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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

Commission file number 001-33013

FLUSHING FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

11-3209278

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

220 RXR Plaza, Uniondale, New York 11556

(Address of principal executive offices)

(718) 961-5400

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

FFIC

The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer  __

Accelerated filer  X

Non-accelerated filer  __

Smaller reporting company  __

Emerging growth company  __

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

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

The number of shares of the registrant’s Common Stock outstanding as of April 29, 2022 was 30,347,077.

Table of Contents

TABLE OF CONTENTS

PAGE

PART I  — FINANCIAL INFORMATION

ITEM 1. Financial Statements - (Unaudited)

Consolidated Statements of Financial Condition

1

Consolidated Statements of Income

2

Consolidated Statements of Comprehensive Income

3

Consolidated Statements of Cash Flows

4

Consolidated Statements of Changes in Stockholders’ Equity

6

Notes to Consolidated Financial Statements

7

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

52

ITEM 4. Controls and Procedures

52

PART II  — OTHER INFORMATION

ITEM 1. Legal Proceedings

53

ITEM 1A. Risk Factors

53

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

53

ITEM 3. Defaults Upon Senior Securities

53

ITEM 4. Mine Safety Disclosures

53

ITEM 5. Other Information

53

ITEM 6. Exhibits

54

SIGNATURES

56

i

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Financial Condition

Item 1.   Financial Statements

March 31, 

December 31, 

2022

2021

(Unaudited)

(Dollars in thousands, except per share data)

Assets

 

  

 

  

Cash and due from banks

$

186,407

$

81,723

Securities held-to-maturity:

 

  

 

  

Mortgage-backed securities (include assets pledged of $5,130 and $5,643 at March 31, 2022 and December 31, 2021, respectively; fair value of $7,880 and $8,667 at March 31, 2022 and December 31, 2021, respectively)

 

7,890

 

7,894

Other securities, net of allowance of $986 and $862 at March 31, 2022 and December 31, 2021 respectively; (none pledged; fair value of $61,839 and $53,362 at March 31, 2022 and December 31, 2021, respectively)

 

66,327

 

49,974

Securities available for sale, at fair value:

 

  

 

  

Mortgage-backed securities (including assets pledged of $225,110 and $212,388 at March 31, 2022 and December 31, 2021, respectively; $364 and $388 at fair value pursuant to the fair value option at March 31, 2022 and December 31, 2021, respectively)

 

553,828

 

572,184

Other securities (including none pledged; $13,676 and $14,180 at fair value pursuant to the fair value option at March 31, 2022 and December 31, 2021, respectively)

 

286,041

 

205,052

Loans:

 

 

Multi-family residential

2,500,570

2,517,026

Commercial real estate

1,764,927

1,775,629

One-to-four family --- mixed used property

563,679

571,795

One-to-four family --- residential

256,474

276,571

Construction

68,488

59,761

Small Business Administration

59,331

93,811

Commercial business and other

1,387,155

1,339,273

Net unamortized premiums and unearned loan fees

6,640

4,239

Less: Allowance for credit losses

 

(37,433)

 

(37,135)

Net loans

 

6,569,831

 

6,600,970

Interest and dividends receivable

 

37,308

 

38,698

Bank premises and equipment, net

 

22,752

 

23,338

Federal Home Loan Bank of New York stock, at cost

 

33,891

 

35,937

Bank owned life insurance

 

211,867

 

210,754

Goodwill

 

17,636

 

17,636

Core deposit intangibles

2,420

2,562

Right of use asset

48,475

 

50,200

Other assets

 

125,160

 

148,989

Total assets

$

8,169,833

$

8,045,911

Liabilities

 

  

 

  

Due to depositors:

 

  

 

  

Non-interest bearing

$

1,041,027

$

967,621

Interest-bearing

 

5,332,373

 

5,365,911

Total Due to depositors

6,373,400

6,333,532

Mortgagors' escrow deposits

 

79,495

 

51,913

Borrowed funds:

 

  

 

  

Federal Home Loan Bank advances and other borrowings

 

696,186

 

636,187

Subordinated debentures

 

122,981

 

122,885

Junior subordinated debentures, at fair value

 

57,955

 

56,472

Total borrowed funds

 

877,122

 

815,544

Operating lease liability

52,292

54,155

Other liabilities

 

111,711

 

111,139

Total liabilities

 

7,494,020

 

7,366,283

Stockholders' Equity

 

  

 

  

Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)

 

 

Common stock ($0.01 par value; 100,000,000 shares authorized; 34,087,623 shares issued at both March 31, 2022 and December 31, 2021; 30,366,544 shares and 30,526,353 shares outstanding at March 31, 2022 and December 31, 2021, respectively)

 

341

 

341

Additional paid-in capital

 

261,837

 

263,375

Treasury stock, at average cost (3,721,079 shares and 3,561,270 shares at March 31, 2022 and December 31, 2021, respectively)

 

(79,834)

 

(75,293)

Retained earnings

 

508,973

 

497,889

Accumulated other comprehensive loss, net of taxes

 

(15,504)

 

(6,684)

Total stockholders' equity

 

675,813

 

679,628

Total liabilities and stockholders' equity

$

8,169,833

$

8,045,911

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

-1-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

For the three months ended

March 31, 

    

    

2022

    

2021

    

(In thousands, except per share data)

Interest and dividend income

Interest and fees on loans

$

67,516

$

69,021

Interest and dividends on securities:

 

  

 

  

Interest

 

3,745

3,072

Dividends

 

8

 

8

Other interest income

51

 

36

Total interest and dividend income

 

71,320

 

72,137

Interest expense

 

  

 

  

Deposits

 

3,408

 

6,105

Other interest expense

 

4,433

 

5,140

Total interest expense

 

7,841

 

11,245

Net interest income

 

63,479

 

60,892

Provision for credit losses

 

1,358

 

2,820

Net interest income after provision for credit losses

 

62,121

 

58,072

Non-interest income

 

  

 

  

Banking services fee income

 

1,374

 

2,725

Net gain on sale of loans

 

 

31

Net gain on disposition of assets

621

Net gain (loss) from fair value adjustments

 

(1,809)

 

982

Federal Home Loan Bank of New York stock dividends

 

397

 

689

Bank owned life insurance

 

1,114

 

997

Other income

 

237

 

266

Total non-interest income

 

1,313

 

6,311

Non-interest expense

 

Salaries and employee benefits

 

23,649

 

22,664

Occupancy and equipment

 

3,604

 

3,367

Professional services

 

2,222

 

2,400

FDIC deposit insurance

 

420

 

1,213

Data processing

 

1,424

 

2,109

Depreciation and amortization of bank premises and equipment

 

1,460

 

1,639

Other real estate owned / foreclosure expense (recoveries)

 

84

 

(10)

Other operating expenses

 

5,931

 

4,777

Total non-interest expense

 

38,794

 

38,159

Income before income taxes

 

24,640

 

26,224

Provision for income taxes

Federal

 

4,650

 

5,071

State and local

 

1,771

 

2,114

Total provision for income taxes

 

6,421

 

7,185

Net income

$

18,219

$

19,039

Basic earnings per common share

$

0.58

$

0.60

Diluted earnings per common share

$

0.58

$

0.60

Dividends per common share

$

0.22

$

0.21

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

-2-

Table of Contents

ART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

For the three months ended

March 31, 

    

2022

    

2021

(In thousands)

Net income

$

18,219

$

19,039

Other comprehensive income (loss), net of tax:

 

  

 

  

Amortization of prior service credits, net of taxes of $2, and $6 for the three months ended March 31, 2022, and 2021, respectively

 

(5)

 

(15)

Amortization of actuarial (gains) losses, net of taxes of $2, and ($36) for the three months ended March 31, 2022, and 2021, respectively

 

(4)

 

81

Change in net unrealized losses on securities available for sale, net of taxes of $10,892, and $986 for the three months ended March 31, 2022, and 2021, respectively

 

(23,427)

 

(2,217)

Net unrealized gain on cash flow hedges, net of taxes of ($6,857), and $(3,461) for the three months ended March 31, 2022, and 2021, respectively

 

14,751

 

7,798

Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of $63 and $36 for the three months ended March 31, 2022, and 2021, respectively

 

(135)

 

(84)

Total other comprehensive income (loss), net of tax

 

(8,820)

 

5,563

Comprehensive net income

$

9,399

$

24,602

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

-3-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

For the three months ended March 31, 

    

2022

    

2021

(In thousands)

Operating Activities

Net income

$

18,219

$

19,039

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Provision for credit losses

 

1,358

 

2,820

Depreciation and amortization of premises and equipment

 

1,460

 

1,639

Net gain on sales of loans

 

 

(31)

Net gain on sale and disposition of assets

 

 

(621)

Net amortization of (discounts) premiums

 

(492)

 

107

Net (gain) loss from fair value adjustments of qualifying hedges

 

129

 

(1,427)

Net (gain) loss from fair value adjustments

1,809

(982)

Income from bank owned life insurance

 

(1,114)

 

(997)

Stock-based compensation expense

 

4,194

 

3,470

Deferred compensation

 

(2,545)

 

(1,754)

Amortization of core deposit intangibles

142

159

Decrease (increase) in other assets

 

3,570

 

(6,972)

(Decrease) increase in other liabilities

 

13,847

 

(4,881)

Net cash provided by operating activities

 

40,577

 

9,569

Investing Activities

 

  

 

  

Purchases of premises and equipment

 

(874)

 

(958)

Net redemptions of Federal Home Loan Bank-NY shares

 

2,046

 

1,941

Purchases of securities held-to-maturity

 

(16,476)

 

Purchases of securities available for sale

 

(130,312)

 

(352,637)

Proceeds from sales and calls of securities available for sale

 

 

7,500

Proceeds from maturities and prepayments of securities available for sale

 

32,177

 

227,829

Net repayments (originations) of loans

 

72,080

 

(41,680)

Purchases of loans

 

(54,309)

 

(25,948)

Proceeds from sale of loans

 

 

8,249

Net cash used in investing activities

 

(95,668)

 

(175,704)

-4-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statements of Cash Flows (Contd.)

(Unaudited)

    

For the three months ended March 31,

2022

2021

(In thousands)

Financing Activities

Net increase in non interest-bearing deposits

$

73,406

$

138,517

Net increase in interest-bearing deposits

 

16,482

 

97,227

Net increase in mortgagors' escrow deposits

 

27,582

 

28,726

Net proceeds from short-term borrowed funds

 

110,000

 

Repayment of long-term borrowings

 

(50,000)

 

(73,361)

Purchases of treasury stock

 

(10,845)

 

(1,290)

Cash dividends paid

 

(6,850)

 

(6,652)

Net cash provided by financing activities

 

159,775

 

183,167

Net increase in cash and cash equivalents

 

104,684

 

17,032

Cash and cash equivalents, beginning of period

 

81,723

 

157,388

Cash and cash equivalents, end of period

$

186,407

$

174,420

Supplemental Cash Flow Disclosure

 

  

 

  

Interest paid

$

6,846

$

9,935

Income taxes paid

 

214

 

1,579

Taxes paid if excess tax benefits on stock-based compensation were not tax deductible

 

384

 

1,254

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

-5-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

    

    

    

Additional

    

    

    

Accumulated Other

Common

Paid-in

Retained

Treasury

Comprehensive 

(Dollars in thousands, except per share data)

Total

Stock

Capital

Earnings

Stock

Income (Loss)

Balance at December 31, 2021

$

679,628

$

341

$

263,375

$

497,889

$

(75,293)

$

(6,684)

Net income

 

18,219

 

 

 

18,219

 

 

Award of common shares released from Employee Benefit Trust (17,964 shares)

 

287

 

 

287

 

 

 

Vesting of restricted stock unit awards (297,626 shares)

 

 

 

(6,019)

 

(285)

 

6,304

 

Purchase of treasury shares (360,000 shares)

 

(8,469)

 

 

 

 

(8,469)

 

Stock-based compensation expense

 

4,194

 

 

4,194

 

 

 

Repurchase of shares to satisfy tax obligation (97,435 shares)

 

(2,376)

 

 

 

 

(2,376)

 

Dividends on common stock ($0.22 per share)

 

(6,850)

 

 

 

(6,850)

 

 

Other comprehensive loss

 

(8,820)

 

 

 

 

 

(8,820)

Balance at March 31, 2022

$

675,813

$

341

$

261,837

$

508,973

$

(79,834)

$

(15,504)

    

    

    

Additional

    

    

    

Accumulated Other

Common

Paid-in

Retained

Treasury

Comprehensive

(Dollars in thousands, except per share data)

Total

Stock

Capital

Earnings

Stock

Income (Loss)

Balance at December 31, 2020

$

618,997

$

341

$

261,533

$

442,789

$

(69,400)

$

(16,266)

Net Income

 

19,039

 

 

 

19,039

 

 

Award of common shares released from Employee Benefit Trust (5,682 shares)

 

74

 

 

74

 

 

 

Vesting of restricted stock unit awards (248,896 shares)

 

 

 

(5,058)

 

(153)

 

5,211

 

Stock-based compensation expense

 

3,470

 

 

3,470

 

 

 

Repurchase of shares to satisfy tax obligation (70,292 shares)

 

(1,290)

 

 

 

 

(1,290)

 

Dividends on common stock ($0.21 per share)

(6,652)

 

 

(6,652)

 

 

Other comprehensive income

 

5,563

 

 

 

 

 

5,563

Balance at March 31, 2021

$

639,201

$

341

$

260,019

$

455,023

$

(65,479)

$

(10,703)

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

-6-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1.     Basis of Presentation

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

The unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q (“Quarterly Report”) include the collective results of the Holding Company and its direct and indirect wholly-owned subsidiaries, including the Bank, Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, which was dissolved as of June 30, 2021, which are collectively herein referred to as “we,” “us,” “our” and the “Company.”

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

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

The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Quarterly Report on Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

When necessary, certain reclassifications were made to prior-year amounts to conform to the current-year presentation. Such reclassifications had no effect on 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.

-7-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

3.     Earnings Per Share

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

For the three months ended

March 31, 

    

2022

    

2021

    

(Dollars in thousands, except per share data)

Net income, as reported

$

18,219

$

19,039

Divided by:

 

  

 

  

Total weighted average common shares outstanding and common stock equivalents (1)

 

31,254

 

31,604

Basic earnings per common share

$

0.58

$

0.60

Diluted earnings per common share

$

0.58

$

0.60

Dividend Payout ratio

 

37.9

%  

 

35.0

%  

(1)For the three months ended March 31, 2022 and 2021, there were no common stock equivalents.

4.     Securities

The Company did not hold any trading securities at March 31, 2022 and December 31, 2021. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2022:

Gross

Gross

Amortized

Unrecognized

Unrecognized

    

Cost

    

Fair Value

    

Gains

Losses

(In thousands)

Securities held-to-maturity:

 

  

 

  

 

  

  

Municipals

$

67,313

$

61,839

$

$

5,474

Total municipals

 

67,313

 

61,839

 

 

5,474

FNMA

 

7,890

 

7,880

 

 

10

Total mortgage-backed securities

 

7,890

 

7,880

 

 

10

Allowance for Credit Losses

(986)

Total

$

74,217

$

69,719

$

$

5,484

-8-

Table of Contents

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 at December 31, 2021:

Gross

Gross

Amortized

Unrecognized

Unrecognized

    

Cost

    

Fair Value

    

Gains

Losses

(In thousands)

Securities held-to-maturity:

 

  

 

  

 

  

  

Municipals

$

50,836

$

53,362

$

2,526

$

Total municipals

 

50,836

 

53,362

 

2,526

 

FNMA

 

7,894

 

8,667

 

773

 

Total mortgage-backed securities

 

7,894

 

8,667

 

773

 

Allowance for Credit Losses

(862)

Total

$

57,868

$

62,029

$

3,299

$

The following table summarizes the Company’s portfolio of securities available for sale at March 31, 2022:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Fair Value

    

Gains

    

Losses

(In thousands)

U.S. government agencies

$

74,543

$

73,870

$

$

673

Corporate

109,924

104,176

86

5,834

Mutual funds

 

11,937

 

11,937

 

 

Collateralized loan obligations

 

95,014

 

94,318

 

 

696

Other

 

1,740

 

1,740

 

 

Total other securities

 

293,158

 

286,041

 

86

 

7,203

REMIC and CMO

 

197,494

 

185,390

 

19

 

12,123

GNMA

 

10,039

 

9,116

 

18

 

941

FNMA

 

226,185

 

213,798

 

67

 

12,454

FHLMC

 

156,501

 

145,524

 

107

 

11,084

Total mortgage-backed securities

 

590,219

 

553,828

 

211

 

36,602

Total securities available for sale

$

883,377

$

839,869

$

297

$

43,805

-9-

Table of Contents

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 at December 31, 2021:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Fair Value

    

Gains

    

Losses

(In thousands)

U.S. government agencies

$

5,599

$

5,590

$

$

9

Corporate

107,423

104,370

136

3,189

Mutual funds

 

12,485

 

12,485

 

 

Collateralized loan obligations

 

81,166

 

80,912

 

1

 

255

Other

 

1,695

 

1,695

 

 

Total other securities

 

208,368

 

205,052

 

137

 

3,453

REMIC and CMO

 

210,948

 

208,509

 

1,217

 

3,656

GNMA

 

10,572

 

10,286

 

30

 

316

FNMA

 

203,777

 

202,938

 

1,321

 

2,160

FHLMC

 

152,760

 

150,451

 

326

 

2,635

Total mortgage-backed securities

 

578,057

 

572,184

 

2,894

 

8,767

Total securities available for sale

$

786,425

$

777,236

$

3,031

$

12,220

The corporate securities held by the Company at March 31, 2022 and December 31, 2021 are issued by U.S. banking institutions. The CMOs held by the Company at March 31, 2022 and December 31, 2021 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 March 31, 2022, 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

$

67,313

$

61,839

Total other securities

67,313

61,839

Mortgage-backed securities

7,890

7,880

75,203

69,719

Allowance for credit losses

(986)

-

Total securities held-to-maturity

 

$

74,217

 

$

69,719

Amortized

Securities available for sale:

    

Cost

    

Fair Value

(In thousands)

Due in one year or less

 

$

10,036

 

$

9,989

Due after one year through five years

79,395

78,619

Due after five years through ten years

 

168,590

 

162,353

Due after ten years

23,200

23,143

Total other securities

 

281,221

 

274,104

Mutual funds

 

11,937

 

11,937

Mortgage-backed securities

 

590,219

 

553,828

Total securities available for sale

$

883,377

$

839,869

-10-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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 March 31, 2022

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

 

3

$

61,839

$

5,474

$

61,839

$

5,474

$

$

Total other securities

 

3

 

61,839

 

5,474

 

61,839

 

5,474

 

 

FNMA

 

1

 

7,880

 

10

 

7,880

 

10

 

 

Total mortgage-backed securities

 

1

 

7,880

 

10

 

7,880

 

10

 

 

Total

 

4

$

69,719

$

5,484

$

69,719

$

5,484

$

$

Available for sale securities

 

  

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government agencies

 

7

$

73,870

$

673

$

69,749

$

667

$

4,121

$

6

Corporate

 

13

 

91,591

 

5,834

 

63,000

 

4,425

 

28,591

 

1,409

CLO

 

12

 

94,319

 

696

 

73,408

 

341

 

20,911

 

355

Total other securities

 

32

 

259,780

 

7,203

 

206,157

 

5,433

 

53,623

 

1,770

REMIC and CMO

 

45

 

174,122

 

12,123

 

120,470

 

6,670

 

53,652

 

5,453

GNMA

 

4

 

8,793

 

941

 

307

 

9

 

8,486

 

932

FNMA

 

43

 

197,920

 

12,454

 

151,792

 

8,184

 

46,128

 

4,270

FHLMC

 

23

 

132,744

 

11,084

 

64,038

 

3,734

 

68,706

 

7,350

Total mortgage-backed securities

 

115

 

513,579

 

36,602

 

336,607

 

18,597

 

176,972

 

18,005

Total

 

147

$

773,359

$

43,805

$

542,764

$

24,030

$

230,595

$

19,775

At December 31, 2021

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)

Available for sale securities

 

  

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government agencies

 

2

$

5,577

$

9

$

1,130

$

5

$

4,447

$

4

Corporate

 

13

 

94,234

 

3,189

 

65,453

 

1,970

 

28,781

 

1,219

CLO

 

4

 

31,012

 

255

 

10,000

 

1

 

21,012

 

254

Total other securities

 

19

 

130,823

 

3,453

 

76,583

 

1,976

 

54,240

 

1,477

REMIC and CMO

 

15

 

124,131

 

3,656

 

105,959

 

2,800

 

18,172

 

856

GNMA

 

4

 

9,924

 

316

 

1,138

 

16

 

8,786

 

300

FNMA

 

25

 

171,109

 

2,160

 

153,657

 

1,587

 

17,452

 

573

FHLMC

 

18

 

129,115

 

2,635

 

98,297

 

1,448

 

30,818

 

1,187

Total mortgage-backed securities

 

62

 

434,279

 

8,767

 

359,051

 

5,851

 

75,228

 

2,916

Total

 

81

$

565,102

$

12,220

$

435,634

$

7,827

$

129,468

$

4,393

-11-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company reviewed each available for sale security that had an unrealized loss at March 31, 2022 and December 31, 2021. 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. If the Company evaluates any decline in the fair value is due to credit loss factors and this valuation indicates that a credit loss exists, then the present value of cash flows is expected to be collected from the security is compared to the amortized cost basis of 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 of these securities are rated investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment.

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 U.S. government, the tranche of the purchased 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 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 no allowance for credit loss was recorded.

The Company reviewed each held-to-maturity security that had an unrealized loss at March 31, 2022 as part of its quarterly Current Expected Credit Loss (“CECL”) process, with an allowance for credit losses of $1.0 million and $0.9 million at March 31, 2022 and December 31, 2021, respectively.

Accrued interest receivable on held-to-maturity securities totaled $0.2 million and $0.1 million at March 31, 2022 and December 31, 2021, respectively, and is excluded from estimates of credit losses. Accrued interest receivable on available-for-sale debt securities totaled $1.7 million and $1.5 million at March 31, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity.

Other Securities

For the three months ended

March 31, 

    

2022

    

2021

(In thousands)

Beginning balance

$

862

$

907

Provision

 

124

 

8

Allowance for credit losses

$

986

$

915

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company did not sell any securities during the three months ended March 31, 2022 and 2021.

5.     Loans

Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans 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

-12-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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 the accrual basis. Accrued interest receivable totaled $34.0 million and $35.8 million at March 31, 2022 and December 31, 2021, respectively, and was reported in “Interest and dividends receivable” on the Consolidated Statements of Financial Condition. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur.

In response to COVID-19, the Company actively assists customers by providing modifications in the form of deferrals of interest, principal and/or escrow for terms ranging from one to thirty months. At March 31, 2022, we had 12 active forbearances for loans with an aggregate outstanding loan balance of approximately $41.8 million resulting in total deferment of $3.2 million in principal, interest and escrow, down from 20 active forbearances for loans with an aggregate outstanding loan balance of $71.9 million at December 31, 2021. Pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and later modified by Consolidated Appropriations Act, certain loan modifications are not classified as “troubled debt restructuring” (“TDR”), if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected not to consider as TDR loans temporarily modified for borrowers directly impacted by COVID-19 where the above criteria was met. As such, these loans are considered current and continue to accrue interest at their original contractual terms until the completion of the applicable deferred periods, following which the borrowers will resume making payments and normal delinquency-based non-accrual policies will apply. Approximately 79% of the active forbearances are expected to be resolved by year end 2022. The Company actively participated in the Paycheck Protection Program (“PPP”), under the CARES Act, closing $310.3 million of these loans since the beginning of the program, with $267.0 million of those PPP loans forgiven by the SBA as of March 31, 2022, of which $34.1 million were forgiven during the recent quarter.

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 recorded a provision for credit losses on loans totaling $1.2 million and $2.8 million for the three months ended March 31, 2022 and 2021, respectively. The provision recorded during the three months ended March 31, 2022 was driven by ongoing environmental uncertainty as a result of high and rising inflation, increasing interest rates and higher risk related to potential personnel turnover. During the three months ended March 31, 2022, the Company made no changes to the reasonable and supportable forecast period or the reversion period from what was used for the December 31, 2021 ACL. The ACL - loans totaled $37.4 million at March 31, 2022 compared to $37.1 million at December 31, 2021. At March 31, 2022, the ACL - loans represented 0.57% of gross loans and 266.1% of non-performing loans. At December 31, 2021, the ACL - loans represented 0.56% of gross loans and 248.7% of non-performing loans.

-13-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company may restructure 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. This restructure may include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as TDR.

The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. All loans classified as TDR are individually evaluated, however TDR loans which have been current for six consecutive months at the time they are restructured as TDR remain on accrual status and are not included as part of non-performing loans. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-accrual performing TDR loans until they have made timely payments for six consecutive months. These restructurings have not included a reduction of principal balance.

The allocation of a portion of the ACL for a performing TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate, or for a non-performing TDR loan which is collateral dependent, the fair value of the collateral. At March 31, 2022, there were no commitments to lend additional funds to borrowers whose loans were modified to a TDR. The modification of loans to a TDR did not have a significant effect on our operating results, nor did it require a significant allocation of the ACL.

During the three months ended March 31, 2022 and 2021 there were no TDRs that defaulted within 12 months of its modification date. There were no loans modified as TDRs for the three months ended March 31, 2021.

The following table shows loans modified as TDR during the period indicated:

For the three months ended

March 31, 2022

(Dollars in thousands)

    

Number

    

Balance

    

Modification description

    

Small Business Administration

1

$

271

Loan amortization extension.

Commercial business and other

 

2

2,768

 

One loan received a below market interest rate and one loan had an amortization extension.

 

Total

 

3

$

3,039

 

  

 

The following table shows loans classified as TDR at amortized cost that are performing according to their restructured terms at the periods indicated:

March 31, 2022

December 31, 2021

Number

Amortized

Number

Amortized

(Dollars in thousands)

    

of contracts

    

Cost

of contracts

    

Cost

Multi-family residential

 

6

$

1,661

6

$

1,690

Commercial real estate

1

7,572

1

7,572

One-to-four family - mixed-use property (1)

 

5

 

1,603

5

 

1,636

One-to-four family - residential

 

1

 

264

3

 

483

Commercial business and other (1)

 

8

 

4,052

5

 

1,381

Total performing

 

21

$

15,152

20

$

12,762

(1)These loans continue to pay as agreed, however the Company records interest received on a cash basis.

There were no loans classified as TDR that are not performing according to their modified agreement as of March 31, 2022 and December 31, 2021.

-14-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table shows 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 period shown below:

At or for the three months ended March 31, 2022

(In thousands)

Non-accrual amortized cost beginning of the reporting period

Non-accrual amortized cost ending of the reporting period

Non-accrual with no related allowance

Interest income recognized

Loans ninety days or more past due and still accruing:

Multi-family residential

$

2,652

$

3,654

$

3,654

$

$

Commercial real estate

640

32

32

One-to-four family - mixed-use property (1)

1,582

1,052

1,052

One-to-four family - residential

7,482

7,052

7,052

Small Business Administration

952

952

952

Commercial business and other (1)

1,945

4,328

326

4

Total

$

15,253

$

17,070

$

13,068

$

4

$

(1) Included in the above analysis are non-accrual performing TDR commercial business totaling $2.8 million. One-to-four family – mixed-use property contains a non-accrual performing TDR totaling $0.3 million.

The following table shows 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 period shown below:

At or for the year ended December 31, 2021

(In thousands)

Non-accrual amortized cost beginning of the reporting period

Non-accrual amortized cost ending of the reporting period

Non-accrual with no related allowance

Interest income recognized

Loans ninety days or more past due and still accruing:

Multi-family residential

$

2,576

$

2,652

$

2,652

$

19

$

Commercial real estate

1,766

640

640

One-to-four family - mixed-use property (1)

1,706

1,582

1,582

6

One-to-four family - residential

5,313

7,482

7,482

1

Small Business Administration

1,168

952

952

Taxi medallion(2)

2,758

Commercial business and other(1)

5,660

1,945

305

78

Total

$

20,947

$

15,253

$

13,613

$

104

$

(1)Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million.
(2)Taxi medallions were completely charged off during the year ended December 31, 2021.

-15-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the periods indicated:

For the three months ended

March 31, 

    

2022

    

2021

    

(In thousands)

Interest income that would have been recognized had the loans performed in accordance with their original terms

$

371

$

462

Less: Interest income included in the results of operations

 

155

 

160

Total foregone interest

$

216

$

302

The following tables show the aging of the amortized cost basis in past-due loans at the period indicated by class of loans:

March 31, 2022

Greater

30 - 59 Days

60 - 89 Days

than

Total Past

(In thousands)

    

Past Due

    

Past Due

    

90 Days

    

Due

    

Current

    

Total Loans

Multi-family residential

$

3,650

$

362

$

3,654

$

7,666

$

2,495,390

$

2,503,056

Commercial real estate

 

237

 

3,620

 

32

 

3,889

 

1,762,119

 

1,766,008

One-to-four family ― mixed-use property

 

2,387

 

591

 

794

 

3,772

 

562,899

 

566,671

One-to-four family ― residential

 

302

 

78

 

7,052

 

7,432

 

250,357

 

257,789

Construction

 

856

 

 

 

856

 

67,406

 

68,262

Small Business Administration

 

 

 

952

 

952

 

57,293

 

58,245

Commercial business and other

 

333

 

434

 

1,008

 

1,775

 

1,385,458

 

1,387,233

Total

$

7,765

$

5,085

$

13,492

$

26,342

$

6,580,922

$

6,607,264

December 31, 2021

Greater

30 - 59 Days

60 - 89 Days

than

Total Past

(In thousands)

    

Past Due

    

Past Due

    

90 Days

    

Due

    

Current

    

Total Loans

Multi-family residential

$

3,652

$

4,193

$

2,652

$

10,497

$

2,508,730

$

2,519,227

Commercial real estate

 

5,743

 

 

640

 

6,383

 

1,770,992

 

1,777,375

One-to-four family ― mixed-use property

 

2,319

 

 

1,321

 

3,640

 

571,296

 

574,936

One-to-four family ― residential

 

163

 

224

 

7,482

 

7,870

 

269,942

 

277,812

Construction

 

 

 

 

 

59,473

 

59,473

Small Business Administration

 

 

 

952

 

952

 

90,884

 

91,836

Commercial business and other

 

101

 

40

 

1,386

 

1,527

 

1,335,919

 

1,337,446

Total

$

11,978

$

4,457

$

14,433

$

30,869

$

6,607,236

$

6,638,105

-16-

Table of Contents

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 indicated:

March 31, 2022

    

    

    

One-to-four

    

    

    

    

    

    

family -

One-to-four

Commercial

Multi-family

Commercial

mixed-use

family -

Construction

Small Business

Taxi

business and

(In thousands)

residential

real estate

property

residential

loans

Administration

medallion

other

Total

Allowance for credit losses:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Beginning balance

$

8,185

$

7,158

$

1,755

$

784

$

186

$

1,209

$

$

17,858

$

37,135

Charge-off's

 

 

 

 

 

 

(1,028)

 

 

(8)

 

(1,036)

Recoveries

 

 

 

 

2

 

 

13

 

12

 

74

 

101

Provision (benefit)

 

376

 

558

 

109

 

(20)

 

82

 

1,643

 

(12)

 

(1,503)

 

1,233

Ending balance

$

8,561

$

7,716

$

1,864

$

766

$

268

$

1,837

$

$

16,421

$

37,433

March 31, 2021

    

    

    

One-to-four

    

    

    

    

    

    

family -

One-to-four

Commercial

Multi-family

Commercial

mixed-use

family -

Construction

Small Business

Taxi

business and

(In thousands)

residential

real estate

property

residential

loans

Administration

medallion

other

Total

Allowance for credit losses:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Beginning balance

$

6,557

$

8,327

$

1,986

$

869

$

497

$

2,251

$

$

24,666

$

45,153

Charge-off's

 

(43)

 

(64)

 

(29)

 

 

 

 

(2,758)

 

(28)

 

(2,922)

Recoveries

 

10

 

 

10

 

5

 

 

10

 

 

22

 

57

Provision (benefit)

 

620

 

93

 

(94)

 

(164)

 

253

 

(134)

 

2,758

 

(521)

 

2,811

Ending balance

$

7,144

$

8,356

$

1,873

$

710

$

750

$

2,127

$

$

24,139

$

45,099

-17-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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.

-18-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the risk category of mortgage and non-mortgage loans by loan portfolio segments and class of loans by year of origination at March 31, 2022:

Revolving Loans

Revolving Loans

Amortized Cost

converted to

(In thousands)

2022

2021

2020

2019

2018

Prior

Basis

term loans

Total

1-4 Family Residential

Pass

$

7,346

$

8,877

$

20,514

$

44,416

$

30,178

$

111,474

$

8,894

$

14,283

$

245,982

Watch

297

728

2,350

1,026

4,401

Special Mention

219

219

Substandard

1,841

4,895

451

7,187

Total 1-4 Family Residential

$

7,346

$

9,174

$

20,514

$

45,144

$

32,019

$

118,719

$

8,894

$

15,979

$

257,789

1-4 Family Mixed-Use

Pass

$

10,794

$

45,419

$

35,105

$

66,830

$

69,997

$

328,183

$

$

$

556,328

Watch

758

7,063

7,821

Special Mention

1,219

1,219

Substandard

1,303

1,303

Total 1-4 Family Mixed Use

$

10,794

$

45,419

$

35,105

$

67,588

$

69,997

$

337,768

$

$

$

566,671

Commercial Real Estate

Pass

$

46,810

$

187,400

$

160,648

$

239,636

$

259,107

$

775,268

$

$

$

1,668,869

Watch

1,684

9,647

7,853

73,438

92,622

Special Mention

3,620

3,620

Substandard

897

897

Total Commercial Real Estate

$

46,810

$

189,084

$

164,268

$

249,283

$

266,960

$

849,603

$

$

$

1,766,008

Construction

Pass

$

1,996

$

12,906

$

12,223

$

14,801

$

1,974

$

$

12,533

$

$

56,433

Watch

5,704

4,522

10,226

Special Mention

1,603

1,603

Total Construction

$

1,996

$

12,906

$

12,223

$

14,801

$

9,281

$

4,522

$

12,533

$

$

68,262

Multifamily

Pass

$

107,272

$

304,922

$

232,977

$

327,630

$

409,630

$

1,084,307

$

5,855

$

$

2,472,593

Watch

1,118

1,652

(31)

12,115

9,486

151

24,491

Special Mention

965

770

221

1,956

Substandard

2,125

1,891

4,016

Total Multifamily

$

107,272

$

306,040

$

235,594

$

327,599

$

424,640

$

1,095,905

$

6,006

$

$

2,503,056

Commercial Business - Secured by RE

Pass

$

50,856

$

174,564

$

91,713

$

36,144

$

42,371

$

106,014

$

$

$

501,662

Watch

21,653

49,206

18,673

58,213

147,745

Special Mention

2,381

2,381

Substandard

3,577

3,577

Total Commercial Business - Secured by RE

$

50,856

$

174,564

$

113,366

$

87,731

$

61,044

$

167,804

$

$

$

655,365

Commercial Business

Pass

$

60,925

$

123,178

$

47,915

$

58,204

$

66,342

$

57,583

$

209,367

$

$

623,514

Watch

1,579

1,661

22,404

16,739

31,446

4,424

78,253

Special Mention

1,381

35

2,205

34

13,156

16,811

Substandard

4,782

31

2,771

4,488

69

12,141

Doubtful

1,009

1,009

Total Commercial Business

$

60,925

$

124,757

$

55,739

$

80,674

$

88,057

$

93,551

$

228,025

$

$

731,728

Small Business Administration

Pass

$

$

39,326

$

8,112

$

723

$

1,333

$

2,267

$

$

$

51,761

Watch

55

2,557

2,597

5,209

Special Mention

47

47

Substandard

1,228

1,228

Total Small Business Administration

$

$

39,326

$

8,112

$

778

$

3,890

$

6,139

$

$

$

58,245

Other

Pass

$

$

$

$

$

$

58

$

82

$

$

140

Total Other

$

$

$

$

$

$

58

$

82

$

$

140

Total by Loan Type

Total Pass

$

285,999

$

896,592

$

609,207

$

788,384

$

880,932

$

2,465,154

$

236,731

$

14,283

$

6,177,282

Total Watch

4,678

24,966

82,767

63,641

189,115

4,575

1,026

370,768

Total Special Mention

5,966

2,416

4,578

1,521

13,156

219

27,856

Total Substandard

4,782

31

6,737

18,279

69

451

30,349

Total Doubtful

1,009

1,009

Total Loans

$

285,999

$

901,270

$

644,921

$

873,598

$

955,888

$

2,674,069

$

255,540

$

15,979

$

6,607,264

-19-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Included within net loans as of March 31, 2022 and December 31, 2021 were $8.1 million and $8.7 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.

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

March 31, 2022

December 31, 2021

(In thousands)

Real Estate

Business Assets

Real Estate

Business Assets

Multi-family residential

$

3,654

$

$

2,652

$

Commercial real estate

542

1,158

One-to-four family - mixed-use property

1,052

1,582

One-to-four family - residential

7,052

7,482

Small Business Administration

952

952

Commercial business and other

3,818

1,427

Total

$

12,300

$

4,770

$

12,874

$

2,379

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 $481.3 million and $472.9 million at March 31, 2022 and December 31, 2021, respectively.

The following table presents the activity in the allowance for off balance sheet credit losses for the three months ended March 31, 2022 and 2021.

For the three months ended

March 31, 

    

2022

    

2021

    

(In thousands)

Balance at beginning of period

$

1,209

$

1,815

Off-Balance Sheet- Provision (Benefit)

380

(511)

Allowance for Off-Balance Sheet - Credit losses (1)

$

1,589

$

1,304

(1)Included in “Other liabilities” on the Consolidated Statements of Financial Condition.

-20-

Table of Contents

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 March 31, 2022 and December 31, 2021, the Bank did not have any loans held for sale. There were no loans sold for the three months ended March 31, 2022.

The following table shows loans sold during the period indicated:

For the three months ended March 31, 2021

(Dollars in thousands)

    

Loans sold

    

Proceeds

    

Net charge-offs

    

Net gain

Delinquent and non-performing loans

 

  

 

  

 

  

 

  

Multi-family residential

 

5

$

2,906

$

(43)

$

5

Commercial

3

3,036

(64)

17

One-to-four family - mixed-use property

 

6

 

2,307

 

(14)

 

9

Total

 

14

$

8,249

$

(121)

$

31

7.     Leases

The Company has 28 operating leases for branches (including headquarters) and office spaces, 11 operating leases for vehicles, and one operating lease for equipment. Our leases have remaining lease terms ranging from one month to approximately 14 years, none of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.

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 two agreements in 2022 and one agreement in 2021 that qualified as short-term leases. 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 was as follows:

 

For the three months ended

(Dollars in thousands)

March 31, 2022

December 31, 2021

Operating lease ROU asset

$

48,475

$

50,200

Operating lease liability

$

52,292

$

54,155

Weighted-average remaining lease term-operating leases

 

7.2 years

7.4 years

Weighted average discount rate-operating leases

 

3.1

%  

3.1

%  

-21-

Table of Contents

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

(Dollars in thousands)

Line Item Presented

March 31, 2022

March 31, 2021

Lease Cost

 

  

 

  

Operating lease cost

Occupancy and equipment

$

2,097

$

2,080

Operating lease cost

Other operating expenses

2

2

Operating lease cost

Other operating expenses

22

22

Short-term lease cost

Professional Services and Other operating expenses

 

61

 

35

Variable lease cost

Occupancy and equipment

 

200

 

298

Total lease cost

$

2,382

$

2,437

Other information

 

  

 

  

Cash paid for amounts included in the measurement of lease liabilities

 

  

 

  

Operating cash flows from operating leases

$

2,426

$

5,630

Right-of-use assets obtained in exchange for new operating lease liabilities

$

47

$

4,760

The Company’s minimum annual rental payments for Bank facilities due under non-cancelable leases are as follows as of March 31, 2022:

Minimum Rental

(In thousands)

Years ended December 31:

2022

$

6,825

2023

9,502

2024

9,336

2025

8,662

2026

7,769

Thereafter

16,277

Total minimum payments required

58,371

Less: implied interest

6,079

Total lease obligations

$

52,292

8.     Stock-Based Compensation

The Company has long-term incentive compensation program for certain Company executive officers that includes grants of performance-based restricted stock units (“PRSUs”) in addition to time-based restricted stock units (“RSU”). 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 three-year performance period, as determined by the Compensation Committee of the Board. As of March 31, 2022, PRSU’s granted in 2022 and 2020 are being accrued at target and PRSU’s granted in 2021 are being accrued above target. The different levels of accrual are commensurate with the projected performance of the respective grant.

-22-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

On May 18, 2021, stockholders approved an amendment to the 2014 Omnibus Plan (the “Amendment”) authorizing an additional 1,100,000 shares available for future issuance. Including the additional shares authorized from the Amendment, 965,394 shares were available for future issuance under the 2014 Omnibus Plan at March 31, 2022.

For the three months ended March 31, 2022 and 2021, the Company’s net income, as reported, included $3.9 million and $4.1 million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and $1.0 million and $1.1 million of income tax benefit, respectively, related to the stock-based compensation plans. During the three months ended March 31, 2022 and 2021, the Company granted 212,811 and 238,985 RSU awards and 63,250 and 62,790 PRSU awards, respectively.

The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight-line method. Forfeitures are recorded in the period they occur.

The following table summarizes the Company’s RSU and PRSU awards at or for the three months ended March 31, 2022:

 

RSU Awards

    

PRSU Awards

 

Weighted-Average

 

Weighted-Average

 

Grant-Date

 

Grant-Date

    

Shares

    

Fair Value

    

Shares

    

Fair Value

Non-vested at December 31, 2021

 

310,430

$

21.49

 

102,920

$

20.02

Granted

 

212,811

 

24.83

 

63,250

 

25.11

Vested

 

(204,837)

 

23.73

 

(64,950)

 

23.75

Forfeited

 

(1,070)

 

24.22

 

 

Non-vested at March 31, 2022

 

317,334

$

22.27

 

101,220

$

20.81

Vested but unissued at March 31, 2022

 

218,025

$

22.41

 

111,805

$

20.76

As of March 31, 2022, there was $7.2 million of total unrecognized compensation cost related to RSU and PRSU awards granted. That cost is expected to be recognized over a weighted-average period of 2.7 years. The total fair value of awards vested for the three months ended March 31, 2022 and 2021 was $6.6 million and $4.8 million, respectively. The vested but unissued RSU and PRSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates.

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 one year of service. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.

The following table summarizes the Phantom Stock Plan at or for the three months ended March 31, 2022:

Phantom Stock Plan

    

Shares

    

Fair Value

Outstanding at December 31, 2021

 

128,881

$

24.30

Granted

 

25,441

 

24.40

Forfeited

Distributions

 

(635)

 

24.78

Outstanding at March 31, 2022

 

153,687

$

22.35

Vested at March 31, 2022

 

153,355

$

22.35

-23-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of ($0.3) million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively. The total fair value of the distributions from the Phantom Stock Plan was $16,000 and $23,000 for the three months ended March 31, 2022 and 2021, respectively.

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

 

March 31, 

(In thousands)

    

2022

    

2021

Employee Pension Plan:

 

  

 

  

Interest cost

$

138

$

128

Amortization of unrecognized loss

 

1

 

122

Expected return on plan assets

 

(257)

 

(274)

Net employee pension benefit

$

(118)

$

(24)

Outside Director Pension Plan:

 

  

 

  

Service cost

$

3

$

4

Interest cost

 

11

 

12

Amortization of unrecognized gain

 

(7)

 

(5)

Net outside director pension expense

$

7

$

11

Other Postretirement Benefit Plans:

 

  

 

  

Service cost

$

67

$

73

Interest cost

 

70

 

58

Amortization of past service credit

 

(7)

 

(21)

Net other postretirement expense

$

130

$

110

The Company previously disclosed in its Consolidated Financial Statements for the year ended December 31, 2021 that it expects to contribute $0.3 million to each of the Outside Director Pension Plan (the “Outside Director Pension Plan”) and the other postretirement benefit plans (the “Other Postretirement Benefit Plans”), during the year ending December 31, 2022. The Company does not expect to make a contribution to the Employee Pension Plan (the “Employee Pension Plan”). As of March 31, 2022, the Company had contributed $36,000 to the Outside Director Pension Plan and $2,500 in contributions were made to the Other Postretirement Benefit Plans. As of March 31, 2022, the Company has not revised its expected contributions for the year ending December 31, 2022.

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. At March 31, 2022, the Company carried financial assets and financial liabilities under the fair value option with fair values of $14.0 million and $58.0 million, respectively. At December 31, 2021, the Company carried financial assets and financial liabilities under the fair value option with fair values of $14.6 million and $56.5

-24-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

million, respectively. The Company did not elect to carry any additional financial assets or financial liabilities under the fair value option during the three ended March 31, 2022 and 2021.

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 gain (loss) from fair value adjustments, at or for the periods ended as indicated:

Fair Value

Fair Value

Changes in Fair Values for Items Measured at Fair Value

Measurements

Measurements

Pursuant to Election of the Fair Value Option

 

at March 31, 

 

at December 31,

 

For the three months ended March 31, 

Description

    

2022

    

2021

    

2022

    

2021

(In thousands)

 

  

 

  

 

  

 

  

Mortgage-backed securities

$

364

$

388

$

(4)

$

(1)

Other securities

 

13,676

 

14,180

 

(536)

 

(175)

Borrowed funds

 

57,955

 

56,472

 

(1,269)

 

(1,460)

Net gain (loss) from fair value adjustments (1)

$

(1,809)

$

(1,636)

(1)The net loss from fair value adjustments presented in the above table does not include net gains $2.6 million for the three months ended March 31, 2021, from the change in the fair value of interest rate swaps.

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 $61.9 million at both March 31, 2022 and December 31, 2021. The fair value of borrowed funds includes accrued interest payable of $0.1 million each at March 31, 2022 and December 31, 2021.

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.

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 March 31, 2022 and December 31, 2021, 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

-25-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

flow assumptions. At March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021:

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

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

 

(In thousands)

Assets:

Securities available for sale

Mortgage-backed

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Securities

$

$

$

553,828

$

572,184

$

$

$

553,828

$

572,184

Other securities

 

11,937

 

12,485

 

272,364

 

190,872

 

1,740

 

1,695

 

286,041

 

205,052

Interest rate swaps

 

 

 

35,636

 

10,683

 

 

 

35,636

 

10,683

Total assets

$

11,937

$

12,485

$

861,828

$

773,739

$

1,740

$

1,695

$

875,505

$

787,919

Liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Borrowings

$

$

$

$

$

57,955

$

56,472

$

57,955

$

56,472

Interest rate swaps

 

 

 

11,585

 

25,071

 

 

 

11,585

 

25,071

Total liabilities

$

$

$

11,585

$

25,071

$

57,955

$

56,472

$

69,540

$

81,543

-26-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table sets 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

March 31, 2022

March 31, 2021

Trust preferred

Junior subordinated

Trust preferred

Junior subordinated

    

securities

    

debentures

    

securities

    

debentures

 

(In thousands)

Beginning balance

$

1,695

$

56,472

$

1,295

$

43,136

Net gain from fair value adjustment of financial assets (1)

 

45

 

 

47

 

Net loss from fair value adjustment of financial liabilities (1)

 

 

1,269

 

 

1,460

Increase (Decrease) in accrued interest

 

 

16

 

 

(4)

Change in unrealized gains included in other comprehensive loss

 

 

198

 

 

120

Ending balance

$

1,740

$

57,955

$

1,342

$

44,712

Changes in unrealized gains held at period end

$

$

3,136

$

$

2,551

(1)Totals in the table above are presented in the Consolidated Statements of Income under net gain (loss) from fair value adjustments.

During the three months ended March 31, 2022 and 2021, there were no transfers between Levels 1, 2 and 3.

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:

March 31, 2022

 

    

Fair Value

    

Valuation Technique

    

Unobservable Input

    

Range

    

Weighted Average

 

(Dollars in thousands)

Assets:

Trust preferred securities

$

1,740

 

Discounted cash flows

 

Discount rate

 

n/a

 

2.0

%

Liabilities:

 

  

 

  

 

  

 

  

 

  

Junior subordinated debentures

$

57,955

 

Discounted cash flows

 

Discount rate

 

n/a

 

2.0

%

    

December 31, 2021

 

    

Fair Value

    

Valuation Technique

    

Unobservable Input

    

Range

    

Weighted Average

 

 

(Dollars in thousands)

Assets:

 

  

 

  

 

  

 

  

 

  

Trust preferred securities

$

1,695

 

Discounted cash flows

 

Discount rate

 

n/a

 

2.2

%

Liabilities:

 

  

 

  

 

  

 

  

 

  

Junior subordinated debentures

$

56,472

 

Discounted cash flows

 

Discount rate

 

n/a

 

2.2

%

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Table of Contents

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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021:

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

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

 

(In thousands)

Assets:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Non-accrual loans

$

$

$

$

$

11,967

$

11,026

$

11,967

$

11,026

Other repossessed assets

 

 

 

 

 

 

 

 

Total assets

$

$

$

$

$

11,967

$

11,026

$

11,967

$

11,026

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 March 31, 2022

 

    

Fair Value

    

Valuation Technique

    

Unobservable Input

    

Range

    

Weighted Average

 

(Dollars in thousands)

 

Assets:

 

  

 

  

 

  

 

  

 

  

Non-accrual loans

$

11,592

 

Sales approach

 

Reduction for planned expedited disposal

8.0% to 15.0

%  

12.6

%

Non-accrual loans

$

375

 

Discounted Cashflow

 

Discount Rate

 

4.3

%  

4.3

%

Probability of Default

35.0

%  

35.0

%

    

At December 31, 2021

 

    

Fair Value

    

Valuation Technique

    

Unobservable Input

    

Range

    

Weighted Average

 

(Dollars in thousands)

 

Assets:

 

  

 

  

 

  

 

  

 

  

Non-accrual loans

$

10,579

 

Sales approach

 

Reduction for planned expedited disposal

8.0% to 15.0

%  

11.9

%

Non-accrual loans

$

447

 

Discounted Cashflow

 

Discount Rate

 

4.3

%  

4.3

%

Probability of Default

35.0

%  

35.0

%

The Company did not have any liabilities that were carried at fair value on a non-recurring basis at March 31, 2022 and December 31, 2021.

The methods and assumptions used to estimate fair value at March 31, 2022 and December 31, 2021 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

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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.

Non-accrual Loans:

For non-accruing 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, 85% of the appraised or internally estimated value of the property. See Note 5 (“Loans”) of the Notes to the Consolidated Financial Statements.

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.

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Table of Contents

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:

    

March 31, 2022

Carrying

Fair

    

Amount

    

Value

    

Level 1

    

Level 2

    

Level 3

 

(In thousands)

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and due from banks

$

186,407

$

186,407

$

186,407

$

$

Securities held-to-maturity

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities

 

7,890

 

7,880

 

 

7,880

 

Other securities

 

67,313

 

61,839

 

 

 

61,839

Securities available for sale

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities

 

553,828

 

553,828

 

 

553,828

 

Other securities

 

286,041

 

286,041

 

11,937

 

272,364

 

1,740

Loans

 

6,607,264

 

6,610,591

 

 

 

6,610,591

FHLB-NY stock

 

33,891

 

33,891

 

 

33,891

 

-

Accrued interest receivable

 

37,308

 

37,308

 

8

 

1,760

 

35,540

Interest rate swaps

 

35,636

 

35,636

 

 

35,636

 

Liabilities:

 

  

 

  

 

  

 

  

 

  

Deposits

$

6,452,895

$

6,444,392

$

5,566,578

$

877,814

$

Borrowings

 

877,122

 

868,589

 

 

810,634

 

57,955

Accrued interest payable

 

5,740

 

5,740

 

 

5,740

 

Interest rate swaps

 

11,585

 

11,585

 

 

11,585

 

    

December 31, 2021

Carrying

Fair

    

Amount

    

Value

    

Level 1

    

Level 2

    

Level 3

(In thousands)

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and due from banks

$

81,723

$

81,723

$

81,723

$

$

Securities held-to-maturity

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities

 

7,894

 

8,667

 

 

8,667

 

Other securities

 

49,974

 

53,362

 

 

 

53,362

Securities available for sale

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities

 

572,184

 

572,184

 

 

572,184

 

Other securities

 

205,052

 

205,052

 

12,485

 

190,872

 

1,695

Loans

 

6,638,105

 

6,687,125

 

 

 

6,687,125

FHLB-NY stock

 

35,937

 

35,937

 

 

35,937

 

Accrued interest receivable

 

38,698

 

38,698

 

 

1,574

 

37,124

Interest rate swaps

 

10,683

 

10,683

 

 

10,683

 

Liabilities:

 

  

 

  

 

  

 

  

 

  

Deposits

$

6,385,445

$

6,385,276

$

5,438,870

$

946,406

$

Borrowings

 

815,544

 

816,012

 

 

759,540

 

56,472

Accrued interest payable

 

4,777

 

4,777

 

 

4,777

 

Interest rate swaps

 

25,071

 

25,071

 

 

25,071

 

11.     Derivative Financial Instruments

At March 31, 2022 and December 31, 2021, 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 totaling $297.2 million and $299.6 million at March 31, 2022 and December 31, 2021, respectively; 2) to facilitate risk management strategies for our loan customers with $226.3 million of swaps outstanding, which include $113.1 million with customers and $113.1 million with bank counterparties at March 31, 2022 and $228.0 million of swaps outstanding, which include $114.0 million with customers and $114.0 million with bank

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

counterparties at December 31, 2021; and 3) to mitigate exposure to rising interest rates on certain short-term advances and brokered CDs totaling $996.5 million at both March 31, 2022 and December 31, 2021.

At March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, derivatives with a combined notional amount of $226.3 million and $228.0 million, respectively, were not designated as hedges. At March 31, 2022 and December 31, 2021, derivatives with a combined notional amount of $297.2 million and $299.6 million, respectively, were designated as fair value hedges. At March 31, 2022 and December 31, 2021, derivatives with a combined notional amount of $996.5 million and $996.5 million, respectively, were designated as cash flow hedges.

For cash flow hedges, the changes in the fair value of the derivative are reported in accumulated other comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive loss are reclassified into earnings in the same period during which the hedged forecasted transaction effects earnings. During the three months ended March 31, 2022 and 2021, $2.7 million and $2.6 million, respectively, was reclassified from accumulated other comprehensive loss to interest expense. The estimated amount to be reclassified in the next 12 months out of accumulated other comprehensive loss is $10.6 million.

Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income.

The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:

    

March 31, 2022

    

December 31, 2021

Notional

Notional

    

Amount

    

Fair Value (1)

    

Amount

    

Fair Value (1)

(In thousands)

Interest rate swaps (cash flow hedge)

$

575,750

$

20,829

$

355,000

$

7,328

Interest rate swaps (fair value hedge)

 

219,494

 

6,768

 

 

Interest rate swaps (non-hedge)

113,140

8,039

113,988

3,355

Interest rate swaps (fair value hedge)

 

77,696

 

(2,266)

 

299,555

 

(12,329)

Interest rate swaps (cash flow hedge)

 

420,750

 

(1,280)

 

641,500

 

(9,387)

Interest rate swaps (non-hedge)

 

113,140

 

(8,039)

 

113,988

 

(3,355)

Total derivatives

$

1,519,970

$

24,051

$

1,524,031

$

(14,388)

(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.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table presents information regarding the Company’s fair value hedged items for the periods indicated:

Cumulative Amount

of the Fair Hedging Adjustment

Line Item in the Statement of

Carrying Amount of the

Included in the Carrying Amount of

Financial Position in Which

Hedged

the Hedged

the Hedged Item Is Included

Assets/(Liabilities)

Assets/(Liabilities)

(In thousands)

March 31, 2022

December 31, 2021

March 31, 2022

December 31, 2021

Loan Receivable

Multi-family residential

$

105,498

$

113,730

$

31

$

7,608

Commercial real estate

182,184

192,694

(5,768)

3,477

Commercial business and other

5,875

6,298

(18)

122

Total

$

293,557

$

312,722

$

(5,755)

$

11,207

The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:

Affected Line Item in the Statement Where Net income is Presented

    

For the three months ended

    

March 31, 

(In thousands)

    

2022

    

2021

    

Financial Derivatives:

 

  

 

  

 

Other interest expense

$

$

(135)

Net gain (loss) from fair value adjustments

2,618

Interest rate swaps (non-hedge)

2,483

Interest rate swaps (fair value hedge)

Interest and fees on loans

(1,435)

38

Interest rate swaps (cash flow hedge)

Other interest expense

 

(2,520)

 

(2,586)

Net loss

$

(3,955)

$

(65)

The Company’s interest rate swaps are subject to master netting arrangements between the Company and its three designated counterparties. The Company has not made a policy election to offset its derivative positions.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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 Condition as of the dates indicated:

March 31, 2022

Gross Amounts Not Offset in the

Consolidated Statement of

Gross Amount Offset in

Net Amount of Assets

Condition

Gross Amount of

the Statement of

Presented in the Statement of

Financial

Cash Collateral

(In thousands)

    

Recognized Assets

    

Condition

    

Condition

    

Instruments

    

Received

    

Net Amount

 

Interest rate swaps

$

35,636

$

$

35,636

$

$

21,005

 

$

14,631

Gross Amounts Not Offset in the

Consolidated Statement of

Gross Amount of

Gross Amount Offset in

Net Amount of Liabilities

Condition

Recognized

the Statement of

Presented in the Statement of

Financial

Cash Collateral

(In thousands)

    

Liabilities

    

Condition

    

Condition

    

Instruments

    

Pledged

    

Net Amount

 

Interest rate swaps

$

11,585

$

$

11,585

$

$

 

$

11,585

December 31, 2021

Gross Amounts Not Offset in the

Consolidated Statement of

Gross Amount Offset in

Net Amount of Assets

Condition

Gross Amount of

the Statement of

Presented in the Statement of

Financial

Cash Collateral

(In thousands)

    

Recognized Assets

    

Condition

    

Condition

    

Instruments

    

Received

    

Net Amount

 

Interest rate swaps

$

10,683

$

$

10,683

$

$

 

$

10,683

Gross Amounts Not Offset in the

Consolidated Statement of

Gross Amount of

Gross Amount Offset in

Net Amount of Liabilities

Condition

Recognized

the Statement of

Presented in the Statement of

Financial

Cash Collateral

(In thousands)

    

Liabilities

    

Condition

    

Condition

    

Instruments

    

Pledged

    

Net Amount

 

Interest rate swaps

$

25,071

$

$

25,071

$

$

21,527

 

$

3,544

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Table of Contents

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 March 31, 2022

 

Unrealized Gains

 

Unrealized Gains

 

(Losses) on

 

(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

$

(6,272)

$

(1,406)

$

(1,282)

$

2,276

$

(6,684)

Other comprehensive income before reclassifications, net of tax

 

(23,427)

 

12,941

 

 

(135)

 

(10,621)

Amounts reclassified from accumulated other comprehensive income, net of tax

 

 

1,810

 

(9)

 

 

1,801

Net current period other comprehensive income, net of tax

 

(23,427)

 

14,751

 

(9)

 

(135)

 

(8,820)

Ending balance, net of tax

$

(29,699)

$

13,345

$

(1,291)

$

2,141

$

(15,504)

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

For the three months ended March 31, 2021

 

Unrealized Gains

 

Unrealized Gains

 

(Losses) on

 

(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

$

1,290

$

(17,521)

$

(1,884)

$

1,849

$

(16,266)

Other comprehensive income before reclassifications, net of tax

 

(2,217)

 

5,973

 

 

(84)

 

3,672

Amounts reclassified from accumulated other comprehensive income, net of tax

 

 

1,825

 

66

 

 

1,891

Net current period other comprehensive income (loss), net of tax

 

(2,217)

 

7,798

 

66

 

(84)

 

5,563

Ending balance, net of tax

$

(927)

$

(9,723)

$

(1,818)

$

1,765

$

(10,703)

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Table of Contents

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 March 31, 2022

 

Amounts Reclassified from

Details about Accumulated Other

 

Accumulated Other

Affected Line Item in the Statement

Comprehensive Loss Components

    

Comprehensive Loss

    

Where Net Income is Presented

(In thousands)

Cash flow hedges:

 

  

  

Interest rate swaps

$

(2,650)

Other interest expense

 

840

Provision for income taxes

$

(1,810)

Net of tax

Amortization of defined benefit pension items:

 

  

  

Actuarial losses

$

(6)

(1)  

Other operating expense

Prior service credits

 

(7)

(1)  

Other operating expense

 

(13)

Total before tax

 

4

Provision for income taxes

$

(9)

Net of tax

For the three months ended March 31, 2021

 

Amounts Reclassified from

Details about Accumulated Other

    

Accumulated Other

    

Affected Line Item in the Statement

Comprehensive Loss Components

 

Comprehensive Loss

Where Net Income is Presented

(In thousands)

Cash flow hedges:

 

  

Interest rate swaps

$

(2,637)

Other interest expense

 

812

Provision for income taxes

$

(1,825)

Net of tax

Amortization of defined benefit pension items:

 

  

Actuarial losses

$

(117)

(1)  

Other operating expense

Prior service credits

 

21

(1)  

Other operating expense

 

(96)

Total before tax

 

30

Provision for income taxes

$

(66)

Net of tax

(1)These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9 (“Pension and Other Postretirement Benefit Plans”) for additional information.

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 March 31, 2022, 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 6.13% at March 31, 2022 and December 31, 2021.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.

    

March 31, 2022

    

December 31, 2021

 

Percent of

Percent of

 

    

Amount

    

Assets

    

Amount

    

Assets

 

 

(Dollars in thousands)

Tier I (leverage) capital:

 

  

 

  

 

  

 

  

Capital level

$

844,429

 

10.45

%  

$

840,105

 

10.39

%

Requirement to be well capitalized

 

404,176

 

5.00

 

404,366

 

5.00

Excess

 

440,253

 

5.45

 

435,739

 

5.39

Common Equity Tier I risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

844,429

 

13.55

%  

$

840,105

 

13.58

%

Requirement to be well capitalized

 

405,045

 

6.50

 

402,100

 

6.50

Excess

 

439,384

 

7.05

 

438,005

 

7.08

Tier I risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

844,429

 

13.55

%  

$

840,105

 

13.58

%

Requirement to be well capitalized

 

498,518

 

8.00

 

494,892

 

8.00

Excess

 

345,911

 

5.55

 

345,213

 

5.58

Total risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

880,754

 

14.13

%  

$

874,400

 

14.13

%

Requirement to be well capitalized

 

623,147

 

10.00

 

618,615

 

10.00

Excess

 

257,607

 

4.13

 

255,785

 

4.13

The Holding Company is subject to the same regulatory capital requirements as the Bank. As of March 31, 2022, the Holding 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 Holding Company at March 31, 2022 and December 31, 2021 was 5.74% and 5.75%, respectively.

Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.

    

March 31, 2022

    

December 31, 2021

 

Percent of

Percent of

 

    

Amount

    

Assets

    

Amount

    

Assets

 

(Dollars in thousands)

 

Tier I (leverage) capital:

 

  

 

  

 

  

 

  

Capital level

$

731,536

 

9.05

%  

$

726,174

 

8.98

%

Requirement to be well capitalized

 

404,150

 

5.00

 

404,422

 

5.00

Excess

 

327,386

 

4.05

 

321,752

 

3.98

Common Equity Tier I risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

675,434

 

10.84

%  

$

671,494

 

10.86

%

Requirement to be well capitalized

 

405,081

 

6.50

 

401,836

 

6.50

Excess

 

270,353

 

4.34

 

269,658

 

4.36

Tier I risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

731,536

 

11.74

%  

$

726,174

 

11.75

%

Requirement to be well capitalized

 

498,562

 

8.00

 

494,568

 

8.00

Excess

 

232,974

 

3.74

 

231,606

 

3.75

Total risk-based capital:

 

  

 

  

 

  

 

  

Capital level

$

892,861

 

14.33

%  

$

885,469

 

14.32

%

Requirement to be well capitalized

 

623,202

 

10.00

 

618,210

 

10.00

Excess

 

269,659

 

4.33

 

267,259

 

4.32

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Table of Contents

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 March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (Topic 326), which replaces the recognition and measurement guidance related to troubled debt restructurings (“TDR”) for creditors that have adopted ASC Topic 326 (commonly referred to as “CECL”) with the recognition and measurement guidance contained in ASC 310-20 to determine whether a modification results in a new loan or a continuation of an existing loan. This ASU also enhances disclosures about loan modifications for borrowers who are experiencing financial difficulty. The guidance also requires public business entities to present gross write-offs by year of origination in their vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this ASU should be applied on a prospective basis; however, institutions have the option to apply a modified retrospective transition method as it relates to the recognition and measurement of TDRs, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. We are evaluating the impacts of this ASU and have not yet determined whether this will have material effects on our business operations and consolidated financial statements.

In January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-01, “Reference Rate Reform” (Topic 848), which clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or re-measurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity could elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We are evaluating the impacts of this ASU and have not yet determined whether LIBOR transition and this ASU will have material effects on our business operations and consolidated financial statements. The amendments in this Update apply to contract modifications that replace a reference rate reform and contemporaneous modifications of other terms related to the replacement of the reference rate.

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Table of Contents

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, 2021. 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, FSB Properties Inc., and Flushing Preferred Funding Corporation, which was dissolved as of June 30, 2021.

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, 2021. 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.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

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 March 31, 2022, 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 average balance of interest-bearing liabilities. We also generate non-interest income primarily from loan fees, service charges on deposit accounts, mortgage servicing fees, 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 also can 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.

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

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 March 31, 2022, we reported net income of $18.2 million, or $0.58 per diluted common share, and reported record net interest income totaling $63.5 million. The record net interest income was driven by a seven basis point increase in the net interest margin, as the cost of interest-bearing liabilities improved eight basis points to 0.50% from 0.58% for the three months ended December 31, 2021.

Our loan portfolio is greater than 87% collateralized by real estate with an average loan to value of less than 38%. We have a long history and foundation built upon disciplined underwriting, good credit quality and a resilient seasoned loan portfolio with strong asset protection. At March 31, 2022, our allowance for credit losses (“ACL”) - loans stands at 57 basis points of gross loans and 266.1% of non-performing loans. Non-performing assets at the end of the quarter were 17 basis points of total assets.

The Bank and Company remain well capitalized under current capital regulations and are subject to the same regulatory capital requirements. See Note 13 (“Regulatory Capital”) of the Notes to the Consolidated Financial Statements.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

General. Net income for the three months ended March 31, 2022 was $18.2 million, a decrease of $0.8 million from $19.0 million for the three months ended March 31, 2021. Diluted earnings per common share were $0.58 for the three months ended March 31, 2022, a decrease of $0.02 from $0.60 for the three months ended March 31, 2021.

Return on average equity was 10.83% for the three months ended March 31, 2022 compared to 12.29% for the three months ended March 31, 2021. Return on average assets was 0.91% for the three months ended March 31, 2022 compared to 0.93% for the three months ended March 31, 2021.

Interest Income. Interest and dividend income decreased $0.8 million, or 1.1%, to $71.3 million for the three months ended March 31, 2022 from $72.1 million for the three months ended March 31, 2021. The decrease in interest income was primarily attributable to a decrease of $96.8 million in the average balance of interest-earning assets to $7,570.4 million for the three months ended March 31, 2022 from $7,667.2 million for the comparable prior year period. The decrease in the average balance of interest-earning assets was primarily driven by the decline in average loans, which were down $121.8 million year over year. Excluding prepayment penalty income from loans, net recoveries/reversals of interest from non-accrual loans, net gains/losses from fair value adjustments on qualifying hedges, and purchase accounting adjustments, the yield on total loans, net, increased one basis point to 3.94% for the three months ended March 31, 2022 from 3.93% for the three months ended March 31, 2021.

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

Interest Expense. Interest expense decreased $3.4 million, or 30.3%, to $7.8 million for the three months ended March 31, 2022 from $11.2 million for the three months ended March 31, 2021. The decrease in interest expense was primarily due to a decline of 19 basis points in the average cost of interest-bearing liabilities to 0.50% for the three months ended March 31, 2022 from 0.69% for the three months ended March 31, 2021 and the decrease of $257.4 million in the average balance of interest-bearing liabilities to $6,220.5 million for the three months ended March 31, 2022 from $6,477.9 million for the comparable prior year period.

Net Interest Income. Net interest income for the three months ended March 31, 2022 was $63.5 million, an increase of $2.6 million, or 4.2%, from $60.9 million for the three months ended March 31, 2021. The increase in net interest income was primarily due to net interest-earning assets growing $160.5 million year over year to $1,349.9 million for the quarter ended March 31, 2022, and an increase of 18 basis points in the net interest margin to 3.36% during the same period. Included in net interest income was prepayment penalty income, net of reversals and recovered interest from non-accrual loans totaling $1.7 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively, net (losses) gains from fair value adjustments on qualifying hedges totaling $(0.1) million and $1.4 million  for the three months ended March 31, 2022 and 2021, respectively, and purchase accounting income adjustments of $1.1 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. Excluding all of these items, the net interest margin for the three months ended March 31, 2022 was 3.22%, an increase of 21 basis points, from 3.01% for the three months ended March 31, 2021.

Provision for Credit Losses. During the three months ended March 31, 2022, the provision for credit losses was $1.4 million, compared to $2.8 million for the three months ended March 31, 2021. The provision recorded during the three months ended March 31, 2022 was greater than net charge-offs of $0.9 million. During the three months ended March 31, 2022, non-accrual loans decreased $0.9 million to $14.1 million from December 31, 2021. The current average loan-to-value ratio for our non-performing loans collateralized by real estate was 37% at March 31, 2022. The Bank continues to maintain conservative underwriting standards.

Non-Interest Income. Non-interest income for the three months ended March 31, 2022 was $1.3 million, a decrease of $5.0 million from $6.3 million in the prior year comparable period. The decrease was primarily due to a decline in loan swap income, gains from disposition of assets and net gains from fair value adjustments. The decline in net gains from fair value adjustments was primarily driven by the termination of $18.0 million in interest rate swaps in 2021. These swaps resulted in net gains totaling $2.6 million for the three months ended March 31, 2021.

Non-Interest Expense. Non-interest expense for the three months ended March 31, 2022 was $38.8 million, an increase of $0.6 million, or 1.7%, from $38.2 million for the three months ended March 31, 2021. The increase in non-interest expense was primarily due to the growth of the Company.

Income before Income Taxes. Income before income taxes for the three months ended March 31, 2022 was $24.6 million, a decrease of $1.6 million, or 6.0%, from $26.2 million for the three months ended March 31, 2021 for the previously discussed reasons.

Provision for Income Taxes. The provision for income taxes was $6.4 million for the three months ended March 31, 2022, a decrease of $0.8 million, or 10.6%, from $7.2 million for the three months ended March 31, 2021. The decrease was primarily due to a decline in income before income taxes. The effective tax rate for three months ended March 31, 2022 was 26.1% compared to 27.4% for the three months ended March 31, 2021.

FINANCIAL CONDITION

Assets. Total assets at March 31, 2022 were $8,169.8 million, an increase of $123.9 million, or 1.5%, from $8,045.9 million at December 31, 2021. Total loans, net decreased $31.1 million, or 0.5%, during the three months ended March 31, 2022, to $6,569.8 million from $6,601.0 million at December 31, 2021. The decrease was primarily due to PPP loan forgiveness totaling $34.1 million during the three months ended March 31, 2022. Loan originations and purchases were $329.3 million for the three months ended March 31, 2022, an increase of $6.4 million, or 2.0%, from $322.9 million for the three months

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

ended March 31, 2021. 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 $663.7 million at March 31, 2022, compared to $429.3 million at December 31, 2021.

The following table shows loan originations and purchases for the periods indicated:

 

For the three months

 

 

ended March 31, 

 

(In thousands)

    

2022

    

2021

    

Multi-family residential

$

98,180

$

58,553

 

Commercial real estate

 

45,102

 

17,156

 

One-to-four family – mixed-use property

 

8,498

 

8,712

 

One-to-four family – residential

 

9,261

 

3,131

 

Construction (1)

 

8,802

 

7,123

 

Small Business Administration (2)

 

 

125,093

 

Commercial business and other (3)

 

159,476

 

103,118

 

Total

$

329,319

$

322,886

(1)Includes purchases of $0.7 million and $3.3 million for the three months ended March 31, 2022 and 2021, respectively.
(2)Includes $123.2 million of SBA PPP loans for the three months ended March 31, 2021.
(3)Includes purchases of $53.6 million and $22.6 million for the three months March 31, 2022 and 2021, 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 March 31, 2022 had an average loan-to-value ratio of 56.9% and an average debt coverage ratio of 176%.

The Bank’s non-performing assets totaled $14.1 million at March 31, 2022, a decrease of $0.9 million, or 5.8%, from December 31, 2021. Total non-performing assets as a percentage of total assets were 0.17% at March 31, 2022 and 0.19% at December 31, 2021. The ratio of ACL - loans to total non-performing loans was 266.1% at March 31, 2022 and 248.7% at December 31, 2021.

During the three months ended March 31, 2022, mortgage-backed securities decreased $18.4 million, or 3.2%, to $561.7 million from $580.1 million at December 31, 2021. The decrease in mortgage-backed securities during the three months ended March 31, 2022 was primarily due to the principal repayment of securities totaling $31.7 million and the decrease in the fair value of the securities totaling $30.5 million partially offset by the purchase of securities totaling $44.5 million at an average rate of 2.48%.

During the three months ended March 31, 2022, other securities, increased $97.3 million, or 38.2%, to $352.4 million from $255.0 million at December 31, 2021. The increase in other securities during the three months ended March 31, 2022, was primarily due to purchases of $102.3 million at an average rate of 2.24% partially offset by a decrease in the fair value of other securities totaling $4.3 million, and maturities, sales and calls totaling $0.6 million. At March 31, 2022 other securities primarily consist of securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds, corporate bonds, and CLOs.

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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 $7,494.0 million at March 31, 2022, an increase of $127.7 million, or 1.7%, from $7,366.3 million at December 31, 2021. During the three months ended March 31, 2022, due to depositors increased $39.9 million, or 0.6%, to $6,373.4 million due to an increase of $100.1 million in non-maturity deposits, partially offset by a decrease of $60.3 million in certificates of deposit. The decrease in certificates of deposit was due to management’s decision to allow these deposits to mature and replace with lower cost funding. The increase in non-maturity deposits was due to increases of $20.4 million, $73.4 million, $4.3 million, and $2.0 million in money market accounts, demand deposits accounts, NOW accounts, and savings accounts, respectively. Included in deposits were brokered deposits totaling $636.7 million, an increase of $10.4 million from $626.3 million at December 31, 2021.  Borrowed funds increased $61.6 million during the three months ended March 31, 2022.

Equity. Total stockholders’ equity decreased $3.8 million, or 0.6%, to $675.8 million at March 31, 2022 from $679.6 million at December 31, 2021. Stockholders’ equity decreased due to a decline in accumulated other comprehensive income of $8.8 million, the declaration and payment of dividends on the Company’s common stock of $0.22 per common share totaling $6.9 million and 360,000 shares repurchased totaling $8.5 million. These decreases were partially offset by net income of $18.2 million. Book value per common share was stable at $22.26 at March 31, 2022 and December 31, 2021.

Liquidity. Liquidity is the ability to economically meet current and future financial obligations. The Company’s primary objectives in terms of managing liquidity is to maintain the ability to originate and purchase loans, 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.

Liquidity management is both a short and long-term function of business management. During 2021, funds were provided by the Company’s operating activities, which were used to fund our investing and financing activities. 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 March 31, 2022, cash and cash equivalents totaled $186.4 million, an increase of $104.7 million from December 31, 2021. We also held unencumbered securities available for sale totaling $584.1 million at March 31, 2022.

At March 31, 2022, the Bank was able to borrow up to $3,621.3 million from the FHLB-NY in Federal Home Loan Bank advances and letters of credit. As of March 31, 2022, the Bank had $1,542.9 million outstanding in combined balances of FHLB-NY advances and letters of credit. At March 31, 2022, the Bank also has unsecured lines of credit with other commercial banks totaling $560.0 million, with $135.0 million outstanding amount. In addition, the Holding Company has subordinated debentures with a principal balance totaling $125.0 million and junior subordinated debentures with a face amount of $61.9 million and a carrying amount of $58.0 million. Management believes its available sources of funds are sufficient to fund current operations.

INTEREST RATE RISK

Economic Value of Equity Analysis. The Consolidated Statements of Financial Position 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

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PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and 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 100 or 200 basis points or down 100 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 March 31, 2022. Various estimates regarding prepayment assumptions are made at each level of rate shock. At March 31, 2022, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.

The following table presents the Company’s interest rate shock as of March 31, 2022:

    

Change in Interest Rate

Net Portfolio Value

Net Portfolio Value Ratio

-100 Basis points

 

(1.6)

%

14.5

%

Base interest rate

 

 

15.1

 

+100 Basis points

 

(5.5)

 

14.6

 

+200 Basis points

 

(11.1)

 

14.0

 

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. On a quarterly basis, management provides a report for review by the ALCO Investment Committee of the Board of Directors. This report quantifies the potential changes in net interest income and net portfolio value through various interest rate scenarios.

The starting point for the net interest income simulation is an estimate of the next twelve month’s net interest income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end levels. The 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 4.2% from a 100 basis point increase in rates over the next twelve months. Actual results could differ significantly from these estimates.

At March 31, 2022, the Company had a derivative portfolio with a notional value totaling $1.5 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.

A portion of this portfolio is comprised of interest rate swaps on certain short-term advances and brokered deposits totaling $996.5 million. At March 31, 2022, $591.5 million of the interest rate swaps are effective swaps at a weighted average rate of approximately 1.95% that largely mature by the end of 2023 and $405.0 million of the interest rate swaps are forward swaps effective at different points through 2024, at an average rate of 0.77%. A summary of maturity dates and effective dates of our interest rate swaps on short-term advances and brokered deposits held at March 31, 2022, are shown in the table below:

2022

2023

2024

2025

(Dollars in thousands)

Notional

Weighted Average Rate

Notional

Weighted Average Rate

Notional

Weighted Average Rate

Notional

Weighted Average Rate

 

  

 

  

  

 

  

  

 

  

  

 

  

Effective Swaps Maturity

$

125,000

1.86

%

$

321,000

2.09

%

$

121,000

1.96

%

$

25,000

0.47

%

Forward Starting Swaps

 

125,000

0.88

 

230,000

0.70

 

50,000

0.80

 

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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

The net interest income simulation incorporates the next twelve months (through March 31, 2023) and only a portion of the effective swap maturities and the forward starting swaps are included in this period. Assuming another equal increment ramp of 100 basis points increase in rates in the second year (through March 31, 2024), for a total of 200 basis points over two years, the total derivative portfolio has a 1.6% benefit to net interest income (versus the base case) in the first year and a cumulative benefit of 4.6% by the second year.

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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 rate earned or paid on them. The following table sets forth certain information relating to the Company’s Consolidated Statements of Financial Condition and Consolidated Statements of Income for the three months ended March 31, 2022 and 2021, 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 March 31, 

 

2022

 

2021

 

Average

 

Yield/

 

Average

 

Yield/

 

Balance

 

Interest

 

Cost

 

Balance

 

Interest

 

Cost

Assets

 

(Dollars in thousands)

Interest-earning assets:

    

  

    

  

    

    

  

    

  

    

Mortgage loans, net

$

5,152,070

$

53,970

 

4.19

%  

$

5,155,975

$

55,219

 

4.28

%

Other loans, net

 

1,426,610

 

13,546

 

3.80

 

1,544,501

 

13,802

 

3.57

Total loans, net (1) (2)

 

6,578,680

67,516

4.11

 

6,700,476

 

69,021

 

4.12

Taxable securities:

 

  

 

  

 

 

  

 

  

 

  

Mortgage-backed securities

 

580,670

 

2,167

 

1.49

 

433,917

 

1,698

 

1.57

Other securities

 

226,744

 

1,119

 

1.97

 

300,828

 

963

 

1.28

Total taxable securities

 

807,414

3,286

1.63

 

734,745

 

2,661

 

1.45

Tax-exempt securities: (3)

 

  

 

  

 

 

  

 

  

 

  

Other securities

 

57,611

 

591

 

4.10

 

50,828

 

530

 

4.17

Total tax-exempt securities

 

57,611

591

4.10

 

50,828

 

530

 

4.17

Interest-earning deposits and federal funds sold

 

126,668

 

51

 

0.16

 

181,168

 

36

 

0.08

Total interest-earning assets

 

7,570,373

71,444

3.77

 

7,667,217

 

72,248

 

3.77

Other assets

 

479,097

 

 

 

480,497

 

 

  

Total assets

$

8,049,470

 

 

$

8,147,714

 

  

Liabilities and Equity

 

  

 

  

 

 

  

 

  

 

Interest-bearing liabilities

 

  

 

  

 

 

  

 

  

 

Deposits:

 

  

 

  

 

 

  

 

  

 

Savings accounts

$

156,592

 

49

 

0.13

$

170,079

 

75

 

0.18

NOW accounts

 

2,036,914

 

793

 

0.16

 

2,185,384

 

1,706

 

0.31

Money market accounts

 

2,253,630

 

1,275

 

0.23

 

1,905,543

 

2,100

 

0.44

Certificate of deposit accounts

 

889,847

 

1,289

 

0.58

 

1,102,641

 

2,222

 

0.81

Total due to depositors

 

5,336,983

3,406

0.26

 

5,363,647

 

6,103

 

0.46

Mortgagors' escrow accounts

 

71,509

 

2

 

0.01

 

65,372

 

2

 

0.01

Total deposits

 

5,408,492

3,408

0.25

 

5,429,019

 

6,105

 

0.45

Borrowed funds

 

812,018

 

4,433

 

2.18

 

1,048,852

 

5,140

 

1.96

Total interest-bearing liabilities

 

6,220,510

7,841

0.50

 

6,477,871

 

11,245

 

0.69

Non-interest-bearing deposits

 

1,001,571

 

  

 

 

856,052

 

  

 

Other liabilities

 

154,377

 

  

 

 

194,144

 

  

 

Total liabilities

 

7,376,458

 

  

 

 

7,528,067

 

  

 

Equity

 

673,012

 

  

 

 

619,647

 

  

 

Total liabilities and equity

$

8,049,470

 

  

 

$

8,147,714

 

  

 

Net interest income / net interest rate spread (tax equivalent) (3)

 

  

$

63,603

 

3.27

%  

 

  

$

61,003

 

3.08

%

Net interest-earning assets / net interest margin (tax equivalent)

$

1,349,863

 

  

 

3.36

%  

$

1,189,346

 

  

 

3.18

%

Ratio of interest-earning assets to interest-bearing liabilities

 

  

 

  

 

1.22

X  

 

  

 

  

 

1.18

X

(1)Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.9 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively.
(2)Loan interest income includes net (losses) gains from fair value adjustments on qualifying hedges of $(0.1) million and $1.4 million for three month periods ended March 31, 2022 and 2021.
(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 for each three month periods ended March 31, 2022 and 2021.

-47-

Table of Contents

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 three months ended March 31, 

(In thousands)

    

2022

    

2021

Mortgage Loans

 

  

 

  

At beginning of period

$

5,200,782

$

5,228,271

Mortgage loans originated:

 

  

 

  

Multi-family residential

 

98,180

 

58,553

Commercial real estate

 

45,102

 

17,156

One-to-four family mixed-use property

 

8,498

 

8,712

One-to-four family residential

 

9,261

 

3,131

Construction

 

8,096

 

3,819

Total mortgage loans originated

 

169,137

 

91,371

Mortgage loans purchased:

 

  

 

  

Construction

 

706

 

3,304

Total mortgage loans purchased

 

706

 

3,304

Less:

 

  

 

  

Principal reductions

 

216,487

 

162,984

Mortgage loan sales

 

 

7,842

Charge-offs

 

 

136

At end of period

$

5,154,138

$

5,151,984

Non-mortgage loans

 

  

 

  

At beginning of period

$

1,433,084

$

1,473,358

Loans originated:

 

  

 

  

Small Business Administration (1)

 

 

125,093

Commercial business

 

105,514

 

80,191

Other

 

359

 

283

Total other loans originated

 

105,873

 

205,567

Non-mortgage loans purchased:

 

 

  

Commercial business

 

53,603

 

22,644

Total non-mortgage loans purchased

 

53,603

 

22,644

Less:

 

  

 

  

Principal reductions (2)

 

146,066

 

105,006

Charge-offs (3)

 

8

 

2,786

At end of period

$

1,446,486

$

1,593,777

(1)Includes SBA PPP originations totaling $123.2 million for the three months ended March 31, 2021.
(2)Includes SBA PPP reductions totaling $34.1 million and $24.1 million for the three months ended March 31, 2022 and 2021, respectively.
(3)Does not include charge-offs totaling $1.0 million on the guaranteed portion of SBA receivables deemed uncollectible during the three months ended March 31, 2022.

-48-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

TROUBLED DEBT RESTRUCTURED (“TDR”) AND NON-PERFORMING ASSETS

The following table shows loans classified as TDR at amortized cost that are performing according to their restructured terms at the periods indicated:

March 31, 

December 31,

(In thousands)

    

2022

    

2021

    

Accrual Status:

 

  

 

  

 

Multi-family residential

$

1,661

$

1,690

Commercial real estate

 

7,572

 

7,572

One-to-four family - mixed-use property

 

1,345

 

1,375

One-to-four family - residential

 

264

 

483

Commercial business and other

 

1,243

 

1,340

Total

 

12,085

 

12,460

Non-Accrual Status:

 

  

 

  

One-to-four family - mixed-use property

 

258

 

261

Commercial business and other

 

2,809

 

41

Total

 

3,067

 

302

Total performing troubled debt restructured

$

15,152

$

12,762

The following table shows our non-performing assets at the period indicated:

March 31,

December 31, 

(In thousands)

 

2022

2021

Non-accrual loans:

 

  

 

  

Multi-family residential

 

3,414

 

2,431

Commercial real estate

 

5

 

613

One-to-four family - mixed-use property (1)

 

790

 

1,309

One-to-four family - residential

 

7,387

 

7,725

Small business administration

 

937

 

937

Commercial Business and other (1)

 

1,533

 

1,918

Total

 

14,066

 

14,933

Total non-performing loans

 

14,066

 

14,933

Total non-performing assets

$

14,066

$

14,933

Non-performing assets to total assets

0.17

%  

0.19

%  

ACL - loans to non-accrual loans

266.12

%

248.66

%  

ACL - loans to non-performing loans

266.12

%  

248.66

%  

(1) Not included in the above analysis are the following non-accrual TDRs that are performing according to their restructured terms: one-to-four family mixed-use property loans totaling $0.3 million at both March 31, 2022 and December 31, 2021, respectively, and commercial business loans totaling $2.8 million and less than $0.1 million at March 31, 2022 and December 31, 2021, respectively.  

-49-

Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

Management’s Discussions and Analysis of

Financial Condition and Results of Operations

CRITICIZED AND CLASSIFIED ASSETS

Our policy is to review our assets, focusing primarily on the loan portfolio, OREO, and the investment portfolios, 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 March 31, 2022 and December 31, 2021. The Company had one investment security classified as special mention that had an outstanding balance of $21.0 million as of March 31, 2022 and December 31, 2021. Our total Criticized and Classified assets were $80.2 million at March 31, 2022, an increase of $1.6 million from $78.6 million at December 31, 2021.

Included within net loans as of March 31, 2022 and December 31, 2021 were $8.1 million and $8.7 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.

ALLOWANCE FOR CREDIT LOSSES

The following table shows allowance for credit losses at the period indicated:

For the three months ended March 31,

(In thousands)

2022

2021

Balance at beginning of period

$

37,135

$

45,153

Loans- Charge-off

(1,036)

(2,922)

Loans- Recovery

101

57

Loans- Provision

1,233

2,811

Allowance for Credit Losses - Loans

$

37,433

$

45,099

Balance at beginning of period

$

862

$

907

HTM Securities- Provision

124

8

Allowance for HTM Securities losses

$

986

$

915

Balance at beginning of period

$

1,209

$

1,815

Off-Balance Sheet- (Benefit) Provision

380

(511)

Allowance for Off-Balance Sheet losses

$

1,589

$

1,304

Allowance for Credit Losses

$

40,008

$

47,318

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Table of Contents

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 three months ended March 31,

 

(Dollars in thousands)

    

2022

    

2021

Balance at beginning of year

$

37,135

$

45,153

Provision for credit losses

 

1,233

 

2,811

Loans charged-off:

 

  

 

  

Multi-family residential

 

 

(43)

Commercial real estate

 

 

(64)

One-to-four family mixed-use property

 

 

(29)

SBA

 

1,028

 

Taxi medallion

 

 

(2,758)

Commercial business and other loans

 

8

 

(28)

Total loans charged-off

 

1,036

 

(2,922)

Recoveries:

 

  

 

  

Multi-family residential

 

 

10

One-to-four family - mixed-use property

 

 

10

One-to-four family - residential

2

5

Small Business Administration

13

10

Taxi medallion

12

Commercial business and other

 

74

 

22

Total recoveries

 

101

 

57

Net (charge-offs) recoveries

 

(935)

 

(2,865)

Balance at end of year

$

37,433

$

45,099

Ratio of net charge-offs (recoveries) during the period to average loans outstanding during the period

 

0.06

%  

 

0.17

%

Ratio of ACL - loans to gross loans at end of period

 

0.57

%  

 

0.31

%  

Ratio of ACL - loans to non-performing assets at end of period

266.12

%  

 

212.52

%  

Ratio of ACL - loans to non-performing loans at end of period

 

266.12

%  

 

212.87

%  

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Table of Contents

PART I – FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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 March 31, 2022, 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.

-52-

Table of Contents

PART II – OTHER INFORMATIOMTION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

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, 2021.

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 March 31, 2022:

    

    

    

    

    

    

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

January 1 to January 31, 2022

 

$

 

 

848,187

February 1 to February 28, 2022

 

245,000

 

23.57

 

245,000

 

603,187

March 1 to March 31, 2022

 

115,000

 

23.42

 

115,000

 

488,187

Total

 

360,000

 

23.52

 

360,000

  

During the quarter ended March 31, 2022, the Company repurchased 360,000 shares of the Company’s common stock. On March 31, 2022, 488,187 shares remained to be repurchased under the currently authorized stock repurchase program. 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

None.

-53-

Table of Contents

PART II – OTHER INFORMATIOMTION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

ITEM 6.       EXHIBITS

Exhibit No.

    

Description

3.1 P

Certificate of Incorporation of Flushing Financial Corporation (1)

3.2

Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (3)

3.3

Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (5)

3.4

Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)

3.5

Certificate of Increase of Shares Designated as Series A Junior Participating Preferred Stock of Flushing Financial Corporation (2)

3.6

Amended and Restated By-Laws of Flushing Financial Corporation (6)

4.1

Indenture dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust, National Association, as trustee. (8)

4.2

First Supplemental Indenture, dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust, National Association, as trustee. (8)

4.3

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.

10.1

Amended Flushing Financial Corporation 2014 Omnibus Plan (7)

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith)

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith)

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer (furnished herewith)

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer (furnished herewith)

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)

(1)Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed

September 1, 1995, Registration No. 33-96488. (P: Indicates a filing submitted in paper)

(2)Incorporated by reference to Exhibit filed with Form 8-K filed September 27, 2006.
(3)Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002.
(4)Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended

September 30, 2002.

(5)Incorporated by reference to Exhibit filed with Form 10-K for the year ended December 31, 2011.
(6)Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2014.
(7)Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2021.
(8)Incorporated by reference to Exhibits filed with Form 8-K filed November 22, 2021.

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Table of Contents

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

EXHIBIT INDEX

Exhibit No.

    

Description

3.1 P

Certificate of Incorporation of Flushing Financial Corporation (1)

3.2

Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (3)

3.3

Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (5)

3.4

Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)

3.5

Certificate of Increase of Shares Designated as Series A Junior Participating Preferred Stock of Flushing Financial Corporation (2)

3.6

Amended and Restated By-Laws of Flushing Financial Corporation (6)

4.1

Indenture dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust, National Association, as trustee. (8)

4.2

First Supplemental Indenture, dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust, National Association, as trustee. (8)

4.3

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.

10.1

Amended Flushing Financial Corporation 2014 Omnibus Plan (7)

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer (filed herewith)

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer (filed herewith)

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer (furnished herewith)

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer (furnished herewith)

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)

(1)Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed

September 1, 1995, Registration No. 33-96488. (P: Indicates a filing submitted in paper)

(2)Incorporated by reference to Exhibit filed with Form 8-K filed September 27, 2006.
(3)Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002.
(4)Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended

September 30, 2002.

(5)Incorporated by reference to Exhibit filed with Form 10-K for the year ended December 31, 2011.
(6)Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2014.
(7)Incorporated by reference to Exhibit filed with Form 10-Q for the quarter ended June 30, 2021.
(8)Incorporated by reference to Exhibits filed with Form 8-K filed November 22, 2021.

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Table of Contents

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:

May 6, 2022

By:

/s/John R. Buran

John R. Buran

President and Chief Executive Officer

Dated:

May 6, 2022

By:

/s/Susan K. Cullen

Susan K. Cullen

Senior Executive Vice President, Treasurer and

Chief Financial Officer

-56-

Exhibit 31.1

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. Buran, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Flushing Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   May 6, 2022

    

By:

/s/John R. Buran

John R. Buran

President and Chief Executive Officer


Exhibit 31.2

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Susan K. Cullen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Flushing Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   May 6, 2022

    

By:

/s/Susan K. Cullen

Susan K. Cullen

Senior Executive Vice President, Treasurer and Chief

Financial Officer


Exhibit 32.1

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Flushing Financial Corporation (the “Corporation”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Buran, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

By:

/s/John R. Buran

John R. Buran

Chief Executive Officer

May 6, 2022


Exhibit 32.2

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Flushing Financial Corporation (the “Corporation”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Susan K. Cullen, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

By:

/s/Susan K. Cullen

Susan K. Cullen

Chief Financial Officer

May 6, 2022