2009 Second Quarter Highlights and Other Significant Events ----------------------------------------------------------- * Core EPS up 35% From Linked Quarter At $0.27 Per Diluted Common Share. * Net Interest Income for the 2nd Quarter Grew to $28.9 Million; a Record Level. * Net Interest Margin Increased to 2.98%. * Loans, Net Grew $55.8 Million, or 1.8%, for the Quarter. * Deposits Grew $69.9 Million, or 2.7%, for the quarter. * Net Charge-Offs for the 2nd Quarter Were 0.19% of Average Loans. * $5.0 Million Provision Recorded for Loan Losses in Quarter. * Non-Performing Loans Remain Below 2.0% of Gross Loans. * $2.0 Million Charge Recorded for FDIC Deposit Insurance Special Assessment. * $1.1 Million Other-Than-Temporary Impairment Charge Recorded On Private Label CMO. * $0.7 Million Gain On Fair Value Under SFAS No. 159. * Regulatory Capital Ratios At June 30, 2009 Were 8.11% for Core Capital and 12.48% for Risk-Weighted Capital. * Book Value Per Common Share Increased to $11.10.
LAKE SUCCESS, N.Y., July 27, 2009 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the "Company") (Nasdaq:FFIC), the parent holding company for Flushing Savings Bank, FSB (the "Bank"), today announced its financial results for the three and six months ended June 30, 2009.
John R. Buran, President and Chief Executive Officer, stated: "We are pleased to report strong core earnings for the second quarter of 2009. Core diluted earnings per common share for the second quarter of 2009 increased $0.07, or 35%, to $0.27 per diluted common share from $0.20 per diluted common share for the first quarter of 2009. Our strong operating performance for the second quarter of 2009 was driven by net interest income that grew to a record level of $28.9 million for the quarter, as the net interest margin increased 26 basis points to 2.98% from 2.72% for the quarter ended March 31, 2009.
"The second quarter of 2009 reflected the same challenges we have faced since early 2008 as the economy remained in a recession. However, we did see a slowdown in the pace of late stage credit deterioration as non-performing loans increased only $1.4 million for the quarter. We recorded a $5.0 million provision for loan losses for the second quarter, which reduced diluted earnings per common share, on an after-tax basis, by $0.13. During the second quarter we also recorded a charge of $2.0 million for a special assessment levied by the FDIC, which reduced diluted earnings per common share, on an after-tax basis, by $0.05, and a $1.1 million other-than-temporary impairment charge on a privately-issued collateralized mortgage obligation held in our investment portfolio, which reduced diluted earnings per common share, on an after-tax basis, by $0.03. These charges were partially offset by net interest income growth of $2.9 million, or 11%, as compared to the first quarter of 2009.
"The growth in net interest income was driven by continued growth in our loan portfolio and deposit base, as both loans and deposits grew to record levels at June 30, 2009. We were also able to further reduce our funding costs, which declined 23 basis points to 3.20% for the second quarter of 2009 from 3.43% for the first quarter of 2009 and declined 65 basis points from 3.85% for the fourth quarter of 2008. A favorable competitive environment as well as our expanded capabilities and product offerings established in the last three years helped to grow transaction accounts by 31% for the first half of 2009, thereby helping to reduce our funding costs.
"While we remain cautious about the economy, we recognize that we have the capital, liquidity, and the credit discipline to pick up market share in this huge New York Metropolitan market, as certain competitors temporarily focus on other matters.
"The Bank continues to be well-capitalized under regulatory requirements, with tangible and risk-weighted capital ratios of 8.11% and 12.48%, respectively, at June 30, 2009."
Net income for the quarter ended June 30, 2009 was $5.2 million, a decrease of $1.3 million, or 20.6%, from the $6.5 million earned in the second quarter of 2008. Diluted earnings per common share for the second quarter were $0.20, a decrease of $0.12, or 37.5%, from the $0.32 earned in the comparable quarter a year ago.
Net income for the six months ended June 30, 2009 was $11.5 million, a decrease of $2.2 million, or 16.0%, from the $13.7 million earned in the comparable 2008 period. Diluted earnings per common share for the six months ended June 30, 2009 were $0.46, a decrease of $0.21, or 31.3%, from the $0.67 earned in the comparable 2008 period.
Core earnings, which exclude the effects of the Statement of Financial Accounting Standards ("SFAS") No. 159 and certain non-recurring items, was $6.5 million, or $0.27 per diluted common share, an increase of $1.5 million, or $0.07 per diluted common share, from the first quarter of 2009, and a decrease of $0.2 million, or $0.06 per diluted share, from the $6.7 million, or $0.33 per diluted share, for the second quarter of 2008. Core earnings during the six months ended June 30, 2009 was $11.5 million, or $0.47 per diluted share, a decrease of $1.9 million, or $0.19 per diluted share from the $13.4 million, or $0.66 per diluted share, for the six months ended June 30, 2008. For a reconciliation of core earnings and core earnings per common share to accounting principles generally accepted in the United States ("GAAP") net income and GAAP earnings per common share, please refer to the tables in the section titled Reconciliation of GAAP and Core Earnings.
Earnings Summary -- Three Months Ended June 30, 2009
For the three months ended June 30, 2009, net interest income was $28.9 million, an increase of $6.8 million, or 30.9%, from $22.1 million for the three months ended June 30, 2008. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $567.0 million, to $3,881.7 million for the quarter ended June 30, 2009, combined with an increase in the net interest spread of 31 basis points to 2.80% for the quarter ended June 30, 2009 from 2.49% for the comparable period in 2008. The yield on interest-earning assets decreased 44 basis points to 6.00% for the three months ended June 30, 2009 from 6.44% in the three months ended June 30, 2008. However, this was more than offset by a decline in the cost of funds of 75 basis points to 3.20% for the three months ended June 30, 2009 from 3.95% for the comparable prior year period. The net interest margin improved 31 basis points to 2.98% for the three months ended June 30, 2009 from 2.67% for the three months ended June 30, 2008. Excluding prepayment penalty income, the net interest margin would have been 2.94% and 2.57% for the three month periods ended June 30, 2009 and 2008, respectively.
The decline in the yield of interest-earning assets was primarily due to a 28 basis point reduction in the yield of the loan portfolio combined with a $345.2 million increase in the average balances of the lower yielding securities portfolio, which has a lower yield than the average yield of total interest-earning assets. The 28 basis point reduction in the yield of the loan portfolio to 6.40% for the quarter ended June 30, 2009 from 6.68% for the quarter ended June 30, 2008 was primarily due to a decline in prepayment penalty income, adjustable rate loans adjusting down as rates have declined, and an increase in non-accrual loans for which we do not accrue interest income. The yield on the mortgage loan portfolio declined 22 basis points to 6.47% for the three months ended June 30, 2009 from 6.69% for the three months ended June 30, 2008. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 15 basis points to 6.42% for the three months ended June 30, 2009 from 6.57% for the three months ended June 30, 2008. The decline in the yield of interest-earning assets was partially offset by an increase of $226.5 million in the average balance of the loan portfolio to $3,051.7 million for the three months ended June 30, 2009.
The decrease in the cost of interest-bearing liabilities is primarily attributable to the Federal Open Market Committee ("FOMC") lowering the overnight interest rate throughout 2008 and maintaining the targeted Fed Funds rate in a range of 0.00% to 0.25% during the first half of 2009. This has allowed the Bank to reduce the rates it pays on its deposit products. The cost of certificates of deposit, money market accounts, savings accounts and NOW accounts decreased 85 basis points, 137 basis points, 67 basis points and 87 basis points, respectively, for the quarter ended June 30, 2009 compared to the same period in 2008. This resulted in a decrease in the cost of due to depositors of 98 basis points to 2.66% for the quarter ended June 30, 2009 from 3.64% for the quarter ended June 30, 2008. The cost of borrowed funds also decreased three basis points to 4.62% for the quarter ended June 30, 2009 from 4.65% for the quarter ended June 30, 2008. The combined average balances of lower-costing savings, money market and NOW accounts increased a total of $318.4 million for the quarter ended June 30, 2009 compared to the same period in 2008, while the average balance of higher-costing certificates of deposits increased $211.3 million for the quarter ended June 30, 2009 compared to the comparable period in 2008. The average balance of borrowed funds declined $42.0 million to $1,069.1 million for the quarter ended June 30, 2009 from $1,111.1 million for the quarter ended June 30, 2008.
The net interest margin for the three months ended June 30, 2009 increased 26 basis points to 2.98% from 2.72% for the quarter ended March 31, 2009. The yield on interest-earning assets increased four basis points during the quarter, while the cost of interest-bearing liabilities decreased 23 basis points. Excluding prepayment penalty income, the net interest margin would have been 2.94% for the quarter ended June 30, 2009, an increase of 27 basis points from 2.67% for the quarter ended March 31, 2009.
A provision for loan losses of $5.0 million was recorded for the quarter ended June 30, 2009 compared to $0.3 million recorded in the quarter ended June 30, 2008. The provision for loan losses recorded in 2009 was primarily due to an increase in both non-performing loans and the level of charge-offs recorded in the second quarter of 2009. This increase in non-performing loans primarily consists of mortgage loans that are located in the New York City metropolitan market. Prior to 2009, the Bank had recorded minimal losses on mortgage loans, primarily due to 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%. However, given the increase in non-performing loans, the current economic uncertainties, and the charge-offs recorded in the second quarter of 2009, management, as a result of the regular quarterly analysis of the allowance for loans losses, deemed it necessary to record an additional provision for possible loan losses in the second quarter of 2009.
Non-interest income for the three months ended June 30, 2009 was $2.4 million, a decrease of $0.4 million, or 13.9%, from the three months ended June 30, 2008. A gain of $0.7 million attributed to changes in the fair value of financial assets and financial liabilities carried at fair value under SFAS No. 159 was recorded for the three months ended June 30, 2009 compared to a loss of $0.3 million for the three months ended June 30, 2008. This was more than offset by a $1.1 million other-than-temporary impairment charge on a collateralized mortgage obligation, and decreases of $0.2 million in dividends received on Federal Home Loan Bank of New York ("FHLB-NY") stock and $0.2 million in loan fee income.
Non-interest expense was $17.7 million for the three months ended June 30, 2009, an increase of $3.4 million, or 23.7%, from $14.3 million for the three months ended June 30, 2008. Employee salary and benefits increased $0.6 million, which is primarily attributed to the growth of the Bank, including one new branch and the expansion of the collections department, and increased costs for postretirement benefits. Federal Deposit Insurance Corporation ("FDIC") insurance increased $2.9 million compared to the comparable prior year period, as the FDIC raised the deposit insurance premiums during 2009, and a $2.0 million special assessment was levied during the three months ended June 30, 2009 by the FDIC to partially replenish the deposit insurance fund. Other operating expense decreased $0.5 million primarily due to the granting of restricted stock unit awards to directors during the first quarter of 2009 as compared to these grants occurring in the second quarter of 2008. The 2005 Omnibus Plan was amended in January 2009 to change the annual grant date of awards to directors from June to January of each year. The efficiency ratio was 66.3% and 57.6% for the three months ended, June 30, 2009 and 2008, respectively.
Net income for the three months ended June 30, 2009 was $5.2 million, a decrease of $1.3 million or 20.6%, as compared to $6.5 million for the three months ended June 30, 2008. Diluted earnings per common share were $0.20 for the three months ended June 30, 2009, a decrease of $0.12, or 37.5%, from $0.32 for the three months ended June 30, 2008.
Return on average equity was 6.7% for the three months ended June 30, 2009 compared to 11.1% for the three months ended June 30, 2008. Return on average assets was 0.5% for the three months ended June 30, 2009 compared to 0.7% for the three months ended June 30, 2008.
Earnings Summary - Six Months Ended June 30, 2009
For the six months ended June 30, 2009, net interest income was $55.0 million, an increase of $12.2 million, or 28.4%, from $42.8 million for the six months ended June 30, 2008. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $597.7 million to $3,859.6 million for the six months ended June 30, 2009, combined with an increase in the net interest spread of 21 basis points to 2.66% for the six months ended June 30, 2009 from 2.45% for the comparable period in 2008. The yield on interest-earning assets decreased 57 basis points to 5.98% for the six months ended June 30, 2009 from 6.55% for the six months ended June 30, 2008. However, this was more than offset by a decline in the cost of funds of 78 basis points to 3.32% for the six months ended June 30, 2009 from 4.10% for the comparable prior year period. The net interest margin improved 23 basis points to 2.85% for the six months ended June 30, 2009 from 2.62% for the six months ended June 30, 2008. Excluding prepayment penalty income, the net interest margin would have been 2.81% and 2.50% for the six month periods ended June 30, 2009 and 2008, respectively.
The decline in the yield of interest-earning assets was primarily due to a 43 basis point reduction in the yield of the loan portfolio combined with a $357.6 million increase in the combined average balances of the lower yielding securities portfolio and interest-earning deposits, with each having a lower yield than the average yield of total interest-earning assets. The 43 basis point reduction in the yield of the loan portfolio to 6.37% for the six months ended June 30, 2009 from 6.80% for the six months ended June 30, 2008 was primarily due to a decline in prepayment penalty income, adjustable rate loans adjusting down as rates have continued to decline, and an increase in non-accrual loans for which we do not accrue interest income. The yield on the mortgage loan portfolio declined 36 basis points to 6.44% for the six months ended June 30, 2009 from 6.80% for the six months ended June 30, 2008. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 27 basis points to 6.38% for the six months ended June 30, 2009 from 6.65% for the six months ended June 30, 2008. The decline in the yield of interest-earning assets was partially offset by an increase of $240.0 million in the average balance of the loan portfolio to $3,019.0 million for the six months ended June 30, 2009.
The decrease in the cost of interest-bearing liabilities is primarily attributed to the FOMC lowering the overnight interest rate throughout 2008, and maintaining the targeted Fed Funds rate in a range of 0.00% to 0.25% during the first half of 2009. This has allowed the Bank to reduce the rates it pays on its deposit products. The cost of certificates of deposit, money market accounts, savings accounts and NOW accounts decreased 91 basis points, 158 basis points, 73 basis points and 63 basis points, respectively, for the six months ended June 30, 2009 compared to the same period in 2008. This resulted in a decrease in the cost of due to depositors of 103 basis points to 2.81% for the six months ended June 30, 2009 from 3.84% for the six months ended June 30, 2008. The cost of borrowed funds also decreased seven basis points to 4.62% for the six months ended June 30, 2009 from 4.69% for the six months ended June 30, 2008. The combined average balances of lower-costing savings, money market and NOW accounts increased a total of $290.8 million for the six months ended June 30, 2009 compared to the same period in 2008, while the average balance of higher-costing certificates of deposits increased $269.0 million for the six months ended June 30, 2009 compared to the comparable period in 2008. The average balance of borrowed funds declined $41.8 million to $1,066.0 million for the six months ended June 30, 2009 from $1,107.7 million for the quarter ended June 30, 2008.
A provision for loan losses of $9.5 million was recorded for the six months ended June 30, 2009 compared to $0.6 million recorded in the six months ended June 30, 2008. The provision for loan losses recorded in 2009 was primarily due to an increase in both non-performing loans and the level of charge-offs recorded in 2009. This increase in non-performing loans primarily consists of mortgage loans that are located in the New York City metropolitan market. Prior to 2009, the Bank had recorded minimal losses on mortgage loans, primarily due to 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%. However, given the increase in non-performing loans, the current economic uncertainties, and the charge-offs recorded in the second quarter of 2009, management, as a result of the regular quarterly analysis of the allowance for loans losses, deemed it necessary to record an additional provision for possible loan losses in the six months ended 2009.
Non-interest income increased $0.3 million, or 4.9%, for the six months ended June 30, 2009 to $7.0 million, as compared to $6.7 million for the six months ended June 30, 2008. A gain of $3.1 million attributed to changes in the fair value of financial assets and financial liabilities carried at fair value under SFAS No. 159 was recorded for the six months ended June 30, 2009 compared to a loss of $1.9 million for the six months ended June 30, 2008. This was partially offset by a $1.1 million other-than-temporary impairment charge on a collateralized mortgage obligation and decreases of $0.8 million in dividends received on FHLB-NY stock and $0.5 million in loan fee income. The six months ended June 30, 2008 also included income of $2.4 million representing a partial recovery of a loss sustained in 2002 on a WorldCom, Inc. senior note. This amount was received as a result of a class action litigation settlement.
Non-interest expense was $33.7 million for the six months ended June 30, 2009, an increase of $6.2 million, or 22.4%, from $27.5 million for the six months ended June 30, 2008. Employee salary and benefits increased $1.6 million, which is primarily attributed to the growth of the Bank, including one new branch and the expansion of the collections department, and increased costs for postretirement benefits. Occupancy and equipment, professional services, and data processing increased $0.2 million, $0.4 million and $0.2 million, respectively, primarily due to the growth of the Bank. FDIC insurance increased $3.6 million compared to the comparable prior year period, as the FDIC raised the deposit insurance premiums during 2009, and a $2.0 million special assessment was levied during the three months ended June 30, 2009 by the FDIC to partially replenish the deposit insurance fund. The efficiency ratio was 66.6% and 56.9% for the six month periods ended June 30, 2009 and 2008, respectively.
Net income for the six months ended June 30, 2009 was $11.5 million, a decrease of $2.2 million or 16.0%, as compared to $13.7 million for the six months ended June 30, 2008. Diluted earnings per common share were $0.46 for the six months ended June 30, 2009, a decrease of $0.21, or 31.3%, from $0.67 in the six months ended June 30, 2008.
Return on average equity was 7.5% for the six months ended June 30, 2009 compared to 11.7% for the six months ended June 30, 2008. Return on average assets was 0.6% for the six months ended June 30, 2009 compared to 0.8% for the six months ended June 30, 2008.
Balance Sheet Summary
At June 30, 2009, total assets were $4,063.6 million, an increase of $114.1 million, or 2.9%, from $3,949.5 million at December 31, 2008. Total loans, net increased $123.9 million, or 4.2%, during the six months ended June 30, 2009 to $3,084.5 million from $2,960.7 million at December 31, 2008. Loan originations and purchases were $244.6 million for the six months ended June 30, 2009, a decrease of $142.5 million from $387.1 million for the six months ended June 30, 2008, as loan demand has declined due to the current economic environment. At June 30, 2009, loan applications in process totaled $218.5 million, compared to $320.6 million at June 30, 2008 and $185.4 million at December 31, 2008. 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) 2009 2008 2009 2008
---------------------------------------------------------------------
Multi-family residential $ 55,584 $ 28,487 $ 92,531 $ 75,969
Commercial real estate 11,983 49,978 48,645 92,911
One-to-four family -
mixed-use property 7,665 37,284 13,773 71,902
One-to-four family -
residential 15,215 25,824 22,229 93,845
Construction 4,735 8,606 10,016 18,108
Small Business
Administration 169 3,635 1,281 6,830
Taxi Medallion 15,256 -- 38,162 3,156
Commercial business and
other loans 10,481 11,175 17,949 24,368
--------- --------- --------- ---------
Total $ 121,088 $ 164,989 $ 244,586 $ 387,089
========= ========= ========= =========
Loan purchases included in the table above totaled $35.4 million and $65.3 million for the six months ended June 30, 2009 and 2008, respectively, and $14.5 million and $12.4 million for the three months ended June 30, 2009 and 2008, respectively.
As the Bank continues to increase its loan portfolio, management continues to adhere to the Bank's conservative underwriting standards. Non-accrual loans and charge-offs from impaired loans have increased, primarily due to the current economic environment. The Bank takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative. The Bank has been developing short-term payment plans that enable certain borrowers to bring their loans current. The Bank reviews its delinquencies on a loan by loan basis, diligently exploring ways to help borrowers meet their obligations and return them back to current status as soon as possible. The Bank has increased staffing to handle delinquent loans by hiring people experienced in loan workouts. The Bank's non-performing assets were $61.5 million at June 30, 2009, an increase of $1.4 million from $60.2 million at March 31, 2009 and an increase of $20.8 million from $40.7 million at December 31, 2008. Total non-performing assets as a percentage of total assets were 1.51% at June 30, 2009, compared to 1.48% at March 31, 2009 and 1.03% as of December 31, 2008. The ratio of allowance for loan losses to total non-performing loans was 24% at June 30, 2009, compared to 26% at March 31, 2009 and 28% at December 31, 2008. The following table shows non-performing assets at the periods indicated:
June 30, March 31, December 31,
(In thousands) 2009 2009 2008
---------------------------------------------------------------------
Loans 90 days or more past
due and still accruing:
Commercial real estate $ -- $ -- $ 425
One-to-four family -
residential 1,935 1,518 889
------------ ------------ ------------
Total 1,935 1,518 1,314
------------ ------------ ------------
Non-accrual loans:
Multi-family residential 20,490 19,113 12,010
Commercial real estate 9,180 11,533 7,409
One-to-four family -
mixed-use property 19,346 16,738 10,639
One-to-four family -
residential 3,042 1,354 1,122
Construction 3,898 3,757 4,457
Small business administration 271 246 354
Commercial business and other 2,701 5,173 2,667
------------ ------------ ------------
Total 58,928 57,914 38,658
------------ ------------ ------------
Total non-performing loans 60,863 59,432 39,972
------------ ------------ ------------
Other non-performing assets:
Real estate acquired through
foreclosure 509 125 125
Investment securities 172 607 607
------------ ------------ ------------
Total 681 732 732
------------ ------------ ------------
Total non-performing
assets $ 61,544 $ 60,164 $ 40,704
============ ============ ============
During the six months ended June 30, 2009, the Bank had $6.1 million in net charge-offs of impaired loans. The following table shows net loan charge-offs for the periods indicated by type of loan:
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
(In thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Multi-family residential $ 1,524 $ 138 $ 1,532 $ 138
Commercial real estate 16 -- 16 --
One-to-four family -
mixed-use property 706 -- 706 --
One-to-four family -
residential 55 -- 55 --
Construction 407 -- 407 --
Small Business
Administration 264 74 497 160
Commercial business and
other loans 2,881 1 2,888 1
--------- --------- --------- ---------
Total $ 5,853 $ 213 $ 6,101 $ 299
========= ========= ========= =========
The net charge-offs shown in the above table include loans that were fully charged-off and loans that were written down to their current value. Loans that were written down to their current value were due to the Bank receiving updated appraisals or revising the estimated fair value for the impaired loans. These values were compared to the related loan balances, and, if necessary, charge-offs were recorded to reduce the carrying amount of each loan to its estimated current value.
During the six months ended June 30, 2009, mortgage-backed securities increased $8.9 million to $683.7 million, while other securities decreased $31.7 million to $40.8 million. During the six months ended June 30, 2009, there were purchases of $85.6 million of mortgage-backed securities. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities.
Total liabilities were $3,751.5 million at June 30, 2009, an increase of $103.5 million, or 2.8%, from December 31, 2008. During the six months ended June 30, 2009, due to depositors increased $213.9 million to $2,651.5 million, as a result of increases of $201.3 million core deposits and $12.7 million in certificates of deposit. Borrowed funds decreased $99.1 million as loan growth was more than funded by deposit growth. In addition, mortgagors' escrow deposits decreased $1.8 million during the six months ended June 30, 2009.
Total stockholders' equity increased $10.6 million, or 3.5%, to $312.0 million at June 30, 2009 from $301.5 million at December 31, 2008. The increase is primarily due to net income of $11.5 million and an increase in other comprehensive income of $3.4 million for the six months ended June 30, 2009. This was partially offset by the declaration and payment of dividends on the Company's common stock and preferred stock of $5.4 million and $1.4 million, respectively. The exercise of stock options increased stockholders' equity by $0.6 million, including the income tax benefit realized by the Company upon the exercise of options. Book value per common share was $11.10 at June 30, 2009, compared to $10.70 per common share at December 31, 2008 and $11.10 per common share at June 30, 2008.
The Company did not repurchase any shares during the quarter ended June 30, 2009 under its current stock repurchase program. At June 30, 2009, 362,050 shares remain to be repurchased under the current stock repurchase program. As a condition of the Company's participation in the U.S. Treasury's Capital Purchase Program, common shares may not be purchased for the next three years without approval of the U.S. Treasury unless the preferred shares are redeemed or transferred to a third party. As of the date of the press release, the Company has not requested approval from the U.S. Treasury to repurchase common shares.
Reconciliation of GAAP and Core Earnings
Although core earnings are not a measure of performance calculated in accordance with GAAP, the Company believes that its core earnings are an important indication of performance through ongoing operations. The Company believes that core earnings are useful to management and investors in evaluating its ongoing operating performance, and in comparing its performance with other companies in the banking industry, particularly those that have not adopted SFAS No. 159. Core earnings should not be considered in isolation or as a substitute for GAAP earnings. During the periods presented, the Company calculated core earnings by adding back or subtracting the fair value gain or loss recorded under SFAS No.159 and the income or expense of certain non-recurring items listed below.
Three Months Ended Six Months Ended
----------------------------- -------------------
June 30, June 30, March 31, June 30, June 30,
2009 2008 2009 2009 2008
----------------------------- -------------------
(In thousands, except per share data)
GAAP net income $ 5,162 $ 6,499 $ 6,309 $ 11,471 $ 13,650
Net gain under SFAS
No. 159, net of tax (390) 189 (1,304) (1,694) 1,085
Other-than-temporary
impairment charge,
net of tax 633 -- -- 633 --
Net gain on sale of
securities, net of
tax (13) -- -- (13) --
FDIC special
assessment, net of
tax 1,114 -- -- 1,114 --
Partial recovery of
WorldCom, Inc.
loss, net of tax -- -- -- -- (1,352)
----------------------------- -------------------
Core net income $ 6,506 $ 6,688 $ 5,005 $ 11,511 $ 13,383
============================= ===================
GAAP diluted
earnings per common
share $ 0.20 $ 0.32 $ 0.26 $ 0.46 $ 0.67
Net gain under SFAS
No. 159, net of tax (0.02) 0.01 (0.06) (0.08) 0.06
Other-than-temporary
impairment charge,
net of tax 0.03 -- -- 0.03 --
Net gain on sale of
securities, net of
tax -- -- -- -- --
FDIC special
assessment, net of
tax 0.05 -- -- 0.05 --
Partial recovery of
WorldCom, Inc.
loss, net of tax -- -- -- -- (0.07)
----------------------------- -------------------
Core diluted
earnings per
common share* $ 0.27 $ 0.33 $ 0.20 $ 0.47 $ 0.66
============================= ===================
* Core diluted earnings per common share may not foot due to rounding.
About Flushing Financial Corporation
Flushing Financial Corporation is the parent holding company for Flushing Savings Bank, FSB, a federally chartered stock savings bank insured by the FDIC. The Bank serves consumers and businesses by offering a full complement of deposit, loan, and cash management services through its fifteen banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. The Bank also operates an online banking division, iGObanking.com(r), which enables the Bank to expand outside of its current geographic footprint. In 2007, the Bank established Flushing Commercial Bank, a wholly-owned subsidiary, to provide banking services to public entities including counties, towns, villages, school districts, libraries, fire districts and the various courts throughout the metropolitan area.
Additional information on Flushing Financial Corporation may be obtained by visiting the Company's website at http://www.flushingsavings.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, 2008 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.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands Except Per Share Data)
(Unaudited)
June 30, December 31,
2009 2008
------------ ------------
ASSETS
------
Cash and due from banks $ 45,054 $ 30,404
Securities available for sale:
Mortgage-backed securities 683,701 674,764
Other securities 40,797 72,497
Loans:
Multi-family residential 1,067,067 999,185
Commercial real estate 779,194 752,120
One-to-four family -
mixed-use property 745,205 751,952
One-to-four family -
residential 241,295 238,711
Co-operative apartments 6,445 6,566
Construction 102,810 103,626
Small Business Administration 18,712 19,671
Taxi medallion 45,713 12,979
Commercial business and other 75,421 69,759
Net unamortized premiums and unearned
loan fees 17,098 17,121
Allowance for loan losses (14,427) (11,028)
------------ ------------
Net loans 3,084,533 2,960,662
Interest and dividends receivable 19,084 18,473
Bank premises and equipment, net 22,851 22,806
Federal Home Loan Bank of New York stock 44,979 47,665
Bank owned life insurance 58,702 57,499
Goodwill 16,127 16,127
Core deposit intangible 2,108 2,342
Other assets 45,643 46,232
------------ ------------
Total assets $ 4,063,579 $ 3,949,471
============ ============
LIABILITIES
-----------
Due to depositors:
Non-interest bearing $ 87,025 $ 69,624
Interest-bearing:
Certificate of deposit accounts 1,449,110 1,436,450
Savings accounts 435,802 359,595
Money market accounts 327,324 306,178
NOW accounts 352,273 265,762
------------ ------------
Total interest-bearing deposits 2,564,509 2,367,985
Mortgagors' escrow deposits 29,439 31,225
Borrowed funds 1,039,856 1,138,949
Other liabilities 30,701 40,196
------------ ------------
Total liabilities 3,751,530 3,647,979
------------ ------------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock ($0.01 par value;
5,000,000 shares authorized; 70,000
shares issued at June 30, 2009 and
December 31, 2008; liquidation preference
value of $70,000) 1 1
Common stock ($0.01 par value; 40,000,000
shares authorized; 21,801,049 shares and
21,625,709 shares issued at June 30, 2009
and December 31, 2008, respectively;
21,796,604 shares and 21,625,709 shares
outstanding at June 30, 2009 and
December 31, 2008, respectively) 218 216
Additional paid-in capital 153,009 150,662
Treasury stock (4,445 and none at June 30,
2009 and December 31, 2008, respectively) (48) --
Unearned compensation (935) (1,300)
Retained earnings 176,674 172,216
Accumulated other comprehensive loss, net
of taxes (16,870) (20,303)
------------ ------------
Total stockholders' equity 312,049 301,492
------------ ------------
Total liabilities and stockholders'
equity $ 4,063,579 $ 3,949,471
============ ============
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Data)
(Unaudited)
For the three For the six months
months ended ended
June 30 June 30,
------------------- ------------------
2009 2008 2009 2008
---------------------------------------------------------------------
Interest and dividend income
Interest and fees on loans $ 48,851 $ 47,166 $ 96,227 $ 94,477
Interest and dividends on
securities:
Interest 8,972 5,081 18,309 10,036
Dividends 366 936 778 1,800
Other interest income 14 179 57 476
-------- -------- -------- --------
Total interest and dividend
income 58,203 53,362 115,371 106,789
-------- -------- -------- --------
Interest expense
----------------
Deposits 16,929 18,356 35,756 37,988
Other interest expense 12,353 12,913 24,638 25,993
-------- -------- -------- --------
Total interest expense 29,282 31,269 60,394 63,981
-------- -------- -------- --------
Net interest income 28,921 22,093 54,977 42,808
Provision for loan losses 5,000 300 9,500 600
-------- -------- -------- --------
Net interest income after
provision for loan losses 23,921 21,793 45,477 42,208
-------- -------- -------- --------
Non-interest income
-------------------
Loan fee income 513 698 930 1,396
Banking services fee income 421 396 867 838
Net gain on sale of loans held
for sale -- -- -- 31
Net gain on sale of loans -- 47 -- 69
Net gain from sale of
securities 23 -- 23 --
Net gain (loss) from fair
value adjustments 703 (339) 3,052 (1,941)
Other-than-temporary
impairment charge (1,140) -- (1,140) --
Federal Home Loan Bank of
New York stock dividends 610 854 956 1,735
Bank owned life insurance 604 549 1,203 1,103
Other income 627 536 1,150 3,482
-------- -------- -------- --------
Total non-interest income 2,361 2,741 7,041 6,713
-------- -------- -------- --------
Non-interest expense
--------------------
Salaries and employee benefits 7,396 6,827 14,867 13,281
Occupancy and equipment 1,624 1,585 3,398 3,221
Professional services 1,547 1,386 3,202 2,769
FDIC deposit insurance 3,220 311 4,197 566
Data processing 1,083 928 2,172 1,973
Depreciation and amortization 682 597 1,304 1,191
Other operating expenses 2,170 2,690 4,574 4,540
-------- -------- -------- --------
Total non-interest expense 17,722 14,324 33,714 27,541
-------- -------- -------- --------
Income before income taxes 8,560 10,210 18,804 21,380
-------- -------- -------- --------
Provision for income taxes
--------------------------
Federal 1,203 2,931 4,298 6,095
State and local 2,195 780 3,035 1,635
-------- -------- -------- --------
Total taxes 3,398 3,711 7,333 7,730
-------- -------- -------- --------
Net income $ 5,162 $ 6,499 $ 11,471 $ 13,650
======== ======== ======== ========
Basic earnings per common
share $ 0.20 $ 0.32 $ 0.46 $ 0.68
Diluted earnings per common
share $ 0.20 $ 0.32 $ 0.46 $ 0.67
Dividends per common share $ 0.13 $ 0.13 $ 0.26 $ 0.26
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands Except Share Data)
(Unaudited)
At or for the three At or for the six months
months ended June 30, ended June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Per Share Data
--------------
Basic earnings per
share $ 0.20 $ 0.32 $ 0.46 $ 0.68
Diluted earnings
per share $ 0.20 $ 0.32 $ 0.46 $ 0.67
Average number of
shares outstanding
for:
Basic earnings per
common share
computation (1) 20,718,175 20,141,874 20,654,351 20,065,126
Diluted earnings
per common share
computation (1) 20,718,375 20,377,457 20,657,511 20,261,782
Book value per
common share (2) $ 11.10 $ 11.10 $ 11.10 $ 11.10
Average Balances
----------------
Total loans, net $ 3,051,743 $ 2,825,270 $ 3,019,033 $ 2,779,031
Total interest-
earning assets 3,881,724 3,314,705 3,859,630 3,261,979
Total assets 4,062,815 3,505,137 4,042,492 3,451,608
Total due to
depositors 2,544,960 2,015,238 2,538,563 1,978,718
Total interest-
bearing
liabilities 3,654,800 3,167,284 3,641,800 3,122,074
Stockholders'
equity 309,739 235,089 304,670 234,085
Performance
Ratios (3)
-----------
Return on average
assets 0.51% 0.74% 0.57 % 0.79%
Return on average
equity 6.67 11.06 7.53 11.66
Yield on average
interest-earning
assets 6.00 6.44 5.98 6.55
Cost of average
interest-bearing
liabilities 3.20 3.95 3.32 4.10
Interest rate
spread during
period 2.80 2.49 2.66 2.45
Net interest margin 2.98 2.67 2.85 2.62
Non-interest
expense to average
assets 1.74 1.63 1.67 1.60
Efficiency ratio 66.28 57.59 66.60 56.85
Average interest-
earning assets to
average interest-
bearing
liabilities 1.06X 1.05X 1.06X 1.04X
(1) Reflects the adoption of FSP EITF 03-6-1,"Determining
Whether Instruments Granted in Share-Based Payment Transactions
are Participating Securities," which has been applied
retrospectively.
(2) Calculated by dividing common stockholders' equity of $242.0
million and $239.6 million at June 30, 2009 and 2008,
respectively, by 21,796,604 and 21,585,979 shares outstanding at
June 30, 2009 and 2008, respectively. Common stockholders'
equity is total stockholders' equity less the liquidation
preference value of preferred shares outstanding.
(3) Ratios for the three and six month periods ended June 30, 2009
and 2008 are presented on an annualized basis.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
At or for At or for
the six the year
months ended ended
June 30, December 31,
2009 2008
------------ ------------
Selected Financial Ratios and Other Data
----------------------------------------
Regulatory capital ratios (for Flushing
Savings Bank only):
Tangible capital
(minimum requirement = 1.5%) 8.11% 7.92%
Leverage and core capital
(minimum requirement = 3%) 8.11 7.92
Total risk-based capital
(minimum requirement = 8%) 12.48 13.02
Capital ratios:
Average equity to average assets 7.54% 6.54%
Equity to total assets 7.68 7.63
Asset quality:
Non-accrual loans $ 58,928 $ 38,658
Non-performing loans 60,863 39,972
Non-performing assets 61,544 40,704
Net charge-offs 6,101 1,205
Asset quality ratios:
Non-performing loans to gross loans 1.97% 1.35%
Non-performing assets to total assets 1.51 1.03
Allowance for loan losses to gross loans 0.47 0.37
Allowance for loan losses to non-
performing assets 23.44 27.09
Allowance for loan losses to non-
performing loans 23.70 27.59
Full-service customer facilities 15 14
FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in Thousands)
(Unaudited)
For the three months ended June 30,
-------------------------------------------------------
2009 2008
--------------------------- --------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
--------------------------- ----------------------------
Assets
Interest-
earning
assets:
Mortgage
loans,
net (1) $2,920,786 $ 47,250 6.47 % $2,711,194 $45,342 6.69 %
Other
loans,
net (1) 130,957 1,601 4.89 114,076 1,824 6.40
--------------------------- --------------------------
Total
loans,
net 3,051,743 48,851 6.40 2,825,270 47,166 6.68
--------------------------- --------------------------
Mortgage-
backed
securities 734,149 8,671 4.72 370,665 4,772 5.15
Other
securities 61,493 667 4.34 79,770 1,245 6.24
--------------------------- --------------------------
Total
securities 795,642 9,338 4.69 450,435 6,017 5.34
--------------------------- --------------------------
Interest-
earning
deposits
and
federal
funds
sold 34,339 14 0.16 39,000 179 1.84
--------------------------- --------------------------
Total
interest-
earning
assets 3,881,724 58,203 6.00 3,314,705 53,362 6.44
--------------------------- --------------------------
Other
assets 181,091 190,432
---------- ----------
Total
assets $4,062,815 $3,505,137
========== ==========
Liabilities
and Equity
Interest-
bearing
liabilities:
Deposits:
Savings
accounts $ 416,584 1,432 1.37 $ 374,567 1,912 2.04
NOW
accounts 371,975 1,430 1.54 112,657 680 2.41
Money
market
accounts 313,366 1,275 1.63 296,297 2,225 3.00
Certificate
of deposit
accounts 1,443,035 12,776 3.54 1,231,717 13,521 4.39
--------------------------- --------------------------
Total
due to
depositors 2,544,960 16,913 2.66 2,015,238 18,338 3.64
Mortgagors'
escrow
accounts 40,739 16 0.16 40,972 18 0.18
--------------------------- --------------------------
Total
deposits 2,585,699 16,929 2.62 2,056,210 18,356 3.57
Borrowed
funds 1,069,101 12,353 4.62 1,111,074 12,913 4.65
--------------------------- --------------------------
Total
interest-
bearing
liabil-
ities 3,654,800 29,282 3.20 3,167,284 31,269 3.95
--------------------------- --------------------------
Non
interest-
bearing
deposits 71,434 81,278
Other
liabilities 26,842 21,486
----------- -----------
Total
liabilities 3,753,076 3,270,048
Equity 309,739 235,089
----------- -----------
Total
liabilities
and equity $4,062,815 $3,505,137
=========== ===========
Net interest
income /
net
interest
rate
spread $ 28,921 2.80 % $22,093 2.49 %
=============== ==============
Net
interest-
earning
assets /
net
interest
margin $ 226,924 2.98 % $ 147,421 2.67 %
========== ====== ========== ======
Ratio of
interest-
earning
assets to
interest-
bearing
liabilities 1.06 X 1.05 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 $0.2 million and $0.8
million for the three-month periods ended June 30, 2009 and 2008,
respectively.
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST MARGIN
(Dollars in Thousands)
(Unaudited)
For the six months ended June 30,
---------------------------------------------------------
2009 2008
----------------------------- --------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------------------------- --------------------------
Assets
Interest-
earning
assets:
Mortgage
loans,
net (1) $2,896,094 $ 93,252 6.44 % $2,655,935 $90,254 6.80 %
Other
loans,
net (1) 122,939 2,975 4.84 123,096 4,223 6.86
----------------------------- --------------------------
Total
loans,
net 3,019,033 96,227 6.37 2,779,031 94,477 6.80
----------------------------- --------------------------
Mortgage-
backed
securities 718,831 17,584 4.89 365,078 9,400 5.15
Other
securities 67,363 1,503 4.46 78,483 2,436 6.21
----------------------------- --------------------------
Total
securities 786,194 19,087 4.86 443,561 11,836 5.34
----------------------------- --------------------------
Interest-
earning
deposits
and
federal
funds sold 54,403 57 0.21 39,387 476 2.42
----------------------------- --------------------------
Total
interest-
earning
assets 3,859,630 115,371 5.98 3,261,979 106,789 6.55
----------------------------- --------------------------
Other assets 182,862 189,629
------------ ----------
Total
assets $4,042,492 $3,451,608
========== ==========
Liabilities
and Equity
Interest-
bearing
liabilities:
Deposits:
Savings
accounts $ 404,855 3,010 1.49 $ 367,561 4,086 2.22
NOW
accounts 344,030 2,937 1.71 93,901 1,100 2.34
Money
market
accounts 310,055 2,799 1.81 306,649 5,193 3.39
Certificate
of deposit
accounts 1,479,623 26,976 3.65 1,210,607 27,575 4.56
----------------------------- --------------------------
Total due
to
depositors 2,538,563 35,722 2.81 1,978,718 37,954 3.84
Mortgagors'
escrow
accounts 37,263 34 0.18 35,613 34 0.19
----------------------------- --------------------------
Total
deposits 2,575,826 35,756 2.78 2,014,331 37,988 3.77
Borrowed
funds 1,065,974 24,638 4.62 1,107,743 25,993 4.69
----------------------------- --------------------------
Total
interest-
bearing
liabil-
ities 3,641,800 60,394 3.32 3,122,074 63,981 4.10
----------------------------- --------------------------
Non
interest-
bearing
deposits 69,259 75,004
Other
liabilities 26,763 20,445
------------- -----------
Total
liabil-
ities 3,737,822 3,217,523
Equity 304,670 234,085
------------- -----------
Total
liabilities
and
equity $4,042,492 $3,451,608
========== ==========
Net interest
income /
net interest
rate spread $54,977 2.66 % $42,808 2.45 %
============== ==============
Net interest-
earning
assets /
net interest
margin $ 217,830 2.85 % $ 139,905 2.62 %
========= ====== ========== ======
Ratio of
interest-
earning
assets to
interest-
bearing
liabilities 1.06 X 1.04 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 $0.5 million and $2.1
million for the six-month periods ended June 30, 2009 and 2008,
respectively.