John R. Buran, President and CEO Commentary

UNIONDALE, N.Y., Jan. 26, 2023 (GLOBE NEWSWIRE) -- The Company reported fourth quarter 2022 GAAP EPS of $0.34, down 41.4% YoY, with ROAA of 0.48%, and ROAE of 6.06%. Core 4Q22 EPS was $0.57, a decrease of 14.9% YoY, with ROAA of 0.82% and ROAE of 10.29%. Full year 2022 GAAP EPS was $2.50, down 3.5% YoY with ROAA of 0.93% and ROAE of 11.44%. Core 2022 EPS was $2.49, a decline of 11.4% YoY with ROAA of 0.92% and ROAE of 11.42%.

Loan Growth of 4.4% YoY; NIM Declined QoQ. Period end net loans increased 4.4% YoY, with business loans comprising 38.3% of the growth; loans declined slightly QoQ. Loan closings of $225.2 million decreased 37.9% YoY, while repayment speeds declined both YoY and QoQ. Management has focused on full banking relationships choosing to forgo transactional business. Net interest income of $54.2 million decreased 13.5% YoY and 11.4% QoQ, primarily due to the increase in funding costs. NIM FTE was 2.70% in 4Q22 compared to 3.07% in 3Q22 and 3.29% a year ago. Core NIM FTE was 2.63% in 4Q22 compared to 3.03% in 3Q22 and 3.21% in 4Q21. Net charge-offs were only 5 bps in 4Q22, which is consistent with the loan portfolio having an average LTV <37%.

71% of 2022 Earnings Returned to Shareholders; TCE/TA¹ Improves QoQ. The Company repurchased 374,862 shares of common stock at an average price of $20.16 during the quarter. Book value and tangible book value per share were $22.97 and $22.31, respectively, while TCE/TA was up 20 bps to 7.82% at December 31, 2022, compared to 7.62% at September 30, 2022.

¹ Tangible Common Equity (“TCE”)/Total Assets (“TA”) ² See “Reconciliation of GAAP Earnings and Core Earnings”, “Reconciliation of GAAP Revenue and Pre-Provision Pre-Tax Net Revenue”, and “Reconciliation of GAAP Net Interest Margin to Core Net Interest Income and Net Interest Margin.” ³ Net Interest Margin (“NIM”) Fully Taxable Equivalent (“FTE”)

• Period end net loans were stable QoQ and increased 4.4% YoY; loan closings were $225.2 million with a rate of 6.10% in 4Q22, down 51.4% QoQ and 37.9% YoY, while the yield on closings increased 150 bps QoQ and 259 bps YoY
• Average deposits, including mortgage escrow, increased 6.4% QoQ and 3.4% YoY to $6.7 billion, with core deposits comprising 79.8% of total average deposits
• Loan pipeline decreased 41.3% YoY to $252.2 million reflecting higher rates and greater client selectivity
• $84.2 million of mortgage-based securities were sold at a loss of $10.9 million ($0.27 per share, net of tax) in 4Q22
• Net interest income decreased 11.4% QoQ and 13.5% YoY to $54.2 million; Core net interest income declined 12.4% QoQ and 13.4% YoY to $52.9 million
• Net interest margin FTE decreased 37 bps QoQ and 59 bps YoY to 2.70%; Core net interest margin FTE decreased 40 bps QoQ and 58 bps YoY to 2.63%; The decline in GAAP and Core NIM was primarily driven by our liability sensitive balance sheet resulting in liabilities repricing faster than assets; after a lag, the NIM is expected to expand when the Fed stops raising rates as loans continue to reprice higher, while the cost of funding is expected to remain steady
• NPAs increased slightly to $53.4 million from $50.0 million at 3Q22 and from $14.9 million at 4Q21
• Provision for credit losses was negligible in 4Q22 compared to $0.8 million in 4Q21; net charge-offs were $0.8 million in 4Q22 compared to net recoveries of $29 thousand in 4Q21
• Tangible Common Equity to Tangible Assets was 7.82% up from 7.62% at 3Q22; the change in accumulated other comprehensive loss, net of taxes positively impacted this ratio by 11 bps in 4Q22
• Repurchased 374,862 shares at an average price of $20.16; dividends and share repurchases were 71% of net income in 2022
  
  

¹ See Reconciliation of GAAP Earnings and Core Earnings

Net interest income totaled $54.2 million in 4Q22 compared to $61.2 million in 3Q22, $64.7 million in 2Q22, $63.5 million in 1Q22, and $62.7 million in 4Q21. Net interest income declined 1.8% in 2022 to $243.6 million compared to $248.0 million in 2021.

• Net interest margin, FTE (“NIM”) of 2.70% decreased 59 bps YoY and 37 bps QoQ
• Prepayment penalty income from loans and securities, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $2.4 million (12 bps to the NIM) in 4Q22 compared to $2.2 million (11 bps) in 3Q22, $2.6 million (13 bps) in 2Q22, $2.6 million (14 bps) in 1Q22, and $3.1 million (16 bps) in 4Q21
• Excluding the items in the previous bullet, net interest margin was 2.58% in 4Q22, 2.96% in 3Q22, 3.22% in both 2Q22 and 1Q22, and 3.13% in 4Q21
  

The Company recorded a benefit for credit losses of $12 thousand in 4Q22, compared to a provision for credit losses of $2.1 million in 3Q22, $1.6 million in 2Q22, $1.4 million in 1Q22, and $0.8 million in 4Q21. The provision for credit losses was $5.1 million in 2022 compared to a benefit for credit losses of $4.9 million in 2021.

• Net charge-offs (recoveries) were $0.8 million in 4Q22 (5 bps of average loans), $0.3 million in 3Q22 (2 bps of average loans), $(0.5) million in 2Q22 ((3) bps of average loans), $0.9 million in 1Q22 (6 bps of average loans), and $(29) thousand in 4Q21 (negligible as compared to average loans)
  

Noninterest income (loss) was $(7.7) million in 4Q22, $9.0 million in 3Q22, $7.4 million in 2Q22, $1.3 million in 1Q22, and $(0.3) million in 4Q21. Noninterest income was $10.0 million in 2022 compared to $3.7 million in 2021.

• Loss on the sale of securities was $10.9 million ($0.27 per share, net of tax) in 4Q22 as the Company sold $84.2 million of mortgage-based securities with an approximate yield of 1.17%; proceeds are being reinvested into securities that are expected to have an earn back period of 3 years or less
• Noninterest income included net gains (losses) from fair value adjustments of $(0.6) million in 4Q22 (($0.02) per share, net of tax), $5.6 million in 3Q22 ($0.13 per share, net of tax), $2.5 million in 2Q22 ($0.06 per share, net of tax), $(1.8) million in 1Q22 ($(0.04) per share, net of tax), and $(5.1) million in 4Q21 ($(0.13) per share, net of tax)
• Life insurance proceeds were $0.3 million ($0.01 per share) in 4Q22 and $1.5 million ($0.05 per share) in 2Q22
• Absent all above items and other immaterial adjustments, core noninterest income was $3.5 million in 4Q22, down 27.4% YoY but up 4.7% QoQ
• Included in 4Q21 core noninterest income was a one-time $2.0 million ($0.05 per share, net of tax) dividend received on retirement plan investments; absent the effects of this dividend, core noninterest income increased 23% YoY
  

Noninterest expense totaled $33.7 million in 4Q22 (a decrease of 13.1% YoY and 5.3% QoQ) compared to $35.6 million in 3Q22, $35.5 million in 2Q22, and $38.8 million in both 1Q22 and 4Q21. Noninterest expense was $143.7 million in 2022 compared to $147.3 million in 2021.

• Salaries and employee benefits includes $2.8 million benefit from a lower discount rate for certain benefit plans and $1.4 million benefit from an Employee Retention Tax Credit refund in 4Q22
• Other operating expenses include $0.6 million reduction in reserves for unfunded commitments in 3Q22
• Included in 1Q22 noninterest expense was $4.3 million of seasonal compensation expense; 4Q21 noninterest expense included a one-time $4.3 million of increased compensation and benefits for all employees due to a record earnings in 2021 and employee performance through the pandemic
• Noninterest expense included $17 thousand pre-tax merger benefit (<$0.01 per share, net of tax) in 4Q21
• Excluding the effects of the merger and other immaterial adjustments, core operating expenses were $33.6 million in 4Q22, down 13.1% YoY and 5.3% QoQ; excluding the Employee Retention Tax Credit refund and the benefit from the lower discount rate, 4Q22 core noninterest expense would have been $37.9 million
• GAAP noninterest expense to average assets was 1.58% in 4Q22, 1.69% in 3Q22, 1.73% in 2Q22, 1.93% in 1Q22, and 1.92% in 4Q21

The provision for income taxes was $2.6 million in 4Q22, compared to $9.0 million in 3Q22, $9.9 million in 2Q22, $6.4 million in 1Q22, and $4.7 million in 4Q21. Provision for income taxes was $27.9 million in 2022 compared to $27.5 million in 2021.

• The effective tax rate was 20.0% in 4Q22, 27.7% in 3Q22, 28.4% in 2Q22, 26.1% in 1Q22, and 20.8% in 4Q21; for the year, the effective tax rate was 26.6% compared to 25.2% in 2021
• The 4Q22 effective tax rate declined due to preferential tax items having a larger impact due to lower levels of pre-tax income
• The 2Q22 effective tax rate includes a loss of a certain state and city tax deductions and a resolution of certain examinations by taxing authorities
• The 4Q21 effective tax rate declined due to lower levels of taxable state income and higher percentage of permanent differences

Average loans were $6.9 billion, an increase of 4.9% YoY and 0.3% QoQ. Average loans for 2022 were $6.7 billion, an 1.5% increase from $6.6 billion in 2021.

• Period end net loans totaled $6.9 billion, up 4.4% YoY, but down 0.3% QoQ
• Total loan closings were $225.2 million in 4Q22, $463.7 million in 3Q22, $503.8 million in 2Q22, $329.3 million in 1Q22, and $362.7 million in 4Q21
• The loan pipeline was $252.2 million at December 31, 2022, down 41.3% YoY and 18.4% QoQ
  

Average Deposits totaled $6.7 billion, increasing 3.4% YoY and 6.4% QoQ. Average deposits were $6.5 billion in 2022, up 0.6% compared to $6.4 billion in 2021.

• Average core deposits (non-CD deposits) were 79.8% of total average deposits (including escrow deposits) in 4Q22, compared to 85.3% a year ago
• Average noninterest bearing deposits increased 0.3% YoY in 4Q22, but decreased 6.7% QoQ and comprised 14.7% of total average deposits (including escrow deposits) in 4Q22 compared to 15.1% a year ago

Credit Quality: Nonperforming loans held at the end of each quarter totaled $32.4 million at 4Q22, $29.0 million at 3Q22, $27.9 million at 2Q22, $14.1 million at 1Q22, and $14.9 million at 4Q21.

• Criticized and classified loans were 98 bps of gross loans at 4Q22 compared to 89 bps at 3Q22, 85 bps at 2Q22, 90 bps at 1Q22, and 87 bps at 4Q21
• Over 88% of gross loans are collateralized by real estate with an average loan-to-value ratio of <37% as of December 31, 2022
• Allowance for credit losses were 124.9% of nonperforming loans at 4Q22 compared to 142.3% at 3Q22 and 248.7% a year ago
  

Capital: Book value per common share was $22.97 at 4Q22, up 2.2% QoQ and 3.2% YoY; tangible book value per common share, a non-GAAP measure, was $22.31 at 4Q22, up 2.3% QoQ and 3.2% YoY.

• The Company paid a dividend of $0.22 per share and repurchased 374,862 shares at an average price of $20.16 in 4Q22
• At the end of 4Q22, 594,462 shares remain subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
• Tangible common equity to tangible assets was 7.82% at 4Q22 compared to 7.62% at 3Q22 and 8.22% at 4Q21
• The Company and the Bank remain well capitalized under all applicable regulatory requirements
• The leverage ratio was 8.61% at 4Q22 compared to 8.74% at 3Q22 and 8.98% at 4Q21
  
  

Conference Call Information:

• John R. Buran, President and Chief Executive Officer, and Susan K. Cullen, Senior Executive Vice President and Chief Financial Officer and Treasurer, will host a conference call on Friday, January 27, 2023, at 9:30 AM (ET) to discuss the Company’s fourth quarter and full year 2022 results and strategy.
• Dial-in for Live Call: 1-877-509-5836; Canada 855-669-9657
• Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=54kQH0yX
• Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658
• Replay Access Code: 8079034
• The conference call will be simultaneously webcast and archived

First Quarter 2023 Earnings Release Date:

The Company plans to release First Quarter 2023 financial results after the market close on April 25, 2023; followed by a conference call at 9:30 AM (ET) on April 26, 2023.

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

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq: FFIC) is the holding company for Flushing Bank®, an FDIC insured, New York State—chartered commercial bank that operates banking offices in Queens, Brooklyn, Manhattan, and on Long Island. The Bank has been building relationships with families, business owners, and communities since 1929. Today, it offers the products, services, and conveniences associated with large commercial banks, including a full complement of deposit, loan, equipment finance, and cash management services. Rewarding customers with personalized attention and bankers that can communicate in the languages prevalent within these multicultural markets is what makes the Bank uniquely different. As an Equal Housing Lender and leader in real estate lending, the Bank’s experienced lending teams create mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also fosters relationships with consumers nationwide through its online banking division with the iGObanking® and BankPurely® brands.

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

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “goals”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

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

#FF

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
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