Flushing Financial Corporation Reports Record Net Interest Income; Net Interest Margin Expansion Driven by Ability to Significantly Reduce Funding Costs
SECOND QUARTER 20201 HIGHLIGHTS
GAAP diluted EPS was $0.63, compared to ($0.05) in 1Q20 and $0.37 in 2Q19Core diluted EPS was $0.36 compared to $0.19 in 1Q20 and $0.42 in 2Q19Net interest margin was 2.87%, up 43bps QoQ and 42bps YoYCore net interest margin was 2.85%, up 36bps QoQ and 45bps YoYRecord GAAP net interest income of $48.7 million, up 19.3% QoQ and 21.8% YoYRecord Core net interest income of $49.1 million, up 14.4% QoQ and 20.2% YoYGAAP and core ROAE 13.1% and 7.4%, respectively, compared with (1.0)% and 3.8%, respectively in 1Q20GAAP and core ROAA were 1.0% and 0.6%, respectively, compared with (0.1)% and 0.3%, respectively in 1Q20Loan pipeline remains strong at $310.8 millionProvision for credit losses of $9.6 million, $0.25 after-tax per diluted common share, driven mainly by economic conditions arising from COVID-19 pandemicNet charge-offs were $1.0 million, compared to $1.1 million in 1Q20UNIONDALE, N.Y., July 21, 2020 (GLOBE NEWSWIRE) — Flushing Financial Corporation (the “Company”) (Nasdaq-GS: FFIC), the parent holding company for Flushing Bank (the “Bank”), today announced its financial results for the second quarter ended June 30, 2020.John R. Buran, President and Chief Executive Officer stated, “I want to thank our employees for their outstanding work during these unprecedented times. The health and welfare of our employees and customers remain our highest priority.”Mr. Buran continued, “We are pleased to announce our second quarter earnings totaled $18.3 million, or $0.63 per diluted common share. Our GAAP earnings for the quarter were positively impacted by two items. First, we executed on our strategic objective to manage our cost of funds and improve funding mix. We achieved record net interest income as a result of the Company’s quick response to the Fed decreasing interest rates in late March resulting in cost of funds decreasing 62 basis points from the previous quarter with additional opportunity to further reduce funding costs in the third quarter. Adding to the reduction of cost of funds in the second quarter, core deposits increased 7% while the net interest margin expanded 43 basis points from the previous quarter.”“The second item positively affecting our GAAP net earnings was the non-cash fair value adjustment on our junior subordinated debt of $10.3 million, or $0.27 per diluted common share, after-tax, due to market conditions.”“Core earnings for the quarter totaled $10.3 million, or $0.36 per diluted common share. Pre-provision pre-tax net revenue totaled $33.7 million, an increase of $28.1 million from the previous quarter. Non-performing assets at the end of the quarter were 29 basis points of total assets. Our loan portfolio is 88% collateralized by real estate with an average loan to value of less than 40%. Despite the current economic environment due to COVID-19, we have a long history and foundation built upon disciplined underwriting, good credit quality and a resilient seasoned loan portfolio with strong asset protection.”“We continue to actively assist our customers during these turbulent times. As a result of COVID-19, we granted forbearances to our customers. Originally, we granted forbearances for one to six months. In anticipation of an extended relief period, we have most recently predominately granted forbearance of principal and interest for six months. At the height of the request period, April and May 2020, COVID-19 forbearances peaked at $1.5 billion. By June 30, 2020, we reduced that number to $1.3 billion comprised of 82% real estate loans. Through July 10th, 63% of the $146 million in loans scheduled to return to regularly scheduled payments have done so.”“Additionally, we have actively participated in the SBA Paycheck Protection Program originating $93 million of these loans. We are one of nine banks in the State of New York participating in the Main Street Lending Program. We are also a proud participant in the FHLBNY Small Business Recovery Grant Program, helping our customers and communities navigate through the current environment.”“During this pandemic, our customers have utilized our enhanced technology platform with new mobile banking capabilities that went live in March 2020. Mobile deposits have increased over 13% from April 2020 through June 2020. Similarly, the usage of ATMs has increased with over 75% of all transactions now completed via ATM. The number of accounts enrolling in online banking and opening new accounts online has also grown during the current quarter to 19% of retail account openings.”“Given the current economic environment at the end of the quarter, we adjusted our economic forecast in our current expected credit loss (“CECL”) model resulting in a provision for credit losses of $9.6 million, or $0.25 per diluted share, after-tax. Our allowance for credit losses stands at 61 basis points of gross loans and 182% of non-performing loans. As a reminder, our maximum charge-offs were only 64 basis points in the midst of the Great Recession while industry peak charge-offs were nearly 5x.”“As we previously disclosed, the pending acquisition of Empire Bancorp was delayed due to the severe instability and volatility in the U.S. financial and stock markets caused by the pandemic. The Company continues to believe that the merger offers benefits to both shareholders and customers of Empire Bancorp and Flushing. We will be refraining from any additional comments at this time.”Mr. Buran concluded by saying, “Overall, we made good progress in the second quarter to achieve our strategic objectives. Importantly, the Company remains committed to building and fostering an environment of diversity and inclusion in our workforce and the communities we serve. In light of recent events, we have formed a Diversity and Inclusion Committee chaired by the EVP/Director of Human Resources, reporting directly to me. The role of this Committee is to make recommendations ensuring Flushing Financial continues to provide a safe and inclusive environment for all employees and ensure our message of inclusion is supported by our actions and participation in community organizations.” Summary of Strategic Objectives
