FOURTH QUARTER 20181 HIGHLIGHTS

• GAAP diluted EPS was $0.44, up 109.5% from 4Q17 and down 27.9% QoQ
• Core diluted EPS was $0.54, up 63.6% from 4Q17 and unchanged QoQ
• Net interest income of $40.6 million, down 2.1% QoQ, and 5.6% from 4Q17
• Net interest margin was 2.55%, down 16bps QoQ and 35bps from 4Q17
• Non-interest expense decreased 5.4% QoQ and 0.5% from 4Q17
• GAAP and core ROAE were 9.2% and 11.4%, compared with 12.9% and 11.4%, respectively in 3Q18
• GAAP and core ROAA were 0.7% and 0.9%, respectively, compared with 1.1% and 1.0% , respectively in 3Q18
• Sold $120.3 million in lower yielding investment securities, resulting in a loss on sale of $1.9 million and purchased $113.4 million in higher yielding investment securities; transaction expected to aid 2019 EPS and NIM
• Tax benefit of $0.06 per diluted share due to release of previously accrued tax liability

FULL YEAR 20181 HIGHLIGHTS

• GAAP diluted EPS was $1.92, up 36.2% YoY
• Record core diluted EPS of $1.94, up 23.6% YoY
• Record loan closings of $1,250.8 million, up 20.3% YoY
• GAAP ROAE was 10.3%, compared with 7.8% and core ROAE was 10.4%, compared with 8.6% for 2017
• GAAP ROAA was 0.9%, compared with 0.7% and core ROAA was 0.9%, compared with 0.7% for 2017
• Net interest income was $167.4 million, down 3.3%, and net interest margin was 2.70%, down 23bps YoY
• Non-interest expense increased 3.9% YoY
• Tax benefit of $0.12 per diluted share due to release of previously accrued tax liability

UNIONDALE, N.Y., Jan. 31, 2019 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq-GS: FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2018.

John R. Buran, President and Chief Executive Officer, stated, “We are pleased to report another quarter of strong loan closings totaling $345 million, our highest quarterly production in 2018, bringing total annual loan closings to a record level of $1.3 billion, resulting in net loan growth of 3.2% (non-annualized) QoQ and 7.3% for the full year. These milestones were achieved while continuing to adhere to our strategy of emphasizing rate over volume, resulting in a 75bps increase in average loan yields on loan closings in 4Q18 compared to those booked in 4Q17. The increase in new loan volume and yields combined with repricings of adjustable rate loans resulted in a 9bps increase in the yield of total loans to 4.38% in 4Q18 from 4.29% in 3Q18, excluding prepayment penalty income and recovered interest from nonaccrual loans.”

“We continued to experience margin pressure during 4Q18 driven by higher cost of funds. The cost of funds increased 12bps QoQ and 58bps YoY, as the Federal Reserve increased benchmark rates by 100bps since the fourth quarter of 2017. We expect continued competition for deposits and additional compression on the NIM through 2019.”

“Overall our net interest margin decreased 16bps from 3Q18 to 2.55% for 4Q18. The decline in the net interest margin was primarily driven by a decrease of approximately $2 million in prepayment penalties and recovered interest from non-accrual loans in 4Q18 from 3Q18. The decrease in our net interest margin shrinks to 3bps QoQ using core NIM which excludes the adjustments noted above for prepayment penalties and recovered interest from non-accrual loans.”

“Our strategy of focusing on our net interest margin spurred our decision to sell lower yielding investment securities, from which we recognized a loss on sale totaling $1.9 million, and reinvested the proceeds into higher yielding investment securities. We anticipate this transaction to aid our future net interest margin and earnings per share and to break even in approximately two years.”

“Similar to the prior quarter, we allowed $15 million of participations with another financial institution to repay, as the rates offered during the refinancing process did not meet our rate criteria. Year-to-date, we have allowed approximately $154 million of participations to repay rather than refinance at a rate below our criteria. We continue to focus on the origination and purchase of adjustable rate loans, as approximately 78% of our new loans and 46% of our new investment securities were adjustable rate products allowing us to manage future compression on net interest margin as spreads are fixed. Additionally, approximately $450 million of forward swaps entered into in late 2017 provided a benefit of a basis point to the quarter’s net interest margin. We expect these swaps to continue to benefit our net interest margin as interest rates rise.”

“Over the past year, C&I loans represented 38% of new loan closings, which are primarily adjustable rate loans. For the first time business loan closings exceeded multi-family closings for the year. We have over $2 billion of loans repricing through 2021. During the fourth quarter $152 million of mortgage loans have repriced up an average of 57bps. In addition, the pipeline totals $197 million with an average yield of 5.12% compared to $355 million at 4.68% in the linked quarter.”

“Total deposits increased $258 million, or 5.5% (non-annualized) QoQ. The majority of this increase was transaction deposits which increased 8.3% (non-annualized) QoQ. Retail deposits increased $105 million QoQ. A prominent feature in the growth of retail deposits is the “Win Flushing” program, which focuses on increasing our deposit market share in the Asian Community of Flushing, Queens. Through the fourth quarter of 2018, we substantially achieved our goal, as we captured over $143 million of the $160 million in deposit growth targeted to be obtained by the end of 1Q19. Central to the “Win Flushing” program was the conversion of Flushing branches to the Universal Banker model, permitting staff to spend more time with customers. As of year-end we had 15 branches operating under the Universal Banker model. In the branches that have been converted we experienced an increase of over 120% in transactions processed at ATMs, to almost 60% of all branch transactions, reducing our customer’s reliance on tellers, resulting in an increase of over 30% in total branch sales, as sales per employee increased approximately 50% due to our branch staff focusing more time on sales opportunities. As previously discussed, we expect to have the remaining branches converted to the Universal Banker model by the end of 2019.”

Mr. Buran continued, “We continue to see strong improvements in our delinquency trends, as non-performing assets decreased by 10% and, total delinquencies decreased 20% since December 31, 2017. The loan-to-value ratio on our non-performing real estate loans at December 31, 2018 remained conservative at 35%. The net recoveries of $214,000 for the quarter reflect the Company’s conservative underwriting and diligence in the collection process.”

The Company retains its focus on preserving strong risk management practices, including conservative underwriting standards and improving yields to achieve improved risk-adjusted returns.

• Multi-family (excluding underlying co-operative mortgages), commercial real estate, and one-to-four family mixed-use property mortgage loans originated during 4Q18 had a yield of 4.73%, an increase of 35bps from 4.38% for 3Q18 and an increase of 82bps from 3.91% for 4Q17. We maintained our asset quality as these loans had an average loan-to-value ratio of 46% and an average debt coverage ratio of 164%.
• We remain committed to our strategy of focusing on C&I loans, commercial real estate loans and multi-family. In the fourth quarter, loan closings represented 34%, 28%, and 25%, respectively, of all originations, which were made while maintaining conservative loan-to-value and debt coverage ratios, and increasing yield.

Mr. Buran concluded, “Overall, we remain well capitalized and positioned to deliver profitable growth and long-term value to our shareholders as we continue to execute on our strategic objectives.”

Summary of Strategic Objectives

• Manage cost of funds and continue to improve funding mix
• Increase interest income by leveraging loan pricing opportunities and portfolio mix
• Enhance core earnings power by improving scalability and efficiency
• Manage credit risk
• Maintain well capitalized levels under all stress test scenarios

Earnings Summary:

Net Interest Income

Net interest income for 4Q18 was $40.6 million, a decrease of $2.4 million, or 5.6% YoY (4Q18 compared to 4Q17) and $0.9 million, or 2.1% QoQ (4Q18 compared to 3Q18).

• Net interest margin of 2.55%, decreased 35bps YoY and 16bps QoQ
• Net interest spread of 2.34%, decreased 41bps YoY and 17bps QoQ
• Yield on average interest-earning assets of 4.24%, increased 22bps YoY but decrease 3bps QoQ
• Cost of average interest-bearing liabilities of 1.90%, increased 63bps YoY and 14bps QoQ
• Cost of funds of 1.75%, increased 58bps YoY and 12bps QoQ, driven by increases in rates paid on deposits and short-term borrowings resulting from increases in the Fed Funds rate
• Average balance of total interest-earning assets of $6,364.5 million, increased $430.0 million, or 7.2%, YoY and $234.0 million, or 3.8%, QoQ
• Net interest income includes prepayment penalty income from loans totaling $0.9 million in 4Q18 compared with $1.4 million in 4Q17 and $1.9 million in 3Q18, accretion of discount upon call of CLO securities of none in 4Q18 and 3Q18 and $0.4 million in 4Q17 and recovered interest from delinquent loans of $0.3 million in 4Q18, compared to $0.1 million in 4Q17 and $1.1 million in 3Q18
• Absent all above items, the yield on interest-earning assets was 4.16% in 4Q18, an improvement of 26bps from 4Q17 and 8bps from 3Q18 and the net interest margin was 2.48% in 4Q18, which decreased 29bps from 4Q17 and 3bps from 3Q18

Provision for loan losses

As a result of the quarterly review of the allowance for loan losses, the Company recorded a provision of $0.4 million compared to $6.6 million in 4Q17 and none in 3Q18.

• Recorded net charge-offs (recoveries) of ($0.2) million in 4Q18, $11.5 million in 4Q17 and ($89,000) in 3Q18

Non-interest Income (Loss)

Non-interest income (loss) for 4Q18 was a loss $1.0 million, a decrease of $4.1 million YoY, and $5.9 million QoQ.

• During 4Q18 securities totaling $120.3 million at an average yield of 2.41% were sold, recording a loss on sale of $1.9 million, and the proceeds were used to purchase $113.4 million in securities at an average yield of 3.70%
• Additionally, non-interest income included net losses from fair value adjustments of $3.6 million in 4Q18, $0.6 million in 4Q17 and $0.2 million in 3Q18, gains from sale of assets of $1.1 million in 4Q18 and gains from life insurance of $2.2 million in 3Q18
• Absent all above items, non-interest income was $3.4 million, a decrease of $0.3 million, or 8.6% YoY, but an increase of $0.5 million, 16.4% QoQ

Non-interest Expense

Non-interest expense for 4Q18 was $25.8 million, a decrease of $0.1 million, or 0.5% YoY, and $1.5 million, or 5.4% QoQ.

• During 4Q18 BOLI split dollar insurance expense was reduced due to an increase in the discount rate used to calculate the cumulative split dollar liability; BOLI split dollar expense (income) was ($0.6) million in 4Q18, $0.6 million in 4Q17 and $0.1 million in 3Q18
• Absent the above items, non-interest expense was $26.4 million, an increase of $1.1 million, or 4.4% YoY, but a decrease of $0.7 million, or 2.5% QoQ
• The efficiency ratio was 58.5% in 4Q18 compared to 55.4% in 4Q17 and 61.3% in 3Q18

Provision for Income Taxes

The provision for income taxes in 4Q18 was $1.0 million, a decrease of $6.6 million, or 86.4% YoY and a decrease of $0.9 million, or 45.2% QoQ.

• Pre-tax income decreased by $0.2 million, or 1.3% YoY and by $5.8 million, or 30.0% QoQ
• The effective tax rates were 7.8% in 4Q18, 56.4% in 4Q17 and 9.9% in 3Q18
• 4Q18 and 3Q18 each reflect the release of a previously accrued tax liability of $1.8 million; 4Q17 reflects additional tax expense totaling $3.8 million from 2017 tax reform
• Absent the above items, the effective tax rates were 20.9% in 4Q18, 28.7% in 4Q17 and 19.1% in 3Q18

Financial Condition Summary:

Loans:

• Net loans held for investment were $5,530.5 million reflecting an increase of 3.2% QoQ (not annualized) and 7.3% from December 31, 2017, as we continue to focus on the origination of multi-family, commercial real estate and commercial business loans with a full relationship while emphasizing rate over volume
• Loan closings of multi-family, commercial real estate and commercial business loans totaled $297.2 million for 4Q18, or 86.6% of loan production
• Loan pipeline was $196.6 million at December 31, 2018, compared to $359.8 million at December 31, 2017 and $355.2 million at September 30, 2018
• The loan-to-value ratio on our portfolio of real estate dependent loans as of December 31, 2018 totaled 38.8%

The following table shows the weighted average rate received from loan closings for the periods indicated:

		For the three months ended
		December 31,			September 30,			December 31,
Loan type		2018			2018			2017
Mortgage loans		4.79	%		4.48	%		3.92	%
Non-mortgage loans		5.11	%		4.50	%		4.52	%
Total loans		4.90	%		4.49	%		4.15	%

Credit Quality:

• Non-performing loans totaled $16.3 million, a decrease of $1.9 million, or 10.4%, from $18.1 million at December 31, 2017
• Non-performing assets totaled $16.3 million, a decrease of $1.8 million, or 10.2%, from $18.1 million at December 31, 2017
• Classified assets totaled $46.5 million, an increase of $12.5 million, or 36.8%, from $34.0 million at December 31, 2017, primarily due to seven business loan relationships totaling $24.6 million being downgraded as they did not meet certain loan covenants; five of the relationships totaling $21.1 million are still accruing and continue to remit payments on time
• Loans classified as troubled debt restructured (TDR) totaled $8.4 million, a decrease of $4.8 million, or 36.6%, from $13.2 million at December 31, 2017, primarily due to the repayment of four taxi medallion TDRs, resulting in a recovery of $0.1 million and the sale of one commercial TDR
• We anticipate continued low loss content in the portfolio, as our strong underwriting standards coupled with our practice of obtaining updated appraisals and recording charge-offs early in the delinquency process has resulted in a 34.9% average loan-to-value for non-performing loans collateralized by real estate at December 31, 2018
• Net recoveries totaled $19,000 during the twelve months ended December 31, 2018

Capital Management:

• The Company and Bank, at December 31, 2018, were both well capitalized under all applicable regulatory requirements
• During 4Q18, stockholders’ equity increased $7.7 million, or 1.4%, to $549.5 million due to net income of $12.4 million, partially offset by the declaration and payment of dividends on the Company’s common stock and repurchases of the Company’s common stock
• During 4Q18, the Company repurchased 42,116 treasury shares at an average cost of $22.27 per share; as of December 31, 2018, up to 467,211 shares remained subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Book value per common share increased to $19.64 at December 31, 2018, from $18.63 at December 31, 2017 and tangible book value per common share, a non-GAAP measure, increased to $19.07 at December 31, 2018, from $18.08 at December 31, 2017

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 on Friday, February 1, 2019 at 9:30 AM (ET) to discuss the Company’s strategy and results for the fourth quarter and full year of 2018
• Dial-in for Live Call: 1-877-509-5836
• Webcast: https://services.choruscall.com/links/ffic190201.html
• Dial-in for Replay: 1-877-344-7529
• Replay Access Code: 10123652
• The conference call will be simultaneously webcast and archived through 5:00 PM (ET) on February 1, 2020

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 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®, our 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.

“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, 2017 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.

- Statistical Tables Follow - FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share data)(Unaudited)

			For the three months ended												For the twelve months ended
			December 31,				September 30,				December 31,				December 31,				December 31,
			2018				2018				2017				2018				2017
Interest and Dividend Income
Interest and fees on loans			$	60,722			$	59,658			$	53,449			$	232,719			$	209,283
Interest and dividends on securities:
Interest				6,376				5,562				6,112				23,022				24,489
Dividends				18				18				13				67				287
Other interest income				317				248				123				1,190				526
Total interest and dividend income				67,433				65,486				59,697				256,998				234,585
Interest Expense
Deposits				20,174				17,425				11,174				64,497				40,319
Other interest expense				6,623				6,540				5,463				25,095				21,159
Total interest expense				26,797				23,965				16,637				89,592				61,478
Net Interest Income				40,636				41,521				43,060				167,406				173,107
Provision for loan losses				422				-				6,595				575				9,861
Net Interest Income After Provision for Loan Losses				40,214				41,521				36,465				166,831				163,246
Non-interest Income
Banking services fee income				1,065				1,017				1,383				4,030				4,156
Net loss on sale of securities				(1,920	)			-				-				(1,920	)			(186	)
Net gain on sale of loans				-				10				207				168				603
Net gain on sale of assets				1,141				-				-				1,141				-
Net loss from fair value adjustments				(3,585	)			(170	)			(631	)			(4,122	)			(3,465	)
Federal Home Loan Bank of New York stock dividends				946				873				875				3,576				3,081
Gains from life insurance proceeds				-				2,222				-				2,998				1,405
Bank owned life insurance				779				782				809				3,099				3,227
Other income				588				221				421				1,367				1,541
Total non-interest income (loss)				(986	)			4,955				3,064				10,337				10,362
Non-interest Expense
Salaries and employee benefits				15,094				15,720				14,249				64,560				62,087
Occupancy and equipment				2,551				2,475				2,757				10,079				10,409
Professional services				1,821				1,915				1,822				8,360				7,500
FDIC deposit insurance				472				596				487				2,115				1,815
Data processing				1,409				1,427				1,365				5,663				5,238
Depreciation and amortization				1,464				1,484				1,339				5,792				4,832
Other real estate owned/foreclosure expense (benefit)				(128	)			(102	)			28				(94	)			404
Net gain from sales of real estate owned				-				-				-				(27	)			(50	)
Other operating expenses				3,077				3,718				3,832				15,235				15,239
Total non-interest expense				25,760				27,233				25,879				111,683				107,474
Income Before Income Taxes				13,468				19,243				13,650				65,485				66,134
Provision (Benefit) for Income Taxes
Federal				349				2,307				7,838				8,574				22,844
State and local				697				(397	)			(145	)			1,821				2,169
Total taxes				1,046				1,910				7,693				10,395				25,013
Net Income			$	12,422			$	17,333			$	5,957			$	55,090			$	41,121
Basic earnings per common share			$	0.44			$	0.61			$	0.21			$	1.92			$	1.41
Diluted earnings per common share			$	0.44			$	0.61			$	0.21			$	1.92			$	1.41
Dividends per common share			$	0.20			$	0.20			$	0.18			$	0.80			$	0.72

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands, except per share data)(Unaudited)

				December 31,				September 30,				December 31,
				2018				2018				2017
ASSETS
Cash and due from banks				$	118,561			$	45,094			$	51,546
Securities held-to-maturity:
	Mortgage-backed securities				7,953				7,958				7,973
	Other securities				24,065				23,207				22,913
Securities available for sale:
	Mortgage-backed securities				557,953				528,119				509,650
	Other securities				264,702				232,913				228,704
Loans:
	Multi-family residential				2,269,048				2,235,370				2,273,595
	Commercial real estate				1,542,547				1,460,555				1,368,112
	One-to-four family ― mixed-use property				577,741				565,302				564,206
	One-to-four family ― residential				190,350				188,975				180,663
	Co-operative apartments				8,498				7,771				6,895
	Construction				50,600				40,239				8,479
	Small Business Administration				15,210				14,322				18,479
	Taxi medallion				4,539				6,078				6,834
	Commercial business and other				877,763				846,224				732,973
	Net unamortized premiums and unearned loan fees				15,188				15,226				16,763
	Allowance for loan losses				(20,945	)			(20,309	)			(20,351	)
			Net loans		5,530,539				5,359,753				5,156,648
Interest and dividends receivable					25,485				24,673				21,405
Bank premises and equipment, net					30,418				29,929				30,836
Federal Home Loan Bank of New York stock					57,282				54,942				60,089
Bank owned life insurance					131,788				131,009				131,856
Goodwill					16,127				16,127				16,127
Other assets					69,303				85,819				61,527
			Total assets	$	6,834,176			$	6,539,543			$	6,299,274
LIABILITIES
Due to depositors:
	Non-interest bearing			$	413,747			$	398,606			$	385,269
	Interest-bearing:
		Certificate of deposit accounts			1,563,310				1,562,962				1,351,933
		Savings accounts			210,022				216,976				290,280
		Money market accounts			1,427,992				1,223,640				979,958
		NOW accounts			1,300,852				1,255,464				1,333,232
			Total interest-bearing deposits		4,502,176				4,259,042				3,955,403
Mortgagors' escrow deposits					44,861				58,667				42,606
Borrowed funds					1,250,843				1,197,101				1,309,653
Other liabilities					73,085				84,371				73,735
			Total liabilities		6,284,712				5,997,787				5,766,666
STOCKHOLDERS' EQUITY
Preferred stock (5,000,000 shares authorized; none issued)					-				-				-
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,530,595 shares
	issued at December 31, 2018, September 30, 2018 and December 31, 2017; 27,983,637
	shares, 28,025,081 shares and 28,588,266 shares outstanding at December 31, 2018,
	September 30, 2018 and December 31, 2017, respectively)				315				315				315
Additional paid-in capital					222,720				221,622				217,906
Treasury stock (3,546,958 shares, 3,505,514 shares and 2,942,329 shares at
	December 31, 2018, September 30, 2018 and December 31, 2017, respectively)				(75,146	)			(74,222	)			(57,675	)
Retained earnings					414,327				407,590				381,048
Accumulated other comprehensive loss, net of taxes					(12,752	)			(13,549	)			(8,986	)
			Total stockholders' equity		549,464				541,756				532,608
			Total liabilities and stockholders' equity	$	6,834,176			$	6,539,543			$	6,299,274

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESSELECTED CONSOLIDATED FINANCIAL DATA(Dollars in thousands, except per share data)(Unaudited)

		At or for the three months ended									At or for the twelve months ended
		December 31,			September 30,			December 31,			December 31,			December 31,
		2018			2018			2017			2018			2017
Per Share Data
Basic earnings per share		$	0.44		$	0.61		$	0.21		$	1.92		$	1.41
Diluted earnings per share		$	0.44		$	0.61		$	0.21		$	1.92		$	1.41
Average number of shares outstanding for:
Basic earnings per common share computation			28,422,215			28,603,543			29,045,491			28,709,378			29,080,095
Diluted earnings per common share computation			28,422,517			28,603,948			29,046,111			28,709,833			29,081,723
Shares outstanding			27,983,637			28,025,081			28,588,266			27,983,637			28,588,266
Book value per common share (1)		$	19.64		$	19.33		$	18.63		$	19.64		$	18.63
Tangible book value per common share (2)		$	19.07		$	18.77		$	18.08		$	19.07		$	18.08
Stockholders' Equity
Stockholders' equity		$	549,464		$	541,756		$	532,608		$	549,464		$	532,608
Tangible stockholders' equity			533,627			525,920			516,772			533,627			516,772
Average Balances
Total loans, net		$	5,438,418		$	5,280,172		$	5,087,102		$	5,316,968		$	4,988,613
Total interest-earning assets			6,364,456			6,130,422			5,934,493			6,194,248			5,916,073
Total assets			6,681,161			6,446,540			6,243,686			6,504,598			6,217,746
Total due to depositors			4,453,200			4,213,118			4,020,334			4,288,868			4,036,347
Total interest-bearing liabilities			5,654,560			5,455,867			5,254,030			5,517,552			5,268,100
Stockholders' equity			541,067			536,416			573,201			534,735			530,300
Performance Ratios (3)
Return on average assets			0.74	%		1.08	%		0.38	%		0.85	%		0.66	%
Return on average equity			9.18			12.93			4.44			10.30			7.75
Yield on average interest-earning assets			4.24			4.27			4.02			4.15			3.97
Cost of average interest-bearing liabilities			1.90			1.76			1.27			1.62			1.17
Cost of funds			1.75			1.63			1.17			1.52			1.09
Interest rate spread during period			2.34			2.51			2.75			2.53			2.80
Net interest margin			2.55			2.71			2.90			2.70			2.93
Non-interest expense to average assets			1.54			1.69			1.66			1.72			1.73
Efficiency ratio (4)			58.53			61.30			55.35			62.20			57.90
Average interest-earning assets to average
interest-bearing liabilities			1.13	X		1.12	X		1.13	X		1.12	X		1.12	X

(1) Calculated by dividing stockholders’ equity by shares outstanding.

(2) 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”.

(3) Ratios are presented on an annualized basis, where appropriate.

(4) Efficiency ratio, a non-GAAP measure, was calculated by dividing non-interest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of net interest income and non-interest income (excluding net gains and losses from the sale of securities, fair value adjustments and life insurance proceeds).

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESSELECTED CONSOLIDATED FINANCIAL DATA(Dollars in thousands)(Unaudited)

		At or for the year					At or for the year
		ended					ended
		December 31, 2018					December 31, 2017
Selected Financial Ratios and Other Data
Regulatory capital ratios (for Flushing Financial Corporation):
Tier 1 capital		$	586,582				$	563,426
Common equity Tier 1 capital			546,230					527,727
Total risk-based capital			682,527					658,777
Tier 1 leverage capital (well capitalized = 5%)			8.74		%			9.02	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			10.98					11.59
Tier 1 risk-based capital (well capitalized = 8.0%)			11.79					12.38
Total risk-based capital (well capitalized = 10.0%)			13.72					14.47
Regulatory capital ratios (for Flushing Bank only):
Tier 1 capital		$	660,782				$	631,285
Common equity Tier 1 capital			660,782					631,285
Total risk-based capital			681,727					651,636
Tier 1 leverage capital (well capitalized = 5%)			9.85		%			10.11	%
Common equity Tier 1 risk-based capital (well capitalized = 6.5%)			13.28					13.87
Tier 1 risk-based capital (well capitalized = 8.0%)			13.28					13.87
Total risk-based capital (well capitalized = 10.0%)			13.70					14.31
Capital ratios:
Average equity to average assets			8.22		%			8.53	%
Equity to total assets			8.04					8.46
Tangible common equity to tangible assets (1)			7.83					8.22
Asset quality:
Non-accrual loans (2)		$	16,253				$	15,710
Non-performing loans			16,253					18,134
Non-performing assets			16,288					18,134
Net charge-offs/ (recoveries)			(19	)				11,739
Asset quality ratios:
Non-performing loans to gross loans			0.29		%			0.35	%
Non-performing assets to total assets			0.24					0.29
Allowance for loan losses to gross loans			0.38					0.39
Allowance for loan losses to non-performing assets			128.60					112.23
Allowance for loan losses to non-performing loans			128.87					112.23
Full-service customer facilities			19					18

1. See “Calculation of Tangible Stockholders’ Common Equity to Tangible Assets”.
2. Excludes performing non-accrual TDR loans.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESNET INTEREST MARGIN(Dollars in thousands)(Unaudited)

	For the three months ended
	December 31, 2018						September 30, 2018						December 31, 2017
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,555,895	$	49,789	4.37	%	$	4,467,349	$	49,612	4.44	%	$	4,355,973	$	45,577	4.19	%
Other loans, net		882,523		10,933	4.96			812,823		10,046	4.94			731,129		7,872	4.31
Total loans, net (1)		5,438,418		60,722	4.47			5,280,172		59,658	4.52			5,087,102		53,449	4.20
Taxable securities:
Mortgage-backed
securities		558,693		4,004	2.87			542,192		3,800	2.80			524,098		3,567	2.72
Other securities		184,592		1,586	3.44			123,174		928	3.01			151,565		1,696	4.48
Total taxable securities		743,285		5,590	3.01			665,366		4,728	2.84			675,663		5,263	3.12
Tax-exempt securities: (2)
Other securities		114,079		804	2.82			123,472		852	2.76			123,816		862	2.78
Total tax-exempt securities		114,079		804	2.82			123,472		852	2.76			123,816		862	2.78
Interest-earning deposits
and federal funds sold		68,674		317	1.85			61,412		248	1.62			47,912		123	1.03
Total interest-earning
assets		6,364,456		67,433	4.24			6,130,422		65,486	4.27			5,934,493		59,697	4.02
Other assets		316,705						316,118						309,193
Total assets	$	6,681,161					$	6,446,540					$	6,243,686
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	213,091		392	0.74		$	219,749		304	0.55		$	306,273		519	0.68
NOW accounts		1,312,834		4,968	1.51			1,336,873		4,416	1.32			1,357,028		2,634	0.78
Money market accounts		1,348,873		6,523	1.93			1,169,130		5,126	1.75			984,619		2,664	1.08
Certificate of deposit
accounts		1,578,402		8,276	2.10			1,487,366		7,453	2.00			1,372,414		5,322	1.55
Total due to depositors		4,453,200		20,159	1.81			4,213,118		17,299	1.64			4,020,334		11,139	1.11
Mortgagors' escrow
accounts		71,108		15	0.08			57,573		126	0.88			65,127		35	0.21
Total interest-bearing
deposits		4,524,308		20,174	1.78			4,270,691		17,425	1.63			4,085,461		11,174	1.09
Borrowings		1,130,252		6,623	2.34			1,185,176		6,540	2.21			1,168,569		5,463	1.87
Total interest-bearing
liabilities		5,654,560		26,797	1.90			5,455,867		23,965	1.76			5,254,030		16,637	1.27
Non interest-bearing
demand deposits		406,501						380,825						373,136
Other liabilities		79,033						73,432						79,319
Total liabilities		6,140,094						5,910,124						5,706,485
Equity		541,067						536,416						537,201
Total liabilities and
equity	$	6,681,161					$	6,446,540					$	6,243,686
Net interest income /
net interest rate spread			$	40,636	2.34	%			$	41,521	2.51	%			$	43,060	2.75	%
Net interest-earning assets /
net interest margin	$	709,896			2.55	%	$	674,555			2.71	%	$	680,463			2.90	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.13	X					1.12	X					1.13	X

1. Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.5 million, $1.2 million and $0.5 million for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.
2. Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESNET INTEREST MARGIN(Dollars in thousands)(Unaudited)

	For the year ended
	December 31, 2018							December 31, 2017
	Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost
Interest-earning Assets:
Mortgage loans, net	$	4,494,210	$	193,186	4.30	%		$	4,304,889	$	181,006	4.20	%
Other loans, net		822,758		39,533	4.80				683,724		28,277	4.14
Total loans, net (1)		5,316,968		232,719	4.38				4,988,613		209,283	4.20
Taxable securities:
Mortgage-backed
securities		539,771		15,065	2.79				526,934		13,686	2.60
Other securities		140,461		4,658	3.32				199,350		7,349	3.69
Total taxable securities		680,232		19,723	2.90				726,284		21,035	2.90
Tax-exempt securities: (2)
Other securities		121,412		3,366	2.77				139,704		3,741	2.68
Total tax-exempt securities		121,412		3,366	2.77				139,704		3,741	2.68
Interest-earning deposits
and federal funds sold		75,636		1,190	1.57				61,472		526	0.86
Total interest-earning
assets		6,194,248		256,998	4.15				5,916,073		234,585	3.97
Other assets		310,350							301,673
Total assets	$	6,504,598						$	6,217,746
Interest-bearing Liabilities:
Deposits:
Savings accounts	$	233,392		1,370	0.59			$	292,887		1,808	0.62
NOW accounts		1,407,945		15,896	1.13				1,444,944		9,640	0.67
Money market accounts		1,164,505		18,707	1.61				908,025		8,151	0.90
Certificate of deposit
accounts		1,483,026		28,310	1.91				1,390,491		20,579	1.48
Total due to depositors		4,288,868		64,283	1.50				4,036,347		40,178	1.00
Mortgagors' escrow
accounts		66,255		214	0.32				61,962		141	0.23
Total interest-bearing
deposits		4,355,123		64,497	1.48				4,098,309		40,319	0.98
Borrowings		1,162,429		25,095	2.16				1,169,791		21,159	1.81
Total interest-bearing
liabilities		5,517,552		89,592	1.62				5,268,100		61,478	1.17
Non interest-bearing
demand deposits		380,889							348,518
Other liabilities		71,422							70,828
Total liabilities		5,969,863							5,687,446
Equity		534,735							530,300
Total liabilities and
equity	$	6,504,598						$	6,217,746
Net interest income /
net interest rate spread			$	167,406	2.53	%				$	173,107	2.80	%
Net interest-earning assets /
net interest margin	$	676,696			2.70	%		$	647,973			2.93	%
Ratio of interest-earning
assets to interest-bearing
liabilities					1.12	X						1.12	X

1. Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.1 million and $2.4 million for the year ended December 31, 2018 and 2017, respectively.
2. Interest income on tax-exempt securities does not include the tax benefit of the tax-exempt securities.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESDEPOSIT COMPOSITION(Unaudited)

																December 2018 vs.						December 2018 vs.
				December 31,			September 30,			June 30,			March 31,			September 2018,			December 31,			December 2017,
(Dollars in thousands)				2018			2018			2018			2018			% Change			2017			% Change
Deposits
Non-interest bearing				$	413,747		$	398,606		$	388,467		$	377,861		3.8	%		$	385,269		7.4	%
Interest bearing:
	Certificate of deposit
		accounts			1,563,310			1,562,962			1,452,016			1,499,326		0.0	%			1,351,933		15.6	%
	Savings accounts				210,022			216,976			225,815			246,888		-3.2	%			290,280		-27.6	%
	Money market accounts				1,427,992			1,223,640			1,069,835			1,032,409		16.7	%			979,958		45.7	%
	NOW accounts				1,300,852			1,255,464			1,422,745			1,479,319		3.6	%			1,333,232		-2.4	%
		Total interest-bearing
			deposits		4,502,176			4,259,042			4,170,411			4,257,942		5.7	%			3,955,403		13.8	%
			Total deposits	$	4,915,923		$	4,657,648		$	4,558,878		$	4,635,803		5.5	%		$	4,340,672		13.3	%

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESLOANS (Unaudited)

Loan Closings

		For the three months										For the year ended
		December 31,			September 30,			December 31,				December 31,			December 31,
(In thousands)		2018			2018			2017				2018			2017
Multi-family residential		$	85,095		$	102,484		$	118,784			$	339,732		$	373,512
Commercial real estate			95,772			38,569			53,381				270,785			238,057
One-to-four family – mixed-use property			28,924			16,870			19,913				74,156			65,247
One-to-four family – residential			7,356			11,362			9,545				42,660			26,168
Co-operative apartments			948			-			100				2,448			332
Construction			8,968			6,008			726				39,595			7,847
Small Business Administration			1,304			344			4,772				3,843			11,559
Commercial business and other			116,365			133,188			121,598				477,572			316,748
Total		$	344,732		$	308,825		$	328,819			$	1,250,791		$	1,039,470

Loan Composition

																				December 2018 vs.								December 2018 vs.
				December 31,				September 30,				June 30,				March 31,				September 2018,				December 31,				December 2017,
(Dollars in thousands)				2018				2018				2018				2018				% Change				2017				% Change
Loans held for investment:
Multi-family residential				$	2,269,048			$	2,235,370			$	2,247,852			$	2,286,803			1.5	%			$	2,273,595			-0.2	%
Commercial real estate					1,542,547				1,460,555				1,471,894				1,426,847			5.6	%				1,368,112			12.8	%
One-to-four family ―
	mixed-use property				577,741				565,302				564,474				566,930			2.2	%				564,206			2.4	%
One-to-four family ― residential					190,350				188,975				187,741				190,115			0.7	%				180,663			5.4	%
Co-operative apartments					8,498				7,771				7,839				6,826			9.4	%				6,895			23.2	%
Construction					50,600				40,239				33,826				23,887			25.7	%				8,479			496.8	%
Small Business Administration					15,210				14,322				14,405				20,004			6.2	%				18,479			-17.7	%
Taxi medallion					4,539				6,078				6,225				6,617			-25.3	%				6,834			-33.6	%
Commercial business and other					877,763				846,224				783,904				768,440			3.7	%				732,973			19.8	%
Net unamortized premiums
	and unearned loan fees				15,188				15,226				15,647				16,395			-0.2	%				16,763			-9.4	%
Allowance for loan losses					(20,945	)			(20,309	)			(20,220	)			(20,542	)		3.1	%				(20,351	)		2.9	%
			Net loans	$	5,530,539			$	5,359,753			$	5,313,587			$	5,292,322			3.2	%			$	5,156,648			7.3	%

Net Loans Activity

		Three Months Ended
		December 31,				September, 30				June 30,				March 31,				December 31,
(In thousands)			2018				2018				2018				2018				2017
Loans originated and purchased		$	344,732			$	308,825			$	255,410			$	341,824			$	328,819
Principal reductions			(173,061	)			(257,902	)			(226,030	)			(202,059	)			(209,400	)
Loans sold			-				(4,027	)			(7,273	)			(2,703	)			(1,018	)
Loan charged-offs			(211	)			(220	)			(416	)			(85	)			(11,616	)
Foreclosures			-				-				-				(744	)			-
Net change in deferred fees and costs			(38	)			(421	)			(748	)			(368	)			(162	)
Net change in the allowance for loan losses			(636	)			(89	)			322				(191	)			4,918
	Total loan activity	$	170,786			$	46,166			$	21,265			$	135,674			$	111,541

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIESNON-PERFORMING ASSETS and NET CHARGE-OFFS(Unaudited)

			December 31,				September 30,				June 30,				March 31,				December 31,
(Dollars in thousands)				2018				2018				2018				2018				2017
Loans 90 Days Or More Past Due
	and Still Accruing:
Commercial real estate			$	-			$	111			$	-			$	1,668			$	2,424
Construction				-				-				730				-				-
	Total			-				111				730				1,668				2,424
Non-accrual Loans:
Multi-family residential				2,410				862				2,165				2,193				3,598
Commercial real estate				1,379				1,398				1,448				1,894				1,473
One-to-four family - mixed-use property				928				795				2,157				2,396				1,867
One-to-four family - residential				6,144				6,610				6,969				7,542				7,808
Co-operative apartments				-				-				575				-				-
Small Business Administration				1,267				1,395				-				41				46
Taxi medallion(1)				613				712				743				906				918
Commercial business and other				3,512				761				2				-				-
	Total			16,253				12,533				14,059				14,972				15,710
	Total Non-performing Loans			16,253				12,644				14,789				16,640				18,134
Other Non-performing Assets:
Real estate acquired through foreclosure				-				-				-				638				-
Other asset acquired through foreclosure				35				35				35				106				-
	Total			35				35				35				744				-
	Total Non-performing Assets		$	16,288			$	12,679			$	14,824			$	17,384			$	18,134
Non-performing Assets to Total Assets				0.24	%			0.19	%			0.23	%			0.27	%			0.29	%
Allowance For Loan Losses to Non-performing Loans				128.9	%			160.6	%			136.7	%			123.5	%			112.2	%

(1) Not included in the above analysis are TDR taxi medallion loans totaling $3.9 million in 4Q18, $5.4 million in 3Q18, $5.5 million in 2Q18, $5.7 million in 1Q18 and $5.9 million in 4Q17.

Net Charge-Offs (Recoveries)

			Three Months Ended
			December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)			2018				2018				2018				2018				2017
Multi-family residential			$	(4	)		$	18			$	28			$	51			$	(1	)
Commercial real estate				-				-				-				-				(3	)
One-to-four family – mixed-use property				(18	)			(36	)			(79	)			-				(37	)
One-to-four family – residential				(199	)			(258	)			(4	)			(107	)			212
Small Business Administration				170				134				18				19				109
Taxi medallion				(143	)			40				353				-				11,229
Commercial business and other				(20	)			13				6				(1	)			4
Total net loan charge-offs (recoveries)			$	(214	)		$	(89	)		$	322			$	(38	)		$	11,513

Core Diluted EPS, Core ROAE, Core ROAA, tangible book value per common share and core earnings before provision and income taxes are each non-GAAP measures used in this release. A reconciliation to the most directly comparable GAAP financial measures appears in tabular form at the end of this release. The Company believes that these measures are useful for both investors and management to understand the effects of certain 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(Dollars in thousands, except per share data)(Unaudited)

		Three Months Ended										Twelve Months Ended
		December 31,			September 30,			December 31,				December 31,			December 31,
			2018			2018			2017				2018			2017
GAAP income before income taxes		$	13,468		$	19,243		$	13,650			$	65,485		$	66,134
Net loss from fair value adjustments			3,585			170			631				4,122			3,465
Net loss on sale of securities			1,920			-			-				1,920			186
Gain from life insurance proceeds			-			(2,222	)		-				(2,998	)		(1,405	)
Net gain on sale of assets			(1,141	)		-			-				(1,141	)		-
Accelerated employee benefits upon Officer's death			-			149			-				149			-
Core income before taxes			17,832			17,340			14,281				67,537			68,380
Provision for income taxes for core income			2,395			2,010			4,652				11,960			22,613
Core net income		$	15,437		$	15,330		$	9,629			$	55,577		$	45,767
GAAP diluted earnings per common share		$	0.44		$	0.61		$	0.21			$	1.92		$	1.41
Net loss from fair value adjustments, net of tax			0.09			-			0.01				0.10			0.07
Net loss on sale of securities, net of tax			0.05			-			-				0.05			-
Gain from life insurance proceeds			-			(0.08	)		-				(0.10	)		(0.05	)
Federal tax reform 2017			-			-			0.13				-			0.13
Net gain on sale of assets, net of tax			(0.03	)		-			-				(0.03	)		-
Accelerated employee benefits upon Officer's death, net of tax			-			-			-				-			-
Core diluted earnings per common share1		$	0.54		$	0.54		$	0.33			$	1.94		$	1.57
Core net income, as calculated above		$	15,437		$	15,330		$	9,629			$	55,577		$	45,767
Average assets			6,681,161			6,446,540			6,243,686				6,504,598			6,217,746
Average equity			541,067			536,416			537,201				534,735			530,300
Core return on average assets2			0.92	%		0.95	%		0.62	%			0.85	%		0.74	%
Core return on average equity2			11.41	%		11.43	%		7.17	%			10.39	%		8.63	%
(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 SUBSIDIARIESCALCULATION OF TANGIBLE STOCKHOLDERS’ COMMON EQUITY to TANGIBLE ASSETS(Unaudited)

						December 31,			December 31,
(Dollars in thousands)						2018			2017
Total Equity						$	549,464		$	532,608
Less:
	Goodwill						(16,127	)		(16,127	)
	Intangible deferred tax liabilities						290			291
		Tangible Stockholders' Common Equity				$	533,627		$	516,772
Total Assets						$	6,834,176		$	6,299,274
Less:
	Goodwill						(16,127	)		(16,127	)
	Intangible deferred tax liabilities						290			291
		Tangible Assets				$	6,818,339		$	6,283,438
Tangible Stockholders' Common Equity to Tangible Assets							7.83	%		8.22	%

1 See the table entitled “Reconciliation of Non-GAAP Financial Measures.”

Contact:

Susan K. CullenSenior Executive Vice President, Treasurer and Chief Financial OfficerFlushing Financial Corporation(718) 961-5400

Source: Flushing Financial Corporation

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