FLUSHING FINANCIAL CORP [FFIC] Filings

10-Q 1 ffic-20230331x10q.htm 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

Commission file number 001-33013

FLUSHING FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

11-3209278

(I.R.S. Employer Identification No.)

220 RXR Plaza, Uniondale, New York 11556

(Address of principal executive offices)

(718) 961-5400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FFIC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes __No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). X Yes __No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer” ,“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer __	Accelerated filer X
Non-accelerated filer __	Smaller reporting company __
Emerging growth company __

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). __ Yes X No

The number of shares of the registrant’s Common Stock outstanding as of April 30, 2023 was 29,488,818.

Table of Contents

TABLE OF CONTENTS

	PAGE
PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements - (Unaudited)
Consolidated Statements of Financial Condition	1
Consolidated Statements of Income	2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Cash Flows	4
Consolidated Statements of Changes in Stockholders’ Equity	6
Notes to Consolidated Financial Statements	7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	55
ITEM 4. Controls and Procedures	55
PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings	56
ITEM 1A. Risk Factors	56
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	57
ITEM 3. Defaults Upon Senior Securities	57
ITEM 4. Mine Safety Disclosures	57
ITEM 5. Other Information	57
ITEM 6. Exhibits	58
SIGNATURES	60

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Financial Condition

(Unaudited)

Item 1. Financial Statements


	March 31,		December 31,
	2023			2022

	(Dollars in thousands, except per share data)
Assets
Cash and due from banks	$	176,747	$	151,754
Securities held-to-maturity, net of allowance of $1,087 and $1,100, respectively, (assets pledged of $4,647 and $4,550, respectively; fair value of $67,869 and $62,550, respectively)		73,523		73,711
Securities available for sale, at fair value: (assets pledged of $193,558 and $172,235, respectively; $13,192 and $13,023 at fair value pursuant to the fair value option, respectively)		811,928		735,357
Loans, net of fees and costs		6,904,176		6,934,769
Less: Allowance for credit losses		(38,729)		(40,442)
Net loans		6,865,447		6,894,327
Interest and dividends receivable		46,836		45,048
Bank premises and equipment, net		21,567		21,750
Federal Home Loan Bank of New York stock, at cost		38,779		45,842
Bank owned life insurance		214,240		213,131
Goodwill		17,636		17,636
Core deposit intangibles		1,891		2,017
Right of use asset		42,268		43,289
Other assets		168,259		179,084
Total assets	$	8,479,121	$	8,422,946

Liabilities
Due to depositors:
Non-interest bearing	$	872,254	$	921,238
Interest-bearing		5,783,263		5,515,945
Total Due to depositors		6,655,517		6,437,183
Mortgagors' escrow deposits		78,573		48,159
Borrowed funds:
Federal Home Loan Bank advances and other borrowings		652,262		815,501
Subordinated debentures		187,130		186,965
Junior subordinated debentures, at fair value		48,117		50,507
Total borrowed funds		887,509		1,052,973
Operating lease liability		45,353		46,125
Other liabilities		138,710		161,349
Total liabilities		7,805,662		7,745,789

Stockholders' Equity
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		—		—
Common stock ($0.01 par value; 100,000,000 shares authorized; 34,087,623 shares issued; 29,488,456 shares and 29,476,391 shares outstanding, respectively)		341		341
Additional paid-in capital		262,876		264,332
Treasury stock, at average cost (4,599,167 shares and 4,611,232 shares, respectively)		(97,760)		(98,535)
Retained earnings		545,786		547,507
Accumulated other comprehensive loss, net of taxes		(37,784)		(36,488)
Total stockholders' equity		673,459		677,157

Total liabilities and stockholders' equity	$	8,479,121	$	8,422,946

The accompanying notes are an integral part of these consolidated financial statements.

-1-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)


	For the three months ended
	March 31,
	2023		2022

	(In thousands, except per share data)
Interest and dividend income
Interest and fees on loans	$	82,889	$	67,516
Interest and dividends on securities:
Interest		7,240		3,745
Dividends		29		8
Other interest income		1,959		51
Total interest and dividend income		92,117		71,320
Interest expense
Deposits		39,056		3,408
Other interest expense		7,799		4,433
Total interest expense		46,855		7,841
Net interest income		45,262		63,479
Provision for credit losses		7,508		1,358
Net interest income after provision for credit losses		37,754		62,121
Non-interest income
Banking services fee income		1,411		1,374
Net gain on sale of loans		54		—
Net gain (loss) from fair value adjustments		2,619		(1,809)
Federal Home Loan Bank of New York stock dividends		697		397
Bank owned life insurance		1,109		1,114
Other income		1,018		237
Total non-interest income		6,908		1,313
Non-interest expense
Salaries and employee benefits		20,887		23,649
Occupancy and equipment		3,793		3,604
Professional services		2,483		2,222
FDIC deposit insurance		977		420
Data processing		1,435		1,424
Depreciation and amortization of bank premises and equipment		1,510		1,460
Other real estate owned / foreclosure expense		165		84
Other operating expenses		6,453		5,931
Total non-interest expense		37,703		38,794
Income before income taxes		6,959		24,640
Provision for income taxes
Federal		1,367		4,650
State and local		434		1,771
Total provision for income taxes		1,801		6,421
Net income	$	5,158	$	18,219

Basic earnings per common share	$	0.17	$	0.58
Diluted earnings per common share	$	0.17	$	0.58
Dividends per common share	$	0.22	$	0.22

The accompanying notes are an integral part of these consolidated financial statements.

-2-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)


	For the three months ended
	March 31,
	2023		2022

	(In thousands)
Net income	$	5,158	$	18,219
Other comprehensive loss, net of tax:
Amortization of actuarial gains, net of taxes of $31 and $2, respectively.		(69)		(4)
Amortization of prior service credits, net of taxes of $2 for the three months ended March 31, 2022.		—		(5)
Change in net unrealized gains (losses) on securities available for sale, net of taxes of ($1,883), and $10,892, respectively.		3,987		(23,427)
Net unrealized (loss) gain on cash flow hedges, net of taxes of $2,345, and ($6,857), respectively.		(5,140)		14,751
Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of $33, and $63, respectively.		(74)		(135)
Total other comprehensive loss, net of tax		(1,296)		(8,820)
Comprehensive net income	$	3,862	$	9,399

The accompanying notes are an integral part of these consolidated financial statements.

-3-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)


	For the three months ended March 31,
	2023		2022

	(In thousands)
Operating Activities
Net income	$	5,158	$	18,219
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses		7,508		1,358
Depreciation and amortization of premises and equipment		1,510		1,460
Net gain on sales of loans		(54)		—
Net amortization (accretion) of premiums and discounts		1,234		(492)
Deferred income tax provision		1,136		—
Net (gain) loss from fair value adjustments		(2,619)		1,809
Net (gain) loss from fair value adjustments of qualifying hedges		(100)		129
Income from bank owned life insurance		(1,109)		(1,114)
Stock-based compensation expense		3,808		4,194
Deferred compensation		(1,707)		(2,545)
Amortization of core deposit intangibles		126		142
(Increase) decrease in other assets		(8,420)		3,570
(Decrease) increase in other liabilities		(16,889)		13,847
Net cash (used in) provided by operating activities		(10,418)		40,577
Investing Activities
Purchases of premises and equipment		(1,327)		(874)
Purchases of Federal Home Loan Bank - NY shares		(55,017)		(388)
Redemptions of Federal Home Loan Bank - NY shares		62,080		2,434
Purchases of securities held-to-maturity		—		(16,476)
Proceeds from prepayments of securities held-to-maturity		200		—
Purchases of securities available for sale		(93,068)		(130,312)
Proceeds from maturities and prepayments of securities available for sale		21,087		32,177
Change in cash collateral		(6,180)		—
Net repayments of loans		75,496		72,080
Purchases of loans		(44,466)		(54,309)
Proceeds from sale of loans		2,575		—
Net cash used in investing activities		(38,620)		(95,668)

-4-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows (Contd.)

(Unaudited)



	For the three months ended March 31,
		2023		2022

	(In thousands)
Financing Activities
Net (decrease) increase in noninterest-bearing deposits	$	(48,984)	$	73,406
Net increase in interest-bearing deposits		267,208		16,482
Net increase in mortgagors' escrow deposits		30,414		27,582
Net (repayments) proceeds from short-term borrowed funds		(235,000)		110,000
Proceeds (repayments) from long-term borrowing		71,761		(50,000)
Purchase of treasury shares and repurchase of shares to satisfy tax obligations		(4,709)		(10,845)
Cash dividends paid		(6,659)		(6,850)
Net cash provided by financing activities		74,031		159,775
Net increase in cash and cash equivalents, and restricted cash		24,993		104,684
Cash, cash equivalents, and restricted cash, beginning of period		151,754		81,723
Cash, cash equivalents, and restricted cash, end of period	$	176,747	$	186,407
Supplemental Cash Flow Disclosure
Interest paid	$	48,889	$	6,846
Income taxes paid		1,993		214
Taxes paid if excess tax benefits on stock-based compensation were not tax deductible		1,948		384

The accompanying notes are an integral part of these consolidated financial statements.

-5-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)


							Additional						Accumulated Other
		Shares			Common		Paid-in		Treasury		Retained		Comprehensive
(Dollars in thousands, except per share data)	Outstanding		Total		Stock		Capital		Stock		Earnings		Loss
Balance at December 31, 2022		29,476,391	$	677,157	$	341	$	264,332	$	(98,535)	$	547,507	$	(36,488)

Net income		—		5,158		—		—		—		5,158		—
Vesting of restricted stock unit awards		256,798		—		—		(5,264)		5,484		(220)		—
Purchase of treasury shares		(159,516)		(3,053)		—		—		(3,053)		—		—
Stock-based compensation expense		—		3,808		—		3,808		—		—		—
Repurchase of shares to satisfy tax obligation		(85,217)		(1,656)		—		—		(1,656)		—		—
Dividends on common stock ($0.22 per share)		—		(6,659)		—		—		—		(6,659)		—
Other comprehensive loss		—		(1,296)		—		—		—		—		(1,296)
Balance at March 31, 2023		29,488,456	$	673,459	$	341	$	262,876	$	(97,760)	$	545,786	$	(37,784)


							Additional						Accumulated Other
		Shares			Common		Paid-in		Treasury		Retained		Comprehensive
(Dollars in thousands, except per share data)	Outstanding		Total		Stock		Capital		Stock		Earnings		Loss
Balance at December 31, 2021		30,526,353	$	679,628	$	341	$	263,375	$	(75,293)	$	497,889	$	(6,684)

Net income		—		18,219		—		—		—		18,219		—
Award of common shares released from Employee Benefit Trust		—		287		—		287		—		—		—
Vesting of restricted stock unit awards		297,626		—		—		(6,019)		6,304		(285)		—
Purchase of treasury shares		(360,000)		(8,469)		—		—		(8,469)		—		—
Stock-based compensation expense		—		4,194		—		4,194		—		—		—
Repurchase of shares to satisfy tax obligation		(97,435)		(2,376)		—		—		(2,376)		—		—
Dividends on common stock ($0.22 per share)		—		(6,850)		—		—		—		(6,850)		—
Other comprehensive loss		—		(8,820)		—		—		—		—		(8,820)
Balance at March 31, 2022		30,366,544	$	675,813	$	341	$	261,837	$	(79,834)	$	508,973	$	(15,504)

The accompanying notes are an integral part of these consolidated financial statements.

-6-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The primary business of Flushing Financial Corporation (the “Holding Company”), a Delaware corporation, is the operation of its wholly owned subsidiary, Flushing Bank (the “Bank”).

The unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q (“Quarterly Report”) include the collective results of the Holding Company and its direct and indirect wholly owned subsidiaries, including the Bank, Flushing Service Corporation and FSB Properties Inc., which are collectively herein referred to as “we,” “us,” “our” and the “Company.”

The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts. The Trusts are not included in the Company’s consolidated financial statements, as the Company would not absorb the losses of the Trusts if any losses were to occur.

The accompanying unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such presented periods of the Company. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report. All inter-company balances and transactions have been eliminated in consolidation. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for the full year.

The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

When necessary, certain reclassifications were made to prior-year amounts to conform to the current-year presentation. Such reclassifications had no effect on the prior period net income or shareholders’ equity and were insignificant amounts.

2. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for credit losses, the evaluation of goodwill for impairment, the review of the need for a valuation allowance of the Company’s deferred tax assets, and the fair value of financial instruments. Management performed a qualitative review of goodwill at March 31, 2023, concluding no impairment was indicated.

-7-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

3. Earnings Per Share

Earnings per common share have been computed based on the following:



	For the three months ended March 31,
	2023			2022

	(In thousands, except per share data)
Net income, as reported	$	5,158		$	18,219
Divided by:
Weighted average common shares outstanding		30,265			31,524
Weighted average common stock equivalents ⁽¹⁾		—			—
Total weighted average common shares outstanding and common stock equivalents		30,265			31,524
Basic earnings per common share	$	0.17		$	0.58
Diluted earnings per common share	$	0.17		$	0.58
Dividend Payout ratio		129.4	%		37.9	%

(1)	For the three months ended March 31, 2023, and 2022, there were no common stock equivalents that were anti-dilutive.

4. Securities

The following table summarizes the Company’s portfolio of securities held-to-maturity on March 31, 2023: