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Flushing Financial Corporation Reports 1Q24 GAAP and Core EPS of $0.12 and $0.14, Respectively; Excellent Quality Driven by Low Risk Credit Profile

'We take pride in what we believe is our low risk credit profile that has performed well over our 95-year history. While there have been increased concerns about commercial real estate loans, especially New York City office and rent regulated multifamily exposure, hallmarks of our risk averse credit culture are demonstrated by only $4,000 of net charge-offs, 24 bps of 30-89 day delinquencies to gross loans, and decreased criticized and classified loans of 23% and flat NPAs during 1Q24. The drivers of this excellent credit performance are centered in our conservative underwriting with 89% of the portfolio secured by real estate, average LTV ratios of less than 36%, multifamily and investor commercial real estate weighted average DCRs of 1.8x, and strong sponsor support. Our exposure to New York City office buildings is very low - approximately 0.5% of total loans, all of which are performing. Our multifamily portfolio has only 18 bps of NPLs, 41 bps of 30-89 day delinquencies, and 54 bps of criticized and classified loans. Additionally, over 99% of our real estate loans that repriced in 1Q24 are current. Our conservative lending profile has served us well. We believe the foundation for our long-term success is pillared by our four areas of focus, which include 1) increasing NIM and reducing volatility; 2) maintaining credit discipline; 3) preserving strong liquidity and capital; and 4) bending the expense curve. While there is more work to do, we continue to make progress and are committed to achieving these goals.'

- John R. Buran, President and CEO

UNIONDALE, NY / ACCESSWIRE / April 23, 2024 / Growth in Average Deposits; GAAP and Core NIM Compress. The Company reported first quarter 2024 GAAP and Core EPS of $0.12 and $0.14, respectively, compared to $0.13, and $0.06, respectively, a year ago. 1Q24 GAAP and Core NIM were both 2.06%, down 21 bps and 19 bps YoY, and 23 bps and 25 bps QoQ, respectively. Absent episodic items¹, the NIM was 2.01% in 1Q24 compared to 2.21% a year ago and 2.14% in the prior quarter. The expected NIM compression was driven by CD repricing, the absence of loan originations that met both our underwriting and pricing criteria, and increased cash from deposit growth. Average total deposits increased 4.0% YoY and 2.9% QoQ,

Credit Quality Improves; Capital Remains Solid. Criticized and classified loans to loans declined to 0.87% in 1Q24, compared to 1.11% in 4Q23, while nonperforming assets to total assets decreased to 53 bps compared to 54 bps in 4Q23. Net charge-offs were only $4,000 in 1Q24. Capital continues to be sound with TCE/TA² of 7.40% at 1Q24 compared to 7.64% at 4Q23.

Key Financial Metrics³

Note: In certain circumstances, reclassifications have been made to prior periods to conform to the current presentation.

¹ Episodic items include prepayment penalty income, customer swap termination fees, net reversals and recovered interest from nonaccrual loans, net gain/loss from fair value on qualifying hedges, and purchase accounting adjustments ² Tangible Common Equity ('TCE')/Total Assets ('TA') ³ 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.' ⁴ Net Interest Margin ('NIM') Fully Taxable Equivalent ('FTE').

1Q24 Highlights

Net interest margin FTE decreased 21 bps YoY and 23 bps QoQ to 2.06%; Core net interest margin FTE decreased 19 bps YoY and 25 bps QoQ to 2.06%; absent prepayment penalty income, customer swap termination fees, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion the NIM was 2.01% in 1Q24 compared to 2.21% in 1Q23 and 2.14% in 4Q23.
Average total deposits increased 4.0% YoY and 2.9% QoQ to $7.1 billion; Average noninterest bearing deposits were 11.8% of total average deposits compared to 13.2% in 1Q23 and 12.7% in 4Q23. Average CDs were $2.4 billion, up 43.3% YoY and 2.8% QoQ; During March and April, new CD rates were lowered across most products.
Period end net loans decreased 1.2% YoY and QoQ to $6.8 billion; Loan closings were $130.0 million down 25.1% YoY and 46.8% QoQ; The yields on closings increased 19 bps YoY, but decreased 49 bps QoQ to 7.20%; Back-to-back swap loan originations were $15.3 million compared to $121.6 million in 4Q23 and generated $0.2 million and $1.5 million of noninterest income, respectively; Loan pipeline decreased 34.6% YoY, but increased 6.7% QoQ to $173.9 million; Approximately 22% of the loan pipeline consists of back-to-back swap loans
NPAs increased slightly to $46.3 million from $42.2 million a year ago and from $46.2 million in the prior quarter
1Q24 noninterest expense includes $1.6 million of seasonal compensation expense that are not expected to repeat in 2Q24
Provision for credit losses was $0.6 million in 1Q24 compared to $7.5 million in 1Q23 and $1.0 million in 4Q23; Net charge-offs were $4,000 in 1Q24 compared to $9.2 million in 1Q23 and $60,000 in 4Q23
Tangible Common Equity to Tangible Assets was 7.40% at March 31, 2024, compared to 7.64% at December 31, 2023; Tangible book value was $22.39 compared to $22.14 a year ago

Areas of Focus

¹ Episodic items include prepayment penalty income, customer swap termination fees, net reversals and recovered interest from nonaccrual loans, net gain/loss from fair value on qualifying hedges, and purchase accounting adjustments, which totaled $1.0 million or 5 bps in 1Q24 compared to $3.0 million or 15 bps in 4Q23

Income Statemen

¹ See Reconciliation of GAAP Earnings and Core Earnings

Net interest income decreased YoY and QoQ.

Net Interest Margin FTE of 2.06% decreased 21 bps YoY and 23 bps QoQ
Prepayment penalty income, customer swap termination fees, 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 $1.0 million (5 bps to the NIM) compared to $3.0 million (15 bps) in 4Q23, $2.6 million (13 bps to the NIM) in 3Q23, $0.5 million (3 bps) in 2Q23, and $1.1 million (6 bps) in 1Q23
Excluding the items in the previous bullet, net interest margin was 2.01% in 1Q24, 2.14% in 4Q23, 2.09% in 3Q23, 2.15% in 2Q23, and 2.21% in 1Q23

The provision for credit losses decreased YoY and QoQ.

Net charge-offs (recoveries) were $4,000 (less than 1 bp of average loans) in 1Q24 compared to $60,000 in 4Q23 (less than 1 bp of average loans), $(42,000) in 3Q23 (less than (1) bp of average loans), $1.6 million in 2Q23 (9 bps of average loans), and $9.2 million in 1Q23 (54 bps of average loans)
1Q23 net charge-offs were primarily related to a commercial business relationship that was placed on nonaccrual in 2Q22

Noninterest income decreased YoY and QoQ.

Back-to-back swap loan closings of $15.3 million in 1Q24 (compared to $121.6 million in 4Q23 and none in 1Q23) and generated $0.2 million of fee income compared to $1.5 million in 4Q23
Net gains (losses) from fair value adjustments were $(0.8) million in 1Q24 ($(0.02) per share, net of tax), $0.9 million in 4Q23 ($0.02 per share, net of tax), $(1.2) million in 3Q23 ($(0.03) per share, net of tax), $0.3 million in 2Q23 ($0.01 per share, net of tax), and $2.6 million in 1Q23 ($0.06 per share, net of tax)
Life insurance proceeds were $0.7 million in 4Q23 ($0.02 per share), $23,000 in 3Q23 (less than $0.01 per share), and $0.6 million ($0.02 per share) in 2Q23
Absent the items in the previous two bullets and other immaterial adjustments, core noninterest income was $3.9 million in 1Q24, down 7.6% YoY and 32.4% QoQ
4Q23 other fee income includes net realized gains on the sale of assets and other dividends from nonqualified plans that are expected to normalize in future periods

Noninterest expense increased slightly YoY but declined QoQ.

Seasonal compensation expense was $1.6 million in 1Q24 compared to $4.1 million in 1Q23
Excluding the effects of immaterial adjustments, core operating expenses were $39.8 million in 1Q24, up 1.9% YoY, but down 0.8% QoQ
GAAP noninterest expense to average assets was 1.83% in 1Q24, 1.90% in 4Q23, 1.71% in 3Q23, 1.66% in 2Q23, and 1.85% in 1Q23

Provision for income taxes decreased YoY and QoQ.

The effective tax rate was 26.3% in 1Q24, 31.1% in 4Q23, 27.1% in 3Q23, 26.8% in 2Q23, and 25.9% in 1Q23
The 4Q23 effective tax rate increased as a result of preferential tax items having a smaller impact due to higher pre-tax income than estimated in 3Q23 and 2Q23

Balance Sheet, Credit Quality, and Capital Highlights

Average loans decreased slightly YoY and QoQ.

Period end net loans totaled $6.8 billion, down 1.2% YoY and QoQ
Total loan closings were $130.0 million in 1Q24, $244.3 million in 4Q23, $241.5 million in 3Q23, $158.8 million in 2Q23, and $173.5 million in 1Q23; the loan pipeline was $173.9 million at March 31, 2024, down 34.6% YoY, but up 6.7% QoQ
The diversified loan portfolio is approximately 89% collateralized by real estate with an average loan-to-value ratio of <36%
Manhattan office buildings exposure is minimal at 0.5% of net loans with all loans performing

Average total deposits increased YoY and QoQ.

Average noninterest bearing deposits decreased 6.9% YoY and 4.5% QoQ and comprised 11.8% of average total deposits in 1Q24 compared to 13.2% a year ago
Average CDs totaled $2.4 billion, up 43.3% YoY and 2.8% QoQ; approximately $450 million of non-swapped CDs are due to mature at a rate of 4.15% in 2Q24

Credit Quality: Nonperforming loans increased YoY but declined QoQ.

Criticized and classified loans were 87 bps of gross loans at 1Q24 compared to 111 bps at 4Q23, 108 bps at 3Q23, 71 bps at 2Q23, and 84 bps at 1Q23
Allowance for credit losses were 164.1% of nonperforming loans at 1Q24 compared to 182.9% at 1Q23 and 159.5% at 4Q23

Capital: Book value per common share and tangible book value per common share, a non-GAAP measure, both increased 1.1% YoY to $23.04 and $22.39, respectively.

The Company paid a dividend of $0.22 per share in 1Q24; 807,964 shares remaining subject to repurchase under the authorized stock repurchase program, which has no expiration or maximum dollar limit
Tangible common equity to tangible assets was 7.40% at March 31, 2024, compared to 7.72% at March 31, 2023, and 7.64% at December 31, 2023

Conference Call Information

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 Wednesday, April 24, 2024, at 9:30 AM (ET) to discuss the Company's first quarter 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=DCkbMHoc
Dial-in for Replay: 1-877-344-7529; Canada 855-669-9658
Replay Access Code: 7388314
The conference call will be simultaneously webcast and archived

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, 2023 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.

#FF - Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)

⁽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 core noninterest expense (excluding OREO expense and the net gain/loss from the sale of OREO) by the total of core net interest income and core noninterest income.

⁽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. See 'Calculation of Tangible Stockholders' Common Equity to Tangible Assets'.

⁽⁶⁾ See 'Calculation of Tangible Stockholders' Common Equity to Tangible Assets'.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIE
CONSOLIDATED STATEMENTS OF INCOM
(Unaudited)

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited)

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
DEPOSIT and LOAN COMPOSITION
(Unaudited)

Deposit Composition

Loan Composition

⁽¹⁾ Includes $3.6 million, $3.9 million, $4.4 million, $4.8 million, and $5.1 million of purchase accounting unamortized discount resulting from the acquisition of Empire Bancorp at March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
LOAN CLOSINGS and RATES
(Unaudited)

Loan Closings

Weighted Average Rate on Loan Closings

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ASSET QUALITY
(Unaudited)

Allowance for Credit Losses

Nonperforming Assets

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS

Non-cash Fair Value Adjustments to GAAP Earnings

The variance in GAAP and core earnings is partly driven by the impact of non-cash net gains and losses from fair value adjustments. These fair value adjustments relate primarily to borrowings carried at fair value under the fair value option.

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

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS and CORE EARNINGS
(Unaudited)

⁽¹⁾ Core diluted earnings per common share may not foot due to rounding.

⁽²⁾ Ratios are calculated on an annualized basis.

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

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
RECONCILIATION OF GAAP NET INTEREST INCOME and NET INTEREST MARGIN
to CORE NET INTEREST INCOME
(Unaudited)

⁽¹⁾ Excludes purchase accounting average balances for all periods presented.

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CALCULATION OF TANGIBLE STOCKHOLDERS'
COMMON EQUITY to TANGIBLE ASSETS
(Unaudited)

SOURCE: Flushing Financial Corporation

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