Fourth Consecutive Quarter of Record Net Interest Income

Rhea-AI Summary

Flushing Financial Corporation reported a 1Q21 GAAP EPS of $0.60 and a core EPS of $0.54, marking a 184% increase year-over-year. The company achieved a record net interest income of $60.9 million, up 49.2% year-over-year. Notably, the net interest margin rose to 3.18%, while average loans increased by 5.1% quarter-over-quarter. The provision for credit losses was $2.8 million, with non-performing assets remaining flat at $21.2 million. Credit quality remains stable with a loan-to-value ratio of 38%.

Positive

• Record net interest income increased by 49.2% YoY and 9.3% QoQ to $60.9 million.
• Core EPS rose by 184% YoY to $0.54, reflecting strong financial performance.
• Net interest margin improved by 10 bps QoQ to 3.18%, benefiting from lower funding costs.
• Loans grew by 5.1% QoQ to $6.7 billion, driven by $123.2 million in PPP loans.
• Credit quality indicators remained stable with NPAs flat QoQ and improving fundamentals.

Negative

• Non-performing assets increased by 24.9% YoY, indicating potential credit risks.
• Provision for credit losses included a $2.8 million charge-off for taxi medallion loans, which may raise concerns about loan performance.
• Efficiency ratio increased to 58.6%, suggesting growing operational challenges.

1Q21 GAAP EPS of $0.60, Core EPS of $0.54; Reported NIM Up 10 bps, Core NIM Rises 3 bps QoQ

UNIONDALE, N.Y., April 27, 2021 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (NASDAQ-GS: FFIC)

John R. Buran, President and CEO Commentary

“We are optimistic that as more people receive vaccines, local economic activity will improve. Our first quarter 2021 actions largely focused on helping our customers navigate an improving, but still challenging environment. Despite these challenges, we achieved our fourth consecutive quarter of record net interest income. We reduced loans in forbearance by 81% from their peak nearly a year ago, and while our forbearance programs will continue into 2022, borrowers’ fundamentals are improving. The recent steepening of the yield curve is a positive for us and we expect to capitalize on our robust loan pipeline. We continue to make investments in our technology platform and fintech partnerships, both of which are driving digital engagement.”

“First quarter of 2021 marked a continuation of the economic improvement in our local economies and the outlook is brighter than three months ago with continued vaccine rollouts and a steeper yield curve. We continue to assist customers during the pandemic by originating $123 million of PPP loans in the quarter and processing nearly $50 million in forgiveness over the life of the program.”  - John R. Buran, President and CEO

Record Net Interest Income; NIM Expansion. “Core NIM improved by 3 bps during the quarter as funding costs declined faster than asset yields. The steeper yield curve should mitigate pressure on asset yields while keeping funding costs low. However, we are preparing for an eventual rise in short term rates by extending the duration of our liabilities and utilizing forward swaps, the bulk of which begin in 2022. We focused our efforts on PPP this quarter and that impacted overall loan growth, which rose 2.4% (annualized) from fourth quarter 2020. We reported first quarter GAAP EPS of $0.60, which included improving fair value adjustments, partially offset by merger and other charges totaling $0.06 per share, net of tax. Adjusting for noncore items¹, first quarter core EPS was $0.54, up 184% year over year. The Empire integration is complete with 100% of the cost savings in our run rate. We are on track to achieve our 20% earnings accretion target for 2021.”

Strong Credit Quality. “We remain confident with our credit quality given the loan to value of 38% on our real estate dependent loans, improving delinquencies, lower criticized and classified assets, and our conservative underwriting standards.”

1Q21 Key Financial Metrics1
		1Q21				4Q20			3Q20			2Q20			1Q20
GAAP:
EPS		$	0.60			$	0.11		$	0.50		$	0.63		$	(0.05	)
ROAA (%)			0.93				0.18			0.81			1.01			(0.08	)
ROAE (%)			12.29				2.27			9.94			13.11			(0.96	)
NIM FTE (%)			3.18				3.08			3.00			2.87			2.44
Core:
EPS		$	0.54			$	0.58		$	0.56		$	0.36		$	0.19
ROAA (%)			0.83				0.92			0.91			0.57			0.31
ROAE (%)			10.96				11.67			11.22			7.39			3.82
Core NIM FTE (%)			3.06				3.03			2.98			2.89			2.56
Efficiency Ratio (%)			58.6				57.6			55.4			54.9			68.2
Credit Quality:
NPAs/Loans&REO (%)			0.31				0.31			0.42			0.34			0.29
LLRs/Loans (%)			0.67				0.67			0.65			0.61			0.47
LLRs/NPLs (%)			212.87				214.27			154.66			181.84			167.73
NCOs/Avg Loans (%)			0.17				0.04			0.06			0.07			0.08
Balance Sheet:
Avg Loans ($B)		$	6.7			$	6.4		$	5.9		$	5.9		$	5.8
Avg Dep ($B)		$	6.3			$	5.5		$	5.0		$	5.0		$	5.1
Book Value/Share		$	20.65			$	20.11		$	20.78		$	20.27		$	19.48
Tangible BV/Share		$	19.99			$	19.45		$	20.22		$	19.71		$	18.92
TCE/TA (%)			7.60				7.52			8.10			7.78			7.38
1 See “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Margin to Core and Base Net Interest Income and Net Interest Margin.”

1Q21 Highlights

• Record net interest income up 9.3% QoQ and 49.2% YoY to $60.9 million, while core net interest income was up 7.0% QoQ and 36.5% YoY to $58.5 million due to Empire transaction and lower funding costs

• Net interest margin rose 10 bps QoQ and 74 bps YoY to 3.18%, and core net interest margin up 3 bps QoQ and 50 bps YoY to 3.06% primarily due to lower funding costs

• Average loans up 5.1% QoQ and 15.6% YoY to $6.7 billion, including $123.2 million of PPP originations

• Average deposits rose 14.0% QoQ and 23.4% YoY to $6.3 billion, with core deposits 83% of total average deposits (including escrow deposits)

• Loan pipeline rose 15.9% YoY to $375.8 million

• Provision for credit losses of $2.8 million and net charge-offs of $2.9 million in 1Q21 largely the result of the $2.8 million charge-off for the remaining taxi medallion loans

• NPAs were flat QoQ at $21.2 million; criticized and classified assets fell 11.9% to $63.1 million

• Loans in forbearance were 4.4% of total loans and only 1.7% of loans excluding loans making interest only payments

Income Statement Highlights
																					Y/Y			Q/Q
($000s, except EPS)			1Q21				4Q20				3Q20			2Q20			1Q20				Change			Change
Net Interest Income			$	60,892			$	55,732			$	49,924		$	48,717		$	40,826			49.2	%		9.3	%
Provision for Credit Losses				2,820				3,862				2,470			9,619			7,178			(60.7	)		(27.0	)
Non-interest Income (Loss)				6,311				(1,181	)			1,351			13,737			(2,864	)		NM			NM
Non-interest Expense				38,159				46,811				29,985			28,755			32,380			17.8			(18.5	)
Income (Loss) Before Income Taxes				26,224				3,878				18,820			24,080			(1,596	)		NM			NM
Provision (Benefit) for Income Taxes				7,185				417				4,489			5,808			(206	)		NM			NM
Net Income (Loss)			$	19,039			$	3,461			$	14,331		$	18,272		$	(1,390	)		NM			NM
Diluted EPS			$	0.60			$	0.11			$	0.50		$	0.63		$	(0.05	)		NM			NM
Avg. Diluted Shares (000s)				31,604				30,603				28,874			28,867			28,853			9.5			3.3
Core Net Income1			$	16,973			$	17,784			$	16,168		$	10,297		$	5,500			208.6			(4.6	)
Core EPS1			$	0.54			$	0.58			$	0.56		$	0.36		$	0.19			184.2			(6.9	)

¹ See Reconciliation of GAAP Earnings and Core Earnings

Net interest income for 1Q21 was $60.9 million, an increase of 49.2% YoY and 9.3% QoQ (Empire contributed $6.1 million in 1Q21 and $4.2 million in 4Q20).

• Net interest margin of 3.18%, increased 74 bps YoY and 10 bps QoQ; net purchase accounting accretion was $0.9 million in 1Q21 and not meaningful in 4Q20
• Prepayment penalty income from loans and securities, net reversals and recoveries of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $3.3 million (17 bps) in 1Q21, $2.1 million (11 bps) in 4Q20, $1.7 million (11 bps) in 3Q20, $0.4 million (2 bps) in 2Q20, and $(0.9) million ((5) bps) in 1Q20
• Excluding these items, net interest margin was 3.01% in 1Q21, 2.97% in 4Q20, 2.89% in 3Q20, 2.85% in 2Q20, and 2.49% in 1Q20, or an increase of 52 bps YoY and 4 bps QoQ
  

The Company recorded a provision for credit losses of $2.8 million in 1Q21, compared to $3.9 million in 4Q20, $2.5 million in 3Q20, $9.6 million in 2Q20, and $7.2 million in 1Q20.

• 1Q21 provision for credit losses was driven by the charge-off of the total remaining taxi medallion portfolio of $2.8 million; excluding the taxi medallion portfolio, net charge-offs were only $0.1 million
• Net charge-offs were $2.9 million in 1Q21, $0.6 million in 4Q20, $0.8 million in 3Q20, $1.0 million in 2Q20, and $1.1 million in 1Q20

Non-interest income (loss) for 1Q21 was $6.3 million versus $(1.2) million in 4Q20, $1.4 million in 3Q20, $13.7 million in 2Q20, and $(2.9) million in 1Q20.

• Non-interest income (loss) included net gains (losses) from fair value adjustments of $1.0 million ($0.02 per share, net of tax) in 1Q21, $(4.1) million ($(0.11) per share, net of tax) in 4Q20, $(2.2) million ($(0.06) per share, net of tax) in 3Q20, $10.2 million ($0.27 per share, net of tax) in 2Q20, and $(6.0) million ($(0.15) per share, net of tax) in 1Q20
• The net gain on the disposition of assets was $0.6 million in 1Q21 ($0.01 per share, net of tax); losses on the sale of investment securities were $0.6 million ($0.02 per share, net of tax) in 4Q20 and less than $0.1 million (less than $0.01 per share, net of tax) in both 2Q20 and 1Q20;
• Absent all above items, non-interest income was $4.7 million in 1Q21, up 48.7% YoY and 32.3% QoQ and was primarily driven by strong customer swap activity
  

Non-interest expense was $38.2 million in 1Q21 compared to $46.8 million in 4Q20, $30.0 million in 3Q20, $28.8 million in 2Q20, and $32.4 million in 1Q20.

• 1Q21 non-interest expense includes $1.0 million of pre-tax merger charges ($0.02 per share, net of tax) and $0.1 million of core deposit intangible amortization and other purchase accounting adjustments (less than $0.01 per share net of tax)
• 4Q20 non-interest expense includes $5.3 million pre-tax merger charges ($0.14 per share, net of tax) and $7.8 million pre-tax debt prepayment penalties ($0.20 per share, net of tax)
• 3Q20, 2Q20, and 1Q20 non-interest expense includes $0.4 million of merger charges ($0.01 per share, net of tax), $0.2 million ($0.01 per share, net of tax), and $0.9 million ($0.02 per share, net of tax), respectively
• Excluding the above items, core operating expenses were $37.1 million in 1Q21, up 17.8% YoY and 10.5% QoQ; Empire contributed $1.9 million in 1Q21 and $1.7 million in 4Q20
• There were $3.3 million of seasonal compensation expenses in 1Q21 (compared to $3.0 million a year ago) that are not expected to repeat in 2Q21
• The ratio of core operating expense to average assets was 1.82% in 1Q21, 1.74% in 4Q20, 1.67% in 3Q20, 1.59% in 2Q20, and 1.77% in 1Q20
• The efficiency ratio was 58.6% in 1Q21, 57.6% in 4Q20, 55.4% in 3Q20, 54.9% in 2Q20, and 68.2% in 1Q20
  

The provision (benefit) for income taxes was $7.2 million in 1Q21 versus $0.4 million in 4Q20, $4.5 million in 3Q20, $5.8 million in 2Q20, and $(0.2) million in 1Q20.

• Pre-tax income (loss) was $26.2 million in 1Q21, compared to $3.9 million in 4Q20, $18.8 million in 3Q20, $24.1 million in 2Q20, and $(1.6) million in 1Q20
• The effective tax rate was 27.4% in 1Q21, 10.8% in 4Q20, 23.9% in 3Q20, 24.1% in 2Q20, and 12.9% in 1Q20
• New York State passed a law increasing the state tax rate to 7.25% from 6.5% on April 19, 2021; with this change, we now expect the effective tax rate to approximate 27% in 2021
  

Balance Sheet, Credit Quality, and Capital Highlights
																		Y/Y			Q/Q
($000s, except per share data)		1Q21				4Q20			3Q20			2Q20			1Q20			Change			Change
Loans And Deposits
Period End Loans, net		$	6,700			$	6,660		$	5,903		$	5,947		$	5,904		13.5	%		0.6	%
Average Deposits			6,285				5,515			4,999			5,043			5,094		23.4			14.0
Credit Quality
Nonperforming Loans		$	21,186			$	21,073		$	24,792		$	20,188		$	16,752		26.5	%		0.5	%
Nonperforming Assets			21,221				21,108			24,827			20,431			16,995		24.9			0.5
Criticized and Classified Assets			63,130				71,691			42,181			48,712			34,199		84.6			(11.9	)
Allowance for Credit Losses/Loans (%)			0.67				0.67			0.65			0.61			0.47		20	bps		-	bps
Capital
Book Value/Share		$	20.65			$	20.11		$	20.78		$	20.27		$	19.48		6.0	%		2.7	%
Tangible Book Value/Share			19.99				19.45			20.22			19.71			18.92		5.7			2.8
Tang. Common Equity/Tang. Assets (%)			7.60				7.52			8.10			7.78			7.38		22	bps		8	bps
Leverage Ratio (%)			8.44				8.38			9.03			8.64			8.59		(15	)		6

Net loans held for investment were $6.7 billion, an increase of 13.5% YoY and 0.6% QoQ.

• SBA Paycheck Protection Program (“PPP”) loans were $251.0 million at 1Q21, compared to $151.9 million at 4Q20, $111.6 million at 3Q20, and $93.2 million at 2Q20, as we supported our customers with the second round of PPP originations and forgiveness, with originations totaling $123.2 million in 1Q21
• Total loan closings were $322.9 million (including $123.2 million from PPP) in 1Q21 versus $316.0 million in 4Q20, $155.6 million in 3Q20, $233.8 million in 2Q20, and $298.7 million in 1Q20
• The loan pipeline was $375.8 million at March 31, 2021, compared to $324.4 million a year ago
  

Average Deposits totaled $6.3 billion, rising 23.4% YoY and 14.0% QoQ, partially due to customer growth, the Empire transaction, and unused PPP funds.

• Core deposits (non-CD deposits) were 82.5% of total average deposits (including escrow deposits) in 1Q21, compared to 75.1% a year ago
• With the steepening of the yield curve, we have extended the duration of our funding liabilities to prepare for rising short term rates

Credit Quality; Non-performing loans totaled $21.2 million compared to $21.1 million in 4Q20 and $16.8 million in 1Q20.

• Non-performing assets totaled $21.2 million, flat QoQ, but up 24.9% YoY
• Criticized and classified assets totaled $63.1 million in 1Q21, compared to $71.7 million in 4Q20, and $34.2 million in 1Q20; the QoQ decline was primarily due to improved borrowers’ fundamentals, while the YoY rise related to the impacts of the pandemic
• Loans classified as troubled debt restructured (TDR) totaled $15.2 million, versus $15.7 million in 4Q20, and $6.3 million a year ago
• Active COVID-19 forbearances totaled 116 loans with a principal balance of $295.5 million at March 31 2021, with 61% making interest payments; approximately 25% of these loans are scheduled to exit forbearance in 2Q21, 15% in 3Q21, and 43% in 4Q21
• Over 85% of gross loans are collateralized by real estate and these loans have a loan-to-value ratio of 38% as of March 31, 2021
• Allowance for credit losses were 0.67% of loans in 1Q21 compared to 0.67% in 4Q20 and 0.47% a year ago

Capital; Book value per common share increased to $20.65 in 1Q21, compared to $20.11 in 4Q20 and $19.48 in 1Q20; tangible book value per common share, a non-GAAP measure, improved to $19.99 in 1Q21, versus $19.45 in 4Q20, and $18.92 in 1Q20.

• The Company paid a dividend of $0.21 per share in 1Q21 and did not repurchase any shares in the quarter; up to 284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Tangible common equity to tangible assets was 7.60% in 1Q21 compared to 7.38% a year ago
• The Company and the Bank remain well capitalized under all applicable regulatory requirements
• The leverage ratio was 8.44% in 1Q21 versus 8.59% in 1Q20

Conference Call Information And Future Earnings Release Dates

Conference Call Information:

• John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call tomorrow, Wednesday, April 28, 2021 at 9:30 AM (ET) to discuss the Company’s first quarter 2021 results and strategy.
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic210428.html
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10151631
• The conference call will be simultaneously webcast and archived through April 28, 2022.

Future Earnings Release Dates:

The Company plans to release quarterly financial results on the following dates:

Second Quarter 2021 after the market close on July 27, 2021; conference call at 9:30 AM (ET) on July 28, 2021.

Third Quarter 2021 after the market close on October 26, 2021; conference call at 9:30 AM (ET) on October 27, 2021.

A detailed announcement will be issued prior to each quarter’s close confirming the date and time of the earnings release and conference call for that quarter.

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq: FFIC) 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, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, equipment finance, and cash management services through its banking offices located in Queens, Brooklyn, Manhattan, and on Long Island. As a leader in real estate lending, the Bank’s experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. Flushing Bank is an Equal Housing Lender. The Bank also operates an online banking division consisting of iGObanking.com®, which offers competitively priced deposit products to consumers nationwide, and BankPurely®, an eco-friendly, healthier lifestyle community brand.

Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at http://www.flushingbank.com. Flushing Financial Corporation’s earnings release and presentation slides will be available prior to the conference call at www.flushingbank.com under investor relations.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

Investor Contact: Susan K. Cullen, SEVP, Treasurer and CFO, 718-961-5400

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)

		At or for the three months ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands, except per share data)		2021				2020				2020				2020				2020
Performance Ratios (1)
Return on average assets			0.93	%			0.18	%			0.81	%			1.01	%			(0.08	)%
Return on average equity			12.29				2.27				9.94				13.11				(0.96	)
Yield on average interest-earning assets (2)			3.77				3.82				3.84				3.81				3.98
Cost of average interest-bearing liabilities			0.69				0.86				0.98				1.09				1.74
Cost of funds			0.61				0.77				0.89				0.99				1.61
Net interest rate spread during period (2)			3.08				2.96				2.86				2.72				2.24
Net interest margin (2)			3.18				3.08				3.00				2.87				2.44
Non-interest expense to average assets			1.87				2.43				1.69				1.60				1.82
Efficiency ratio (3)			58.58				57.56				55.37				54.92				68.21
Average interest-earning assets to average interest-bearing liabilities			1.18	X			1.17	X			1.16	X			1.15	X			1.13	X
Average Balances
Total loans, net		$	6,700,476			$	6,375,516			$	5,904,051			$	5,946,412			$	5,794,866
Total interest-earning assets			7,667,217				7,243,472				6,675,896				6,809,835				6,719,857
Total assets			8,147,714				7,705,407				7,083,028				7,206,059				7,106,998
Total due to depositors			5,361,619				4,708,760				4,353,560				4,395,228				4,578,793
Total interest-bearing liabilities			6,475,843				6,169,574				5,731,899				5,912,774				5,951,925
Stockholders' equity			619,647				609,463				576,512				557,414				576,597
Per Share Data
Book value per common share (4)		$	20.65			$	20.11			$	20.78			$	20.27			$	19.48
Tangible book value per common share (5)		$	19.99			$	19.45			$	20.22			$	19.71			$	18.92
Stockholders' Equity
Stockholders' equity		$	639,201			$	618,997			$	586,406			$	571,921			$	549,683
Tangible stockholders' equity			618,839				598,476				570,571				556,086				533,848
Consolidated Regulatory Capital Ratios
Tier 1 capital		$	679,343			$	662,987			$	630,380			$	617,620			$	610,898
Common equity Tier 1 capital			636,071				621,247				593,344				583,238				567,306
Total risk-based capital			806,922				794,034				740,499				726,291				712,761
Risk Weighted Assets			6,281,136				6,287,598				5,381,938				5,406,104				5,418,219
Tier 1 leverage capital (well capitalized = 5%)			8.44	%			8.38	%			9.03	%			8.64	%			8.59	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			10.13				9.88				11.02				10.79				10.47
Tier 1 risk-based capital (well capitalized = 8.0%)			10.82				10.54				11.71				11.42				11.28
Total risk-based capital (well capitalized = 10.0%)			12.85				12.63				13.76				13.43				13.16
Capital Ratios
Average equity to average assets			7.61	%			7.91	%			8.14	%			7.74	%			8.11	%
Equity to total assets			7.83				7.76				8.30				7.98				7.59
Tangible common equity to tangible assets (6)			7.60				7.52				8.10				7.78				7.38
Asset Quality
Non-accrual loans (7)		$	18,604			$	18,325			$	24,792			$	20,038			$	16,752
Non-performing loans			21,186				21,073				24,792				20,188				16,752
Non-performing assets			21,221				21,108				24,827				20,431				16,995
Net charge-offs			2,865				646				837				1,007				1,149
Asset Quality Ratios
Non-performing loans to gross loans			0.31	%			0.31	%			0.42	%			0.34	%			0.28	%
Non-performing assets to total assets			0.26				0.26				0.35				0.29				0.23
Allowance for loan losses to gross loans			0.67				0.67				0.65				0.61				0.47
Allowance for loan losses to non-performing assets			212.52				213.91				154.44				179.68				165.32
Allowance for loan losses to non-performing loans			212.87				214.27				154.66				181.85				167.73
Net charge-offs to average loans			0.17				0.04				0.06				0.07				0.08
Full-service customer facilities			25				25				20				20				20

(see footnotes on next page)

---

⁽¹⁾ Ratios are presented on an annualized basis, where appropriate.
⁽²⁾ Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.
⁽³⁾ Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding merger expense, OREO expense, prepayment penalty on borrowings, the net gain/loss from the sale of OREO and net amortization of purchase accounting adjustments) by the total of net interest income (excluding net gains and losses from fair value adjustments on qualifying hedges and net amortization of purchase accounting adjustments) and non-interest income (excluding life insurance proceeds, net gains and losses from the sale or disposition of securities, assets and fair value adjustments).
⁽⁴⁾ Calculated by dividing stockholders’ equity by shares outstanding.
⁽⁵⁾ Calculated by dividing tangible stockholders’ common equity, a non-GAAP measure, by shares outstanding. Tangible stockholders’ common equity is stockholders’ equity less intangible assets (goodwill, net of deferred taxes). See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
⁽⁶⁾ See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
⁽⁷⁾ Excludes performing non-accrual TDR loans.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	For the three months ended
	March 31,				December 31,				September 30,				June 30,				March 31,
(In thousands, except per share data)	2021				2020				2020				2020				2020
Interest and Dividend Income
Interest and fees on loans	$	69,021			$	66,120			$	60,367			$	60,557			$	61,109
Interest and dividends on securities:
Interest		3,072				2,813				3,525				4,182				5,256
Dividends		8				8				9				11				15
Other interest income		36				30				13				22				290
Total interest and dividend income		72,137				68,971				63,914				64,772				66,670
Interest Expense
Deposits		6,105				6,470				7,093				9,971				18,778
Other interest expense		5,140				6,769				6,897				6,084				7,066
Total interest expense		11,245				13,239				13,990				16,055				25,844
Net Interest Income		60,892				55,732				49,924				48,717				40,826
Provision for credit losses		2,820				3,862				2,470				9,619				7,178
Net Interest Income After Provision for Credit Losses		58,072				51,870				47,454				39,098				33,648
Non-interest Income
Banking services fee income		2,725				1,442				1,316				944				798
Net loss on sale of securities		—				(610	)			—				(54	)			(37	)
Net gain on sale of loans		31				6				—				—				42
Net gain on disposition of assets		621				—				—				—				—
Net gain (loss) from fair value adjustments		982				(4,129	)			(2,225	)			10,205				(5,993	)
Federal Home Loan Bank of New York stock dividends		689				734				874				881				964
Life insurance proceeds		—				—				—				659				—
Bank owned life insurance		997				1,016				923				932				943
Other income		266				360				463				170				419
Total non-interest income (loss)		6,311				(1,181	)			1,351				13,737				(2,864	)
Non-interest Expense
Salaries and employee benefits		22,664				22,089				17,335				16,184				18,620
Occupancy and equipment		3,367				3,446				3,021				2,827				2,840
Professional services		2,400				2,463				2,064				1,985				2,862
FDIC deposit insurance		1,213				562				727				737				650
Data processing		2,109				3,411				1,668				1,813				1,694
Depreciation and amortization		1,639				1,579				1,542				1,555				1,536
Other real estate owned/foreclosure (recoveries) expense		(10	)			95				240				45				(164	)
Net loss from sales of real estate owned		—				—				5				—				31
Prepayment penalty on borrowings		—				7,834				—				—				—
Other operating expenses		4,777				5,332				3,383				3,609				4,311
Total non-interest expense		38,159				46,811				29,985				28,755				32,380
Income (loss) Before Income Taxes		26,224				3,878				18,820				24,080				(1,596	)
Provision (benefit) for Income Taxes
Federal		5,071				533				3,359				4,307				989
State and local		2,114				(116	)			1,130				1,501				(1,195	)
Total taxes		7,185				417				4,489				5,808				(206	)
Net Income (loss)	$	19,039			$	3,461			$	14,331			$	18,272			$	(1,390	)
Basic earnings (loss) per common share	$	0.60			$	0.11			$	0.50			$	0.63			$	(0.05	)
Diluted earnings (loss) per common share	$	0.60			$	0.11			$	0.50			$	0.63			$	(0.05	)
Dividends per common share	$	0.21			$	0.21			$	0.21			$	0.21			$	0.21
Basic average shares		31,604				30,603				28,874				28,867				28,853
Diluted average shares		31,604				30,603				28,874				28,867				28,853

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2021				2020				2020				2020				2020
ASSETS
Cash and due from banks		$	174,420			$	157,388			$	75,560			$	84,754			$	157,184
Securities held-to-maturity:
Mortgage-backed securities			7,909				7,914				7,919				7,924				7,929
Other securities			49,912				49,918				50,252				50,078				50,225
Securities available for sale:
Mortgage-backed securities			518,781				404,460				386,235				442,507				489,556
Other securities			242,440				243,514				234,721				232,803				225,856
Loans			6,745,316				6,704,674				5,941,398				5,983,275				5,932,088
Allowance for loan losses			(45,099	)			(45,153	)			(38,343	)			(36,710	)			(28,098	)
Net loans			6,700,217				6,659,521				5,903,055				5,946,565				5,903,990
Interest and dividends receivable			44,941				44,041				36,068				30,219				25,526
Bank premises and equipment, net			27,498				28,179				25,766				27,018				27,899
Federal Home Loan Bank of New York stock			41,498				43,439				57,119				56,400				74,000
Bank owned life insurance			182,707				181,710				158,701				157,779				158,655
Goodwill			17,636				17,636				16,127				16,127				16,127
Other real estate owned, net			—				—				—				208				208
Core deposit intangibles			3,013				3,172				—				—				—
Right of use asset			53,802				50,743				42,326				38,303				39,729
Other assets			94,410				84,759				69,207				71,974				68,526
Total assets		$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659			$	7,245,410
LIABILITIES
Deposits		$	6,326,577			$	6,090,733			$	4,906,359			$	5,049,874			$	4,828,435
Mortgagors' escrow deposits			74,348				45,622				57,136				48,525				73,051
Borrowed funds			948,920				1,020,895				1,323,975				1,305,187				1,617,582
Operating lease liability			58,080				59,100				49,737				45,897				47,726
Other liabilities			112,058				141,047				139,443				141,255				128,933
Total liabilities			7,519,983				7,357,397				6,476,650				6,590,738				6,695,727
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued)			—				—				—				—				—
Common stock ($0.01 par value; 100,000,000 shares authorized)			341				341				315				315				315
Additional paid-in capital			260,019				261,533				227,877				226,901				225,893
Treasury stock			(65,479	)			(69,400	)			(69,409	)			(69,436	)			(69,540	)
Retained earnings			455,023				442,789				445,931				437,663				425,455
Accumulated other comprehensive loss, net of taxes			(10,703	)			(16,266	)			(18,308	)			(23,522	)			(32,440	)
Total stockholders' equity			639,201				618,997				586,406				571,921				549,683
Total liabilities and stockholders' equity		$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659			$	7,245,410
(In thousands)
Issued shares			34,088				34,088				31,531				31,531				31,531
Outstanding shares			30,954				30,776				28,218				28,217				28,214
Treasury shares			3,133				3,312				3,312				3,313				3,317

  

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited)

		For the three months ended
		March 31,			December 31,			September 30,			June 30,			March 31,
(In thousands)		2021			2020			2020			2020			2020
Interest-earning Assets:
Mortgage loans, net		$	5,155,975		$	5,010,097		$	4,721,742		$	4,762,068		$	4,697,531
Other loans, net			1,544,501			1,365,419			1,182,309			1,184,344			1,097,335
Total loans, net			6,700,476			6,375,516			5,904,051			5,946,412			5,794,866
Taxable securities:
Mortgage-backed securities			433,917			413,875			413,902			465,365			507,912
Other securities			300,828			266,663			243,754			243,867			243,726
Total taxable securities			734,745			680,538			657,656			709,232			751,638
Tax-exempt securities:
Other securities			50,828			50,768			51,652			60,280			63,535
Total tax-exempt securities			50,828			50,768			51,652			60,280			63,535
Interest-earning deposits and federal funds sold			181,168			136,650			62,537			93,911			109,818
Total interest-earning assets			7,667,217			7,243,472			6,675,896			6,809,835			6,719,857
Other assets			480,497			461,935			407,132			396,224			387,141
Total assets		$	8,147,714		$	7,705,407		$	7,083,028		$	7,206,059		$	7,106,998
Interest-bearing Liabilities:
Deposits:
Savings accounts		$	170,079		$	163,382		$	160,100		$	188,587		$	194,026
NOW accounts			2,183,356			1,924,840			1,625,109			1,440,147			1,419,739
Money market accounts			1,905,543			1,507,245			1,461,996			1,580,652			1,697,783
Certificate of deposit accounts			1,102,641			1,113,293			1,106,355			1,185,842			1,267,245
Total due to depositors			5,361,619			4,708,760			4,353,560			4,395,228			4,578,793
Mortgagors' escrow accounts			65,372			75,005			55,868			87,058			65,503
Total interest-bearing deposits			5,426,991			4,783,765			4,409,428			4,482,286			4,644,296
Borrowings			1,048,852			1,385,809			1,322,471			1,430,488			1,307,629
Total interest-bearing liabilities			6,475,843			6,169,574			5,731,899			5,912,774			5,951,925
Non interest-bearing demand deposits			858,080			731,170			589,674			560,637			449,761
Other liabilities			194,144			195,200			184,943			175,234			128,715
Total liabilities			7,528,067			7,095,944			6,506,516			6,648,645			6,530,401
Equity			619,647			609,463			576,512			557,414			576,597
Total liabilities and equity		$	8,147,714		$	7,705,407		$	7,083,028		$	7,206,059		$	7,106,998
Net interest-earning assets		$	1,191,374		$	1,073,898		$	943,997		$	897,061		$	767,932

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
NET INTEREST INCOME AND NET INTEREST MARGIN
(Unaudited)

		For the three months ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2021				2020				2020				2020				2020
Interest Income:
Mortgage loans, net		$	55,219			$	53,777			$	49,814			$	49,719			$	49,412
Other loans, net			13,802				12,343				10,553				10,838				11,697
Total loans, net			69,021				66,120				60,367				60,557				61,109
Taxable securities:
Mortgage-backed securities			1,698				1,435				1,928				2,327				3,040
Other securities			963				957				1,166				1,358				1,697
Total taxable securities			2,661				2,392				3,094				3,685				4,737
Tax-exempt securities:
Other securities			530				543				557				643				676
Total tax-exempt securities			530				543				557				643				676
Interest-earning deposits and federal funds sold			36				30				13				22				290
Total interest-earning assets			72,248				69,085				64,031				64,907				66,812
Interest Expense:
Deposits:
Savings accounts		$	75			$	75			$	65			$	74			$	281
NOW accounts			1,706				1,320				1,242				2,099				4,648
Money market accounts			2,100				2,010				2,108				3,208				7,042
Certificate of deposit accounts			2,222				3,065				3,700				4,564				6,767
Total due to depositors			6,103				6,470				7,115				9,945				18,738
Mortgagors' escrow accounts			2				—				(22	)			26				40
Total interest-bearing deposits			6,105				6,470				7,093				9,971				18,778
Borrowings			5,140				6,769				6,897				6,084				7,066
Total interest-bearing liabilities			11,245				13,239				13,990				16,055				25,844
Net interest income- tax equivalent		$	61,003			$	55,846			$	50,041			$	48,852			$	40,968
Included in net interest income above:
Prepayment penalties received on loans and securities and net of reversals and recovered interest from non-accrual loans		$	947			$	1,093			$	1,518			$	776			$	1,189
Net gains/(losses) from fair value adjustments on qualifying hedges included in loan interest income			1,427				1,023				230				(365	)			(2,073	)
Purchase accounting adjustments			922				11				—				—				—
Interest-earning Assets Yields:
Mortgage loans, net			4.28	%			4.29	%			4.22	%			4.18	%			4.21	%
Other loans, net			3.57				3.62				3.57				3.66				4.26
Total loans, net			4.12				4.15				4.09				4.07				4.22
Taxable securities:
Mortgage-backed securities			1.57				1.39				1.86				2.00				2.39
Other securities			1.28				1.44				1.91				2.23				2.79
Total taxable securities			1.45				1.41				1.88				2.08				2.52
Tax-exempt securities: (1)
Other securities			4.17				4.28				4.31				4.27				4.26
Total tax-exempt securities			4.17				4.28				4.31				4.27				4.26
Interest-earning deposits and federal funds sold			0.08				0.09				0.08				0.09				1.06
Total interest-earning assets			3.77	%			3.82	%			3.84	%			3.81	%			3.98	%
Interest-bearing Liabilities Yields:
Deposits:
Savings accounts			0.18	%			0.18	%			0.16	%			0.16	%			0.58	%
NOW accounts			0.31				0.27				0.31				0.58				1.31
Money market accounts			0.44				0.53				0.58				0.81				1.66
Certificate of deposit accounts			0.81				1.10				1.34				1.54				2.14
Total due to depositors			0.46				0.55				0.65				0.91				1.64
Mortgagors' escrow accounts			0.01				—				(0.16	)			0.12				0.24
Total interest-bearing deposits			0.45				0.54				0.64				0.89				1.62
Borrowings			1.96				1.95				2.09				1.70				2.16
Total interest-bearing liabilities			0.69	%			0.86	%			0.98	%			1.09	%			1.74	%
Net interest rate spread (tax equivalent)			3.08	%			2.96	%			2.86	%			2.72	%			2.24	%
Net interest margin (tax equivalent)			3.18	%			3.08	%			3.00	%			2.87	%			2.44	%
Ratio of interest-earning assets to interest-bearing liabilities			1.18	X			1.17	X			1.16	X			1.15	X			1.13	X

---

⁽¹⁾ Yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT and LOAN COMPOSITION
(Unaudited)

Deposit Composition

																	March 2021 vs.			March 2021 vs.
		March 31,			December 31,			September 30,			June 30,			March 31,			December 2020			March 2020
(Dollars in thousands)		2021			2020			2020			2020			2020			% Change			% Change
Deposits
Non-interest bearing		$	917,189		$	778,672		$	607,954		$	581,881		$	489,198		17.8	%		87.5	%
Interest bearing:
Certificate of deposit accounts			1,070,595			1,138,361			1,051,644			1,135,977			1,172,381		(6.0	)		(8.7	)
Savings accounts			170,272			168,183			160,294			184,895			192,192		1.2			(11.4	)
Money market accounts			1,990,656			1,682,345			1,381,552			1,474,880			1,597,109		18.3			24.6
NOW accounts			2,177,865			2,323,172			1,704,915			1,672,241			1,377,555		(6.3	)		58.1
Total interest-bearing deposits			5,409,388			5,312,061			4,298,405			4,467,993			4,339,237		1.8			24.7
Total deposits		$	6,326,577		$	6,090,733		$	4,906,359		$	5,049,874		$	4,828,435		3.9	%		31.0	%

Loan Composition

																						March 2021 vs.			March 2021 vs.
		March 31,				December 31,				September 30,				June 30,				March 31,				December 2020			March 2020
(Dollars in thousands)		2021				2020				2020				2020				2020				% Change			% Change
Loans held for investment:
Multi-family residential		$	2,525,967			$	2,533,952			$	2,252,757			$	2,285,555			$	2,272,343			(0.3	)%		11.2	%
Commercial real estate			1,721,702				1,754,754				1,636,659				1,646,085				1,664,934			(1.9	)		3.4
One-to-four family ― mixed-use property			595,431				602,981				585,159				591,347				592,109			(1.3	)		0.6
One-to-four family ― residential			239,391				245,211				191,011				184,741				189,774			(2.4	)		26.1
Co-operative apartments			7,965				8,051				8,132				8,423				8,493			(1.1	)		(6.2	)
Construction			61,528				83,322				63,567				69,433				66,727			(26.2	)		(7.8	)
Mortgage Loans			5,151,984				5,228,271				4,737,285				4,785,584				4,794,380			(1.5	)		7.5
Small Business Administration (1)			267,120				167,376				124,649				106,813				14,076			59.6			1,797.7
Taxi medallion			—				2,757				2,317				3,269				3,281			(100.0	)		(100.0	)
Commercial business and other			1,326,657				1,303,225				1,063,429				1,073,623				1,104,967			1.8			20.1
Non-mortgage loans			1,593,777				1,473,358				1,190,395				1,183,705				1,122,324			8.2			42.0
Net unamortized premiums and unearned loan fees (2)			(445	)			3,045				13,718				13,986				15,384			(114.6	)		(102.9	)
Allowance for loan losses			(45,099	)			(45,153	)			(38,343	)			(36,710	)			(28,098	)		(0.1	)		60.5
Net loans		$	6,700,217			$	6,659,521			$	5,903,055			$	5,946,565			$	5,903,990			0.6	%		13.5	%

---

⁽¹⁾ Includes $251.0 million, $151.9 million, $111.6 million and $93.2 million of PPP loans at March, 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.
⁽²⁾ Includes $10.5 million and $11.3 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at March 31, 2021 and December 31, 2020, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOAN CLOSINGS, RATES, and FORBEARANCE DETAIL
(Unaudited)

Loan Closings

		For the three months ended
		March 31,			December 31,			September 30,			June 30,			March 31,
(In thousands)		2021			2020			2020			2020			2020
Multi-family residential		$	58,553		$	52,024		$	33,733		$	59,654		$	67,318
Commercial real estate			17,156			57,634			26,644			8,003			99,571
One-to-four family – mixed-use property			8,712			9,692			3,867			8,117			13,455
One-to-four family – residential			3,131			8,422			2,296			2,674			8,413
Co-operative apartments			—			—			—			—			704
Construction			7,123			6,869			5,420			2,821			6,749
Mortgage Loans			94,675			134,641			71,960			81,269			196,210
Small Business Administration (1)			125,093			598			18,456			93,241			57
Commercial business and other			103,118			180,787			65,160			59,287			102,448
Non-mortgage Loans			228,211			181,385			83,616			152,528			102,505
Total		$	322,886		$	316,026		$	155,576		$	233,797		$	298,715

---

⁽¹⁾ Includes $123.2 million, $18.4 million and $93.2 million of PPP closings for the three months ended March 31, 2021, September 30, 2020 and June 30, 2020, respectively.

Weighted Average Rate on Loan Closings

		For the three months ended
		March 31,			December 31,			September 30,			June 30,			March 31,
Loan type		2021			2020			2020			2020			2020
Mortgage loans		3.47	%		3.47	%		3.56	%		3.79	%		3.93	%
Non-mortgage loans		2.26			3.37			2.81			1.99			4.23
Total loans		2.62	%		3.41	%		3.16	%		2.62	%		4.03	%
Excluding PPP loans		3.62	%		3.41	%		3.45	%		3.71	%		4.03	%

Forbearance Detail
•   Loans paying interest only comprise 61% of forbearance loans; excluding this forbearance loans were only 1.7% of loans

(Dollars in thousands)		Forbearances (1)						Backed by Mortgages (1)
		Balance			% of Sector			Balance			% of Forbearances			LTV
Higher Risk Segments
Restaurants and Catering Halls		$	15,578		17.0	%		$	15,578		100.0	%		31.6	%
Hotels			107,867		56.6				107,867		100.0			50.3
Travel and Leisure			37,670		21.0				37,670		100.0			36.9
Retail Services (2)			12,046		6.5				3,169		26.3			36.9
CRE - Single Tenant			275		0.2				275		100.0			51.9
CRE - Strip Mall			9,785		3.4				9,785		100.0			47.3
Transportation (2)			7,463		4.9				—		—			—
Contractors (2)			2,131		0.6				723		33.9			58.3
Schools and Child Care			10,260		14.4				10,260		100.0			55.5
Subtotal		$	203,075		10.5	%		$	185,327		91.3	%		44.6	%
Lower Risk Segments		$	92,452		1.9	%		$	90,404		97.8	%		33.8	%
Total		$	295,527		4.4	%		$	275,731		93.3	%		40.4	%

---

⁽¹⁾ Represents dollar amount granted at modification
⁽²⁾ Loans not backed by mortgages are collateralized by equipment

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ASSET QUALITY
(Unaudited)

Allowance for Loan Losses

		For the Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2021				2020				2020				2020				2020
Allowance for loan losses
Beginning balances		$	45,153			$	38,343			$	36,710			$	28,098			$	21,751
Adoption of Current Expected Credit Losses			—				—				—				—				379
Multi-family residential			33				(11	)			(14	)			(7	)			(6	)
Commercial real estate			64				—				—				—				—
One-to-four family – mixed-use property			19				—				(60	)			3				(78	)
One-to-four family – residential			(5	)			(2	)			(2	)			(3	)			(5	)
Small Business Administration			(10	)			(3	)			(47	)			165				(7	)
Taxi medallion			2,758				124				951				—				—
Commercial business and other			6				538				9				849				1,245
Total net loan charge-offs			2,865				646				837				1,007				1,149
Provision for loan losses			2,811				3,357				2,470				9,619				7,117
Allowance recorded at the time of Acquisition			—				4,099				—				—				—
Ending balance		$	45,099			$	45,153			$	38,343			$	36,710			$	28,098
Gross charge-offs		$	2,922			$	752			$	964			$	1,030			$	1,259
Gross recoveries			57				106				127				23				110
Allowance for loan losses to gross loans			0.67	%			0.67	%			0.65	%			0.61	%			0.47	%
Net loan charge-offs to average loans			0.17				0.04				0.06				0.07				0.08

Non-Performing Assets

		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2021				2020				2020				2020				2020
Loans 90 Days Or More Past Due and Still Accruing:
Multi-family residential		$	201			$	201			$	—			$	—			$	—
Commercial real estate			—				2,547				—				—				—
Construction			2,381				—				—				—				—
Commercial business and other			—				—				—				150				—
Total			2,582				2,748				—				150				—
Non-accrual Loans:
Multi-family residential			4,338				2,524				2,661				3,688				2,741
Commercial real estate			8				1,683				2,657				2,671				8
One-to-four family - mixed-use property (1)			2,355				1,366				1,366				2,511				607
One-to-four family - residential			7,335				5,854				6,454				6,412				5,158
Small Business Administration			1,151				1,151				1,151				1,321				1,518
Taxi medallion(1)			—				2,317				2,218				1,757				1,761
Commercial business and other(1)			3,417				3,430				8,285				1,678				4,959
Total			18,604				18,325				24,792				20,038				16,752
Total Non-performing Loans			21,186				21,073				24,792				20,188				16,752
Other Non-performing Assets:
Real estate acquired through foreclosure			—				—				—				208				208
Other asset acquired through foreclosure			35				35				35				35				35
Total			35				35				35				243				243
Total Non-performing Assets		$	21,221			$	21,108			$	24,827			$	20,431			$	16,995
Non-performing Assets to Total Assets			0.26	%			0.26	%			0.35	%			0.29	%			0.23	%
Allowance For Loan Losses to Non-performing Loans			212.9	%			214.3	%			154.7	%			181.8	%			167.7	%

---

⁽¹⁾ Not included in the above analysis are non-accrual performing TDR one-to-four family mixed use property loans totaling $0.3 million each in 1Q21, 4Q20 and 3Q20; non-accrual performing TDR taxi medallion loans totaling $0.4 million in 4Q20, $0.1 million in 3Q20, $1.5 million in 2Q20, and $1.5 million in 1Q20, and non-accrual performing TDR commercial business loans totaling $2.2 million each in 1Q21 and 4Q20, respectively; $1.0 million each in 3Q20, 2Q20, 1Q20, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to swaps designated to protect against rising rates and borrowing carried at fair value under the fair value option. As the swaps get closer to maturity, the volatility in fair value adjustments will dissipate. In a declining interest rate environment, the movement in the curve exaggerates our mark-to-market loss position. In a rising interest rate environment or a steepening of the yield curve, the loss position would experience an improvement.

Core Net Income, Core Diluted EPS, Core ROAE, Core ROAA, Pre-provision Pre-tax Net Revenue, Core Net Interest Income FTE, Core Net Interest Margin FTE, Base Net Interest Income FTE, Base Net Interest Margin FTE, Core Interest Income and Yield on Total Loans, Base Interest Income and Yield on Total Loans, Core Non-interest Income, Core Non-interest Expense and tangible book value per common share are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears below in tabular form. The Company believes that these measures are useful for both investors and management to understand the effects of certain interest and 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 common share is useful for both investors and management as these are measures commonly used by financial institutions, regulators and investors to measure the capital adequacy of financial institutions. The Company believes these measures facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These measures should not be viewed as a substitute for total shareholders' equity.

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Unaudited)

		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars In thousands, except per share data)		2021				2020				2020				2020				2020
GAAP income (loss) before income taxes		$	26,224			$	3,878			$	18,820			$	24,080			$	(1,596	)
Day 1, Provision for Credit Losses - Empire transaction (Provision for credit losses)			—				1,818				—				—				—
Net (gain) loss from fair value adjustments (Non-interest income (loss))			(982	)			4,129				2,225				(10,205	)			5,993
Net loss on sale of securities (Non-interest income (loss))			—				610				—				54				37
Life insurance proceeds (Non-interest income (loss))			—				—				—				(659	)			—
Net gain on disposition of assets (Non-interest income (loss))			(621	)			—				—				—				—
Net (gain) loss from fair value adjustments on qualifying hedges (Interest and fees on loans)			(1,427	)			(1,023	)			(230	)			365				2,073
Prepayment penalty on borrowings (Non-interest expense)			—				7,834				—				—				—
Net amortization of purchase accounting adjustments (Various)			(789	)			80				—				—				—
Merger expense (Various)			973				5,349				422				194				929
Core income before taxes			23,378				22,675				21,237				13,829				7,436
Provision for income taxes for core income			6,405				4,891				5,069				3,532				1,936
Core net income		$	16,973			$	17,784			$	16,168			$	10,297			$	5,500
GAAP diluted earnings (loss) per common share		$	0.60			$	0.11			$	0.50			$	0.63			$	(0.05	)
Day 1, Provision for Credit Losses - Empire transaction, net of tax			—				0.05				—				—				—
Net (gain) loss from fair value adjustments, net of tax			(0.02	)			0.11				0.06				(0.27	)			0.15
Net loss on sale of securities, net of tax			—				0.02				—				—				—
Life insurance proceeds			—				—				—				(0.02	)			—
Net gain on disposition of assets, net of tax			(0.01	)			—				—				—				—
Net (gain) loss from fair value adjustments on qualifying hedges, net of tax			(0.03	)			(0.03	)			(0.01	)			0.01				0.05
Prepayment penalty on borrowings, net of tax			—				0.20				—				—				—
Net amortization of purchase accounting adjustments, net of tax			(0.02	)			—				—				—				—
Merger expense, net of tax			0.02				0.14				0.01				0.01				0.02
Core diluted earnings per common share(1)		$	0.54			$	0.58			$	0.56			$	0.36			$	0.19
Core net income, as calculated above		$	16,973			$	17,784			$	16,168			$	10,297			$	5,500
Average assets			8,147,714				7,705,407				7,083,028				7,206,059				7,106,998
Average equity			619,647				609,463				576,512				557,414				576,597
Core return on average assets(2)			0.83	%			0.92	%			0.91	%			0.57	%			0.31	%
Core return on average equity(2)			10.96	%			11.67	%			11.22	%			7.39	%			3.82	%

---

⁽¹⁾ Core diluted earnings per common share may not foot due to rounding.
⁽²⁾ Ratios are calculated on an annualized basis.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP REVENUE and PRE-PROVISION
PRE-TAX NET REVENUE
(Unaudited)

		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars In thousands)		2021				2020				2020				2020				2020
GAAP Net interest income		$	60,892			$	55,732			$	49,924			$	48,717			$	40,826
Net (gain) loss from fair value adjustments on qualifying hedges			(1,427	)			(1,023	)			(230	)			365				2,073
Net amortization of purchase accounting adjustments			(922	)			(11	)			—				—				—
Core Net interest income		$	58,543			$	54,698			$	49,694			$	49,082			$	42,899
GAAP Non-interest income (loss)		$	6,311			$	(1,181	)		$	1,351			$	13,737			$	(2,864	)
Net (gain) loss from fair value adjustments			(982	)			4,129				2,225				(10,205	)			5,993
Net loss on sale of securities			—				610				—				54				37
Life insurance proceeds			—				—				—				(659	)			—
Net gain on sale of assets			(621	)			—				—				—				—
Core Non-interest income		$	4,708			$	3,558			$	3,576			$	2,927			$	3,166
GAAP Non-interest expense		$	38,159			$	46,811			$	29,985			$	28,755			$	32,380
Prepayment penalty on borrowings			—				(7,834	)			—				—				—
Net amortization of purchase accounting adjustments			(133	)			(91	)			—				—				—
Merger expense			(973	)			(5,349	)			(422	)			(194	)			(929	)
Core Non-interest expense		$	37,053			$	33,537			$	29,563			$	28,561			$	31,451
GAAP:
Net interest income		$	60,892			$	55,732			$	49,924			$	48,717			$	40,826
Non-interest income (loss)			6,311				(1,181	)			1,351				13,737				(2,864	)
Non-interest expense			(38,159	)			(46,811	)			(29,985	)			(28,755	)			(32,380	)
Pre-provision pre-tax net revenue		$	29,044			$	7,740			$	21,290			$	33,699			$	5,582
Core:
Net interest income		$	58,543			$	54,698			$	49,694			$	49,082			$	42,899
Non-interest income			4,708				3,558				3,576				2,927				3,166
Non-interest expense			(37,053	)			(33,537	)			(29,563	)			(28,561	)			(31,451	)
Pre-provision pre-tax net revenue		$	26,198			$	24,719			$	23,707			$	23,448			$	14,614
Efficiency Ratio			58.6	%			57.6	%			55.4	%			54.9	%			68.2	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
to CORE and BASE NET INTEREST INCOME and NET INTEREST MARGIN
(Unaudited)

		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars In thousands)		2021				2020				2020				2020				2020
GAAP net interest income		$	60,892			$	55,732			$	49,924			$	48,717			$	40,826
Net (gain) loss from fair value adjustments on qualifying hedges			(1,427	)			(1,023	)			(230	)			365				2,073
Net amortization of purchase accounting adjustments			(922	)			(11	)			—				—				—
Tax equivalent adjustment			111				114				117				135				142
Core net interest income FTE		$	58,654			$	54,812			$	49,811			$	49,217			$	43,041
Prepayment penalties received on loans, net of reversals and recoveries of interest from non-accrual loans			(947	)			(1,093	)			(1,518	)			(776	)			(1,189	)
Base net interest income FTE		$	57,707			$	53,719			$	48,293			$	48,441			$	41,852
Total average interest-earning assets (1)		$	7,676,833			$	7,245,147			$	6,675,896			$	6,809,835			$	6,719,857
Core net interest margin FTE			3.06	%			3.03	%			2.98	%			2.89	%			2.56	%
Base net interest margin FTE			3.01	%			2.97	%			2.89	%			2.85	%			2.49	%
GAAP interest income on total loans, net		$	69,021			$	66,120			$	60,367			$	60,557			$	61,109
Net (gain) loss from fair value adjustments on qualifying hedges			(1,427	)			(1,023	)			(230	)			365				2,073
Net amortization of purchase accounting adjustments			(728	)			(356	)			—				—				—
Core interest income on total loans, net		$	66,866			$	64,741			$	60,137			$	60,922			$	63,182
Prepayment penalties received on loans, net of reversals and recoveries of interest from non-accrual loans			(947	)			(1,093	)			(1,443	)			(776	)			(1,189	)
Base interest income on total loans, net		$	65,919			$	63,648			$	58,694			$	60,146			$	61,993
Average total loans, net (1)		$	6,711,446			$	6,379,429			$	5,904,051			$	5,946,412			$	5,794,866
Core yield on total loans			3.99	%			4.06	%			4.07	%			4.10	%			4.36	%
Base yield on total loans			3.93	%			3.99	%			3.98	%			4.05	%			4.28	%

---

⁽¹⁾ Excludes purchase accounting average balances for three months ended March 31, 2021, and December 31, 2020.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS’
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)

		March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2021				2020				2020				2020				2020
Total Equity		$	639,201			$	618,997			$	586,406			$	571,921			$	549,683
Less:
Goodwill			(17,636	)			(17,636	)			(16,127	)			(16,127	)			(16,127	)
Core deposit Intangibles			(3,013	)			(3,172	)			—				—				—
Intangible deferred tax liabilities			287				287				292				292				292
Tangible Stockholders' Common Equity		$	618,839			$	598,476			$	570,571			$	556,086			$	533,848
Total Assets		$	8,159,184			$	7,976,394			$	7,063,056			$	7,162,659			$	7,245,410
Less:
Goodwill			(17,636	)			(17,636	)			(16,127	)			(16,127	)			(16,127	)
Core deposit Intangibles			(3,013	)			(3,172	)			—				—				—
Intangible deferred tax liabilities			287				287				292				292				292
Tangible Assets		$	8,138,822			$	7,955,873			$	7,047,221			$	7,146,824			$	7,229,575
Tangible Stockholders' Common Equity to Tangible Assets			7.60	%			7.52	%			8.10	%			7.78	%			7.38	%

FAQ

What were Flushing Financial Corporation's 1Q21 earnings per share?

Flushing Financial Corporation reported a GAAP EPS of $0.60 and a core EPS of $0.54 for 1Q21.

How did the net interest margin change in Flushing Financial's 1Q21 report?

The net interest margin increased by 10 basis points QoQ to 3.18% in 1Q21.

What is the loan growth reported by Flushing Financial in 1Q21?

Flushing Financial reported a loan growth of 5.1% QoQ, reaching $6.7 billion.

What was the non-performing assets amount for Flushing Financial in 1Q21?

Non-performing assets remained flat at $21.2 million in 1Q21.

How much did Flushing Financial Corporation's net interest income increase in 1Q21?

Net interest income increased by 49.2% year-over-year to $60.9 million in 1Q21.