classified as available for sale, decreases in the Company’s stockholders’ equity, if such securities were retained.
The Company manages the mix of interest-earning assets and interest-bearing liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk. On a quarterly basis, management prepares the “Earnings and Economic Exposure to Changes in Interest Rate” report for review by the Asset Liability Committee of the Board of Directors, as summarized below. This report quantifies the potential changes in net interest income and net portfolio value should interest rates immediately go up 100 or 200 basis points or down (shocked) 200100 basis points, assuming the yield curves of the rate shocks will be parallel to each other. The Company’s regulators currently place focus on the net portfolio value, focusing on a rate shock up or down of 200 basis points. Net portfolio value is defined as the market value of assets net of the market value of liabilities. The market value of assets and liabilities is determined using a discounted cash flow calculation. The net portfolio value ratio is the ratio of the net portfolio value to the market value of assets. AllThe changes in income and value are measured as percentage changes from the projected net interest income and net portfolio value at the base interest rate scenario. The base interest rate scenario assumes interest rates at SeptemberJune 30, 2017.2022. Various estimates regarding prepayment assumptions are made at each level of rate shock. However, prepayment penalty income is excluded from this analysis. Actual results could differ significantly from these estimates. At SeptemberJune 30, 2017,2022, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.
The following table presents the Company’s interest rate shock as of SeptemberJune 30, 2017:2022:
| | | | | |
|
| | | | |
Change in Interest Rate | | Net Portfolio Value | | Net Portfolio Value Ratio | |
-100 Basis points |
| 3.1 | % | 15.4 | % |
Base interest rate |
| — |
| 15.3 |
|
+100 Basis points |
| (5.7) |
| 14.7 |
|
+200 Basis points |
| (11.5) |
| 14.1 |
|
Income Simulation Analysis. The Company manages the mix of interest-earning assets and interest-bearing liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk. On a quarterly basis, management provides a report for review by the ALCO Investment Committee of the Board of Directors. This report quantifies the potential changes in net interest income and net portfolio value through various interest rate scenarios.
Projected Percentage Change In | ||||||
Net Interest | Net Portfolio | Net Portfolio | ||||
Change in Interest Rate | Income | Value | Value Ratio | |||
-200 Basis points | 5.03% | 11.57% | 12.52% | |||
-100 Basis points | 4.63 | 3.84 | 12.04 | |||
Base interest rate | 0.00 | 0.00 | 11.89 | |||
+100 Basis points | -6.05 | -8.76 | 11.18 | |||
+200 Basis points | -12.18 | -15.24 | 10.66 |
- 55 - The starting point for the net interest income simulation is an estimate of the next twelve month’s net interest income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end levels. The net interest income simulation assumes that changes in interest rates change gradually in equal increments over the twelve-month period. Prepayment penalty income is excluded from this analysis. Based on these assumptions, net interest income would be reduced by 3.9% from a 100 basis point increase in rates over the next twelve months. Actual results could differ significantly from these estimates.
-54-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
At June 30 2022, the Company had a derivative portfolio with a notional value totaling $1.4 billion. This portfolio is designed to provide protection against rising interest rates. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
A portion of this portfolio is comprised of interest rate swaps on certain short-term advances and brokered deposits totaling $871.5 million. At June 30, 2022, $591.5 million of the interest rate swaps are effective swaps at a weighted average rate of approximately 1.74% that largely mature by early 2024 and $280.0 million of the interest rate swaps are forward swaps effective at different points through 2024, at an average rate of 0.72%.
The net interest income simulation incorporates the next twelve months (through June 30, 2023) and only a portion of the effective swap maturities and the forward starting swaps are included in this period. Assuming another equal increment ramp of 100 basis points increase in rates in the second year (through June 30, 2024), for a total of 200 basis points over two years, the total derivative portfolio has a 1.6% benefit to net interest income (versus the base case) in the first year and a cumulative benefit of 4.2% by the second year.
-55-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
AVERAGE BALANCES
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amount of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. The following tabletables sets forth certain information relating to the Company’s Consolidated Statements of Financial Condition and Consolidated Statements of Income for the three and six months ended SeptemberJune 30, 20172022 and 2016,2021, and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields include amortization of fees which are considered adjustments to yields.
For the three months ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||||||||
Assets | (Dollars in thousands) | |||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Mortgage loans, net | $ | 4,350,338 | $ | 46,121 | 4.24 | % | $ | 4,093,240 | $ | 43,777 | 4.28 | % | ||||||||||||
Other loans, net | 683,328 | 7,197 | 4.21 | 593,353 | 5,404 | 3.64 | ||||||||||||||||||
Total loans, net (1) | 5,033,666 | 53,318 | 4.24 | 4,686,593 | 49,181 | 4.20 | ||||||||||||||||||
Taxable securities: | �� | |||||||||||||||||||||||
Mortgage-backed securities | 520,889 | 3,335 | 2.56 | 554,515 | 3,350 | 2.42 | ||||||||||||||||||
Other securities | 189,957 | 1,787 | 3.76 | 245,477 | 2,160 | 3.52 | ||||||||||||||||||
Total taxable securities | 710,846 | 5,122 | 2.88 | 799,992 | 5,510 | 2.76 | ||||||||||||||||||
Tax-exempt securities: (2) | ||||||||||||||||||||||||
Other securities | 142,899 | 758 | 2.12 | 148,004 | 784 | 2.12 | ||||||||||||||||||
Total tax-exempt securities | 142,899 | 758 | 2.12 | 148,004 | 784 | 2.12 | ||||||||||||||||||
Interest-earning deposits and federal funds sold | 48,718 | 121 | 0.99 | 49,824 | 49 | 0.39 | ||||||||||||||||||
Total interest-earning assets | 5,936,129 | 59,319 | 4.00 | 5,684,413 | 55,524 | 3.91 | ||||||||||||||||||
Other assets | 303,192 | 292,312 | ||||||||||||||||||||||
Total assets | $ | 6,239,321 | $ | 5,976,725 | ||||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Savings accounts | $ | 330,316 | 583 | 0.71 | $ | 258,884 | 306 | 0.47 | ||||||||||||||||
NOW accounts | 1,340,228 | 2,468 | 0.74 | 1,384,368 | 1,979 | 0.57 | ||||||||||||||||||
Money market accounts | 927,067 | 2,337 | 1.01 | 601,709 | 990 | 0.66 | ||||||||||||||||||
Certificate of deposit accounts | 1,375,052 | 5,218 | 1.52 | 1,428,770 | 5,213 | 1.46 | ||||||||||||||||||
Total due to depositors | 3,972,663 | 10,606 | 1.07 | 3,673,731 | 8,488 | 0.92 | ||||||||||||||||||
Mortgagors' escrow accounts | 54,236 | 49 | 0.36 | 48,840 | 32 | 0.26 | ||||||||||||||||||
Total deposits | 4,026,899 | 10,655 | 1.06 | 3,722,571 | 8,520 | 0.92 | ||||||||||||||||||
Borrowed funds | 1,249,038 | 5,623 | 1.80 | 1,337,049 | 5,291 | 1.58 | ||||||||||||||||||
Total interest-bearing liabilities | 5,275,937 | 16,278 | 1.23 | 5,059,620 | 13,811 | 1.09 | ||||||||||||||||||
Non interest-bearing deposits | 354,149 | 318,188 | ||||||||||||||||||||||
Other liabilities | 72,767 | 89,943 | ||||||||||||||||||||||
Total liabilities | 5,702,853 | 5,467,751 | ||||||||||||||||||||||
Equity | 536,468 | 508,974 | ||||||||||||||||||||||
Total liabilities and equity | $ | 6,239,321 | $ | 5,976,725 | ||||||||||||||||||||
Net interest income / net interest rate spread | $ | 43,041 | 2.77 | % | $ | 41,713 | 2.82 | % | ||||||||||||||||
Net interest-earning assets / net interest margin | $ | 660,192 | 2.90 | % | $ | 624,793 | 2.94 | % | ||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.13 | X | 1.12 | X |
| | | | | | | | | | | | | | | | | |
|
| For the three months ended June 30, | | ||||||||||||||
|
| 2022 |
| 2021 | | ||||||||||||
|
| Average | | | |
| Yield/ |
| Average | | |
| Yield/ | | |||
|
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost | | ||||
Assets |
| (Dollars in thousands) | | ||||||||||||||
Interest-earning assets: |
| |
|
| |
|
| |
| |
|
| |
|
| | |
Mortgage loans, net | | $ | 5,178,029 | | $ | 54,775 |
| 4.23 | % | $ | 5,130,400 | | $ | 52,987 |
| 4.13 | % |
Other loans, net | |
| 1,462,302 | |
| 14,417 |
| 3.94 | |
| 1,556,488 | |
| 15,012 |
| 3.86 | |
Total loans, net (1) (2) | |
| 6,640,331 | | | 69,192 | | 4.17 | |
| 6,686,888 | | | 67,999 | | 4.07 | |
Taxable securities: | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Mortgage-backed securities | |
| 594,923 | |
| 2,356 |
| 1.58 | |
| 578,134 | |
| 2,233 |
| 1.54 | |
Other securities | |
| 333,158 | |
| 2,090 |
| 2.51 | |
| 232,020 | |
| 1,037 |
| 1.79 | |
Total taxable securities | |
| 928,081 | | | 4,446 | | 1.92 | |
| 810,154 | | | 3,270 | | 1.61 | |
Tax-exempt securities: (3) | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Other securities | |
| 67,315 | |
| 625 |
| 3.71 | |
| 50,830 | |
| 535 |
| 4.21 | |
Total tax-exempt securities | |
| 67,315 | | | 625 | | 3.71 | |
| 50,830 | | | 535 | | 4.21 | |
Interest-earning deposits and federal funds sold | |
| 104,956 | |
| 159 |
| 0.61 | |
| 242,302 | |
| 51 |
| 0.08 | |
Total interest-earning assets | |
| 7,740,683 | | | 74,422 | | 3.85 | |
| 7,790,174 | | | 71,855 | | 3.69 | |
Other assets | |
| 471,080 | |
| |
| | |
| 473,379 | |
| |
| | |
Total assets | | $ | 8,211,763 | |
| |
| | | $ | 8,263,553 | |
| |
| | |
Liabilities and Equity | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Interest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Deposits: | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Savings accounts | | $ | 156,785 | |
| 50 |
| 0.13 | | $ | 153,113 | |
| 66 |
| 0.17 | |
NOW accounts | |
| 2,089,851 | |
| 1,405 |
| 0.27 | |
| 2,255,581 | |
| 1,499 |
| 0.27 | |
Money market accounts | |
| 2,231,743 | |
| 1,952 |
| 0.35 | |
| 2,043,257 | |
| 2,060 |
| 0.40 | |
Certificate of deposit accounts | |
| 820,476 | |
| 1,273 |
| 0.62 | |
| 1,043,985 | |
| 1,913 |
| 0.73 | |
Total due to depositors | |
| 5,298,855 | | | 4,680 | | 0.35 | |
| 5,495,936 | | | 5,538 | | 0.40 | |
Mortgagors' escrow accounts | |
| 97,496 | |
| 6 |
| 0.02 | |
| 91,545 | |
| 1 |
| — | |
Total deposits | |
| 5,396,351 | | | 4,686 | | 0.35 | |
| 5,587,481 | | | 5,539 | | 0.40 | |
Borrowed funds | |
| 941,023 | |
| 4,875 |
| 2.07 | |
| 945,410 | |
| 5,164 |
| 2.18 | |
Total interest-bearing liabilities | |
| 6,337,374 | | | 9,561 | | 0.60 | |
| 6,532,891 | | | 10,703 | | 0.66 | |
Non-interest-bearing deposits | |
| 1,044,553 | |
|
|
| | |
| 923,220 | |
|
|
| | |
Other liabilities | |
| 162,380 | |
|
|
| | |
| 162,752 | |
|
|
| | |
Total liabilities | |
| 7,544,307 | |
|
|
| | |
| 7,618,863 | |
|
|
| | |
Equity | |
| 667,456 | |
|
|
| | |
| 644,690 | |
|
|
| | |
Total liabilities and equity | | $ | 8,211,763 | |
|
|
| | | $ | 8,263,553 | |
|
|
| | |
Net interest income / net interest rate spread (tax equivalent) (3) | |
|
| | $ | 64,861 |
| 3.25 | % |
|
| | $ | 61,152 |
| 3.03 | % |
Net interest-earning assets / net interest margin(tax equivalent) | | $ | 1,403,309 | |
|
|
| 3.35 | % | $ | 1,257,283 | |
|
|
| 3.14 | % |
Ratio of interest-earning assets to interest-bearing liabilities | |
|
| |
|
|
| 1.22 | X |
|
| |
|
|
| 1.19 | X |
(1) | Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately |
(2) | Loan interest income includes net (losses) gains from fair value adjustments on qualifying hedges of $(0.1) million and $0.7 million for three month periods ended June 30, 2022 and 2021. |
(3) | Interest |
- 56 -
-56-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
The following table sets forth certain information relating to the Company’s Consolidated Statements of Financial Condition and Consolidated Statements of Income for the nine months ended September 30, 2017 and 2016, and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields include amortization of fees which are considered adjustments to yields.
For the nine months ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest | Cost | Balance | Interest | Cost | |||||||||||||||||||
Assets | (Dollars in thousands) | |||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Mortgage loans, net | $ | 4,287,674 | $ | 135,429 | 4.21 | % | $ | 3,972,502 | $ | 129,200 | 4.34 | % | ||||||||||||
Other loans, net | 667,749 | 20,405 | 4.07 | 575,652 | 15,952 | 3.69 | ||||||||||||||||||
Total loans, net (1) | 4,955,423 | 155,834 | 4.19 | 4,548,154 | 145,152 | 4.26 | ||||||||||||||||||
Taxable securities: | ||||||||||||||||||||||||
Mortgage-backed securities | 527,890 | 10,122 | 2.56 | 603,994 | 11,231 | 2.48 | ||||||||||||||||||
Other securities | 215,453 | 6,220 | 3.85 | 241,821 | 6,038 | 3.33 | ||||||||||||||||||
Total taxable securities | 743,343 | 16,342 | 2.93 | 845,815 | 17,269 | 2.72 | ||||||||||||||||||
Tax-exempt securities: (2) | ||||||||||||||||||||||||
Other securities | 145,058 | 2,309 | 2.12 | 140,889 | 2,366 | 2.24 | ||||||||||||||||||
Total tax-exempt securities | 145,058 | 2,309 | 2.12 | 140,889 | 2,366 | 2.24 | ||||||||||||||||||
Interest-earning deposits and federal funds sold | 66,042 | 403 | 0.81 | 61,484 | 191 | 0.41 | ||||||||||||||||||
Total interest-earning assets | 5,909,866 | 174,888 | 3.95 | 5,596,342 | 164,978 | 3.93 | ||||||||||||||||||
Other assets | 299,139 | 287,111 | ||||||||||||||||||||||
Total assets | $ | 6,209,005 | $ | 5,883,453 | ||||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Savings accounts | $ | 288,376 | 1,289 | 0.60 | $ | 262,382 | 910 | 0.46 | ||||||||||||||||
NOW accounts | 1,474,572 | 7,006 | 0.63 | 1,539,050 | 5,863 | 0.51 | ||||||||||||||||||
Money market accounts | 882,213 | 5,487 | 0.83 | 514,626 | 2,277 | 0.59 | ||||||||||||||||||
Certificate of deposit accounts | 1,396,583 | 15,257 | 1.46 | 1,416,811 | 15,455 | 1.45 | ||||||||||||||||||
Total due to depositors | 4,041,744 | 29,039 | 0.96 | 3,732,869 | 24,505 | 0.88 | ||||||||||||||||||
Mortgagors' escrow accounts | 60,895 | 106 | 0.23 | 55,481 | 85 | 0.20 | ||||||||||||||||||
Total deposits | 4,102,639 | 29,145 | 0.95 | 3,788,350 | 24,590 | 0.87 | ||||||||||||||||||
Borrowed funds | 1,170,203 | 15,696 | 1.79 | 1,233,571 | 15,653 | 1.69 | ||||||||||||||||||
Total interest-bearing liabilities | 5,272,842 | 44,841 | 1.13 | 5,021,921 | 40,243 | 1.07 | ||||||||||||||||||
Non interest-bearing deposits | 340,221 | 296,321 | ||||||||||||||||||||||
Other liabilities | 67,967 | 73,594 | ||||||||||||||||||||||
Total liabilities | 5,681,030 | 5,391,836 | ||||||||||||||||||||||
Equity | 527,975 | 491,617 | ||||||||||||||||||||||
Total liabilities and equity | $ | 6,209,005 | $ | 5,883,453 | ||||||||||||||||||||
Net interest income / net interest rate spread | $ | 130,047 | 2.82 | % | $ | 124,735 | 2.86 | % | ||||||||||||||||
Net interest-earning assets / net interest margin | $ | 637,024 | 2.93 | % | �� | $ | 574,421 | 2.97 | % | |||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.12 | X | 1.11 | X |
| | | | | | | | | | | | | | | | | |
|
| For the six months ended June 30, | | ||||||||||||||
|
| 2022 |
| 2021 | | ||||||||||||
|
| Average | | | |
| Yield/ |
| Average | | |
| Yield/ | | |||
|
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost | | ||||
Assets |
| (Dollars in thousands) | | ||||||||||||||
Interest-earning assets: |
| |
|
| |
|
| |
| |
|
| |
|
| | |
Mortgage loans, net | | $ | 5,165,121 | | $ | 108,745 |
| 4.21 | % | $ | 5,143,117 | | $ | 108,206 |
| 4.21 | % |
Other loans, net | |
| 1,444,555 | |
| 27,963 |
| 3.87 | |
| 1,550,527 | |
| 28,814 |
| 3.72 | |
Total loans, net (1) (2) | |
| 6,609,676 | | | 136,708 | | 4.14 | |
| 6,693,644 | | | 137,020 | | 4.09 | |
Taxable securities: | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Mortgage-backed securities | |
| 587,836 | |
| 4,523 |
| 1.54 | |
| 506,424 | |
| 3,931 |
| 1.55 | |
Other securities | |
| 280,245 | |
| 3,209 |
| 2.29 | |
| 266,234 | |
| 2,000 |
| 1.50 | |
Total taxable securities | |
| 868,081 | | | 7,732 | | 1.78 | |
| 772,658 | | | 5,931 | | 1.54 | |
Tax-exempt securities: (3) | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Other securities | |
| 62,490 | |
| 1,216 |
| 3.89 | |
| 50,829 | |
| 1,065 |
| 4.19 | |
Total tax-exempt securities | |
| 62,490 | | | 1,216 | | 3.89 | |
| 50,829 | | | 1,065 | | 4.19 | |
Interest-earning deposits and federal funds sold | |
| 115,752 | |
| 210 |
| 0.36 | |
| 211,904 | |
| 87 |
| 0.08 | |
Total interest-earning assets | |
| 7,655,999 | | | 145,866 | | 3.81 | |
| 7,729,035 | | | 144,103 | | 3.73 | |
Other assets | |
| 475,066 | |
| |
| | |
| 476,919 | |
| |
| | |
Total assets | | $ | 8,131,065 | |
| |
| | | $ | 8,205,954 | |
| |
| | |
Liabilities and Equity | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Interest-bearing liabilities | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Deposits: | |
|
| |
|
|
| | |
|
| |
|
|
| | |
Savings accounts | | $ | 156,689 | |
| 99 |
| 0.13 | | $ | 161,549 | |
| 141 |
| 0.17 | |
NOW accounts | |
| 2,063,529 | |
| 2,198 |
| 0.21 | |
| 2,220,677 | |
| 3,205 |
| 0.29 | |
Money market accounts | |
| 2,242,626 | |
| 3,227 |
| 0.29 | |
| 1,974,781 | |
| 4,160 |
| 0.42 | |
Certificate of deposit accounts | |
| 854,970 | |
| 2,562 |
| 0.60 | |
| 1,073,151 | |
| 4,135 |
| 0.77 | |
Total due to depositors | |
| 5,317,814 | | | 8,086 | | 0.30 | |
| 5,430,158 | | | 11,641 | | 0.43 | |
Mortgagors' escrow accounts | |
| 84,574 | |
| 8 |
| 0.02 | |
| 78,531 | |
| 3 |
| 0.01 | |
Total deposits | |
| 5,402,388 | | | 8,094 | | 0.30 | |
| 5,508,689 | | | 11,644 | | 0.42 | |
Borrowed funds | |
| 876,877 | |
| 9,308 |
| 2.12 | |
| 996,845 | |
| 10,304 |
| 2.07 | |
Total interest-bearing liabilities | |
| 6,279,265 | | | 17,402 | | 0.55 | |
| 6,505,534 | | | 21,948 | | 0.67 | |
Non-interest-bearing deposits | |
| 1,023,181 | |
|
|
| | |
| 889,821 | |
|
|
| | |
Other liabilities | |
| 158,400 | |
|
|
| | |
| 178,361 | |
|
|
| | |
Total liabilities | |
| 7,460,846 | |
|
|
| | |
| 7,573,716 | |
|
|
| | |
Equity | |
| 670,219 | |
|
|
| | |
| 632,238 | |
|
|
| | |
Total liabilities and equity | | $ | 8,131,065 | |
|
|
| | | $ | 8,205,954 | |
|
|
| | |
Net interest income / net interest rate spread (tax equivalent) (3) | |
|
| | $ | 128,464 |
| 3.26 | % |
|
| | $ | 122,155 |
| 3.06 | % |
Net interest-earning assets / net interest margin(tax equivalent) | | $ | 1,376,734 | |
|
|
| 3.36 | % | $ | 1,223,501 | |
|
|
| 3.16 | % |
Ratio of interest-earning assets to interest-bearing liabilities | |
|
| |
|
|
| 1.22 | X |
|
| |
|
|
| 1.19 | X |
(1) | Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately |
(2) | Loan interest income includes net gains (losses) from fair value adjustments on qualifying hedges of ($0.2) million and $0.8 million for the six months ended June 30, 2022 and 2021, respectively. |
(3) | Interest |
- 57 -
-57-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
LOANS
The following table sets forth the Company’s loan originations (including the net effect of refinancing) and the changes in the Company’s portfolio of loans, including purchases, sales and principal reductions for the periods indicated.
| | | | | | |
| | For the six months ended June 30, | ||||
(In thousands) |
| 2022 |
| 2021 | ||
| | | | | | |
Mortgage Loans |
| |
|
| |
|
At beginning of period | | $ | 5,200,782 | | $ | 5,228,271 |
Mortgage loans originated: | |
|
| |
|
|
Multi-family residential | |
| 235,082 | |
| 125,466 |
Commercial real estate | |
| 209,928 | |
| 55,119 |
One-to-four family mixed-use property | |
| 20,726 | |
| 15,847 |
One-to-four family residential | |
| 13,472 | |
| 4,673 |
Construction | |
| 15,498 | |
| 5,468 |
Total mortgage loans originated | |
| 494,706 | |
| 206,573 |
| | | | | | |
Mortgage loans purchased: | |
|
| |
|
|
One-to-four family residential | |
| — | |
| 57,952 |
Construction | |
| 1,623 | |
| 6,936 |
Total mortgage loans purchased | |
| 1,623 | |
| 64,888 |
| | | | | | |
Less: | |
|
| |
|
|
Principal reductions | |
| 398,074 | |
| 271,294 |
Mortgage loan sales | |
| 18,342 | |
| 17,846 |
Charge-offs | |
| — | |
| 139 |
At end of period | | $ | 5,280,695 | | $ | 5,210,453 |
| | | | | | |
Non-mortgage loans | |
|
| |
|
|
At beginning of period | | $ | 1,433,084 | | $ | 1,473,358 |
Loans originated: | |
|
| |
|
|
Small Business Administration (1) | |
| 2,750 | |
| 142,678 |
Commercial business | |
| 222,281 | |
| 164,166 |
Other | |
| 2,341 | |
| 3,170 |
Total other loans originated | |
| 227,372 | |
| 310,014 |
| | | | | | |
Non-mortgage loans purchased: | |
| | |
|
|
Commercial business | |
| 109,405 | |
| 65,818 |
Total non-mortgage loans purchased | |
| 109,405 | |
| 65,818 |
| | | | | | |
Less: | |
|
| |
|
|
Principal reductions (2) | |
| 297,813 | |
| 338,537 |
Charge-offs (3) | |
| 59 | |
| 3,969 |
At end of period | | $ | 1,471,989 | | $ | 1,506,684 |
(1) | Includes SBA PPP originations totaling $138.7 million for the six months ended June 30, 2021. |
(2) | Includes SBA PPP reductions totaling $55.2 million and $93.2 million for the six months ended June 30, 2022 and 2021, respectively. |
(3) | Does not include charge-offs totaling $1.0 million on the guaranteed portion of SBA receivables deemed uncollectible during the six months ended June 30, 2022. |
For the nine months ended September 30, | ||||||||
(In thousands) | 2017 | 2016 | ||||||
Mortgage Loans | ||||||||
At beginning of period | $ | 4,187,818 | $ | 3,832,914 | ||||
Mortgage loans originated: | ||||||||
Multi-family residential | 223,766 | 195,028 | ||||||
Commercial real estate | 158,749 | 219,183 | ||||||
One-to-four family – mixed-use property | 45,334 | 42,493 | ||||||
One-to-four family – residential | 16,623 | 17,050 | ||||||
Co-operative apartments | 232 | 470 | ||||||
Construction | 7,121 | 6,034 | ||||||
Total mortgage loans originated | 451,825 | 480,258 | ||||||
Mortgage loans purchased: | ||||||||
Multi-family residential | 30,962 | 98,357 | ||||||
Commercial real estate | 25,927 | 25,931 | ||||||
Total mortgage loans purchased | 56,889 | 124,288 | ||||||
Less: | ||||||||
Principal and other reductions | 300,897 | 305,218 | ||||||
Loans transferred to Available for Sale | 30,565 | - | ||||||
Sales | 18,975 | 7,259 | ||||||
At end of period | $ | 4,346,095 | $ | 4,124,983 | ||||
Non-Mortgage Loans | ||||||||
At beginning of period | $ | 631,316 | $ | 539,697 | ||||
Other loans originated: | ||||||||
Small Business Administration | 6,787 | 6,785 | ||||||
Commercial business | 174,541 | 223,938 | ||||||
Other | 1,666 | 1,371 | ||||||
Total other loans originated | 182,994 | 232,094 | ||||||
Other loans purchased: | ||||||||
Commercial business | 18,943 | 13,706 | ||||||
Total other loans purchased | 18,943 | 13,706 | ||||||
Less: | ||||||||
Principal and other reductions | 119,519 | 182,439 | ||||||
Sales | 4,842 | 3,211 | ||||||
Other | 1,536 | |||||||
At end of period | $ | 707,356 | $ | 599,847 |
- 58 -
-58-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
TROUBLED DEBT RESTRUCUTUREDRESTRUCTURED (“TDR”) AND NON-PERFORMING ASSETS
Management continues to adhere to the Company’s conservative underwriting standards. At times, the Company may restructure a loan to enable a borrower to continue making payments when it is deemed to be in the best long-term interest of the Company. See Note 5 of the Notes to the Consolidated Financial Statements “Loans”.
The following table shows loans classified as TDR at amortized cost that are performing according to their restructured terms at the periods indicated:
| | | | | | |
| | June 30, | | December 31, | ||
(In thousands) |
| 2022 |
| 2021 | ||
Accrual Status: |
| |
|
| |
|
Multi-family residential | | $ | 1,656 | | $ | 1,690 |
Commercial real estate | |
| 7,572 | |
| 7,572 |
One-to-four family - mixed-use property | |
| 1,000 | |
| 1,375 |
One-to-four family - residential | |
| 260 | |
| 483 |
Commercial business and other | |
| 1,190 | |
| 1,340 |
Total | |
| 11,678 | |
| 12,460 |
| | | | | | |
Non-Accrual Status: | |
|
| |
|
|
One-to-four family - mixed-use property | |
| 254 | |
| 261 |
Commercial business and other | |
| 2,850 | |
| 41 |
Total | |
| 3,104 | |
| 302 |
| | | | | | |
Total performing troubled debt restructured | | $ | 14,782 | | $ | 12,762 |
(In thousands) | | September 30, 2017 | | June 30, 2017 | | December 31, 2016 | ||||||
Accrual Status: | ||||||||||||
Multi-family residential | $ | 2,531 | $ | 2,546 | $ | 2,572 | ||||||
Commercial real estate | 2,031 | 2,037 | 2,062 | |||||||||
One-to-four family - mixed-use property | 1,765 | 1,778 | 1,800 | |||||||||
One-to-four family - residential | 577 | 581 | 591 | |||||||||
Taxi medallion | 10,965 | 10,486 | 9,735 | |||||||||
Commercial business and other | 368 | 381 | 420 | |||||||||
Total | 18,237 | 17,809 | 17,180 | |||||||||
Non-Accrual Status: | ||||||||||||
Taxi medallion | 4,109 | 3,384 | - | |||||||||
Commercial business and other | 150 | 185 | 255 | |||||||||
Total | 4,259 | 3,569 | 255 | |||||||||
Total performing troubled debt restructured | $ | 22,496 | $ | 21,378 | $ | 17,435 |
- 59 -
-59-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
The following table shows our non-performing assets at the periodsperiod indicated:
| | | | | | | |
| | | | | | | |
| | June 30, | | December 31, | | ||
(In thousands) |
| 2022 | | 2021 | | ||
| | | | | | | |
Loans 90 days or more past due and still accruing: | | | | | | | |
Commercial Business and other | | $ | 100 | | $ | — | |
Total | |
| 100 | |
| — | |
Non-accrual loans: | |
|
| |
|
| |
Multi-family residential | |
| 3,414 | |
| 2,431 | |
Commercial real estate | |
| 242 | |
| 613 | |
One-to-four family - mixed-use property (1) | |
| 790 | |
| 1,309 | |
One-to-four family - residential | |
| 5,055 | |
| 7,725 | |
Construction | | | 856 | | | — | |
Small business administration | |
| 937 | |
| 937 | |
Commercial Business and other (1) | |
| 16,554 | |
| 1,918 | |
Total | |
| 27,848 | |
| 14,933 | |
Total non-performing loans | |
| 27,948 | |
| 14,933 | |
Other non-performing assets: | |
|
| |
|
| |
Held-to-maturity securities | |
| 20,981 | |
| — | |
Total | |
| 20,981 | |
| — | |
| | | | | | | |
Total non-performing assets | | $ | 48,929 | | $ | 14,933 | |
| | | | | | | |
Non-performing assets to total assets | | | 0.59 | % | | 0.19 | % |
ACL - loans to non-accrual loans | | | 141.57 | % | | 248.66 | % |
ACL - loans to non-performing loans | | | 141.06 | % | | 248.66 | % |
(In thousands) | | September 30, 2017 | | June 30, 2017 | | December 31, 2016 | ||||||
Loans 90 days or more past due and still accruing: | ||||||||||||
Multi-family residential | $ | 415 | $ | - | $ | - | ||||||
Commercial real estate | 38 | - | - | |||||||||
One-to-four family - mixed-use property | 129 | - | 386 | |||||||||
Construction | - | 602 | - | |||||||||
Taxi medallion | 1,147 | 727 | - | |||||||||
Total | 1,729 | 1,329 | 386 | |||||||||
Non-accrual loans: | ||||||||||||
Multi-family residential | 1,309 | 1,537 | 1,837 | |||||||||
Commercial real estate | 1,147 | 1,948 | 1,148 | |||||||||
One-to-four family - mixed-use property | 2,217 | 2,971 | 4,025 | |||||||||
One-to-four family - residential | 7,434 | 7,616 | 8,241 | |||||||||
Small business administration | 50 | 53 | 1,886 | |||||||||
Taxi medallion | - | - | 3,825 | |||||||||
Commercial business and other | 4 | 5 | 68 | |||||||||
Total | 12,161 | 14,130 | 21,030 | |||||||||
Total non-performing loans | 13,890 | 15,459 | 21,416 | |||||||||
Other non-performing assets: | ||||||||||||
Real estate acquired through foreclosure | - | - | 533 | |||||||||
Total | - | - | 533 | |||||||||
Total non-performing assets | $ | 13,890 | $ | 15,459 | $ | 21,949 | ||||||
Non-performing assets to total assets | 0.22 | % | 0.25 | % | 0.36 | % | ||||||
Allowance for loan losses to non-performing loans | 181.92 | % | 143.33 | % | 103.80 | % |
Included(1)Not included in loans over 90 days past due and still accruing were fourthe above analysis are the following non-accrual TDRs that are performing according to their restructured terms: one-to-four family mixed-use property loans totaling $1.7 million, four loans totaling $1.3 million and two loans totaling $0.4$0.3 million at September 30, 2017,both June 30, 20172022 and December 31, 2016,2021, respectively, which are past their respective maturity dates and are still remitting payments. The Bank is actively working with these borrowers to extend thecommercial business loans maturity or repay these loans.
Included in non-performing loans was one loan totaling $0.4$2.8 million and less than $0.1 million at September 30, 2017, June 30, 20172022 and December 31, 2016 which was restructured as TDR and not performing in accordance with its restructured terms.2021, respectively.
- 60 -
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
CRITICIZED AND CLASSIFIED ASSETS
Our policy is to review our assets, focusing primarily on the loan portfolio, OREOother real estate owned, and the investment portfolios, to ensure that the credit quality is maintained at the highest levels. See Note 5 (“Loans”) of the Notes to the Consolidated Financial Statements “Loans” for a description of how loans are determined to be criticized or classified and a table displaying criticized and classified loans at SeptemberJune 30, 20172022 and December 31, 2016. The Company had no criticized or classified OREO at September 30, 2017 and had $0.5 million classified OREO at December 31, 2016. The Company did not hold any criticized or classified investment securities at September 30, 2017 and December 31, 2016.2021. Our total Criticized and Classified assets were $72.6$78.1 million at SeptemberJune 30, 2017,2022, a decrease $0.1of $0.5 million from December 31, 2016.
On a quarterly basis, all collateral dependent loans that are classified as Substandard or Doubtful are internally reviewed for impairment, based on updated cash flows for income producing properties, or updated independent appraisals. The loan balances of collateral dependent loans reviewed for impairment are then compared to the loans updated fair value. We consider fair value of collateral dependent loans to be 85% of the appraised or internally estimated value of the property, except for taxi medallion loans. The balance which exceeds fair value is generally charged-off, except for taxi medallion loans. The fair value of the underlying collateral of taxi medallion loans is the value of the underlying medallion based upon the most recently reported arm’s length transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates. All taxi medallion loans are classified impaired. Taxi medallion loans with a loan-to-value greater than 100% are allocated a portion of the allowance for loan losses (“ALL”) in the amount of the excess of the loan-to-value over the loan’s principal balance. At September 30, 2017, the current average loan-to-value ratio on our collateral dependent loans reviewed for impairment was 52.9%.
ALLOWANCE FOR LOAN LOSSES
The ALL represents the expense charged to earnings based upon management’s quarterly analysis of credit risk. The amount of the ALL is based upon multiple factors that reflect management’s assessment of the credit quality of the loan portfolio. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes.
Management has developed a comprehensive analytical process to monitor the adequacy of the ALL. The process and guidelines were developed using, among other factors, the guidance from federal banking regulatory agencies and GAAP. The results of this process, along with the conclusions of our independent loan review officer, support management’s assessment as to the adequacy of the ALL at each balance sheet date. See Note 5 of the Notes to the Consolidated Financial Statements “Loans” for a detailed explanation of management’s methodology and policy.
During the nine months ended September 30, 2107, the portion of the ALL related to the loss history declined. Charge-offs recorded in the past twelve quarters were minimal, as credit conditions remained stable. The percentage of loans originated prior to 2009, compared to the total loan portfolio, decreased as scheduled amortization and repayments occurred. As disclosed in Note 5 of the Notes to the Consolidated Financial Statements “Loans”, the loans originated prior to 2009 have a higher delinquency and loss rate. These reductions in the ALL were more than offset by an additional allocation to our taxi medallion portfolio due to a reduction in the estimated fair value of the collateral underlying our performing taxi medallion portfolio. At September 30, 2017, we have allocated $6.0$78.6 million of the allowance to the taxi medallion portfolio which equals 33.0% of the outstanding principal. The impact from the above and the minimal charge-offs recorded during the nine months ended September 30, 2017 resulted in the ALL totaling $25.3 million, an increase of $3.0 million, or 13.7% from December 31, 2016. Based upon management consistently applying the ALL methodology and review of the loan portfolio, management concluded a charge to earnings to increase the ALL was warranted. The ALL at September 30, 2017, represented 0.50% of gross loans outstanding as compared to 0.46% of gross loans outstanding at December 31, 2016.2021. The ALL represented 181.9%Company had one investment security with an amortized cost of non-performing loans$21.0 million classified as substandard at SeptemberJune 30, 2017 compared to 103.8%2022. This same security was reported as special mention at December 31, 2016.2021.
As a componentIncluded within net loans as of June 30, 2022 and December 31, 2021 were $5.4 million and $8.7 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the credit risk assessment, the Bank has established an Asset Classification Committee which carefully evaluates loans which are past due 90 days and/or are classified. The Asset Classification Committee thoroughly assesses the condition and circumstances surrounding each loan meeting the criteria. The Bank also has a Delinquency Committee that evaluates loans meeting specific criteria. The Bank’s loan policy requires loans to be placed into non-accrual status once the loan becomes 90 days delinquent unless there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future.applicable jurisdiction.
- 61 -
-60-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s DiscussionDiscussions and Analysis of
Financial Condition and Results of Operations
ALLOWANCE FOR CREDIT LOSSES
The following table shows allowance for credit losses at the period indicated:
Management recommends to the Board
| | | | | | |
| | For the six months ended June 30, | ||||
(In thousands) | | | 2022 | | | 2021 |
| | | | | | |
Balance at beginning of period | | $ | 37,135 | | $ | 45,153 |
Loans- Charge-off | | | (1,086) | | | (4,108) |
Loans- Recovery | | | 652 | | | 341 |
Loans- Provision | | | 2,723 | | | 1,284 |
Allowance for Credit Losses - Loans | | $ | 39,424 | | $ | 42,670 |
| | | | | | |
| | | | | | |
Balance at beginning of period | | $ | 862 | | $ | 907 |
HTM Securities- Provision (Benefit) | | | 223 | | | (63) |
Allowance for HTM Securities losses | | $ | 1,085 | | $ | 844 |
| | | | | | |
| | | | | | |
Balance at beginning of period | | $ | 1,209 | | $ | 1,815 |
Off-Balance Sheet- (Benefit) Provision | | | 235 | | | (245) |
Allowance for Off-Balance Sheet losses | | $ | 1,444 | | $ | 1,570 |
| | | | | | |
Allowance for Credit Losses | | $ | 41,953 | | $ | 45,084 |
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Table of Directors the amountContents
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of the ALL quarterly. The Board
Financial Condition and Results of Directors approves the ALL.Operations
The following table sets forth the activity in the Company's allowance for loan lossesCompany’s ACL - loans for the periods indicated:
| | | | | | | |
| | For the six months ended June 30, |
| ||||
(Dollars in thousands) |
| 2022 |
| 2021 | | ||
| | | | | | | |
Balance at beginning of year | | $ | 37,135 | | $ | 45,153 | |
Provision for credit losses | |
| 2,723 | |
| 1,284 | |
| | | | | | | |
Loans charged-off: | |
|
| |
|
| |
Multi-family residential | |
| — | |
| (43) | |
Commercial real estate | |
| — | |
| (64) | |
One-to-four family mixed-use property | |
| — | |
| (32) | |
SBA | |
| (1,054) | |
| — | |
Taxi medallion | |
| — | |
| (2,758) | |
Commercial business and other loans | |
| (32) | |
| (1,211) | |
Total loans charged-off | |
| (1,086) | |
| (4,108) | |
| | | | | | | |
Recoveries: | |
|
| |
|
| |
Multi-family residential | |
| 1 | |
| 10 | |
One-to-four family - mixed-use property | |
| — | |
| 10 | |
One-to-four family - residential | | | 4 | | | 7 | |
Small Business Administration | | | 26 | | | 19 | |
Taxi medallion | | | 447 | | | 222 | |
Commercial business and other | |
| 174 | |
| 73 | |
Total recoveries | |
| 652 | |
| 341 | |
| | | | | | | |
Net charge-offs | |
| (434) | |
| (3,767) | |
Balance at end of year | | $ | 39,424 | | $ | 42,670 | |
| | | | | | | |
Ratio of net charge-offs to average loans outstanding during the period | |
| 0.01 | % |
| 0.11 | % |
Ratio of ACL - loans to gross loans at end of period | |
| 0.58 | % |
| 0.64 | % |
Ratio of ACL - loans to non-performing loans at end of period | |
| 141.06 | % |
| 242.55 | % |
For the nine months ended September 30, | ||||||||
(Dollars in thousands) | 2017 | 2016 | ||||||
Balance at beginning of period | $ | 22,229 | $ | 21,535 | ||||
Provision for loan losses | 3,266 | - | ||||||
Loans charged-off: | ||||||||
Multi-family residential | (452 | ) | (155 | ) | ||||
Commercial real estate | (4 | ) | - | |||||
One-to-four family – mixed-use property | (36 | ) | (139 | ) | ||||
One-to-four family – residential | (170 | ) | (74 | ) | ||||
Small Business Administration | (89 | ) | (362 | ) | ||||
Taxi medallion | (54 | ) | - | |||||
Commercial business and other | (48 | ) | (59 | ) | ||||
Total loans charged-off | (853 | ) | (789 | ) | ||||
Recoveries: | ||||||||
Multi-family residential | 297 | 230 | ||||||
Commercial real estate | 93 | 11 | ||||||
One-to-four family – mixed-use property | 68 | 252 | ||||||
One-to-four family – residential | 58 | 366 | ||||||
Small Business Administration | 66 | 118 | ||||||
Commercial business and other | 45 | 72 | ||||||
Total recoveries | 627 | 1,049 | ||||||
Net (charge-offs) recoveries | (226 | ) | 260 | |||||
Balance at end of period | $ | 25,269 | $ | 21,795 | ||||
Ratio of net charge-offs (recoveries) during the period to average loans outstanding during the period | 0.01 | % | (0.01 | )% | ||||
Ratio of allowance for loan losses to gross loans at end of period | 0.50 | % | 0.46 | % | ||||
Ratio of allowance for loan losses to non-performing assets at end of period | 181.92 | % | 82.64 | % | ||||
Ratio of allowance for loan losses to non-performing loans at end of period | 181.92 | % | 92.61 | % |
The increase in non-performing assets is due to three relationships. One of the loans increasing non-performing assets was resolved subsequent to June 30, 2022.The second loan relationship is collateralized by non-real estate collateral, including credit insurance. The non-performing investment security and attendant loan are collateralized by a commercial condominium located in Manhattan with a combined LTV of approximately 63%.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the qualitative and quantitative disclosures about market risk, see the information under the caption "Management's"Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk."
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 30, 2017,2022, the design and operation of these disclosure controls and procedures were effective. During the period covered by this Quarterly Report, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits. Management of the Company, after consultation with outside legal counsel, believes that the resolution of these various matters will not result in any material adverse effect on the Company'sCompany’s consolidated financial condition, results of operations and cash flows.
ITEM 1A. RISK FACTORS
ThereExcept as set forth below there have been no material changes from the risk factors disclosed in the Company’s Annual Reportannual report on Form 10-K for the year ended December 31, 2016.2021.
Changes in Interest Rates, Including Recent and Perhaps Future Increases Fueled by Inflation, May Significantly Impact Our Financial Condition and Results of Operations
Our primary source of income is net interest income, which is the difference between the interest income generated by our interest-earning assets (consisting primarily of multi-family residential loans, commercial business loans and commercial real estate mortgage loans) and the interest expense generated by our interest-bearing liabilities (consisting primarily of deposits). The level of net interest income is primarily a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the FRB (the “FOMC”), and market interest rates.
It is currently expected that during the remainder of 2022, and perhaps beyond, the FOMC will increase interest rates to reduce the rate of inflation to the extent necessary to reduce inflation to the rate that the FOMC believes is appropriate. In March 2022, the FOMC commenced increasing the target range for the federal funds rate by implementing a 25-basis point increase to a range of 0.25% to 0.50%. In May 2022, the FOMC implemented a 50-basis point increase to a range of 0.75% to 1.00%. In June 2022, the FOMC implemented a 75-basis point increase to a range of 1.50% to 1.75%. At its most recent meeting, in late July 2022, the FOMC further added a 75-basis point increase to a range of 2.25% to 2.50%. All of these increases were expressly made in response to inflationary pressures, which are currently expected to continue. In its July 2022 “Beige Book”, the FRB noted that economic activity had expanded at a modest pace from mid-May, with higher food and gas prices and diminished household discretionary income. The report also noted that housing demand had weakened, commercial real estate conditions had slowed, and loan demand had been mixed, with some financial institutions reporting increased customer usage of revolving credit lines and others reporting weakened residential loan demand amid higher mortgage interest rates. The report concluded that the outlook for future economic growth is mostly negative, with expectations for further weakening of demand over the next six to twelve months.
There can be no assurances as to any future FOMC conduct. If the FOMC further increases the targeted federal funds rates, overall interest rates likely will rise, which will positively impact our interest income but may further negatively impact the entire national economy, including the housing industry in the markets we serve, by reducing refinancing activity and new home purchases. In addition, deflationary pressures, while possibly lowering our operational costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans, which could negatively affect our financial performance. A significant portion of our loans have fixed interest rates (or, if adjustable, are initially fixed for periods of five to 10 years) and longer terms than our deposits and borrowings. Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans. Our interest rate risk is exacerbated in the short term by the fact that approximately 80% of our certificates of deposit accounts and borrowings will reprice or mature during the next year. While the higher payments we would receive on adjustable-rate loans in a rising interest rate environment may increase our interest income, nonetheless (notwithstanding our stress testing) some borrowers ultimately may be unable to afford the higher payment amounts, which could result in a higher rate of default. Rising interest rates also may reduce the demand for loans and the value of fixed-rate investment securities. These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations.
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As a result of our historical focus on the origination of multi-family residential mortgage loans, commercial business loans and commercial real estate mortgage loans, most of our loans are adjustable rate, however, many adjust at periods of five to 10 years. In addition, a large percentage of our investment securities and mortgage-backed securities have fixed interest rates and are classified as available for sale. As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time and are currently at historical low levels. As interest rates increase, including as noted above, our cost of funds will increase more rapidly than the yields on a substantial portion of our interest-earning assets. In addition, the market value of our fixed-rate assets for example, our investment and mortgage-backed securities portfolios, would decline if interest rates increase. In line with the foregoing, we have experienced and may continue to experience an increase in the cost of interest-bearing liabilities primarily due to raising the rates we pay on some of our deposit products to stay competitive within our market and an increase in borrowing costs from increases in the federal funds rate.
Prevailing interest rates also affect the extent to which borrowers repay and refinance loans. In a declining interest rate environment, the number of loan prepayments and loan refinancing may increase, as well as prepayments of mortgage-backed securities. Call provisions associated with our investment in U.S. government agency and corporate securities may also adversely affect yield in a declining interest rate environment. Such prepayments and calls may adversely affect the yield of our loan portfolio and mortgage-backed and other securities as we reinvest the prepaid funds in a lower interest rate environment. However, we typically receive additional loan fees when existing loans are refinanced, which partially offset the reduced yield on our loan portfolio resulting from prepayments. In periods of low interest rates, our level of core deposits also may decline if depositors seek higher-yielding instruments or other investments not offered by us, which in turn may increase our cost of funds and decrease our net interest margin to the extent alternative funding sources are utilized. An increasing interest rate environment would tend to extend the average lives of lower yielding fixed rate mortgages and mortgage-backed securities, which could adversely affect net interest income. Also, in an increasing interest rate environment, mortgage loans and mortgage-backed securities may prepay at slower rates than experienced in the past, which could result in a reduction of prepayment penalty income. In addition, depositors tend to open longer term, higher costing certificate of deposit accounts which could adversely affect our net interest income if rates were to subsequently decline. Additionally, adjustable-rate mortgage loans and mortgage-backed securities generally contain interim and lifetime caps that limit the amount the interest rate can increase or decrease at repricing dates. Significant increases in prevailing interest rates may significantly affect demand for loans and the value of bank collateral. See “— Local Economic Conditions” disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information regarding the shares of common stock repurchased by the Company during the three months ended SeptemberJune 30, 2017:2022:
| | | | | | | | | |
|
|
|
| | |
|
|
| Maximum |
| | | | | | | Total Number of | | Number of |
| | Total | | | | | Shares Purchased | | Shares That May |
| | Number | | | | | as Part of Publicly | | Yet Be Purchased |
| | of Shares | | Average Price | | Announced Plans | | Under the Plans | |
Period | | Purchased | | Paid per Share | | or Programs | | or Programs | |
April 1 to April 30, 2022 | | 20,000 | | $ | 21.67 | | 20,000 | | 468,187 |
May 1 to May 31, 2022 | | 246,164 | | | 21.89 | | 246,164 | | 1,222,023 |
June 1 to June 30, 2022 | | 121,525 | | | 22.31 | | 121,525 | | 1,100,498 |
Total |
| 387,689 | | $ | 22.01 |
| 387,689 | |
|
On May 17, 2022, the Board of Directors approved a new stock repurchase program to purchase up to an additional 1,000,000 shares. During the quarter ended SeptemberJune 30, 2017,2022, the Company did not repurchase anyrepurchased 387,689 shares of the Company’s common stock. At SeptemberOn June 30, 2017, 485,9052022, 1,100,498 shares may stillremained to be repurchased under the currently authorized stock repurchase program.programs. Stock will be purchased under the current stock repurchase programprograms from time to time, in the open market or through private transactions, subject to market conditions. There is no expiration or maximum dollar amount under this authorization.these authorizations.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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PART II – OTHER INFORMATIOMTIONINFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ITEM 6. EXHIBITS
| | |
Exhibit No. | Description | |
| | |
3.1 P | | Certificate of Incorporation of Flushing Financial Corporation (1) |
3.2 | | Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (3) |
3.3 | | Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (5) |
3.4 | | |
3.5 | | |
3.6 | | Amended and Restated By-Laws of Flushing Financial Corporation (6) |
4.1 | | |
4.2 | | |
4.3 | | Flushing Financial Corporation has outstanding certain long-term debt. None of such debt exceeds ten percent of Flushing Financial Corporation's total assets; therefore, copies of constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the Securities and Exchange Commission upon request. |
10.1 | | Amended Flushing Financial Corporation 2014 Omnibus Plan (7) |
31.1 | | |
31.2 | | |
32.1 | | |
32.2 | | |
101.INS | | Inline XBRL Instance Document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document (filed herewith) |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
(1) | Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed |
September 1, 1995, Registration No. 33-96488. (P: Indicates a filing submitted in paper)
(2) | Incorporated by reference to Exhibit filed with Form 8-K filed September 27, 2006. |
(3) | Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002. |
(4) | Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended |
September 30, 2002.
(5) | Incorporated by reference to Exhibit filed with Form 10-K for the year ended December 31, 2011. |
(6) | Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2014. |
(7) | Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2021. |
(8) | Incorporated by reference to Exhibits filed with Form 8-K filed November 22, 2021. |
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
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 thereunto duly authorized.
| | |
Exhibit No. | Description | |
| | |
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
EXHIBIT INDEX
3.1 P | | Certificate of Incorporation of Flushing Financial Corporation (1) | |
3.2 | | Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (3) | |
3.3 | | Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (5) | |
3.4 | | ||
3.5 | | ||
3.6 | | Amended and Restated By-Laws of Flushing Financial Corporation (6) | |
4.1 | | ||
4.2 | | ||
4.3 | | Flushing Financial Corporation has outstanding certain long-term debt. None of such debt exceeds ten percent of Flushing Financial Corporation's total assets; therefore, copies of constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the Securities and Exchange Commission upon request. | |
10.1 | | Amended Flushing Financial Corporation 2014 Omnibus Plan (7) | |
31.1 | | ||
31.2 | | ||
32.1 | | ||
32.2 | | ||
101.INS | | Inline XBRL Instance Document | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document (filed herewith) | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) | |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
(1) | Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed |
September 1, 1995, Registration No. 33-96488. (P: Indicates a filing submitted in paper)
(2) | Incorporated by reference to Exhibit filed with Form 8-K filed September 27, 2006. |
(3) | Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002. |
(4) | Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended |
September 30, 2002.
(5) | Incorporated by reference to Exhibit filed with Form 10-K for the year ended December 31, 2011. |
(6) | Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2014. |
(7) | Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2021. |
(8) | Incorporated by reference to Exhibits filed with Form 8-K filed November 22, 2021. |
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SIGNATURES
- 67 -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 thereunto duly authorized.
| Flushing Financial Corporation, | |||
| | | ||
| | | ||
| | | ||
Dated: | August 5, 2022 | | By: | /s/John R. Buran |
| | | John R. Buran | |
| | | President and Chief Executive Officer | |
| | | ||
| | | ||
| | | ||
Dated: | August 5, 2022 | | By: | /s/Susan K. Cullen |
| | | Susan K. Cullen | |
| | | Senior Executive Vice President, Treasurer and | |
| | | Chief Financial Officer |
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