PART I — FINANCIAL INFORMATION This section presents the unaudited financial information for Flushing Financial Corporation, including statements, notes, and management's discussion and analysis [ITEM 1. Financial Statements - (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20-%20(Unaudited)) This section presents the unaudited consolidated financial statements of Flushing Financial Corporation and its subsidiaries for the quarter ended March 31, 2023, along with detailed notes [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Statements of Financial Condition (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $8,479,121 | $8,422,946 | | Total Liabilities | $7,805,662 | $7,745,789 | | Total Stockholders' Equity | $673,459 | $677,157 | - Total assets increased by **$56.2 million**, or **0.7%**, from December 31, 2022, to March 31, 2023[7](index=7&type=chunk)[154](index=154&type=chunk) - Total liabilities increased by **$59.9 million**, or **0.8%**, while total stockholders' equity decreased by **$3.7 million**, or **0.5%**[163](index=163&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This statement details the company's revenues, expenses, and net income over a specific reporting period Consolidated Statements of Income (in thousands) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $92,117 | $71,320 | | Total interest expense| $46,855 | $7,841 | | Net interest income | $45,262 | $63,479 | | Provision for credit losses | $7,508 | $1,358 | | Total non-interest income | $6,908 | $1,313 | | Total non-interest expense| $37,703 | $38,794 | | Net income | $5,158 | $18,219 | | Basic EPS | $0.17 | $0.58 | | Diluted EPS | $0.17 | $0.58 | - Net income decreased by **$13.1 million (71.7%)** to **$5.2 million** for Q1 2023 compared to **$18.2 million** in Q1 2022[10](index=10&type=chunk)[144](index=144&type=chunk) - This decrease was primarily due to a significant increase in interest expense (up **497.6%**) and a higher provision for credit losses (up **452.9%**)[147](index=147&type=chunk)[149](index=149&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income items, reflecting changes in equity from non-owner sources Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income | $5,158 | $18,219 | | Total other comprehensive loss, net of tax | $(1,296) | $(8,820) | | Comprehensive net income | $3,862 | $9,399 | - Comprehensive net income decreased by **$5.5 million (58.9%)** to **$3.9 million** in Q1 2023 from **$9.4 million** in Q1 2022[13](index=13&type=chunk) - This was driven by lower net income and a reduced, but still negative, total other comprehensive loss[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities during a period Consolidated Statements of Cash Flows (in thousands) | Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(10,418) | $40,577 | | Net cash used in investing activities | $(38,620) | $(95,668) | | Net cash provided by financing activities | $74,031 | $159,775 | | Net increase in cash and cash equivalents, and restricted cash | $24,993 | $104,684 | | Cash, cash equivalents, and restricted cash, end of period | $176,747 | $186,407 | - The company experienced a shift from net cash provided by operating activities in Q1 2022 to net cash used in operating activities in Q1 2023[16](index=16&type=chunk)[18](index=18&type=chunk) - Net cash provided by financing activities significantly decreased, contributing to a lower overall net increase in cash and cash equivalents[16](index=16&type=chunk)[18](index=18&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines the changes in each component of stockholders' equity over a reporting period Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Balance at period end | $673,459 | $677,157 | | Net income | $5,158 | N/A | | Dividends on common stock | $(6,659) | N/A | | Purchase of treasury shares | $(3,053) | N/A | | Other comprehensive loss | $(1,296) | N/A | - Total stockholders' equity decreased by **$3.7 million** from December 31, 2022, to March 31, 2023[21](index=21&type=chunk)[163](index=163&type=chunk) - This decrease was primarily due to dividends paid (**$6.7 million**), treasury share repurchases (**$3.1 million**), and other comprehensive loss (**$1.3 million**), partially offset by net income (**$5.2 million**)[21](index=21&type=chunk)[163](index=163&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide additional information and explanations essential for understanding the consolidated financial statements [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) This note describes the accounting principles and consolidation policies used in preparing the financial statements - Flushing Financial Corporation operates its wholly-owned subsidiary, Flushing Bank, and other direct/indirect subsidiaries[23](index=23&type=chunk)[24](index=24&type=chunk) - The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC regulations for interim financial statements, with certain information condensed or omitted[25](index=25&type=chunk)[26](index=26&type=chunk) [2. Use of Estimates](index=10&type=section&id=2.%20Use%20of%20Estimates) This note explains management's use of estimates and assumptions in preparing the financial statements - The preparation of financial statements requires management to make estimates and assumptions, particularly for the allowance for credit losses, goodwill impairment, deferred tax asset valuation allowance, and fair value of financial instruments[28](index=28&type=chunk) - Management concluded no goodwill impairment was indicated at March 31, 2023[28](index=28&type=chunk) [3. Earnings Per Share](index=11&type=section&id=3.%20Earnings%20Per%20Share) This note provides details on the calculation of basic and diluted earnings per share Earnings Per Share (in thousands, except per share data) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income, as reported | $5,158 | $18,219 | | Weighted average common shares outstanding | 30,265 | 31,524 | | Basic earnings per common share | $0.17 | $0.58 | | Diluted earnings per common share | $0.17 | $0.58 | | Dividend Payout ratio | 129.4 % | 37.9 % | - Basic and diluted EPS decreased significantly from **$0.58** in Q1 2022 to **$0.17** in Q1 2023[29](index=29&type=chunk) - The dividend payout ratio increased to **129.4%** in Q1 2023 from **37.9%** in Q1 2022, indicating dividends exceeded net income[29](index=29&type=chunk) [4. Securities](index=11&type=section&id=4.%20Securities) This note details the company's investment securities, including held-to-maturity and available-for-sale classifications Securities Fair Value (in thousands) | Security Type | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :--------------------------- | :------------------------ | :--------------------------- | | Securities held-to-maturity | $67,869 | $62,550 | | Securities available for sale| $811,928 | $735,357 | Unrealized Losses (in thousands) | Unrealized Losses | March 31, 2023 | December 31, 2022 | | :------------------------------- | :------------- | :---------------- | | Held-to-maturity securities | $6,741 | $12,261 | | Available for sale securities | $87,066 | $91,529 | - The Company does not intend to sell securities with unrealized losses and does not anticipate being required to sell them before recovery of amortized cost[36](index=36&type=chunk) - Management believes unrealized losses are not credit-related, as all securities are investment grade or above and performing according to terms[37](index=37&type=chunk) Allowance for Credit Losses for HTM Securities (in thousands) | Allowance for Credit Losses for HTM Securities | March 31, 2023 | March 31, 2022 | | :------------------------------------------------------------ | :------------- | :------------- | | Beginning balance | $1,100 | $862 | | (Benefit) provision | $(13) | $124 | | Allowance for credit losses | $1,087 | $986 | [5. Loans](index=17&type=section&id=5.%20Loans) This note provides a breakdown of the loan portfolio, including composition, credit quality, and related allowances Loan Composition (in thousands) | Loan Composition | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Multi-family residential | $2,601,174 | $2,601,384 | | Commercial real estate | $1,904,293 | $1,913,040 | | Commercial business and other | $1,518,756 | $1,521,548 | | Gross loans | $6,895,193 | $6,925,758 | - Gross loans decreased by **$30.6 million (0.4%)** from December 31, 2022, to March 31, 2023[42](index=42&type=chunk) - The provision for credit losses on loans was **$7.5 million** in Q1 2023, up from **$1.2 million** in Q1 2022, driven by a charge-off and increased reserves on two specific loans[47](index=47&type=chunk) ACL - Loans (in thousands) | ACL - Loans | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | ACL - loans | $38,729 | $40,442 | | ACL - loans as % of gross loans | 0.56% | 0.58% | | ACL - loans as % of non-performing loans | 182.9% | 124.9% | Non-accrual Loans (in thousands) | Non-accrual Loans | March 31, 2023 | December 31, 2022 | | :------------------------------- | :------------- | :---------------- | | Total non-accrual amortized cost end of period | $20,955 | $29,942 | | Total non-accrual with no related allowance | $13,400 | $13,040 | Allowance for Off-Balance Sheet Credit Losses (in thousands) | Allowance for Off-Balance Sheet Credit Losses | March 31, 2023 | March 31, 2022 | | :----------------------------------------------------------- | :------------- | :------------- | | Balance at beginning of period | $970 | $1,209 | | (Benefit) provision | $(85) | $380 | | Allowance for Off-Balance Sheet - Credit losses | $885 | $1,589 | [6. Loans held for sale](index=27&type=section&id=6.%20Loans%20held%20for%20sale) This note discusses loans designated for sale and any related transactions during the period - The Bank did not have any loans held for sale at March 31, 2023, or December 31, 2022[69](index=69&type=chunk) - During Q1 2023, the Company sold **8 delinquent and non-performing loans** for **$2.575 million**, resulting in a net gain of **$54 thousand**[70](index=70&type=chunk) [7. Leases](index=28&type=section&id=7.%20Leases) This note outlines the company's lease arrangements, including right-of-use assets and lease liabilities - The Company has **31 operating leases** for branches/office spaces, **10 for vehicles**, and **one for equipment**, with remaining terms from three months to 13 years[71](index=71&type=chunk) - The Company elected a short-term lease recognition exemption for leases under 12 months[72](index=72&type=chunk) Lease Metric (in thousands) | Lease Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Operating lease ROU asset | $42,268 | $43,289 | | Operating lease liability | $45,353 | $46,125 | | Weighted-average remaining lease term | 6.6 years | 6.6 years | | Weighted average discount rate | 3.1 % | 2.9 % | Lease Cost (in thousands) | Lease Cost | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Total lease cost | $2,659 | $2,382 | [8. Stock-Based Compensation](index=29&type=section&id=8.%20Stock-Based%20Compensation) This note describes the company's stock-based incentive plans and the associated compensation expense - The Company's long-term incentive program includes performance-based restricted stock units (PRSUs) and time-based restricted stock units (RSUs)[76](index=76&type=chunk) - Stock-based compensation costs, net of tax benefit, were **$3.1 million** in Q1 2023, down from **$3.9 million** in Q1 2022[78](index=78&type=chunk) Stock-Based Awards (Shares) | Stock-Based Awards | RSU Awards Granted Q1 2023 | PRSU Awards Granted Q1 2023 | | :-------------------------- | :------------------------- | :-------------------------- | | Granted | 235,850 | 79,050 | - As of March 31, 2023, there was **$6.7 million** of total unrecognized compensation cost related to RSU and PRSU awards, expected to be recognized over a weighted-average period of **2.8 years**[80](index=80&type=chunk) [9. Pension and Other Postretirement Benefit Plans](index=31&type=section&id=9.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) This note provides information on the company's defined benefit pension and other postretirement benefit plans Net Expense (in thousands) | Net Expense | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Net employee pension benefit | $(74) | $(118) | | Net outside director pension expense | $(23) | $7 | | Net other postretirement expense | $75 | $130 | - The Company expects to contribute **$0.2 million** to the Outside Director Pension Plan and **$0.3 million** to Other Postretirement Benefit Plans in 2023, with no expected contribution to the Employee Pension Plan[84](index=84&type=chunk) [10. Fair Value of Financial Instruments](index=31&type=section&id=10.%20Fair%20Value%20of%20Financial%20Instruments) This note details the fair value measurements of financial instruments, categorized by valuation input levels - The Company carries certain financial assets and liabilities at fair value, with **$13.2 million** in assets and **$48.1 million** in liabilities under the fair value option at March 31, 2023[85](index=85&type=chunk) Fair Value Option (in thousands) | Fair Value Option | March 31, 2023 | December 31, 2022 | | :------------------------------- | :------------- | :---------------- | | Mortgage-backed securities | $288 | $295 | | Other securities | $12,904 | $12,728 | | Borrowed funds | $48,117 | $50,507 | | Net gain (loss) from fair value adjustments | $2,619 | $(1,809) | - Fair value measurements are categorized into Level 1 (quoted active market prices), Level 2 (observable inputs for similar instruments), and Level 3 (unobservable inputs)[90](index=90&type=chunk)[91](index=91&type=chunk) - Level 3 includes trust preferred securities and junior subordinated debentures[92](index=92&type=chunk) Level 3 Fair Value (in thousands) | Level 3 Fair Value | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Trust preferred securities | $1,445 | $1,516 | | Junior subordinated debentures | $48,117 | $50,507 | [11. Derivative Financial Instruments](index=37&type=section&id=11.%20Derivative%20Financial%20Instruments) This note describes the company's use of derivative instruments for risk management and their impact on financial statements - The Company uses interest rate swaps to mitigate exposure to rising interest rates on fixed-rate loans and securities, facilitate risk management for loan customers, and mitigate exposure on short-term advances and brokered deposits[104](index=104&type=chunk)[105](index=105&type=chunk) Derivative Type (in thousands) | Derivative Type | Notional Amount (March 31, 2023) | Fair Value (Assets, March 31, 2023) | Notional Amount (December 31, 2022) | Fair Value (Assets, December 31, 2022) | | :----------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | :----------------------------------- | | Cash flow hedges | $921,500 | $28,653 | $871,500 | $31,716 | | Fair value hedges | $471,520 | $20,967 | $273,607 | $24,673 | | Non hedge | $219,498 | $15,452 | $221,196 | $18,197 | | Total | $1,612,518 | $65,072 | $1,366,303 | $74,586 | - For cash flow hedges, **$4.3 million** in reduced expense was reclassified from accumulated other comprehensive loss to interest expense in Q1 2023[109](index=109&type=chunk) - An estimated **$15.5 million** in reduced expense is expected to be reclassified in the next 12 months[109](index=109&type=chunk) Effect on Income Statement (in thousands) | Effect on Income Statement | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Total net income (loss) from derivative effects | $6,243 | $(3,955) | [12. Accumulated Other Comprehensive Income (Loss)](index=41&type=section&id=12.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note presents the components of accumulated other comprehensive income or loss Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | March 31, 2023 Ending Balance | December 31, 2022 Beginning Balance | | :----------------------- | :---------------------------- | :---------------------------------- | | Unrealized Gains (Losses) on Available for Sale Securities | $(59,119) | $(63,106) | | Cash flow Hedges | $20,240 | $25,380 | | Defined Benefit Pension Items | $(344) | $(275) | | Fair Value Option Elected on Liabilities | $1,439 | $1,513 | | Total | $(37,784) | $(36,488) | - Total accumulated other comprehensive loss increased from **$(36.5) million** at December 31, 2022, to **$(37.8) million** at March 31, 2023[113](index=113&type=chunk) - This was primarily due to a **$(5.1) million** loss from cash flow hedges, partially offset by a **$4.0 million** gain from available-for-sale securities[113](index=113&type=chunk) [13. Regulatory Capital](index=45&type=section&id=13.%20Regulatory%20Capital) This note provides information on the company's compliance with regulatory capital requirements - Both the Bank and the Holding Company remain categorized as 'well-capitalized' under prompt corrective action regulations[118](index=118&type=chunk) - They continue to exceed all regulatory capital requirements[121](index=121&type=chunk) Bank Capital Ratios | Bank Capital Ratios | March 31, 2023 | December 31, 2022 | | :------------------ | :------------- | :---------------- | | Tier I (leverage) capital | 10.55 % | 10.56 % | | Common Equity Tier I risk-based capital | 13.61 % | 13.79 % | | Tier I risk-based capital | 13.61 % | 13.79 % | | Total risk-based capital | 14.18 % | 14.37 % | | Capital Conservation Buffer | 6.18 % | 6.37 % | Holding Company Capital Ratios | Holding Company Capital Ratios | March 31, 2023 | December 31, 2022 | | :----------------------------- | :------------- | :---------------- | | Tier I (leverage) capital | 8.58 % | 8.61 % | | Common Equity Tier I risk-based capital | 10.37 % | 10.52 % | | Tier I risk-based capital | 11.07 % | 11.25 % | | Total risk-based capital | 14.50 % | 14.69 % | | Capital Conservation Buffer | 5.07 % | 5.25 % | [14. New Authoritative Accounting Pronouncements](index=46&type=section&id=14.%20New%20Authoritative%20Accounting%20Pronouncements) This note discusses recently adopted and issued accounting pronouncements and their potential impact - The Company adopted ASU No. 2022-02, 'Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures' on January 1, 2023, with no material impact on business operations or consolidated financial statements[124](index=124&type=chunk) - The FASB issued ASU 2022-06, 'Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,' extending the sunset date to December 31, 2024[125](index=125&type=chunk) - The Company is evaluating the impact of ASU 2022-06[127](index=127&type=chunk) - The Company is also evaluating the impacts of ASU No. 2021-01 and ASU No. 2020-04, both related to 'Reference Rate Reform,' which provide optional expedients and exceptions for contract modifications and hedge accounting affected by the transition away from LIBOR[128](index=128&type=chunk)[129](index=129&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2023, compared to the prior year, highlighting key financial trends, asset quality, liquidity, and interest rate risk management [Executive Summary](index=50&type=section&id=Executive%20Summary) This summary provides an overview of the company's business, financial performance, and key highlights for the period - Flushing Financial Corporation operates Flushing Bank, a full-service New York State-chartered commercial bank, primarily attracting retail deposits and investing in various loans and securities[135](index=135&type=chunk) - Net income for Q1 2023 was **$5.2 million ($0.17 diluted EPS)**, a **71.7% decrease** from Q1 2022, primarily due to a **109 basis point decline** in net interest margin to **2.27%** driven by increased cost of interest-bearing liabilities[138](index=138&type=chunk) - The loan portfolio is over **88% collateralized by real estate** with an average loan-to-value of less than **37%**[140](index=140&type=chunk) - The allowance for credit losses (ACL) on loans was **0.56% of gross loans** and **182.9% of non-performing loans** at March 31, 2023[140](index=140&type=chunk) - The Bank and Company remain well-capitalized under current regulatory capital requirements[142](index=142&type=chunk) [COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022](index=52&type=section&id=COMPARISON%20OF%20OPERATING%20RESULTS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20MARCH%2031,%202023%20AND%202022) This section compares the company's financial performance for the three-month periods ended March 31, 2023, and 2022 - Net income decreased by **$13.1 million (71.7%)** to **$5.2 million** in Q1 2023, with diluted EPS falling to **$0.17** from **$0.58**[144](index=144&type=chunk) - This was mainly due to a **109 basis point decline** in net interest margin to **2.27%**[144](index=144&type=chunk) Return on Average Equity and Assets | Metric | Q1 2023 | Q1 2022 | | :-------------------- | :------ | :------ | | Return on average equity | 3.02% | 10.83% | | Return on average assets | 0.24% | 0.91% | - Interest and dividend income increased by **$20.8 million (29.2%)** to **$92.1 million**, driven by an **84 basis point increase** in the yield on interest-earning assets to **4.61%**[146](index=146&type=chunk) - Interest expense surged by **$39.0 million (497.6%)** to **$46.9 million**, as the average cost of interest-bearing liabilities rose **230 basis points** to **2.80%** due to Federal Reserve rate hikes[147](index=147&type=chunk) - Net interest income decreased by **$18.2 million (28.7%)** to **$45.3 million**, with the net interest margin declining **109 basis points** to **2.27%**, as liability costs outpaced asset yields[148](index=148&type=chunk) - Provision for credit losses increased to **$7.5 million** in Q1 2023 from **$1.4 million** in Q1 2022, mainly due to a charge-off and increased reserves on two specific credits[149](index=149&type=chunk) - Non-interest income increased by **$5.6 million** to **$6.9 million**, primarily due to net gains from fair value adjustments (**$2.6 million**) in Q1 2023 compared to net losses (**$1.8 million**) in Q1 2022[150](index=150&type=chunk) - Non-interest expense decreased by **$1.1 million (2.8%)** to **$37.7 million**, attributed to reversed salary accruals, Employee Retention Tax Credit refunds, and the impact of a decreased stock price on benefit plans[151](index=151&type=chunk) [FINANCIAL CONDITION](index=53&type=section&id=FINANCIAL%20CONDITION) This section analyzes the company's balance sheet, including assets, liabilities, and equity, and their changes over time - Total assets increased by **$56.2 million (0.7%)** to **$8,479.1 million** at March 31, 2023[154](index=154&type=chunk) - Total net loans decreased by **$28.9 million (0.4%)** to **$6,865.4 million**[154](index=154&type=chunk) Loan Originations and Purchases (in thousands) | Loan Originations and Purchases | Q1 2023 | Q1 2022 | | :--------------------------------------------- | :------ | :------ | | Multi-family residential | $42,164 | $98,180 | | Commercial real estate | $15,570 | $45,102 | | Commercial business and other | $95,668 | $159,476| | Total | $173,546| $329,319| - Loan originations and purchases decreased by **$155.8 million (47.3%)** to **$173.5 million** in Q1 2023[154](index=154&type=chunk) - The loan pipeline was **$266.1 million** at March 31, 2023[154](index=154&type=chunk) - Non-performing assets decreased by **$11.2 million (21.0%)** to **$42.2 million**, representing **0.50% of total assets** at March 31, 2023[159](index=159&type=chunk) - The ACL-loans to non-performing loans ratio was **182.9%**[159](index=159&type=chunk) - Total liabilities increased by **$59.9 million (0.8%)** to **$7,805.7 million**[162](index=162&type=chunk) - Deposits increased by **$218.3 million (3.4%)** to **$6,655.5 million**, driven by a **$353.9 million** increase in certificates of deposit[162](index=162&type=chunk) - Uninsured and uncollateralized deposits totaled **$1.1 billion**, or **16% of total deposits**, at March 31, 2023[162](index=162&type=chunk) - Total stockholders' equity decreased by **$3.7 million (0.5%)** to **$673.5 million**, with book value per common share decreasing to **$22.84**[163](index=163&type=chunk) - Available liquidity totaled **$3.7 billion** at March 31, 2023, with primary sources being deposits, borrowings, and loan/security payments[164](index=164&type=chunk)[168](index=168&type=chunk) [INTEREST RATE RISK](index=58&type=section&id=INTEREST%20RATE%20RISK) This section discusses the company's exposure to interest rate fluctuations and its strategies for managing this risk - The Company quantifies interest rate risk using Economic Value of Equity (EVE) analysis and Income Simulation Analysis[169](index=169&type=chunk) - EVE measures changes in net portfolio value (NPV) under interest rate shocks[170](index=170&type=chunk) Economic Value of Equity (EVE) Analysis | Change in Interest Rate | % Change in NPV | NPV Ratio | | :---------------------- | :-------------- | :-------- | | -200 Basis points | (2.6)% | 10.1% | | -100 Basis points | (0.9) | 10.5 | | Base interest rate | - | 10.8 | | +100 Basis points | (3.4) | 10.6 | | +200 Basis points | (6.8) | 10.4 | - Income Simulation Analysis projects changes in net interest income under various rate scenarios[171](index=171&type=chunk) - A **100 basis point increase** in rates over the next twelve months is projected to reduce net interest income by **5.9% (shocked)** or **3.1% (gradual)**[173](index=173&type=chunk)[174](index=174&type=chunk) - The Company's derivative portfolio, with a notional value of **$1.6 billion**, is designed to protect against rising interest rates[175](index=175&type=chunk) - This includes **$921.5 million** in interest rate swaps on short-term advances and brokered deposits[176](index=176&type=chunk) [AVERAGE BALANCES](index=60&type=section&id=AVERAGE%20BALANCES) This section presents average balances of interest-earning assets and interest-bearing liabilities, along with their corresponding yields and costs Average Balances (in thousands) | Metric | Q1 2023 Average Balance | Q1 2023 Yield/Cost | Q1 2022 Average Balance | Q1 2022 Yield/Cost | | :-------------------------------- | :----------------------------------- | :----------------- | :----------------------------------- | :----------------- | | Total interest-earning assets | $7,996,677 | 4.61% | $7,570,373 | 3.77% | | Total interest-bearing liabilities| $6,703,558 | 2.80% | $6,220,510 | 0.50% | | Net interest income | $45,362 | 1.81% (spread) | $63,603 | 3.27% (spread) | | Net interest margin | $1,293,119 (assets) | 2.27% | $1,349,863 (assets) | 3.36% | - The average yield on interest-earning assets increased by **84 basis points** to **4.61%** in Q1 2023[179](index=179&type=chunk) - The average cost of interest-bearing liabilities significantly increased by **230 basis points** to **2.80%**[179](index=179&type=chunk) - This led to a decrease in net interest margin by **109 basis points** to **2.27%**[179](index=179&type=chunk) [LOANS](index=62&type=section&id=LOANS) This section provides a detailed analysis of the company's loan portfolio, including originations, purchases, and reductions Loan Activity (in thousands) | Loan Activity | Q1 2023 Originated | Q1 2023 Purchased | Q1 2023 Reductions | Q1 2023 Sales | | :--------------------------- | :----------------- | :---------------- | :----------------- | :------------ | | Mortgage Loans | $77,431 | $129 | $102,543 | $2,375 | | Non-mortgage Loans | $51,649 | $44,337 | $89,901 | N/A | - Total mortgage loan originations decreased from **$169.1 million** in Q1 2022 to **$77.4 million** in Q1 2023[183](index=183&type=chunk) - Non-mortgage loan originations also decreased from **$105.9 million** to **$51.6 million**[183](index=183&type=chunk) - Principal reductions for mortgage loans decreased from **$216.5 million** in Q1 2022 to **$102.5 million** in Q1 2023[183](index=183&type=chunk) - Non-mortgage loan reductions decreased from **$146.1 million** to **$89.9 million**[183](index=183&type=chunk) [TROUBLED DEBT RESTRUCTURED ("TDR") AND NON-PERFORMING ASSETS](index=63&type=section&id=TROUBLED%20DEBT%20RESTRUCTURED%20(%22TDR%22)%20AND%20NON-PERFORMING%20ASSETS) This section discusses the company's troubled debt restructurings and non-performing assets, including trends and management - The Company adopted ASU No. 2022-02 regarding TDRs without material impact[185](index=185&type=chunk) - At December 31, 2022, total performing TDRs were **$11.8 million**, with **$11.5 million** on accrual status and **$0.3 million** on non-accrual status[186](index=186&type=chunk) Non-Performing Assets (in thousands) | Non-Performing Assets | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Loans 90 days or more past due and still accruing | $0 | $2,600 | | Non-accrual loans | $21,176 | $29,782 | | Held-to-maturity securities | $20,981 | $20,981 | | Total non-performing assets | $42,157 | $53,363 | | Non-performing assets to total assets| 0.50 % | 0.63 % | | ACL - loans to non-accrual loans | 182.89 % | 135.79 % | - Total non-performing assets decreased by **$11.2 million (21.0%)** to **$42.2 million** at March 31, 2023, primarily due to a reduction in non-accrual loans[187](index=187&type=chunk) [CRITICIZED AND CLASSIFIED ASSETS](index=64&type=section&id=CRITICIZED%20AND%20CLASSIFIED%20ASSETS) This section provides information on assets identified as having potential credit weaknesses - The amortized cost of Criticized and Classified assets decreased by **$8.3 million** to **$80.6 million** at March 31, 2023, from **$88.9 million** at December 31, 2022[188](index=188&type=chunk) - The Company had one investment security with an amortized cost of **$21.0 million** classified as substandard at both March 31, 2023, and December 31, 2022[188](index=188&type=chunk) [ALLOWANCE FOR CREDIT LOSSES](index=65&type=section&id=ALLOWANCE%20FOR%20CREDIT%20LOSSES) This section details the allowance for credit losses, including its components and changes during the period Allowance for Credit Losses (in thousands) | ACL Component | March 31, 2023 | March 31, 2022 | | :--------------------------- | :------------- | :------------- | | Allowance for credit losses - loans | $38,729 | $37,433 | | Allowance for HTM securities losses | $1,087 | $986 | | Allowance for off-balance sheet losses | $885 | $1,589 | | Total Allowance for credit losses | $40,701 | $40,008 | ACL - Loans Activity (in thousands) | ACL - Loans Activity | Q1 2023 | Q1 2022 | | :---------------------------------- | :------ | :------ | | Beginning balance | $40,442 | $37,135 | | Provision for credit losses | $7,521 | $1,233 | | Net charge-offs | $(9,234)| $(935) | | Ending balance | $38,729 | $37,433 | | Ratio of net charge-offs to average loans | 0.54 % | 0.06 % | | Ratio of ACL - loans to gross loans | 0.56 % | 0.57 % | | Ratio of ACL - loans to non-performing loans | 182.89 %| 266.12 %| - The ACL for loans decreased to **$38.7 million** at March 31, 2023, from **$40.4 million** at the beginning of the year[191](index=191&type=chunk) - This was primarily due to higher charge-offs (**$9.3 million**) partially offset by a **$7.5 million** provision[191](index=191&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the detailed discussion of market risk, including Economic Value of Equity Analysis and Income Simulation Analysis, provided within the Management's Discussion and Analysis of Financial Condition and Results of Operations - For a discussion of market risk, refer to the 'Interest Rate Risk' subsection within 'Management's Discussion and Analysis of Financial Condition and Results of Operations'[193](index=193&type=chunk) [ITEM 4. Controls and Procedures](index=67&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023. No material changes to internal control over financial reporting occurred during the period - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[193](index=193&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the period covered by this report[193](index=193&type=chunk) PART II — OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity security sales, and other miscellaneous information [ITEM 1. Legal Proceedings](index=68&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in various lawsuits, but management, in consultation with legal counsel, believes that their resolution will not materially adversely affect the Company's financial condition, results of operations, or cash flows - Management believes the resolution of current legal proceedings will not have a material adverse effect on the Company's financial condition, results of operations, and cash flows[195](index=195&type=chunk) [ITEM 1A. Risk Factors](index=68&type=section&id=ITEM%201A.%20Risk%20Factors) Recent banking industry events, including regional bank failures, have created significant market volatility and eroded customer confidence, potentially impacting the Company's liquidity, loan funding, net interest margin, and capital. These events may also lead to adverse regulatory changes or increased deposit insurance premiums - Recent bank failures and media coverage have eroded customer confidence, potentially impacting liquidity, loan funding capacity, net interest margin, and capital for regional banks like Flushing Bank[197](index=197&type=chunk) - Flushing Bank did not experience higher than normal deposit outflows immediately following the regional bank failures in March 2023[197](index=197&type=chunk) - Potential adverse changes to banking laws/regulations or increased FDIC deposit insurance premiums could result from these recent events[198](index=198&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2023, the Company repurchased 159,516 shares of common stock at an average price of $19.14 per share. As of March 31, 2023, 434,946 shares remained authorized for repurchase under existing programs with no expiration or maximum dollar amount Unregistered Sales of Equity Securities and Use of Proceeds | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------------ | :------------------------------- | :--------------------------- | | January 1 to January 31, 2023 | 129,668 | $18.89 | | February 1 to February 28, 2023 | 29,848 | $20.22 | | March 1 to March 31, 2023 | — | — | | Total | 159,516 | $19.14 | - As of March 31, 2023, **434,946 shares** remained to be repurchased under currently authorized stock repurchase programs, which have no expiration or maximum dollar amount[199](index=199&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=69&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[200](index=200&type=chunk) [ITEM 4. Mine Safety Disclosures](index=69&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[201](index=201&type=chunk) [ITEM 5. Other Information](index=69&type=section&id=ITEM%205.%20Other%20Information) No other information is reported under this item - No other information is reported[202](index=202&type=chunk) [ITEM 6. Exhibits](index=70&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures, certifications, and XBRL-related documents - The exhibits include the Certificate of Incorporation, Amended and Restated By-Laws, Indentures, Section 302 and 906 Certifications, and Inline XBRL documents[204](index=204&type=chunk)[205](index=205&type=chunk) [SIGNATURES](index=72&type=section&id=SIGNATURES) The report is duly signed on behalf of Flushing Financial Corporation by its President and Chief Executive Officer, John R. Buran, and Senior Executive Vice President, Treasurer and Chief Financial Officer, Susan K. Cullen, on May 10, 2023 - The report was signed by John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer, on May 10, 2023[209](index=209&type=chunk)

Financial Data and Key Metrics Changes - The company reported a GAAP EPS of $0.17 and core EPS of $0.10 for Q1 2023, impacted by net interest margin compression and a charge-off of a previously identified credit [43][44] - Average total deposits increased by 2% during the quarter and 6% year-over-year, with a loan to deposit ratio decreasing to 102% from 107% [26][46] - The net interest margin (NIM) declined by 43 basis points to 2.7% during the quarter, with expectations of continued compression as long as the Fed raises rates [29][62] Business Line Data and Key Metrics Changes - The loan portfolio saw a 5% year-over-year increase but was down less than 1% quarter-over-quarter, with loan closings lower than recent run rates [27][46] - Core loan yields increased by 17 basis points during the quarter, with yields on loan closings exceeding those on satisfactions by 113 basis points [27][46] - Non-performing assets declined by 21%, and delinquencies decreased by 16 basis points during the quarter [46][50] Market Data and Key Metrics Changes - The company has $1.2 billion of deposits and $810 million of loans in Asian markets, representing 18% of total deposits with only 3% market share, indicating significant growth opportunities [23] - The digital banking platform continues to grow, with high growth rates in mobile deposit users and digital banking enrollment [24][46] Company Strategy and Development Direction - The company aims to move towards a more interest rate risk-neutral balance sheet, having achieved 40% of this goal [43][62] - Focus on risk-adjusted returns and profitability, with an emphasis on recession-proof industries and tightening discretionary expenses [43][44] - The company is expanding its client base and enhancing customer service to capitalize on market disruptions [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with current results but is optimistic about future profitability due to decisive actions taken [43][44] - The expectation is that the NIM will begin to expand once funding costs stabilize and loans continue to reprice higher [29][62] - The company remains comfortable with its low-risk loan portfolio, with over 88% secured by real estate and a debt service coverage ratio of 1.9 times [45][49] Other Important Information - The company has $3.7 billion of available liquidity, which is over three times the amount of uninsured and uncollateralized deposits [21][46] - The investment security portfolio is valued at $886 million, with 53% classified as floating rate [33] Q&A Session Summary Question: How much more in C&I loan participations do you have? - Management confirmed they re-underwrite loans to conservative standards before participation [1] Question: Is the target TCE ratio still around 8%? - Management indicated that buybacks may slow or cease as they are currently below that target [2][89] Question: Where do you think the margin bottoms out? - Management noted intense competition in the market but expects less intensity moving forward [3] Question: What specific areas are being looked at for credit quality? - Management is focused on recession-proof industries and maintaining strong standards in real estate [75] Question: What is the expected impact of the Fed's rate changes on NIM? - Management expects NIM to benefit from contractual repricing of the loan portfolio once the Fed pauses rate increases [98][100]

See Appendix for definitions of Core NII FTE, Core NIM, and Core Loan Yields 32 Book Value and Tangible Book Value Per Share Grow in 2022 $15. 00 $16. 00 $17. 00 $18. 00 $19. 00 $20. 00 $21. 00 $22. 00 $23. 00 $24. 00 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% Tangible Book Value Per Share Tangible Common Equity/Tangible Assets Book Value Per Share CET1 Ratio Leverage Ratio 33 See more details in our ESG Report under Investor Relations at FlushingBank.com | --- | --- | --- | --- ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Commission file number 001-33013 FLUSHING FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 11-3209278 (I.R.S. Employer Identification No.) (State or other jurisdiction of incorporation or organization) 220 RXR Plaza, Uniondale, New York 11556 (Ad ...

Flushing Financial Corporation (NASDAQ:FFIC) Q4 2022 Earnings Conference Call January 27, 2022 9:30 AM ET Company Participants John Buran - President & Chief Executive Officer Susan Cullen - Senior Executive Vice President, Chief Financial Officer & Treasurer Conference Call Participants Christopher O'Connell - KBW Manuel Navas - D.A. Davidson Operator Welcome to Flushing Financial Corporation's Fourth Quarter and Full Year 2022 Earnings Conference Call. Hosting the call today are John Buran, President and ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 Commission file number 001-33013 FLUSHING FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 11-3209278 (I.R.S. Employer Identification No.) 220 RXR Plaza, Uniondale, New York ...

Flushing Financial Corporation (NASDAQ:FFIC) Q3 2022 Earnings Conference Call October 26, 2022 9:30 AM ET Company Participants John Buran - President, Chief Executive Officer and Director Susan Cullen - Senior Executive Vice President, Treasurer and Chief Financial Officer Conference Call Participants Mark Fitzgibbon - Piper Sandler Christopher O'Connell - KBW Manuel Navas - D.A. Davidson Operator Welcome to Flushing Financial Corporation's Third Quarter 2022 Earnings Conference Call. Hosting the call today ...

Part I – Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited consolidated financial statements of Flushing Financial Corporation and its subsidiaries for the quarter ended June 30, 2022, including the statements of financial condition, income, comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes to these financial statements [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total Assets: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $8,339,587 | | Dec 31, 2021 | $8,045,911 | Total Liabilities: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $7,668,775 | | Dec 31, 2021 | $7,366,283 | Total Stockholders' Equity: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $670,812 | | Dec 31, 2021 | $679,628 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net Income and EPS: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income (in thousands) | $25,035 | $19,258 | $43,254 | $38,297 | | Basic EPS | $0.81 | $0.61 | $1.39 | $1.21 | | Diluted EPS | $0.81 | $0.61 | $1.39 | $1.21 | Net Interest Income: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Interest Income (in thousands) | $64,730 | $61,039 | $128,209 | $121,931 | Provision (benefit) for credit losses: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision (benefit) (in thousands) | $1,590 | $(1,598) | $2,948 | $1,222 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive Net Income: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Comprehensive Net Income (in thousands) | $9,275 | $21,544 | $18,674 | $46,146 | Total Other Comprehensive Income (Loss), net of tax: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Other Comprehensive Income (Loss) (in thousands) | $(15,760) | $2,286 | $(24,580) | $7,849 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net Cash Provided by Operating Activities: | Period | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by Operating Activities (in thousands) | $44,642 | $35,975 | Net Cash Used in Investing Activities: | Period | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net Cash Used in Investing Activities (in thousands) | $(303,491) | $(197,804) | Net Cash Provided by Financing Activities: | Period | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by Financing Activities (in thousands) | $314,152 | $150,412 | Net Increase in Cash and Cash Equivalents: | Period | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net Increase (Decrease) in Cash and Cash Equivalents (in thousands) | $55,303 | $(11,417) | [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total Stockholders' Equity: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $670,812 | | March 31, 2022 | $675,813 | | Dec 31, 2021 | $679,628 | | June 30, 2021 | $655,167 | | March 31, 2021 | $639,201 | | Dec 31, 2020 | $618,997 | - Key changes in Stockholders' Equity for the six months ended June 30, 2022, include net income of **$43.3 million**, treasury share purchases of **$(17.0) million**, common stock dividends of **$(13.6) million**, and an other comprehensive loss of **$(24.6) million**[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) - Flushing Financial Corporation's primary business is the operation of its wholly-owned subsidiary, Flushing Bank[21](index=21&type=chunk) - The consolidated financial statements include the Holding Company and its direct and indirect wholly-owned subsidiaries, excluding certain special purpose business trusts[22](index=22&type=chunk) - The statements are prepared in accordance with GAAP and SEC regulations for interim financial statements[23](index=23&type=chunk)[24](index=24&type=chunk) [2. Use of Estimates](index=10&type=section&id=2.%20Use%20of%20Estimates) - Management's estimates and assumptions are critical for financial statements, particularly for the allowance for credit losses, goodwill impairment, deferred tax assets valuation, and fair value of financial instruments[26](index=26&type=chunk) [3. Earnings Per Share](index=11&type=section&id=3.%20Earnings%20Per%20Share) Basic and Diluted Earnings Per Common Share: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.81 | $0.61 | $1.39 | $1.21 | | Diluted EPS | $0.81 | $0.61 | $1.39 | $1.21 | - There were no common stock equivalents for the three and six months ended June 30, 2022 and 2021[28](index=28&type=chunk) [4. Securities](index=11&type=section&id=4.%20Securities) - The Company held no trading securities at June 30, 2022, and December 31, 2021. Securities available for sale are recorded at fair value, while held-to-maturity (HTM) securities are at amortized cost[29](index=29&type=chunk) Securities Held-to-Maturity at June 30, 2022: | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | Gross Unrecognized Losses (in thousands) | | :------------------- | :---------------------------- | :------------------------ | :--------------------------------------- | | Municipals | $67,315 | $57,064 | $10,251 | | FNMA | $7,885 | $7,496 | $389 | | Total | $74,115 | $64,560 | $10,640 | Securities Available for Sale at June 30, 2022: | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | Gross Unrealized Losses (in thousands) | | :--------------------------- | :---------------------------- | :------------------------ | :--------------------------------------- | | U.S. government agencies | $84,463 | $83,039 | $1,434 | | Corporate | $133,927 | $124,468 | $9,531 | | Collateralized loan obligations | $131,094 | $125,978 | $5,116 | | Mortgage-backed securities | $567,643 | $510,934 | $56,753 | | Total | $930,362 | $857,654 | $72,834 | - The Company does not intend to sell securities with unrealized losses and is unlikely to be required to sell them before recovery of amortized cost[44](index=44&type=chunk) - Allowance for credit losses for HTM debt securities was **$1.085 million** at June 30, 2022, an increase from **$0.862 million** at December 31, 2021[46](index=46&type=chunk)[48](index=48&type=chunk) - No securities were sold during the three and six months ended June 30, 2022[48](index=48&type=chunk) [5. Loans](index=17&type=section&id=5.%20Loans) - Loans are reported net of unearned income, charge-offs, deferred fees, and unamortized premiums/discounts. Interest is recognized on an accrual basis, generally discontinued after 90 days delinquency[51](index=51&type=chunk)[52](index=52&type=chunk) - At June 30, 2022, the Company had five active CARES Act forbearances totaling approximately **$26.7 million**, a decrease from 20 forbearances totaling **$71.9 million** at December 31, 2021[53](index=53&type=chunk) - The Allowance for Credit Losses (ACL) on loans was **$39.4 million** at June 30, 2022, up from **$37.1 million** at December 31, 2021[58](index=58&type=chunk) - The ACL-loans represented **0.58% of gross loans** and **141.1% of non-performing loans** at June 30, 2022, compared to **0.56%** and **248.7%** at December 31, 2021[58](index=58&type=chunk) - Provision for credit losses on loans was **$1.5 million** for the three months ended June 30, 2022 (vs. **$1.5 million benefit** in 2021) and **$2.7 million** for the six months ended June 30, 2022 (vs. **$1.3 million** in 2021), driven by loan growth and ongoing environmental uncertainty[58](index=58&type=chunk) - Two commercial business and other loans classified as Troubled Debt Restructured (TDRs) totaling **$2.5 million** defaulted within 12 months of modification during the three and six months ended June 30, 2022[62](index=62&type=chunk) Performing TDR Loans at Amortized Cost: | Loan Type | June 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :---------------------------- | :--------------------------- | :-------------------------- | | Multi-family residential | $1,656 | $1,690 | | Commercial real estate | $7,572 | $7,572 | | One-to-four family - mixed-use property | $1,254 | $1,636 | | One-to-four family - residential | $260 | $483 | | Small Business Administration | $269 | $0 | | Commercial business and other | $3,771 | $1,381 | | **Total Performing** | **$14,782** | **$12,762** | Non-Performing TDR Loans at Amortized Cost (June 30, 2022): | Loan Type | Amortized Cost (in thousands) | | :---------------------------- | :---------------------------- | | Commercial business and other | $2,453 | | **Total Non-Performing** | **$2,453** | Non-Accrual Loans at Amortized Cost (June 30, 2022): | Loan Type | Amortized Cost (in thousands) | | :---------------------------- | :---------------------------- | | Multi-family residential | $3,707 | | Commercial real estate | $273 | | One-to-four family - mixed-use property | $1,049 | | One-to-four family - residential | $4,708 | | Small Business Administration | $951 | | Construction | $856 | | Commercial business and other | $3,330 | | **Total** | **$14,874** | - Total foregone interest on non-accrual and TDR loans was **$306 thousand** for the three months ended June 30, 2022, and **$523 thousand** for the six months ended June 30, 2022[72](index=72&type=chunk) - Commitments to extend credit (off-balance sheet) totaled **$542.6 million** at June 30, 2022, an increase from **$472.9 million** at December 31, 2021[86](index=86&type=chunk) - Allowance for off-balance sheet credit losses was **$1.444 million** at June 30, 2022, compared to **$1.209 million** at December 31, 2021[87](index=87&type=chunk) [6. Loans held for sale](index=30&type=section&id=6.%20Loans%20held%20for%20sale) - The Bank did not have any loans held for sale at June 30, 2022, and December 31, 2021[91](index=91&type=chunk) [7. Leases](index=31&type=section&id=7.%20Leases) - The Company has 28 operating leases for branches/offices, 10 for vehicles, and one for equipment, with terms ranging from six months to approximately 14 years[95](index=95&type=chunk) Operating Lease Information: | Metric | June 30, 2022 | Dec 31, 2021 | | :----------------------------------- | :------------ | :----------- | | Operating lease ROU asset (in thousands) | $46,687 | $50,200 | | Operating lease liability (in thousands) | $50,346 | $54,155 | | Weighted-average remaining lease term | 7.0 years | 7.4 years | | Weighted average discount rate | 3.1% | 3.1% | - Total lease cost for the three months ended June 30, 2022, was **$2.399 million**, and for the six months ended June 30, 2022, was **$4.781 million**[97](index=97&type=chunk)[99](index=99&type=chunk) [8. Stock-Based Compensation](index=32&type=section&id=8.%20Stock-Based%20Compensation) - The Company's long-term incentive program includes grants of performance-based restricted stock units (PRSUs) and time-based restricted stock units (RSUs)[102](index=102&type=chunk) - As of June 30, 2022, **966,785 shares** were available for future issuance under the 2014 Omnibus Plan[104](index=104&type=chunk) - Stock-based compensation costs (including phantom stock awards) were **$0.9 million** for the three months ended June 30, 2022 (vs. **$1.1 million** in 2021) and **$4.9 million** for the six months ended June 30, 2022 (vs. **$5.2 million** in 2021)[105](index=105&type=chunk) RSU and PRSU Awards Activity (Six Months Ended June 30, 2022): | Metric | RSU Awards (Shares) | PRSU Awards (Shares) | | :----------------------------------- | :------------------ | :------------------- | | Non-vested at Dec 31, 2021 | 310,430 | 102,920 | | Granted | 212,811 | 63,250 | | Vested | (219,835) | (71,390) | | Forfeited | (1,695) | — | | Non-vested at June 30, 2022 | 301,711 | 94,780 | - Unrecognized compensation cost related to RSU and PRSU awards was **$6.2 million** as of June 30, 2022, expected to be recognized over a weighted-average period of **2.6 years**[107](index=107&type=chunk) - Phantom Stock Plan outstanding shares were **155,159** at June 30, 2022, with a fair value of **$21.26 per share**[110](index=110&type=chunk) [9. Pension and Other Postretirement Benefit Plans](index=34&type=section&id=9.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) Net Employee Pension Benefit: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Employee Pension Benefit (in thousands) | $(119) | $(24) | $(237) | $(48) | Net Outside Director Pension Expense: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Outside Director Pension Expense (in thousands) | $8 | $11 | $15 | $22 | Net Other Postretirement Expense: | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Other Postretirement Expense (in thousands) | $129 | $126 | $259 | $235 | - The Company expects to contribute **$0.3 million** to each of the Outside Director Pension Plan and Other Postretirement Benefit Plans in 2022, with **$72,000** and **$21,000** already contributed, respectively, as of June 30, 2022. No contribution is expected for the Employee Pension Plan[114](index=114&type=chunk) [10. Fair Value of Financial Instruments](index=35&type=section&id=10.%20Fair%20Value%20of%20Financial%20Instruments) - The Company carries certain financial assets and liabilities at fair value under the fair value option, totaling **$13.6 million** in assets and **$55.4 million** in liabilities at June 30, 2022[115](index=115&type=chunk) Net Gain (Loss) from Fair Value Adjustments (Fair Value Option): | Period | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net gain (loss) (in thousands) | $2,533 | $(5,353) | $724 | $(6,989) | - Fair value measurements are categorized into Level 1 (quoted market prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - At June 30, 2022, Level 3 assets included trust preferred securities (**$1.662 million**) and Level 3 liabilities included junior subordinated debentures (**$55.352 million**)[127](index=127&type=chunk) - Non-accrual loans are carried at fair value on a non-recurring basis, totaling **$22.502 million** at June 30, 2022, and **$11.026 million** at December 31, 2021[132](index=132&type=chunk) [11. Derivative Financial Instruments](index=43&type=section&id=11.%20Derivative%20Financial%20Instruments) - The Company uses interest rate swaps to mitigate exposure to rising interest rates on fixed-rate loans (**$289.2 million** at June 30, 2022) and short-term advances/brokered deposits (**$871.5 million** at June 30, 2022), and to facilitate risk management for loan customers (**$224.6 million** at June 30, 2022)[140](index=140&type=chunk)[142](index=142&type=chunk) - Derivatives are carried at fair value, with changes accounted for based on hedge designation[144](index=144&type=chunk) - Notional amounts of derivative financial instruments at June 30, 2022, include **$871.5 million** for cash flow hedges, **$289.2 million** for fair value hedges, and **$224.6 million** not designated as hedges[145](index=145&type=chunk) - For cash flow hedges, **$2.4 million** was reclassified from accumulated other comprehensive loss to interest expense for the three months ended June 30, 2022[146](index=146&type=chunk) - The estimated amount to be reclassified from accumulated other comprehensive loss in the next 12 months is **$5.7 million**[146](index=146&type=chunk) Total Derivatives Fair Value: | Date | Fair Value (in thousands) | | :------------- | :------------------------ | | June 30, 2022 | $40,727 | | Dec 31, 2021 | $(14,388) | [12. Accumulated Other Comprehensive Income (Loss)](index=47&type=section&id=12.%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) Accumulated Other Comprehensive Income (Loss) Ending Balance, Net of Tax: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $(31,264) | | March 31, 2022 | $(15,504) | | June 30, 2021 | $(8,417) | | Dec 31, 2020 | $(16,266) | - Net current period other comprehensive income (loss), net of tax, was **$(15.760) million** for the three months ended June 30, 2022, and **$(24.580) million** for the six months ended June 30, 2022[155](index=155&type=chunk)[157](index=157&type=chunk) - Significant reclassifications from AOCI include interest rate swaps affecting interest expense and pension items affecting other expense[160](index=160&type=chunk)[162](index=162&type=chunk) [13. Regulatory Capital](index=55&type=section&id=13.%20Regulatory%20Capital) - Both the Bank and the Holding Company remain 'well-capitalized' under current capital regulations and exceed all regulatory capital requirements as of June 30, 2022[164](index=164&type=chunk)[166](index=166&type=chunk) Bank Capital Ratios (June 30, 2022): | Capital Ratio | Capital Level | Requirement to be Well-Capitalized | Excess | | :----------------------------- | :------------ | :--------------------------------- | :------------ | | Tier I (leverage) capital | 10.28% | 5.00% | 5.28% | | Common Equity Tier I risk-based capital | 13.09% | 6.50% | 6.59% | | Tier I risk-based capital | 13.09% | 8.00% | 5.09% | | Total risk-based capital | 13.67% | 10.00% | 3.67% | - The Capital Conservation Buffer (CCB) for the Bank was **5.67%** at June 30, 2022 (vs. **6.13%** at Dec 31, 2021)[164](index=164&type=chunk) - The CCB for the Holding Company was **5.34%** at June 30, 2022 (vs. **5.75%** at Dec 31, 2021)[166](index=166&type=chunk) [14. New Authoritative Accounting Pronouncements](index=56&type=section&id=14.%20New%20Authoritative%20Accounting%20Pronouncements) - FASB issued ASU No. 2022-02, 'Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,' effective for fiscal years beginning after December 15, 2022, which replaces TDR recognition guidance for CECL adopters and enhances disclosures. The Company is evaluating its impact[170](index=170&type=chunk) - FASB issued ASU No. 2021-01 and ASU No. 2020-04, 'Reference Rate Reform' (Topic 848), providing optional expedients for contract modifications and hedge accounting related to the LIBOR transition, effective through December 31, 2022. The Company is evaluating the material effects[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, comparing the three and six months ended June 30, 2022, to the corresponding periods in 2021. It highlights key financial metrics, loan portfolio performance, asset quality, liquidity, and interest rate risk management [Executive Summary](index=59&type=section&id=Executive%20Summary) - Flushing Financial Corporation operates Flushing Bank, a full-service New York State-chartered commercial bank, primarily attracting retail deposits and investing in multi-family residential, commercial business, commercial real estate, and one-to-four family mixed-use property loans[179](index=179&type=chunk) - Net income for the three months ended June 30, 2022, was **$25.0 million**, or **$0.81 diluted EPS**, driven by record net interest income of **$64.7 million**[183](index=183&type=chunk) - Net interest margin was **3.35%** for the three months ended June 30, 2022, a slight decrease of one basis point from the prior quarter. Excluding certain adjustments, it increased two basis points to **3.33%**[184](index=184&type=chunk) - The loan portfolio is over **87% collateralized by real estate** with an average loan-to-value of less than **38%**[185](index=185&type=chunk) - ACL - loans stood at **58 basis points of gross loans** and **141.1% of non-performing loans** at June 30, 2022. Non-performing assets were **59 basis points of total assets**[185](index=185&type=chunk) - The Bank and Company remain well-capitalized under current capital regulations[186](index=186&type=chunk) [Comparison of Operating Results (Three Months Ended June 30)](index=60&type=section&id=COMPARISON%20OF%20OPERATING%20RESULTS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%202021) [General (Three Months)](index=60&type=section&id=General_3M) Net Income and EPS (3 Months Ended June 30): | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--------------------------- | :---------- | :---------- | :---------- | :--------- | | Net Income (in millions) | $25.0 | $19.3 | $5.8 | 30.0% | | Diluted EPS | $0.81 | $0.61 | $0.20 | 32.8% | Return on Average Equity and Assets (3 Months Ended June 30): | Metric | 2022 | 2021 | | :--------------------------- | :------ | :------ | | Return on average equity | 15.00% | 11.95% | | Return on average assets | 1.22% | 0.93% | [Interest Income (Three Months)](index=60&type=section&id=Interest%20Income_3M) - Interest and dividend income increased by **$2.5 million (3.6%)** to **$74.3 million** for the three months ended June 30, 2022, from **$71.7 million** in the prior year[189](index=189&type=chunk) - The yield on interest-earning assets increased by **16 basis points** to **3.85%** in Q2 2022 from **3.69%** in Q2 2021[189](index=189&type=chunk) - Excluding certain adjustments, the yield on total loans, net, increased **seven basis points** to **4.01%** in Q2 2022 from **3.94%** in Q2 2021[189](index=189&type=chunk) [Interest Expense (Three Months)](index=61&type=section&id=Interest%20Expense_3M) - Interest expense decreased by **$1.1 million (10.7%)** to **$9.6 million** for the three months ended June 30, 2022, from **$10.7 million** in the prior year[191](index=191&type=chunk) - The average cost of interest-bearing liabilities declined by **six basis points** to **0.60%** in Q2 2022 from **0.66%** in Q2 2021[191](index=191&type=chunk) - The average balance of interest-bearing liabilities decreased by **$195.5 million** to **$6,337.4 million**[191](index=191&type=chunk) [Net Interest Income (Three Months)](index=61&type=section&id=Net%20Interest%20Income_3M) - Net interest income increased by **$3.7 million (6.0%)** to **$64.7 million** for the three months ended June 30, 2022, from **$61.0 million** in the prior year[192](index=192&type=chunk) - Net interest-earning assets grew by **$146.0 million** year-over-year to **$1,403.3 million**[192](index=192&type=chunk) - Net interest margin increased by **21 basis points** to **3.35%** during the same period[192](index=192&type=chunk) - Excluding prepayment penalties, hedge adjustments, and purchase accounting, net interest margin increased **18 basis points** to **3.22%** in Q2 2022 from **3.04%** in Q2 2021[192](index=192&type=chunk) [Provision (Benefit) for Credit Losses (Three Months)](index=61&type=section&id=Provision%20%28Benefit%29%20for%20Credit%20Losses_3M) - Provision for credit losses was **$1.6 million** for the three months ended June 30, 2022, compared to a benefit of **$1.6 million** for the three months ended June 30, 2021[193](index=193&type=chunk) - Non-performing assets increased by **$34.8 million** to **$48.9 million** at June 30, 2022, primarily due to the addition of one non-accrual investment security and three non-accrual commercial business loans[193](index=193&type=chunk) - The current average loan-to-value ratio for non-performing assets collateralized by real estate was **50.7%** at June 30, 2022[193](index=193&type=chunk) [Non-Interest Income (Loss) (Three Months)](index=61&type=section&id=Non-Interest%20Income%20%28Loss%29_3M) - Non-interest income increased by **$10.6 million** to **$7.4 million** for the three months ended June 30, 2022, from a loss of **$3.2 million** in the prior year comparable period[194](index=194&type=chunk) - The increase was primarily due to net gains from fair value adjustments (**$2.5 million** in Q2 2022 vs. **$6.5 million net losses** in Q2 2021) and **$1.5 million** in life insurance proceeds in Q2 2022[194](index=194&type=chunk) [Non-Interest Expense (Three Months)](index=61&type=section&id=Non-Interest%20Expense_3M) - Non-interest expense increased by **$1.5 million (4.4%)** to **$35.5 million** for the three months ended June 30, 2022, from **$34.0 million** in the prior year, primarily due to the growth of the Company[195](index=195&type=chunk) [Income before Income Taxes (Three Months)](index=61&type=section&id=Income%20before%20Income%20Taxes_3M) - Income before income taxes increased by **$9.6 million (37.6%)** to **$35.0 million** for the three months ended June 30, 2022, from **$25.4 million** in the prior year[196](index=196&type=chunk) [Provision for Income Taxes (Three Months)](index=61&type=section&id=Provision%20for%20Income%20Taxes_3M) - The provision for income taxes was **$9.9 million** for the three months ended June 30, 2022, an increase of **$3.8 million (61.4%)** from **$6.2 million** in the prior year[197](index=197&type=chunk) - The effective tax rate increased to **28.4%** in Q2 2022 from **24.2%** in Q2 2021, primarily due to the loss of certain New York State and City tax deductions[197](index=197&type=chunk) [Comparison of Operating Results (Six Months Ended June 30)](index=62&type=section&id=COMPARISON%20OF%20OPERATING%20RESULTS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202022%20AND%202021) [General (Six Months)](index=62&type=section&id=General_6M) Net Income and EPS (6 Months Ended June 30): | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--------------------------- | :---------- | :---------- | :---------- | :--------- | | Net Income (in millions) | $43.3 | $38.3 | $5.0 | 12.9% | | Diluted EPS | $1.39 | $1.21 | $0.18 | 14.9% | Return on Average Equity and Assets (6 Months Ended June 30): | Metric | 2022 | 2021 | | :--------------------------- | :------ | :------ | | Return on average equity | 12.91% | 12.11% | | Return on average assets | 1.06% | 0.93% | [Interest Income (Six Months)](index=62&type=section&id=Interest%20Income_6M) - Interest and dividend income increased by **$1.7 million (1.2%)** to **$145.6 million** for the six months ended June 30, 2022, from **$143.9 million** in the prior year[201](index=201&type=chunk) - The yield on interest-earning assets increased by **8 basis points** to **3.81%** in H1 2022 from **3.73%** in H1 2021[201](index=201&type=chunk) - Excluding certain adjustments, the yield on total loans, net, increased **three basis points** to **3.97%** in H1 2022 from **3.94%** in H1 2021[201](index=201&type=chunk) [Interest Expense (Six Months)](index=62&type=section&id=Interest%20Expense_6M) - Interest expense decreased by **$4.5 million (20.7%)** to **$17.4 million** for the six months ended June 30, 2022, from **$21.9 million** in the prior year[202](index=202&type=chunk) - The average cost of interest-bearing liabilities declined by **12 basis points** to **0.55%** in H1 2022 from **0.67%** in H1 2021[202](index=202&type=chunk) - The average balance of interest-bearing liabilities decreased by **$226.3 million** to **$6,279.3 million**[202](index=202&type=chunk) [Net Interest Income (Six Months)](index=62&type=section&id=Net%20Interest%20Income_6M) - Net interest income increased by **$6.3 million (5.1%)** to **$128.2 million** for the six months ended June 30, 2022, from **$121.9 million** in the prior year[203](index=203&type=chunk) - Net interest margin increased by **20 basis points** to **3.36%** during the six months ended June 30, 2022[203](index=203&type=chunk) - Net interest-earning assets increased by **$153.2 million** to **$1,376.7 million** for the same period[203](index=203&type=chunk) - Excluding prepayment penalties, hedge adjustments, and purchase accounting, net interest margin increased **20 basis points** to **3.22%** in H1 2022 from **3.02%** in H1 2021[203](index=203&type=chunk) [Provision for Credit Losses (Six Months)](index=62&type=section&id=Provision%20for%20Credit%20Losses_6M) - Provision for credit losses was **$2.9 million** for the six months ended June 30, 2022, compared to **$1.2 million** for the six months ended June 30, 2021[204](index=204&type=chunk) - Non-performing assets increased by **$34.0 million** to **$48.9 million** from **$14.9 million** at December 31, 2021, primarily due to the addition of one non-accrual investment security and three non-accrual commercial business loans[204](index=204&type=chunk) - The current average loan-to-value ratio for non-performing assets collateralized by real estate was **50.7%** at June 30, 2022[204](index=204&type=chunk) [Non-Interest Income (Six Months)](index=62&type=section&id=Non-Interest%20Income_6M) - Non-interest income increased by **$5.6 million** to **$8.7 million** for the six months ended June 30, 2022, from **$3.1 million** in the prior year comparable period[205](index=205&type=chunk) - The increase was primarily due to net gains from fair value adjustments (**$0.7 million** in H1 2022 vs. **$5.6 million net losses** in H1 2021) and **$1.5 million** in life insurance proceeds in H1 2022[205](index=205&type=chunk) - These increases were partially offset by a decline in loan swap income during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, due to lower activity[206](index=206&type=chunk) [Non-Interest Expense (Six Months)](index=64&type=section&id=Non-Interest%20Expense_6M) - Non-interest expense increased by **$2.1 million (3.0%)** to **$74.3 million** for the six months ended June 30, 2022, from **$72.2 million** in the prior year, primarily due to the growth of the Company[208](index=208&type=chunk) [Income before Income Taxes (Six Months)](index=64&type=section&id=Income%20before%20Income%20Taxes_6M) - Income before income taxes increased by **$8.0 million (15.4%)** to **$59.6 million** for the six months ended June 30, 2022, from **$51.6 million** in the prior year[209](index=209&type=chunk) [Provision for Income Taxes (Six Months)](index=64&type=section&id=Provision%20for%20Income%20Taxes_6M) - The provision for income taxes was **$16.4 million** for the six months ended June 30, 2022, an increase of **$3.0 million (22.6%)** from **$13.3 million** in the prior year[210](index=210&type=chunk) - The effective tax rate increased to **27.4%** in H1 2022 from **25.8%** in H1 2021, primarily due to the loss of certain New York State and City tax deductions[210](index=210&type=chunk) [Financial Condition](index=64&type=section&id=FINANCIAL%20CONDITION) [Assets](index=64&type=section&id=Assets_FC) - Total assets increased by **$293.7 million (3.7%)** to **$8,339.6 million** at June 30, 2022, from **$8,045.9 million** at December 31, 2021[211](index=211&type=chunk) - Total loans net increased by **$120.0 million (1.8%)** to **$6,721.0 million** at June 30, 2022[211](index=211&type=chunk) - Loan originations and purchases were **$833.1 million** for the six months ended June 30, 2022, an increase of **$185.8 million (28.7%)** from the prior year[211](index=211&type=chunk) - The loan pipeline was **$582.6 million** at June 30, 2022, up from **$429.3 million** at December 31, 2021[211](index=211&type=chunk) - Mortgage-backed securities decreased by **$61.3 million (10.6%)** to **$518.8 million**, primarily due to principal repayments and fair value decreases, partially offset by purchases[216](index=216&type=chunk) - Other securities increased by **$157.9 million (61.9%)** to **$413.0 million**, mainly due to purchases[217](index=217&type=chunk) - Non-performing assets totaled **$48.9 million** at June 30, 2022, an increase of **$34.0 million (227.7%)** from December 31, 2021[215](index=215&type=chunk) - Non-performing assets as a percentage of total assets were **0.59%** at June 30, 2022 (vs. **0.19%** at Dec 31, 2021)[215](index=215&type=chunk) - The ratio of ACL - loans to total non-performing loans was **141.1%** at June 30, 2022 (vs. **248.7%** at Dec 31, 2021)[215](index=215&type=chunk) [Liabilities](index=66&type=section&id=Liabilities_FC) - Total liabilities increased by **$302.5 million (4.1%)** to **$7,668.8 million** at June 30, 2022, from **$7,366.3 million** at December 31, 2021[218](index=218&type=chunk) - Deposits increased by **$16.5 million (0.3%)** to **$6,350.0 million**, driven by a **$113.6 million** increase in non-interest bearing deposits, partially offset by a decrease of **$97.1 million** in NOW, money market accounts and certificates of deposit[218](index=218&type=chunk) - Brokered deposits increased by **$402.1 million** to **$1,028.4 million**[218](index=218&type=chunk) - Borrowed funds increased by **$274.1 million** during the six months ended June 30, 2022[218](index=218&type=chunk) [Equity](index=66&type=section&id=Equity_FC) - Total stockholders' equity decreased by **$8.8 million (1.3%)** to **$670.8 million** at June 30, 2022, from **$679.6 million** at December 31, 2021[219](index=219&type=chunk) - This decrease was due to a **$24.6 million** decline in accumulated other comprehensive income, **$13.6 million** in dividends paid, and **$17.0 million** in share repurchases, partially offset by **$43.3 million** in net income[219](index=219&type=chunk) - Book value per common share increased to **$22.38** at June 30, 2022, compared to **$22.26** at December 31, 2021[219](index=219&type=chunk) [Liquidity](index=66&type=section&id=Liquidity_FC) - The Company's primary liquidity objectives are to fund loan originations, repay borrowings, satisfy financial obligations, and meet customer deposit withdrawal needs[220](index=220&type=chunk) - Cash and cash equivalents totaled **$137.0 million** at June 30, 2022, an increase of **$55.3 million** from December 31, 2021[221](index=221&type=chunk) - Unencumbered securities available for sale totaled **$546.4 million** at June 30, 2022[221](index=221&type=chunk) - At June 30, 2022, the Bank had **$3,675.0 million** available from the FHLB-NY (with **$1,655.4 million** outstanding) and **$695.0 million** in unsecured lines of credit with other commercial banks (no outstanding amount)[223](index=223&type=chunk) [Interest Rate Risk](index=68&type=section&id=INTEREST%20RATE%20RISK) [Economic Value of Equity Analysis](index=68&type=section&id=Economic%20Value%20of%20Equity%20Analysis) - The Company quantifies the net portfolio value (market value of assets net of liabilities) under various interest rate shock scenarios[225](index=225&type=chunk) Interest Rate Shock Analysis (June 30, 2022): | Scenario | Change in Net Portfolio Value (%) | Net Portfolio Value Ratio (%) | | :------------------- | :-------------------------------- | :---------------------------- | | -100 Basis points | 3.1% | 15.4% | | Base interest rate | — | 15.3% | | +100 Basis points | (5.7)% | 14.7% | | +200 Basis points | (11.5)% | 14.1% | - At June 30, 2022, the Company was within the guidelines set forth by the Board of Directors for each interest rate level[225](index=225&type=chunk) [Income Simulation Analysis](index=68&type=section&id=Income%20Simulation%20Analysis) - Based on assumptions, net interest income would be reduced by **3.9%** from a **100 basis point** increase in rates over the next twelve months[227](index=227&type=chunk) - The Company had a derivative portfolio with a notional value totaling **$1.4 billion** at June 30, 2022, designed to provide protection against rising interest rates[229](index=229&type=chunk) - A portion of this portfolio includes interest rate swaps on certain short-term advances and brokered deposits totaling **$871.5 million**[230](index=230&type=chunk) - Assuming a **200 basis point** increase over two years, the total derivative portfolio has a **1.6% benefit** to net interest income in the first year and a cumulative **4.2% benefit** by the second year[231](index=231&type=chunk) [Average Balances, Yields, and Costs](index=71&type=section&id=AVERAGE%20BALANCES) Average Interest-Earning Assets and Yields (Three Months Ended June 30): | Category | Average Balance (in thousands) | Interest (in thousands) | Yield/Cost (%) | | :--------------------------- | :----------------------------- | :---------------------- | :------------- | | Total loans, net (2022) | $6,640,331 | $69,192 | 4.17% | | Total loans, net (2021) | $6,686,888 | $67,999 | 4.07% | | Total interest-earning assets (2022) | $7,740,683 | $74,422 | 3.85% | | Total interest-earning assets (2021) | $7,790,174 | $71,855 | 3.69% | Average Interest-Bearing Liabilities and Costs (Three Months Ended June 30): | Category | Average Balance (in thousands) | Interest (in thousands) | Yield/Cost (%) | | :--------------------------- | :----------------------------- | :---------------------- | :------------- | | Total deposits (2022) | $5,396,351 | $4,686 | 0.35% | | Total deposits (2021) | $5,587,481 | $5,539 | 0.40% | | Total interest-bearing liabilities (2022) | $6,337,374 | $9,561 | 0.60% | | Total interest-bearing liabilities (2021) | $6,532,891 | $10,703 | 0.66% | Net Interest Margin (Tax Equivalent) (Three Months Ended June 30): | Period | Net Interest Margin (%) | | :----- | :---------------------- | | 2022 | 3.35% | | 2021 | 3.14% | Net Interest Margin (Tax Equivalent) (Six Months Ended June 30): | Period | Net Interest Margin (%) | | :----- | :---------------------- | | 2022 | 3.36% | | 2021 | 3.16% | [Loans (MD&A)](index=74&type=section&id=LOANS_MD%26A) Mortgage Loans Originated (Six Months Ended June 30): | Loan Type | 2022 (in thousands) | 2021 (in thousands) | | :---------------------------- | :------------------ | :------------------ | | Multi-family residential | $235,082 | $125,466 | | Commercial real estate | $209,928 | $55,119 | | One-to-four family mixed-use property | $20,726 | $15,847 | | One-to-four family residential | $13,472 | $4,673 | | Construction | $15,498 | $5,468 | | **Total Mortgage Loans Originated** | **$494,706** | **$206,573** | Non-Mortgage Loans Originated (Six Months Ended June 30): | Loan Type | 2022 (in thousands) | 2021 (in thousands) | | :---------------------------- | :------------------ | :------------------ | | Small Business Administration | $2,750 | $142,678 | | Commercial business | $222,281 | $164,166 | | Other | $2,341 | $3,170 | | **Total Other Loans Originated** | **$227,372** | **$310,014** | - Mortgage loans purchased were **$1.6 million** in H1 2022 (vs. **$64.9 million** in H1 2021). Non-mortgage loans purchased were **$109.4 million** in H1 2022 (vs. **$65.8 million** in H1 2021)[240](index=240&type=chunk) - The Bank maintains conservative underwriting standards, including a loan-to-value ratio of **75% or less** and a debt coverage ratio of at least **125%**[213](index=213&type=chunk) [Troubled Debt Restructured (TDR) and Non-Performing Assets](index=75&type=section&id=TROUBLED%20DEBT%20RESTRUCTURED%20%28%22TDR%22%29%20AND%20NON-PERFORMING%20ASSETS) Total Performing TDR Loans: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $14,782 | | Dec 31, 2021 | $12,762 | Total Non-Performing Assets: | Date | Amount (in thousands) | | :------------- | :-------------------- | | June 30, 2022 | $48,929 | | Dec 31, 2021 | $14,933 | - Non-performing assets to total assets increased to **0.59%** at June 30, 2022, from **0.19%** at December 31, 2021[245](index=245&type=chunk) - ACL - loans to non-performing loans decreased to **141.06%** at June 30, 2022, from **248.66%** at December 31, 2021[245](index=245&type=chunk) [Criticized and Classified Assets](index=76&type=section&id=CRITICIZED%20AND%20CLASSIFIED%20ASSETS) - Total Criticized and Classified assets were **$78.1 million** at June 30, 2022, a slight decrease from **$78.6 million** at December 31, 2021[246](index=246&type=chunk) - One investment security with an amortized cost of **$21.0 million** was classified as substandard at June 30, 2022 (previously special mention at Dec 31, 2021)[246](index=246&type=chunk) - Consumer mortgage loans in formal foreclosure proceedings totaled **$5.4 million** at June 30, 2022 (vs. **$8.7 million** at Dec 31, 2021)[247](index=247&type=chunk) [Allowance for Credit Losses](index=77&type=section&id=ALLOWANCE%20FOR%20CREDIT%20LOSSES) Allowance for Credit Losses (ACL) Summary (Six Months Ended June 30): | Category | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------- | :------------------ | :------------------ | | ACL - Loans | $39,424 | $42,670 | | ACL - HTM Securities | $1,085 | $844 | | ACL - Off-Balance Sheet | $1,444 | $1,570 | | **Total Allowance for Credit Losses** | **$41,953** | **$45,084** | - Net charge-offs were **$(434) thousand** for the six months ended June 30, 2022, compared to **$(3,767) thousand** in the prior year[251](index=251&type=chunk) - Ratio of net charge-offs to average loans outstanding was **0.01%** in H1 2022 (vs. **0.11%** in H1 2021)[251](index=251&type=chunk) - The increase in non-performing assets is attributed to three relationships, one of which was resolved subsequent to June 30, 2022[252](index=252&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk" for detailed disclosures on market risk - For market risk disclosures, refer to the "Interest Rate Risk" section within Management's Discussion and Analysis[253](index=253&type=chunk) [Controls and Procedures](index=79&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, and concluded they were effective. No material changes to internal control over financial reporting occurred during the period - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[253](index=253&type=chunk) - No material changes to internal control over financial reporting occurred during the reporting period[253](index=253&type=chunk) Part II – Other Information [Legal Proceedings](index=80&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in various lawsuits, but management, in consultation with legal counsel, believes that their resolution will not have a material adverse effect on the Company's consolidated financial condition, results of operations, or cash flows - Management believes current legal proceedings will not materially adversely affect the Company's consolidated financial condition, results of operations, or cash flows[255](index=255&type=chunk) [Risk Factors](index=80&type=section&id=ITEM%201A.%20Risk%20Factors) This section updates risk factors, primarily focusing on the significant impact of changes in interest rates, including recent and potential future increases by the FOMC to combat inflation. It highlights how rising rates could affect net interest income, loan demand, asset values, and borrower repayment ability, while also noting the shorter duration of liabilities compared to assets - No material changes from the risk factors disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2021, except as set forth in this section[256](index=256&type=chunk) - Changes in interest rates, including recent and perhaps future increases fueled by inflation, may significantly impact the Company's financial condition and results of operations[256](index=256&type=chunk) - The FOMC has increased the target range for the federal funds rate multiple times in 2022 (March: **25 bps**, May: **50 bps**, June: **75 bps**, July: **75 bps**) in response to inflationary pressures[257](index=257&type=chunk) - Rising interest rates could increase the rates paid on deposits and borrowings more rapidly than the rates earned on loans, adversely affecting net interest income[258](index=258&type=chunk) - Approximately **80%** of the Company's certificates of deposit accounts and borrowings will reprice or mature during the next year, exacerbating short-term interest rate risk[258](index=258&type=chunk) - An increasing interest rate environment would tend to extend the average lives of lower yielding fixed rate mortgages and mortgage-backed securities, which could adversely affect net interest income, and may also result in a reduction of prepayment penalty income[261](index=261&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased 387,689 shares of common stock during the three months ended June 30, 2022, under authorized stock repurchase programs. A new program for up to 1,000,000 additional shares was approved in May 2022, with 1,100,498 shares remaining for repurchase under current authorizations Common Stock Repurchases (Three Months Ended June 30, 2022): | Period | Total Shares Purchased | Average Price per Share | | :-------------------------- | :--------------------- | :---------------------- | | April 1 to April 30, 2022 | 20,000 | $21.67 | | May 1 to May 31, 2022 | 246,164 | $21.89 | | June 1 to June 30, 2022 | 121,525 | $22.31 | | **Total** | **387,689** | **$22.01** | - On May 17, 2022, the Board of Directors approved a new stock repurchase program to purchase up to an additional **1,000,000 shares**[263](index=263&type=chunk) - As of June 30, 2022, **1,100,498 shares** remained to be repurchased under the currently authorized stock repurchase programs[263](index=263&type=chunk) [Defaults Upon Senior Securities](index=83&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[264](index=264&type=chunk) [Mine Safety Disclosures](index=83&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[265](index=265&type=chunk) [Other Information](index=83&type=section&id=ITEM%205.%20Other%20Information) No other information was reported - No other information was reported[266](index=266&type=chunk) [Exhibits](index=84&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate organizational documents, indentures, the 2014 Omnibus Plan, and certifications under the Sarbanes-Oxley Act - Exhibits include the Certificate of Incorporation, By-Laws, Indentures, and the Amended Flushing Financial Corporation 2014 Omnibus Plan[270](index=270&type=chunk)[274](index=274&type=chunk) - Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and Chief Financial Officer are filed/furnished[270](index=270&type=chunk)[274](index=274&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Documents are also included as exhibits[270](index=270&type=chunk)[274](index=274&type=chunk) [Signatures](index=86&type=section&id=SIGNATURES) The report is duly signed on behalf of Flushing Financial Corporation by John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer, on August 5, 2022 - The report was signed by John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer[279](index=279&type=chunk) - The signing date for the report was August 5, 2022[279](index=279&type=chunk)

Financial Performance - GAAP EPS 为 $0.81，核心 EPS 为 $0.70[2] - GAAP ROAA 和 ROAE 分别为 1.22% 和 15.00%；核心 ROAA 和 ROAE 在 2Q22 分别为 1.05% 和 12.90%[2] - 平均无息存款同比增长 13.1%[2] Loan and Deposit Growth - 不包括 PPP，贷款完成额同比增长 63.0%[2] - 不包括 PPP，净贷款同比增长 3.4%[2] - 强劲的贷款储备为 5.83 亿美元[2] - 贷款收益率上升 6 个基点；核心贷款收益率环比扩大 11 个基点[2] - 2Q22 检查账户开户数同比增长 17.6%[19] Asset Quality - 不良资产占资产的比例增加至 0.59%[3] - 不良资产的 LTV 为 50.7%[3] - 总体房地产投资组合的平均 LTV 低于 38.0%[3,29] Digital Banking and Technology - 每月移动活跃用户同比增长 28%[8] - 活跃网上银行用户约为 25,000 人，同比增长 27%[8] - 数字银行注册人数同比增长 14%[8] - 上半年在数字平台上发放了约 1100 万美元的贷款承诺[3,8] Strategic Initiatives - 自 2021 年 3 月 31 日以来，从合并机构增加了 42 人，其中 18 人是创收者[3,5,41] - 在 Elmhurst 开设新分行，扩大亚洲市场足迹[9] - 2Q22 回购了 387,689 股股票[39,41]

Flushing Financial Corporation (NASDAQ:FFIC) Q2 2022 Earnings Conference Call July 27, 2022 9:30 AM ET Company Participants John Buran – President and Chief Executive Officer Susan Cullen – Senior Executive Vice President and Chief Financial Officer Conference Call Participants Mark Fitzgibbon – Piper Sandler Chris O’Connell – KBW Manuel Navas – D.A. Davidson Operator Welcome to Flushing Financial Corporation's Second Quarter 2022 Earnings Conference Call. Hosting the call today are John Buran, President an ...