Flushing Financial (FFIC) Authorized Repurchase of Extra 1M Shares

July 27, 2021 5:06 PM EDT

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Flushing Financial Corporation (NASDAQ: FFIC)

“Our successful deposit strategy, the integration of Empire National Bank and the reopening of the New York metro area, resulted in a strong quarter for our Company. Quarterly GAAP EPS of $0.61 resulted in an increase of 2% over the prior quarter. We achieved record core EPS of $0.73, up 103% YoY and 35% QoQ. Importantly, we recognized GAAP ROAA and ROAE of 0.93% and 11.95%, respectively, and record core ROAA and ROAE of 1.11% and 14.27%, respectively.”

“We delivered on our strategic objective of optimizing the cost of funds. The cost of funds decreased four basis points from the prior quarter while the average deposit mix continued to improve with both non-interest bearing and core deposits increasing 8% and 5% (not annualized), respectively. The fifth consecutive quarter of record net interest income equaled $61.0 million, despite total assets remaining flat. We also performed well against our strategic objective to obtain appropriate risk adjusted returns as credit quality improved due to non-performing assets decreasing 17% QoQ.”
- John R. Buran, President and CEO

Empire Exceeding Expectations. “The results of the acquisition of Empire National Bank have exceeded our expectations. When the acquisition was announced, tangible book value earn back was modeled at 3.4 years. Our tangible book value per share as of June 30, 2021 totaling $20.51 exceeds the tangible book value per share of $20.22 as of September 30, 2020, the reported value when the deal closed and the tangible book value per share of $19.62 as of September 30, 2019, the reported value when the deal was announced. This accomplishment provided investors with an earn back of 9 months as management actions to achieve targeted cost saves and improved NIM were successful despite the COVID-19 pandemic and subsequent delays.”

Strong Capital; Increased Share Repurchase Authorization. “The capital ratios increased during the quarter with TCE/TA increasing to 7.80%. The Board of Directors authorized an increase of 1 million shares to our current share repurchase program, which now totals nearly 1.3 million shares and had no expiration. With our history of a low inherent risk business model, low loan to values for our real estate loans along with improved credit metrics, we are confident in our ability to support an increased stock repurchase program.”

2Q21 Key Financial Metrics1

2Q21 1Q21 4Q20 3Q20 2Q20
GAAP:
EPS $0.61 $0.60 $0.11 $0.50 $0.63
ROAA (%) 0.93 0.93 0.18 0.81 1.01
ROAE (%) 11.95 12.29 2.27 9.94 13.11
NIM FTE (%) 3.14 3.18 3.08 3.00 2.87
Core:
EPS $0.73 $0.54 $0.58 $0.56 $0.36
ROAA (%) 1.11 0.83 0.92 0.91 0.57
ROAE (%) 14.27 10.96 11.67 11.22 7.39
Core NIM FTE (%) 3.14 3.06 3.03 2.98 2.89
Efficiency Ratio (%) 53.4 58.6 57.6 55.4 54.9
Credit Quality:
NPAs/Loans&REO (%) 0.26 0.31 0.31 0.42 0.34
LLRs/Loans (%) 0.64 0.67 0.67 0.65 0.61
LLRs/NPLs (%) 242.55 212.87 214.27 154.66 181.84
NCOs/Avg Loans (%) 0.05 0.17 0.04 0.06 0.07
Balance Sheet:
Avg Loans ($B) $6.7 $6.7 $6.4 $5.9 $5.9
Avg Dep ($B) $6.5 $6.3 $5.5 $5.0 $5.0
Book Value/Share $21.16 $20.65 $20.11 $20.78 $20.27
Tangible BV/Share $20.51 $19.99 $19.45 $20.22 $19.71
TCE/TA (%) 7.80 7.60 7.52 8.10 7.78

1 See “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Margin to Core and Base Net Interest Income and Net Interest Margin.”

2Q21 Highlights

  • Record net interest income up 0.2% QoQ and 25.3% YoY to $61.0 million, while core net interest income was up 4.4% QoQ and 24.6% YoY to $61.1 million due to continued improvement in funding costs, increased prepayment penalty income, and net PPP fees
  • Net interest margin declined 4 bps QoQ, but rose 27 bps YoY to 3.14%, and core net interest margin was up 8 bps QoQ and 25 bps YoY to 3.14% primarily due to an improvement in funding costs and a rise in prepayment penalty income
  • Period end loans, excluding PPP, rose 0.4% QoQ and 10.7% YoY; loan closings were $324.4 million in 2Q21, up 0.5% QoQ and 38.8% YoY
  • Average deposits rose 3.6% QoQ and 29.1% YoY to $6.5 billion, with core deposits 84% of total average deposits
  • Loan pipeline rose 39.2% YoY to $432.6 million
  • Benefit for credit losses of $1.6 million due to an improving economic outlook; strong LTVs, and improving credit metrics; net charge-offs were $0.9 million or 5 bps of average loans in 2Q21
  • NPAs fell 17% QoQ to $17.6 million; criticized and classified assets increased 9.6% to $69.2 million (representing 1.03% of loans)
  • Tangible Common Equity to Tangible Assets improved to 7.80% from 7.60% in 1Q21
Income Statement Highlights
Y/Y Q/Q
($000s, except EPS) 2Q21 1Q21 4Q20 3Q20 2Q20 Change Change
Net Interest Income $61,039 $60,892 $55,732 $49,924 $48,717 25.3% 0.2%
(Benefit) Provision for Credit Losses (1,598) 2,820 3,862 2,470 9,619 (116.6) (156.7)
Non-interest Income (Loss) (3,210) 6,311 (1,181) 1,351 13,737 (123.4) (150.9)
Non-interest Expense 34,011 38,159 46,811 29,985 28,755 18.3 (10.9)
Income Before Income Taxes 25,416 26,224 3,878 18,820 24,080 5.5 (3.1)
Provision for Income Taxes 6,158 7,185 417 4,489 5,808 6.0 (14.3)
Net Income $19,258 $19,039 $3,461 $14,331 $18,272 5.4 1.2
Diluted EPS $0.61 $0.60 $0.11 $0.50 $0.63 (3.2) 1.7
Avg. Diluted Shares (000s) 31,677 31,604 30,603 28,874 28,867 9.7 0.2
Core Net Income1 $22,994 $16,973 $17,784 $16,168 $10,297 123.3 35.5
Core EPS1 $0.73 $0.54 $0.58 $0.56 $0.36 102.8 35.2

1 See Reconciliation of GAAP Earnings and Core Earnings

Net interest income for 2Q21 was $61.0 million, an increase of 25.3% YoY and 0.2% QoQ.

  • Net interest margin of 3.14%, increased 27 bps YoY, but declined 4 bps QoQ; there was no effect of the PPP loans on the NIM in 2Q21, but there was a drag on the NIM of 4 bps in 1Q21, 3 bps in 4Q20, 2 bps in 3Q20, and 1 bp in 2Q20; net purchase accounting accretion was $0.6 million in 2Q21, $0.9 million in 1Q21 and not meaningful in 4Q20
  • Prepayment penalty income from loans and securities, net reversals and recoveries of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $1.8 million (10 bps) in 2Q21, $3.3 million (17 bps) in 1Q21, $2.1 million (11 bps) in 4Q20, $1.7 million (11 bps) in 3Q20, and $0.4 million (2 bps) in 2Q20
  • Excluding these items in the previous bullet, net interest margin improved to 3.04% in 2Q21 from 3.01% in 1Q21, 2.97% in 4Q20, 2.89% in 3Q20, and 2.85% in 2Q20, or an increase of 19 bps YoY and 3 bps QoQ
  • Net PPP loan fees were $1.2 million (6 bps NIM impact) in 2Q21, an increase from $0.5 million (3 bps) in 1Q21, $0.4 million (2 bps) in 4Q20, $0.3 million (1 bp) in 3Q20, and $0.1 million (1 bp) in 2Q20

The Company recorded a benefit for credit losses of $1.6 million in 2Q21, compared to provisions for credit losses of $2.8 million in 1Q21 and $9.6 million in 2Q20.

  • 2Q21 benefit for credit losses was driven by the improving economic outlook supported by the low LTVs and inherent risk in the real estate portfolio
  • Net charge-offs were $0.9 million in 2Q21, an improvement from $2.9 million in 1Q21, but roughly stable from the $0.6 million in 4Q20, $0.8 million in 3Q20, and $1.0 million in 2Q20

Non-interest income for 2Q21 was a loss of $3.2 million, compared to income of $6.3 million in 1Q21 and income of $13.7 million in 2Q20.

  • Non-interest income included net gains (losses) from fair value adjustments of $(6.5) million ($(0.15) per share, net of tax) in 2Q21, $1.0 million ($0.02 per share, net of tax) in 1Q21, $(4.1) million ($(0.11) per share, net of tax) in 4Q20, $(2.2) million ($(0.06) per share, net of tax) in 3Q20, and $10.2 million ($0.27 per share, net of tax) in 2Q20
  • Absent all above items and other immaterial adjustments, non-interest income was $3.2 million in 2Q21, up 9.8% YoY, but down 31.7% QoQ as customer swap activity normalized after a strong 1Q21

Non-interest expense was $34.0 million in 2Q21, down from $38.2 million in 1Q21 and $46.8 million in 4Q20, but up from $30.0 million in 3Q20, and $28.8 million in 2Q20.

  • 2Q21 non-interest expense includes $0.5 million of pre-tax merger benefits primarily related to a refund received from a data processing vendor ($(0.01) per share, net of tax)
  • 1Q21 non-interest expense includes $1.0 million of pre-tax merger charges ($0.02 per share, net of tax); 1Q21 includes $3.3 million of seasonal compensation expense
  • 4Q20 non-interest expense includes $5.3 million pre-tax merger charges ($0.14 per share, net of tax) and $7.8 million pre-tax debt prepayment penalties ($0.20 per share, net of tax)
  • Non-interest expense includes merger charges of $0.4 million in 3Q20 and $0.2 million in 2Q20 ($0.01 per share, net of tax, for each period)
  • Excluding the above items and other and immaterial adjustments, core operating expenses were $34.4 million in 2Q21, up 20.3% YoY, but down 7.3% QoQ
  • The efficiency ratio improved to 53.4% in 2Q21, from 58.6% in 1Q21, 57.6% in 4Q20, 55.4% in 3Q20, and 54.9% in 2Q20

The provision for income taxes was $6.2 million in 2Q21, $7.2 million in 1Q21, $0.4 million in 4Q20, $4.5 million in 3Q20, and $5.8 million in 2Q20.

  • The effective tax rate was 24.2% in 2Q21, 27.4% in 1Q21, 10.8% in 4Q20, 23.9% in 3Q20, and 24.1% in 2Q20
  • The 2Q21 effective tax rate includes $0.8 million benefit for the state rate change; absent this benefit the effective tax rate would have been 27.2%
Balance Sheet, Credit Quality, and Capital Highlights
Y/Y Q/Q
($000s, except per share data) 2Q21 1Q21 4Q20 3Q20 2Q20 Change Change
Average Loans And Deposits
Loans $6,687 $6,700 $6,376 $5,904 $5,946 12.5% (0.2)%
Deposits 6,511 6,285 5,515 4,999 5,043 29.1 3.6
Credit Quality
Nonperforming Loans $17,592 $21,186 $21,073 $24,792 $20,188 (12.9)% (17.0)%
Nonperforming Assets 17,592 21,221 21,108 24,827 20,431 (13.9) (17.1)
Criticized and Classified Assets 69,161 63,130 71,691 42,181 48,712 42.0 9.6
Allowance for Credit Losses/Loans (%) 0.64 0.67 0.67 0.65 0.61 3bps (3)bps
Capital
Book Value/Share $21.16 $20.65 $20.11 $20.78 $20.27 4.4% 2.5%
Tangible Book Value/Share 20.51 19.99 19.45 20.22 19.71 4.1 2.6
Tang. Common Equity/Tang. Assets (%) 7.80 7.60 7.52 8.10 7.78 2bps 20bps
Leverage Ratio (%) 8.50 8.44 8.38 9.03 8.64 (14) 6

Average loans were $6.7 billion, an increase of 12.5% YoY, but a decline of 0.2% QoQ.

  • Total loan closings rose to $324.4 million in 2Q21, compared to $322.9 million in 1Q21, $316.0 million in 4Q20, $155.6 million in 3Q20, and $233.8 million in 2Q20
  • The loan pipeline increased to $432.6 million at June 30, 2021, compared to $310.8 million a year ago
  • SBA Paycheck Protection Program (“PPP”) loans were $197.3 million at 2Q21, $251.0 million at 1Q21, $151.9 million at 4Q20, $111.6 million at 3Q20, and $93.2 million at 2Q20; forgiven PPP loans were $69.2 million in 2Q21 compared to $24.1 million in 1Q21; the SBA has up to 90 days to process forgiveness; remaining unamortized net PPP fees were $4.4 million

Average Deposits totaled $6.5 billion, rising 29.1% YoY and 3.6% QoQ.

  • Average core deposits (non-CD deposits) rose to 84.0% of total average deposits (including escrow deposits) in 2Q21, compared to 76.5% a year ago

Credit Quality; Non-performing loans declined to $17.6 million in 2Q21, compared to $21.2 million in 1Q21 and $20.4 million in 2Q20.

  • Non-performing assets totaled $17.6 million, down 17.1% QoQ, and 13.9% YoY
  • Criticized and classified assets totaled $69.2 million at 2Q21, $63.1 million at 1Q21, $71.7 million at 4Q20, $42.2 million at 3Q20, and $48.7 million at 2Q20; the QoQ increase was primarily due to a rise in watch list loans; partially offset by a decline in classified loans
  • Loans classified as troubled debt restructured (TDR) totaled $15.5 million versus $15.2 million at 1Q21 and $6.0 million a year ago
  • Active COVID-19 forbearances totaled 69 loans with a principal balance of $245.8 million at June 30, 2021, with $163.3 million making interest payments and only $82.5 million (1.2% of loans) with full payment deferrals
  • Over 85% of gross loans are collateralized by real estate and these loans have a loan-to-value ratio of 38% as of June 30, 2021
  • Allowance for credit losses were 0.64% of loans at 2Q21 compared to 0.67% of loans at 1Q21 and 0.61% a year ago

Capital; Book value per common share increased to $21.16 at 2Q21, versus $20.65 at 1Q21 and $20.27 at 2Q20; tangible book value per common share, a non-GAAP measure, rose to $20.51 at 2Q21, compared to $19.99 at 1Q21 and $19.71 in 2Q20.

  • The Company paid a dividend of $0.21 per share in 2Q21 and did not repurchase any shares in the quarter
  • The Board of Directors increased the share repurchase authorization by 1 million shares; up to 1,284,806 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
  • Tangible common equity to tangible assets was 7.80% at 2Q21 compared to 7.78% a year ago
  • The Company and the Bank remain well capitalized under all applicable regulatory requirements
  • The leverage ratio was 8.50% in 2Q21 versus 8.64% in 2Q20
Conference Call Information And Third Quarter Earnings Release Date

Conference Call Information:

  • John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer, will host a conference call tomorrow, Wednesday, July 28, 2021, at 9:30 AM (ET) to discuss the Company’s second quarter 2021 results and strategy.
  • Dial-in for Live Call: 1-877-509-5836
  • Webcast: https://services.choruscall.com/links/ffic210728.html
  • Dial-in for Replay: 1-877-344-7529
  • Replay Access Code: 10151629
  • The conference call will be simultaneously webcast and archived through July 28, 2022.

Third Quarter 2021 Earnings Release Date:

The Company plans to release Third Quarter 2021 financial results after the market close on October 26, 2021; conference call at 9:30 AM (ET) on October 27, 2021.

A detailed announcement will be issued prior to the third quarter’s close confirming the date and time of the earnings release.

About Flushing Financial Corporation

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

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

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

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

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESFINANCIAL HIGHLIGHTS(Unaudited)

At or for the three months ended At or for the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars in thousands, except per share data) 2021 2021 2020 2020 2020 2021 2020
Performance Ratios (1)
Return on average assets 0.93% 0.93% 0.18% 0.81% 1.01% 0.93% 0.47%
Return on average equity 11.95 12.29 2.27 9.94 13.11 12.11 5.95
Yield on average interest-earning assets (2) 3.69 3.77 3.82 3.84 3.81 3.73 3.89
Cost of average interest-bearing liabilities 0.66 0.69 0.86 0.98 1.09 0.67 1.41
Cost of funds 0.57 0.61 0.77 0.89 0.99 0.59 1.30
Net interest rate spread during period (2) 3.03 3.08 2.96 2.86 2.72 3.06 2.48
Net interest margin (2) 3.14 3.18 3.08 3.00 2.87 3.16 2.66
Non-interest expense to average assets 1.65 1.87 2.43 1.69 1.60 1.76 1.71
Efficiency ratio (3) 53.38 58.58 57.56 55.37 54.92 55.96 61.16
Average interest-earning assets to average interest-bearing liabilities 1.19X 1.18X 1.17X 1.16X 1.15X 1.19X 1.14X
Average Balances
Total loans, net $6,686,888 $6,700,476 $6,375,516 $5,904,051 $5,946,412 $6,693,644 $5,870,640
Total interest-earning assets 7,790,174 7,667,217 7,243,472 6,675,896 6,809,835 7,729,035 6,764,846
Total assets 8,263,553 8,147,714 7,705,407 7,083,028 7,206,059 8,205,954 7,156,529
Total due to depositors 5,495,936 5,363,647 4,708,760 4,353,560 4,395,228 5,430,158 4,487,011
Total interest-bearing liabilities 6,532,891 6,477,871 6,169,574 5,731,899 5,912,774 6,505,534 5,932,350
Stockholders' equity 644,690 619,647 609,463 576,512 557,414 632,238 567,006
Per Share Data
Book value per common share (4) $21.16 $20.65 $20.11 $20.78 $20.27 $21.16 $20.27
Tangible book value per common share (5) $20.51 $19.99 $19.45 $20.22 $19.71 $20.51 $19.71
Stockholders' Equity
Stockholders' equity $655,167 $639,201 $618,997 $586,406 $571,921 $655,167 $571,921
Tangible stockholders' equity 634,959 618,839 598,476 570,571 556,086 634,959 556,086
Consolidated Regulatory Capital Ratios
Tier 1 capital $697,591 $679,343 $662,987 $630,380 $617,620 $697,591 $617,620
Common equity Tier 1 capital 649,367 636,071 621,247 593,344 583,238 649,367 583,238
Total risk-based capital 823,494 806,922 794,034 740,499 726,291 823,494 726,291
Risk Weighted Assets 6,344,076 6,281,136 6,287,598 5,381,938 5,406,014 6,344,076 5,406,104
Tier 1 leverage capital (well capitalized = 5%) 8.50% 8.44% 8.38% 9.03% 8.64% 8.50% 8.64%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%) 10.24 10.13 9.88 11.02 10.79 10.24 10.79
Tier 1 risk-based capital (well capitalized = 8.0%) 11.00 10.82 10.54 11.71 11.42 11.00 11.42
Total risk-based capital (well capitalized = 10.0%) 12.98 12.85 12.63 13.76 13.43 12.98 13.43
Capital Ratios
Average equity to average assets 7.80% 7.61% 7.91% 8.14% 7.74% 7.70% 7.92%
Equity to total assets 8.03 7.83 7.76 8.30 7.98 8.03 7.98
Tangible common equity to tangible assets (6) 7.80 7.60 7.52 8.10 7.78 7.80 7.78
Asset Quality
Non-accrual loans (7) $17,391 $18,604 $18,325 $24,792 $20,038 $17,391 $20,038
Non-performing loans 17,592 21,186 21,073 24,792 20,188 17,592 20,188
Non-performing assets 17,592 21,221 21,108 24,827 20,431 17,592 20,431
Net charge-offs 902 2,865 646 837 1,007 3,767 2,156
Asset Quality Ratios
Non-performing loans to gross loans 0.26% 0.31% 0.31% 0.42% 0.34% 0.26% 0.34%
Non-performing assets to total assets 0.22 0.26 0.26 0.35 0.29 0.22 0.29
Allowance for loan losses to gross loans 0.64 0.67 0.67 0.65 0.61 0.64 0.61
Allowance for loan losses to non-performing assets 242.55 212.52 213.91 154.44 179.68 242.55 179.68
Allowance for loan losses to non-performing loans 242.55 212.87 214.27 154.66 181.84 242.55 181.84
Net charge-offs to average loans 0.05 0.17 0.04 0.06 0.07 0.11 0.07
Full-service customer facilities 25 25 25 20 20 25 20

(See footnotes on next page)

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME (Unaudited)

For the three months ended For the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(In thousands, except per share data)2021 2021 2020 2020 2020 2021 2020
Interest and Dividend Income
Interest and fees on loans$67,999 $69,021 $66,120 $60,367 $60,557 $137,020 $121,666
Interest and dividends on securities:
Interest 3,685 3,072 2,813 3,525 4,182 6,757 9,438
Dividends 7 8 8 9 11 15 26
Other interest income 51 36 30 13 22 87 312
Total interest and dividend income 71,742 72,137 68,971 63,914 64,772 143,879 131,442
Interest Expense
Deposits 5,539 6,105 6,470 7,093 9,971 11,644 28,749
Other interest expense 5,164 5,140 6,769 6,897 6,084 10,304 13,150
Total interest expense 10,703 11,245 13,239 13,990 16,055 21,948 41,899
Net Interest Income 61,039 60,892 55,732 49,924 48,717 121,931 89,543
(Benefit) provision for credit losses (1,598) 2,820 3,862 2,470 9,619 1,222 16,797
Net Interest Income After (Benefit) Provision for Credit Losses 62,637 58,072 51,870 47,454 39,098 120,709 72,746
Non-interest Income (loss)
Banking services fee income 1,233 2,725 1,442 1,316 944 3,958 1,742
Net gain (loss) on sale of securities 123 (610) (54) 123 (91)
Net gain on sale of loans 127 31 6 158 42
Net gain on disposition of assets 621 621
Net gain (loss) from fair value adjustments (6,548) 982 (4,129) (2,225) 10,205 (5,566) 4,212
Federal Home Loan Bank of New York stock dividends 500 689 734 874 881 1,189 1,845
Life insurance proceeds 659 659
Bank owned life insurance 1,009 997 1,016 923 932 2,006 1,875
Other income 346 266 360 463 170 612 589
Total non-interest income (loss) (3,210) 6,311 (1,181) 1,351 13,737 3,101 10,873
Non-interest Expense
Salaries and employee benefits 19,879 22,664 22,089 17,335 16,184 42,543 34,804
Occupancy and equipment 3,522 3,367 3,446 3,021 2,827 6,889 5,667
Professional services 1,988 2,400 2,463 2,064 1,985 4,388 4,847
FDIC deposit insurance 729 1,213 562 727 737 1,942 1,387
Data processing 1,419 2,109 3,411 1,668 1,813 3,528 3,507
Depreciation and amortization 1,638 1,639 1,579 1,542 1,555 3,277 3,091
Other real estate owned/foreclosure (recoveries) expense 22 (10) 95 240 45 12 (119)
Prepayment penalty on borrowings 7,834
Other operating expenses 4,814 4,777 5,332 3,388 3,609 9,591 7,951
Total non-interest expense 34,011 38,159 46,811 29,985 28,755 72,170 61,135
Income Before Income Taxes 25,416 26,224 3,878 18,820 24,080 51,640 22,484
Provision (benefit) for Income Taxes
Federal 4,857 5,071 533 3,359 4,307 9,928 5,296
State and local 1,301 2,114 (116) 1,130 1,501 3,415 306
Total taxes 6,158 7,185 417 4,489 5,808 13,343 5,602
Net Income$19,258 $19,039 $3,461 $14,331 $18,272 $38,297 $16,882
Basic earnings per common share$0.61 $0.60 $0.11 $0.50 $0.63 $1.21 $0.58
Diluted earnings per common share$0.61 $0.60 $0.11 $0.50 $0.63 $1.21 $0.58
Dividends per common share$0.21 $0.21 $0.21 $0.21 $0.21 $0.42 $0.42
Basic average shares 31,677 31,604 30,603 28,874 28,867 31,641 28,860
Diluted average shares 31,677 31,604 30,603 28,874 28,867 31,641 28,860

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands) 2021 2021 2020 2020 2020
ASSETS
Cash and due from banks $145,971 $174,420 $157,388 $75,560 $84,754
Securities held-to-maturity:
Mortgage-backed securities 7,904 7,909 7,914 7,919 7,924
Other securities 49,986 49,912 49,918 50,252 50,078
Securities available for sale:
Mortgage-backed securities 596,661 518,781 404,460 386,235 442,507
Other securities 224,784 242,440 243,514 234,721 232,803
Loans 6,718,806 6,745,316 6,704,674 5,941,398 5,983,275
Allowance for loan losses (42,670) (45,099) (45,153) (38,343) (36,710)
Net loans 6,676,136 6,700,217 6,659,521 5,903,055 5,946,565
Interest and dividends receivable 43,803 44,941 44,041 36,068 30,219
Bank premises and equipment, net 26,438 27,498 28,179 25,766 27,018
Federal Home Loan Bank of New York stock 41,630 41,498 43,439 57,119 56,400
Bank owned life insurance 183,715 182,707 181,710 158,701 157,779
Goodwill 17,636 17,636 17,636 16,127 16,127
Core deposit intangibles 2,859 3,013 3,172
Right of use asset 51,972 53,802 50,743 42,326 38,303
Other assets 89,850 94,410 84,759 69,207 72,182
Total assets $8,159,345 $8,159,184 $7,976,394 $7,063,056 $7,162,659
LIABILITIES
Deposits $6,298,790 $6,326,577 $6,090,733 $4,906,359 $5,049,874
Mortgagors' escrow deposits 58,230 74,348 45,622 57,136 48,525
Borrowed funds 971,827 948,920 1,020,895 1,323,975 1,305,187
Operating lease liability 56,151 58,080 59,100 49,737 45,897
Other liabilities 119,180 112,058 141,047 139,443 141,255
Total liabilities 7,504,178 7,519,983 7,357,397 6,476,650 6,590,738
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued)
Common stock ($0.01 par value; 100,000,000 shares authorized) 341 341 341 315 315
Additional paid-in capital 260,958 260,019 261,533 227,877 226,901
Treasury stock (65,335) (65,479) (69,400) (69,409) (69,436)
Retained earnings 467,620 455,023 442,789 445,931 437,663
Accumulated other comprehensive loss, net of taxes (8,417) (10,703) (16,266) (18,308) (23,522)
Total stockholders' equity 655,167 639,201 618,997 586,406 571,921
Total liabilities and stockholders' equity $8,159,345 $8,159,184 $7,976,394 $7,063,056 $7,162,659
(In thousands)
Issued shares 34,088 34,088 34,088 31,531 31,531
Outstanding shares 30,962 30,954 30,776 28,218 28,217
Treasury shares 3,126 3,133 3,312 3,312 3,313

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESAVERAGE BALANCE SHEETS (Unaudited)

For the three months ended For the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(In thousands) 2021 2021 2020 2020 2020 2021 2020
Interest-earning Assets:
Mortgage loans, net $5,130,400 $5,155,975 $5,010,097 $4,721,742 $4,762,068 $5,143,117 $4,729,800
Other loans, net 1,556,488 1,544,501 1,365,419 1,182,309 1,184,344 1,550,527 1,140,840
Total loans, net 6,686,888 6,700,476 6,375,516 5,904,051 5,946,412 6,693,644 5,870,640
Taxable securities:
Mortgage-backed securities 578,134 433,917 413,875 413,902 465,365 506,424 486,638
Other securities 232,020 300,828 266,663 243,754 243,867 266,234 243,796
Total taxable securities 810,154 734,745 680,538 657,656 709,232 772,658 730,434
Tax-exempt securities:
Other securities 50,830 50,828 50,768 51,652 60,280 50,829 61,908
Total tax-exempt securities 50,830 50,828 50,768 51,652 60,280 50,829 61,908
Interest-earning deposits and federal funds sold 242,302 181,168 136,650 62,537 93,911 211,904 101,864
Total interest-earning assets 7,790,174 7,667,217 7,243,472 6,675,896 6,809,835 7,729,035 6,764,846
Other assets 473,379 480,497 461,935 407,132 396,224 476,919 391,683
Total assets $8,263,553 $8,147,714 $7,705,407 $7,083,028 $7,206,059 $8,205,954 $7,156,529
Interest-bearing Liabilities:
Deposits:
Savings accounts $153,113 $170,079 $163,382 $160,100 $188,587 $161,549 $191,307
NOW accounts 2,255,581 2,185,384 1,924,840 1,625,109 1,440,147 2,220,677 1,429,943
Money market accounts 2,043,257 1,905,543 1,507,245 1,461,996 1,580,652 1,974,781 1,639,217
Certificate of deposit accounts 1,043,985 1,102,641 1,113,293 1,106,355 1,185,842 1,073,151 1,226,544
Total due to depositors 5,495,936 5,363,647 4,708,760 4,353,560 4,395,228 5,430,158 4,487,011
Mortgagors' escrow accounts 91,545 65,372 75,005 55,868 87,058 78,531 76,281
Total interest-bearing deposits 5,587,481 5,429,019 4,783,765 4,409,428 4,482,286 5,508,689 4,563,292
Borrowings 945,410 1,048,852 1,385,809 1,322,471 1,430,488 996,845 1,369,058
Total interest-bearing liabilities 6,532,891 6,477,871 6,169,574 5,731,899 5,912,774 6,505,534 5,932,350
Non interest-bearing demand deposits 923,220 856,052 731,170 589,674 560,637 889,821 505,199
Other liabilities 162,752 194,144 195,200 184,943 175,234 178,361 151,974
Total liabilities 7,618,863 7,528,067 7,095,944 6,506,516 6,648,645 7,573,716 6,589,523
Equity 644,690 619,647 609,463 576,512 557,414 632,238 567,006
Total liabilities and equity $8,263,553 $8,147,714 $7,705,407 $7,083,028 $7,206,059 $8,205,954 $7,156,529
Net interest-earning assets $1,257,283 $1,189,346 $1,073,898 $943,997 $897,061 $1,223,501 $832,496

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

For the three months ended For the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars in thousands) 2021 2021 2020 2020 2020 2021 2020
Interest Income:
Mortgage loans, net $52,987 $55,219 $53,777 $49,814 $49,719 $108,206 $99,131
Other loans, net 15,012 13,802 12,343 10,553 10,838 28,814 22,535
Total loans, net 67,999 69,021 66,120 60,367 60,557 137,020 121,666
Taxable securities:
Mortgage-backed securities 2,233 1,698 1,435 1,928 2,327 3,931 5,367
Other securities 1,037 963 957 1,166 1,358 2,000 3,055
Total taxable securities 3,270 2,661 2,392 3,094 3,685 5,931 8,422
Tax-exempt securities:
Other securities 535 530 543 557 643 1,065 1,319
Total tax-exempt securities 535 530 543 557 643 1,065 1,319
Interest-earning deposits and federal funds sold 51 36 30 13 22 87 312
Total interest-earning assets 71,855 72,248 69,085 64,031 64,907 144,103 131,719
Interest Expense:
Deposits:
Savings accounts $66 $75 $75 $65 $74 $141 $355
NOW accounts 1,499 1,706 1,320 1,242 2,099 3,205 6,747
Money market accounts 2,060 2,100 2,010 2,108 3,208 4,160 10,250
Certificate of deposit accounts 1,913 2,222 3,065 3,700 4,564 4,135 11,331
Total due to depositors 5,538 6,103 6,470 7,115 9,945 11,641 28,683
Mortgagors' escrow accounts 1 2 (22) 26 3 66
Total interest-bearing deposits 5,539 6,105 6,470 7,093 9,971 11,644 28,749
Borrowings 5,164 5,140 6,769 6,897 6,084 10,304 13,150
Total interest-bearing liabilities 10,703 11,245 13,239 13,990 16,055 21,948 41,899
Net interest income- tax equivalent $61,152 $61,003 $55,846 $50,041 $48,852 $122,155 $89,820
Included in net interest income above:
Prepayment penalties received on loans and securities and net of reversals and recovered interest from non-accrual loans $2,046 $947 $1,093 $1,518 $776 $2,993 $1,965
Net gains/(losses) from fair value adjustments on qualifying hedges included in loan interest income (664) 1,427 1,023 230 (365) 763 (2,438)
Purchase accounting adjustments 565 922 11 1,487
Interest-earning Assets Yields:
Mortgage loans, net 4.13% 4.28% 4.29% 4.22% 4.18% 4.21% 4.19%
Other loans, net 3.86 3.57 3.62 3.57 3.66 3.72 3.95
Total loans, net 4.07 4.12 4.15 4.09 4.07 4.09 4.14
Taxable securities:
Mortgage-backed securities 1.54 1.57 1.39 1.86 2.00 1.55 2.21
Other securities 1.79 1.28 1.44 1.91 2.23 1.50 2.51
Total taxable securities 1.61 1.45 1.41 1.88 2.08 1.54 2.31
Tax-exempt securities: (1)
Other securities 4.21 4.17 4.28 4.31 4.27 4.19 4.26
Total tax-exempt securities 4.21 4.17 4.28 4.31 4.27 4.19 4.26
Interest-earning deposits and federal funds sold 0.08 0.08 0.09 0.08 0.09 0.08 0.61
Total interest-earning assets 3.69% 3.77% 3.82% 3.84% 3.81% 3.73% 3.89%
Interest-bearing Liabilities Yields:
Deposits:
Savings accounts 0.17% 0.18% 0.18% 0.16% 0.16% 0.17% 0.37%
NOW accounts 0.27 0.31 0.27 0.31 0.58 0.29 0.94
Money market accounts 0.40 0.44 0.53 0.58 0.81 0.42 1.25
Certificate of deposit accounts 0.73 0.81 1.10 1.34 1.54 0.77 1.85
Total due to depositors 0.40 0.46 0.55 0.65 0.91 0.43 1.28
Mortgagors' escrow accounts 0.01 (0.16) 0.12 0.01 0.17
Total interest-bearing deposits 0.40 0.45 0.54 0.64 0.89 0.42 1.26
Borrowings 2.18 1.96 1.95 2.09 1.70 2.07 1.92
Total interest-bearing liabilities 0.66% 0.69% 0.86% 0.98% 1.09% 0.67% 1.41%
Net interest rate spread (tax equivalent) 3.03% 3.08% 2.96% 2.86% 2.72% 3.06% 2.48%
Net interest margin (tax equivalent) 3.14% 3.18% 3.08% 3.00% 2.87% 3.16% 2.66%
Ratio of interest-earning assets to interest-bearing liabilities 1.19X 1.18X 1.17X 1.16X 1.15X 1.19X 1.14X

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESDEPOSIT and LOAN COMPOSITION(Unaudited)

Deposit Composition

June 2021 vs. June 2021 vs.
June 30, March 31, December 31, September 30, June 30, March 2021 June 2020
(Dollars in thousands) 2021 2021 2020 2020 2020 % Change % Change
Non-interest bearing $945,491 $917,189 $778,672 $607,954 $581,881 3.1% 62.5%
Interest bearing:
Certificate of deposit accounts 1,020,615 1,070,595 1,138,361 1,051,644 1,135,977 (4.7) (10.2)
Savings accounts 152,931 170,272 168,183 160,294 184,895 (10.2) (17.3)
Money market accounts 2,057,188 1,990,656 1,682,345 1,381,552 1,474,880 3.3 39.5
NOW accounts 2,122,565 2,177,865 2,323,172 1,704,915 1,672,241 (2.5) 26.9
Total interest-bearing deposits 5,353,299 5,409,388 5,312,061 4,298,405 4,467,993 (1.0) 19.8
Total deposits $6,298,790 $6,326,577 $6,090,733 $4,906,359 $5,049,874 (0.4)% 24.7%

Loan Composition

June 2021 vs. June 2021 vs.
June 30, March 31, December 31, September 30, June 30, March 2021 June 2020
(Dollars in thousands) 2021 2021 2020 2020 2020 % Change % Change
Multi-family residential $2,542,010 $2,525,967 $2,533,952 $2,252,757 $2,285,555 0.6% 11.2%
Commercial real estate 1,726,895 1,721,702 1,754,754 1,636,659 1,646,085 0.3 4.9
One-to-four family ― mixed-use property 582,211 595,431 602,981 585,159 591,347 (2.2) (1.5)
One-to-four family ― residential 288,652 239,391 245,211 191,011 184,741 20.6 56.2
Co-operative apartments 7,883 7,965 8,051 8,132 8,423 (1.0) (6.4)
Construction 62,802 61,528 83,322 63,567 69,433 2.1 (9.6)
Mortgage Loans 5,210,453 5,151,984 5,228,271 4,737,285 4,785,584 1.1 8.9
Small Business Administration (1) 215,158 267,120 167,376 124,649 106,813 (19.5) 101.4
Taxi medallion 2,757 2,317 3,269 (100.0)
Commercial business and other 1,291,526 1,326,657 1,303,225 1,063,429 1,073,623 (2.6) 20.3
Non-mortgage loans 1,506,684 1,593,777 1,473,358 1,190,395 1,183,705 (5.5) 27.3
Net unamortized premiums and unearned loan fees (2) 1,669 (445) 3,045 13,718 13,986 (475.1) (88.1)
Allowance for loan losses (42,670) (45,099) (45,153) (38,343) (36,710) (5.4) 16.2
Net loans $6,676,136 $6,700,217 $6,659,521 $5,903,055 $5,946,565 (0.4)% 12.3%

(1) Includes $197.3 million, $251.0 million, $151.9 million, $111.6 million and $93.2 million of PPP loans at June 30, 2021, March, 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.(2) Includes $8.3 million, $10.5 million and $11.3 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESLOAN CLOSINGS and RATES (Unaudited)

Loan Closings

For the three months ended For the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(In thousands) 2021 2021 2020 2020 2020 2021 2020
Multi-family residential $66,913 $58,553 $52,024 $33,733 $59,654 $125,466 $126,972
Commercial real estate 37,963 17,156 57,634 26,644 8,003 55,119 107,574
One-to-four family – mixed-use property 7,135 8,712 9,692 3,867 8,117 15,847 21,572
One-to-four family – residential 59,494 3,131 8,422 2,296 2,674 62,625 11,087
Co-operative apartments 704
Construction 5,281 7,123 6,869 5,420 2,821 12,404 9,570
Mortgage Loans 176,786 94,675 134,641 71,960 81,269 271,461 277,479
Small Business Administration (1) 17,585 125,093 598 18,456 93,241 142,678 93,298
Commercial business and other 130,036 103,118 180,787 65,160 59,287 233,154 161,735
Non-mortgage Loans 147,621 228,211 181,385 83,616 152,528 375,832 255,033
Total $324,407 $322,886 $316,026 $155,576 $233,797 $647,293 $532,512

(1) Includes $15.5 million, $123.2 million, $18.4 million and $93.2 million of PPP closings for the three months ended June 30, 2021, March 31, 2021, September 30, 2020, and June 30, 2020, respectively.

Weighted Average Rate on Loan Closings

For the three months ended
June 30, March 31, December 31, September 30, June 30,
Loan type 2021 2021 2020 2020 2020
Mortgage loans 3.53% 3.47% 3.47% 3.56% 3.79%
Non-mortgage loans 3.23 2.26 3.37 2.81 1.99
Total loans 3.39% 2.62% 3.41% 3.16% 2.62%
Excluding PPP loans 3.51% 3.62% 3.41% 3.45% 3.71%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESASSET QUALITY(Unaudited)Allowance for Loan Losses

For the Three Months Ended For the six months ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars in thousands) 2021 2021 2020 2020 2020 2021 2020
Allowance for loan losses
Beginning balances $45,099 $45,153 $38,343 $36,710 $28,098 45,153 21,751
Adoption of Current Expected Credit Losses 379
Multi-family residential 33 (11) (14) (7) $33 $(13)
Commercial real estate 64 64
One-to-four family – mixed-use property 3 19 (60) 3 22 (75)
One-to-four family – residential (2) (5) (2) (2) (3) (7) (8)
Small Business Administration (9) (10) (3) (47) 165 (19) 158
Taxi medallion (222) 2,758 124 951 2,536
Commercial business and other 1,132 6 538 9 849 1,138 2,094
Total net loan charge-offs 902 2,865 646 837 1,007 3,767 2,156
(Benefit) provision for loan losses (1,527) 2,811 3,357 2,470 9,619 1,284 16,736
Allowance recorded at the time of Acquisition 4,099
Ending balance $42,670 $45,099 $45,153 $38,343 $36,710 $42,670 $36,710
Gross charge-offs $1,186 $2,922 $752 $964 $1,030 $4,108 $2,289
Gross recoveries 284 57 106 127 23 341 133
Allowance for loan losses to gross loans 0.64% 0.67% 0.67% 0.65% 0.61% 0.64% 0.61%
Net loan charge-offs to average loans 0.05 0.17 0.04 0.06 0.07 0.11 0.07

Non-Performing Assets

June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands) 2021 2021 2020 2020 2020
Loans 90 Days Or More Past Due and Still Accruing:
Multi-family residential $201 $201 $201 $ $
Commercial real estate 2,547
Construction 2,381
Commercial business and other 150
Total 201 2,582 2,748 150
Non-accrual Loans:
Multi-family residential 4,669 4,338 2,524 2,661 3,688
Commercial real estate 8 8 1,683 2,657 2,671
One-to-four family - mixed-use property (1) 2,309 2,355 1,366 1,366 2,511
One-to-four family - residential 6,940 7,335 5,854 6,454 6,412
Small Business Administration 976 1,151 1,151 1,151 1,321
Taxi medallion(1) 2,317 2,218 1,757
Commercial business and other(1) 2,489 3,417 3,430 8,285 1,678
Total 17,391 18,604 18,325 24,792 20,038
Total Non-performing Loans (NPLs) 17,592 21,186 21,073 24,792 20,188
Other Non-performing Assets:
Real estate acquired through foreclosure 208
Other asset acquired through foreclosure 35 35 35 35
Total 35 35 35 243
Total Non-performing Assets $17,592 $21,221 $21,108 $24,827 $20,431
Non-performing Assets to Total Assets 0.22% 0.26% 0.26% 0.35% 0.29%
Allowance For Loan Losses to NPLs 242.6% 212.9% 214.3% 154.7% 181.8%

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESRECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

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

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

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESRECONCILIATION OF GAAP EARNINGS and CORE EARNINGS (Unaudited)

Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars In thousands, except per share data) 2021 2021 2020 2020 2020 2021 2020
GAAP income before income taxes $25,416 $26,224 $3,878 $18,820 $24,080 $51,640 $22,484
Day 1, Provision for Credit Losses - Empire transaction (Provision for credit losses) 1,818
Net (gain) loss from fair value adjustments (Non-interest income (loss)) 6,548 (982) 4,129 2,225 (10,205) 5,566 (4,212)
Net (gain) loss on sale of securities (Non-interest income (loss)) (123) 610 54 (123) 91
Life insurance proceeds (Non-interest income (loss)) (659) (659)
Net gain on disposition of assets (Non-interest income (loss)) (621) (621)
Net (gain) loss from fair value adjustments on qualifying hedges (Interest and fees on loans) 664 (1,427) (1,023) (230) 365 (763) 2,438
Prepayment penalty on borrowings (Non-interest expense) 7,834
Net amortization of purchase accounting adjustments (Various) (418) (789) 80 (1,207)
Merger (benefit) expense (Various) (490) 973 5,349 422 194 483 1,123
Core income before taxes 31,597 23,378 22,675 21,237 13,829 54,975 21,265
Provision for income taxes for core income 8,603 6,405 4,891 5,069 3,532 15,008 5,468
Core net income $22,994 $16,973 $17,784 $16,168 $10,297 $39,967 $15,797
GAAP diluted earnings per common share $0.61 $0.60 $0.11 $0.50 $0.63 $1.21 $0.58
Day 1, Provision for Credit Losses - Empire transaction, net of tax 0.05
Net (gain) loss from fair value adjustments, net of tax 0.15 (0.02) 0.11 0.06 (0.27) 0.13 (0.11)
Net loss on sale of securities, net of tax 0.02
Life insurance proceeds (0.02) (0.02)
Net gain on disposition of assets, net of tax (0.01) (0.01)
Net (gain) loss from fair value adjustments on qualifying hedges, net of tax 0.02 (0.03) (0.03) (0.01) 0.01 (0.02) 0.06
Prepayment penalty on borrowings, net of tax 0.20
Net amortization of purchase accounting adjustments, net of tax (0.01) (0.02) (0.03)
Merger (benefit) expense, net of tax (0.01) 0.02 0.14 0.01 0.01 0.01 0.03
NYS tax change (0.02) (0.02)
Core diluted earnings per common share(1) $0.73 $0.54 $0.58 $0.56 $0.36 $1.26 $0.55
Core net income, as calculated above $22,994 $16,973 $17,784 $16,168 $10,297 $39,967 $15,797
Average assets 8,263,553 8,147,714 7,705,407 7,083,028 7,206,059 8,205,954 7,156,529
Average equity 644,690 619,647 609,463 576,512 557,414 632,238 567,006
Core return on average assets(2) 1.11% 0.83% 0.92% 0.91% 0.57% 0.97% 0.44%
Core return on average equity(2) 14.27% 10.96% 11.67% 11.22% 7.39% 12.64% 5.57%

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

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

Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars In thousands) 2021 2021 2020 2020 2020 2021 2020
GAAP Net interest income $61,039 $60,892 $55,732 $49,924 $48,717 $121,931 $89,543
Net (gain) loss from fair value adjustments on qualifying hedges 664 (1,427) (1,023) (230) 365 (763) 2,438
Net amortization of purchase accounting adjustments (565) (922) (11) (1,487)
Core Net interest income $61,138 $58,543 $54,698 $49,694 $49,082 $119,681 $91,981
GAAP Non-interest income (loss) $(3,210) $6,311 $(1,181) $1,351 $13,737 $3,101 $10,873
Net (gain) loss from fair value adjustments 6,548 (982) 4,129 2,225 (10,205) 5,566 (4,212)
Net loss on sale of securities (123) 610 54 (123) 91
Life insurance proceeds (659) (659)
Net gain on sale of assets (621) (621)
Core Non-interest income $3,215 $4,708 $3,558 $3,576 $2,927 $7,923 $6,093
GAAP Non-interest expense $34,011 $38,159 $46,811 $29,985 $28,755 $72,170 $61,135
Prepayment penalty on borrowings (7,834)
Net amortization of purchase accounting adjustments (147) (133) (91) (280)
Merger (benefit) expense 490 (973) (5,349) (422) (194) (483) (1,123)
Core Non-interest expense $34,354 $37,053 $