Flushing Financial (FFIC) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

Flushing Financial Corporation Reports Record Second Quarter GAAP Diluted EPS of $1.05 Driven by the Sale of a Building; Core Diluted EPS of $0.39, Up 8.3% YoY Driven by 21.6% Annualized Loan Growth

Second Quarter 2016

• GAAP diluted EPS was $1.05, up 105.9% YoY, materially impacted by the sale of one of the Bank’s branch buildings for a pre-tax gain of $33.8 million
• Notable items in GAAP include net gains on sale of buildings and securities, net loss from fair value adjustments and prepayment penalties from the extinguishment of debt that, combined, increased diluted EPS by $0.66
• Core diluted EPS was $0.39, up 8.3% YoY
• Net interest margin was 2.99%, compared to 3.03% for the second quarter of 2015
• Excluding prepayment penalty income from loans and recovered interest from nonaccrual loans, the net interest margin improved to 2.87%, an increase of four basis points QoQ
• GAAP ROAE was 25.0%, compared with 12.7% for the second quarter of 2015
• Core ROAE was 9.3%, compared with 9.1% for the second quarter of 2015
• GAAP ROAA was 2.1%, compared with 1.1% for the second quarter of 2015
• Core ROAA was 0.8%, the same as the second quarter of 2015
• Net interest income was a record totaling $41.9 million, up 9.8% YoY

UNIONDALE, N.Y., July 26, 2016 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq:FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the three and six months ended June 30, 2016.

John R. Buran, President and Chief Executive Officer, stated: “We are pleased to report record earnings per diluted common share of $1.05 for the second quarter of 2016. The quarter’s earnings were driven by the gain recognized on the sale of one of our properties in Flushing, Queens. The planned sale is part of our greater strategy of reducing non-interest-earning assets and redeploying those assets into our growing markets.

“The current quarter’s earnings were aided by continuing the strategy of originating and purchasing multi-family, commercial real estate, and commercial business loans. Loan originations and purchases for these loans totaled $368.8 million, or 95.1%, of the total second quarter loan production of $387.9 million. This level of loan production resulted in net loans increasing a record $237.5 million, or a 21.6% annualized growth rate, while maintaining our underwriting standards. Loan originations for these loan products, excluding underlying co-operative mortgages, had an average loan-to-value of 52.7% and an average debt coverage ratio of 184%. The loan pipeline remains strong totaling $329.8 million at June 30, 2016.”

Core earnings, a non-GAAP measure, exclude the effects of net gains/losses from the sale of buildings and securities, net gains/losses from fair value adjustments, prepayment penalties from the extinguishment of debt, and the gain from life insurance proceeds.

For a reconciliation of core earnings and core diluted earnings per common share to accounting principles generally accepted in the United States (“GAAP”) net income and GAAP diluted earnings per common share, please refer to the table titled “Reconciliation of GAAP Earnings and Core Earnings."

Earnings Summary:

Quarter ended June 30, 2016 (2Q16) compared to the quarters ended June 30, 2015 (2Q15) and March 31, 2016 (1Q16)

Net Interest Income

Net interest income for 2Q16 was $41.9 million, an increase of 9.8% YoY and 1.8% QoQ.

• Average balance of total interest-earning assets of $5,612.9 million, increased $579.2 million, or 11.5% YoY and increased $122.2 million, or 2.2% QoQ
• Yield on interest-earning assets of 3.93% decreased 6 basis points YoY and 3 basis points QoQ
• Cost of interest-bearing liabilities of 1.05% decreased 1 basis point YoY and 2 basis points QoQ
• Net interest spread and net interest margin of 2.88% and 2.99%, respectively, decreased 5 basis points and 4 basis points, respectively YoY and decreased 1 basis point each QoQ
• Includes prepayment penalty income from loans of $1.4 million, compared with $1.5 million in 2Q15 and $2.2 million in 1Q16, and recovered interest from nonaccrual loans of $0.2 million, compared with $0.1 million in 2Q15 and 1Q16
• Excluding prepayment penalty income and recovered interest from nonaccrual loans, the yield on total loans, net, would be 4.10%, compared with 4.27% in 2Q15 and 4.13% in 1Q16, and the net interest margin would be 2.87%, compared with 2.90% in 2Q15 and 2.83% in 1Q16
• Cost of total deposits of 0.84% decreased 2 basis points YoY but was flat QoQ
• Cost of borrowed funds of 1.70% decreased 5 basis points YoY and 11 basis points QoQ, primarily due to the extinguishment of debt at an average cost of 4.16%

The following table shows the basis points increase (decrease) in the cost of interest-bearing liabilities:

Change in the Cost of Interest-Bearing Liabilities (bps)
	2Q16 vs.
		1Q16		2Q15
Savings		1		3
NOW		2		4
Money market		3		19
Certificate of deposit		(1	)	(9	)
Borrowings		(11	)	(5	)
Total interest-bearing liabilities		(2	)	(1	)

Non-interest Income

Non-interest income for 2Q16 was $37.7 million, an increase of $27.8 million YoY and $35.2 million QoQ.

• Gain of $33.8 million recorded from the planned sale of one of our properties in Flushing, Queens (the “Building Sale”)
• Net gain of $2.4 million recorded from the sale of $64.6 million in securities in connection with the extinguishment of debt
• Decrease in fair value adjustments of $1.9 million compared to 2Q15 and $0.1 compared to 1Q16, which also included net gains of $0.4 million from life insurance proceeds and $0.3 million from the sale of loans

Non-interest Expense

Non-interest expense for 2Q16 was $28.5 million, an increase of $4.2 million, or 17.3%, YoY and essentially unchanged QoQ.

• The 2Q16 includes a non-recurring penalty of $2.1 million on the prepayment of $38.0 million in repurchase agreements and a write-down of $0.8 million on one OREO property. Absent these two items, non-interest expense decreased $3.0 million, or 10.4% QoQ
• Salaries and benefits increased YoY by $0.8 million primarily due to annual salary increases and additions in staffing but declined $2.3 million QoQ due to 1Q16 including seasonal expenses from annual restricted stock unit awards for employees and higher payroll taxes
• Professional services increased $0.7 million YoY due to increased legal and consulting expenses but declined $0.1 QoQ
• The efficiency ratio improved to 57.1% from 57.5% in 2Q15 and 64.5% in 1Q16

Provision for Income Taxes

The provision for income taxes in 2Q16 was $20.7 million, an increase of $11.2 million YoY and $15.1 million QoQ.

• Increase in income before income taxes of $26.8 million YoY and $36.0 million QoQ, primarily due to the net gain from the Building Sale
• Higher effective tax rate of 40.5% from 39.1% in 2Q15 and 37.0% in 1Q16 mainly reflects the reduced impact of preferential tax items as a result of the Building Sale

Loans:

• Net loans were $4,674.1 million reflecting an increase of 5.4% QoQ (not annualized) and 7.0% year-to-date as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship
• Total loan originations and purchases were $617.1 million year-to-date, an increase of $113.7 million YoY
• Loan purchases, which are underwritten to the same standards as organic originations, were $138.0 million year-to-date, an increase of $11.9 million YoY
• Loan pipeline remains strong, totaling $329.8 million at June 30, 2016 compared with $330.5 million at December 31, 2015
• Multi-family (excluding underlying co-operative mortgages), commercial real estate and one-to-four family mixed-use property mortgage loans originated during the quarter had an average loan-to-value ratio of 53.7% and an average debt coverage ratio of 184%

The following table shows the average rate received from loan originations and purchases for the periods indicated:

	For the three months ended
	June 30,		March 31,		June 30,
Loan type	2016		2016		2015
Mortgage loans	3.53	%	3.78	%	3.74	%
Non-mortgage loans	4.29	%	3.73	%	3.87	%
Total loans	3.71	%	3.76	%	3.79	%

Credit Quality:

• Credit quality continues to improve with non-performing loans totaling $21.9 million, a decrease of $4.2 million, or 15.9%, from $26.1 million at December 31, 2015
• Classified assets totaled $44.8 million, an increase of $0.9 million, or 2.0%, from $43.9 million at December 31, 2015
• Loans classified as troubled debt restructured totaled $8.3 million, a decrease of $1.2 million, or 12.7%, from $9.5 million at December 31, 2015
• Strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs, when necessary, has resulted in a 41.8% average loan-to-value for non-performing loans collateralized by real estate
• Year-to-date, no provision for loan losses was recorded compared with a benefit of $1.3 million recorded in the comparable prior year period
• Net recoveries totaled $0.7 million year-to-date, amid continued improvement in credit conditions
• Properties obtained through foreclosure have been sold at amounts that approximate book value
• The Bank takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative
• We anticipate continued low loss content in the loan portfolio

Capital Management:

• The Bank and Company are subject to the same regulatory capital requirements and at June 30, 2016, both were well-capitalized under all regulatory requirements
• Year-to-date, stockholders’ equity increased $35.8 million, or 7.6% to $508.9 million due to net income of $40.0 million and an improvement in other comprehensive income of $8.7 million, mainly due to an increase in the fair value of the securities portfolio and the net impact of $4.5 million from the vesting and exercising of shares of employee and director stock plans
• Increases above were partially offset by the declaration and payment of dividends on the Company’s common stock of $0.34 per common share totaling $9.9 million and the purchase of 378,695 treasury shares, at an average price of $19.78 per share, for a total cost of $7.5 million
• As of June 30, 2016, 520,905 shares may still be repurchased under the currently authorized stock repurchase program, which has no expiration or maximum dollar amount
• Book value per common share was $17.77 at June 30, 2016, compared with $16.41 at December 31, 2015
• Tangible book value per common share, a non-GAAP measure, was $17.22, compared with $15.86 at December 31, 2015

About Flushing Financial Corporation

Flushing Financial Corporation is the holding company for Flushing Bank, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, and public entities by offering a full complement of deposit, loan, and cash management services through its 19 banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. The Bank also operates an online banking division, iGObanking.com®, which offers competitively priced deposit products to consumers nationwide.

Additional information on Flushing Financial Corporation may be obtained by visiting the Company’s website at http://www.flushingbank.com.

 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
	For the three months ended									For the six months ended
	June 30,			March 31,			June 30,			June 30,
	2016			2016			2015			2016			2015
Interest and Dividend Income
Interest and fees on loans	$	48,413		$	47,558		$	44,084		$	95,971		$	87,618
Interest and dividends on securities:
Interest		6,510			6,592			5,988			13,102			11,858
Dividends		120			119			118			239			236
Other interest income		48			94			32			142			53
Total interest and dividend income		55,091			54,363			50,222			109,454			99,765
Interest Expense
Deposits		8,097			7,973			7,437			16,070			14,895
Other interest expense		5,105			5,257			4,645			10,362			9,176
Total interest expense		13,202			13,230			12,082			26,432			24,071
Net Interest Income		41,889			41,133			38,140			83,022			75,694
Benefit for loan losses		-			-			(516	)		-			(1,250	)
Net Interest Income After Benefit for Loan Losses		41,889			41,133			38,656			83,022			76,944
Non-interest Income
Banking services fee income		973			976			898			1,949			1,782
Net gain on sale of securities		2,363			-			64			2,363			64
Net gain on sale of loans		3			341			47			344			49
Net gain on sale of buildings		33,814			-			6,537			33,814			6,537
Net (loss) gain from fair value adjustments		(1,115	)		(987	)		768			(2,102	)		173
Federal Home Loan Bank of New York stock dividends		582			623			457			1,205			975
Gains from life insurance proceeds		-			411			-			411			-
Bank owned life insurance		694			695			715			1,389			1,432
Other income		403			481			461			884			865
Total non-interest income		37,717			2,540			9,947			40,257			11,877
Non-interest Expense
Salaries and employee benefits		13,968			16,261			13,157			30,229			27,823
Occupancy and equipment		2,352			2,370			2,635			4,722			5,348
Professional services		2,027			2,150			1,350			4,177			3,129
FDIC deposit insurance		940			904			811			1,844			1,560
Data processing		1,199			1,091			1,172			2,290			2,247
Depreciation and amortization		1,062			1,032			867			2,094			1,535
Other real estate owned/foreclosure expense		405			153			87			558			607
Prepayment penalty on borrowings		2,082			-			-			2,082			-
Other operating expenses		4,419			4,536			4,169			8,955			7,938
Total non-interest expense		28,454			28,497			24,248			56,951			50,187
Income Before Income Taxes		51,152			15,176			24,355			66,328			38,634
Provision for Income Taxes
Federal		15,203			4,747			7,155			19,950			11,407
State and local		5,514			868			2,366			6,382			3,660
Total taxes		20,717			5,615			9,521			26,332			15,067
Net Income	$	30,435		$	9,561		$	14,834		$	39,996		$	23,567
Basic earnings per common share	$	1.05		$	0.33		$	0.51		$	1.38		$	0.80
Diluted earnings per common share	$	1.05		$	0.33		$	0.51		$	1.38		$	0.80
Dividends per common share	$	0.17		$	0.17		$	0.16		$	0.34		$	0.32

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
				June 30,			March 31,			December 31,
				2016			2016			2015
ASSETS
Cash and due from banks				$	50,165		$	51,417		$	42,363
Securities held-to-maturity:
	Other securities				28,410			7,885			6,180
Securities available for sale:
	Mortgage-backed securities				580,500			668,412			668,740
	Other securities				368,611			372,851			324,657
Loans:
	Multi-family residential				2,159,138			2,039,794			2,055,228
	Commercial real estate				1,146,400			1,058,028			1,001,236
	One-to-four family ― mixed-use property				566,702			571,846			573,043
	One-to-four family ― residential				190,251			191,158			187,838
	Co-operative apartments				7,571			8,182			8,285
	Construction				9,899			7,472			7,284
	Small Business Administration				14,718			14,701			12,194
	Taxi medallion				20,641			20,757			20,881
	Commercial business and other				564,084			531,322			506,622
	Net unamortized premiums and unearned loan fees				16,875			15,281			15,368
	Allowance for loan losses				(22,198	)		(21,993	)		(21,535	)
			Net loans		4,674,081			4,436,548			4,366,444
Interest and dividends receivable					20,390			19,369			18,937
Bank premises and equipment, net					24,470			25,130			25,622
Federal Home Loan Bank of New York stock					67,195			53,368			56,066
Bank owned life insurance					115,100			114,405			115,536
Goodwill					16,127			16,127			16,127
Other assets					41,678			47,555			63,962
			Total assets	$	5,986,727		$	5,813,067		$	5,704,634
LIABILITIES
Due to depositors:
	Non-interest bearing			$	317,112		$	280,450		$	269,469
	Interest-bearing:
		Certificate of deposit accounts			1,411,550			1,362,062			1,403,302
		Savings accounts			260,528			268,057			261,748
		Money market accounts			452,589			485,774			472,489
		NOW accounts			1,453,540			1,610,932			1,448,695
			Total interest-bearing deposits		3,578,207			3,726,825			3,586,234
Mortgagors' escrow deposits					45,905			56,612			36,844
Borrowed funds					1,444,751			1,190,789			1,271,676
Other liabilities					91,869			70,612			67,344
			Total liabilities		5,477,844			5,325,288			5,231,567
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued)					-			-			-
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares
	issued at June 30, 2016, March 31, 2016 and December 31, 2015; 28,631,243
	shares, 28,986,566 shares and 28,830,558 shares outstanding at June 30, 2016,
	March 31, 2016 and December 31, 2015, respectively)				315			315			315
Additional paid-in capital					212,613			211,735			210,652
Treasury stock (2,899,352 shares, 2,544,029 shares and 2,700,037 shares at
	June 30, 2016, March 31, 2016 and December 31, 2015, respectively)				(53,351	)		(46,307	)		(48,868	)
Retained earnings					346,218			320,725			316,530
Accumulated other comprehensive income (loss), net of taxes					3,088			1,311			(5,562	)
			Total stockholders' equity		508,883			487,779			473,067
			Total liabilities and stockholders' equity	$	5,986,727		$	5,813,067		$	5,704,634

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
(Unaudited)
	At or for the three months ended									At or for the six months ended
	June 30,			March 31,			June 30,			June 30,
	2016			2016			2015			2016			2015
Per Share Data
Basic earnings per share	$	1.05		$	0.33		$	0.51		$	1.38		$	0.80
Diluted earnings per share	$	1.05		$	0.33		$	0.51		$	1.38		$	0.80
Average number of shares outstanding for:
Basic earnings per common share computation		29,022,122			29,096,663			29,245,792			29,059,393			29,321,203
Diluted earnings per common share computation		29,034,454			29,111,172			29,268,138			29,072,813			29,342,940
Shares outstanding		28,631,243			28,986,566			28,923,000			28,631,243			28,923,000
Book value per common share (1)	$	17.77		$	16.83		$	15.98		$	17.77		$	15.98
Tangible book value per common share (2)	$	17.22		$	16.29		$	15.43		$	17.22		$	15.43
Stockholders' Equity
Stockholders' equity		508,883			487,779			462,136			508,883			462,136
Tangible stockholders' equity		493,163			472,059			446,410			493,163			446,410
Average Balances
Total loans, net	$	4,567,019		$	4,389,331		$	3,981,908		$	4,478,175		$	3,915,185
Total interest-earning assets		5,612,935			5,490,714			5,033,694			5,551,825			4,948,144
Total assets		5,897,858			5,774,750			5,309,463			5,836,304			5,221,699
Total due to depositors		3,779,256			3,746,268			3,415,938			3,762,762			3,368,274
Total interest-bearing liabilities		5,046,162			4,959,563			4,542,899			5,002,863			4,466,793
Stockholders' equity		486,261			479,424			465,618			482,843			462,877
Performance Ratios (3)
Return on average assets		2.06	%		0.66	%		1.12	%		1.37	%		0.90	%
Return on average equity		25.04			7.98			12.74			16.57			10.18
Yield on average interest-earning assets		3.93			3.96			3.99			3.94			4.03
Cost of average interest-bearing liabilities		1.05			1.07			1.06			1.06			1.08
Interest rate spread during period		2.88			2.89			2.93			2.88			2.95
Net interest margin		2.99			3.00			3.03			2.99			3.06
Non-interest expense to average assets		1.93			1.97			1.83			1.95			1.92
Efficiency ratio (4)		57.09			64.50			57.54			60.78			61.17
Average interest-earning assets to average
interest-bearing liabilities		1.11	X		1.11	X		1.11	X		1.11	X		1.11	X
(1)  Calculated by dividing common stockholders’ equity by shares outstanding.
(2)  Calculated by dividing tangible common stockholders’ equity, a non-GAAP measure by shares outstanding. Tangible common stockholders’ equity is total stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Reconciliation of GAAP Earnings and Core Earnings”.
(3)  Ratios are presented on an annualized basis.
(4)  Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense, prepayment penalties from the extinguishment of debt and the net gain/loss from the sale of OREO) by the total of net interest income and non-interest income (excluding net gains and losses from fair value adjustments, net gain and losses from the sale of securities, life insurance proceeds, and sale of buildings). See “Reconciliation of GAAP Earnings and Core Earnings”.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
	At or for the six				At or for the year			At or for the six
	months ended				ended			months ended
	June 30, 2016				December 31, 2015			June 30, 2015
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital	$	516,551			$	490,919		$	478,658
Common equity Tier 1 capital		490,015				462,883			450,169
Total risk-based capital		538,749				512,454			501,742
Tier 1 leverage capital (well capitalized = 5%)		8.80		%		8.84	%		9.06	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)		11.45				11.83			12.20
Tier 1 risk-based capital (well capitalized = 8.0%)		12.07				12.55			12.97
Total risk-based capital (well capitalized = 10.0%)		12.59				13.10			13.59
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital	$	522,961			$	494,690		$	483,407
Common equity Tier 1 capital		522,961				494,690			483,407
Total risk-based capital		545,159				516,226			506,491
Tier 1 leverage capital (well capitalized = 5%)		8.89		%		8.89	%		9.13	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)		12.20				12.62			13.07
Tier 1 risk-based capital (well capitalized = 8.0%)		12.20				12.62			13.07
Total risk-based capital (well capitalized = 10.0%)		12.72				13.17			13.70
Capital ratios:
Average equity to average assets		8.27		%		8.68	%		8.86	%
Equity to total assets		8.50				8.29			8.62
Tangible common equity to tangible assets (1)		8.26				8.04			8.35
Asset quality:
Non-accrual loans (2)	$	20,381			$	22,817		$	27,462
Non-performing loans		21,923				26,077			28,559
Non-performing assets		25,591				31,009			32,814
Net charge-offs/ (recoveries)		(663	)			2,605			762
Asset quality ratios:
Non-performing loans to gross loans		0.47		%		0.60	%		0.71	%
Non-performing assets to total assets		0.43				0.54			0.61
Allowance for loan losses to gross loans		0.47				0.49			0.57
Allowance for loan losses to non-performing assets		86.74				69.45			70.35
Allowance for loan losses to non-performing loans		101.25				82.58			80.83
Full-service customer facilities		19				19			18
(1) See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
(2) Excludes performing non-accrual TDR loans.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
	For the three months ended
	June 30, 2016						March 31, 2016						June 30, 2015
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	3,983,615	$	42,969	4.31	%	$	3,839,325	$	42,454	4.42	%	$	3,476,163	$	39,737	4.57	%
Other loans, net		583,404		5,444	3.73			550,006		5,104	3.71			505,745		4,347	3.44
Total loans, net (1)		4,567,019		48,413	4.24			4,389,331		47,558	4.33			3,981,908		44,084	4.43
Taxable securities:
Mortgage-backed
securities		599,247		3,707	2.47			658,764		4,174	2.53			706,510		4,340	2.46
Other securities		249,956		2,133	3.41			229,991		1,745	3.03			148,244		887	2.39
Total taxable securities		849,203		5,840	2.75			888,755		5,919	2.66			854,754		5,227	2.45
Tax-exempt securities: (2)
Other securities		147,230		790	2.15			127,355		792	2.49			137,270		879	2.56
Total tax-exempt securities		147,230		790	2.15			127,355		792	2.49			137,270		879	2.56
Interest-earning deposits
and federal funds sold		49,483		48	0.39			85,273		94	0.44			59,762		32	0.21
Total interest-earning
assets		5,612,935		55,091	3.93			5,490,714		54,363	3.96			5,033,694		50,222	3.99
Other assets		284,923						284,036						275,769
Total assets	$	5,897,858					$	5,774,750					$	5,309,463
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	265,856		306	0.46		$	262,443		298	0.45		$	268,791		291	0.43
NOW accounts		1,612,704		1,962	0.49			1,621,779		1,922	0.47			1,475,574		1,651	0.45
Money market accounts		483,317		681	0.56			457,895		606	0.53			331,117		307	0.37
Certificate of deposit
accounts		1,417,379		5,121	1.45			1,404,151		5,121	1.46			1,340,456		5,165	1.54
Total due to depositors		3,779,256		8,070	0.85			3,746,268		7,947	0.85			3,415,938		7,414	0.87
Mortgagors' escrow
accounts		67,728		27	0.16			49,947		26	0.21			62,906		23	0.15
Total interest-bearing
deposits		3,846,984		8,097	0.84			3,796,215		7,973	0.84			3,478,844		7,437	0.86
Borrowings		1,199,178		5,105	1.70			1,163,348		5,257	1.81			1,064,055		4,645	1.75
Total interest-bearing
liabilities		5,046,162		13,202	1.05			4,959,563		13,230	1.07			4,542,899		12,082	1.06
Non interest-bearing
demand deposits		296,597						273,937						242,732
Other liabilities		68,838						61,826						58,214
Total liabilities		5,411,597						5,295,326						4,843,845
Equity		486,261						479,424						465,618
Total liabilities and
equity	$	5,897,858					$	5,774,750					$	5,309,463
Net interest income /
net interest rate spread			$	41,889	2.88	%			$	41,133	2.89	%			$	38,140	2.93	%
Net interest-earning assets /
net interest margin	$	566,773			2.99	%	$	531,151			3.00	%	$	490,795			3.03	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.11	X					1.11	X					1.11	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 $1.0 million, $1.5 million and $1.0 million for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in thousands)
(Unaudited)
	For the six months ended
	June 30, 2016						June 30, 2015
	Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	3,911,470	$	85,423	4.37	%	$	3,417,708	$	79,177	4.63	%
Other loans, net		566,705		10,548	3.72			497,477		8,441	3.39
Total loans, net (1)		4,478,175		95,971	4.29			3,915,185		87,618	4.48
Taxable securities:
Mortgage-backed
securities		629,006		7,881	2.51			704,520		8,721	2.48
Other securities		239,973		3,878	3.23			139,143		1,607	2.31
Total taxable securities		868,979		11,759	2.71			843,663		10,328	2.45
Tax-exempt securities: (2)
Other securities		137,293		1,582	2.30			137,627		1,766	2.57
Total tax-exempt securities		137,293		1,582	2.30			137,627		1,766	2.57
Interest-earning deposits
and federal funds sold		67,378		142	0.42			51,669		53	0.21
Total interest-earning
assets		5,551,825		109,454	3.94			4,948,144		99,765	4.03
Other assets		284,479						273,555
Total assets	$	5,836,304					$	5,221,699
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	264,150		604	0.46		$	267,507		555	0.41
NOW accounts		1,617,241		3,884	0.48			1,463,576		3,201	0.44
Money market accounts		470,606		1,287	0.55			317,962		560	0.35
Certificate of deposit
accounts		1,410,765		10,242	1.45			1,319,229		10,533	1.60
Total due to depositors		3,762,762		16,017	0.85			3,368,274		14,849	0.88
Mortgagors' escrow
accounts		58,838		53	0.18			55,415		46	0.17
Total interest-bearing
deposits		3,821,600		16,070	0.84			3,423,689		14,895	0.87
Borrowings		1,181,263		10,362	1.75			1,043,104		9,176	1.76
Total interest-bearing
liabilities		5,002,863		26,432	1.06			4,466,793		24,071	1.08
Non interest-bearing
demand deposits		285,267						238,234
Other liabilities		65,331						53,795
Total liabilities		5,353,461						4,758,822
Equity		482,843						462,877
Total liabilities and
equity	$	5,836,304					$	5,221,699
Net interest income /
net interest rate spread			$	83,022	2.88	%			$	75,694	2.95	%
Net interest-earning assets /
net interest margin	$	548,962			2.99	%	$	481,351			3.06	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.11	X					1.11	X
(1) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.5 million and $1.7 million for the six months ended June 30, 2016 and 2015, respectively.
(2) Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT COMPOSITION
(Unaudited)
										June 2016 vs.							June 2016 vs.
				June 30,		March 31,		December 31,		December 2015			September 30,		June 30,		June 2015
(Dollars in thousands)				2016		2016		2015		% Change			2015		2015		% Change
Deposits
Non-interest bearing				$	317,112	$	280,450	$	269,469		17.7	%	$	257,196	$	257,575		23.1	%
Interest bearing:
	Certificate of deposit
		accounts			1,411,550		1,362,062		1,403,302		0.6	%		1,386,945		1,375,506		2.6	%
	Savings accounts				260,528		268,057		261,748		(0.5	%)		261,400		264,718		(1.6	%)
	Money market accounts				452,589		485,774		472,489		(4.2	%)		438,457		399,191		13.4	%
	NOW accounts				1,453,540		1,610,932		1,448,695		0.3	%		1,338,715		1,357,412		7.1	%
		Total interest-bearing
			deposits		3,578,207		3,726,825		3,586,234		(0.2	%)		3,425,517		3,396,827		5.3	%
			Total deposits	$	3,895,319	$	4,007,275	$	3,855,703		1.0	%	$	3,682,713	$	3,654,402		6.6	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOANS
(Unaudited)
Loan Origination and Purchases
	For the three months						For the six months ended
	June 30,		March 31,		June 30,		June 30,
(In thousands)	2016		2016		2015		2016		2015
Multi-family residential	$	162,364	$	69,643	$	50,429	$	232,007	$	177,175
Commercial real estate		114,007		62,137		57,331		176,144		143,726
One-to-four family – mixed-use property		11,630		18,245		9,916		29,875		24,897
One-to-four family – residential		4,195		9,493		8,975		13,688		22,078
Co-operative apartments		470		-		450		470		450
Construction		2,427		1,687		845		4,114		1,387
Small Business Administration		314		6,001		5,233		6,315		6,481
Taxi Medallion		-		-		-		-		-
Commercial business and other		92,456		62,034		63,704		154,490		127,211
Total	$	387,863	$	229,240	$	196,883	$	617,103	$	503,405

Loan Composition
												June 30, 2016 vs.									June 2016 vs.
			June 30,			March 31,			December 31,			December 2015			September 30,			June 30,			June 2015
(Dollars in thousands)			2016			2016			2015			% Change			2015			2015			% Change
Loans:
Multi-family residential			$	2,159,138		$	2,039,794		$	2,055,228			5.1	%	$	2,043,740		$	2,017,891			7.0	%
Commercial real estate				1,146,400			1,058,028			1,001,236			14.5	%		857,806			726,136			57.9	%
One-to-four family ―
	mixed-use property			566,702			571,846			573,043			(1.1	%)		568,401			567,060			(0.1	%)
One-to-four family ― residential				190,251			191,158			187,838			1.3	%		191,430			189,573			0.4	%
Co-operative apartments				7,571			8,182			8,285			(8.6	%)		9,122			7,681			(1.4	%)
Construction				9,899			7,472			7,284			35.9	%		5,671			3,673			169.5	%
Small Business Administration				14,718			14,701			12,194			20.7	%		10,540			12,181			20.8	%
Taxi medallion				20,641			20,757			20,881			(1.1	%)		21,025			21,211			(2.7	%)
Commercial business and other				564,084			531,322			506,622			11.3	%		479,085			472,485			19.4	%
Net unamortized premiums
	and unearned loan fees			16,875			15,281			15,368			9.8	%		14,129			13,251			27.3	%
Allowance for loan losses				(22,198	)		(21,993	)		(21,535	)		3.1	%		(22,973	)		(23,084	)		(3.8	%)
		Net loans	$	4,674,081		$	4,436,548		$	4,366,444			7.0	%	$	4,177,976		$	4,008,058			16.6	%

Loan Activity
		Three Months Ended
		June 30,			December 31,			March 31,			September 30,			June 30,
(In thousands)		2016			2015			2016			2015			2015
Loans originated and purchased		$	387,863		$	395,592		$	229,240		$	334,464		$	196,883
Principal reductions			(149,307	)		(206,125	)		(152,521	)		(155,794	)		(158,829	)
Loans transferred to held-for-sale			-			-			-			-			(300	)
Loans sold			(2,310	)		(1,164	)		(5,515	)		(8,800	)		(3,601	)
Loan charged-offs			(102	)		(2,478	)		(147	)		(168	)		(803	)
Foreclosures			-			(34	)		(408	)		(773	)		(239	)
Net change in deferred (fees) and costs			1,594			1,239			(87	)		878			(23	)
Net change in the allowance for loan losses			(205	)		1,438			(458	)		111			1,007
	Total loan activity	$	237,533		$	188,468		$	70,104		$	169,918		$	34,095

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NON-PERFORMING ASSETS and NET CHARGE-OFFS
(Unaudited)
		June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)		2016			2016			2015			2015			2015
Loans 90 Days Or More Past Due
	and Still Accruing:
Multi-family residential		$	574		$	792		$	233		$	516		$	-
Commercial real estate			320			1,083			1,183			253			416
One-to-four family - mixed-use property			635			743			611			1,293			353
One-to-four family - residential			13			13			13			13			13
Construction			-			570			1,000			-			-
Commercial business and other			-			-			220			222			315
	Total		1,542			3,201			3,260			2,297			1,097
Non-accrual Loans:
Multi-family residential			3,162			3,518			3,561			4,686			6,352
Commercial real estate			2,299			3,295			2,398			2,407			2,694
One-to-four family - mixed-use property			6,005			5,519			5,952			5,446			6,238
One-to-four family - residential			8,406			8,861			10,120			10,441			11,329
Small business administration			185			201			218			234			170
Taxi Medallion			196			196			-			-			-
Commercial business and other			128			511			568			3,089			679
	Total		20,381			22,101			22,817			26,303			27,462
	Total Non-performing Loans		21,923			25,302			26,077			28,600			28,559
Other Non-performing Assets:
Real estate acquired through foreclosure			3,668			4,602			4,932			4,855			4,255
	Total		3,668			4,602			4,932			4,855			4,255
	Total Non-performing Assets	$	25,591		$	29,904		$	31,009		$	33,455		$	32,814
Non-performing Assets to Total Assets			0.43	%		0.51	%		0.54	%		0.61	%		0.61	%
Allowance For Loan Losses to Non-performing Loans			101.3	%		86.9	%		82.6	%		80.3	%		80.8	%

Net Charge-Offs (Recoveries)
	Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(In thousands)	2016			2016			2015			2015			2015
Multi-family residential	$	(183	)	$	29		$	(35	)	$	54		$	112
Commercial real estate		-			-			-			(100	)		18
One-to-four family – mixed-use property		36			(173	)		18			73			350
One-to-four family – residential		7			(299	)		97			(300	)		17
Co-operative apartments		-			-			-			-			-
Small Business Administration		(42	)		(31	)		17			4			(7	)
Commercial business and other		(23	)		16			2,005			10			1
Total net loan charge-offs (recoveries)	$	(205	)	$	(458	)	$	2,102		$	(259	)	$	491

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per share and tangible common stockholders’ equity are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears in tabular form at the end of this release. The Company believes that these measures are useful for both investors and management to understand the effects of certain non-interest items and provide an alternative view of the Company's performance over time and in comparison to the Company's competitors. These measures should not be viewed as a substitute for net income. The Company believes that tangible book value per share and tangible common stockholders’ equity are useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2016			2016			2015			2016			2015
GAAP income before income taxes	$	51,152		$	15,176		$	24,355		$	66,328		$	38,634
Net (gain) loss from fair value adjustments		1,115			987			(768	)		2,102			(173	)
Net gain on sale of securities		(2,363	)		-			(64	)		(2,363	)		(64	)
Gain from life insurance proceeds		-			(411	)		-			(411	)		-
Net gain on sale of buildings		(33,814	)		-			(6,537	)		(33,814	)		(6,537	)
Prepayment penalty on borrowings		2,082			-			-			2,082			-
Core income before taxes		18,172			15,752			16,986			33,924			31,860
Provision for income taxes for core income		6,851			6,041			6,359			12,892			12,160
Core net income	$	11,321		$	9,711		$	10,627		$	21,032		$	19,700
GAAP diluted earnings per common share	$	1.05		$	0.33		$	0.51		$	1.38		$	0.80
Net (gain) loss from fair value adjustments, net of tax		0.02			0.02			(0.01	)		0.04			-
Net gain on sale of securities, net of tax		(0.05	)		-			-			(0.05	)		-
Gain from life insurance proceeds		-			(0.01	)		-			(0.01	)		-
Net gain on sale of buildings, net of tax		(0.67	)		-			(0.13	)		(0.67	)		(0.13	)
Prepayment penalty on borrowings		0.04			-			-			0.04			-
Core diluted earnings per common share*	$	0.39		$	0.33		$	0.36		$	0.72		$	0.67
Core net income, as calculated above	$	11,321		$	9,711		$	10,627		$	21,032		$	19,700
Average assets		5,897,858			5,774,750			5,309,463			5,836,304			5,221,699
Average equity		486,261			479,424			465,618			482,843			462,877
Core return on average assets**		0.77	%		0.67	%		0.80	%		0.72	%		0.75	%
Core return on average equity**		9.31	%		8.10	%		9.13	%		8.71	%		8.51	%
*  Core diluted earnings per common share may not foot due to rounding.
**  Ratios are calculated on an annualized basis.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)
			June 30,			December 31,
(Dollars in thousands)			2016			2015
Total Equity			$	508,883		$	473,067
Less:
	Goodwill			(16,127	)		(16,127	)
	Intangible deferred tax liabilities			407			406
		Tangible Stockholders' Common Equity	$	493,163		$	457,346
Total Assets			$	5,986,727		$	5,704,634
Less:
	Goodwill			(16,127	)		(16,127	)
	Intangible deferred tax liabilities			407			406
		Tangible Assets	$	5,971,007		$	5,688,913
Tangible Stockholders' Common Equity to Tangible Assets				8.26	%		8.04	%

Susan K. Cullen
Senior Executive Vice President, Treasurer and Chief Financial Officer
Flushing Financial Corporation
(718) 961-5400