Flushing Financial (FFIC) - 2025 Q2 - Quarterly Report

FORM 10-Q Cover Page The registrant is FLUSHING FINANCIAL CORPORATION, filing for the quarterly period ended June 30, 2025 - The registrant is FLUSHING FINANCIAL CORPORATION, filing for the quarterly period ended June 30, 2025[2] - The company is an accelerated filer[4] - As of July 31, 2025, 33,778,438 shares of Common Stock were outstanding[4] TABLE OF CONTENTS The report is structured into PART I – FINANCIAL INFORMATION and PART II – OTHER INFORMATION, detailing financial statements, management's discussion, and other disclosures - The report is structured into PART I – FINANCIAL INFORMATION and PART II – OTHER INFORMATION[6] - PART I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosures About Market Risk, and Controls and Procedures[6] - PART II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, Other Information, and Exhibits[6] PART I — FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2025, and December 31, 2024 ITEM 1. Financial Statements - (Unaudited) This section presents the unaudited consolidated financial statements of Flushing Financial Corporation and its subsidiaries, including the Statements of Financial Condition, Operations, Comprehensive Income, Changes in Stockholders' Equity, Cash Flows, and accompanying notes, for the periods ended June 30, 2025, and December 31, 2024 Consolidated Statements of Financial Condition Total assets decreased by $262.4 million to $8.78 billion, primarily due to reductions in securities and loans held for sale, while total liabilities decreased by $244.3 million from reduced borrowed funds | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $8,776,524 | $9,038,972 | | Total Liabilities | $8,070,147 | $8,314,433 | | Total Stockholders' Equity | $706,377 | $724,539 | - Securities available for sale decreased by $106.1 million to $1.39 billion at June 30, 2025, from $1.50 billion at December 31, 2024[8] - Loans held for sale decreased from $70.1 million at December 31, 2024, to zero at June 30, 2025[8] - Total borrowed funds decreased by $315.9 million to $600.2 million at June 30, 2025, from $916.1 million at December 31, 2024[8] Consolidated Statements of Operations Net income for the three months ended June 30, 2025, significantly increased to $14.2 million, but for the six months, it decreased to $4.4 million due to a goodwill impairment charge Net Income and EPS (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | $14,203 | $5,322 | 166.9% | | Basic earnings (loss) per common share | $0.41 | $0.18 | 127.8% | Net Income and EPS (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | $4,407 | $9,006 | -51.1% | | Basic earnings (loss) per common share | $0.12 | $0.30 | -60.0% | - Net interest income for the three months ended June 30, 2025, increased by $10.4 million to $53.2 million, up from $42.8 million in 2024[11] - Non-interest income for the three months ended June 30, 2025, increased by $6.1 million to $10.3 million, up from $4.2 million in 2024[11] - A goodwill impairment charge of $17.6 million was recorded for the six months ended June 30, 2025[11] Consolidated Statements of Comprehensive Income Comprehensive net income for the three months ended June 30, 2025, was $10.2 million, but for the six months, the company reported a comprehensive net loss of $4.0 million due to unrealized losses on cash flow hedges Comprehensive Net Income (Loss) | Period | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Three months ended June 30 | $10,244 | $1,822 | | Six months ended June 30 | $(3,991) | $8,341 | - Net unrealized losses on cash flow hedges, net of taxes, amounted to $(11.2 million) for the six months ended June 30, 2025[13] - Change in net unrealized gains on securities available for sale, net of taxes, was $3.0 million for the six months ended June 30, 2025[13] Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased by $18.2 million to $706.4 million at June 30, 2025, primarily due to dividend payments and other comprehensive losses Stockholders' Equity | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $706,377 | | December 31, 2024 | $724,539 | - Dividends on common stock totaled $(7.6 million) for the three months ended June 30, 2025, and $(15.1 million) for the six months ended June 30, 2025[15][19] - Other comprehensive income (loss) for the six months ended June 30, 2025, was $(8.4 million)[13] Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating activities generated $32.6 million, investing activities provided $185.7 million, while financing activities used $220.8 million, resulting in a net decrease of $2.5 million in cash Net Cash Flow by Activity (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Operating Activities | $32,629 | $3,341 | | Investing Activities | $185,718 | $(569,305) | | Financing Activities | $(220,798) | $550,720 | - Net decrease in cash and cash equivalents was $2.5 million for the six months ended June 30, 2025[19] - Cash, cash equivalents, and restricted cash at June 30, 2025, totaled $150.1 million[19] Notes to Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, financial instrument valuations, loan portfolio, regulatory capital, and other significant financial information Note 1. Basis of Presentation The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC regulations for interim financial statements, including Flushing Financial Corporation and its subsidiaries - The Company's primary business is the operation of its wholly owned subsidiary, Flushing Bank[21] - Consolidated entities include Flushing Financial Corporation, Flushing Bank, Flushing Service Corporation, and FSB Properties Inc[22] - Statements are prepared in conformity with GAAP and SEC Form 10-Q instructions, with condensed or omitted information[23][24] Note 2. Use of Estimates Management makes estimates for the allowance for credit losses, deferred tax assets, and fair value of financial instruments, with goodwill impairment being a significant estimate in prior periods - Key estimates include the allowance for credit losses, valuation allowance of deferred tax assets, and fair value of financial instruments[26] - Goodwill impairment was a significant estimate for reporting periods preceding March 31, 2025[26] Note 3. Earnings Per Share Basic and diluted EPS for the three months ended June 30, 2025, was $0.41, up from $0.18 in 2024, but for the six months, it was $0.12, down from $0.30 in 2024 Basic and Diluted EPS (Three Months Ended June 30) | Year | EPS | | :--- | :--- | | 2025 | $0.41 | | 2024 | $0.18 | Basic and Diluted EPS (Six Months Ended June 30) | Year | EPS | | :--- | :--- | | 2025 | $0.12 | | 2024 | $0.30 | Dividend Payout Ratio | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | 53.7% | 122.2% | | Six months ended June 30 | 366.7% | 146.7% | Note 4. Securities The securities portfolio totaled $1.39 billion at June 30, 2025, with gross unrealized losses of $7.6 million and an allowance for credit losses of $3.1 million for one municipal security Securities Held-to-Maturity (June 30, 2025) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Municipals | $43,360 | $37,940 | | FNMA | $7,826 | $7,146 | | Total | $51,186 | $45,086 | Securities Available for Sale (June 30, 2025) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Total other securities | $570,937 | $563,031 | | Total mortgage-backed securities | $825,880 | $828,756 | | Total | $1,396,817 | $1,391,787 | - An allowance for credit losses of $3.1 million was recorded for one municipal security at June 30, 2025, due to an identified credit loss[35][42] - The Company holds $10 million of corporate debt from a New York-based bank holding company rated B1, which is on a watch list but not considered credit-related[36] Note 5. Loans The loan portfolio, net of fees and costs, totaled $6.71 billion at June 30, 2025, with ACL increasing to $41.2 million and non-accrual loans significantly rising to $51.0 million Loan Composition (June 30, 2025) | Loan Type | Amount (in thousands) | | :--- | :--- | | Multi-family residential | $2,487,610 | | Commercial real estate | $1,987,523 | | Commercial business and other | $1,407,792 | | One-to-four family — mixed-use property | $493,846 | | One-to-four family — residential | $258,608 | | Construction | $46,798 | | Small Business Administration | $15,473 | | Total loans, net of fees and costs | $6,709,601 | Allowance for Credit Losses (ACL) - Loans | Date | Amount (in thousands) | % of Gross Loans | % of Non-Performing Loans | | :--- | :--- | :--- | :--- | | June 30, 2025 | $41,247 | 0.62% | 83.8% | | December 31, 2024 | $40,152 | 0.60% | 120.5% | - Non-accrual loans increased from $34.0 million at December 31, 2024, to $51.0 million at June 30, 2025[55] - A provision for credit losses on loans of $3.8 million was recorded for the three months ended June 30, 2025, primarily due to increased reserves on Business Banking loans and charge-offs on Multi-Family residential loans[50] Note 6. Loans held for sale Loans held for sale decreased to zero at June 30, 2025, from $70.1 million at December 31, 2024, largely due to reclassification and a $2.6 million net gain on sale - Loans held for sale decreased from $70.1 million at December 31, 2024, to zero at June 30, 2025[72] - $32.1 million of loans classified as held for sale were transferred back to held for investment during the three months ended June 30, 2025[72] - A net gain on sale of $2.6 million was recorded from the reversal of a previously recorded valuation allowance upon the reclassification of loans[72][77] Note 7. Leases The Company has 32 operating leases, with ROU assets of $49.8 million and liabilities of $50.1 million at June 30, 2025, and total lease cost of $2.7 million for the three months ended June 30, 2025 Lease Information (June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Operating lease ROU assets | $49,759 | | Operating lease liabilities | $50,102 | | Weighted-average remaining lease term | 7.0 years | | Weighted average discount rate | 4.2% | Total Lease Cost | Period | Amount (in thousands) | | :--- | :--- | | Three months ended June 30, 2025 | $2,683 | | Six months ended June 30, 2025 | $5,375 | - The Company extended the term of its corporate headquarters operating lease by 3 years during the three months ended June 30, 2025[79] Note 8. Stock-Based Compensation The 2024 Omnibus Incentive Plan authorizes 974,000 shares for equity awards, with stock-based compensation costs of $0.8 million for the three months ended June 30, 2025, and $6.5 million in unrecognized compensation cost - The 2024 Omnibus Incentive Plan authorizes the issuance of up to 974,000 shares for stock options, stock appreciation rights, restricted stock awards, RSUs, PRSUs, and other stock-based awards[86] Stock-Based Compensation Costs (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $800 | $300 | | Six months ended June 30 | $1,300 | $1,300 | - As of June 30, 2025, there was $6.5 million of total unrecognized compensation cost related to RSU and PRSU awards, expected to be recognized over a weighted-average period of 2.1 years[91] Note 9. Pension and Other Postretirement Benefit Plans For the three months ended June 30, 2025, net employee pension benefit was $(74) thousand, net outside director pension benefit was $(11) thousand, and net other postretirement expense was $105 thousand Net Expense for Pension and Other Postretirement Benefit Plans (Three Months Ended June 30, 2025, in thousands) | Plan | Net Benefit (Expense) | | :--- | :--- | | Employee Pension Plan | $(74) | | Outside Director Pension Plan | $(11) | | Other Postretirement Benefit Plans | $105 | - The Company expects to contribute $0.1 million to the outside director pension plan and $0.3 million to other postretirement benefit plans during 2025, with no expected contribution to the employee pension plan[98] Note 10. Fair Value of Financial Instruments The Company measures certain financial assets and liabilities at fair value, with a net gain of $1.7 million from fair value adjustments for the three months ended June 30, 2025, and impaired loans totaling $26.3 million Net Gain (Loss) from Fair Value Adjustments (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $1,656 | $57 | | Six months ended June 30 | $1,504 | $(777) | - Fair value measurements are categorized into Level 1 (quoted market prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[105][107][108] - Impaired loans carried at fair value on a non-recurring basis totaled $26.3 million at June 30, 2025[115] - Junior subordinated debentures, valued under Level 3, had a fair value of $47.6 million at June 30, 2025, with effective yields as significant unobservable inputs[114] Note 11. Derivative Financial Instruments The Company uses interest rate swaps and floor options to manage interest rate risk, with a total notional value of approximately $2.6 billion at June 30, 2025, and a $4.8 million effect on net income for the three months ended June 30, 2025 - Derivative financial instruments include interest rate swaps and interest rate floor options[124] - Derivatives are used to mitigate exposure to rising interest rates on fixed-rate loans, facilitate customer risk management, mitigate exposure to rising rates on short-term advances/brokered deposits, and mitigate exposure to decreasing rates on adjustable-rate loans[124] Notional Amount of Derivatives (June 30, 2025, in thousands) | Category | Notional Amount (Assets) | Notional Amount (Liabilities) | | :--- | :--- | :--- | | Cash flow hedges | $305,000 | $520,750 | | Fair value hedges | $437,002 | $275,000 | | Non hedge | $523,193 | $523,193 | | Total | $1,265,195 | $1,318,943 | Effect of Derivative Instruments on Net Income (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $4,824 | $11,284 | | Six months ended June 30 | $11,301 | $22,682 | Note 12. Accumulated Other Comprehensive Income (Loss) AOCI was $(1.3 million) at June 30, 2025, with a net current period other comprehensive loss of $(8.4 million) for the six months, primarily due to unrealized losses on cash flow hedges - The ending balance of Accumulated Other Comprehensive Income (Loss), net of tax, was $(1.3 million) at June 30, 2025[138][140] - Net current period other comprehensive income (loss), net of tax, for the six months ended June 30, 2025, was $(8.4 million)[140] - Unrealized losses on cash flow hedges (net of tax) were $(11.2 million) for the six months ended June 30, 2025[140] - Unrealized gains on available for sale securities (net of tax) were $3.0 million for the six months ended June 30, 2025[140] Note 13. Regulatory Capital Both Flushing Bank and Flushing Financial Corporation remain 'well-capitalized' as of June 30, 2025, exceeding all regulatory capital requirements, with the Capital Conservation Buffer for the Bank at 5.74% and the Company at 5.10% - The Bank and Company are categorized as 'well-capitalized' under prompt corrective action regulations[145][149] Bank Capital Levels (June 30, 2025) | Capital Ratio | Capital Level | Requirement to be Well-Capitalized | Excess | | :--- | :--- | :--- | :--- | | Tier I (leverage) capital | 9.82% | 5.00% | 4.82% | | Common Equity Tier I risk-based capital | 13.11% | 6.50% | 6.61% | | Tier I risk-based capital | 13.11% | 8.00% | 5.11% | | Total risk-based capital | 13.74% | 10.00% | 3.74% | Company Capital Levels (June 30, 2025) | Capital Ratio | Capital Level | Requirement to be Well-Capitalized | Excess | | :--- | :--- | :--- | :--- | | Tier I (leverage) capital | 8.31% | 5.00% | 3.31% | | Common Equity Tier I risk-based capital | 10.41% | 6.50% | 3.91% | | Tier I risk-based capital | 11.10% | 8.00% | 3.10% | | Total risk-based capital | 14.57% | 10.00% | 4.57% | Capital Conservation Buffer (CCB) | Entity | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Bank | 5.74% | 5.11% | | Company | 5.10% | 4.82% | Note 14. Segment Reporting The Company operates as a single reportable segment, a community bank, with performance evaluated based on net income, return on assets, and return on equity - The Company operates as a single reportable segment: a community bank[151] - The CODM uses net income (loss), return on average assets, and return on average equity to evaluate performance[152] Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $14,203 thousand | $5,322 thousand | | Diluted earnings (loss) per common share | $0.41 | $0.18 | | Return on average assets | 0.64% | 0.24% | | Return on average equity | 8.00% | 3.19% | Note 15. New Authoritative Accounting Pronouncements The Company adopted ASU No. 2023-09 on January 1, 2025, impacting disclosures, and is evaluating ASU No. 2024-03, effective for annual periods beginning after December 15, 2026 - ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' was adopted on January 1, 2025, affecting disclosures only[156] - ASU No. 2024-03, 'Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures,' is pending adoption, effective for annual periods beginning after December 15, 2026[157] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the Company's financial performance and condition, highlighting increased net income for the three months ended June 30, 2025, but a decrease for the six-month period due to a goodwill impairment charge Executive Summary Flushing Financial Corporation reported a substantial increase in net income to $14.2 million for the three months ended June 30, 2025, driven by a 49 basis point increase in net interest margin to 2.54%, maintaining a well-capitalized status - Net income for the three months ended June 30, 2025, was $14.2 million, an increase of 166.9% from $5.3 million in the prior year[167] - The net interest margin increased 49 basis points to 2.54% for the three months ended June 30, 2025[168] - Approximately 90% of the loan portfolio is collateralized by real estate, with an average loan to value of less than 35% at origination[169] Asset Quality Ratios (June 30, 2025) | Metric | Ratio | | :--- | :--- | | Allowance for credit losses (ACL) to gross loans | 0.62% | | ACL to non-performing loans | 83.8% | | Non-performing assets to total assets | 0.75% | Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024 Net income increased by 166.9% to $14.2 million, with diluted EPS rising to $0.41, driven by a 24.4% increase in net interest income and a 143.8% increase in non-interest income Operating Data Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net interest income (loss) | $53,209 | $42,776 | | Provision (benefit) for credit losses | $4,194 | $809 | | Non-interest income (loss) | $10,277 | $4,216 | | Net income (loss) | $14,203 | $5,322 | | Diluted earnings (loss) per common share | $0.41 | $0.18 | - Interest and dividend income increased by 3.7% to $117.4 million, with the yield on interest-earning assets rising 16 basis points to 5.59%[173] - Interest expense decreased by 8.9% to $64.2 million, as the average cost of interest-bearing liabilities declined 37 basis points to 3.58%[174] - The increase in net gain on sale of loans was driven by the reversal of a previously recorded valuation allowance upon the reclassification of loans held for sale to loans held for investment[177] Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024 Net income decreased by 51.1% to $4.4 million, primarily due to a $17.6 million non-cash goodwill impairment charge, despite a 24.7% increase in net interest income Operating Data Highlights (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net interest income (loss) | $106,198 | $85,173 | | Provision (benefit) for credit losses | $8,512 | $1,401 | | Non-interest income (loss) | $15,351 | $7,300 | | Net income (loss) | $4,407 | $9,006 | | Diluted earnings (loss) per common share | $0.12 | $0.30 | - The primary reason for the decrease in net income was a $17.6 million non-cash, non-tax deductible goodwill impairment charge[182][188] - Interest and dividend income increased by 5.0% to $233.9 million, with the yield on interest-earning assets rising 18 basis points to 5.55%[183] - Interest expense decreased by 7.1% to $127.7 million, due to a 35 basis point decrease in the average cost of interest-bearing liabilities to 3.54%[184] - The effective tax rate for the six months ended June 30, 2025, was 66.1%, up from 25.8% in 2024, primarily due to the non-tax deductible goodwill impairment and income tax audit settlements[190] Financial Condition Total assets decreased by 2.9% to $8.78 billion, while loan originations increased by 30.2%, and non-performing assets rose by 28.9% to $66.1 million - Total assets at June 30, 2025, were $8.78 billion, a decrease of $262.4 million (2.9%) from December 31, 2024[192] - Available for sale securities decreased by $106.1 million (7.1%) to $1.39 billion[192] - Loan originations and purchases for the six months ended June 30, 2025, were $333.3 million, an increase of 30.2% from $255.9 million in 2024[192][193] - Non-performing assets totaled $66.1 million at June 30, 2025, an increase of $14.8 million (28.9%) from December 31, 2024[196] - The ratio of ACL – loans to total non-performing loans was 83.8% at June 30, 2025, compared to 120.5% at December 31, 2024[196] Liabilities Total liabilities decreased by 2.9% to $8.07 billion, with deposits increasing by 1.3% to $7.22 billion, while borrowed funds significantly decreased by 34.5% - Total liabilities were $8.07 billion at June 30, 2025, a decrease of $244.3 million (2.9%) from December 31, 2024[199] - Due to depositors increased by $95.1 million (1.3%) to $7.22 billion, primarily from a $320.1 million increase in NOW accounts[199] - Borrowed funds decreased by $315.9 million (34.5%) during the six months ended June 30, 2025[199] - Uninsured deposits totaled $2.5 billion (34.7% of deposits), with $1.2 billion being uninsured and uncollateralized at June 30, 2025[199] - Brokered deposits decreased by $129.7 million (9.8%) to $1.19 billion at June 30, 2025[200] Equity Total stockholders' equity decreased by 2.5% to $706.4 million at June 30, 2025, due to $15.1 million in dividends and an $8.4 million decrease in other comprehensive income, with book value per common share decreasing to $20.91 - Total stockholders' equity was $706.4 million at June 30, 2025, a decrease of $18.2 million (2.5%) from December 31, 2024[201] - Dividends paid on common stock totaled $15.1 million ($0.44 per common share) for the six months ended June 30, 2025[201] - Book value per common share was $20.91 at June 30, 2025, down from $21.53 at December 31, 2024[201] Liquidity The Company maintains strong liquidity with $3.6 billion in combined available liquidity at June 30, 2025, from internal and external sources, and cash and cash equivalents totaling $150.1 million - Total available liquidity was $3.59 billion at June 30, 2025[203] Available Liquidity by Source (June 30, 2025, in millions) | Source | Net Availability | | :--- | :--- | | Unencumbered Securities | $767.4 | | Federal Home Loan Bank | $679.8 | | Federal Reserve Bank | $1,616.2 | | Other Banks | $457.0 | - Cash and cash equivalents totaled $150.1 million at June 30, 2025, with $20.6 million being restricted cash[203] Interest Rate Risk The Company manages interest rate risk through ALCO and Board ALCO, remaining within Board-set guidelines for net portfolio value and net interest income changes under various rate shock scenarios, supported by a $2.6 billion derivative portfolio - Interest rate risk is assessed and managed by the Asset/Liability Management Committee (ALCO) and the Investment Committee of the Board of Directors (Board ALCO)[205] Projected Percentage Change in Net Portfolio Value (June 30, 2025) | Change in Interest Rate | Projected % Change | | :--- | :--- | | -200 Basis points | 6.0% | | -100 Basis points | 2.7% | | +100 Basis points | (5.4)% | | +200 Basis points | (11.5)% | Projected Percentage Change in Net Interest Income (June 30, 2025) | Change in Interest Rate | Projected % Change | | :--- | :--- | | -200 Basis points | -% | | -100 Basis points | (0.4)% | | +100 Basis points | (3.8)% | | +200 Basis points | (8.5)% | - At June 30, 2025, the Company had a derivative portfolio with a notional value totaling $2.6 billion, designed to provide protection against rising interest rates[217] Average Balances For the three months ended June 30, 2025, average interest-earning assets were $8.4 billion with a yield of 5.59%, resulting in $53.3 million net interest income and a 2.54% net interest margin Average Balances and Yields/Costs (Three Months Ended June 30, 2025, in thousands) | Metric | Average Balance | Interest/Cost | Yield/Cost | | :--- | :--- | :--- | :--- | | Total interest-earning assets | $8,402,582 | $117,498 | 5.59% | | Total interest-bearing liabilities | $7,176,399 | $64,193 | 3.58% | | Net interest income | - | $53,305 | - | | Net interest margin | $1,226,183 | - | 2.54% | Average Balances and Yields/Costs (Six Months Ended June 30, 2025, in thousands) | Metric | Average Balance | Interest/Cost | Yield/Cost | | :--- | :--- | :--- | :--- | | Total interest-earning assets | $8,435,565 | $234,130 | 5.55% | | Total interest-bearing liabilities | $7,218,514 | $127,740 | 3.54% | | Net interest income (tax equivalent) | - | $106,390 | - | | Net interest margin (tax equivalent) | $1,217,051 | - | 2.52% | Loans Held for Investment For the six months ended June 30, 2025, mortgage loan originations increased to $121.3 million, commercial business loan originations reached $134.6 million, with total mortgage loans held for investment at $5.27 billion Mortgage Loans Held for Investment Activity (Six Months Ended June 30, 2025, in thousands) | Activity | Amount | | :--- | :--- | | At beginning of period | $5,316,249 | | Mortgage loans originated | $121,272 | | Mortgage loans purchased | $35,148 | | Principal reductions | $(212,866) | | Mortgage loan sales | $(18,374) | | At end of period | $5,274,385 | Commercial Business Loans Held for Investment Activity (Six Months Ended June 30, 2025, in thousands) | Activity | Amount | | :--- | :--- | | At beginning of period | $1,421,527 | | Commercial business and other loans originated | $134,615 | | Commercial business loans purchased | $42,217 | | Principal reductions | $(163,190) | | At end of period | $1,423,265 | Non-Performing Assets Total non-performing assets increased by 28.9% to $66.1 million at June 30, 2025, primarily due to an increase in non-accrual mortgage and commercial real estate loans, resulting in a 0.75% non-performing assets to total assets ratio Non-Performing Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total non-accrual loans | $49,247 | $33,318 | | Available for sale securities | $16,878 | $18,000 | | Total non-performing assets | $66,125 | $51,318 | - Non-performing loans to gross loans increased to 0.74% at June 30, 2025, from 0.49% at December 31, 2024[225] - Non-performing assets to total assets increased to 0.75% at June 30, 2025, from 0.57% at December 31, 2024[225] Criticized and Classified Assets The amortized cost of Criticized and Classified assets decreased slightly by $1.3 million to $90.6 million at June 30, 2025, with loans designated based on credit quality assessments - The amortized cost of Criticized and Classified assets was $90.6 million at June 30, 2025, a decrease of $1.3 million from $91.9 million at December 31, 2024[226] - Loans are designated as 'Special Mention,' 'Substandard,' 'Doubtful,' or 'Loss' based on credit risk[61] - Consumer mortgage loans in formal foreclosure proceedings totaled $2.5 million at June 30, 2025[227] Allowance for Credit Losses The total Allowance for Credit Losses (ACL) increased to $45.6 million at June 30, 2025, driven by an $8.1 million provision for credit losses on loans, partially offset by $7.0 million in net charge-offs Allowance for Credit Losses (Six Months Ended June 30, 2025, in thousands) | Category | Amount | | :--- | :--- | | Balance at beginning of period | $40,152 | | Loans- provision (benefit) | $8,071 | | Loans- charge-off (net of recoveries) | $(6,976) | | Allowance for credit losses - loans | $41,247 | | Total Allowance for credit losses | $45,644 | - The ratio of ACL - loans to gross loans was 0.62% at June 30, 2025[229] - The ratio of ACL - loans to non-accrual loans was 83.76% at June 30, 2025[229] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk' for detailed market risk disclosures - For market risk disclosures, refer to the 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk' section[230] ITEM 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the period - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[230] - No material changes in internal control over financial reporting occurred during the period[230] PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults, mine safety disclosures, other information, and exhibits ITEM 1. Legal Proceedings The Company is a defendant in various lawsuits, but management believes these will not have a material adverse effect on its financial condition or results - The Company is a defendant in various lawsuits[232] - Management believes the resolution of these matters will not result in any material adverse effect on the Company's financial condition, results of operations, and cash flows[232] ITEM 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[233] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company did not repurchase any common stock during the three months ended June 30, 2025, with 807,964 shares remaining authorized for repurchase under programs with no expiration - The Company did not repurchase any shares of common stock during the three months ended June 30, 2025[234] - As of June 30, 2025, 807,964 shares remained to be repurchased under currently authorized stock repurchase programs[234] - The stock repurchase authorizations have no expiration or maximum dollar amount[234] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[235] ITEM 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[236] ITEM 5. Other Information No other information is reported under this item - None[237] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, indentures, new severance policies, and Sarbanes-Oxley Act certifications - Exhibits include Certificate of Incorporation, Amended and Restated By-Laws, and Indentures[239][242] - New policies filed include the Flushing Bank Specified Officer Change in Control Severance Policy and the Employee Severance Compensation Plan for Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents, both effective July 2025[239][240][242][244] - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 by the CEO and CFO are included[239][242] SIGNATURES The report was signed by John R. Buran, President and CEO, and Susan K. Cullen, Senior EVP, Treasurer, and CFO, on August 7, 2025 - The report is signed by John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer[247] - The report was dated August 7, 2025[247]