美國
證券交易委員會
華盛頓特區20549
表格
根據《證券交易所法》執行法案
截至2024年6月30日季度結束
委員會文件編號
（依憑章程所載的完整登記名稱）
(成立地或組織其他管轄區)
（聯邦稅號）
(總部辦公地址)
(註冊人電話號碼，包括區號)
根據法案第12(b)條註冊的證券：
每種類別的名稱 | 交易標的（s） | 每個註冊交易所的名稱 |
請勾選表示：（1）在過去12個月內或在要求提交的較短期限內依據1934年證券交易所法第13或15(d)條的規定提交所有報告，並（2）在過去90天內一直須遵循這些提交要求。X
標明註冊者在過去12個月內（或註冊者需提交此等文件的較短期間內）是否已電子提交根據S-t法規（本章節§232.405號規則）要求提交的每個交互式數據文件？X
標明註冊者是否為大型加速認證審核者、加速認證審核者、非加速認證審核者、較小報告公司或新興成長公司，請參見《交易法》第120億2條中對「大型加速認證審核者」、「加速認證審核者」、「較小報告公司」和「新興成長公司」的定義。
大型加速決策者 __ | |
非加速決策者 __ | |
如果一家新興成長公司，請勾選表示登記公司已選擇不使用根據交易法第13(a)條提供的遵守任何新的或修改後的財務會計準則的延長過渡期。
請勾選表示公司是否是外殼公司（如《法案》第1202條所定義）。 __ 是
截至2024年10月31日，登記公司的普通股已發行股份為
i
第一部分 - 財務資訊
FLUSHING FINANCIAL CORPORATION及其附屬公司
財務狀況綜合報表
(未經查核)
項目 1 基本財務報表
九月三十日 | 十二月三十一日 | |||||
2024 | 2023 | |||||
（單位：千元美元，每股數據除外） | ||||||
資產 |
|
|
|
| ||
銀行存款及應付款項（限制性現金$ | $ | | $ | | ||
持有至到期的證券，扣除$的條款 |
| |
| | ||
可供出售證券，按公允價值計量（攤銷成本為$ |
| |
| | ||
貸款，扣除費用和成本 |
| |
| | ||
扣除：信用損失準備 |
| ( |
| ( | ||
淨貸款 |
| |
| | ||
利息和股息應收款 |
| |
| | ||
銀行樓宇和設備，淨值 |
| |
| | ||
New York聯邦住宅貸款銀行庫存，成本 |
| |
| | ||
銀行持有的人壽保險 |
| |
| | ||
商譽 |
| |
| | ||
核心存款無形資產 | | | ||||
租賃資產 | |
| | |||
其他資產 |
| |
| | ||
資產總額 | $ | | $ | | ||
負債 |
|
|
|
| ||
由於存款人： |
|
|
|
| ||
非利息軸承 | $ | | $ | | ||
利息收入 |
| |
| | ||
存款者應付款總額 | | | ||||
貸款人的質押存款 |
| |
| | ||
借入資金： |
|
|
|
| ||
聯邦住宅貸款銀行提前付款和其他借款 |
| |
| | ||
次順位債券 |
| |
| | ||
次公司輔助債券，按公允價值計算 |
| |
| | ||
所有借入资金总额 |
| |
| | ||
營業租賃負債 | | | ||||
其他負債 |
| |
| | ||
總負債 |
| |
| | ||
股東權益 |
|
| ||||
优先股（$0.0001面值；3,333,333股已授权） |
|
| ||||
普通股（$0.0001面值；授權50,000,000股，截至2023年12月31日和2024年6月30日止已發行18735946和18724596股） |
| |
| | ||
資本公積額額外增資 |
| |
| | ||
庫藏股，按平均成本（ |
| ( |
| ( | ||
保留收益 |
| |
| | ||
其他綜合損益（稅後），總額 |
| ( |
| ( | ||
股東權益總額 |
| |
| | ||
負債總額及股東權益合計 | $ | | $ | | ||
附注是這些綜合基本報表的重要部分。
-1-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
For the three months ended | For the nine months ended | |||||||||||
| September 30, | September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(In thousands, except per share data) | ||||||||||||
Interest and dividend income | ||||||||||||
Interest and fees on loans | $ | | $ | | $ | | $ | | ||||
Interest and dividends on securities: |
|
|
|
|
|
|
| |||||
Interest |
| | |
| | | ||||||
Dividends |
| |
| |
| |
| | ||||
Other interest income | |
| | |
| | ||||||
Total interest and dividend income |
| |
| |
| |
| | ||||
Interest expense |
|
|
|
|
|
|
|
| ||||
Deposits |
| |
| |
| |
| | ||||
Other interest expense |
| |
| |
| |
| | ||||
Total interest expense |
| |
| |
| |
| | ||||
Net interest income |
| |
| |
| |
| | ||||
Provision (benefit) for credit losses |
| |
| |
| |
| | ||||
Net interest income after provision (benefit) for credit losses |
| |
| |
| |
| | ||||
Non-interest income |
|
|
|
|
|
|
|
| ||||
Banking services fee income |
| |
| |
| |
| | ||||
Net gain (loss) on sale of loans |
| |
| — |
| |
| | ||||
Net gain (loss) from fair value adjustments |
| |
| ( |
| |
| | ||||
Federal Home Loan Bank of New York stock dividends |
| |
| |
| |
| | ||||
Life insurance proceeds |
| |
| |
| |
| | ||||
Bank owned life insurance |
| |
| |
| |
| | ||||
Other income |
| |
| |
| |
| | ||||
Total non-interest income (loss) |
| |
| |
| |
| | ||||
Non-interest expense |
|
| ||||||||||
Salaries and employee benefits |
| |
| |
| |
| | ||||
Occupancy and equipment |
| |
| |
| |
| | ||||
Professional services |
| |
| |
| |
| | ||||
FDIC deposit insurance |
| |
| |
| |
| | ||||
Data processing |
| |
| |
| |
| | ||||
Depreciation and amortization of bank premises and equipment |
| |
| |
| |
| | ||||
Other real estate owned / foreclosure expense |
| |
| |
| |
| | ||||
Net (gain) loss from sales of real estate owned |
| ( |
| — |
| ( |
| — | ||||
Other operating expenses |
| |
| |
| |
| | ||||
Total non-interest expense |
| |
| |
| |
| | ||||
Income before income taxes |
| |
| |
| |
| | ||||
Provision for income taxes | ||||||||||||
Federal |
| |
| |
| |
| | ||||
State and local |
| |
| |
| |
| | ||||
Total provision for income taxes |
| |
| |
| |
| | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Basic earnings per common share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per common share | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these consolidated financial statements.
-2-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
For the three months ended | For the nine months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
(In thousands) | |||||||||||||
Net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
| |||||
Amortization of actuarial (gains) losses, net of taxes of $ |
| ( |
| ( |
| ( |
| ( | |||||
Change in net unrealized gains (losses) on securities available for sale, net of taxes of ($ |
| |
| ( |
| |
| ( | |||||
Net unrealized gains (losses) on cashflow hedges, net of taxes of $ |
| ( |
| |
| ( |
| | |||||
Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of ($ |
| |
| |
| ( |
| | |||||
Other comprehensive income (loss), net of tax: |
| ( |
| ( |
| ( |
| ( | |||||
Comprehensive net income | $ | | $ | | $ | | $ | | |||||
The accompanying notes are an integral part of these consolidated financial statements.
-3-
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 |
| Stock | Capital |
| Stock | Earnings | Income (Loss) | Total | ||||||||||||
Balance at December 31, 2023 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — |
| — | — |
| |
| — |
| | |||||||||
Vesting of restricted stock unit awards | |
| — |
| ( | |
| ( |
| — |
| — | |||||||||
Stock-based compensation expense | — |
| — |
| | — |
| — |
| — |
| | |||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Dividends on common stock ($ | — |
| — |
| — | — |
| ( |
| — |
| ( | |||||||||
Other comprehensive income (loss) | — | — | — | — | — | | | ||||||||||||||
Balance at March 31, 2024 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — |
| — | — |
| |
| — |
| | |||||||||
Vesting of restricted stock unit awards | |
| — |
| ( | |
| ( |
| — |
| — | |||||||||
Stock-based compensation expense | — |
| — |
| | — |
| — |
| — |
| | |||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Dividends on common stock ($ | — |
| — |
| — | — |
| ( |
| — |
| ( | |||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ( | ||||||||||||||
Balance at June 30, 2024 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — | — | — | | — |
| | ||||||||||||
Vesting of restricted stock unit awards | |
| — | — | — | — | — |
| — | ||||||||||||
Stock-based compensation expense | — |
| — | | — | — | — |
| | ||||||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — | — | — | — | — |
| — | ||||||||||||
Dividends on common stock ($ | — |
| — | — | — | ( | — |
| ( | ||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ( | ||||||||||||||
Balance at September 30, 2024 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
-4-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity (Contd.)
(Unaudited)
|
| Additional |
| Accumulated Other |
| ||||||||||||||||
Shares | Common | Paid-in | Treasury | Retained | Comprehensive | ||||||||||||||||
(Dollars in thousands, except per share data) | Outstanding |
| Stock | Capital |
| Stock | Earnings | Income (Loss) | Total | ||||||||||||
Balance at December 31, 2022 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — |
| — | — |
| |
| — |
| | |||||||||
Vesting of restricted stock unit awards | |
| — |
| ( | |
| ( |
| — |
| — | |||||||||
Purchase of treasury shares | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Stock-based compensation expense | — |
| — |
| | — |
| — |
| — |
| | |||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Dividends on common stock ($ | — |
| — |
| — | — |
| ( |
| — |
| ( | |||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ( | ||||||||||||||
Balance at March 31, 2023 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — |
| — | — |
| |
| — |
| | |||||||||
Vesting of restricted stock unit awards | |
| — |
| ( | |
| ( |
| — |
| — | |||||||||
Purchase of treasury shares | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Stock-based compensation expense | — |
| — |
| | — |
| — |
| — |
| | |||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — |
| — | ( |
| — |
| — |
| ( | |||||||||
Dividends on common stock ($ | — |
| — |
| — | — |
| ( |
| — |
| ( | |||||||||
Other comprehensive income (loss) | — | — | — | — | — | | | ||||||||||||||
Balance at June 30, 2023 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
Net income | — |
| — | — | — | | — | | |||||||||||||
Vesting of restricted stock unit awards | |
| — | ( | | ( | — | — | |||||||||||||
Purchase of treasury shares | ( |
| — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation expense | — |
| — | | — | — | — | | |||||||||||||
Repurchase of shares to satisfy tax obligation | ( |
| — | — | ( | — | — | ( | |||||||||||||
Dividends on common stock ($ | — |
| — | — | — | ( | — | ( | |||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ( | ||||||||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
-5-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended September 30, | ||||||
| 2024 |
| 2023 | |||
(In thousands) | ||||||
Operating Activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
| ||
Provision (benefit) for credit losses |
| |
| | ||
Depreciation and amortization of premises and equipment |
| |
| | ||
Net (loss) gain on sales of loans |
| ( |
| ( | ||
Net amortization (accretion) of premiums and discounts |
| |
| | ||
Net (gain) loss on sales of REO | ( | | ||||
Deferred income tax provision (benefit) | | | ||||
Net (gain) loss from fair value adjustments | ( | ( | ||||
Net (gain) loss from fair value adjustments of hedges |
| ( |
| | ||
Gain from life insurance proceeds | ( | ( | ||||
Bank owned life insurance |
| ( |
| ( | ||
Stock-based compensation expense |
| |
| | ||
Deferred compensation |
| ( |
| ( | ||
Amortization of core deposit intangibles | | | ||||
(Increase) decrease in other assets |
| ( |
| ( | ||
Increase (decrease) in other liabilities |
| ( |
| ( | ||
Net cash provided by (used in) operating activities | | | ||||
Investing Activities |
|
|
|
| ||
Purchases of premises and equipment |
| ( |
| ( | ||
Purchases of Federal Home Loan Bank New York stock | ( | ( | ||||
Redemptions of Federal Home Loan Bank New York stock |
| |
| | ||
Proceeds from prepayments of securities held-to-maturity |
| |
| | ||
Purchases of securities available for sale |
| ( |
| ( | ||
Proceeds from sales and calls of securities available for sale |
| |
| | ||
Proceeds from maturities and prepayments of securities available for sale |
| |
| | ||
Proceeds from sale of real estate owned |
| |
| | ||
Proceeds from bank owned life insurance | | | ||||
Change in cash collateral |
| ( |
| | ||
Net repayments (originations) of loans |
| |
| | ||
Purchases of loans |
| ( |
| ( | ||
Proceeds from sale of loans originally classified as held to investment |
| |
| | ||
Net cash provided by (used in) investing activities | ( | ( | ||||
-6-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows (Contd.)
(Unaudited)
| |||||||
For the nine months ended September 30, | |||||||
2024 | 2023 | ||||||
(In thousands) | |||||||
Financing Activities | |||||||
Net increase (decrease) in noninterest-bearing deposits | $ | | $ | ( | |||
Net increase (decrease) in interest-bearing deposits |
| |
| | |||
Net increase (decrease) in mortgagors' escrow deposits |
| |
| | |||
Net (repayments) proceeds from short-term borrowed funds |
| ( |
| ( | |||
Proceeds from long-term borrowing |
| |
| | |||
Repayment of long-term borrowings |
| ( |
| ( | |||
Purchase of treasury shares |
| |
| ( | |||
Repurchase of shares to satisfy tax obligations | ( | ( | |||||
Cash dividends paid |
| ( |
| ( | |||
Net cash provided by (used in) financing activities |
| |
| | |||
Net increase (decrease) in cash and cash equivalents, and restricted cash |
| |
| | |||
Cash, cash equivalents, and restricted cash, beginning of period |
| |
| | |||
Cash, cash equivalents, and restricted cash, end of period | $ | | $ | | |||
Supplemental Cash Flow Disclosure |
|
|
|
| |||
Interest paid | $ | | $ | | |||
Income taxes paid |
| |
| | |||
Transfer of loans held for investment to other real estate owned |
| |
| | |||
Transfer of loans held for investment to held for sale | | | |||||
The accompanying notes are an integral part of these consolidated financial statements.
-7-
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 “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 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 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, 2023.
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 September 30, 2024, concluding
-8-
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 | For the nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| ||||||
(In thousands, except per share data) | ||||||||||||||
Net income, as reported | $ | | $ | | $ | | $ | | ||||||
Divided by: |
|
|
|
|
|
|
|
| ||||||
Total weighted average common shares outstanding and common stock equivalents |
| |
| |
| |
| | ||||||
Basic earnings per common share | $ | | $ | | $ | | $ | | ||||||
Diluted earnings per common share | $ | | $ | | $ | | $ | | ||||||
Dividend Payout ratio |
| | % |
| | % |
| | % |
| | % | ||
4. Securities
The following table summarizes the Company’s portfolio of securities held-to-maturity on September 30, 2024:
Gross | Gross | |||||||||||
Amortized | Unrecognized | Unrecognized | ||||||||||
| Cost |
| Fair Value |
| Gains | Losses | ||||||
(In thousands) | ||||||||||||
Municipals | $ | | $ | | $ | — | $ | ( | ||||
Total municipals |
| |
| |
| — |
| ( | ||||
FNMA |
| |
| |
| — |
| ( | ||||
Total mortgage-backed securities |
| |
| |
| — |
| ( | ||||
Total before allowance for credit losses | | $ | | $ | — | $ | ( | |||||
Allowance for credit losses | ( | |||||||||||
Total | $ | | ||||||||||
-9-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s portfolio of securities held-to-maturity on December 31, 2023:
Gross | Gross | |||||||||||
Amortized | Unrecognized | Unrecognized | ||||||||||
| Cost |
| Fair Value |
| Gains | Losses | ||||||
(In thousands) | ||||||||||||
Municipals | $ | | $ | | $ | — | $ | ( | ||||
Total municipals |
| |
| |
| — |
| ( | ||||
FNMA |
| |
| |
| — |
| ( | ||||
Total mortgage-backed securities |
| |
| |
| — |
| ( | ||||
Total before allowance for credit losses | | $ | | $ | — | $ | ( | |||||
Allowance for credit losses | ( | |||||||||||
Total | $ | | ||||||||||
The following table summarizes the Company’s portfolio of securities available for sale on September 30, 2024:
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | ||||||||||
| Cost |
| Fair Value |
| Gains |
| Losses | |||||
(In thousands) | ||||||||||||
U.S. government agencies | $ | | $ | | $ | | $ | ( | ||||
Corporate | | | | ( | ||||||||
Mutual funds |
| |
| |
| — |
| — | ||||
Collateralized loan obligations |
| |
| |
| |
| ( | ||||
Other |
| |
| |
| — |
| — | ||||
Total other securities |
| |
| |
| |
| ( | ||||
REMIC and CMO |
| |
| |
| |
| ( | ||||
GNMA |
| |
| |
| |
| ( | ||||
FNMA |
| |
| |
| |
| ( | ||||
FHLMC |
| |
| |
| — |
| ( | ||||
Total mortgage-backed securities |
| |
| |
| |
| ( | ||||
Total Securities excluding portfolio layer adjustments | | | | ( | ||||||||
Unallocated portfolio layer basis adjustments (1) | ( | n/a | — | | ||||||||
Total securities available for sale | $ | | $ | | $ | | $ | ( | ||||
(1) Represents the amount of portfolio layer method basis adjustments related to available for sale (“AFS”) securities hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for the individual securities being hedged. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
-10-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s portfolio of securities available for sale on December 31, 2023:
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | ||||||||||
| Cost |
| Fair Value |
| Gains |
| Losses | |||||
(In thousands) | ||||||||||||
U.S. government agencies | $ | | $ | | $ | | $ | ( | ||||
Corporate | | | — | ( | ||||||||
Mutual funds |
| |
| |
| — |
| | ||||
Collateralized loan obligations |
| |
| |
| |
| ( | ||||
Other |
| |
| |
| — |
| | ||||
Total other securities |
| |
| |
| |
| ( | ||||
REMIC and CMO |
| |
| |
| — |
| ( | ||||
GNMA |
| |
| |
| |
| ( | ||||
FNMA |
| |
| |
| |
| ( | ||||
FHLMC |
| |
| |
| — |
| ( | ||||
Total mortgage-backed securities |
| |
| |
| |
| ( | ||||
Total Securities excluding portfolio layer adjustments | | | | ( | ||||||||
Unallocated portfolio layer basis adjustments (1) | ( | n/a | — | | ||||||||
Total securities available for sale | $ | | $ | | $ | | $ | ( | ||||
(1) Represents the amount of portfolio layer method basis adjustments related to AFS securities hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for the individual securities being hedged. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
The corporate securities held by the Company at September 30, 2024 and December 31, 2023, are issued by U.S. banking institutions. The CMOs held by the Company at September 30, 2024 and December 31, 2023, are either fully guaranteed or issued by a government sponsored enterprise.
The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at September 30, 2024, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| Amortized | |||||
Securities held-to-maturity: |
| Cost |
| Fair Value | ||
| (In thousands) | |||||
Due after ten years | $ | $ | ||||
Total other securities | ||||||
Mortgage-backed securities | ||||||
Total before allowance for credit losses | $ | | ||||
Allowance for credit losses | ( | |||||
Total |
| $ | |
| ||
-11-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Amortized | ||||||
Securities available for sale: |
| Cost |
| Fair Value | ||
(In thousands) | ||||||
Due in one year or less |
| $ | |
| $ | |
Due after one year through five years | | | ||||
Due after five years through ten years | |
| | |||
Due after ten years | | | ||||
Total other securities |
| |
| | ||
Mutual funds |
| |
| | ||
Mortgage-backed securities |
| |
| | ||
Total securities available for sale (1) | $ | | $ | | ||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:
At September 30, 2024 | ||||||||||||||||||||
Total | Less than 12 months | 12 months or more | ||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
| Count |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | |||||||
(Dollars in thousands) | ||||||||||||||||||||
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Municipals |
| | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Total other securities |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
FNMA |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total mortgage-backed securities |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total |
| | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Available for sale securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Government Agencies |
| | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Corporate |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Collateralized loan obligations |
| |
| |
| ( |
| |
| ( |
| — |
| — | ||||||
Total other securities |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
REMIC and CMO |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
GNMA |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
FNMA |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
FHLMC |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total mortgage-backed securities |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Total |
| | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
-12-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
At December 31, 2023 | ||||||||||||||||||||
Total | Less than 12 months | 12 months or more | ||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
| Count |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | |||||||
(Dollars in thousands) | ||||||||||||||||||||
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Municipals |
| | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Total other securities |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
FNMA |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total mortgage-backed securities |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total |
| | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Available for sale securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. government agencies |
| | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Corporate |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Collateralized loan obligations |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total other securities |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
REMIC and CMO |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
GNMA |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
FNMA |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
FHLMC |
| |
| |
| ( |
| — |
| — |
| |
| ( | ||||||
Total mortgage-backed securities |
| |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Total |
| | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
The Company reviewed each available for sale security that had an unrealized loss at September 30, 2024 and December 31, 2023. The Company does not have the intent to sell these securities, and it is more likely than not the Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations, none of which the Company believes would cause the sale of the securities. If the Company identifies any decline in the fair value due to credit loss factors and an evaluation indicates that a credit loss exists, then the present value of cash flows that is expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. All but one of these securities are rated investment grade or better, and all these securities have a long history of no credit losses. The Bank holds approximately $
In determining the risk of loss for available for sale securities, the Company considered that mortgage-backed securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to the U.S. government, and that issuers of the collateralized loan obligations (“CLO”) and the issuer of corporate securities are global systematically important banks. Each of these securities is performing according to its terms
-13-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
and, in the opinion of management, will continue to perform according to its terms. Based on this review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and
The Company reviewed each held-to-maturity security at September 30, 2024 and December 31, 2023 as part of its quarterly Current Expected Credit Loss (“CECL”) process, resulting in an allowance for credit losses of $
It is the Company’s policy to exclude accrued interest receivable from the calculation of the allowance for credit losses on held-to-maturity and the valuation of available for sale securities. Accrued interest receivable on held-to-maturity securities totaled $
The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity.
For the three months ended | For the nine months ended | ||||||||||
September 30, | September 30, | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
(In thousands) | |||||||||||
Beginning balance | $ | | $ | | $ | | $ | | |||
Provision (benefit) |
| ( |
| | ( |
| ( | ||||
Allowance for credit losses | $ | | $ | | $ | | $ | | |||
Realized gains and losses on the sales of securities are determined using the specific identification method. The Company did
5. Loans
The following represents the composition of loans as of the dates indicated:
September 30, | December 31, | |||||
2024 |
| 2023 | ||||
(In thousands) | ||||||
Multi-family residential | $ | | $ | | ||
Commercial real estate |
| |
| | ||
One-to-four family ― mixed-use property |
| |
| | ||
One-to-four family ― residential |
| |
| | ||
Construction |
| |
| | ||
Small Business Administration |
| |
| | ||
Commercial business and other |
| |
| | ||
Net unamortized premiums and unearned loan fees |
| |
| | ||
Total loans, net of fees and costs excluding portfolio layer basis adjustments | | | ||||
Unallocated portfolio layer basis adjustments (1) | | ( | ||||
Total loans, net of fees and costs | $ | | $ | | ||
(1) This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
-14-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans, certain market value adjustments related to hedging and unamortized premiums or discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.
Interest on loans is recognized on an accrual basis. Accrued interest receivable totaled $
Allowance for credit losses
The allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis of credit risk.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes. The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans.
The Company recorded a provision for credit losses on loans totaling $
The Company may modify loans to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. When modifying a loan, an assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. This modification may include reducing the loan interest rate, extending the loan term, any other-than-insignificant payment delay, principal forgiveness or any combination of these types of modifications. When such modifications are performed, a change to the allowance for credit losses is generally not required as the methodologies used to estimate the allowance already capture the effect of borrowers experiencing financial difficulty. On September 30, 2024, there were no commitments to lend additional funds to borrowers who have received a loan modification due to financial difficulty.
-15-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show loan modifications made to borrowers experiencing financial difficulty by type of modification granted during the periods indicated:
For the three and nine months ended September 30, 2024 | ||||||||
(Dollars in thousands) | Other-than-insignificant Payment Delay | |||||||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty | Number | Amortized Cost Basis | % of Total Class of Financing Receivable |
| Financial Effect | |||
Commercial real estate | | $ | | | % | Provided payment deferral to be collected at maturity (January 2027) | ||
Total | | $ | |
|
| |||
For the three and nine months ended September 30, 2024 | ||||||||
(Dollars in thousands) | Term Extension and Other-than-insignificant Payment Delay | |||||||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty | Number | Amortized Cost Basis | % of Total Class of Financing Receivable |
| Financial Effect | |||
Commercial real estate | | $ | | | % | Extended Maturity to January 2027 (32 months) and provided payment deferral to be collected at maturity | ||
Total | | $ | |
|
| |||
For the nine months ended September 30, 2024 | ||||||||
(Dollars in thousands) | Term Extension and Reduced Interest Rate | |||||||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty | Number | Amortized Cost Basis | % of Total Class of Financing Receivable |
| Financial Effect | |||
Commercial business and other | | $ | | — | % | Extended Maturity to August 2026 (3 months) and reduced rate to zero percent | ||
Total | | $ | |
|
| |||
For the three and nine months ended September 30, 2023 | ||||||||
(Dollars in thousands) | Term Extension | |||||||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty | Number | Amortized Cost Basis | % of Total Class of Financing Receivable |
| Financial Effect | |||
Commercial business and other | | $ | | | % | Extended Maturity to June 2025 (20 months) | ||
Total | | $ | |
|
| |||
-16-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2023 | ||||||||
(Dollars in thousands) | Other-than-insignificant Payment Delay | |||||||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty | Number | Amortized Cost Basis | % of Total Class of Financing Receivable |
| Financial Effect | |||
Small Business Administration | | $ | | | % | Provided twelve months payment deferral to be collected at maturity | ||
Total | | $ | |
|
| |||
The following table shows the payment status at September 30, 2024 of borrowers experiencing financial difficulty for which a modification was granted:
Payment Status of Borrowers Experiencing Financial Difficulty (Amortized Cost Basis) | ||||||||
(In thousands) | Current |
| 30-89 Days Past Due | 90+ Days Past Due |
| Total Modified | ||
Commercial real estate | $ | | $ | — | $ | — | $ | |
Commercial business and other | — | | | | ||||
Total | $ | | $ | | $ | | $ | |
The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified in the 12 months before default to borrowers experiencing financial difficulty:
Amortized Cost Basis of Modified Financing Receivables That Subsequently Defaulted | ||||||||||
(In thousands) | Rate Reduction |
| Term Extension | Principal Forgiveness |
| Other-than-insignificant payment delay |
| Combination - Term Extension and Interest Rate Reduction | ||
Commercial business and other | $ | — | $ | — | $ | — | $ | — | $ | |
Total | $ | — | $ | — | $ | — | $ | — | $ | |
-17-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show our non-accrual loans at amortized cost with no related allowance and interest income recognized for loans ninety days or more past due and still accruing for the periods shown below:
At or for the nine months September 30, 2024 | |||||||||||||||
(In thousands) | Non-accrual amortized cost beginning of the reporting period | Non-accrual amortized cost end of the reporting period | Non-accrual with no related allowance | Interest income (loss) recognized | Loans ninety days or more past due and still accruing | ||||||||||
Multi-family residential | $ | | $ | | $ | | $ | | $ | — | |||||
Commercial real estate | — | | | — | — | ||||||||||
One-to-four family - mixed-use property | | | | | — | ||||||||||
One-to-four family - residential | | | | | — | ||||||||||
Small Business Administration | | | | — | — | ||||||||||
Commercial business and other | | | | | — | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | — | |||||
At or for the year ended December 31, 2023 | |||||||||||||||
(In thousands) | Non-accrual amortized cost beginning of the reporting period | Non-accrual amortized cost end of the reporting period | Non-accrual with no related allowance | Interest income (loss) recognized | Loans ninety days or more past due and still accruing | ||||||||||
Multi-family residential | $ | | $ | | $ | | $ | | $ | | |||||
Commercial real estate | | — | — | — | — | ||||||||||
One-to-four family - mixed-use property | | | | | — | ||||||||||
One-to-four family - residential | | | | | — | ||||||||||
Small Business Administration | | | | — | — | ||||||||||
Commercial business and other | | | | | — | ||||||||||
Total | $ | | $ | | $ | | $ | | $ | | |||||
The following is a summary of interest foregone on non-accrual loans for the periods indicated.
For the three months ended | For the nine months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
(In thousands) | |||||||||||||
Interest income that would have been recognized had the loans performed in accordance with their original terms | $ | | $ | | $ | | $ | | |||||
Less: Interest income included in the results of operations |
| ( |
| ( |
| ( |
| ( | |||||
Total foregone interest | $ | | $ | | $ | | $ | | |||||
-18-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the aging analysis of the amortized cost basis of loans at the period indicated by class of loans:
At September 30, 2024 | ||||||||||||||||||
(In thousands) |
| 30 - 59 Days Past Due |
| 60 - 89 Days Past Due |
| Greater than 90 Days |
| Total Past Due |
| Current |
| Total Loans (1) | ||||||
Multi-family residential | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Commercial real estate |
| |
| |
| |
| |
| |
| | ||||||
One-to-four family - mixed-use property |
| |
| |
| |
| |
| |
| | ||||||
One-to-four family - residential |
| |
| |
| |
| |
| |
| | ||||||
Construction |
| |
| |
| |
| |
| |
| | ||||||
Small Business Administration |
| |
| |
| |
| |
| |
| | ||||||
Commercial business and other |
| |
| |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
At December 31, 2023 | ||||||||||||||||||
(In thousands) |
| 30 - 59 Days Past Due |
| 60 - 89 Days Past Due |
| Greater than 90 Days |
| Total Past Due |
| Current |
| Total Loans (1) | ||||||
Multi-family residential | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Commercial real estate |
| |
| |
| |
| |
| |
| | ||||||
One-to-four family - mixed-use property |
| |
| |
| |
| |
| |
| | ||||||
One-to-four family - residential |
| |
| |
| |
| |
| |
| | ||||||
Construction |
| |
| |
| |
| |
| |
| | ||||||
Small Business Administration |
| |
| |
| |
| |
| |
| | ||||||
Commercial business and other |
| |
| |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
-19-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables show the activity in the ACL on loans for the three-month periods ended:
September 30, 2024 | ||||||||||||||||||||||||
|
|
| One-to-four |
| One-to-four |
|
|
| Commercial |
| ||||||||||||||
Multi-family | Commercial | family - mixed- | family - | Construction | Small Business | business and | ||||||||||||||||||
(In thousands) | residential | real estate | use property | residential | loans | Administration | other | Total | ||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Charge-offs |
| — |
| — |
| — |
| — |
| — |
| ( | ( | ( | ||||||||||
Recoveries |
| — |
| — |
| — |
| |
| — |
| | | | ||||||||||
Provision (benefit) |
| |
| |
| ( |
| ( |
| ( |
| | | | ||||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
September 30, 2023 | ||||||||||||||||||||||||
|
|
| One-to-four |
| One-to-four |
|
|
| Commercial |
| ||||||||||||||
Multi-family | Commercial | family - mixed- | family - | Construction | Small Business | business and | ||||||||||||||||||
(In thousands) | residential | real estate | use property | residential | loans | Administration | other | Total | ||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Charge-offs |
| — |
| — |
| — |
| — |
| — |
| — | ( | ( | ||||||||||
Recoveries |
| — |
| — |
| — |
| |
| — |
| | | | ||||||||||
Provision (benefit) |
| |
| |
| |
| |
| |
| ( | ( | | ||||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
The following tables show the activity in the ACL on loans for the nine-month periods ended:
September 30, 2024 | ||||||||||||||||||||||||
|
|
| One-to-four |
| One-to-four |
|
|
| Commercial |
| ||||||||||||||
Multi-family | Commercial | family - mixed- | family - | Construction | Small Business | business and | ||||||||||||||||||
(In thousands) | residential | real estate | use property | residential | loans | Administration | other | Total | ||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Charge-offs |
| — |
| — |
| — |
| ( |
| — |
| ( |
| ( |
| ( | ||||||||
Recoveries |
| |
| — |
| |
| |
| — |
| |
| |
| | ||||||||
Provision (benefit) |
| |
| |
| ( |
| |
| |
| ( |
| |
| | ||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
September 30, 2023 | ||||||||||||||||||||||||
|
|
| One-to-four |
| One-to-four |
|
|
| Commercial |
| ||||||||||||||
Multi-family | Commercial | family - mixed- | family - | Construction | Small Business | business and | ||||||||||||||||||
(In thousands) | residential | real estate | use property | residential | loans | Administration | other | Total | ||||||||||||||||
Beginning balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Charge-offs |
| — |
| ( |
| — |
| ( |
| — |
| ( |
| ( |
| ( | ||||||||
Recoveries |
| |
| — |
| — |
| |
| — |
| |
| |
| | ||||||||
Provision (benefit) |
| |
| |
| ( |
| ( |
| ( |
| ( |
| |
| | ||||||||
Ending balance | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans.” If a loan does not fall within one of the previously mentioned categories and management believes weakness is evident then we designate the loan as “Watch;” all other loans would be considered “Pass.” Loans that are non-accrual are designated as Substandard, Doubtful or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that may jeopardize the orderly liquidation of the debt. We designate a loan as Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for Credit Losses. We designate a loan as Special Mention if the asset does not warrant classification within one of the other classifications but does contain a potential weakness that deserves closer attention.
-20-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables summarize the various risk categories of mortgage and non-mortgage loans by loan portfolio segments and by class of loans by year of origination at the periods indicated below:
September 30, 2024 | |||||||||||||||||||||||||||
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
Amortized Cost | converted to | ||||||||||||||||||||||||||
(In thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Basis | term loans | Total | ||||||||||||||||||
Multi-family Residential | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Watch | — | — | | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | | | | | | — | | ||||||||||||||||||
Total Multi-family Residential | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Commercial Real Estate | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | | | | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total Commercial Real Estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
1-4 Family Mixed-Use Property | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | — | — | — | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total 1-4 Family Mixed-Use Property | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
1-4 Family Residential | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Watch | — | — | | | — | | — | | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | | | ||||||||||||||||||
Total 1-4 Family Residential | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Construction | |||||||||||||||||||||||||||
Pass | $ | — | $ | | $ | | $ | | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Watchlist | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Special Mention | — | | — | — | — | — | — | — | | ||||||||||||||||||
Total Construction | $ | — | $ | | $ | | $ | | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Small Business Administration | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | — | — | — | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | | — | | — | — | | ||||||||||||||||||
Total Small Business Administration | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Commercial Business | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Watch | — | | | | | | | — | | ||||||||||||||||||
Special Mention | | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | | | | — | | | — | | ||||||||||||||||||
Doubtful | — | | — | — | — | — | | — | | ||||||||||||||||||
Total Commercial Business | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
Commercial Business - Secured by RE | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Watch | | — | | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total Commercial Business - Secured by RE | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Other | |||||||||||||||||||||||||||
Pass | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
Total Other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Total by Loan Type | |||||||||||||||||||||||||||
Total Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Total Watch | | | | | | | | | | ||||||||||||||||||
Total Special Mention | | | — | — | — | | — | | | ||||||||||||||||||
Total Substandard | — | | | | | | | | | ||||||||||||||||||
Total Doubtful | — | | — | — | — | — | | — | | ||||||||||||||||||
Total Loans (1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Total Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
-21-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 2023 | |||||||||||||||||||||||||||
Revolving Loans | Revolving Loans | ||||||||||||||||||||||||||
Amortized Cost | converted to | ||||||||||||||||||||||||||
(In thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Basis | term loans | Total | ||||||||||||||||||
Multi-family Residential | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Watch | — | | | | — | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total Multi-family Residential | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Commercial Real Estate | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total Commercial Real Estate | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
1-4 Family Mixed-Use Property | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | — | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | | | — | — | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | — | | ||||||||||||||||||
Total 1-4 Family Mixed-Use Property | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
1-4 Family Residential | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Watch | — | | | — | | | — | | | ||||||||||||||||||
Special Mention | — | — | — | — | — | — | — | | | ||||||||||||||||||
Substandard | — | — | — | — | — | | — | | | ||||||||||||||||||
Total 1-4 Family Residential | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Construction | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | — | $ | — | — | $ | | $ | — | $ | | ||||||||||
Total Construction | $ | | $ | | $ | | $ | — | $ | — | $ | — | $ | | $ | — | $ | | |||||||||
Small Business Administration | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | — | — | — | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | — | | — | — | | ||||||||||||||||||
Substandard | — | — | | — | — | | — | — | | ||||||||||||||||||
Total Small Business Administration | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Commercial Business | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Watch | | | | | | | | — | | ||||||||||||||||||
Special Mention | — | — | — | — | | — | | — | | ||||||||||||||||||
Substandard | | | | — | | | | — | | ||||||||||||||||||
Doubtful | | — | — | — | — | — | | — | | ||||||||||||||||||
Total Commercial Business | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | | |||||||||
Gross charge-offs | $ | | $ | — | $ | | $ | — | $ | | $ | | $ | | $ | — | $ | | |||||||||
Commercial Business - Secured by RE | |||||||||||||||||||||||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Watch | | | — | — | | | — | — | | ||||||||||||||||||
Special Mention | — | — | — | — | | | — | — | | ||||||||||||||||||
Total Commercial Business - Secured by RE | $ | | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Other | |||||||||||||||||||||||||||
Pass | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
Total Other | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||||
Gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||||
Total by Loan Type | |||||||||||||||||||||||||||
Total Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Total Watch | | | | | | | | | | ||||||||||||||||||
Total Special Mention | — | — | — | — | | | | | | ||||||||||||||||||
Total Substandard | | | | — | | | | | | ||||||||||||||||||
Total Doubtful | | — | — | — | — | — | | — | | ||||||||||||||||||
Total Loans (1) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Total Gross charge-offs | $ | | $ | — | $ | | $ | — | $ | | $ | | $ | | $ | — | $ | | |||||||||
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $
-22-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Included within net loans were $
A loan is considered collateral dependent when the borrower is experiencing financial difficulties and repayment is expected to be substantially provided by the operation or sale of the collateral. The following table presents types of collateral-dependent loans by class of loans as of the periods indicated:
Collateral Type | ||||||||||||
September 30, 2024 | December 31, 2023 | |||||||||||
(In thousands) | Real Estate | Business Assets | Real Estate | Business Assets | ||||||||
Multi-family residential | $ | | $ | — | $ | | $ | — | ||||
Commercial real estate | | — | — | — | ||||||||
One-to-four family - mixed-use property | | — | | — | ||||||||
One-to-four family - residential | | — | | — | ||||||||
Small Business Administration | — | | — | | ||||||||
Commercial business and other | | | — | | ||||||||
Total | $ | | $ | | $ | | $ | | ||||
Off-Balance Sheet Credit Losses
Also included within scope of the CECL standard are off-balance sheet loan commitments, which includes the unfunded portion of committed lines of credit and commitments “in-process”. Commitments “in‐process” reflect loans not in the Company’s books but rather negotiated loan / line of credit terms and rates that the Company has offered to customers and is committed to honoring. In reference to “in‐process” credits, the Company defines an unfunded commitment as a credit that has been offered to and accepted by a borrower, which has not closed and by which the obligation is not unconditionally cancellable.
Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) totaled $
The following table presents the activity in the allowance for off-balance sheet credit losses for the three and nine months ended:
For the three months ended | For the nine months ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
(In thousands) | ||||||||||||
Balance at beginning of period | $ | | $ | | $ | | $ | | ||||
Provision (benefit) (1) | | | ( | ( | ||||||||
Allowance for Off-Balance Sheet - Credit losses (2) | $ | | $ | | $ | | $ | | ||||
(1) Included in “Other operating expenses” on the Consolidated Statements of Income.
(2) Included in “Other liabilities” on the Consolidated Statements of Financial Condition.
-23-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
6. Loans held for sale
Loans held for sale are carried at the lower of cost or estimated fair value. At September 30, 2024 and December 31, 2023, the Bank did not have any loans held for sale.
The following table shows loans sold during the periods indicated:
For the three months ended September 30, 2024 | |||||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Performing loans |
| ||||||||||
Multi-family residential |
| | $ | | $ | — | $ | — | |||
Commercial |
| | | — | — | ||||||
Total |
| | $ | | $ | — | $ | — | |||
Delinquent and non-performing loans | |||||||||||
Multi-family residential |
| | $ | | $ | — | $ | — | |||
Commercial |
| | | — | — | ||||||
One-to-four family - mixed-use property |
| | | — | | ||||||
One-to-four family - residential | | | — | | |||||||
Total |
| | $ | | $ | — | $ | | |||
For the three months ended September 30, 2023 | |||||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Performing loans |
| ||||||||||
Commercial |
| | $ | | $ | — | $ | — | |||
Total |
| | $ | | $ | — | $ | — | |||
-24-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2024 | |||||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Performing loans |
| ||||||||||
Multi-family residential |
| | $ | | $ | — | $ | — | |||
Commercial |
| | | — | — | ||||||
Total |
| | $ | | $ | — | $ | — | |||
Delinquent and non-performing loans | |||||||||||
Multi-family residential |
| | $ | | $ | — | $ | | |||
Commercial |
| | | — | — | ||||||
One-to-four family - mixed-use property |
| | | — | | ||||||
One-to-four family - residential | | | — | | |||||||
Total |
| | $ | | $ | — | $ | | |||
For the nine months ended September 30, 2023 | |||||||||||
(Dollars in thousands) |
| Loans sold |
| Proceeds |
| Net charge-offs |
| Net gain | |||
Performing loans |
|
|
|
|
|
|
|
| |||
Commercial | | $ | | $ | — | $ | — | ||||
Total |
| | $ | | $ | — | $ | — | |||
Delinquent and non-performing loans |
| ||||||||||
Multi-family residential |
| | $ | | $ | — | $ | | |||
Commercial |
| | | ( | — | ||||||
One-to-four family - mixed-use property |
| | | — | | ||||||
Total |
| | $ | | $ | ( | $ | | |||
-25-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
7. Leases
The Company has
The Company has elected the short-term lease recognition exemption such that the Company will not recognize Right of Use (“ROU”) assets or lease liabilities for leases with a term of less than 12 months from the commencement date. The Company has
Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-cancelable operating lease agreements expire through 2036.
Supplemental balance sheet information related to leases are as follows:
(Dollars in thousands) | September 30, 2024 | December 31, 2023 | |||||
Operating lease ROU asset | $ | | $ | | |||
Operating lease liability | $ | | $ | | |||
Weighted-average remaining lease term-operating leases |
| ||||||
Weighted average discount rate-operating leases |
| | % | | % | ||
-26-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The components of lease expense and cash flow information related to leases were as follows:
For the three months ended September 30, | ||||||||
(In thousands) | Line Item Presented | 2024 | 2023 | |||||
Lease Cost |
|
|
|
| ||||
Operating lease cost | Occupancy and equipment | $ | | $ | | |||
Operating lease cost | Other operating expenses | | | |||||
Short-term lease cost | Professional services and other operating expenses |
| |
| | |||
Variable lease cost | Occupancy and equipment |
| |
| | |||
Total lease cost | $ | | $ | | ||||
Other information |
| |||||||
Cash paid for amounts included in the measurement of lease liabilities: |
| |||||||
Operating cash flows from operating leases | $ | | $ | | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — | $ | | ||||
For the nine months ended September 30, | ||||||||
(In thousands) | Line Item Presented | 2024 | 2023 | |||||
Lease Cost |
|
|
|
| ||||
Operating lease cost | Occupancy and equipment | $ | | $ | | |||
Operating lease cost | Other operating expenses | | | |||||
Short-term lease cost | Professional Services, Occupancy and equipment and Other operating expenses |
| |
| | |||
Variable lease cost | Occupancy and equipment |
| |
| | |||
Total lease cost | $ | | $ | | ||||
Other information |
|
|
|
| ||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
| |||||
Operating cash flows from operating leases | $ | | $ | | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | | $ | | ||||
The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows as of September 30, 2024:
Minimum Rental | |||
(In thousands) | |||
Years ended December 31: | |||
2024 | $ | | |
2025 | | ||
2026 | | ||
2027 | | ||
2028 | | ||
Thereafter | | ||
Total minimum payments required | | ||
Less: implied interest | ( | ||
Total lease obligations | $ | | |
-27-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
8. Stock-Based Compensation
On May 29, 2024, stockholders approved the Company’s 2024 Omnibus Incentive Plan (the “2024 Plan”) to replace the 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2024 Plan is an “omnibus” stock plan that provides for a variety of equity award vehicles to maintain flexibility. The 2024 Plan, like the 2014 Plan, permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”), and other stock-based awards. Currently, awards to employees primarily consist of RSUs and PRSUs and to Company directors of RSUs. The 2024 Plan authorizes the issuance of up to
The Company has a long-term incentive compensation program for certain Company executive officers that includes grants of PRSUs in addition to time-based RSUs. Under the terms of the PRSU Agreement, the number of PRSUs that may be earned depends on the extent to which performance goals for the award are achieved over a
For the three months ended September 30, 2024 and 2023, the Company’s net income, as reported, included $
During the three months ended September 30, 2024 and 2023 the Company did not grant any RSU or PRSU awards. During the nine months ended September 30, 2024 and 2023, the Company granted
The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards and performance restricted stock units. Compensation cost is recognized over the vesting period of the award using the straight-line method. Forfeitures are recorded in the period they occur.
-28-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s RSU and PRSU awards under the 2014 Omnibus Plan for the nine months ended September 30, 2024:
| RSU Awards |
| PRSU Awards | |||||||
| Weighted-Average |
| Weighted-Average | |||||||
| Grant-Date |
| Grant-Date | |||||||
| Shares |
| Fair Value |
| Shares |
| Fair Value | |||
Non-vested awards at December 31, 2023 |
| | $ | |
| | $ | | ||
Granted |
| |
| |
| |
| | ||
Added (reduced) shares due to performance factor |
| — |
| — |
| ( |
| | ||
Vested |
| ( |
| |
| ( |
| | ||
Forfeitures | ( | | — | — | ||||||
Non-vested awards at September 30, 2024 |
| | $ | |
| | $ | | ||
Vested but unissued at September 30, 2024 |
| | $ | |
| | $ | | ||
As of September 30, 2024, there was $
Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its profit-sharing plan for officers who have achieved the designated level and completed
The following table summarizes the Phantom Stock Plan at or for the nine months ended September 30, 2024:
Phantom Stock Plan |
| Shares |
| Fair Value | Weighted-Average Fair Value | |||
Outstanding at December 31, 2023 |
| | $ | | ||||
Granted |
| | $ | | ||||
Distributions |
| ( | $ | | ||||
Outstanding and vested at September 30, 2024 |
| | $ | | ||||
The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of $
The Company recorded stock-based compensation expense (benefit) for the Phantom Stock Plan of ($
-29-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
9. Pension and Other Postretirement Benefit Plans
The following table sets forth information regarding the components of net expense for the pension and other postretirement benefit plans.
| Three months ended |
| Nine months ended | |||||||||
| September 30, |
| September 30, | |||||||||
(In thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Employee Pension Plan: |
|
|
|
|
|
|
|
| ||||
Interest cost | $ | | $ | | $ | | $ | | ||||
Expected return on plan assets |
| ( |
| ( |
| ( |
| ( | ||||
Net employee pension benefit (1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Outside Director Pension Plan: |
|
|
|
|
|
|
|
| ||||
Service cost | $ | | $ | | $ | | $ | | ||||
Interest cost |
| |
| |
| |
| | ||||
Amortization of unrecognized gain |
| ( |
| ( |
| ( |
| ( | ||||
Net outside director pension (benefit) expense (2) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Other Postretirement Benefit Plans: |
|
|
|
|
|
|
|
| ||||
Service cost | $ | | $ | | $ | | $ | | ||||
Interest cost |
| |
| |
| |
| | ||||
Amortization of unrecognized gain | ( | ( | ( | ( | ||||||||
Net other postretirement expense (1) | $ | | $ | | $ | | $ | | ||||
(1) Reported in the Consolidated Statements of Income as part of salaries and employee benefits.
(2) Reported in the Consolidated Statements of Income as part of other operating expenses.
The Company previously disclosed in its Consolidated Financial Statements for the year ended December 31, 2023 that it expects to contribute $
-30-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
10. Fair Value of Financial Instruments
The Company carries certain financial assets and financial liabilities at fair value in accordance with GAAP which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not purchase or sell any financial assets or liabilities carried under the fair value option during the three and nine months ended September 30, 2024 and 2023.
The following table presents the financial assets and financial liabilities reported at fair value under the fair value option, and the changes in fair value included in the Consolidated Statement of Income – Net (loss) gain from fair value adjustments, at or for the periods ended as indicated:
Changes in Fair Values For Items Measured at Fair Value | ||||||||||||||||||
Fair Value | Fair Value | Pursuant to Election of the Fair Value Option | ||||||||||||||||
| Measurements at |
| Measurements at | For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||
Description |
| September 30, 2024 |
| December 31, 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage-backed securities | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Other securities |
| |
| |
| |
| ( |
| |
| ( | ||||||
Borrowed funds |
| |
| |
| |
| ( |
| ( |
| | ||||||
Net gain (loss) from fair value adjustments | $ | | $ | ( | $ | | $ | | ||||||||||
Included in the fair value of the financial assets and financial liabilities selected for the fair value option is the accrued interest receivable or payable for the related instrument. The Company reports as interest income or interest expense in the Consolidated Statement of Income, the interest receivable or payable on the financial instruments selected for the fair value option at their respective contractual rates.
The borrowed funds had a contractual principal amount of $
The Company generally holds its earning assets to maturity and settles its liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market information. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and prepayments, fair value estimates change, and these amounts may not necessarily be realized in an immediate sale.
Disclosure of fair value does not require fair value information for items that do not meet the definition of a financial instrument or certain other financial instruments specifically excluded from its requirements. These items include core deposit intangibles and other customer relationships, premises and equipment, leases, income taxes and equity.
Further, fair value disclosure does not attempt to value future income or business. These items may be material and accordingly, the fair value information presented does not purport to represent, nor should it be construed to represent, the underlying “market” or franchise value of the Company.
-31-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
A description of the methods and significant assumptions utilized in estimating the fair value of the Company’s financial assets and liabilities that are carried at fair value on a recurring basis are as follows:
Level 1 – when quoted market prices are available in an active market. At September 30, 2024 and December 31, 2023, Level 1 included one mutual fund.
Level 2 – when quoted market prices are not available, fair value is estimated using quoted market prices for similar financial instruments and adjusted for differences between the quoted instrument and the instrument being valued. Fair value can also be estimated by using pricing models, or discounted cash flows. Pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices and credit spreads. In addition to observable market information, models also incorporate maturity and cash flow assumptions. At September 30, 2024 and December 31, 2023, Level 2 included mortgage-backed securities, CLOs, corporate debt, municipals, and interest rate swaps.
Level 3 – when there is limited activity or less transparency around inputs to the valuation, financial instruments are classified as Level 3. At September 30, 2024 and December 31, 2023, Level 3 included trust preferred securities owned, and junior subordinated debentures issued by the Company.
The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values. While the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies, assumptions, and models to determine fair value of certain financial instruments could produce different estimates of fair value at the reporting date.
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a recurring basis, including those reported at fair value under the fair value option, and the level that was used to determine their fair value, at September 30, 2024 and December 31, 2023:
Quoted Prices | ||||||||||||||||||||||||
in Active Markets | Significant Other | Significant Other | ||||||||||||||||||||||
for Identical Assets | Observable Inputs | Unobservable Inputs | Total carried at fair value | |||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | on a recurring basis | |||||||||||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||||||
Assets: |
| (In thousands) | ||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | $ | | ||||||||
Other securities |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Interest rate swaps |
| — |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||
Total assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Borrowings | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | | $ | | ||||||||
Interest rate swaps |
| — |
| — |
| |
| |
| — |
| — |
| |
| | ||||||||
Total liabilities | $ | — | $ | — | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
-32-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth the Company’s assets and liabilities that are carried at fair value on a recurring basis, classified within Level 3 of the valuation hierarchy for the periods indicated:
| For the three months ended | |||||||||||
September 30, 2024 | September 30, 2023 | |||||||||||
Trust preferred | Junior subordinated | Trust preferred | Junior subordinated | |||||||||
| securities |
| debentures |
| securities |
| debentures | |||||
| (In thousands) | |||||||||||
Beginning balance | $ | | $ | | $ | | $ | | ||||
Net gain (loss) from fair value adjustment of financial assets (1) |
| ( |
| — |
| |
| — | ||||
Net (gain) loss from fair value adjustment of financial liabilities (1) |
| — |
| ( |
| — |
| | ||||
Increase (decrease) in accrued interest |
| — |
| ( |
| |
| | ||||
Change in unrealized (gains) losses included in other comprehensive loss |
| — |
| ( |
| — |
| ( | ||||
Ending balance | $ | | $ | | $ | | $ | | ||||
Changes in unrealized gains (losses) held at period end | $ | — | $ | | $ | — | $ | | ||||
| For the nine months ended | |||||||||||
September 30, 2024 | September 30, 2023 | |||||||||||
Trust preferred | Junior subordinated | Trust preferred | Junior subordinated | |||||||||
| securities |
| debentures |
| securities |
| debentures | |||||
| (In thousands) | |||||||||||
Beginning balance | $ | | $ | | $ | | $ | | ||||
Net gain (loss) from fair value adjustment of financial assets (1) |
| |
| — |
| ( |
| — | ||||
Net (gain) loss from fair value adjustment of financial liabilities (1) |
| — |
| |
| — |
| ( | ||||
Increase (decrease) in accrued interest |
| ( |
| ( |
| |
| | ||||
Change in unrealized (gains) losses included in other comprehensive loss |
| — |
| |
| — |
| ( | ||||
Ending balance | $ | | $ | | $ | | $ | | ||||
Changes in unrealized gains (losses) held at period end | $ | — | $ | | $ | — | $ | | ||||
(1) Presented in the Consolidated Statements of Income under net (loss) gain from fair value adjustments.
The following tables present the quantitative information about recurring Level 3 fair value of financial instruments and the fair value measurements at the periods indicated:
September 30, 2024 | |||||||||||
Valuation | Input | Weighted | |||||||||
| Fair Value | Technique | Unobservable | Range | Average | ||||||
(Dollars in thousands) | |||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| |
Trust preferred securities | $ | |
| Discounted cash flows |
| Spread over 3-month SOFR |
| | % | n/a | |
Liabilities: |
|
|
|
|
|
|
|
|
| ||
Junior subordinated debentures | $ | |
| Discounted cash flows |
| Spread over 3-month SOFR |
| | % | n/a | |
December 31, 2023 | |||||||||||
Valuation | Input | Weighted | |||||||||
| Fair Value | Technique | Unobservable | Range | Average | ||||||
(Dollars in thousands) | |||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| |
Trust preferred securities | $ | |
| Discounted cash flows |
| Spread over 3-month SOFR |
| | % | n/a | |
Liabilities: |
|
|
|
|
|
|
|
|
| ||
Junior subordinated debentures | $ | |
| Discounted cash flows |
| Spread over 3-month SOFR |
| | % | n/a | |
-33-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The significant unobservable inputs used in the fair value measurement of the Company’s trust preferred securities and junior subordinated debentures valued under Level 3 at September 30, 2024 and December 31, 2023, are the effective yields used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a significantly lower or higher fair value measurement.
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a non-recurring basis and the level that was used to determine their fair value at September 30, 2024 and December 31, 2023:
Quoted Prices |
|
|
|
|
| |||||||||||||||||||
in Active Markets | Significant Other | Significant Other | ||||||||||||||||||||||
for Identical Assets | Observable Inputs | Unobservable Inputs | Total carried at fair value | |||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | on a non-recurring basis | |||||||||||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||||||
| (In thousands) | |||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Impaired loans | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | | $ | | ||||||||
Total assets | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | | $ | | ||||||||
The following tables present the qualitative information about non-recurring Level 3 fair value of financial instruments and the fair value measurements at the periods indicated:
| At September 30, 2024 |
| ||||||||||
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| ||
(Dollars in thousands) |
| |||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| ||
Certain delinquent loans |
| $ | | Discounted Cashflow | Discount Rate | % | % | |||||
| Probability of Default | % | % | |||||||||
Certain delinquent loans |
| $ | | Income approach | Capitalization rate | | % | % | ||||
Reduction for planned expedited disposal | | % | % | |||||||||
| At December 31, 2023 |
| ||||||||||
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| ||
(Dollars in thousands) |
| |||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| ||
| ||||||||||||
Certain delinquent loans |
| $ | | Sales approach | Adjustment to sales comparison value | - | % | - | % | |||
| Reduction for planned expedited disposal | n/a | - | % | ||||||||
| ||||||||||||
Certain delinquent loans |
| $ | | Discounted Cashflow | Discount Rate | % | % | |||||
| Probability of Default | % | | % | ||||||||
The weighted average for unobservable inputs for collateral-dependent loans is based on the relative fair value of the loans.
The Company did
-34-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The methods and assumptions used to estimate fair value at September 30, 2024 and December 31, 2023 are as follows:
Securities:
The fair values of securities are contained in Note 4 (“Securities”) of the Notes to Consolidated Financial Statements. Fair value is based upon quoted market prices, where available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and the instrument being valued. When there is limited activity or less transparency around inputs to the valuation, securities are valued using discounted cash flows.
Certain Delinquent Loans:
For certain delinquent loans, fair value is generally estimated by discounting management’s estimate of future cash flows with a discount rate commensurate with the risk associated with such assets or, for collateral dependent loans,
Other Real Estate Owned and Other Repossessed Assets:
At the time of foreclosure these properties are acquired at fair value, less estimated selling costs. The fair value is based on appraised value through a current appraisal, or sometimes through an internal review. This determination is made on an individual asset basis. If the fair value of a property is less than the carrying amount of the loan, the difference is recognized as a charge to the ACL. Further decreases to the estimated value will be recorded directly to the Consolidated Statements of Income through the establishment of a valuation allowance. The fair value for other repossessed assets are based upon the most recently reported arm’s length sales transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates.
Junior Subordinated Debentures:
The fair value of the junior subordinated debentures was developed using a credit spread based on stated spreads for recently issued subordinated debt instruments for issuers of similar asset size and credit quality of the Company and with similar durations adjusting for differences in the junior subordinated debt’s credit rating, liquidity, and time to maturity. The unrealized net gain/loss attributable to changes in our own credit risk was determined by adjusting the fair value as determined in the proceeding sentence by the average rate of default on debt instruments with a similar debt rating as our junior subordinated debentures, with the difference from the original calculation and this calculation resulting in the instrument-specific unrealized gain/loss.
Interest Rate Swaps:
The fair value of interest rate swaps is based upon broker quotes.
-35-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth the carrying amounts and estimated fair values of selected financial instruments based on the assumptions described above used by the Company in estimating fair value at the periods indicated:
| September 30, 2024 | ||||||||||||||
Carrying | Fair | ||||||||||||||
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
| (In thousands) | ||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from banks | $ | | $ | | $ | | $ | — | $ | — | |||||
Securities held-to-maturity |
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-backed securities |
| |
| |
| — |
| |
| — | |||||
Other securities |
| |
| |
| — |
| — |
| | |||||
Securities available for sale |
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-backed securities |
| |
| |
| — |
| |
| — | |||||
Other securities |
| |
| |
| |
| |
| | |||||
Loans |
| |
| |
| — |
| — |
| | |||||
FHLB-NY stock |
| |
| |
| — |
| |
| — | |||||
Accrued interest receivable |
| |
| |
| — |
| |
| — | |||||
Interest rate swaps |
| |
| |
| — |
| |
| — | |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
| |||||
Deposits | $ | | $ | | $ | | $ | | $ | — | |||||
Borrowed Funds |
| |
| |
| — |
| |
| | |||||
Accrued interest payable |
| |
| |
| — |
| |
| — | |||||
Interest rate swaps |
| — |
| |
| — |
| |
| — | |||||
| December 31, 2023 | ||||||||||||||
Carrying | Fair | ||||||||||||||
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
(In thousands) | |||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from banks | $ | | $ | | $ | | $ | — | $ | — | |||||
Securities held-to-maturity |
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-backed securities |
| |
| |
| — |
| |
| — | |||||
Other securities |
| |
| |
| — |
| — |
| | |||||
Securities available for sale |
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-backed securities |
| |
| |
| — |
| |
| — | |||||
Other securities |
| |
| |
| |
| |
| | |||||
Loans |
| |
| |
| — |
| — |
| | |||||
FHLB-NY stock |
| |
| |
| — |
| |
| — | |||||
Accrued interest receivable |
| |
| |
| — |
| |
| — | |||||
Interest rate swaps |
| |
| |
| — |
| |
| — | |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
| |||||
Deposits | $ | | $ | | $ | | $ | | $ | — | |||||
Borrowed Funds |
| |
| |
| — |
| |
| | |||||
Accrued interest payable |
| |
| |
| — |
| |
| — | |||||
Interest rate swaps |
| |
| |
| — |
| |
| — | |||||
-36-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
11. Derivative Financial Instruments
At September 30, 2024 and December 31, 2023, the Company’s derivative financial instruments consisted of interest rate swaps. The Company’s interest rate swaps are used for three purposes: 1) to mitigate the Company’s exposure to rising interest rates on certain fixed rate loans and securities with a notional amount of $
At both September 30, 2024 and December 31, 2023, the Company maintained portfolio layer hedges on a closed portfolio of AFS securities with a notional amount of $
For non-portfolio layer method fair value hedges, the hedge basis (the amount of the change in fair value) is added to (or subtracted from) the carrying amount of the hedged item. For portfolio layer method hedges, the hedge basis does not adjust the carrying value of the hedged item and is instead maintained on a closed portfolio basis. These basis adjustments would be allocated to the amortized cost of specific loans or AFS securities within the pools if either of the hedges were de-designated.
At September 30, 2024 and December 31, 2023, we held derivatives designated as cash flow hedges, fair value hedges and certain derivatives not designated as hedges.
The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of Other Assets for derivatives with positive fair values and Other Liabilities for derivatives with negative fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.
At September 30, 2024 and December 31, 2023, derivatives with a combined notional amount of $
For cash flow hedges, the changes in the fair value of the derivatives are reported in accumulated other comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive income (loss) are reclassified into earnings in the same period during which the hedged forecasted transaction affected earnings. During the three months ended September 30, 2024 and 2023, $
A portion of the reduced expense is driven by the amortization of income from terminated cash flow hedges. This income is amortized over the remaining original terms of terminated cash flow hedges. During the three months ended September 30, 2024 there were
-37-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
million and $
The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:
| Assets |
| Liabilities | |||||||||
Notional | Notional | |||||||||||
| Amount |
| Fair Value (1) |
| Amount |
| Fair Value (1) | |||||
September 30, 2024 | (In thousands) | |||||||||||
Cash flow hedges: | ||||||||||||
Interest rate swaps (deposits and borrowings) | $ | | $ | | $ | | $ | | ||||
Fair value hedges: | ||||||||||||
Interest rate swaps (loans and securities) | | | | | ||||||||
Non hedge: | ||||||||||||
Interest rate swaps (loans) |
| | | | | |||||||
Total | $ | | $ | | $ | | $ | | ||||
December 31, 2023 | ||||||||||||
Cash flow hedges: | ||||||||||||
Interest rate swaps (borrowings and deposits) | $ | | $ | | $ | | $ | | ||||
Fair value hedges: | ||||||||||||
Interest rate swaps (loans and securities) | | | | | ||||||||
Non hedge: | ||||||||||||
Interest rate swaps (loans and deposits) |
| | | | | |||||||
Total | $ | | $ | | $ | | $ | | ||||
(1) Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.
The following table presents information regarding the Company’s fair value hedged items for the periods indicated:
Cumulative Amount | ||||||||||||
of the Fair Value Hedging Adjustment | ||||||||||||
Line Item in the Consolidated Statement | Carrying Amount of the | Included in the Carrying Amount of | ||||||||||
of Financial Condition in Which | Hedged | the Hedged | ||||||||||
the Hedged Item Is Included | Assets/(Liabilities) | Assets/(Liabilities) | ||||||||||
(In thousands) | September 30, 2024 | December 31, 2023 | September 30, 2024 | December 31, 2023 | ||||||||
Loans | ||||||||||||
Multi-family residential | $ | | $ | | $ | ( | $ | ( | ||||
Commercial real estate | | | ( | ( | ||||||||
Commercial business | | | ( | ( | ||||||||
Total | $ | | $ | | $ | ( | $ | ( | ||||
Portfolio Layer | ||||||||||||
Loans held for Investment | $ | | $ | | $ | | $ | ( | ||||
Securities available for sale | | | ( | ( | ||||||||
Total | $ | | $ | | $ | | $ | ( | ||||
-38-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:
For the three months ended |
| For the nine months ended | ||||||||||||
Affected Line Item in the Statements | September 30, | September 30, | ||||||||||||
(In thousands) |
| Where Net Income is Presented |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Financial Derivatives: |
|
|
|
|
|
|
| |||||||
Interest rate swaps - fair value hedge (loans) | | | | | ||||||||||
Interest rate swaps - fair value hedge (securities) | | | | | ||||||||||
Interest rate swaps - non hedge (municipal deposit) | — |
| | | | |||||||||
| ||||||||||||||
Interest rate swaps - cash flow hedge (short-term advances) | |
| | | | |||||||||
| ||||||||||||||
Interest rate swaps - cash flow hedge (brokered deposits) | Interest expense - Deposits | | | | | |||||||||
Total net income (expense) from the effects of derivative instruments | $ | | $ | | $ | | $ | | ||||||
The Company’s interest rate swaps are subject to master netting arrangements between the Company and its designated counterparties. The Company has not made a policy election to offset its derivative positions. The interest rate swaps with borrowers are cross collateralized with the underlying loan and, therefore, there is no posted collateral. Interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount and receive collateral for agreements in a net asset position.
The following tables present the effect of the master netting arrangements on the presentation of the derivative assets and liabilities in the Consolidated Statements of Financial Condition as of the dates indicated
Gross Amount | Net Amount | |||||||||||||||||
Gross Amounts | Offset in Statement of | Presented in Statement of | Financial | Cash | ||||||||||||||
(In thousands) |
| Recognized |
| Financial Condition |
| Financial Condition |
| Instruments |
| Collateral |
| Net Amount | ||||||
September 30, 2024 | ||||||||||||||||||
Assets: | ||||||||||||||||||
Interest rate swaps | $ | | $ | | $ | | $ | — | $ | ( | $ | | ||||||
Liabilities: | ||||||||||||||||||
Interest rate swaps | | | | — | — | | ||||||||||||
December 31, 2023 | ||||||||||||||||||
Assets: | ||||||||||||||||||
Interest rate swaps | $ | | $ | | $ | | $ | — | $ | ( | $ | | ||||||
Liabilities: | ||||||||||||||||||
Interest rate swaps | | | | — | — | | ||||||||||||
-39-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
12. Accumulated Other Comprehensive Income (Loss):
The following tables set forth the changes in accumulated other comprehensive income (loss) by component for the periods indicated:
| For the three months ended September 30, 2024 | ||||||||||||||
Unrealized Gains (Losses) on | Fair Value | ||||||||||||||
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | ||||||||
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | ||||||
| (In thousands) | ||||||||||||||
Beginning balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
Other comprehensive income (loss) before reclassifications, net of tax |
| |
| ( |
| — |
| |
| | |||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| — |
| ( |
| ( |
| — |
| ( | |||||
Net current period other comprehensive income (loss), net of tax |
| |
| ( |
| ( |
| |
| ( | |||||
Ending balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
For the three months ended September 30, 2023 | |||||||||||||||
Unrealized Gains (Losses) on | Fair Value | ||||||||||||||
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | ||||||||
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | ||||||
| (In thousands) | ||||||||||||||
Beginning balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
Other comprehensive income (loss) before reclassifications, net of tax |
| ( |
| |
| |
| |
| | |||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| |
| ( |
| ( |
| |
| ( | |||||
Net current period other comprehensive income (loss), net of tax |
| ( |
| |
| ( |
| |
| ( | |||||
Ending balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
-40-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| For the nine months ended September 30, 2024 | ||||||||||||||
| Unrealized Gains (Losses) on | Fair Value | |||||||||||||
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | ||||||||
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | ||||||
| (In thousands) | ||||||||||||||
Beginning balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
Other comprehensive income (loss) before reclassifications, net of tax |
| |
| |
| — |
| ( |
| | |||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| — |
| ( |
| ( |
| — |
| ( | |||||
Net current period other comprehensive income (loss), net of tax |
| |
| ( |
| ( |
| ( |
| ( | |||||
Ending balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
| For the nine months ended September 30, 2023 | ||||||||||||||
| Unrealized Gains (Losses) on | Fair Value | |||||||||||||
| Available for Sale |
| Cash flow |
| Defined Benefit |
| Option Elected | ||||||||
| Securities |
| Hedges |
| Pension Items |
| on Liabilities |
| Total | ||||||
| (In thousands) | ||||||||||||||
Beginning balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
Other comprehensive income (loss) before reclassifications, net of tax |
| ( |
| |
| — |
| |
| | |||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| — |
| ( |
| ( |
| — |
| ( | |||||
Net current period other comprehensive income (loss), net of tax |
| ( |
| |
| ( |
| |
| ( | |||||
Ending balance, net of tax | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||
-41-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables set forth significant amounts reclassified from accumulated other comprehensive income (loss) by component for the periods indicated:
For the three months ended September 30, 2024 | |||||
| Amounts Reclassified from | ||||
Details about Accumulated Other |
| Accumulated Other | Affected Line Item in the Statement | ||
Comprehensive Income (Loss) Components |
| Comprehensive Income (Loss) |
| Where Net Income is Presented | |
(In thousands) | |||||
Cash flow hedges: |
|
| |||
Interest rate swaps benefit (expense) | $ | | Interest expense | ||
| ( | Provision for income taxes | |||
$ | | ||||
Amortization of defined benefit pension items: |
|
| |||
Actuarial losses benefit (expense) | $ | | (1) | Other operating expenses | |
| ( | Provision for income taxes | |||
$ | | ||||
For the three months ended September 30, 2023 | |||||
| Amounts Reclassified from | ||||
Details about Accumulated Other |
| Accumulated Other |
| Affected Line Item in the Statement | |
Comprehensive Income (Loss) Components |
| Comprehensive Income (Loss) | Where Net Income is Presented | ||
(In thousands) | |||||
Cash flow hedges: |
|
| |||
Interest rate swaps benefit (expense) | $ | | Interest expense | ||
| ( | Provision for income taxes | |||
$ | | ||||
Amortization of defined benefit pension items: |
|
| |||
Actuarial losses benefit (expense) | $ | | (1) | Other operating expenses | |
| ( | Provision for income taxes | |||
$ | | ||||
(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 9 (“Pension and Other Postretirement Benefit Plans”) of the Notes to the Consolidated Financial Statements for additional information.
-42-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2024 | |||||
Amounts Reclassified from | |||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | |||
Comprehensive Income Components |
| Comprehensive Income (Loss) |
| Where Net Income (Loss) is Presented | |
(In thousands) | |||||
Cash flow hedges: |
|
|
| ||
Interest rate swaps benefit (expense) | $ | |
| Interest expense | |
| ( |
| Provision for income taxes | ||
$ | |
| |||
Amortization of defined benefit pension items: |
|
|
| ||
Actuarial losses benefit (expense) | $ | | (1) | Other operating expense | |
| ( |
| Provision for income taxes | ||
$ | |
| |||
For the nine months ended September 30, 2023 | |||||
Amounts Reclassified from | |||||
Details about Accumulated Other | Accumulated Other | Affected Line Item in the Statement | |||
Comprehensive Income Components |
| Comprehensive Income (Loss) |
| Where Net Income (Loss) is Presented | |
(In thousands) | |||||
Cash flow hedges: |
|
|
|
| |
Interest rate swaps benefit (expense) | $ | |
| Interest expense | |
| ( |
| Provision for income taxes | ||
$ | |
| |||
Amortization of defined benefit pension items: |
|
|
| ||
Actuarial losses benefit (expense) | $ | | (1) | Other operating expense | |
| ( | Provision for income taxes | |||
$ | |
| |||
-43-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
13. Regulatory Capital
Under current capital regulations, the Bank is required to comply with four separate capital adequacy standards and a Capital Conservation Buffer (“CCB”). As of September 30, 2024, the Bank continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. The CCB for the Bank was
Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.
| September 30, 2024 |
| December 31, 2023 |
| |||||||
Percent of | Percent of |
| |||||||||
| Amount |
| Assets |
| Amount |
| Assets |
| |||
| (Dollars in thousands) | ||||||||||
Tier I (leverage) capital: |
|
|
|
|
|
|
|
| |||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Common Equity Tier I risk-based capital: |
|
|
|
|
|
|
|
| |||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Tier I risk-based capital: |
|
|
|
|
|
|
|
| |||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Total risk-based capital: |
|
|
|
|
|
|
|
| |||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
-44-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company is subject to the same regulatory capital requirements as the Bank. As of September 30, 2024, the Company continues to be categorized as “well-capitalized” under the prompt corrective action regulations and continues to exceed all regulatory capital requirements. The CCB for the Company at September 30, 2024 and December 31, 2023 was
Set forth below is a summary of the Company’s compliance with banking regulatory capital standards.
| September 30, 2024 |
| December 31, 2023 |
| |||||||
Percent of | Percent of |
| |||||||||
| Amount |
| Assets |
| Amount |
| Assets |
| |||
(Dollars in thousands) |
| ||||||||||
Tier I (leverage) capital: |
|
|
|
|
|
|
|
| |||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Common Equity Tier I risk-based capital: |
|
|
|
|
|
| |||||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Tier I risk-based capital: |
|
|
|
|
|
| |||||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
Total risk-based capital: |
|
|
|
|
|
| |||||
Capital level | $ | |
| | % | $ | |
| | % | |
Requirement to be well-capitalized |
| |
| |
| |
| | |||
Excess |
| |
| |
| |
| | |||
-45-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
14. New Authoritative Accounting Pronouncements
Accounting Standards: Pending Adoption
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU requires that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The ASU requires all entities disclose on an annual basis (1) the amount of income taxes paid, disaggregated by federal, state and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid. The ASU also requires that all entities disclose (1) income (loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic or foreign and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state and foreign. This ASU is effective for public business entities for annual periods beginning after December 15, 2024. We do not expect adoption of this ASU to have a material effect on our consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. This ASU enhances disclosures about significant segment expenses. The key amendments include: (1) a requirement that a public entity disclose on an annual an interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, (2) a requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition, (3) a requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss currently required by GAAP in interim periods as well, (4) a clarification that if CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit, (5) a requirement that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources and (6) a requirement that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures. This ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. As we have
-46-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report should be read in conjunction with the more detailed and comprehensive disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition, please read this section in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein.
As used in this Quarterly Report, the words “we,” “us,” “our” and the “Company” are used to refer to Flushing Financial Corporation and its direct and indirect wholly owned subsidiaries, Flushing Bank (the “Bank”), Flushing Service Corporation, and FSB Properties Inc.
Statements contained in this Quarterly Report relating to plans, strategies, objectives, 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 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, factors discussed elsewhere in this Quarterly Report and in other documents filed by us with the Securities and Exchange Commission from time to time, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2023. 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. We have no obligation to update these forward-looking statements.
Executive Summary
We are a Delaware corporation organized in May 1994. The Bank was organized in 1929 as a New York State-chartered mutual savings bank. Today the Bank operates as a full-service New York State-chartered commercial bank. The Bank’s primary regulator is the New York State Department of Financial Services, and its primary federal regulator is the Federal Deposit Insurance Corporation (“FDIC”). Deposits are insured to the maximum allowable amount by the FDIC. Additionally, the Bank is a member of the Federal Home Loan Bank system. The primary business of Flushing Financial Corporation has been the operation of the Bank. At September 30, 2024, the Bank owns two subsidiaries: Flushing Service Corporation and FSB Properties Inc. The Bank also operates an internet branch, which operates under the brands of iGObanking.com® and BankPurely® (the “Internet Branch”). The activities of Flushing Financial Corporation are primarily funded by dividends, if any, received from the Bank, issuances of subordinated debt, junior subordinated debt, and issuances of equity securities. Flushing Financial Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol “FFIC.”
Our principal business is attracting retail deposits from the general public and investing those deposits together with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family residential loans, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-to-four family loans (focusing on mixed-use properties, which are properties that contain both residential dwelling units and commercial units); (2) Small Business Administration (“SBA”) loans and other small business loans; (3) construction loans; (4) mortgage loan surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. Our results of operations depend primarily on net interest income, which is the difference between the income earned on our interest-earning assets and the cost of our interest-bearing liabilities. Net interest income is the result of our net interest rate margin, which is the difference between the average yield earned on interest-earning assets and the average cost of interest-bearing liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the
-47-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
average balance of interest-bearing liabilities. We also generate non-interest income primarily from loan fees, service charges on deposit accounts, and other fees, income earned on Bank Owned Life Insurance (“BOLI”), dividends on Federal Home Loan Bank of New York (“FHLB-NY”) stock and net gains and losses on sales of securities and loans. Our operating expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and administrative expenses and income tax expense. Our results of operations can also be significantly affected by changes in the fair value of financial assets and financial liabilities for which changes in value are recorded through earnings and our periodic provision for credit losses.
Our investment policy, which is approved by the Board of Directors, is designed primarily to manage the interest rate sensitivity of our overall assets and liabilities, to generate a favorable return without incurring undue interest rate risk and credit risk, to complement our lending activities and to provide and maintain liquidity. In establishing our investment strategies, we consider our business and growth strategies, the economic environment, our interest rate risk exposure, our interest rate sensitivity “gap” position, the types of securities to be held and other factors. We classify our investment securities as available for sale or held-to-maturity.
We carry a portion of our financial assets and financial liabilities under the fair value option and record changes in their fair value through earnings in non-interest income on our Consolidated Statements of Income and Comprehensive Income. A description of the financial assets and financial liabilities that are carried at fair value through earnings can be found in Note 10 (“Fair Value of Financial Instruments”) of the Notes to the Consolidated Financial Statements.
For the three months ended September 30, 2024 we reported net income of $8.9 million, or $0.30 per diluted common share, an increase of $3.6 million, or 67.3% from net income of $5.3 million, or $0.18 per diluted common share earned in the three months ended June 30, 2024. The increase in net income was primarily driven by increases in net interest income and non-interest income of $2.8 million and $2.1 million, respectively, and a decrease in non-interest expense of $0.4 million, partially offset by an increase of $0.9 million in the provision for credit losses.
During the three months ended September 30, 2024, the net interest margin increased five basis points to 2.10% from 2.05% in the three months ended June 30, 2024. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual and delinquent loans, net gains (losses) from fair value adjustments on hedges, and purchase accounting adjustments, the net interest margin decreased three basis points to 1.99% for the three months ended September 30, 2024 from 2.02% for the three months ended June 30, 2024.
Approximately 90% of our loan portfolio is collateralized by real estate with an average loan to value of less than 36%. We have a long history and foundation built upon disciplined underwriting, strong credit quality, and a resilient seasoned loan portfolio with solid asset protection. At September 30, 2024 our allowance for credit losses (“ACL”) to gross loans stood at 59 basis points and our ACL to non-performing loans was 117.7%. Non-performing assets at the end of the quarter were 59 basis points of total assets.
Goodwill is presumed to have an indefinite life and is tested for impairment, rather than amortized, on at least an annual basis. Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for measurement, when available. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment of goodwill. At September 30, 2024, the market capitalization of our reporting unit did not exceed its carrying value, however the fair value of our reporting unit is not driven solely by the market price of our stock. For goodwill impairment testing, management has concluded that the Company has one reporting unit. The Company performed a quantitative assessment in testing for the impairment of goodwill as of December 31, 2023, concluding that there was no goodwill impairment. At September 30, 2024 we tested goodwill through a qualitative assessment concluding no impairment was indicated. We monitor goodwill for potential impairment triggers on a quarterly basis. Given the inherent uncertainties resulting from global macroeconomic conditions, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative model prepared for the reporting unit, which could result in impairment charges in subsequent periods.
-48-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The Bank and Company remain well-capitalized under current capital regulations of the FDIC and the Federal Reserve Board, respectively, and are subject to similar regulatory capital requirements. See Note 13 (“Regulatory Capital”) of the Notes to the Consolidated Financial Statements.
The following table presents operating data highlights for the periods indicated:
| For the three months ended September 30, | |||||
| 2024 |
| 2023 | |||
(In thousands except per share data) | ||||||
Operating data: |
|
|
|
| ||
Interest income | $ | 122,593 | $ | 104,036 | ||
Interest expense |
| 76,990 |
| 59,609 | ||
Net interest income |
| 45,603 |
| 44,427 | ||
Provision for credit losses |
| 1,727 |
| 596 | ||
Noninterest income |
| 6,277 |
| 3,309 | ||
Noninterest expense |
| 38,696 |
| 36,388 | ||
Income before income tax expense |
| 11,457 |
| 10,752 | ||
Income tax expense |
| 2,551 |
| 2,917 | ||
Net income | $ | 8,906 | $ | 7,835 | ||
Basic earnings per common share | $ | 0.30 | $ | 0.26 | ||
Dividends per common share | 0.30 | 0.26 | ||||
Average diluted shares | 29,742 | 29,703 | ||||
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
General. Net income for the three months ended September 30, 2024 was $8.9 million, an increase of $1.1 million, or 13.7%, from $7.8 million for the three months ended September 30, 2023. Diluted earnings per common share were $0.30 for the three months ended September 30, 2024, an increase of $0.04, or 15.4%, from $0.26 for the three months ended September 30, 2023.
Return on average equity was 5.30% for the three months ended September 30, 2024 compared to 4.64% for the three months ended September 30, 2023. Return on average assets was 0.39% for the three months ended September 30, 2024 compared to 0.37% for the three months ended September 30, 2023.
Interest Income. Interest and dividend income increased $18.6 million, or 17.8%, to $122.6 million for the three months ended September 30, 2024 from $104.0 million for the three months ended September 30, 2023. The increase in interest income was primarily attributable to the 44 basis point increase in the yield on interest-earning assets to 5.63% for the three months ended September 30, 2024 compared to 5.19% for the three months ended September 30, 2023, coupled with the average balance of total interest-earning assets increasing $686.4 million from the comparable prior year period. During the three months ended September 30, 2024, we concluded the security purchases associated with the leverage strategy which increased interest-earning assets by $732.9 million. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual and delinquent loans, net gains (losses) from fair value adjustments on hedges, and purchase accounting adjustments, the yield on total interest-earning assets increased 47 basis points to 5.53% for the three months ended September 30, 2024 from 5.06% for the three months ended September 30, 2023.
Interest Expense. Interest expense increased $17.4 million, or 29.2%, to $77.0 million for the three months ended September 30, 2024 from $59.6 million for the three months ended September 30, 2023. The growth in interest expense was primarily due to an increase of 58 basis points in the average cost of interest-bearing liabilities to 4.10% for the three months ended September 30, 2024 from 3.52% for the three months ended September 30, 2023 and the increase of $732.7 million in the average balance of interest-bearing liabilities to $7,504.5 million for the three months ended September 30, 2024 from $6,771.9 million for the comparable prior year period.
-49-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
Net Interest Income. Net interest income for the three months ended September 30, 2024 was $45.6 million, an increase of $1.2 million, or 2.6%, from $44.4 million for the three months ended September 30, 2023. The increase in net interest income was driven by an increase totaling $686.4 million in the average balance of total interest-earning assets, to $8,709.7 million for the three months ended September 30, 2024, partially offset by a decrease in the net interest margin of 12 basis points to 2.10% for the three months ended September 30, 2024. Included in net interest income for the three months ended September 30, 2024 and 2023, was prepayment penalty income and net recovered interest from non-accrual and delinquent loans totaling $1.6 million and $0.9 million, respectively, net gains and (losses) from fair value adjustments on hedges totaling $0.6 million and $1.3 million, respectively, and purchase accounting income of $0.2 million and $0.3 million, respectively. Excluding all of these items, the net interest margin for the three months ended September 30, 2024 was 1.99%, a decrease of 10 basis points, from 2.09% for the three months ended September 30, 2023.
Provision for Credit Losses. During the three months ended September 30, 2024, the provision for credit losses was $1.7 million compared to $0.6 million for the three months ended September 30, 2023. The provision recorded during the three months ended September 30, 2024, was driven by increased reserves on one commercial business loan and one multi-family loan. The current average loan-to-value ratio for our non-performing assets collateralized by real estate was 55.0% at September 30, 2024. The Bank continues to maintain conservative underwriting standards.
Non-Interest Income. Non-interest income for the three months ended September 30, 2024 was $6.3 million, an increase of $3.0 million, or 89.7% from $3.3 million in the prior year comparable period. The increase was primarily due to net gains from fair value adjustments totaling $1.0 million for the three months ended September 30, 2024, compared to net losses of $1.2 million recorded in the prior year comparable period. In addition, the three months ended September 30, 2024 included insurance recoveries and non-recurring income totaling $0.8 million.
Non-Interest Expense. Non-interest expense for the three months ended September 30, 2024 was $38.7 million, an increase of $2.3 million, or 6.3%, from $36.4 million for the three months ended September 30, 2023. The increase was primarily due to increases in salary and benefits, occupancy and equipment and professional services expenses related to business investments in staff and branches and an increase in FDIC insurance assessment rates.
Income before Income Taxes. Income before income taxes for the three months ended September 30, 2024 was $11.5 million, an increase of $0.7 million, or 6.6%, from $10.8 million for the three months ended September 30, 2023 for the reasons discussed above.
Provision for Income Taxes. The provision for income taxes was $2.6 million for the three months ended September 30, 2024, a decrease of $0.4 million, or 12.5%, from $2.9 million for the three months ended September 30, 2023. The decrease was primarily due to a decline in the effective tax rate for the three months ended September 30, 2024 to 22.3% compared to 27.1% for the three months ended September 30, 2023. The three months ended September 30, 2024 included a discrete tax benefit totaling $0.5 million which is not expected to repeat in future periods.
-50-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table presents operating data highlights for the periods indicated:
| For the nine months ended September 30, | |||||
| 2024 |
| 2023 | |||
(In thousands except per share data) | ||||||
Operating data: |
|
|
|
| ||
Interest income | $ | 345,322 | $ | 292,714 | ||
Interest expense |
| 214,546 |
| 159,647 | ||
Net interest income |
| 130,776 |
| 133,067 | ||
Provision for credit losses |
| 3,128 |
| 9,520 | ||
Noninterest income |
| 13,577 |
| 15,186 | ||
Noninterest expense |
| 117,635 |
| 110,654 | ||
Income before income tax expense |
| 23,590 |
| 28,079 | ||
Income tax expense |
| 5,678 |
| 7,514 | ||
Net income | $ | 17,912 | $ | 20,565 | ||
Basic earnings per common share | $ | 0.60 | $ | 0.69 | ||
Dividends per common share | 0.60 | 0.69 | ||||
Average diluted shares | 29,758 | 30,017 | ||||
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
General. Net income for the nine months ended September 30, 2024 was $17.9 million, a decrease of $2.7 million, or 12.9%, from $20.6 million for the nine months ended September 30, 2023. Diluted earnings per common share were $0.60 for the nine months ended September 30, 2024, a decrease of $0.09, or 13.0%, from $0.69 for the nine months ended September 30, 2023.
Return on average equity was 3.57% for the nine months ended September 30, 2024 compared to 4.05% for the nine months ended September 30, 2023. Return on average assets was 0.27% for the nine months ended September 30, 2024 compared to 0.32% for the nine months ended September 30, 2023.
Interest Income. Interest and dividend income increased $52.6 million, or 18.0%, to $345.3 million for the nine months ended September 30, 2024 from $292.7 million for the nine months ended September 30, 2023. The increase in interest income was primarily attributable to the 58 basis point increase in the yield on interest-earning assets to 5.46% for the nine months ended September 30, 2024 compared to 4.88% for the nine months ended September 30, 2023, coupled with the average balance of total interest-earning assets increasing $428.4 million from the comparable prior year period. During the nine months ended September 30, 2024, $934.6 million of investment securities were purchased at an average rate of 6.72% as part of a leverage strategy. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual and delinquent loans, net gains (losses) from fair value adjustments on hedges, and purchase accounting adjustments, the yield on total interest-earning assets increased 59 basis points to 5.40% for the nine months ended September 30, 2024 from 4.81% for the nine months ended September 30, 2023.
Interest Expense. Interest expense increased $54.9 million, or 34.4%, to $214.5 million for the nine months ended September 30, 2024 from $159.6 million for the nine months ended September 30, 2023. The growth in interest expense was primarily due to an increase of 80 basis points in the average cost of interest-bearing liabilities to 3.96% for the nine months ended September 30, 2024 from 3.16% for the nine months ended September 30, 2023, coupled with an increase of $476.6 million in the average balance of interest-bearing liabilities to $7,220.9 million for the nine months ended September 30, 2024 from $6,744.3 million for the comparable prior year period.
Net Interest Income. Net interest income for the nine months ended September 30, 2024 was $130.8 million, a decrease of $2.3 million, or 1.7%, from $133.1 million for the nine months ended September 30, 2023. The decrease in net interest income was driven by the net interest margin decreasing 15 basis points to 2.07% for the nine months ended September 30, 2024 from 2.22% for the nine months ended September 30, 2023. Included in net interest income for the nine months
-51-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
ended September 30, 2024 and 2023, was prepayment penalty income and net recovered interest from non-accrual and delinquent loans totaling $2.9 million and $1.9 million, respectively, net gains and (losses) from fair value adjustments on hedges totaling $0.5 million and $1.2 million, respectively, and purchase accounting income of $0.6 million and $1.0 million, respectively. Excluding all of these items, the net interest margin for the nine months ended September 30, 2024 was 2.01%, a decrease of 14 basis points, from 2.15% for the nine months ended September 30, 2023.
Provision for Credit Losses. During the nine months ended September 30, 2024, the provision for credit losses was $3.1 million compared to $9.5 million for the nine months ended September 30, 2023. The provision recorded during the nine months ended September 30, 2024, was driven by increased reserves on two commercial business loans and one multifamily loan, as well as an increase in the qualitative reserve to capture additional risk related to credit concentrations. The current average loan-to-value ratio for our non-performing assets collateralized by real estate was 55.0% at September 30, 2024. The Bank continues to maintain conservative underwriting standards.
Non-Interest Income. Non-interest income for the nine months ended September 30, 2024 was $13.6 million, a decrease of $1.6 million, or 10.6% from $15.2 million in the prior year comparable period. The decrease was primarily due to net losses from fair value adjustments totaling $0.2 million in the current period compared to a net gain of $1.7 million recorded during the prior year period, coupled with insurance recoveries and non-recurring income totaling $0.8 million recorded during the nine months ended September 30, 2024. These increases were partially offset by a gain from life insurance proceeds recorded in the prior year period totaling $0.6 million, compared to $1,000 in the current period.
Non-Interest Expense. Non-interest expense for the nine months ended September 30, 2024 was $117.6 million, an increase of $7.0 million, or 6.3%, from $110.7 million for the nine months ended September 30, 2023. The increase was primarily due to increases in salary and benefits, occupancy and equipment and professional services expenses related to business investments in staff and branches and an increase in FDIC insurance assessment rates.
Income before Income Taxes. Income before income taxes for the nine months ended September 30, 2024 was $23.6 million, a decrease of $4.5 million, or 16.0%, from $28.1 million for the nine months ended September 30, 2023 for the reasons discussed above.
Provision for Income Taxes. The provision for income taxes was $5.7 million for the nine months ended September 30, 2024, a decrease of $1.8 million, or 24.4%, from $7.5 million for the nine months ended September 30, 2023. The decrease was primarily due to the decline in income before income taxes. The effective tax rate for the nine months ended September 30, 2024 was 24.1% compared to 26.8% for the nine months ended September 30, 2023. The nine months ended September 30, 2024 included a discrete tax benefit totaling $0.5 million which is not expected to repeat in future periods.
FINANCIAL CONDITION
Assets. Total assets at September 30, 2024 were $9,280.9 million, an increase of $743.7million, or 8.7%, from $8,537.2 million at December 31, 2023. The increase in total assets was mainly due to available for sale securities increasing $739.5 million, or 84.5%, to $1,614.2 million as the Company purchased primarily adjustable-rate securities. Total net loans decreased $88.8 million, or 1.3%, during the nine months ended September 30, 2024, to $6,778.0 million from $6,866.8 million at December 31, 2023. Loan originations and purchases were $473.0 million for the nine months ended September 30, 2024, a decrease of $100.8 million, or 17.6%, from $573.8 million for the nine months ended September 30, 2023. The decreased loan originations were a result of the absence of loans that met both our underwriting and pricing criteria. We continue to focus on the origination of multi-family residential, commercial real estate and commercial business loans with a full banking relationship. The loan pipeline was $293.0 million at September 30, 2024, compared to $163.1 million at December 31, 2023.
-52-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table shows loan originations and purchases for the periods indicated:
| For the three months ended |
| For the nine months ended | |||||||||
| September 30, | September 30, | ||||||||||
(In thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Multi-family residential | $ | 50,528 | $ | 75,655 |
| $ | 90,299 | $ | 149,720 | |||
Commercial real estate |
| 56,713 |
| 70,197 |
| 87,326 | 124,290 | |||||
One-to-four family – mixed-use property |
| 5,709 |
| 6,028 |
| 10,439 | 16,778 | |||||
One-to-four family – residential (1) |
| 1,705 |
| 1,070 |
| 54,933 | 5,429 | |||||
Construction (2) |
| 5,063 |
| 6,971 |
| 11,552 | 26,374 | |||||
Small Business Administration |
| 5,930 |
| — |
| 5,930 | 1,138 | |||||
Commercial business and other (3) |
| 91,447 |
| 81,549 |
| 212,564 |
| 250,067 | ||||
Total | $ | 217,095 | $ | 241,470 | $ | 473,043 | $ | 573,796 | ||||
(1) Includes purchases of $52.3 million for the nine months ended September 30, 2024.
(2) Includes purchases of $0.1 million for the nine months ended September 30, 2023.
(3) Includes purchases of $33.6 million and $36.7 million for the three months ended September 30, 2024 and 2023, respectively. Includes purchases of $78.0 million and $120.6 million for the nine months ended September 30, 2024 and 2023, respectively.
The Bank maintains its conservative underwriting standards that include, among other things, a loan-to-value ratio of 75% or less and a debt coverage ratio of at least 125%. Multi-family residential (excluding underlying co-operative mortgages), commercial real estate and one-to-four family mixed-use property mortgage loans originated and purchased during the three months ended September 30, 2024 had an average loan-to-value ratio of 45.0% and an average debt coverage ratio of 151.0%.
The Bank’s non-performing assets totaled $54.9 million at September 30, 2024, an increase of $8.7 million, or 18.9% from December 31, 2023. Total non-performing assets as a percentage of total assets were 0.59% at September 30, 2024 and 0.54% at December 31, 2023. The ratio of ACL – loans to total non-performing loans was 117.7% at September 30, 2024 and 159.5% at December 31, 2023.
During this period of lower loan originations, the investment securities have increased to augment interest-earning assets.
During the nine months ended September 30, 2024 mortgage-backed securities increased $572.4 million, or 158.0%, to $934.6 million from $362.2 million at December 31, 2023. The increase during the nine months ended September 30, 2024 was primarily due to purchases of $616.9 million of primarily adjustable-rate securities with an average yield of 6.56%, coupled with an increase in the fair value totaling $13.1 million, partially offset by principal repayments totaling $57.0 million.
During the nine months ended September 30, 2024, other securities increased $165.9 million, or 28.3%, to $751.4 million from $585.5 million at December 31, 2023. The increase in other securities during the nine months ended September 30, 2024, was primarily due to purchases of $317.7 million of adjustable-rate securities at an average yield of 7.02%, partially offset by maturities, repayments and calls totaling $157.6 million. At September 30, 2024, other securities primarily consisted of securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds, corporate bonds, and CLOs.
-53-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
Liabilities. Total liabilities were $8,614.0 million at September 30, 2024, an increase of $746.6 million, or 9.5%, from $7,867.4 million at December 31, 2023. During the nine months ended September 30, 2024, due to depositors increased $734.1 million, or 10.9%, to $7,499.0 million primarily due to increases in certificates of deposit of $564.2 million and NOW accounts of $232.1 million. At September 30, 2024, the Company had uninsured deposits totaling $2.3 billion, or 30.6% of deposits with $1.2 billion fully collateralized by some other method leaving uninsured and uncollateralized deposits totaling $1.1 billion or 15.0% of deposits. Uninsured deposits are greatly influenced by our government deposit portfolio. These deposits fluctuate at times that affect both the uninsured deposit levels and other sources of liquidity used. Borrowed funds increased $4.8 million, or 0.6%, during the nine months ended September 30, 2024, primarily due to funding needs being met by deposit growth.
Total deposits at the periods shown and the weighted average rate on deposits at September 30, 2024 and December 31, 2023, are as follows:
Weighted Average |
| Weighted Average |
| |||||||||
September 30, | December 31, | Nominal Rate |
| Nominal Rate |
| |||||||
| 2024 |
| 2023 |
| 2024 (1) |
|
| 2023 (1) |
| |||
Interest-bearing deposits: |
| (Dollars in thousands) |
|
|
|
| ||||||
Certificate of deposit accounts | $ | 2,875,486 | $ | 2,311,290 |
| 4.82 | % |
| 4.51 | % | ||
Savings accounts |
| 100,279 |
| 108,605 |
| 0.47 |
| 0.45 | ||||
Money market accounts |
| 1,659,027 |
| 1,726,404 |
| 4.10 |
| 3.91 | ||||
NOW accounts |
| 2,003,301 |
| 1,771,164 |
| 3.74 |
| 3.58 | ||||
Total interest-bearing deposits |
| 6,638,093 |
| 5,917,463 |
|
|
|
| ||||
Non-interest bearing demand deposits |
| 860,930 |
| 847,416 |
|
|
|
| ||||
Total due to depositors |
| 7,499,023 |
| 6,764,879 |
|
|
|
| ||||
Mortgagors' escrow deposits |
| 73,372 |
| 50,382 |
| 0.27 | 0.25 | |||||
Total deposits | $ | 7,572,395 | $ | 6,815,261 |
|
|
|
| ||||
(1) The weighted average rate does not reflect the benefit of interest rate swaps.
Included in deposits were brokered deposits totaling $1,658.6 million, an increase of $556.6 million from $1,102.0 million at December 31, 2023. We utilize brokered deposits as an additional funding source, to assist in the management of our interest rate risk and as an underlying funding source for a portion of our interest rate swaps. We obtain brokered certificates of deposit as a wholesale funding source when the interest rate on these deposits are below other wholesale options, or to extend the maturities of our deposits. Brokered deposits generally have a higher beta than our retail deposits as the interest rates are typically more sensitive to changes in the federal funds rates. A portion of our brokered certificates of deposit are hedged against rising interest rates using interest rate swaps. At September 30, 2024 and December 31, 2023, $800.8 million and $680.0 million, respectively, were hedged using interest rate swaps. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements. Brokered deposits obtained by the Bank are generally fully FDIC insured. At September 30, 2024 and December 31, 2023, the Bank did not hold any uninsured brokered deposits.
The following table shows the composition of brokered deposits at the periods indicated below:
September 30, | December 31, | |||||
(In thousands) | 2024 | 2023 | ||||
NOW accounts | $ | 201,314 | $ | 187,119 | ||
Money market accounts |
| 73,533 |
| 96,596 | ||
Certificates of deposit | 1,383,724 | 818,287 | ||||
Total brokered deposits | $ | 1,658,571 | $ | 1,102,002 | ||
-54-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
Interest expense on brokered deposits is summarized as follows for the periods indicated below:
For the three months ended | ||||||
September 30, | ||||||
(In thousands) | 2024 | 2023 | ||||
NOW accounts | $ | 694 | $ | 621 | ||
Money market accounts |
| 214 |
| 590 | ||
Certificates of deposit | 12,027 | 5,294 | ||||
Total interest expense on brokered deposits | $ | 12,935 | $ | 6,505 | ||
For the nine months ended | ||||||
September 30, | ||||||
(In thousands) | 2024 | 2023 | ||||
NOW accounts | $ | 908 | $ | 875 | ||
Money market accounts |
| 1,099 |
| 2,943 | ||
Certificates of deposit | 22,916 | 12,223 | ||||
Total brokered deposits | $ | 24,923 | $ | 16,041 | ||
Equity. Total stockholders’ equity was $666.9 million at September 30, 2024, a decrease of $2.9 million, or 0.4%, from $669.8 million at December 31, 2023. Stockholders’ equity decreased primarily due to the declaration and payment of dividends on the Company’s common stock of $0.66 per common share totaling $19.6 million, partially offset by net income totaling $17.9 million. Book value per common share was $22.94 at September 30, 2024 compared to $23.21 at December 31, 2023.
Liquidity. Liquidity is the ability to economically meet current and future financial obligations. The Company’s primary objectives in terms of managing liquidity are to maintain the ability to originate and purchase loans and securities, repay borrowings as they mature, satisfy financial obligations that arise in the normal course of business and meet our customer’s deposit withdrawal needs. Our primary sources of funds are deposits, borrowings, principal and interest payments on loans, mortgage-backed and other securities, and proceeds from sales of securities and loans. Deposit flows and mortgage prepayments, however, are greatly influenced by general interest rates, economic conditions, and competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits and other types of borrowings. During 2024 the FHLB-NY reduced the available lines to all its member banks from 45% of total assets to 30% of total assets. To offset the FHLB-NY policy change, the Company expanded its line with the Federal Reserve. At September 30, 2024, the Company had $3.9 billion in combined available liquidity through cash lines with the FHLB-NY, Federal Reserve and other commercial banks as well as unencumbered securities compared to $4.1 billion at December 31, 2023.
-55-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table presents the Company’s available liquidity by source at the periods indicated below:
| At September 30, 2024 | |||||||
| Total | Amount | Net | |||||
| Available | Used | Availability | |||||
Internal Sources: | (In millions) | |||||||
Unencumbered Securities | $ | 895.9 | $ | — |
| $ | 895.9 | |
Interest Earnings Deposits |
| 185.9 |
| — |
|
| 185.9 | |
External Sources: |
|
|
|
|
|
|
| |
Federal Home Loan Bank |
| 2,654.5 |
| 1,900.7 |
|
| 753.8 | |
Federal Reserve Bank | 1,678.0 | 100.0 | 1,578.0 | |||||
Other Banks |
| 474.0 |
| — |
|
| 474.0 | |
Total Liquidity | $ | 5,888.3 | $ | 2,000.7 | $ | 3,887.6 | ||
| At December 31, 2023 | |||||||
| Total | Amount | Net | |||||
| Available | Used | Availability | |||||
Internal Sources: | (In millions) | |||||||
Unencumbered Securities | $ | 508.3 | $ | — |
| $ | 508.3 | |
Interest Earnings Deposits |
| 71.2 |
| — |
|
| 71.2 | |
External Sources: |
|
|
|
|
|
|
| |
Federal Home Loan Bank |
| 3,808.6 |
| 1,599.5 |
|
| 2,209.1 | |
Federal Reserve Bank | 298.0 | 100.0 | 198.0 | |||||
Other Banks |
| 1,128.0 |
| 25.0 |
|
| 1,103.0 | |
Total Liquidity | $ | 5,814.1 | $ | 1,724.5 | $ | 4,089.6 | ||
Liquidity management is both a short and long-term function of business management. During 2024, funds were provided by the Company’s operating and financing activities, which were used to fund our investing activities. The largest use of funds during 2024 was the purchase of $934.9 million of available for sale securities as part of a leveraging strategy which was primarily funded by an increase of $719.9 million in interest-bearing deposits and $206.7 million in net repayments of loans. This strategy, which was completed during the three months ended September 30, 2024, was initiated to offset tempered loan growth. Our most liquid assets are cash and cash equivalents, which include cash and due from banks, overnight interest-earning deposits and federal funds sold with original maturities of 90 days or less. The level of these assets is dependent on our operating, financing, lending, and investing activities during any given period. At September 30, 2024, cash and cash equivalents totaled $267.6 million, an increase of $95.5 million, or 55.5% from $172.2 million, at December 31, 2023. A portion of our cash and cash equivalents is restricted cash held as collateral for interest rate swaps. At September 30, 2024 and December 31, 2023, restricted cash totaled $22.8 million and $47.9 million, respectively.
INTEREST RATE RISK
Interest rate risk is the impact on earnings and capital from changes in interest rates. Interest rate risk exists because our interest-earning assets and interest-bearing liabilities may mature or reprice at different times or by different amounts. We assess interest rate risk by comparing the results of several income and capital simulations scenarios to the base case compared to scenarios with changes in interest rates, degree of change over time, speed of change, and changes in the shape of the yield curve. These scenarios have assumptions including loan originations, investment securities purchases and sales, prepayment rates on loans and investment securities, deposit flows, and mix and pricing decisions.
Asset/Liability Management. Asset/liability management involves assessing, monitoring and managing interest rate risk. The asset liability committee (“ALCO”) Investment Committee of the Board of Directors (“Board ALCO”) has primary oversight responsibility of interest rate risk. The actions and activities of the Board ALCO are dictated by the “ALCO and Investment Committee Charter of the Company Board of Directors (the “Charter”). The Board ALCO has established policy limits for changes of net interest income and the economic value of equity under various scenarios and liquidity risk limits to ensure the Company has sufficient liquid assets to meet its short-term obligations, even during periods of
-56-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
financial stress and is reviewed no less frequently than quarterly. The ALCO policy and oversight is interconnected to the Company’s capital plan.
The Board ALCO reviews simulations of various interest rate scenarios to assess the potential impact on the Company’s balance sheet and income statement. The model employed by the Company uses a statistic balance sheet as of the date the modeling is being generated. The limitation to this model is that unexpected events may not be captured in the output. The model is validated no less frequently than annually with the variables in the model subjected to annual stress tests. In addition, the interest rate risk model is back-tested no less frequently than quarterly to ensure the model remains consistent with actual results. The information from the interest rate risk modeling allows the Board ALCO to assess the potential impact of interest rate changes on the Company’s profitability and future earnings.
The interest rate risk scenarios affect the position the Company may take with the pricing of assets and liabilities.
Models are inherently imperfect and subject to assumptions and limitations. The model output is affected by the data quality and the assumptions used. The Company uses both internal and external inputs into the model. The market interest rates are obtained from the Federal Reserve WIRP curve and may be adjusted by the management level ALCO committee (“Management ALCO”); the change in deposit betas is based upon deposit studies completed by an independent third party; loan prepayment assumptions are based upon internal analysis; loan origination data is Company generated; and additions to assets and liabilities is derived from the budget or forecast or internally generated projected cash flows.
There was no material change in the source of the data used in our interest rate risk modeling in the current year. Current economic factors such as interest rate forecasts as changed from period over period may affect the modeling. Key assumptions include deposit betas and loan origination yields. Deposit betas vary by product and direction of interest rates. In an upward shock, weighted average deposit betas (based on period end balances) were 71% at September 30, 2024 compared to 74% in September 30, 2023. In a downward shock, weighted average deposit betas (based on period end balances) were 63% at September 30, 2024 compared to 66% at September 30, 2023. Loan origination yields vary by product and the weighted average yield (based on period end loan balances) was 7.08% at September 30, 2024 compared to 7.16% at September 30, 2023.
Management ALCO, which consists of representatives from treasury, finance, business units, and senior management, oversees the interest rate risk, liquidity risk and capital risk while providing regular reports to the Board ALCO. These reports quantify the potential changes in net interest income and economic value of equity through various rate scenarios. The Management ALCO also provides the results of the liquidity stress test prepared by the Chief Risk Officer, the sensitivity analyses of the interest rate risk model variables, and the capital position of the Company and the Bank.
Economic Value of Equity Analysis. The Consolidated Statements of Financial Condition have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in fair value of certain investments due to changes in interest rates. Generally, the fair value of financial investments such as loans and securities fluctuate inversely with changes in interest rates. As a result, increases in interest rates could result in decreases in the fair value of the Company’s interest-earning assets which could adversely affect the Company’s results of operations if such assets were sold, or, in the case of securities classified as available for sale, decreases in the Company’s stockholders’ equity, if such securities were retained.
The Company quantifies the net portfolio value should interest rates immediately go up or down 100 or 200 basis points, assuming the yield curves of the rate shocks will be parallel to each other. Net portfolio value is defined as the market value of assets net of the market value of liabilities. The market value of assets and liabilities is determined using a discounted cash flow calculation. The net portfolio value ratio is the ratio of the net portfolio value to the market value of assets. The changes in value are measured as percentage changes from the net portfolio value at the base interest rate scenario. The base interest rate scenario assumes interest rates at September 30, 2024. Various estimates regarding prepayment assumptions are made at each level of rate shock. At September 30, 2024, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.
-57-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table presents the change in the Company’s net portfolio value and the net portfolio ratio for the following periods:
Projected Percentage Change In | ||||||||||||
Net Portfolio Value (NPV) | Net Portfolio Value Ratio | |||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||
Change in Interest Rate | 2024 | 2023 | 2024 | 2023 | ||||||||
-200 Basis points | (3.3) | % | (1.8) | % | 5.4 | % | 7.4 | % | ||||
-100 Basis points | (2.6) | (0.9) | 5.5 | 7.6 | ||||||||
Base interest rate | - | - | 5.8 |
| 7.8 |
| ||||||
+100 Basis points | (4.9) | (3.5) | 5.6 |
| 7.7 |
| ||||||
+200 Basis points | (9.0) | (6.7) | 5.4 |
| 7.6 |
| ||||||
Income Simulation Analysis. The Company manages the mix of interest-earning assets and interest-bearing liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk. The starting point for the net interest income simulation is an estimate of the next twelve months’ net interest income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end levels. The report quantifies the potential changes in net interest income should interest rates go up or down 100 or 200 basis points (shocked), assuming the yield curves of the rate shocks will be parallel to each other. All changes in income are measured as percentage changes from the projected net interest income at the base interest rate scenario. The base interest rate scenario assumes interest rates at September 30, 2024 and 2023. Prepayment penalty income is excluded from this analysis. Actual results could differ significantly from these estimates. At September 30, 2024, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.
-58-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table presents the Company’s interest rate shock as of September 30, 2024 and 2023:
Projected Percentage | ||||||
Change In | ||||||
Net Interest Income | ||||||
Change in Interest Rate | 2024 | 2023 | ||||
-200 Basis points | (1.8) | % | (1.0) | % | ||
-100 Basis points | (0.4) | - | ||||
Base interest rate | - | - | ||||
+100 Basis points | (3.5) | (3.0) | ||||
+200 Basis points | (7.7) | (6.0) | ||||
Another net interest income simulation assumes that changes in interest rates change gradually in equal increments over the twelve-month period. Prepayment penalty income is excluded from this analysis. Based on these assumptions, net interest income would be reduced by 3.6% from a 200 basis point increase in rates over the next twelve months and a 0.6% reduction from a 200 basis point decrease in rate over the same period. Actual results could differ significantly from these estimates.
At September 30, 2024, the Company had a derivative portfolio with a notional value totaling $2.7 billion. This portfolio is designed to provide protection against rising interest rates. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
-59-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
AVERAGE BALANCES
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amount of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. The following tables set forth certain information relating to the Company’s Consolidated Statements of Financial Condition and Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023, and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields include amortization of fees which are considered adjustments to yields.
| For the three months ended September 30, | ||||||||||||||||
| 2024 |
| 2023 | ||||||||||||||
| Average |
| Yield/ |
| Average |
| Yield/ | ||||||||||
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost | ||||||
Assets |
| (Dollars in thousands) | |||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage loans, net | $ | 5,337,170 | $ | 74,645 |
| 5.59 | % | $ | 5,314,215 | $ | 68,931 |
| 5.19 | % | |||
Other loans, net |
| 1,400,091 |
| 21,135 |
| 6.04 |
| 1,498,804 |
| 22,535 |
| 6.01 | |||||
Total loans, net (1) (2) |
| 6,737,261 | 95,780 | 5.69 |
| 6,813,019 | 91,466 | 5.37 | |||||||||
Taxable securities: |
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage-backed securities |
| 984,383 |
| 12,443 |
| 5.06 |
| 436,181 |
| 3,031 |
| 2.78 | |||||
Other securities |
| 714,161 |
| 11,431 |
| 6.40 |
| 528,091 |
| 7,003 |
| 5.30 | |||||
Total taxable securities |
| 1,698,544 | 23,874 | 5.62 |
| 964,272 | 10,034 | 4.16 | |||||||||
Tax-exempt securities: (3) |
|
|
|
|
|
|
|
|
|
| |||||||
Other securities |
| 65,070 |
| 474 |
| 2.91 |
| 66,438 |
| 484 |
| 2.91 | |||||
Total tax-exempt securities |
| 65,070 | 474 | 2.91 |
| 66,438 | 484 | 2.91 | |||||||||
Interest-earning deposits and federal funds sold |
| 208,796 |
| 2,565 |
| 4.91 |
| 179,508 |
| 2,154 |
| 4.80 | |||||
Total interest-earning assets (3) |
| 8,709,671 | 122,693 | 5.63 |
| 8,023,237 | 104,138 | 5.19 | |||||||||
Other assets |
| 494,213 |
|
|
| 482,109 |
|
| |||||||||
Total assets | $ | 9,203,884 |
|
| $ | 8,505,346 |
|
| |||||||||
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
| |||||||
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
| |||||||
Deposits: |
|
|
|
|
|
|
|
|
|
| |||||||
Savings accounts | $ | 102,196 |
| 122 |
| 0.48 | $ | 115,437 |
| 130 |
| 0.45 | |||||
NOW accounts |
| 1,886,387 |
| 18,795 |
| 3.99 |
| 1,907,781 |
| 16,843 |
| 3.53 | |||||
Money market accounts |
| 1,673,499 |
| 17,485 |
| 4.18 |
| 1,584,308 |
| 14,386 |
| 3.63 | |||||
Certificate of deposit accounts |
| 2,884,280 |
| 29,676 |
| 4.12 |
| 2,290,669 |
| 18,639 |
| 3.25 | |||||
Total due to depositors |
| 6,546,362 | 66,078 | 4.04 |
| 5,898,195 | 49,998 | 3.39 | |||||||||
Mortgagors' escrow accounts |
| 71,965 |
| 72 |
| 0.40 |
| 69,525 |
| 68 |
| 0.39 | |||||
Total deposits |
| 6,618,327 | 66,150 | 4.00 |
| 5,967,720 | 50,066 | 3.36 | |||||||||
Borrowed funds |
| 886,190 |
| 10,840 |
| 4.89 |
| 804,140 |
| 9,543 |
| 4.75 | |||||
Total interest-bearing liabilities |
| 7,504,517 | 76,990 | 4.10 |
| 6,771,860 | 59,609 | 3.52 | |||||||||
Non-interest-bearing deposits |
| 845,456 |
|
|
|
| 851,677 |
|
|
| |||||||
Other liabilities |
| 181,149 |
|
|
|
| 206,768 |
|
|
| |||||||
Total liabilities |
| 8,531,122 |
|
|
|
| 7,830,305 |
|
|
| |||||||
Equity |
| 672,762 |
|
|
|
| 675,041 |
|
|
| |||||||
Total liabilities and equity | $ | 9,203,884 |
|
|
| $ | 8,505,346 |
|
|
| |||||||
Net interest income / net interest rate spread (tax equivalent) (3) |
|
| $ | 45,703 |
| 1.53 | % |
|
| $ | 44,529 |
| 1.67 | % | |||
Net interest-earning assets / net interest margin(tax equivalent) (3) | $ | 1,205,154 |
|
|
| 2.10 | % | $ | 1,251,377 |
|
|
| 2.22 | % | |||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
| 1.16 | X |
|
|
|
|
| 1.18 | X | |||
(1) Loan interest income includes loan fee income (expense) (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.4 million each for the three months ended September 30, 2024 and 2023.
(2) Loan interest income includes net gains (losses) from fair value adjustments on qualifying hedges of $0.4 million and $1.4 million for three months ended September 30, 2024 and 2023, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.1 million each for the three months ended September 30, 2024 and 2023.
-60-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
| For the nine months ended September 30, | ||||||||||||||||
| 2024 |
| 2023 | ||||||||||||||
| Average |
| Yield/ |
| Average |
| Yield/ | ||||||||||
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost | ||||||
Assets |
| (Dollars in thousands) | |||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage loans, net | $ | 5,343,108 | $ | 218,185 |
| 5.44 | % | $ | 5,318,616 | $ | 194,673 |
| 4.88 | % | |||
Other loans, net |
| 1,419,970 |
| 63,282 |
| 5.94 |
| 1,519,124 |
| 65,059 |
| 5.71 | |||||
Total loans, net (1) (2) |
| 6,763,078 | 281,467 | 5.55 |
| 6,837,740 | 259,732 | 5.06 | |||||||||
Taxable securities: |
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage-backed securities |
| 714,030 |
| 23,601 |
| 4.41 |
| 447,491 |
| 8,288 |
| 2.47 | |||||
Other securities |
| 656,325 |
| 30,343 |
| 6.16 |
| 470,898 |
| 17,461 |
| 4.94 | |||||
Total taxable securities |
| 1,370,355 | 53,944 | 5.25 |
| 918,389 | 25,749 | 3.74 | |||||||||
Tax-exempt securities: (3) |
|
|
|
|
|
|
|
|
|
| |||||||
Other securities |
| 65,485 |
| 1,418 |
| 2.89 |
| 66,631 |
| 1,441 |
| 2.88 | |||||
Total tax-exempt securities |
| 65,485 | 1,418 | 2.89 |
| 66,631 | 1,441 | 2.88 | |||||||||
Interest-earning deposits and federal funds sold |
| 235,365 |
| 8,791 |
| 4.98 |
| 183,106 |
| 6,095 |
| 4.44 | |||||
Total interest-earning assets (3) |
| 8,434,283 | 345,620 | 5.46 |
| 8,005,866 | 293,017 | 4.88 | |||||||||
Other assets |
| 480,793 |
|
|
| 472,971 |
|
| |||||||||
Total assets | $ | 8,915,076 |
|
| $ | 8,478,837 |
|
| |||||||||
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
| |||||||
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
| |||||||
Deposits: |
|
|
|
|
|
|
|
|
|
| |||||||
Savings accounts | $ | 103,908 |
| 359 |
| 0.46 | $ | 124,736 |
| 396 |
| 0.42 | |||||
NOW accounts |
| 1,946,022 |
| 57,293 |
| 3.93 |
| 1,968,199 |
| 46,780 |
| 3.17 | |||||
Money market accounts |
| 1,704,320 |
| 52,083 |
| 4.07 |
| 1,797,398 |
| 43,113 |
| 3.20 | |||||
Certificate of deposit accounts |
| 2,578,988 |
| 74,977 |
| 3.88 |
| 2,007,954 |
| 44,927 |
| 2.98 | |||||
Total due to depositors |
| 6,333,238 | 184,712 | 3.89 |
| 5,898,287 | 135,216 | 3.06 | |||||||||
Mortgagors' escrow accounts |
| 80,408 |
| 196 |
| 0.33 |
| 79,136 |
| 155 |
| 0.26 | |||||
Total deposits |
| 6,413,646 | 184,908 | 3.84 |
| 5,977,423 | 135,371 | 3.02 | |||||||||
Borrowed funds |
| 807,230 |
| 29,638 |
| 4.90 |
| 766,919 |
| 24,276 |
| 4.22 | |||||
Total interest-bearing liabilities |
| 7,220,876 | 214,546 | 3.96 |
| 6,744,342 | 159,647 | 3.16 | |||||||||
Non-interest-bearing deposits |
| 834,217 |
|
|
|
| 865,777 |
|
|
| |||||||
Other liabilities |
| 190,138 |
|
|
|
| 191,769 |
|
|
| |||||||
Total liabilities |
| 8,245,231 |
|
|
|
| 7,801,888 |
|
|
| |||||||
Equity |
| 669,845 |
|
|
|
| 676,949 |
|
|
| |||||||
Total liabilities and equity | $ | 8,915,076 |
|
|
| $ | 8,478,837 |
|
|
| |||||||
Net interest income / net interest rate spread (tax equivalent) (3) |
|
| $ | 131,074 |
| 1.50 | % |
|
| $ | 133,370 |
| 1.72 | % | |||
Net interest-earning assets / net interest margin (tax equivalent) (3) | $ | 1,213,407 |
|
|
| 2.07 | % | $ | 1,261,524 |
|
|
| 2.22 | % | |||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
| 1.17 | X |
|
|
|
|
| 1.19 | X | |||
(1) Loan interest income includes loan fee income (expense) (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $0.6 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively.
(2) Loan interest income includes net gains (losses) from fair value adjustments and termination on qualifying hedges of $0.4 million and $1.3 million for the nine months ended September 30, 2024 and 2023, respectively.
(3) Interest and yields are calculated on the tax equivalent basis using the statutory federal income tax rate of 21% for the periods presented totaling $0.3 million each for the nine months ended September 30, 2024 and 2023.
-61-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
LOANS
The following table sets forth the Company’s loan originations (including the net effect of refinancing) and the changes in the Company’s portfolio of loans, including purchases, sales and principal reductions for the periods indicated.
For the nine months ended September 30, | ||||||
(In thousands) |
| 2024 |
| 2023 | ||
Mortgage Loans |
|
|
|
| ||
At beginning of period | $ | 5,425,586 | $ | 5,380,935 | ||
Mortgage loans originated: |
|
|
|
| ||
Multi-family residential |
| 90,299 |
| 149,720 | ||
Commercial real estate |
| 87,326 |
| 124,290 | ||
One-to-four family mixed-use property |
| 10,439 |
| 16,778 | ||
One-to-four family residential |
| 2,619 |
| 5,429 | ||
Construction |
| 11,552 |
| 26,245 | ||
Total mortgage loans originated |
| 202,235 |
| 322,462 | ||
Mortgage loans purchased: |
|
|
|
| ||
One-to-four family residential |
| 52,314 |
| — | ||
Construction |
| — |
| 129 | ||
Total mortgage loans purchased |
| 52,314 |
| 129 | ||
Less: |
|
|
|
| ||
Principal reductions |
| 262,210 |
| 307,017 | ||
Mortgage loan sales |
| 18,148 |
| 8,506 | ||
Charge-Offs |
| 14 |
| 20 | ||
Loans transferred to OREO |
| 329 |
| — | ||
At end of period | $ | 5,399,434 | $ | 5,387,983 | ||
Commercial business loans |
|
|
|
| ||
At beginning of period | $ | 1,472,723 | $ | 1,544,823 | ||
Loans originated: |
|
|
|
| ||
Small Business Administration |
| 5,930 |
| 1,138 | ||
Commercial business | 130,032 | 126,547 | ||||
Other |
| 4,514 |
| 2,929 | ||
Total commercial business and other loans originated |
| 140,476 |
| 130,614 | ||
Commercial business loans purchased: |
|
|
|
| ||
Commercial business |
| 78,018 |
| 120,591 | ||
Total commercial business loans purchased |
| 78,018 |
| 120,591 | ||
Less: |
|
|
|
| ||
Principal reductions |
| 280,721 |
| 275,329 | ||
Charge-offs |
| 3,163 |
| 11,028 | ||
At end of period | $ | 1,407,333 | $ | 1,509,671 | ||
-62-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
NON-PERFORMING ASSETS
The following table shows the principal balance of our non-performing assets at the periods indicated:
September 30, | December 31, | ||||||
(Dollars in thousands) |
| 2024 | 2023 | ||||
Loans 90 days or more past due and still accruing: | |||||||
Multi-family residential | $ | — | $ | 1,463 | |||
Total |
| — |
| 1,463 | |||
Non-accrual mortgage loans: |
|
|
|
| |||
Multi-family residential |
| 9,478 |
| 3,206 | |||
One-to-four family mixed-use property |
| 369 |
| 981 | |||
One-to-four family residential |
| 1,493 |
| 5,181 | |||
Commercial real estate | 6,705 | — | |||||
Total |
| 18,045 |
| 9,368 | |||
|
|
|
| ||||
Non-accrual commercial business loans: |
| ||||||
Small Business Administration |
| 2,445 |
| 2,552 | |||
Commercial Business and other |
| 13,771 |
| 11,789 | |||
Total |
| 16,216 |
| 14,341 | |||
Total non-accrual loans | 34,261 | 23,709 | |||||
|
| ||||||
Total non-performing loans |
| 34,261 |
| 25,172 | |||
Other non-performing assets: |
|
| |||||
Held-to-maturity securities |
| 20,627 |
| 20,981 | |||
Total |
| 20,627 |
| 20,981 | |||
Total non-performing assets | $ | 54,888 | $ | 46,153 | |||
Non-performing loans to gross loans | 0.50 | % | 0.36 | % | |||
Non-performing assets to total assets | 0.59 | % | 0.54 | % | |||
CRITICIZED AND CLASSIFIED ASSETS
Our policy is to review our assets, focusing primarily on the loan portfolio, other real estate owned, and the investment portfolio, to ensure that credit quality is maintained at the highest levels. See Note 5 (“Loans”) of the Notes to the Consolidated Financial Statements for a description of how loans are determined to be criticized or classified and a table displaying criticized and classified loans at September 30, 2024. The amortized cost of Criticized and Classified assets was $90.6 million at September 30, 2024, a decrease of $8.5 million from $99.1 million at December 31, 2023. The Company had one investment security with an amortized cost of $20.6 million and $21.0 million classified as substandard at September 30, 2024 and December 31, 2023, respectively.
Included within net loans at September 30, 2024 and December 31, 2023, were $1.8 million and $4.8 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
-63-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
ALLOWANCE FOR CREDIT LOSSES
The following table shows allowance for credit losses at the period indicated:
For the nine months ended September 30, | ||||||
(In thousands) | 2024 | 2023 | ||||
Balance at beginning of period | $ | 40,161 | $ | 40,442 | ||
Loans- charge-off | (3,179) | (11,050) | ||||
Loans- recovery | 231 | 298 | ||||
Loans- provision (benefit) | 3,129 | 9,538 | ||||
Allowance for credit losses - loans | $ | 40,342 | $ | 39,228 | ||
Balance at beginning of period | $ | 1,087 | $ | 1,100 | ||
HTM securities provision (benefit) | (1) | (18) | ||||
Allowance for credit losses - HTM securities | $ | 1,086 | $ | 1,082 | ||
Balance at beginning of period | $ | 1,102 | $ | 970 | ||
Off-balance sheet- provision (benefit) | (44) | (37) | ||||
Allowance for credit losses - off-balance sheet | $ | 1,058 | $ | 933 | ||
Allowance for credit losses | $ | 42,486 | $ | 41,243 | ||
-64-
PART I – FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussions and Analysis of
Financial Condition and Results of Operations
The following table sets forth the activity in the Company’s ACL - loans for the periods indicated:
For the nine months ended September 30, |
| ||||||
(Dollars in thousands) |
| 2024 |
| 2023 | |||
Balance at beginning of year | $ | 40,161 | $ | 40,442 | |||
Provision (benefit) for credit losses |
| 3,129 |
| 9,538 | |||
Loans charged-off: |
|
|
|
| |||
Commercial real estate | — | (8) | |||||
One-to-four family - residential | (14) | (12) | |||||
Small Business Administration |
| (7) |
| (7) | |||
Commercial business and other loans |
| (3,158) |
| (11,023) | |||
Total loans charged-off |
| (3,179) |
| (11,050) | |||
Recoveries: |
|
|
|
| |||
Multi-family residential |
| 1 |
| 1 | |||
One-to-four family - mixed-use property | 2 | — | |||||
One-to-four family - residential | 61 | 50 | |||||
Small Business Administration | 104 | 219 | |||||
Commercial business and other | 63 | 28 | |||||
Total recoveries |
| 231 |
| 298 | |||
Net charge-offs |
| (2,948) |
| (10,752) | |||
Balance at end of year | $ | 40,342 | $ | 39,228 | |||
Ratio of net charge-offs to average loans outstanding during the period |
| 0.06 | % |
| 0.21 | % | |
Ratio of ACL - loans to gross loans at end of period |
| 0.59 | % |
| 0.57 | % | |
Ratio of ACL - loans to non-accrual loans at end of period | 117.75 | % |
| 225.38 | % | ||
Ratio of ACL - loans to non-performing loans at end of period |
| 117.75 | % |
| 225.38 | % | |
-65-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the qualitative and quantitative disclosures about market risk, see the information under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk."
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, the design and operation of these disclosure controls and procedures were effective. During the period covered by this Quarterly Report, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
-66-
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits. Management of the Company, after consultation with outside legal counsel, believes that the resolution of these various matters will not result in any material adverse effect on the Company’s consolidated financial condition, results of operations and cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information regarding the shares of common stock repurchased by the Company during the three months ended September 30, 2024:
|
|
|
|
|
| Maximum | |||
Total Number of | Number of | ||||||||
Total | Shares Purchased | Shares That May | |||||||
Number | as Part of Publicly | Yet Be Purchased | |||||||
of Shares | Average Price | Announced Plans | Under the Plans | ||||||
Period | Purchased | Paid per Share | or Programs | or Programs | |||||
July 1 to July 31, 2024 | — | — | — | 807,964 | |||||
August 1 to August 31, 2024 | — | — | — | 807,964 | |||||
September 1 to September 30, 2024 | — | — | — | 807,964 | |||||
Total |
| — | $ | — |
| — |
| ||
During the quarter ended September 30, 2024, the Company did not repurchase any shares of the Company’s common stock. On September 30, 2024, 807,964 shares remained to be repurchased under the currently authorized stock repurchase programs. Stock will be purchased under the current stock repurchase programs from time to time, in the open market or through private transactions, subject to market conditions. There is no expiration or maximum dollar amount under these authorizations.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
-67-
ITEM 6. EXHIBITS
Exhibit No. |
| Description |
3.1 P | Certificate of Incorporation of Flushing Financial Corporation (Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed September 1, 1995, Registration No. 33-96488) | |
3.2 | ||
3.3 | ||
3.4 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | Flushing Financial Corporation has outstanding certain long-term debt. None of such debt exceeds ten percent of Flushing Financial Corporation's total assets; therefore, copies of constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the Securities and Exchange Commission upon request. | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith) | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |
P Indicates a filing submitted in paper.
-68-
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
EXHIBIT INDEX
Exhibit No. |
| Description |
3.1 P | Certificate of Incorporation of Flushing Financial Corporation (Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed September 1, 1995, Registration No. 33-96488) | |
3.2 | ||
3.3 | ||
3.4 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | Flushing Financial Corporation has outstanding certain long-term debt. None of such debt exceeds ten percent of Flushing Financial Corporation's total assets; therefore, copies of constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the Securities and Exchange Commission upon request. | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith) | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
P Indicates a filing submitted in paper.
-69-
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Flushing Financial Corporation, | |||
Dated: | November 5, 2024 | By: | /s/John R. Buran | |
John R. Buran | ||||
President and Chief Executive Officer | ||||
Dated: | November 5, 2024 | By: | /s/Susan K. Cullen | |
Susan K. Cullen | ||||
Senior Executive Vice President, Treasurer and | ||||
Chief Financial Officer | ||||
-70-