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 June 30, ~~2021~~2022

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 York 11556

(Address of principal executive offices)

(718) 961-5400

(Registrant’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. X Yes __No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). X Yes __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 X No

The number of shares of the registrant’s Common Stock outstanding as of July ~~31, 2021~~29, 2022 was ~~30,936,504.~~29,982,205.

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Financial Condition

~~(Unaudited)~~

Item 1. Financial Statements


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021

					(Unaudited)
	(Dollars in thousands, except per share data)				(Dollars in thousands, except per share data)
Assets
Cash and due from banks	$	145,971	$	157,388	$	137,026	$	81,723
Securities held-to-maturity:
Mortgage-backed securities (including assets pledged of $5,760 and $5,853 at June 30, 2021 and December 31, 2020, respectively; fair value of $8,848 and $8,991 at June 30, 2021 and December 31, 2020, respectively)		7,904		7,914
Other securities, net of allowance for credit losses of $844 and $907 at June 30, 2021 and December 31, 2020, respectively, (NaN pledged; fair value of $53,598 and $54,538 at June 30, 2021 and December 31, 2020, respectively)		49,986		49,918
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 $287,288 and $264,968 at June 30, 2021 and December 31, 2020, respectively; $441 and $505 at fair value pursuant to the fair value option at June 30, 2021 and December 31, 2020, respectively)		596,661		404,460
Other securities (including asset pledged of $6,000 and $6,453 at June 30, 2021 and December 31, 2020, respectively; $14,080 and $13,998 at fair value pursuant to the fair value option at June 30, 2021 and December 31, 2020, respectively)		224,784		243,514
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		2,542,010		2,533,952		2,531,858		2,517,026
Commercial real estate		1,726,895		1,754,754		1,864,507		1,775,629
One-to-four family - mixed-use property		582,211		602,981
One-to-four family - residential		288,652		245,211
Co-operative apartments		7,883		8,051
One-to-four family --- mixed used property						561,100		571,795
One-to-four family --- residential						250,859		276,571
Construction		62,802		83,322		72,148		59,761
Small Business Administration		215,158		167,376		40,572		93,811
Taxi medallion		—		2,757
Commercial business and other		1,291,526		1,303,225		1,431,417		1,339,273
Net unamortized premiums and unearned loan fees		1,669		3,045		7,932		4,239
Allowance for Credit losses - Loans		(42,670)		(45,153)
Less: Allowance for credit losses						(39,424)		(37,135)
Net loans		6,676,136		6,659,521		6,720,969		6,600,970
Interest and dividends receivable		43,803		44,041		38,811		38,698
Bank premises and equipment, net		26,438		28,179		22,285		23,338
Federal Home Loan Bank of New York stock, at cost		41,630		43,439		50,017		35,937
Bank owned life insurance		183,715		181,710		211,220		210,754
Goodwill		17,636		17,636		17,636		17,636
Core deposit intangibles		2,859		3,172		2,282		2,562
Right of Use Asset		51,972		50,743
Right of use asset						46,687		50,200
Other assets		89,850		84,759		160,885		148,989
Total assets	$	8,159,345	$	7,976,394	$	8,339,587	$	8,045,911

Liabilities
Due to depositors:
Non-interest bearing	$	945,491	$	778,672	$	1,081,208	$	967,621
Interest-bearing		5,353,299		5,312,061		5,268,792		5,365,911
Total Deposits		6,298,790		6,090,733
Total Due to depositors						6,350,000		6,333,532
Mortgagors' escrow deposits		58,230		45,622		57,577		51,913
Borrowed funds:
Federal Home Loan Bank advances		831,932		887,579
Federal Home Loan Bank advances and other borrowings						911,186		636,187
Subordinated debentures		90,081		90,180		123,083		122,885
Junior subordinated debentures, at fair value		49,814		43,136		55,352		56,472
Total borrowed funds		971,827		1,020,895		1,089,621		815,544
Operating lease liability		56,151		59,100		50,346		54,155
Other liabilities		119,180		141,047		121,231		111,139
Total liabilities		7,504,178		7,357,397		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 June 30, 2021 and December 31, 2020; 30,961,504 shares and 30,775,854 shares outstanding at June 30, 2021 and December 31, 2020, respectively)		341		341
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		260,958		261,533		262,860		263,375
Treasury stock, at average cost (3,126,119 shares and 3,373,389 shares at June 30, 2021 and December 31, 2020, respectively)		(65,335)		(69,400)
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		467,620		442,789		527,217		497,889
Accumulated other comprehensive loss, net of taxes		(8,417)		(16,266)		(31,264)		(6,684)
Total stockholders' equity		655,167		618,997		670,812		679,628

Total liabilities and stockholders' equity	$	8,159,345	$	7,976,394	$	8,339,587	$	8,045,911

The accompanying notes are an integral part of these consolidated financial statements.

-1-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

For the three months ended

For the six months ended


June 30,

June 30,
(Dollars in thousands, except per share data)

2021

2020

2021

2020

Interest and dividend income

Interest and fees on loans

$
67,999

$
60,557

$
137,020

$
121,666
Interest and dividends on securities:








Interest

3,685

4,182

6,757

9,438
Dividends

7

11

15

26
Other interest income

51

22

87

312
Total interest and dividend income

71,742

64,772

143,879

131,442
Interest expense








Deposits

5,539

9,971

11,644

28,749
Other interest expense

5,164

6,084

10,304

13,150
Total interest expense

10,703

16,055

21,948

41,899
Net interest income

61,039

48,717

121,931

89,543
(Benefit) provision for credit losses

(1,598)

9,619

1,222

16,797
Net interest income after (benefit) provision for credit losses

62,637

39,098

120,709

72,746
Non-interest income








Banking services fee income

1,233

944

3,958

1,742
Net gain (loss) on sale of securities

123

(54)

123

(91)
Net gain on sale of loans

127

—

158

42
Net gain on disposition of assets

—

—

621

0
Net gain (loss) from fair value adjustments

(6,548)

10,205

(5,566)

4,212
Life insurance proceeds

—

659

0

659
Federal Home Loan Bank of New York stock dividends

500

881

1,189

1,845
Bank owned life insurance

1,009

932

2,006

1,875
Other income

346

170

612

589
Total non-interest income (loss)

(3,210)

13,737

3,101

10,873
Non-interest expense

Salaries and employee benefits

19,879

16,184

42,543

34,804
Occupancy and equipment

3,522

2,827

6,889

5,667
Professional services

1,988

1,985

4,388

4,847
FDIC deposit insurance

729

737
��

1,942

1,387
Data processing

1,419

1,813

3,528

3,507
Depreciation and amortization

1,638

1,555

3,277

3,091
Other real estate owned/foreclosure expense (recoveries)

22

45

12

(119)
Other operating expenses

4,814

3,609

9,591

7,951
Total non-interest expense

34,011

28,755

72,170

61,135
Income before income taxes

25,416

24,080

51,640

22,484
Provision for income taxes

Federal

4,857

4,307

9,928

5,296
State and local

1,301

1,501

3,415

306
Total taxes

6,158

5,808

13,343

5,602
Net income

$
19,258

$
18,272

$
38,297

$
16,882

Basic earnings per common share

$
0.61

$
0.63

$
1.21

$
0.58
Diluted earnings per common share

$
0.61

$
0.63

$
1.21

$
0.58
Dividends per common share

$
0.21

$
0.21

$
0.42

$
0.42


	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

The accompanying notes are an integral part of these consolidated financial statements.

-2-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

For the three months ended

For the six months ended

June 30,

June 30,

(In thousands)

2021

2020

2021

2020


Net income

$
19,258

$
18,272

$
38,297

16,882

Other comprehensive income (loss), net of tax:









Amortization of actuarial losses, net of taxes of ($41) and ($31) for the three months ended June 30, 2021 and 2020, respectively, and of ($77) and ($61) for the six months ended June 30, 2021 and 2020, respectively.

92

67

173

134

Amortization of prior service credits, net of taxes of $6 and $8 for the three months ended June 30, 2021 and 2020, respectively, and of $13 and $14 for the six months ended June 30, 2021 and 2020, respectively.

(15)

(15)

(30)

(29)

Net unrealized gains (losses) on securities, net of taxes of ($664) and ($5,193) for the three months ended June 30, 2021 and 2020, respectively, and of $322 and ($551) for the six months ended June 30, 2021 and 2020, respectively.

1,497

11,414

(720)

1,212

Reclassification adjustment for net losses included in income, net of taxes of $38 and ($17) for the three months ended June 30, 2021 and 2020, respectively and of $38 and ($29) for the six months ended June 30, 2021 and 2020, respectively.

(85)

37

(85)

62

Net unrealized gains (losses) on cash flow hedges, net of taxes of ($120) and $912 for the three months ended June 30, 2021 and 2020 respectively, and of ($3,574) and $7,102 for the six months ended June 30, 2021 and 2020 respectively.

521

(2,005)

8,319

(15,610)

Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of ($147) and $259 for the three months ended June 30, 2021 and 2020, respectively, and of ($112) and ($230) for the six months ended June 30, 2021 and 2020, respectively.

276

(580)

192

516

Total other comprehensive income (loss), net of tax

2,286

8,918

7,849

(13,715)

Comprehensive income

$
21,544

$
27,190

$
46,146

$
3,167


	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

The accompanying notes are an integral part of these consolidated financial statements.

-3-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)


	For the six months ended June 30,				For the six months ended June 30,
	2021		2020		2022		2021

	(In thousands)				(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Operating Activities
Net income	$	38,297	$	16,882	$	43,254	$	38,297
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		1,222		16,797		2,948		1,222
Depreciation and amortization of bank premises and equipment		3,277		3,091
Amortization of premium, net of accretion of discount		(190)		3,235
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		5,566		(4,212)		(724)		5,566
Net (gain) loss from fair value adjustments on qualifying hedges		(763)		2,438
Net gain from sale of loans		(158)		(42)
Net (gain) loss from sale of securities		(123)		91
Net gain from disposition of asset		(621)		0
Net loss from OREO		0		31
Income from bank owned life insurance		(2,006)		(1,875)		(2,229)		(2,006)
Life insurance proceeds		0		(659)
Amortization of core deposit intangibles		313		0
Stock-based compensation expense		4,539		4,531		5,255		4,539
Deferred compensation		(2,057)		(3,060)		(3,627)		(2,057)
Deferred income tax benefit		(762)		(2,546)
Amortization of core deposit intangibles						280		313
Decrease (increase) in other assets						9,303		(5,175)
Decrease in other liabilities		(5,384)		(1,411)		(15,004)		(5,384)
Increase in other assets		(5,175)		(3,398)
Net cash provided by operating activities		35,975		29,893		44,642		35,975
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of bank premises and equipment		(1,536)		(1,433)
Net redemptions of Federal Home Loan Bank of New York shares		1,809		521
Proceeds from maturities and calls of securities held-to-maturity		0		180
Proceeds from prepayments of securities held-to-maturity		0		300
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		(478,155)		(130,344)		(210,261)		(478,155)
Proceeds from sales and calls of securities available for sale		38,623		139,741		0		38,623
Change in cash collateral						34,365		0
Proceeds from maturities and prepayments of securities available for sale		263,640		87,658		64,227		263,640
Net repayments (originations) of loans		89,937		(72,371)
Net (originations) and repayments of loans						(69,676)		89,937
Purchases of loans		(130,706)		(112,245)		(111,028)		(130,706)
Proceeds from sale of loans		18,584		580		18,565		18,584
Net cash used in investing activities		(197,804)		(87,413)		(303,491)		(197,804)

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows (Contd.)

(Unaudited)

For the six months ended June 30,


2021

2020

(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES

Net increase in non-interest bearing deposits

166,819

146,809
Net increase (decrease) in interest-bearing deposits

41,312

(119,076)
Net increase in mortgagors' escrow deposits

12,608

4,150
Net proceeds from short-term borrowed funds

150,000

0
Proceeds from long-term borrowings

0

204,378
Repayment of long-term borrowings

(205,647)

(127,762)
Purchases of treasury stock

(1,375)

(3,865)
Cash dividends paid

(13,305)

(12,147)
Net cash provided by financing activities

150,412

92,487
Net (decrease) increase in cash and cash equivalents

(11,417)

34,967
Cash and cash equivalents, beginning of period

157,388

49,787
Cash and cash equivalents, end of period

$
145,971

$
84,754
SUPPLEMENTAL CASH FLOW DISCLOSURE




Interest paid

$
22,217

$
44,272
Income taxes paid

10,207

4,664
Taxes paid if excess tax benefits on stock-based compensation were not tax deductible

9,877

4,446



	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-

Table of Contents

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, 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)


					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, 2019

$
579,672

$
315

$
226,691

$
433,960

$
(71,487)

$
(9,807)

Impact of adoption of ASC 326 - Credit Losses

(875)

—

—

(875)

—

—
Net loss

(1,390)

—

—

(1,390)

—

—
Award of common shares released from Employee Benefit Trust (116,414 shares)

1,398

—

1,398

—

—

—
Vesting of restricted stock unit awards (272,946 shares)

—

—

(5,626)

(156)

5,782

—
Stock-based compensation expense

3,430

—

3,430

—

—

—
Purchase of treasury shares (142,405 shares)

(2,342)

—

—

—

(2,342)

—
Repurchase of shares to satisfy tax obligation (74,145 shares)

(1,493)

—

—

—

(1,493)

—
Dividends on common stock ($0.21 per share)

(6,084)

—

—

(6,084)

—

—
Other comprehensive loss

(22,633)

—

—

—

—

(22,633)
Balance at March 31, 2020

549,683

315

225,893

425,455

(69,540)

(32,440)

Net income

18,272

—

—

18,272

—

—
Award of common shares released from Employee Benefit Trust (10,956 shares)

40

—

40

—

—

—
Vesting of restricted stock unit awards (6,390 shares)

—

—

(133)

(1)

134

—
Stock-based compensation expense

1,101

—

1,101

—

—

—
Repurchase of shares to satisfy tax obligation (2,558 shares)

(30)

—

—

—

(30)

—
Dividends on common stock ($0.21 per share)

(6,063)

—

—

(6,063)

—

—
Other comprehensive income

8,918

—

—

—

—

8,918
Balance at June 30, 2020

$
571,921

$
315

$
226,901

$
437,663

$
(69,436)

$
(23,522)


					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-

Table of Contents

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, which was dissolved as of June 30, ~~2021. Flushing Service Corporation, and FSB Properties Inc.,~~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, ~~2020.~~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 ~~including novel Coronavirus Disease 2019 (“COVID-19”) related changes,~~ are used in connection with the determination of the allowance for credit losses, 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 instruments.

~~In response to COVID-19, the Company is actively assisting customers by providing modifications in the form of deferrals of interest, principal and/or escrow for terms ranging from~~ ~~one~~ to thirty months. At June 30, 2021, we had 69 active forbearances for loans with an aggregate outstanding loan balance of approximately $245.8 million resulting in total deferment of $16.2 million in principal, interest and escrow, down from 134 active forbearances for loans with an aggregate outstanding loan balance of $364.4 million at December 31, 2020. Given the pandemic and current economic environment, we continue to work with our customers to modify loans although the pace of requests slowed down. The Company actively participated in the Paycheck Protection Program (“PPP”), under the Coronavirus Aid, Relief and Economic

-7-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Security Act (the “CARES Act”), closing $138.7 million of these loans during the three months ended June 30, 2021, with $69.2 million in PPP loans forgiven by the SBA during the same time period. We are also a participant in the Main Street Lending Program in order to assist customers. Pursuant to the CARES Act and later modified by Consolidated Appropriations Act, certain loan modifications are not classified as “troubled debt restructuring” (“TDR”), if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected that loans temporarily modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above criteria is met and as such, these loans are considered current and continue to accrue interest at its original contractual terms until the completion of the deferred period. Once the deferred period is over, the borrower will resume making payment and normal delinquency-based non-accrual policies will apply.

In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors in the communities we serve, which may negatively impact the demand for loans and other services we offer. However, the Company’s capital and financial resources have not been materially impacted by the pandemic, as our results of operations depend primarily on net interest income, which benefited from the actions taken by the Federal Reserve to counteract the negative economic impact of the pandemic. Future operating results and near-and-long-term financial condition are subject to significant uncertainty. Our funding sources have not changed significantly, and we expect to continue to be able to timely service our debts and its obligations.

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						For the three months ended						For the six months ended
	June 30,						June 30,						June 30,						June 30,
	2021			2020			2021			2020			2022			2021			2022			2021

	(In thousands, except per share data)												(Dollars in thousands, except per share data)
Net income	$	19,258		$	18,272		$	38,297		$	16,882
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)		31,677			28,867			31,641			28,860			30,937			31,677			31,095			31,641
Basic earnings per common share	$	0.61		$	0.63		$	1.21		$	0.58		$	0.81		$	0.61		$	1.39		$	1.21
Diluted earnings per common share ⁽¹⁾	$	0.61		$	0.63		$	1.21		$	0.58		$	0.81		$	0.61		$	1.39		$	1.21
Dividend payout ratio		34.4	%		33.3	%		34.7	%		72.4	%
Dividend Payout ratio														27.2	%		34.4	%		31.7	%		34.7	%

(1)	For the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, there were 0 common stock ~~equivalents and there were 0 common stock equivalents that were anti-dilutive.~~equivalents.

4. Securities

The Company did 0t hold any trading securities at June 30, ~~2021~~2022 and December 31, ~~2020.~~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 June 30, 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-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~Allowance for credit losses~~

The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical information, current conditions and a reasonable and supportable forecast. The Company’s portfolio is made up of 3 securities totaling $58.7 million (before allowance for credit losses) : the first with an amortized cost of $29.9 million structured similar to a commercial owner occupied loan and modeled for credit losses similar to commercial business loans secured by real estate with a reserve of $0.2 million at June 30, 2021; the second with an amortized cost of $20.0 million that currently is under forbearance with a specific reserve of $0.6 million at June 30, 2021; and the third with an amortized cost of $7.9 million issued and guaranteed by Fannie Mae, which is a government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government. Accordingly, the Company assumes a zero loss expectation from the portfolio. The security currently in forbearance is considered current and as such, continues to accrue interest at its original contractual terms. Accrued interest receivable on held-to-maturity securities totaled $0.1 million at June 30, 2021 and December 31, 2020 and is excluded from estimates of credit losses.

~~The following table summarizes the Company’s portfolio of securities held-to-maturity at June 30, 2021:~~

Gross

Gross

Amortized

Unrecognized

Unrecognized


Cost

Fair Value

Gains

Losses

(In thousands)
Securities held-to-maturity:








Municipals

$
50,830

$
53,598

$
2,768

$
0
Total other securities

50,830

53,598

2,768

0

FNMA

7,904

8,848

944

0
Total mortgage-backed securities

7,904

8,848

944

0

Allowance for Credit Losses

(844)

—

—

—
Total

$
57,890

$
62,446

$
3,712

$
0

The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, ~~2020:~~2021:


					Gross		Gross						Gross		Gross
	Amortized				Unrecognized		Unrecognized		Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses		Cost		Fair Value		Gains		Losses

	(In thousands)								(In thousands)
Securities held-to-maturity:
Municipals	$	50,825	$	54,538	$	3,713	$	—	$	50,836	$	53,362	$	2,526	$	—
Total other securities		50,825		54,538		3,713		—
Total municipals										50,836		53,362		2,526		—

FNMA		7,914		8,991		1,077		—		7,894		8,667		773		—
Total mortgage-backed securities		7,914		8,991		1,077		—		7,894		8,667		773		—

Allowance for Credit Losses		(907)		—		—		—		(862)		—		—		—
Total	$	57,832	$	63,529	$	4,790	$	—	$	57,868	$	62,029	$	3,299	$	—

The following table summarizes the Company’s portfolio of securities available for sale at June 30, 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-

Table of Contents

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 June 30, 2021:~~

Gross

Gross

Amortized

Unrealized

Unrealized


Cost

Fair Value

Gains

Losses

(In thousands)
Securities available for sale:

U.S Government Agencies

$
6,206

$
6,218

$
15

$
3
Corporate

117,420

117,602

461

279
Mutual funds

12,585

12,585

0

0
Collateralized loan obligations

87,148

86,884

18

282
Other

1,495

1,495

0

0
Total other securities

224,854

224,784

494

564
REMIC and CMO

222,748

224,065

3,042

1,725
GNMA

12,033

11,802

39

270
FNMA

205,159

205,782

1,783

1,160
FHLMC

155,944

155,012

589

1,521
Total mortgage-backed securities

595,884

596,661

5,453

4,676
Total securities available for sale

$
820,738

$
821,445

$
5,947

$
5,240

The following table summarizes the Company’s portfolio of securities available for sale at December 31, ~~2020:~~2021:


					Gross		Gross						Gross		Gross
	Amortized				Unrealized		Unrealized		Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses		Cost		Fair Value		Gains		Losses

	(In thousands)								(In thousands)
Securities available for sale:
U.S Government Agencies	$	6,452	$	6,453	$	2	$	1
U.S. government agencies									$	5,599	$	5,590	$	0	$	9
Corporate		130,000		123,865		131		6,266		107,423		104,370		136		3,189
Mutual funds		12,703		12,703		0		0		12,485		12,485		0		0
Collateralized loan obligations		100,561		99,198		0		1,363		81,166		80,912		1		255
Other		1,295		1,295		0		0		1,695		1,695		0		0
Total other securities		251,011		243,514		133		7,630		208,368		205,052		137		3,453
REMIC and CMO		175,142		180,877		5,735		0		210,948		208,509		1,217		3,656
GNMA		13,009		13,053		66		22		10,572		10,286		30		316
FNMA		143,154		146,169		3,046		31		203,777		202,938		1,321		2,160
FHLMC		63,796		64,361		648		83		152,760		150,451		326		2,635
Total mortgage-backed securities		395,101		404,460		9,495		136		578,057		572,184		2,894		8,767
Total securities available for sale	$	646,112	$	647,974	$	9,628	$	7,766	$	786,425	$	777,236	$	3,031	$	12,220

~~We did 0t hold any private issue CMO’s that are collateralized by commercial real estate mortgages at June 30, 2021 and December 31, 2020.~~

The corporate securities held by the Company at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are issued by U.S. banking institutions.

~~-10-~~

~~Table of Contents~~ 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.

~~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 June 30, ~~2021,~~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				Amortized
Securities held-to-maturity:	Cost		Fair Value		Cost		Fair Value

	(In thousands)				(In thousands)
Due after ten years	$	50,830	$	53,598	$	67,315	$	57,064
Total other securities		50,830		53,598		67,315		57,064
Mortgage-backed securities		7,904		8,848		7,885		7,496
Total held-to-maturity securities		58,734		62,446
Allowance for Credit Losses		(844)		—
Total held-to-maturity securities, net of allowance for credit losses	$	57,890	$	62,446
						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

(In thousands)
Due after one year through five years

$
30,000

$
30,242
Due after five years through ten years

159,551

159,243
Due after ten years

22,718

22,714
Total

212,269

212,199
Mutual funds

12,585

12,585
Total other securities

224,854

224,784
Mortgage-backed securities

595,884

596,661
Total available for sale securities

$
820,738

$
821,445


	Amortized
Securities available for sale:	Cost		Fair Value

	(In thousands)
Due in one year or less	$	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		36,019		35,391
Total other securities		351,146		335,147
Mutual funds		11,573		11,573
Mortgage-backed securities		567,643		510,934
Total securities available for sale	$	930,362	$	857,654

~~-11-~~-10-

Table of Contents

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, 2021													At June 30, 2022
	Total					Less than 12 months				12 months or more					Total				Less than 12 months				12 months or more
				Unrealized				Unrealized				Unrealized					Unrealized				Unrealized				Unrealized
	Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

	(Dollars in thousands)													(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	1	$	4,897	$	3	$	4,897	$	3	$	0	$	0
U.S. government agencies														7	$	79,004	$	1,434	$	79,004	$	1,434	$	0	$	0
Corporate	7		52,141		279		22,403		16		29,738		263	18		115,395		9,531		85,515		6,917		29,880		2,614
Collateralized loan obligations	6		44,633		282		0		0		44,633		282
CLO														19		125,978		5,116		105,745		4,082		20,233		1,034
Total other securities	14		101,671		564		27,300		19		74,371		545	44		320,377		16,081		270,264		12,433		50,113		3,648

REMIC and CMO	11		112,847		1,725		112,847		1,725		0		0	45		167,535		18,105		112,167		9,561		55,368		8,544
GNMA	4		11,404		270		11,404		270		0		0	4		7,964		1,393		276		15		7,688		1,378
FNMA	16		107,883		1,160		107,883		1,160		0		0	48		189,798		19,777		146,971		13,508		42,827		6,269
FHLMC	10		85,084		1,521		85,084		1,521		0		0	25		141,019		17,478		77,799		6,218		63,220		11,260
Total mortgage-backed securities	41		317,218		4,676		317,218		4,676		0		0	122		506,316		56,753		337,213		29,302		169,103		27,451

Total securities available for sale	55	$	418,889	$	5,240	$	344,518	$	4,695	$	74,371	$	545
Total														166	$	826,693	$	72,834	$	607,477	$	41,735	$	219,216	$	31,099

At December 31, 2020

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)
Available for sale securities















U.S Government Agencies

1

$
4,988

$
1

$
4,988

$
1

$
0

$
0
Corporate

14

113,734

6,266

0

0

113,734

6,266
Collateralized loan obligations

13

99,199

1,363

7,441

52

91,758

1,311
Total other securities

28

217,921

7,630

12,429

53

205,492

7,577

GNMA

1

10,341

22

10,341

22

0

0
FNMA

5

32,463

31

23,864

28

8,599

3
FHLMC

3

30,095

83

30,095

83

0

0
Total mortgage-backed securities

9

72,899

136

64,300

133

8,599

3

Total securities available for sale

37

$
290,820

$
7,766

$
76,729

$
186

$
214,091

$
7,580


	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

	(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	19		130,823		3,453		76,583		1,976		54,240		1,477

REMIC and CMO	15		124,131		3,656		105,959		2,800		18,172		856
GNMA	4		9,924		316		1,138		16		8,786		300
FNMA	25		171,109		2,160		153,657		1,587		17,452		573
FHLMC	18		129,115		2,635		98,297		1,448		30,818		1,187
Total mortgage-backed securities	62		434,279		8,767		359,051		5,851		75,228		2,916
Total	81	$	565,102	$	12,220	$	435,634	$	7,827	$	129,468	$	4,393

-11-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company reviewed each available for sale ~~debt~~ security that had an unrealized loss at June 30, ~~2021~~2022 and December 31, 2020. At June 30, 2021 and December 31, 2020, the Company evaluated whether the decline in fair value of a debt security resulted from credit losses or other factors under Accounting Standards Codification (“ASC”) Topic 326, ~~Credit Losses~~ ~~also referred to as Current Expected Credit Losses(“CECL”).~~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 conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations, none of which~~If the Company ~~believes would cause~~evaluates any decline in the ~~sale~~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 expected to be collected from the security is compared to the amortized cost basis of the ~~securities.~~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 investment.

In determining the risk of loss for available for sale securities, the Company considered 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 tranche of the 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 reviewed each held-to-maturity security that had an unrealized loss at June 30, 2022 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, 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 did 0t sell any securities during the three and six months ended June 30, 2022. The Company sold $25.0 million in corporate securities during the three and six months ended June 30, 2021.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

In determining the risk of loss for available for sale securities, the Company considered 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 issuer of Corporate securities are global systematically important banks, and the tranche of the purchased CLO’s. 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, m~~anagement believes that the unrealized losses have resulted from other factors not deemed credit-related and 0 allowance for credit loss was recorded~~.

Accrued interest receivable on available-for-sale debt securities totaled $1.7 million and $1.3 million at June 30, 2021 and December 31, 2020, 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,


2021

2020

2021

2020

(In thousands)
Beginning balance

$
915

$
402

$
907

$
340
Provision (benefit)

(71)

—

(63)

62

Allowance for credit losses

$
844

$
402

$
844

$
402

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold $25.0 million in corporate securities during the three and six months ended June 30, 2021.The Company sold $66.2 million and $130.8 million in mortgage-backed securities during the three and six months ended June 30, 2020, respectively.

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,


2021

2020

2021

2020

(In thousands)
Gross gains from the sale of securities

$
123

$
763

$
123

$
1,476
Gross losses from the sale of securities

0

(817)

0

(1,567)

Net gains (losses) from the sale of securities

$
123

$
(54)

$
123

$
(91)


	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

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.

~~-13-~~

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Interest on loans is recognized on the accrual basis. Accrued interest receivable totaled ~~$40.6~~$33.5 million and ~~$41.5~~$35.8 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~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.

Allowance for credit losses

The ~~Allowance~~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,

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Table of Contents

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.

During the three months ended June 30, ~~2021,~~2022, the Company recorded a ~~benefit~~provision for credit losses on loans totaling $1.5 million, compared to a ~~provision~~benefit for credit losses on loans ~~of $9.6~~totaling $1.5 million for the three months ~~ending~~ended June 30, ~~2020.~~2021. The Company recorded a provision for credit losses on loans totaling ~~$1.3~~$2.7 million and ~~$16.7~~$1.3 million for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~benefit~~provision recorded during the ~~three~~six months ended June 30, ~~2021~~2022 was driven by loan growth coupled with the ~~improving economic outlook. During the three months ended June 30, 2021, the~~ongoing environmental uncertainty resulting from high and rising inflation and increasing interest rates. The Company made ~~an adjustment~~no changes to ~~decrease~~ the reasonable and supportable forecast period and ~~increase~~decreased the reversion period from six quarters to ~~adjust for~~four quarters at June 30, 2022, in order to revert back to our historical losses sooner as the economic forecast in the model ~~using a~~is more favorable ~~forecast based on national statistics~~than the current conditions. The ACL - loans totaled $39.4 million at June 30, 2022 compared to ~~the Bank’s primary market area, the New York Tri-State area, where economic improvements lag behind the nation. This resulted in~~$37.1 million at December 31, 2021. At June 30, 2022, the ACL - loans ~~totaling $42.7 million at June 30, 2021 compared to $45.2 million at~~represented 0.58% of gross loans and 141.1% of non-performing loans. At December 31, ~~2020. At June 30,~~ 2021, the ACL - loans represented ~~0.64%~~0.56% of gross loans and ~~242.6%~~248.7% of non-performing loans. ~~At December 31, 2020, the ACL - loans represented 0.61% of gross loans and 181.9% of non-performing loans.~~

Pursuant to the CARES Act and later modified by Consolidated Appropriations Act, certain loan modifications are not classified as TDR, if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected that loans temporarily modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above criteria is met. As such, these loans are considered current and continue to accrue interest at its original contractual terms until the completion of the deferred period. Once the deferred period is over, the borrower will resume making payment and normal delinquency-based non-accrual policies will apply.

The Company may restructure loans ~~that are not directly impacted by COVID-19~~ 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 ~~TDR.~~Troubled Debt Restructured (“TDR”).

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 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-~~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 ACL 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 June 30, 2022, there were 0 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 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-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table shows loans modified as TDR during the period indicated:


	For the three months ended
	June 30, 2022
(Dollars in thousands)	Number	Balance		Modification description

Commercial business and other	2	$	2,453	Two loans had loan extensions
Total	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

-15-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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 ACL 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 June 30, 2021, there were 0 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 ACL. There were 0 TDR loan modifications during the three and six months ended June 30, 2020.

For the three and six months ended

June 30, 2021

(Dollars in thousands)

Number

Balance

Modification description

Commercial business and other

2

674

Amortization period extended

Total

2

$
674

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, 2021			December 31, 2020			June 30, 2022			December 31, 2021
	Number	Amortized		Number	Amortized		Number	Amortized		Number	Amortized
(Dollars in thousands)	of contracts	Cost		of contracts	Cost		of contracts	Cost		of contracts	Cost
Multi-family residential	6	$	1,673	6	$	1,700	6	$	1,656	6	$	1,690
Commercial real estate	1		7,583	1		7,702	1		7,572	1		7,572
One-to-four family - mixed-use property ⁽¹⁾	5		1,682	5		1,731	4		1,254	5		1,636
One-to-four family - residential	3		497	3		507	1		260	3		483
Taxi medallion ⁽²⁾	—		—	2		440
Small Business Administration							1		269	—		—
Commercial business and other ⁽¹⁾	9		4,107	8		3,831	7		3,771	5		1,381
Total performing troubled debt restructured	24	$	15,542	25	$	15,911
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.

~~(2)~~

~~These loans were completely charged off during the three months ended March 31, 2021.~~

During the three and six months ended June 30, 2021 there was 1 commercial business TDR loan totaling $0.3 million that defaulted within 12 months of its modification date. During the three and six months ended June 30, 2020, there were 0 TDR loans that defaulted within 12 months of their modification date.

The following table shows loans classified as TDR at amortized cost that ~~are~~were not performing according to their restructured terms at the periods indicated:


	June 30, 2021			December 31, 2020			June 30, 2022
	Number	Amortized		Number	Amortized		Number	Amortized
(Dollars in thousands)	of contracts	Cost		of contracts	Cost		of contracts	Cost
Taxi medallion ⁽¹⁾	0	$	0	11	$	1,922
Commercial business and other	2		596	1		279	2	$	2,453
Total troubled debt restructurings that subsequently defaulted	2	$	596	12	$	2,201
Total non-performing							2	$	2,453

~~(1)~~

~~These loans were completely charged off during the three months ended March 31, 2021.~~

There were 0 loans classified as TDR that were not performing according to their modified agreement as of December 31, 2021.

~~-15-~~-16-

Table of Contents

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 period shown below:


	At or for the six months ended June 30, 2021										At or for the six months ended June 30, 2022
(In thousands)		Non-Accrual Amortized Cost Beginning of Reporting Period		Non-Accrual Amortized Cost Ending of Reporting Period		Non-Accrual with no related Allowance		Interest Income Recognized		Loans ninety days or more past due and still accruing:		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	$	4,850	$	4,850	$	5	$	201	$	2,652	$	3,707	$	3,707	$	—	$	—
Commercial real estate		1,766		35		35		—		—		640		273		273		—		—
One-to-four family - mixed-use property ⁽¹⁾		1,706		2,706		2,706		2		—		1,582		1,049		1,049		—		—
One-to-four family - residential		5,313		6,404		6,404		1		—		7,482		4,708		4,708		—		—
Small Business Administration												952		951		951		—		—
Construction		—		—		—		—		—		—		856		856		—		—
Small Business Administration		1,168		992		992		—		—
Taxi medallion⁽²⁾		2,758		—		—		—		—
Commercial business and other⁽¹⁾		5,660		4,715		725		52		—		1,945		19,373		3,330		139		100
Total	$	20,947	$	19,702	$	15,712	$	60	$	201	$	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.

(1) Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million, and non-accrual performing TDR commercial business loans totaling $2.2 million at June 30, 2021.

~~(2) Taxi medallion loans were completely charged off during the six months ended June 30, 2021.~~


	At or for the twelve months ended December 31, 2020										At or for the year ended December 31, 2021
(In thousands)		Non-Accrual Amortized Cost Beginning of Reporting Period		Non-Accrual Amortized Cost Ending of Reporting Period		Non-Accrual with no related Allowance		Interest Income Recognized		Loans ninety days or more past due and still accruing:		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	$	2,723	$	2,576	$	2,576	$	—	$	201	$	2,576	$	2,652	$	2,652	$	19	$	—
Commercial real estate		2,714		1,766		1,766		—		2,547		1,766		640		640		—		—
One-to-four family - mixed-use property ⁽¹⁾		1,704		1,706		1,706		—		—		1,706		1,582		1,582		6		—
One-to-four family - residential		9,992		5,313		5,313		—		—		5,313		7,482		7,482		1		—
Small Business Administration		1,169		1,168		1,168		—		—		1,168		952		952		—		—
Taxi medallion⁽¹⁾⁽²⁾		2,318		2,758		2,758		—		—		2,758		—		—		—		—
Commercial business and other⁽¹⁾		7,406		5,660		1,593		58		—		5,660		1,945		305		78		—
Total	$	28,026	$	20,947	$	16,880	$	58	$	2,748	$	20,947	$	15,253	$	13,613	$	104	$	—

(1)

Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 ~~million,~~million. Commercial business and other contains a non-accrual performing TDR ~~taxi medallion loans~~ totaling ~~$0.4 million and non-accrual performing TDR commercial business loans totaling $2.2 million at~~less than $0.1 million.

(2)

Taxi medallions were completely charged-off during the year ended December 31, ~~2020.~~2021.

~~-16-~~-17-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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				For the three months ended				For the six months ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

	(In thousands)
(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	453	$	430	$	915	$	805	$	588	$	453	$	960	$	915
Less: Interest income included in the results of operations		163		73		323		162		282		163		437		323
Total foregone interest	$	290	$	357	$	592	$	643	$	306	$	290	$	523	$	592

The following tables show the aging of the amortized cost basis in past-due loans at the period indicated by class of loans:


	June 30, 2021												June 30, 2022
					Greater												Greater
	30 - 59 Days		60 - 89 Days		than		Total Past						30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans		Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	14,894	$	1,259	$	5,051	$	21,204	$	2,522,555	$	2,543,759	$	2,413	$	0	$	3,707	$	6,120	$	2,529,067	$	2,535,187
Commercial real estate		7,213		0		35		7,248		1,722,659		1,729,907		337		0		273		610		1,865,773		1,866,383
One-to-four family - mixed-use property		787		1,089		2,439		4,315		581,434		585,749		3,937		0		795		4,732		559,401		564,133
One-to-four family - residential		988		1,373		6,404		8,765		288,926		297,691		1,196		77		4,708		5,981		246,128		252,109
Construction		7,089		0		0		7,089		55,622		62,711		0		0		856		856		71,105		71,961
Small Business Administration		81		199		992		1,272		209,246		210,518		40		1,991		951		2,982		37,029		40,011
Taxi medallion		0		0		0		0		0		0
Commercial business and other		588		64		1,942		2,594		1,285,877		1,288,471		93		3		3,580		3,676		1,426,933		1,430,609
Total	$	31,640	$	3,984	$	16,863	$	52,487	$	6,666,319	$	6,718,806	$	8,016	$	2,071	$	14,870	$	24,957	$	6,735,436	$	6,760,393


	December 31, 2020												December 31, 2021
					Greater												Greater
	30 - 59 Days		60 - 89 Days		than		Total Past						30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans		Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	7,582	$	3,186	$	2,777	$	13,545	$	2,522,432	$	2,535,977	$	3,652	$	4,193	$	2,652	$	10,497	$	2,508,730	$	2,519,227
Commercial real estate		17,903		5,123		4,313		27,339		1,731,045		1,758,384		5,743		0		640		6,383		1,770,992		1,777,375
One-to-four family - mixed-use property		5,673		1,132		1,433		8,238		598,647		606,885		2,319		0		1,321		3,640		571,296		574,936
One-to-four family - residential		3,087		805		5,313		9,205		243,486		252,691		163		224		7,482		7,870		269,942		277,812
Construction loans		750		0		0		750		82,411		83,161
Construction														0		0		0		0		59,473		59,473
Small Business Administration		1,823		0		1,168		2,991		162,579		165,570		0		0		952		952		90,884		91,836
Taxi medallion		0		0		2,318		2,318		279		2,597
Commercial business and other		129		1,273		1,593		2,995		1,296,414		1,299,409		101		40		1,386		1,527		1,335,919		1,337,446
Total	$	36,947	$	11,519	$	18,915	$	67,381	$	6,637,293	$	6,704,674	$	11,978	$	4,457	$	14,433	$	30,869	$	6,607,236	$	6,638,105

~~-17-~~-18-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following tables show the activity in the ACL 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

June 30, 2020






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

$
5,895

$
6,791

$
2,170

$
892

$
185

$
1,528

$
—

$
10,637

$
28,098
Charge-offs

—

—

(3)

—

—

(178)

—

(849)

(1,030)
Recoveries

7

—

—

3

—

13

—

—

23
Provision (benefit)

3,033

180

659

266

(2)

23

—

5,460

9,619
Ending balance

$
8,935

$
6,971

$
2,826

$
1,161

$
183

$
1,386

$
—

$
15,248

$
36,710

~~-18-~~-19-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following tables show the activity in the ACL on loans for the six month periods indicated:

June 30, 2021

One-to-four

family -

One-to-four

Small

Commercial

Multi-family

Commercial

mixed-use

family -

Construction

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-off's

(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

June 30, 2020

One-to-four

family -

One-to-four

Small

Commercial

Multi-family

Commercial

mixed-use

family -

Construction

Business

Taxi

business and

(In thousands)

residential

real estate

property

residential

loans

Administration

medallion

other

Total

Allowance for credit losses:


















Beginning balance

$
5,391

$
4,429

$
1,817

$
756

$
441

$
363

$
—

$
8,554

$
21,751
Impact of CECL Adoption

(650)

1,170

(55)

(160)

(279)

1,180

—

(827)

379
Charge-off's

—

—

(3)

—

—

(178)

—

(2,108)

(2,289)
Recoveries

13

—

78

8

—

20

—

14

133
Provision (benefit)

4,181

1,372

989

557

21

1

—

9,615

16,736
Ending balance

$
8,935

$
6,971

$
2,826

$
1,161

$
183

$
1,386

$
—

$
15,248

$
36,710


	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

~~-19-~~-20-

Table of Contents

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 ~~previous~~previously 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 may 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 Credit 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. ~~Loans that are in forbearance pursuant to the CARES Act generally continued to be reported in the same category as they were reported immediately prior to modification.~~

~~-20-~~-21-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the risk category of mortgage and non-mortgage loans by loan portfolio segments and class of loans by year of origination at June 30, ~~2021:~~2022:

Revolving Loans,

Lines of Credit

Amortized Cost

converted to

(In thousands)

2021

2020

2019

2018

2017

Prior

Basis

term loans

Total
1-4 Family Residential

Pass

$
57,316

$
31,897

$
36,253

$
32,818

$
20,935

$
75,903

$
10,524

$
15,288

$
280,934
Watch

—

481

724

280

2,430

1,541

190

2,287

7,933
Special Mention

—

—

—

—

1,115

517

160

—

1,792
Substandard

—

—

—

1,836

—

4,167

—

1,029

7,032
Total 1-4 Family Residential

$
57,316

$
32,378

$
36,977

$
34,934

$
24,480

$
82,128

$
10,874

$
18,604

$
297,691
1-4 Family Mixed-Use

Pass

$
18,221

$
35,902

$
71,259

$
75,193

$
54,249

$
308,869

$
—

$
—

$
563,693
Watch

—

—

—

3,092

6,118

7,668

—

—

16,878
Special Mention

—

—

—

—

761

1,438

—

—

2,199
Substandard

—

—

—

501

—

2,478

—

—

2,979
Total 1-4 Family Mixed Use

$
18,221

$
35,902

$
71,259

$
78,786

$
61,128

$
320,453

$
—

$
—

$
585,749
Commercial Real Estate

Pass

$
58,238

$
171,433

$
256,707

$
266,369

$
180,000

$
680,308

$
—

$
—

$
1,613,055
Watch

4,179

934

3,433

5,708

2,657

83,926

—

—

100,837
Special Mention

—

—

—

6,855

—

1,542

—

—

8,397
Substandard

—

—

7,583

—

—

35

—

—

7,618
Total Commercial Real Estate

$
62,417

$
172,367

$
267,723

$
278,932

$
182,657

$
765,811

$
—

$
—

$
1,729,907
Construction

Pass

$
3,079

$
23,121

$
14,797

$
1,960

$
—

$
—

$
—

$
—

$
42,957
Watch

—

—

2,115

8,284

5,904

—

—

—

16,303
Special Mention

—

—

—

859

2,592

—

—

—

3,451
Substandard

—

—

—

—

—

—

—

—

—
Total Construction

$
3,079

$
23,121

$
16,912

$
11,103

$
8,496

$
—

$
—

$
—

$
62,711
Multifamily

Pass

$
168,396

$
240,612

$
340,195

$
449,407

$
360,108

$
941,236

$
6,346

$
—

$
2,506,300
Watch

—

2,111

4,205

12,605

—

10,834

398

—

30,153
Special Mention

—

792

468

—

—

—

—

—

1,260
Substandard

—

—

703

2,599

1,803

740

201

—

6,046
Total Multifamily

$
168,396

$
243,515

$
345,571

$
464,611

$
361,911

$
952,810

$
6,945

$
—

$
2,543,759
Commercial Business - Secured by RE

Pass

$
96,311

$
93,588

$
38,733

$
52,180

$
28,173

$
99,637

$
—

$
—

$
408,622
Watch

—

23,623

51,501

18,557

11,979

47,442

—

—

153,102
Special Mention

—

—

604

—

—

—

—

—

604
Substandard

—

—

—

—

—

4,228

—

—

4,228
Total Commercial Business - Secured by RE

$
96,311

$
117,211

$
90,838

$
70,737

$
40,152

$
151,307

$
—

$
—

$
566,556
Commercial Business

Pass

$
51,015

$
72,432

$
90,417

$
76,675

$
29,154

$
73,507

$
207,786

$
—

$
600,986
Watch

6

1,683

22,505

19,308

33,143

43

22,493

—

99,181
Special Mention

—

—

45

2,488

103

—

3,207

—

5,843
Substandard

—

4,900

535

320

4,957

1,903

995

—

13,610
Doubtful

—

—

—

—

—

929

1,235

—

2,164
Total Commercial Business

$
51,021

$
79,015

$
113,502

$
98,791

$
67,357

$
76,382

$
235,716

$
—

$
721,784
Small Business Administration

Pass

$
130,255

$
67,148

$
1,292

$
1,560

$
654

$
2,920

$
—

$
—

$
203,829
Watch

—

—

61

2,588

1,946

849

—

—

5,444
Special Mention

—

—

—

—

140

107

—

—

247
Substandard

—

—

—

—

992

6

—

—

998
Total Small Business Administration

$
130,255

$
67,148

$
1,353

$
4,148

$
3,732

$
3,882

$
—

$
—

$
210,518
Other

Pass

$
—

$
—

$
—

$
—

$
—

$
52

$
79

$
—

$
131
Total Other

$
—

$
—

$
—

$
—

$
—

$
52

$
79

$
—

$
131

Total Loans

$
587,016

$
770,657

$
944,135

$
1,042,042

$
749,913

$
2,352,825

$
253,614

$
18,604

$
6,718,806



														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

~~-21-~~-22-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Included within net loans as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$9.3~~$5.4 million and ~~$5.9~~$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 by class of loans as of the periods indicated:



	Collateral Type								Collateral Type
	June 30, 2021				December 31, 2020				June 30, 2022				December 31, 2021
(In thousands)		Real Estate		Business Assets		Real Estate		Business Assets		Real Estate		Business Assets		Real Estate		Business Assets
Multi-family residential	$	4,850	$	—	$	2,576	$	—	$	3,707	$	—	$	2,652	$	—
Commercial real estate		1,246		—		2,994		—		775		—		1,158		—
One-to-four family - mixed-use property		2,706		—		1,706		—		1,049		—		1,582		—
One-to-four family - residential		6,404		—		5,313		—		4,708		—		7,482		—
Construction										856		—		—		—
Small Business Administration		—		992		—		1,168		—		951		—		952
Commercial business and other		—		2,556		—		3,482		—		18,871		—		1,427
Taxi Medallion		—		—		—		2,758
Total	$	15,206	$	3,548	$	12,589	$	7,408	$	11,095	$	19,822	$	12,874	$	2,379

Off-Balance Sheet Credit Losses

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) totaled ~~$499.8~~$542.6 million and ~~$474.0~~$472.9 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~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, ~~2021~~2022 and ~~2020.~~2021.


	For the three months ended				For the six months ended				For the three months ended				For the six months ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

	(In thousands)								(In thousands)
Balance at beginning of period	$	1,304	$	797	$	1,815	$	—	$	1,589	$	1,304	$	1,209	$	1,815
Off-Balance Sheet - CECL Adoption		—		—		—		553
Off-Balance Sheet- Provision (benefit)		266		467		(245)		711
Off-Balance Sheet- Provision (Benefit)										(145)		266		235		(245)
Allowance for Off-Balance Sheet - Credit losses ⁽¹⁾	$	1,570	$	1,264	$	1,570	$	1,264	$	1,444	$	1,570	$	1,444	$	1,570

(1)

Included in “Other liabilities” on the Consolidated Statements of Financial Condition.

~~-22-~~-23-

Table of Contents

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Bank did 0tnot 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. There were 0 loans sold for the three months ended June 30, 2020.

~~The~~ following ~~tables show~~table shows loans sold during the ~~period~~periods indicated:


	For the three months ended June 30, 2021
				Net Recoveries				For the three and six months ended June 30, 2022
(Dollars in thousands)	Loans sold	Proceeds		(Charge-offs)		Net gain		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
Multi-family residential	3	$	7,846	$	—	$	58
Commercial								1		3,687		—		73
One-to-four family - mixed-use property	4		2,488		—		69	1		430		—		—
Total	7	$	10,334	$	—	$	127	2	$	4,117	$	—	$	73


	For the six months ended June 30, 2021							For the three months ended June 30, 2021
				Net Recoveries							Net
(Dollars in thousands)	Loans sold	Proceeds		(Charge-offs)		Net gain		Loans sold	Proceeds		charge-offs		Net gain
Delinquent and non-performing loans
Multi-family residential	8	$	10,752	$	(43)	$	63	3	$	7,846	$	—	$	58
Commercial real estate	3		3,036		(64)		17
One-to-four family - mixed-use property	10		4,796		(14)		78	4		2,488		—		69
Total	21	$	18,584	$	(121)	$	158	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 six months ended June 30, 2020

Net Recoveries

(Dollars in thousands)

Loans sold

Proceeds

(Charge-offs)

Net gain
Delinquent and non-performing loans








Multi-family residential

1

$
284

$
—

$
42
One-to-four family - mixed-use property

1

296

—

—
Total

2

$
580

$
—

$
42

~~-23-~~

~~Table of Contents~~

~~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, 9 operating leases for vehicles, and 1 operating lease for equipment. Our leases have remaining lease terms ranging from four months to approximately 15 years, none of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.

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’s operating lease expense totaled $2.2 million and $1.9 million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for the three month periods ended June 30, 2021 and 2020, respectively. The Company’s operating lease expense totaled $4.3 million and $3.8 million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for the six month periods ended June 30, 2021 and 2020, respectively.

The Company has one agreement that qualifies as a short-term lease with expense totaling approximately $60,000 and $34,000 for the three month periods ended June 30, 2021 and 2020 and approximately $90,000 and $68,000 for the six month periods ended June 30, 2021 and 2020, included in Professional services on the Consolidated Statements of Income. The Company has $0.3 million in variable lease payments, which include insurance and real estate tax expenses and was recorded in Occupancy and equipment on the Consolidated Statements of Income, for each of the three months ended June 30, 2021 and 2020. The Company has $0.6 million in variable lease payments, which include insurance and real estate tax expenses and was recorded in Occupancy and equipment on the Consolidated Statements of Income, for each of the six months ended June 30, 2021 and 2020. At June 30, 2021, the weighted-average remaining lease term for our operating leases is approximately ~~eight years~~ ~~and the weighted average discount rate is 3.2%. Our lease agreements do not contain any residual value guarantees.~~

~~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, 2021

December 31, 2020

Operating lease ROU asset

$
51,972

$
50,743

Operating lease liability

$
56,151

$
59,100

Weighted-average remaining lease term-operating leases

7.7 years

8.3 years

Weighted average discount rate-operating leases

3.2
%

3.2
%

-24-

Table of Contents

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.

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					For the three months ended
(Dollars in thousands)	June 30, 2021		June 30, 2020		Line Item Presented	June 30, 2022		June 30, 2021

Lease Cost
Operating lease cost					Occupancy and equipment	$	2,099	$	2,224
Operating lease cost	$	2,244	$	1,897	Other operating expenses		26		20
Short-term lease cost		60		34	Professional Services and Other operating expenses		36		60
Variable lease cost		298		287	Occupancy and equipment		238		298
Total lease cost	$	2,602	$	2,218		$	2,399	$	2,602

Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,418	$	2,200		$	2,343	$	4,769
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	27

For the six months ended
(Dollars in thousands)

June 30, 2021

June 30, 2020

Lease Cost




Operating lease cost

$
4,348

$
3,782
Short-term lease cost

95

68
Variable lease cost

596

552
Total lease cost

$
5,039

$
4,402

Other information




Cash paid for amounts included in the measurement of lease liabilities




Operating cash flows from operating leases

$
8,048

$
4,182
Right-of-use assets obtained in exchange for new operating lease liabilities

$
—

$
50

-25-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows as of June 30, 2021:~~

Minimum Rental

(In thousands)
Years ended December 31:

2021

$
4,369
2022

9,149
2023

9,281
2024

9,121
2025

8,479
Thereafter

22,898
Total minimum payments required

63,297
Less: Implied interest

7,146
Total lease obligations

$
56,151


		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 ~~December 31, 2020:~~June 30, 2022:


	Minimum Rental		Minimum Rental
	(In thousands)		(In thousands)
Years ended December 31:
2021	$	8,757
2022		8,871	$	4,485
2023		9,006		9,502
2024		8,847		9,336
2024		8,212
2025				8,662
2026				7,769
Thereafter		23,547		16,277
Total minimum payments required	$	67,240		56,031
Less: Implied interest		8,140
Less: implied interest				5,685
Total lease obligations	$	59,100	$	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, ~~2021,~~2022, PRSUs granted in ~~2021~~2022 and 2020 are being accrued at target and PRSUs granted in ~~2019~~2021 are being accrued above target.

~~On May 18, 2021, stockholders approved an amendment to~~ The different levels of accrual are commensurate with the ~~2014 Omnibus Plan (the “Amendment”) authorizing an additional 1,100,000 shares available for future issuance. Including~~projected performance of the ~~additional shares authorized from the Amendment, 1,170,408 shares were available for future issuance under the 2014 Omnibus Plan at June 30, 2021.~~

For the three months ended June 30, 2021 and 2020, the Company’s net income, as reported, included $1.1 million and $0.9 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and $0.3 million and $0.2 million of income tax benefits, respectively, related to the stock-based compensation plans. For the six months ended June 30, 2021 and 2020, the Company’s net income, as reported, included $5.2 million and $3.4respective grant.

-26-

Table of Contents

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 June 30, 2022 and 2021, the Company’s net income, as reported, included $0.9 million and $1.1 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and ~~$1.4 million and $0.8~~$0.3 million of income tax ~~benefits,~~benefit for each period, related to the stock-based compensation plans. For the six months ended June 30, 2022 and 2021, the Company’s net income, as reported, included $4.9 million and $5.2 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and $1.3 million and $1.4 million of income tax benefit, respectively, related to the stock-based compensation plans.

During the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company did ~~not~~0t grant any RSU or ~~PRSU’s.~~ PRSUs. During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company granted 212,811 and 238,985 RSU awards and ~~172,228 RSU, respectively. During the six months ended June 30, 2021~~63,250 and ~~2020, the Company granted~~ 62,790 ~~and 72,143 in~~ PRSU awards, respectively.

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. Forfeitures are recorded in the period they occur.

The following table summarizes the Company’s RSU and PRSU awards at or for the six months ended June 30, ~~2021:~~2022:


	RSU Awards			PRSU Awards			RSU Awards			PRSU Awards
		Weighted-Average			Weighted-Average			Weighted-Average			Weighted-Average
		Grant-Date			Grant-Date			Grant-Date			Grant-Date
	Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value

Non-vested at December 31, 2020	336,898	$	23.48	66,580	$	21.26
Non-vested at December 31, 2021							310,430	$	21.49	102,920	$	20.02
Granted	238,985		18.44	62,790		18.46	212,811		24.83	63,250		25.11
Vested	(240,176)		21.22	(35,070)		18.81	(219,835)		23.62	(71,390)		23.48
Forfeited	(4,662)		20.61	0		0	(1,695)		23.87	—		—
Non-vested at June 30, 2021	331,045	$	21.51	94,300	$	20.31
Vested but unissued at June 30, 2021	214,829	$	21.03	102,185	$	20.48
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

As of June 30, ~~2021,~~2022, there was ~~$6.3~~$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 ~~2.5~~2.6 years. The total fair value of awards vested for the three months ended June 30, 2022 and 2021 ~~and 2020~~ was ~~$0.2~~$0.5 million and ~~$0.1~~$0.2 million, respectively. The total fair value of awards vested for the six months ended June 30, 2022 and 2021 ~~and 2020~~ was ~~$5.0~~$7.1 million and ~~$5.1~~$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.

Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its ~~profit sharing~~profit-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.

~~The following table summarizes the Phantom Stock Plan at or for the six months ended June 30, 2021:~~

Phantom Stock Plan

Shares

Fair Value
Outstanding at December 31, 2020

120,248

$
16.64
Granted

9,042

19.52
Forfeited

(11)

18.25
Distributions

(1,483)

17.15
Outstanding at June 30, 2021

127,796

$
21.43
Vested at June 30, 2021

127,685

$
21.43

The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of $0.1 million and ($0.2) million for the three months ended June 30, 2021 and 2020, respectively. The total fair value of the distributions from the Phantom Stock Plan was $2,000 and $7,000 for the three months ended June 30, 2021 and 2020, respectively.

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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 six months ended June 30, 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

The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of ~~$0.6~~($0.1) million and ~~($1.1)~~$0.1 million for the ~~six~~three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The total fair value of the distributions from the Phantom Stock Plan was ~~$25,000~~$2,000 for each of the three months ended June 30, 2022 and ~~$8,000~~2021.

The Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of ($0.4) million and $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 was $18,000 and ~~2020,~~$25,000 for the six months ended June 30, 2022, and 2021, respectively.

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				Three months ended				Six months ended
	June 30,				June 30,				June 30,				June 30,
(In thousands)	2021		2020		2021		2020		2022		2021		2022		2021

Employee Pension Plan:
Interest cost	$	128	$	163	$	256	$	326	$	138	$	128	$	276	$	256
Amortization of actuarial loss		122		111		244		222
Amortization of unrecognized loss										1		122		2		244
Expected return on plan assets		(274)		(257)		(548)		(514)		(258)		(274)		(515)		(548)
Net employee pension (benefit) expense	$	(24)	$	17	$	(48)	$	34
Net employee pension benefit									$	(119)	$	(24)	$	(237)	$	(48)

Outside Director Pension Plan:
Service cost	$	4	$	3	$	8	$	7	$	3	$	4	$	6	$	8
Interest cost		12		16		24		32		12		12		23		24
Amortization of actuarial gain		(5)		(13)		(10)		(27)
Amortization of past service liability		0		0		0		0
Amortization of unrecognized gain										(7)		(5)		(14)		(10)
Net outside director pension expense	$	11	$	6	$	22	$	12	$	8	$	11	$	15	$	22

Other Postretirement Benefit Plans:
Service cost	$	73	$	68	$	146	$	137	$	67	$	73	$	134	$	146
Interest cost		58		65		116		130		69		58		139		116
Amortization of actuarial gain		16		—		16		—		—		16		—		16
Amortization of past service credit		(21)		(23)		(43)		(43)		(7)		(21)		(14)		(43)
Net other postretirement expense	$	126	$	110	$	235	$	224	$	129	$	126	$	259	$	235

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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, ~~2020~~2021 that it expects to contribute $0.3 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”), during the year ending December 31, ~~2021.~~2022. The Company does 0t expect to make a contribution to the Employee Pension Plan (the “Employee Pension Plan”). As of June 30, ~~2021,~~2022, the Company had contributed $72,000 to the Outside Director Pension Plan and ~~$70,000 in contributions were made to~~$21,000 tto the Other Postretirement Benefit Plans. As of June 30, ~~2021,~~2022, the Company has not revised its expected contributions for the year ending December 31, ~~2021.~~2022.

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. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. At June 30, 2022, the Company carried financial assets and financial liabilities under the fair value option with fair values of $13.6 million and $55.4 million, respectively. At December 31, 2021, the Company carried financial assets and financial liabilities under the fair value option with fair values of ~~$14.5~~$14.6 million and ~~$49.8 million, respectively. At December 31, 2020, the Company carried financial assets and financial liabilities under the fair value option with fair values of $14.5 million and $43.1~~$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 three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

~~-28-~~

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~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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
(In thousands)

2021

2020

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020













Mortgage-backed securities

$
441

$
505

$
(1)

$
(1)

$
(2)

$
2
Other securities

14,080

13,998

176

(182)

1

37
Borrowed funds

49,814

43,136

(5,528)

10,334

(6,988)

7,983
Net gain (loss) from fair value adjustments ⁽¹⁾⁽²⁾

$
(5,353)

$
10,151

$
(6,989)

$
8,022


	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)

(1)	The net gain (loss) from fair value adjustments presented in the above table does not include net gains (losses) of ($1.2) million ~~and $0.1 million~~ for the three months ended June 30, 2021 and ~~2020, respectively, from the change in the fair value of interest rate swaps.~~

~~(2)~~

~~The net gain (loss) from fair value adjustments presented in the above table does not include net gains (losses) of~~ $1.4 ~~million and ($3.8)~~ million for the six months ended June 30, 2021, ~~and 2020, respectively,~~ from the change in the fair value of interest rate swaps.

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 June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The fair value of borrowed funds includes accrued interest payable of $0.2 million and $0.1 million ~~each~~ at June 30, ~~2021~~2022 and December 31, ~~2020.~~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.

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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.

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 – when quoted market prices are available in an active market. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Level 1 included one mutual fund.

~~-29-~~

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~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Level 2 included mortgage-backed securities, ~~CLO’s,~~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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Level 3 included trust preferred securities owned, and junior subordinated debentures issued by the Company.

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.

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 level that was used to determine their fair value, at June 30, 2021 and December 31, 2020:

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


2021

2020

2021

2020

2021

2020

2021

2020

(In thousands)
Assets:

Securities available for sale

Mortgage-backed Securities

$
0

$
0

$
596,661

$
404,460

$
0

$
0

$
596,661

$
404,460
Other securities

12,585

12,703

210,704

229,516

1,495

1,295

224,784

243,514
Interest rate swaps

0

0

6,998

1,319

0

0

6,998

1,319

Total assets

$
12,585

$
12,703

$
814,363

$
635,295

$
1,495

$
1,295

$
828,443

$
649,293

Liabilities:
















Borrowings

$
0

$
0

$
0

$
0

$
49,814

$
43,136

$
49,814

$
43,136
Interest rate swaps

0

0

42,520

60,987

0

0

42,520

60,987

Total liabilities

$
0

$
0

$
42,520

$
60,987

$
49,814

$
43,136

$
92,334

$
104,123

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


	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

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 periods indicated:


	For the three months ended								For the three months ended
	June 30, 2021				June 30, 2020				June 30, 2022				June 30, 2021
	Trust preferred		Junior subordinated		Trust preferred		Junior subordinated		Trust preferred		Junior subordinated		Trust preferred		Junior subordinated
	securities		debentures		securities		debentures		securities		debentures		securities		debentures

	(In thousands)								(In thousands)

Beginning balance	$	1,342	$	44,712	$	1,355	$	45,126	$	1,740	$	57,955	$	1,342	$	44,712
Net (loss) gain from fair value adjustment of financial assets ⁽¹⁾		153		—		(285)		—		(80)		—		153		—
Net (gain) loss from fair value adjustment of financial liabilities ⁽¹⁾		—		5,528		—		(10,334)		—		(3,025)		—		5,528
Decrease in accrued interest receivable		—		—		(2)		—
Decrease in accrued interest payable		—		(3)		—		(61)
Change in unrealized gains included in other comprehensive income		—		(423)		—		839
Increase (Decrease) in accrued interest										2		61		—		(3)
Change in unrealized (gains) losses included in other comprehensive loss										—		361		—		(423)
Ending balance	$	1,495	$	49,814	$	1,068	$	35,570	$	1,662	$	55,352	$	1,495	$	49,814

Changes in unrealized gains held at period end	$	—		2,973		—		2,223	$	—	$	2,775	$	—	$	2,973

(1)	Totals in the ~~table~~tables above are presented in the Consolidated Statements of Income under net gain (loss) from fair value adjustments.

For the six months ended

June 30, 2021

June 30, 2020

Trust preferred

Junior subordinated

Trust preferred

Junior subordinated


securities

debentures

securities

debentures

(In thousands)
Beginning balance

$
1,295

$
43,136

$
1,332

$
44,384
Net gain from fair value adjustment of financial assets ⁽¹⁾

200

—

(261)

—
Net loss from fair value adjustment of financial liabilities⁽¹⁾

—

6,987

—

(7,983)
Decrease in accrued interest receivable

—

—

(3)

—
Increase (decrease) in accrued interest payable

—

(6)

—

(85)
Change in unrealized gains included in other comprehensive income

—

(303)

—

(746)
Ending balance

$
1,495

$
49,814

$
1,068

$
35,570

Changes in unrealized gains held at period end

$
—

2,973

—

2,223

~~(1)~~~~Totals in the table above are presented in the Consolidated Statements of Income under net gain (loss) from fair value adjustments.~~

~~During the three and six months ended June 30, 2021 and 2020, there were 0 transfers between Levels 1, 2 and 3.~~

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Table of Contents

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

June 30, 2021


Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

(Dollars in thousands)

Assets:

Trust preferred securities

$
1,495

Discounted cash flows

Discount rate

n/a

3.2
%

Liabilities:











Junior subordinated debentures

$
49,814

Discounted cash flows

Discount rate

n/a

3.2
%

December 31, 2020

December 31, 2021

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

(Dollars in thousands)

Assets:

Trust preferred securities

1,295

Discounted cash flows

Discount rate

n/a

4.2

1,695

Discounted cash flows

Discount rate

n/a

2.2

Liabilities:

Junior subordinated debentures

43,136

Discounted cash flows

Discount rate

n/a

4.2

56,472

Discounted cash flows

Discount rate

n/a

2.2

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~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.

The following table sets forth the Company’s assets and liabilities that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value at June 30, 2021 and December 31, 2020:

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


	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

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:


	June 30, 2021						At June 30, 2022
	Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average	Fair Value		Valuation Technique	Unobservable Input	Range		Weighted Average

	(Dollars in thousands)						(Dollars in thousands)
Assets:

Non-accrual loans	$	8,865	Sales approach	Reduction for planned expedited disposal	8.0% to 15.0%	12.0%	$	22,140	Sales approach	Reduction for planned expedited disposal	8.0% to 15.0	%	12.0	%

Non-accrual loans	$	1,057	Discounted Cashflow	Discount Rate	4.3% to 5.5%	4.8%
				Probability of Default	35.0% to 50.0%	41.7%

Non-accrual loans	$	183	Blended Income and Sales Approach	Adjustment to sales comparison value to reconcile differences between comparable sales	0.0% to 5.0%	2.5%	$	362	Discounted Cashflow	Discount Rate	4.3	%	4.3	%
				Capitalization rate	8.3%	8.3%				Probability of Default	35.0	%	35.0	%
				Probability of Default	15.0%	15.0%


	At December 31, 2020						At December 31, 2021
	Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average	Fair Value		Valuation Technique	Unobservable Input	Range		Weighted Average

	(Dollars in thousands)						(Dollars in thousands)
Assets:

Non-accrual loans	$	10,690	Sales approach	Reduction for planned expedited disposal	(100.0%) to 15.0%	6.8%	$	10,579	Sales approach	Reduction for planned expedited disposal	8.0% to 15.0	%	11.9	%


Non-accrual loans	$	1,290	Discounted Cashflow	Discount Rate	4.3% to 5.5%	4.9%	$	447	Discounted Cashflow	Discount Rate	4.3	%	4.3	%
				Probability of Default	20.0% to 35.0%	27.4%				Probability of Default	35.0	%	35.0	%

The Company did 0t have any liabilities that were carried at fair value on a non-recurring basis at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

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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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:

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.

Non-accrual Loans:

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. See Note 5 (“Loans”) of the Notes to the Consolidated Financial Statements.

~~-33-~~

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~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Junior Subordinated Debentures:

The fair value of the junior subordinated debentures was developed using a credit spread based on stated spreads for recently issued subordinated debt instruments 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. The unrealized net gain/loss attributable to changes in our own credit risk was determined by adjusting the fair value as 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 this calculation resulting in the instrument-specific unrealized gain/loss.

~~Other Real Estate Owned and Other Repossessed Assets:~~

The fair value for OREO 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. The fair value for other repossessed assets are based upon the most recently reported arm’s length sales transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates.

Interest Rate Swaps:

The fair value of interest rate swaps is based upon broker quotes.

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, 2021

Carrying

Fair


Amount

Value

Level 1

Level 2

Level 3

(In thousands)
Assets:











Cash and due from banks

$
145,971

$
145,971

$
145,971

$
0

$
0
Securities held-to-maturity










Mortgage-backed securities

7,904

8,848

0

8,848

0
Other securities

49,986

53,598

0

0

53,598
Securities available for sale








Mortgage-backed securities

596,661

596,661

0

596,661

0
Other securities

224,784

224,784

12,585

210,704

1,495
Loans

6,718,806

6,702,618

0

0

6,702,618
FHLB-NY stock

41,630

41,630

0

41,630

0
Accrued interest receivable

43,803

43,803

2

1,705

42,096
Interest rate swaps

6,998

6,998

0

6,998

0

Liabilities:










Deposits

$
6,357,020

$
6,361,050

$
5,336,405

$
1,024,645

$
0
Borrowings

971,827

973,198

0

923,384

49,814
Accrued interest payable

4,675

4,675

0

4,675

0
Interest rate swaps

42,520

42,520

0

42,520

0

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

December 31, 2020

Carrying

Fair


Amount

Value

Level 1

Level 2

Level 3

(In thousands)
Assets:











Cash and due from banks

$
157,388

$
157,388

$
157,388

$
0

$
0
Securities held-to-maturity










Mortgage-backed securities

7,914

8,991

0

8,991

0
Other securities

49,918

54,538

0

0

54,538
Securities available for sale








Mortgage-backed securities

404,460

404,460

0

404,460

0
Other securities

243,514

243,514

12,703

229,516

1,295
Loans

6,704,674

6,793,885

0

0

6,793,885
FHLB-NY stock

43,439

43,439

0

43,439

0
Accrued interest receivable

44,041

44,041

2

1,389

42,650
Interest rate swaps

1,319

1,319

0

1,319

0

Liabilities:










Deposits

$
6,136,355

$
6,141,775

$
4,997,994

$
1,143,781

$
0
Borrowings

1,020,895

1,017,573

0

974,437

43,136
Accrued interest payable

4,755

4,755

0

4,755

0
Interest rate swaps

60,987

60,987

0

60,987

0


	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		—

11. Derivative Financial Instruments

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s derivative financial instruments ~~consist~~consisted of interest rate swaps. The Company’s interest rate swaps are used for ~~four~~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 June 30, 2021 and December 31, 2020; 2) to mitigate the Company’s exposure to rising interest rates on certain fixed rate loans totaling ~~$310.9~~$289.2 million and ~~$316.1~~$299.6 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively; 3)2) to facilitate risk management strategies for our loan customers with ~~$231.4~~$224.6 million of swaps outstanding,

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

which include ~~$115.7~~$112.3 million with customers and ~~$115.7~~$112.3 million with bank counterparties at June 30, ~~2021~~2022 and ~~$125.6~~$228.0 million of swaps outstanding, which include ~~$62.8~~$114.0 million with customers and ~~$62.8~~$114.0 million with bank counterparties at December 31, ~~2020;~~2021; and 4)3) to mitigate exposure to rising interest rates on certain short-term advances and brokered deposits totaling ~~$996.5 million and $1,021.5~~$871.5 million at June 30, ~~2021~~2022, and $996.5 at December 31, ~~2020, respectively.~~2021.

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we held derivatives designated as cash flow hedges, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, derivatives with a combined notional amount of ~~$249.4~~$224.6 million and ~~$143.6~~$228.0 million, respectively, were not designated as hedges. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, derivatives with a combined notional amount of ~~$310.9~~$289.2 million and ~~$316.1~~$299.6 million, respectively, were designated as fair value hedges. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, derivatives with a combined notional amount of ~~$996.5~~$871.5 million and ~~$1,021.5~~$996.5 million, respectively, were designated as cash flow hedges.

For cash flow hedges, the changes in the fair value of the derivative isare reported in accumulated other comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive ~~income (loss)~~loss are reclassified into earnings in the same period during which the hedged forecasted transaction effects earnings. During the three months ended June 30, 2022 and 2021, $2.4 million and ~~2020,~~ $2.6 million, ~~and $0.2 million,~~ respectively, ~~were~~was reclassified from accumulated other comprehensive loss to interest expense. The estimated amount to be reclassified in the next 12 months out of accumulated other comprehensive loss is $5.7 million.

Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net gain (loss) from fair value adjustments” in the Consolidated Statements of Income.

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)

(1)Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

~~-35-~~-36-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~interest expense. The estimated amount to be reclassified in the next 12 months out of accumulated other comprehensive income (loss) is $10.5 million.~~

~~Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income.~~

The following table ~~sets forth~~presents information regarding the Company’s ~~derivative financial instruments at~~fair value hedged items for the periods indicated:

June 30, 2021

December 31, 2020

Notional

Net Carrying

Notional

Net Carrying


Amount

Value ⁽¹⁾

Amount

Value ⁽¹⁾

(In thousands)
Interest rate swaps (non-hedge)

$
115,681

$
3,241

$
62,779

$
1,319
Interest rate swaps (cash flow hedge)

355,000

3,757

—

—
Interest rate swaps (fair value hedge)

310,939

(17,858)

316,051

(28,689)
Interest rate swaps (cash flow hedge)

641,500

(17,165)

1,021,500

(25,300)
Interest rate swaps (non-hedge)

133,681

(7,497)

80,779

(6,998)
Total derivatives

$
1,556,801

$
(35,522)

$
1,481,109

$
(59,668)

~~(1)~~


						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

Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

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					For the three months ended				For the six months ended
		June 30,				June 30,					June 30,				June 30,
(In thousands)	Affected Line Item in the Statement Where Net income is Presented	2021		2020		2021		2020		Affected Line Item in the Statements Where Net Income is Presented	2022		2021		2022		2021
Financial Derivatives:
	Other interest expense	$	(138)	$	(101)	$	(272)	$	(166)	Other interest expense	$	—	$	(138)	$	—	$	(272)
	Net gain (loss) from fair value adjustments		(1,195)		54		1,423		(3,810)	Net gain (loss) from fair value adjustments		—		(1,195)		—		1,423
Interest rate swaps (non-hedge)			(1,333)		(47)		1,151		(3,976)			—		(1,333)		—		1,151

Interest rate swaps (fair value hedge)	Interest and fees on loans		(2,062)		(1,456)		(2,025)		(3,705)	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)	Other interest expense		(2,619)		(1,156)		(5,205)		(1,546)			(1,385)		(2,619)		(3,905)		(5,205)

Net loss		$	(6,014)	$	(2,659)	$	(6,079)	$	(9,227)		$	(2,271)	$	(6,014)	$	(6,226)	$	(6,079)

The Company’s interest rate swaps are subject to master netting arrangements between the Company and its three designated counterparties. The Company has not made a policy election to offset its derivative positions.

~~-36-~~-37-

Table of Contents

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, 2021												June 30, 2022
							Gross Amounts Not Offset in the												Gross Amounts Not Offset in the
							Consolidated Statement of												Consolidated Statements of
			Gross Amount Offset in		Net Amount of Assets		Condition								Gross Amount Offset in		Net Amount of Assets		Financial Condition
	Gross Amount of		the Statement of		Presented in the Statement of		Financial		Cash Collateral				Gross Amount of		the Statements		Presented in the		Financial		Cash Collateral
(In thousands)	Recognized Assets		Condition		Condition		Instruments		Received		Net Amount		Recognized Assets		of Condition		Statements of Condition		Instruments		Received		Net Amount

Interest rate swaps	$	6,998	$	0	$	6,998	$	0	$	0	$	6,998	$	53,985	$	0	$	53,985	$	0	$	38,972	$	15,013

							Gross Amounts Not Offset in the												Gross Amounts Not Offset in the
							Consolidated Statement of												Consolidated Statements of
	Gross Amount of		Gross Amount Offset in		Net Amount of Liabilities		Condition						Gross Amount of		Gross Amount Offset in		Net Amount of Liabilities		Financial Condition
	Recognized		the Statement of		Presented in the Statement of		Financial		Cash Collateral				Recognized		the Statements		Presented in the		Financial		Cash Collateral
(In thousands)	Liabilities		Condition		Condition		Instruments		Pledged		Net Amount		Liabilities		of Condition		Statements of Condition		Instruments		Pledged		Net Amount

Interest rate swaps	$	42,520	$	0	$	42,520	$	0	$	41,817	$	703	$	13,258	$	0	$	13,258	$	0	$	0	$	13,258


	December 31, 2020												December 31, 2021
							Gross Amounts Not Offset in the												Gross Amounts Not Offset in the
							Consolidated Statement of												Consolidated Statements of
			Gross Amount Offset in		Net Amount of Assets		Condition								Gross Amount Offset in		Net Amount of Assets		Financial Condition
	Gross Amount of		the Statement of		Presented in the Statement of		Financial		Cash Collateral				Gross Amount of		the Statements		Presented in the		Financial		Cash Collateral
(In thousands)	Recognized Assets		Condition		Condition		Instruments		Received		Net Amount		Recognized Assets		of Condition		Statements of Condition		Instruments		Received		Net Amount

Interest rate swaps	$	1,319	$	0	$	1,319	$	0	$	—	$	1,319	$	10,683	$	0	$	10,683	$	0	$	—	$	10,683

							Gross Amounts Not Offset in the												Gross Amounts Not Offset in the
							Consolidated Statement of												Consolidated Statements of
	Gross Amount of		Gross Amount Offset in		Net Amount of Liabilities		Condition						Gross Amount of		Gross Amount Offset in		Net Amount of Liabilities		Financial Condition
	Recognized		the Statement of		Presented in the Statement of		Financial		Cash Collateral				Recognized		the Statements		Presented in the		Financial		Cash Collateral
(In thousands)	Liabilities		Condition		Condition		Instruments		Pledged		Net Amount		Liabilities		of Condition		Statements of Condition		Instruments		Pledged		Net Amount

Interest rate swaps	$	60,987	$	0	$	60,987	$	99	$	63,517	$	(2,629)	$	25,071	$	0	$	25,071	$	0	$	21,527	$	3,544

~~-37-~~-38-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

12. Accumulated Other Comprehensive Income (Loss):

The following tables set forth the changes in accumulated other comprehensive income (loss) by component for the periods indicated:

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, net of tax

1,412

521

77

276

2,286

Ending balance, net of tax

$
485

$
(9,202)

$
(1,741)

$
2,041

$
(8,417)

~~-38-~~

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

For the three months ended June 30, 2020

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

$
(14,159)

$
(19,468)

$
(930)

$
2,117

$
(32,440)

Other comprehensive income before reclassifications, net of tax

11,414

(2,404)

0

(580)

8,430

Amounts reclassified from accumulated other comprehensive income, net of tax

37

399

52

0

488

Net current period other comprehensive income (loss), net of tax

11,451

(2,005)

52

(580)

8,918

Ending balance, net of tax

$
(2,708)

$
(21,473)

$
(878)

$
1,537

$
(23,522)

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)


	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)

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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)

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


	For the six months ended June 30, 2020										For the six months ended June 30, 2021
	Unrealized Gains		Unrealized Gains								Unrealized Gains		Unrealized Gains
	(Losses) on		(Losses) on				Fair Value				(Losses) on		(Losses) on				Fair Value
	Available for Sale		Cash flow		Defined Benefit		Option Elected				Available for Sale		Cash flow		Defined Benefit		Option Elected
	Securities		Hedges		Pension Items		on Liabilities		Total		Securities		Hedges		Pension Items		on Liabilities		Total

	(In thousands)										(In thousands)

Beginning balance, net of tax	$	(3,982)	$	(5,863)	$	(983)	$	1,021	$	(9,807)	$	1,290	$	(17,521)	$	(1,884)	$	1,849	$	(16,266)

Other comprehensive income before reclassifications, net of tax		1,212		(16,152)		—		516		(14,424)		(720)		4,706		—		192		4,178

Amounts reclassified from accumulated other comprehensive income (loss), net of tax		62		542		105		—		709
Amounts reclassified from accumulated other comprehensive income, net of tax												(85)		3,613		143		—		3,671

Net current period other comprehensive income, net of tax		1,274		(15,610)		105		516		(13,715)
Net current period other comprehensive income (loss), net of tax												(805)		8,319		143		192		7,849

Ending balance, net of tax	$	(2,708)	$	(21,473)	$	(878)	$	1,537	$	(23,522)	$	485	$	(9,202)	$	(1,741)	$	2,041	$	(8,417)

~~The following tables set forth significant amounts reclassified from accumulated other comprehensive income (loss) by component for the periods indicated:~~

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 gains on available for sale securities

$
123

Net gains on sale of securities

(38)

Provision for income taxes

$
85

Net of tax
Cash flow hedges:




Interest rate swaps

$
(2,605)

Other interest expense

817

Provision for income taxes

$
(1,788)

Net of tax
Amortization of defined benefit pension items:




Actuarial losses

$
(133)
⁽¹⁾
Other operating expense
Prior service credits

21
⁽¹⁾
Other operating expense

(112)

Total before tax

35

Provision for income taxes

$
(77)

Net of tax

~~-40-~~-41-

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


~~For the three months ended June 30, 2020~~
	~~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~~	$	~~(54)~~		~~Net loss on sale of securities~~
		17		~~Provision for income taxes~~
	$	~~(37)~~		~~Net of tax~~

~~Cash flow hedges:~~
~~Interest rate swaps~~	$	~~(581)~~		~~Other interest expense~~
		~~182~~		~~Provision for income taxes~~
	$	~~(399)~~		~~Net of tax~~

~~Amortization of defined benefit pension items:~~
~~Actuarial losses~~	$	~~(98)~~	⁽¹⁾	~~Other operating expense~~
~~Prior service credits~~		23	⁽¹⁾	~~Other operating expense~~
		~~(75)~~		~~Total before tax~~
		23		~~Provision for income taxes~~
	$	~~(52)~~		~~Net of tax~~

The following tables set forth significant amounts reclassified from accumulated other comprehensive income (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

(1)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 109 (“Pension and Other Postretirement Benefit Plans”) for additional ~~information.~~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 gains on available for sale securities

$
123

Net gains on sale of securities

(38)

Provision for income taxes

$
85

Net of tax
Cash flow hedges:




Interest rate swaps

$
(5,242)

Other interest expense

1,629

Tax benefit

$
(3,613)

Net of tax
Amortization of defined benefit pension items:




Actuarial losses

$
(250)
⁽¹⁾
Other operating expense
Prior service credits

43
⁽¹⁾
Other operating expense

(207)

Total before tax

64

Provision for income taxes

$
(143)

Net of tax


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

~~-41-~~

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~


~~For the six months ended June 30, 2020~~
	~~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~~	$	~~(91)~~		~~Net loss on sale of securities~~
		29		~~Provision for income taxes~~
	$	~~(62)~~		~~Net of tax~~

~~Cash flow hedges:~~
~~Interest rate swaps~~	$	~~(789)~~		~~Other interest expense~~
		~~247~~		~~Provision for income taxes~~
	$	~~(542)~~		~~Net of tax~~

~~Amortization of defined benefit pension items:~~
~~Actuarial losses~~	$	~~(195)~~	⁽¹⁾	~~Other operating expense~~
~~Prior service credits~~		43	⁽¹⁾	~~Other operating expense~~
		~~(152)~~		~~Total before tax~~
		47		~~Provision for income taxes~~
	$	~~(105)~~		~~Net of tax~~

(1)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 109 (“Pension and Other Postretirement Benefit Plans”) for additional ~~information.~~information

~~13.~~~~Regulatory Capital~~

Under current capital regulations, the Bank is required to comply with four separate capital adequacy standards and a Capital Conservation Buffer (“CCB”). As of June 30, 2021, the Bank 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 Bank at June 30, 2021 and December 31, 2020 was 4.88% and 4.30%, respectively.

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.~~

June 30, 2021

December 31, 2020

Percent of

Percent of


Amount

Assets

Amount

Assets

(Dollars in thousands)

Tier I (leverage) capital:









Capital level

$
778,707

9.49
%
$
733,010

9.27
%
Requirement to be well capitalized

410,271

5.00

395,510

5.00

Excess

368,436

4.49

337,500

4.27

Common Equity Tier I risk-based capital:









Capital level

$
778,707

12.27
%
$
733,010

11.65
%
Requirement to be well capitalized

412,598

6.50

408,929

6.50

Excess

366,109

5.77

324,081

5.15

Tier 1 risk-based capital:









Capital level

$
778,707

12.27
%
$
733,010

11.65
%
Requirement to be well capitalized

507,813

8.00

503,297

8.00

Excess

270,894

4.27

229,713

3.65

Total risk-based capital:









Capital level

$
817,410

12.88
%
$
773,807

12.30
%
Requirement to be well capitalized

634,767

10.00

629,121

10.00

Excess

182,643

2.88

144,686

2.30

The Holding Company is subject to the same regulatory capital requirements as the Bank. As of June 30, 2021, 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 June 30, 2021 and December 31, 2020 was 4.98% and 4.54%, respectively.


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

~~Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.~~


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

June 30, 2021

December 31, 2020

Percent of

Percent of


Amount

Assets

Amount

Assets

(Dollars in thousands)

Tier I (leverage) capital:









Capital level

$
697,591

8.50
%
$
662,987

8.38
%
Requirement to be well capitalized

410,118

5.00

395,439

5.00

Excess

287,473

3.50

267,548

3.38

Common Equity Tier I risk-based capital:









Capital level

$
649,367

10.24
%
$
621,247

9.88
%
Requirement to be well capitalized

412,365

6.50

408,694

6.50

Excess

237,002

3.74

212,553

3.38

Tier 1 risk-based capital:









Capital level

$
697,591

11.00
%
$
662,987

10.54
%
Requirement to be well capitalized

507,526

8.00

503,008

8.00

Excess

190,065

3.00

159,979

2.54

Total risk-based capital:









Capital level

$
823,494

12.98
%
$
794,034

12.63
%
Requirement to be well capitalized

634,408

10.00

628,760

10.00

Excess

189,086

2.98

165,274

2.63

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Table of Contents

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 and a Capital Conservation Buffer (“CCB”). As of June 30, 2022, the Bank 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 Bank was 5.67% and 6.13% at June 30, 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

The Holding Company is subject to the same regulatory capital requirements as the Bank. As of June 30, 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 June 30, 2022 and December 31, 2021 was 5.34% and 5.75%, respectively.

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Table of Contents

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

14. New Authoritative Accounting Pronouncements

Accounting Standards Pending Adoption:

In ~~January 2021,~~March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (Topic 326), which 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 loan. This ASU also enhances disclosures about loan modifications for borrowers who are experiencing financial difficulty. The guidance also requires public business entities to present gross write-offs by year of origination in their vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this ASU should be applied on a prospective basis; however, institutions have the option to apply a modified retrospective transition method 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 contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing 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 and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

that 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 ~~may~~could elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 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 and 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~~update apply to contract modifications that replace a reference rate reform and contemporaneous modifications of other terms related to the replacement of the reference rate.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions 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, ~~2020.~~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, ~~2020.~~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.

~~Impact of COVID-19~~

~~Update~~

In response to the novel Coronavirus Disease 2019 (“COVID-19”), the Company is actively assisting customers by providing modifications in the form of deferrals of interest, principal and/or escrow for terms ranging from one to thirty months. At June 30, 2021, we had 69 active forbearances for loans with an aggregate outstanding loan balance of approximately $245.8 million resulting in total deferment of $16.2 million in principal, interest and escrow, down from 134 active forbearances for loans with an aggregate outstanding loan balance of $364.4 million at December 31, 2020. Given the pandemic and current economic environment, we continue to work with our customers to modify loans although the pace of requests slowed down. The Company actively participated in the Paycheck Protection Program (“PPP”), under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), closing $138.7 million of these loans during the three months ended June 30, 2021 , with $69.2 million in PPP loans forgiven by the SBA during the same time period. We are also a participant in the Main Street Lending Program in order to assist customers. Pursuant to the CARES Act and later modified by Consolidated Appropriations Act, certain loan modifications are not classified as “troubled debt restructuring” (“TDR”), if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected that loans temporarily modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above criteria is met and as such, these loans are considered current and continue to accrue interest at its original contractual terms until the completion of the deferred period. Once the deferred period is over, the borrower will resume making payment and normal delinquency-based non-accrual policies will apply.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

long-term financial condition are subject to significant uncertainty. Our funding sources have not changed significantly and we expect to continue to be able to timely service our debts and its obligations.

Executive Summary

We are a Delaware corporation organized in May 1994. The Bank was organized in 1929 as a New York State-chartered mutual savings bank. Today the Bank operates as a full-service New York ~~State~~State-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. ~~The~~At June 30, 2022, the Bank owns ~~three~~two 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® 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; (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 credit ~~losses and specific provision for losses on real estate owned.~~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.

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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

We carry a portion of our financial assets and financial liabilities under 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 10 (“Fair Value of Financial Instruments”) of the Notes to the Consolidated Financial Statements.

For the three months ended June 30, ~~2021,~~2022 we reported net income of ~~$19.3~~$25.0 million, or ~~$0.61~~$0.81 per diluted common share, anand reported record net interest income totaling $64.7 million. The record net interest income was driven by a $170.3 million increase ~~of $0.2 million, or $0.01 per diluted common share from March 31, 2021. During~~in average earning assets during the quarter as the net interest margin declined one basis point compared to the three months ended ~~June~~

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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~~

30, 2021, we produced record net interest income for the fifth consecutive quarter totaling $61.0 million. The record results were achieved primarily through growth in net-interest earning assets and a reduction in the cost of funds, partially offset by an increase in net losses from qualifying hedges.March 31, 2022.

During the three months ended June 30, ~~2021,~~2022, the yield on interest-earning assets ~~decreased~~increased eight basis points, while the cost of interest-bearing liabilities ~~decreased three~~increased 10 basis points from the three months ended March 31, ~~2021,~~2022, which resulted in a decrease of ~~four~~one basis ~~points~~point in net interest margin to ~~3.14%~~3.35% from ~~3.18%~~3.36% for the three months ended March 31, ~~2021.~~2022. Excluding net ~~gains/losses~~gains (losses) from qualifying hedges and purchase accounting adjustments, the net interest margin increased ~~eight~~two basis points to ~~3.14%~~3.33% for the three months ended June 30, ~~2021~~2022 from ~~3.06%~~3.31% for the three months ended March 31, ~~2021.~~2022.

Our loan portfolio is ~~85%~~greater than 87% collateralized by real estate with an average loan to value of less than ~~40%~~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. ~~The average loan-to-value on our non-performing real estate loans at June 30, 2021 remained conservative at approximately 30.4%.~~ At June 30, ~~2021,~~2022, our ~~ACL~~allowance for credit losses (“ACL”) - loans ~~stands~~stood at 6458 basis points of gross loans and ~~243%~~141.1% of non-performing loans. Non-performing assets at the end of the quarter were 2259 basis points of total assets.

The Bank and Company remain ~~well capitalized~~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.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

General. Net income for the three months ended June 30, ~~2021~~2022 was ~~$19.3~~$25.0 million, an increase of ~~$1.0~~$5.8 million, or 30.0%, from ~~$18.3~~$19.3 million for the three months ended June 30, ~~2020.~~2021. Diluted earnings per common share were $0.81 for the three months ended June 30, 2022, an increase of $0.20, or 32.8%, from $0.61 for the three months ended June 30, ~~2021, a decrease of $0.02 from $0.63~~2021.

Return on average equity was 15.00% for the three months ended June 30, ~~2020.~~

~~Return on average equity decreased~~2022 compared to 11.95% for the three months ended June 30, ~~2021 from 13.11%~~2021. Return on average assets was 1.22% for the three months ended June 30, ~~2020. Return on average assets decreased~~2022 compared to 0.93% for the three months ended June 30, ~~2021 from 1.01% for the three months ended June 30, 2020.~~2021.

Interest Income. Interest and dividend income increased ~~$7.0~~$2.5 million, or ~~10.8%~~3.6%, to $74.3 million for the three months ended June 30, 2022 from $71.7 million for the three months ended June 30, ~~2021 from $64.8 million for the three months ended June 30, 2020.~~2021. The increase in interest income was primarily attributable to anthe 16 basis point increase ~~of $980.3 million~~ in the ~~average balance of~~yield on interest-earning assets to ~~$7,790.2 million~~3.85% for the three months ended June 30, ~~2021 from $6,809.8 million~~2022 compared to 3.69% for the comparable prior year period, partially offset by a decrease in the yield of average interest earning assets of 12 basis points. The increase in the average balance was primarily driven by the acquisition of Empire Bancorp, Inc. (“Empire”) in the fourth quarter of 2020 coupled with organic growth throughout 2020. The decrease in the yield on interest-earning assets was primarily due to the decrease of 47 basis points in the yield of taxable securities. The decrease in the yield of taxable securities was primarily due to higher yielding securities paying down and being replaced by lower yielding securities.period. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual loans, net gains from fair value adjustments on qualifying hedges, and purchase accounting adjustments, the yield on total loans, net, decreased 11 basis points to 3.94% for the three months ended June 30, 2021 from 4.05% for the three months ended June 30, 2020.

~~Interest Expense.~~ Interest expense decreased $5.4 million, or 33.3%, to $10.7 million for the three months ended June 30, 2021 from $16.1 million for the three months ended June 30, 2020. The decrease in interest expense was primarily due to a decrease of 43 basis points in the average cost of interest-bearing liabilities to 0.66% for the three months ended June 30, 2021 from 1.09% for the three months ended June 30, 2020, partially offset by an increase of $620.1 million in the average balance of interest-bearing liabilities to $6,532.9 million for the three months ended June 30, 2021 from $5,912.8 million for the comparable prior year period. The decrease in the cost of interest-bearing liabilities was primarily due to the Company’s response to the Federal Reserve lowering rates.

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~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Management’s Discussions and Analysis of~~

~~Financial Condition and Results of Operations~~

~~Net Interest Income.~~ Net interest income for the three months ended June 30, 2021 was $61.0 million, an increase of $12.3 million, or 25.3%, from $48.7 million for the three months ended June 30, 2020. The increase in net interest income was primarily due to an increase of 27 basis points in the net interest margin to 3.14% for the quarter ended June 30, 2021 compared to 2.87% for the quarter ended June 30, 2020, coupled with net interest-earning assets growing $360.2 million to $1,257.3 million during the same period. Included in net interest income was prepayment penalty income from loans totaling $2.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, net losses from fair value adjustments on qualifying hedges totaling $0.7 million and $0.4 million for three months ended June 30, 2021 and 2020, respectively, and purchase accounting income adjustments of $0.6 million for the three months ended June 30, 2021. Excluding all of these items and other immaterial items, the net interest margin for the three months ended June 30, 2021 was 3.04%, an increase of 19 basis points, from to 2.85% for the three months ended June 30, 2020.

~~(Benefit) Provision for Credit Losses.~~ During the three months ended June 30, 2021, a benefit for credit losses was recorded totaling $1.6 million, compared to a provision of $9.6 million for the three months ended June 30, 2020. The benefit recorded during the three months ended June 30, 2021 was driven by the improving conditions of economy. During the six months ended June 30, 2021, non-accrual loans decreased $0.9 million to $17.4 million from $18.3 million at December 31, 2020. The current average loan-to-value ratio for our non-performing loans collateralized by real estate was 30.4% at June 30, 2021. The Bank continues to maintain conservative underwriting standards.

~~Non-Interest (Loss) Income.~~ Non-interest loss for the three months ended June 30, 2021 was $3.2 million, a decrease of $16.9 million from income of $13.7 million recorded in the prior year comparable period. The decrease was primarily due to a decrease in net gains from fair value adjustments totaling $16.8 million.

~~Non-Interest Expense.~~ Non-interest expense for the three months ended June 30, 2021 was $34.0 million, an increase of $5.3 million, or 18.3%, from $28.8 million for the three months ended June 30, 2020. The increase in non-interest expense was primarily due to the growth of the Company, which includes the impact of the acquisition of Empire.

~~Income before Income Taxes.~~ Income before income taxes for the three months ended June 30, 2020 was $25.4 million, an increase of $1.3 million, or 5.5%, from $24.1 million for the three months ended June 30, 2020 for the reasons discussed above.

~~Provision for Income Taxes.~~ The provision for income taxes was $6.2 million for the three months ended June 30, 2021, an increase of $0.4 million, or 6.0%, from $5.8 million for the three months ended June 30, 2020. The increase was primarily due to an increase in income before income taxes. The effective tax rate for three months ended June 30, 2021 was 24.2% compared to 24.1% for the three months ended June 30, 2020.

~~COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020~~

~~General.~~ Net income for the six months ended June 30, 2021 was $38.3 million, an increase of $21.4 million, or 126.9%, from $16.9 million for the six months ended June 30, 2020. Diluted earnings per common share were $1.21 for the six months ended June 30, 2021, an increase of $0.63, or 108.6%, from $0.58 for the six months ended June 30, 2020.

Return on average equity increased to 12.11% for the six months ended June 30, 2021 from 5.95% for the six months ended June 30, 2020. Return on average assets increased to 0.93% for the six months ended June 30, 2021 from 0.47% for the six months ended June 30, 2020.

~~Interest Income.~~ Interest and dividend income increased $12.4 million, or 9.5%, to $143.9 million for the six months ended June 30, 2021 from $131.4 million for the six months ended June 30, 2020. The increase in interest income was primarily attributable to an increase of $964.2 million in the average balance of interest-earning assets to $7,729.0 million for the six months ended June 30, 2021 from $6,764.8 million for the comparable prior year period, partially offset by a decrease in the yield of average interest earning assets of 16 basis points. The increase in the average balance was primarily driven by the acquisition of Empire in the fourth quarter of 2020 coupled with organic growth through out 2020. The decrease in the yield on interest-earning assets was primarily due to decreases of five basis points and 77 basis points in

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~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Management’s Discussions and Analysis of~~

~~Financial Condition and Results of Operations~~

the yield of total loans and taxable securities, respectively. The decrease in the yield on the total loans, net, was primarily due to loans being both originated and repriced at lower rates. The decrease in the yield of securities was primarily due to higher yielding securities paying down and being replaced by lower yielding securities. 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, ~~decreased 22~~increased seven basis points to ~~3.94%~~4.01% for the ~~six~~three months ended June 30, ~~2021~~2022 from ~~4.16%~~3.94% for the ~~six months ended June 30, 2020.~~

~~Interest Expense.~~ Interest expense decreased $20.0 million, or 47.6%, to $21.9 million for the six months ended June 30, 2021 from $41.9 million for the six months ended June 30, 2020. The decrease in interest expense was primarily due to a decrease of 74 basis points in the average cost of interest-bearing liabilities to 0.67% for the six months ended June 30, 2021 from 1.41% for the six months ended June 30, 2020, partially offset by an increase of $573.2 million in the average balance of interest-bearing liabilities to $6,505.5 million for the six months ended June 30, 2021 from $5,932.4 million for the comparable prior year period. The decrease in the cost of interest-bearing liabilities was primarily due to the Company’s quick response to the Federal Reserve lowering rates.

~~Net Interest Income.~~ Net interest income for the six months ended June 30, 2021 was $121.9 million, an increase of $32.4 million, or 36.2%, from $89.5 million for the six months ended June 30, 2020. The increase in net interest income was primarily due to an increase of $391.0 million in net interest-earning assets to $1,223.5 million for the six months ended June 30, 2021 from $832.5 million for the comparable prior year period, coupled with a 50 basis point increase in the net interest margin to 3.16% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Included in net interest income was prepayment penalty income from loans totaling $3.2 million and $1.5 million for the six months ended June 30, 2021 and 2020, respectively, net (reversals)/ recovered interest from non-accrual loans totaling ($0.2) million and $0.5 million for the six months ended June 30, 2021 and 2020, respectively, net gains (losses) from fair value adjustments on qualifying hedges totaling $0.8 million and ($2.4) million for six months ended June 30, 2021 and 2020, respectively, and purchase accounting income adjustments of $1.5 million for the six months ended June 30, 2021. Excluding all of these items, the net interest margin for the six months ended June 30, 2021 was 3.02%, an increase of 35 basis points, from to 2.67% for the six months ended June 30, 2020.

~~Provision for Credit Losses.~~ During the six months ended June 30, 2021, a provision for credit losses was recorded totaling $1.2 million, compared to $16.8 million for the six months ended June 30, 2020. The provision recorded during the six months ended June 30, 2021 was driven by the charge-off of the remaining taxi medallion portfolio totaling $2.8 million, partially offset by improving conditions of economy. During the six months ended June 30, 2021, non-accrual loans decreased $0.9 million to $17.4 million from $18.3 million at December 31, 2020. The current average loan-to-value ratio for our non-performing loans collateralized by real estate was 30.4% at June 30, 2021. The Bank continues to maintain conservative underwriting standards.

~~Non-Interest Income.~~ Non-interest income for the six months ended June 30, 2021 was $3.1 million, a decrease of $7.8 million from the prior year comparable period. The decrease was primarily due to a decrease in net gains from fair value adjustments totaling $9.8 million coupled with $0.7 million in gain from life insurance for the six months ended June 30, 2020, partially offset with $1.7 million in customer loan swap fee income and a $0.6 million net gain from the disposition of assets during the sixthree months ended June 30, 2021.

~~Non-Interest Expense.~~ Non-interest expense for the six months ended June 30, 2021 was $72.2 million, an increase of $11.0 million, or 18.1%, from $61.1 million for the six months ended June 30, 2020. The increase in non-interest expense was primarily due to the growth of the Company, which includes the impact of the acquisition of Empire.

~~Income before Income Taxes.~~ ~~Income before income taxes increased $29.2 million, to $51.6 million for the six months ended June 30, 2021 from $22.5 million for the six months ended June 30, 2020 for the reasons discussed above.~~

~~Provision for Income Taxes.~~ The provision for income taxes was $13.3 million for the six months ended June 30, 2021, an increase of $7.7 million from $5.6 million for the six months ended June 30, 2020. The increase was primarily due to an increase in income before income taxes. The effective tax rate for six months ended June 30, 2021 was 25.8% compared

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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 decreased $1.1 million, or 10.7%, to ~~24.9%~~$9.6 million for the three months ended June 30, 2022 from $10.7 million for the three months ended June 30, 2021. The decrease in interest expense was primarily due to a decline of six basis points in the average cost of interest-bearing liabilities to 0.60% for the three months ended June 30, 2022 from 0.66% for the three months ended June 30, 2021 and the decrease of $195.5 million in the average balance of interest-bearing liabilities to $6,337.4 million for the three months ended June 30, 2022 from $6,532.9 million for the comparable prior year period.

Net Interest Income. Net interest income for the three months ended June 30, 2022 was $64.7 million, an increase of $3.7 million, or 6.0%, from $61.0 million for the three months ended June 30, 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, ~~2020.~~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 ~~effective tax rate~~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 ~~reflects~~and the ~~discontinuation~~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 20 basis points in the net 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 $1.376.7 million for the same period. Included in net interest income was prepayment penalty income, net of reversals and recovered interest from non-accrual loans totaling $4.0 million and $3.0 million for the six months ended June 30, 2022 and 2021, respectively, net (losses) gains from fair value adjustments on qualifying hedges totaling $(0.2) million and $0.8 million for the six months ended June 30, 2022 and 2021, respectively, and purchase accounting income adjustments of $1.4 million and $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 six months ended June 30, 2022 was 3.22%, an increase of 20 basis points, from 3.02% for the six months ended June 30, 2021.

Provision for Credit Losses. During the six months ended June 30, 2022, the provision for credit losses was $2.9 million, compared to $1.2 million for the six months ended June 30, 2021. The provision recorded during the six months ended June 30, 2022 was greater than net charge-offs of $0.4 million. During the six months ended June 30, 2022, nonperforming assets increased $34.0 million to $48.9 million from $14.9 million at 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 assets collateralized by real estate was 50.7% at June 30, 2022. The Bank continues to maintain conservative underwriting standards.

Non-Interest Income. Non-interest income for the six months ended June 30, 2022 was $8.7 million, an increase of $5.6 million from $3.1 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 $5.6 million compared 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 a decline in loan swap income during the six months ended June 30, 2022 compared to the six month ended June 30, 2021, due to lower activity in 2022.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

Non-Interest Expense. Non-interest expense for the six months ended June 30, 2022 was $74.3 million, an increase of $2.1 million, or 3.0%, from $72.2 million for the six 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 six months ended June 30, 2022 was $59.6 million, an increase of $8.0 million, or 15.4%, from $51.6 million for the six months ended June 30, 2021 for the previously discussed reasons.

Provision for Income Taxes. The provision for income taxes was $16.4 million for the 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 increase was primarily due to the growth in income before income taxes, and an 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 the loss of certain New York State and ~~New York~~ City tax benefits provided by the Company’s subsidiary, Flushing Preferred Funding Corporation. Due to regulations, the benefit is not available to banks with average assets of greater than $8.0 billion. Flushing Preferred Funding Corporation was dissolved as of June 30, 2021.deductions in 2022.

FINANCIAL CONDITION

Assets. Total assets at June 30, ~~2021~~2022 were ~~$8,159.3~~$8,339.6 million, an increase of ~~$183.0~~$293.7 million, or ~~2.3%~~3.7%, from ~~$7,976.4~~$8,045.9 million at December 31, ~~2020.~~2021. Total loans net increased ~~$16.6~~$120.0 million, or ~~0.2%~~1.8%, during the six months ended June 30, ~~2021,~~2022, to ~~$6,676.1~~$6,721.0 million from ~~$6,659.5~~$6,601.0 million at December 31, ~~2020.~~2021. The increase was primarily due to loan originations which exceeded satisfactions. Loan originations and purchases were ~~$647.3~~$833.1 million for the six months ended June 30, ~~2021,~~2022, an increase of ~~$114.8~~$185.8 million, or ~~21.6%~~28.7%, from ~~$532.5~~$647.3 million for ~~the six months ended June 30, 2020. In order to support our customers during this COVID-19 pandemic, we have originated $138.7 million of PPP loans during~~ the six months ended June 30, 2021. 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 was ~~$432.6~~$582.6 million at June 30, ~~2021,~~2022, compared to ~~$354.6~~$429.3 million at December 31, ~~2020.~~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)

2021

2020

2021

2020
Multi-family residential ⁽¹⁾

$
66,913

$
59,654

$
125,466

$
126,972
Commercial real estate ⁽²⁾

37,963

8,003

55,119

107,574
One-to-four family – mixed-use property

7,135

8,117

15,847

21,572
One-to-four family – residential ⁽³⁾

59,494

2,674

62,625

11,087
Co-operative apartments

—

—

—

704
Construction ⁽⁴⁾

5,281

2,821

12,404

9,570
Small Business Administration⁽⁵⁾

17,585

93,241

142,678

93,298
Commercial business and other ⁽⁶⁾

130,036

59,287

233,154

161,735
Total

$
324,407

$
233,797

$
647,293

$
532,512


	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

(1)	Includes purchases of ~~$3.1~~$0.9 million and $3.6 million for the three months ended June 30, 2022 and 2021, respectively. Includes purchases of $1.6 million and $6.9 million for the six months ended June 30, ~~2020.~~2022 and 2021, respectively.

(2)	Includes ~~purchases~~$15.5 million and $138.7 million of ~~$30.0 million for the six months ended June 30, 2020.~~

~~(3)~~

~~Includes purchases of $58.0 million~~SBA PPP loans for the three and six months ended June 30, ~~2021.~~2021, respectively.

~~(4)~~(3)

Includes purchases of ~~$3.6~~$55.8 million and ~~$43,000~~$43.2 million for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Includes purchases of ~~$6.9~~$109.4 million and ~~$3.4~~$65.8 million for the six months ended June 30, ~~2021~~2022 and ~~2020, respectively.~~

~~(5)~~

~~Includes $15.5 million and $93.2 million of SBA PPP loans for the three months ended June 30,~~ 2021, ~~and 2020, respectively. Includes $138.7 million and $93.2 million of SBA PPP loans for the six months ended June 30, 2021 and 2020, respectively.~~

~~(6)~~

Includes purchases of $43.2 million and $35 million for the three months ended June 30, 2021 and 2020, respectively. Includes purchases of $65.8 million and $75.7 million for the six months ended June 30, 2021 and 2020, respectively.

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 six months ended June 30, ~~2021~~2022 had an average loan-to-value ratio of ~~46.7%~~56.6% and an average debt coverage ratio of ~~175%~~170%.

The Bank’s non-performing assets totaled $17.6 million at June 30, 2021, a decrease of $3.5 million, or 16.7%, from $21.1 million at December 31, 2020. Total non-performing assets as a percentage of total assets were 0.22% at June 30, 2021 and 0.26% at December 31, 2020. The ratio of ACL - loans to total non-performing loans was 242.6% at June 30, 2021 and 214.3% at December 31, 2020.

During the six months ended June 30, 2021, mortgage-backed securities increased $192.2 million, or 46.6%, to $604.6 million from $412.4 million at December 31, 2020. The increase in mortgage-backed securities during the six months ended June 30, 2021 was primarily due to the purchase of securities totaling $290.6 million at an average rate of 1.28%,

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

~~partially offset by maturities~~The Bank’s non-performing assets totaled $48.9 million at June 30, 2022, an increase of $34.0 million, or 227.7%, from December 31, 2021. Total non-performing assets as a percentage of total assets were 0.59% at June 30, 2022 and 0.19% at December 31, 2021. The ratio of ACL - loans to total non-performing loans was 141.1% at June 30, 2022 and 248.7% at December 31, 2021.

During the six months ended June 30, 2022, mortgage-backed securities decreased $61.3 million, or 10.6%, to $518.8 million from $580.1 million at December 31, 2021. The decrease in mortgage-backed securities during the six months ended June 30, 2022 was primarily due to the principal ~~repayments~~repayment of securities totaling ~~$88.4~~$63.7 million and the ~~decline~~decrease in the fair value of the securities totaling ~~$8.6 million.~~$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, ~~2021,~~2022, other securities ~~decreased $18.7~~increased $157.9 million, or ~~6.4%~~61.9%, to ~~$274.8~~$413.0 million from ~~$293.4~~$255.0 million at December 31, ~~2020.~~2021. The ~~decrease~~increase in other securities during the six months ended June 30, ~~2021,~~2022, was primarily due to ~~maturities, sales and calls totaling $213.5 million, partially offset by~~ purchases of ~~$187.4~~$172.3 million at an average rate of ~~0.34% and an increase~~2.98% partially offset by a decrease in the fair value of other securities ~~of $7.4~~totaling $13.6 million, and maturities, sales and calls totaling $0.9 million. At June 30, ~~2021~~2022, other securities primarily ~~consist~~consisted of securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds, corporate bonds, and ~~CLO’s.~~CLOs.

Liabilities. Total liabilities were ~~$7,504.2~~$7,668.8 million at June 30, ~~2021,~~2022, an increase of ~~$146.8~~$302.5 million, or ~~2.0%~~4.1%, from ~~$7,357.4~~$7,366.3 million at December 31, ~~2020.~~2021. During the six months ended June 30, ~~2021,~~2022, due to depositors increased ~~$208.1~~$16.5 million, or ~~3.4%~~0.3%, to ~~$6,298.8~~$6,350.0 million due to an increase of ~~$325.8~~$113.6 million in ~~non-maturity~~non-interest bearing deposits, partially offset by a decrease of ~~$117.7~~$97.1 million in NOW, money market accounts and certificates of deposit. The decrease in NOW, money market accounts and certificates of deposit was due to management’s decision to allow these deposits to mature and replace with lower cost funding. The increase in non-maturity deposits was due to increases of $374.8 million and $166.8 million in money market accounts and demand deposits accounts, respectively, partially offset by a decrease of $200.6 million and $15.3 million in NOW accounts and savings accounts, respectively. Included in deposits were brokered deposits totaling ~~$494.7~~$1,028.4 million, ~~a decrease~~an increase of ~~$579.4~~$402.1 million from ~~$1,074.1~~$626.3 million at December 31, ~~2020.~~2021. Borrowed funds ~~decreased $49.1~~increased $274.1 million during the six months ended June 30, ~~2021.~~2022.

Equity. Total stockholders’ equity ~~increased $36.2~~decreased $8.8 million, or ~~5.8%~~1.3%, to ~~$655.2~~$670.8 million at June 30, ~~2021~~2022, from ~~$619.0~~$679.6 million at December 31, ~~2020.~~2021. Stockholders’ equity ~~increased~~decreased due to ~~net income totaling $38.3 million, an increase~~a decline in accumulated other comprehensive income of ~~$7.8~~$24.6 million, ~~and~~ the ~~net impact of vesting and exercising of shares of employee and director stock plans totaling $3.3 million. These increases were partially offset by~~ declaration and payment of dividends on the Company’s common stock of ~~$0.42~~$0.44 per common share totaling ~~$13.3~~$13.6 million and 747,689 shares repurchased totaling $17.0 million. These decreases were partially offset by net income of $43.3 million. Book value per common share ~~improved~~increased to ~~$21.16~~$22.38 at June 30, ~~2021~~2022 compared to ~~$20.11~~$22.26 at December 31, ~~2020.~~2021.

~~Cash flow.~~Liquidity. ~~During~~Liquidity is the ~~six months ended June 30,~~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.

Liquidity management is both a short and long-term function of business management. During 2021, funds were provided by the Company’s operating activities, which were used to fund our 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 amounted to $36.0 million and $150.4 million, respectively. These funds were utilized to fund $197.8 million used in investing activities. 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 six months endedduring any given period. At June 30, ~~2021, the net total~~2022, cash and cash equivalents totaled $137.0 million, an increase of ~~loan purchases less loan repayments and sales was $22.2 million. During the six months ended June 30, 2021, the Company~~$55.3 million from December 31, 2021. We also ~~funded $478.2 million in purchases of~~held unencumbered securities available for ~~sale. During the six months ended~~sale totaling $546.4 million at June 30, ~~2021, funds were provided by sales, calls, prepayments~~2022.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and ~~maturities~~SUBSIDIARIES

Management’s Discussions and Analysis of ~~available for sale securities totaling $302.3 million. During the six months ended~~

Financial Condition and Results of Operations

At June 30, ~~2021, funds were provided by increases~~2022, the Bank was able to borrow up to $3,675.0 million from the FHLB-NY in ~~deposits~~Federal Home Loan Bank advances and ~~short term borrowings totaling~~letters of ~~$370.7 million. The funds were used to repay $205.6 million in long-term borrowings. The Company also used funds~~credit. As of ~~$13.3 million for dividend payments and $1.4 million in purchases of treasury stock during the six months ended~~ June 30, ~~2021.~~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 ~~fluctuates~~fluctuate 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.

~~-51-~~

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES~~

~~Management’s Discussions and Analysis of~~

~~Financial Condition and Results of Operations~~

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 100 basis points, ~~(shocked),~~ assuming the yield curves of the rate shocks will be parallel to each other. 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. ~~All~~The 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 June 30, ~~2021.~~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 June 30, ~~2021,~~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 June 30, ~~2021:~~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

Projected Percentage Change In

Change in Interest Rate

Net Interest Income

Net Portfolio Value

Net Portfolio Value Ratio

-100 Basis points

2.32
%
(14.45)
%
9.20
%
Base interest rate

—

—

10.91

+100 Basis points

(7.02)

(3.29)

10.80

+200 Basis points

(14.08)

(7.45)

10.58

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.

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.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions 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-

Table of Contents

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 tables 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 June 30, ~~2021~~2022 and ~~2020,~~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 June 30,												For the three months ended June 30,
	2021						2020						2022						2021
	Average				Yield/		Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost

Assets	(Dollars in thousands)												(Dollars in thousands)
Interest-earning assets:
Mortgage loans, net	$	5,130,400	$	52,987	4.13	%	$	4,762,068	$	49,719	4.18	%	$	5,178,029	$	54,775	4.23	%	$	5,130,400	$	52,987	4.13	%
Other loans, net		1,556,488		15,012	3.86			1,184,344		10,838	3.66			1,462,302		14,417	3.94			1,556,488		15,012	3.86
Total loans, net^{(1) (2)}		6,686,888		67,999	4.07			5,946,412		60,557	4.07			6,640,331		69,192	4.17			6,686,888		67,999	4.07
Taxable securities:
Mortgage-backed securities		578,134		2,233	1.54			465,365		2,327	2.00			594,923		2,356	1.58			578,134		2,233	1.54
Other securities		232,020		1,037	1.79			243,867		1,358	2.23			333,158		2,090	2.51			232,020		1,037	1.79
Total taxable securities		810,154		3,270	1.61			709,232		3,685	2.08			928,081		4,446	1.92			810,154		3,270	1.61
Tax-exempt securities: ⁽³⁾
Other securities		50,830		535	4.21			60,280		643	4.27			67,315		625	3.71			50,830		535	4.21
Total tax-exempt securities		50,830		535	4.21			60,280		643	4.27			67,315		625	3.71			50,830		535	4.21
Interest-earning deposits and federal funds sold		242,302		51	0.08			93,911		22	0.09			104,956		159	0.61			242,302		51	0.08
Total interest-earning assets		7,790,174		71,855	3.69			6,809,835		64,907	3.81			7,740,683		74,422	3.85			7,790,174		71,855	3.69
Other assets		473,379						396,224						471,080						473,379
Total assets	$	8,263,553					$	7,206,059					$	8,211,763					$	8,263,553
Liabilities and Equity
Interest-bearing liabilities
Deposits:
Savings accounts	$	153,113		66	0.17		$	188,587		74	0.16		$	156,785		50	0.13		$	153,113		66	0.17
NOW accounts		2,255,581		1,499	0.27			1,440,147		2,099	0.58			2,089,851		1,405	0.27			2,255,581		1,499	0.27
Money market accounts		2,043,257		2,060	0.40			1,580,652		3,208	0.81			2,231,743		1,952	0.35			2,043,257		2,060	0.40
Certificate of deposit accounts		1,043,985		1,913	0.73			1,185,842		4,564	1.54			820,476		1,273	0.62			1,043,985		1,913	0.73
Total due to depositors		5,495,936		5,538	0.40			4,395,228		9,945	0.91			5,298,855		4,680	0.35			5,495,936		5,538	0.40
Mortgagors' escrow accounts		91,545		1	—			87,058		26	0.12			97,496		6	0.02			91,545		1	—
Total deposits		5,587,481		5,539	0.40			4,482,286		9,971	0.89			5,396,351		4,686	0.35			5,587,481		5,539	0.40
Borrowed funds		945,410		5,164	2.18			1,430,488		6,084	1.70			941,023		4,875	2.07			945,410		5,164	2.18
Total interest-bearing liabilities		6,532,891		10,703	0.66			5,912,774		16,055	1.09			6,337,374		9,561	0.60			6,532,891		10,703	0.66
Non-interest-bearing deposits		923,220						560,637						1,044,553						923,220
Other liabilities		162,752						175,234						162,380						162,752
Total liabilities		7,618,863						6,648,645						7,544,307						7,618,863
Equity		644,690						557,414						667,456						644,690
Total liabilities and equity	$	8,263,553					$	7,206,059					$	8,211,763					$	8,263,553
Net interest income / net interest rate spread (tax equivalent) ⁽³⁾			$	61,152	3.03	%			$	48,852	2.72	%			$	64,861	3.25	%			$	61,152	3.03	%
Net interest-earning assets / net interest margin(tax equivalent)	$	1,257,283			3.14	%	$	897,061			2.87	%	$	1,403,309			3.35	%	$	1,257,283			3.14	%
Ratio of interest-earning assets to interest-bearing liabilities					1.19	X					1.15	X					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 ~~$3.2~~$2.2 million and ~~$0.3~~$3.2 million for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(2)

Loan interest income includes net ~~losses~~(losses) gains from fair value adjustments on qualifying hedges of $(0.1) million and $0.7 million ~~and $0.4 million~~ for ~~the~~ three ~~months~~month periods ended June 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

(3)

Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.1 million in each ~~period.~~for the three months ended June 30 2022 and 2021.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

For the six months ended June 30,

2021

2020

Average

Yield/

Average

Yield/

Balance

Interest

Cost

Balance

Interest

Cost

Assets

(Dollars in thousands)

Interest-earning assets:
















Mortgage loans, net

$
5,143,117

$
108,206

4.21
%
$
4,729,800

$
99,131

4.19
%
Other loans, net

1,550,527

28,814

3.72

1,140,840

22,535

3.95

Total loans, net^{(1) (2)}

6,693,644

137,020

4.09

5,870,640

121,666

4.14

Taxable securities:









Mortgage-backed securities

506,424

3,931

1.55

486,638

5,367

2.21

Other securities

266,234

2,000

1.50

243,796

3,055

2.51

Total taxable securities

772,658

5,931

1.54

730,434

8,422

2.31

Tax-exempt securities: ⁽³⁾









Other securities

50,829

1,065

4.19

61,908

1,319

4.26

Total tax-exempt securities

50,829

1,065

4.19

61,908

1,319

4.26

Interest-earning deposits and federal funds sold

211,904

87

0.08

101,864

312

0.61

Total interest-earning assets

7,729,035

144,103

3.73

6,764,846

131,719

3.89

Other assets

476,919

391,683

Total assets

$
8,205,954

$
7,156,529

Liabilities and Equity









Interest-bearing liabilities









Deposits:









Savings accounts

$
161,549

141

0.17

$
191,307

355

0.37

NOW accounts

2,220,677

3,205

0.29

1,429,943

6,747

0.94

Money market accounts
��

1,974,781

4,160

0.42

1,639,217

10,250

1.25

Certificate of deposit accounts

1,073,151

4,135

0.77

1,226,544

11,331

1.85

Total due to depositors

5,430,158

11,641

0.43

4,487,011

28,683

1.28

Mortgagors' escrow accounts

78,531

3

0.01

76,281

66

0.17

Total deposits

5,508,689

11,644

0.42

4,563,292

28,749

1.26

Borrowed funds

996,845

10,304

2.07

1,369,058

13,150

1.92

Total interest-bearing liabilities

6,505,534

21,948

0.67

5,932,350

41,899

1.41

Non-interest-bearing deposits

889,821



505,199



Other liabilities

178,361



151,974



Total liabilities

7,573,716



6,589,523



Equity

632,228



567,006



Total liabilities and equity

$
8,205,944



$
7,156,529



Net interest income / net interest rate spread (tax equivalent) ⁽³⁾



$
122,155

3.06
%



$
89,820

2.48
%
Net interest-earning assets / net interest margin(tax equivalent)

$
1,223,501



3.16
%
$
832,496



2.66
%
Ratio of interest-earning assets to interest-bearing liabilities





1.19
X





1.14
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 ~~$4.8~~$5.1 million and ~~$0.5~~4.8 million for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(2)

Loan interest income includes net gains (losses) from fair value adjustments on qualifying hedges of ~~$0.8~~($0.2) million and ~~($2.4)~~$0.8 million for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(3)

Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling ~~$0.2~~$0.3 million and ~~$0.3~~$0.2 million for the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions 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)

2021

2020

Mortgage Loans




At beginning of period

$
5,228,271

$
4,677,703




Mortgage loans originated:

Multi-family residential

125,466

123,844
Commercial real estate

55,119

77,569
One-to-four family – mixed-use property

15,847

21,572
One-to-four family – residential

4,673

11,087
Co-operative apartments

—

704
Construction

5,468

6,132
Total mortgage loans originated

206,573

240,908

Mortgage loans purchased:




Multi-family residential

—

3,128
Commercial real estate

—

30,005
One-to-four family - mixed-use property

—

—
One-to-four family - residential

57,952

—
Construction

6,936

3,438
Total mortgage loans purchased

64,888

36,571

Less:




Principal and other reductions

271,294

169,097
Sales

17,846

498
Charge-offs

139

3
At end of period

$
5,210,453

$
4,785,584

Non-Mortgage Loans




At beginning of period

$
1,473,358

$
1,079,232
Other loans originated:

Small Business Administration ⁽¹⁾

142,678

93,298
Commercial business

164,166

83,500
Other

3,170

2,561
Total other loans originated

310,014

179,359

Other loans purchased:




Commercial business

65,818

75,674
Total other loans purchased

65,818

75,674

Less:




Principal and other reductions

338,537

148,274
Charge-offs

3,969

2,286
At end of period

$
1,506,684

$
1,183,705


	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, ~~2021~~2022 and ~~2020,~~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.

~~-55-~~-58-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

TROUBLED DEBT RESTRUCTURED (“TDR”) AND NON-PERFORMING ASSETS

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,		June 30,		December 31,
(In thousands)	2021		2020		2022		2021
Accrual Status:
Multi-family residential	$	1,673	$	1,700	$	1,656	$	1,690
Commercial real estate		7,583		7,702		7,572		7,572
One-to-four family - mixed-use property		1,414		1,459		1,000		1,375
One-to-four family - residential		497		507		260		483
Commercial business and other		1,868		1,588		1,190		1,340
Total		13,035		12,956		11,678		12,460

Non-Accrual Status:
One-to-four family - mixed-use property		268		272		254		261
Commercial business and other		2,239		2,243		2,850		41
Taxi medallion		—		440
Total		2,507		2,955		3,104		302

Total performing troubled debt restructured	$	15,542	$	15,911	$	14,782	$	12,762

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

The following table shows our non-performing assets at the period indicated:



	June 30,			December 31,			June 30,			December 31,
(In thousands)	2021			2020			2022			2021

Loans 90 days or more past due and still accruing:
Multi-family residential	$	201		$	201
Commercial real estate		—			2,547
Commercial Business and other							$	100		$	—
Total		201			2,748			100			—
Non-accrual loans:
Multi-family residential		4,669			2,524			3,414			2,431
Commercial real estate		8			1,683			242			613
One-to-four family - mixed-use property ⁽¹⁾		2,309			1,366			790			1,309
One-to-four family - residential		6,940			5,854			5,055			7,725
Construction								856			—
Small business administration		976			1,151			937			937
Taxi medallion⁽¹⁾		—			2,317
Commercial Business and other ⁽¹⁾		2,489			3,430			16,554			1,918
Total		17,391			18,325			27,848			14,933
Total non-performing loans		17,592			21,073			27,948			14,933
Other non-performing assets:
Other assets acquired through foreclosure		—			35
Held-to-maturity securities								20,981			—
Total		—			35			20,981			—

Total non-performing assets	$	17,592		$	21,108		$	48,929		$	14,933

Non-performing assets to total assets		0.22	%		0.26	%		0.59	%		0.19	%
ACL - loans to non-accrual loans								141.57	%		248.66	%
ACL - loans to non-performing loans		242.55	%		214.27	%		141.06	%		248.66	%

(1) Not included in the above analysis are the following non-accrual TDRs that are performing ~~TDR~~according to their restructured terms: one-to-four family mixed-use property loans totaling $0.3 million at both June 30, ~~2021~~2022 and December 31, ~~2020; non-accrual performing TDR taxi medallion loans totaling $0.4 million at December 31, 2020~~2021, respectively, and ~~non-accrual performing TDR~~ commercial business loans totaling ~~$2.2~~$2.8 million and less than $0.1 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively.

CRITICIZED AND CLASSIFIED ASSETS

Our policy is to review our assets, focusing primarily on the loan portfolio, ~~OREO~~other real estate owned, and the investment portfolios, to ensure that credit quality is maintained at the highest levels. See Note 5 (“Loans”) of the Notes to the Consolidated Financial Statements for a description of how loans are determined to be criticized or classified and a table displaying criticized and classified loans at June 30, ~~2021~~2022 and December 31, ~~2020. The Company did not hold any criticized or classified investment securities at June 30, 2021 and December 31, 2020.~~2021. Our total Criticized and Classified assets were ~~$68.5~~$78.1 million at June 30, ~~2021,~~2022, a decrease of ~~$3.2~~$0.5 million from ~~$71.7~~$78.6 million at December 31, ~~2020.~~2021. The Company had one investment security with an amortized cost of $21.0 million classified as substandard at June 30, 2022. This same security was reported as special mention at December 31, 2021.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions 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:

At or for the six months ended June 30,

(Dollars in thousands)

2021

2020

Balance at beginning of period
$
45,153

$
21,751

Loans- CECL Adoption

—

379

Loans- Charge-off

(4,108)

(2,289)

Loans- Recovery

341

133

Loans- Provision

1,284

16,736

ACL - loans
$
42,670

$
36,710

Balance at beginning of period
$
907

$
—

HTM Securities- CECL Adoption

—

340

HTM Securities- Provision (Benefit)

(63)

62

ACL - HTM Securities
$
844

$
402

Balance at beginning of period
$
1,815

$
—

Off-Balance Sheet - CECL Adoption

—

553

Off-Balance Sheet- Provision (Benefit)

(245)

711

ACL - Off-Balance Sheet
$
1,570

$
1,264

Allowance for Credit Losses
$
45,084

$
38,376


	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

~~-58-~~-61-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

The following table sets forth the activity in the Company’s ACL - loans for the periods indicated:


	At or for the six months ended June 30,						For the six months ended June 30,
(Dollars in thousands)	2021			2020			2022			2021

Balance at beginning of period	$	45,153		$	21,751
CECL Adoption		—			379
Provision for credit losses on loans		1,284			16,736
Balance at beginning of year							$	37,135		$	45,153
Provision for credit losses								2,723			1,284

Loans charged-off:
Multi-family residential		(43)			—			—			(43)
Commercial real estate		(64)			—			—			(64)
One-to-four family - mixed-use property		(32)			(3)
Small Business Administration		—			(178)
One-to-four family mixed-use property								—			(32)
SBA								(1,054)			—
Taxi medallion		(2,758)			—			—			(2,758)
Commercial business and other		(1,211)			(2,108)
Commercial business and other loans								(32)			(1,211)
Total loans charged-off		(4,108)			(2,289)			(1,086)			(4,108)

Recoveries:
Multi-family residential		10			13			1			10
One-to-four family - mixed-use property		10			78			—			10
One-to-four family - residential		7			8			4			7
Small Business Administration		19			20			26			19
Taxi medallion		222			—			447			222
Commercial business and other		73			14			174			73
Total recoveries		341			133			652			341

Net charge-offs		(3,767)			(2,156)			(434)			(3,767)
Balance at end of period	$	42,670		$	36,710
Balance at end of year							$	39,424		$	42,670

Ratio of net charge-offs during the period to average loans outstanding during the period		0.11	%		0.07	%
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		0.64	%		0.61	%		0.58	%		0.64	%
Ratio of ACL - loans to non-performing assets at end of period		0.22	%		179.68	%
Ratio of ACL - loans to non-performing loans at end of period		242.55	%		181.85	%		141.06	%		242.55	%

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%.

~~-59-~~-62-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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 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 June 30, ~~2021,~~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.

~~-60-~~-63-

Table of Contents

PART II – OTHER ~~INFORMATIOMTION~~INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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’s consolidated financial condition, results of operations and cash flows.

ITEM 1A. RISK FACTORS

~~There~~Except as set forth below there have been no material changes from the risk factors disclosed in the Company’s annual report on Form 10-K for the year ended December 31, ~~2020.~~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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PART II – OTHER INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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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PART II – OTHER INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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 ~~six~~three months ended June 30, ~~2021:~~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, 2021~~	—	$	—	—	~~284,806~~
~~May 1 to May 31, 2021~~	—		—	—	~~284,806~~
~~June 1 to June 30, 2021~~	—		—	—	~~284,806~~
~~Total~~	—		—	—


					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 June 30, ~~2021,~~2022, the Company ~~did not repurchase any~~repurchased 387,689 shares of the Company’s common stock. On June 30, ~~2021, 284,806~~2022, 1,100,498 shares remained to be repurchased under the currently authorized stock repurchase ~~program.~~programs. Stock will be purchased under the current stock repurchase programs 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 these authorizations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

~~-61-~~

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PART II – OTHER ~~INFORMATIOMTION~~INFORMATION

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		Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)
3.5		Certificate of Increase of Shares Designated as Series A Junior Participating Preferred Stock of Flushing Financial Corporation (2)
3.6		Amended and Restated By-Laws of Flushing Financial Corporation (6)
4.1		~~Subordinated~~ Indenture dated ~~as of December 12, 2016, by and~~November 22, 2021, between ~~the Company~~Flushing Financial Corporation and Wilmington Trust, National Association, as ~~Trustee. (7)~~trustee. (8)
4.2		First Supplemental Indenture, dated ~~as of December 12, 2016, by and~~November 22, 2021, between ~~the Company~~Flushing Financial Corporation and Wilmington Trust, National Association, as ~~Trustee, including the form of the Notes attached as Exhibit A thereto. (7)~~trustee. (8)
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 ~~(filed herewith)~~(7)
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith)
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith)
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer (furnished herewith)
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer (furnished herewith)
101.INS		Inline XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 ~~December 12, 2016.~~November 22, 2021.

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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

EXHIBIT INDEX


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		Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)
3.5		Certificate of Increase of Shares Designated as Series A Junior Participating Preferred Stock of Flushing Financial Corporation (2)
3.6		Amended and Restated By-Laws of Flushing Financial Corporation (6)
4.1		~~Subordinated~~ Indenture dated ~~as of December 12, 2016, by and~~November 22, 2021, between ~~the Company~~Flushing Financial Corporation and Wilmington Trust, National Association, as ~~Trustee. (7)~~trustee. (8)
4.2		First Supplemental Indenture, dated ~~as of December 12, 2016, by and~~November 22, 2021, between ~~the Company~~Flushing Financial Corporation and Wilmington Trust, National Association, as ~~Trustee, including the form of the Notes attached as Exhibit A thereto. (7)~~trustee. (8)
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 ~~(filed herewith)~~(7)
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith)
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith)
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer (furnished herewith)
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer (furnished herewith)
101.INS		Inline XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 ~~December 12, 2016.~~November 22, 2021.

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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

SIGNATURES

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 ~~4, 2021~~5, 2022	By:	/s/John R. Buran
			John R. Buran
			President and Chief Executive Officer



Dated:	August ~~4, 2021~~5, 2022	By:	/s/Susan K. Cullen
			Susan K. Cullen
			Senior Executive Vice President, Treasurer and
			Chief Financial Officer

~~-64-~~-69-

	PAGE
PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements - (Unaudited)
Consolidated Statements of Financial Condition	1
Consolidated Statements of Income	2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Cash Flows	4
Consolidated Statements of Changes in Stockholders’ Equity	6
Notes to Consolidated Financial Statements	7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4547
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	6063
ITEM 4. Controls and Procedures	6063
PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings	6164
ITEM 1A. Risk Factors	6164
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	6166
ITEM 3. Defaults Upon Senior Securities	6166
ITEM 4. Mine Safety Disclosures	6166
ITEM 5. Other Information	6166
ITEM 6. Exhibits	6267
SIGNATURES	6469


	For the three and six months ended
	June 30, 2021
(Dollars in thousands)	Number	Balance		Modification description
Commercial business and other	2		674	Amortization period extended
Total	2	$	674



														Revolving Loans,		Lines of Credit
														Amortized Cost		converted to
(In thousands)		2021		2020		2019		2018		2017		Prior		Basis		term loans		Total
1-4 Family Residential
Pass	$	57,316	$	31,897	$	36,253	$	32,818	$	20,935	$	75,903	$	10,524	$	15,288	$	280,934
Watch		—		481		724		280		2,430		1,541		190		2,287		7,933
Special Mention		—		—		—		—		1,115		517		160		—		1,792
Substandard		—		—		—		1,836		—		4,167		—		1,029		7,032
Total 1-4 Family Residential	$	57,316	$	32,378	$	36,977	$	34,934	$	24,480	$	82,128	$	10,874	$	18,604	$	297,691
1-4 Family Mixed-Use
Pass	$	18,221	$	35,902	$	71,259	$	75,193	$	54,249	$	308,869	$	—	$	—	$	563,693
Watch		—		—		—		3,092		6,118		7,668		—		—		16,878
Special Mention		—		—		—		—		761		1,438		—		—		2,199
Substandard		—		—		—		501		—		2,478		—		—		2,979
Total 1-4 Family Mixed Use	$	18,221	$	35,902	$	71,259	$	78,786	$	61,128	$	320,453	$	—	$	—	$	585,749
Commercial Real Estate
Pass	$	58,238	$	171,433	$	256,707	$	266,369	$	180,000	$	680,308	$	—	$	—	$	1,613,055
Watch		4,179		934		3,433		5,708		2,657		83,926		—		—		100,837
Special Mention		—		—		—		6,855		—		1,542		—		—		8,397
Substandard		—		—		7,583		—		—		35		—		—		7,618
Total Commercial Real Estate	$	62,417	$	172,367	$	267,723	$	278,932	$	182,657	$	765,811	$	—	$	—	$	1,729,907
Construction
Pass	$	3,079	$	23,121	$	14,797	$	1,960	$	—	$	—	$	—	$	—	$	42,957
Watch		—		—		2,115		8,284		5,904		—		—		—		16,303
Special Mention		—		—		—		859		2,592		—		—		—		3,451
Substandard		—		—		—		—		—		—		—		—		—
Total Construction	$	3,079	$	23,121	$	16,912	$	11,103	$	8,496	$	—	$	—	$	—	$	62,711
Multifamily
Pass	$	168,396	$	240,612	$	340,195	$	449,407	$	360,108	$	941,236	$	6,346	$	—	$	2,506,300
Watch		—		2,111		4,205		12,605		—		10,834		398		—		30,153
Special Mention		—		792		468		—		—		—		—		—		1,260
Substandard		—		—		703		2,599		1,803		740		201		—		6,046
Total Multifamily	$	168,396	$	243,515	$	345,571	$	464,611	$	361,911	$	952,810	$	6,945	$	—	$	2,543,759
Commercial Business - Secured by RE
Pass	$	96,311	$	93,588	$	38,733	$	52,180	$	28,173	$	99,637	$	—	$	—	$	408,622
Watch		—		23,623		51,501		18,557		11,979		47,442		—		—		153,102
Special Mention		—		—		604		—		—		—		—		—		604
Substandard		—		—		—		—		—		4,228		—		—		4,228
Total Commercial Business - Secured by RE	$	96,311	$	117,211	$	90,838	$	70,737	$	40,152	$	151,307	$	—	$	—	$	566,556
Commercial Business
Pass	$	51,015	$	72,432	$	90,417	$	76,675	$	29,154	$	73,507	$	207,786	$	—	$	600,986
Watch		6		1,683		22,505		19,308		33,143		43		22,493		—		99,181
Special Mention		—		—		45		2,488		103		—		3,207		—		5,843
Substandard		—		4,900		535		320		4,957		1,903		995		—		13,610
Doubtful		—		—		—		—		—		929		1,235		—		2,164
Total Commercial Business	$	51,021	$	79,015	$	113,502	$	98,791	$	67,357	$	76,382	$	235,716	$	—	$	721,784
Small Business Administration
Pass	$	130,255	$	67,148	$	1,292	$	1,560	$	654	$	2,920	$	—	$	—	$	203,829
Watch		—		—		61		2,588		1,946		849		—		—		5,444
Special Mention		—		—		—		—		140		107		—		—		247
Substandard		—		—		—		—		992		6		—		—		998
Total Small Business Administration	$	130,255	$	67,148	$	1,353	$	4,148	$	3,732	$	3,882	$	—	$	—	$	210,518
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	52	$	79	$	—	$	131
Total Other	$	—	$	—	$	—	$	—	$	—	$	52	$	79	$	—	$	131

Total Loans	$	587,016	$	770,657	$	944,135	$	1,042,042	$	749,913	$	2,352,825	$	253,614	$	18,604	$	6,718,806


	Projected Percentage Change In
Change in Interest Rate	Net Interest Income		Net Portfolio Value		Net Portfolio Value Ratio
-100 Basis points	2.32	%	(14.45)	%	9.20	%
Base interest rate	—		—		10.91
+100 Basis points	(7.02)		(3.29)		10.80
+200 Basis points	(14.08)		(7.45)		10.58