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, 2003
Commission file number 000-24272
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.)
144-51 Northern Boulevard, Flushing, New York 11354
(Address of principal executive offices)
(718) 961-5400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.01 par value.
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 is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). X Yes __No
The number of shares of the registrant’s Common Stock outstanding as of April 30, 2003 was 12,670,164.
TABLE OF CONTENTS
| PAGE | |
| PART I -- FINANCIAL INFORMATION | |
ITEM 1. Financial Statements |
|
Consolidated Statements of Financial Condition |
1 |
Consolidated Statements of Income and Comprehensive Income |
2 |
Consolidated Statements of Cash Flows |
3 |
Consolidated Statements of Changes in Stockholders' Equity |
4 |
Notes to Consolidated Statements |
5 |
ITEM 2. Management's Discussion and Analysis of Financial Condition | |
| and Results of Operations | 7 |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk |
17 |
ITEM 4. Controls and Procedures |
17 |
PART II. -- OTHER INFORMATION | |
ITEM 1. Legal Proceedings |
17 |
ITEM 2. Changes in Securities and Use of Proceeds |
17 |
ITEM 3. Defaults Upon Senior Securities |
17 |
ITEM 4. Submission of Matters to a Vote of Security Holders |
17 |
ITEM 5. Other Information |
17 |
ITEM 6. Exhibits and Reports on Form 8-K |
18 |
SIGNATURES |
19 |
CERTIFICATIONS |
20 |
i
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Financial Condition
| (Dollars in thousands, except share data) |
March 31, 2003 |
December 31, 2002 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | (Unaudited) | |||||||
| Cash and due from banks | $ | 16,398 | $ | 29,119 | ||||
| Federal funds sold | - | 18,500 | ||||||
| Securities available for sale: | ||||||||
| Mortgage-backed securities | 399,492 | 319,255 | ||||||
| Other securities | 59,949 | 39,729 | ||||||
| Loans: | ||||||||
| One-to-four family residential - conventional | 244,242 | 262,944 | ||||||
| One-to-four family residential - mixed-use properties | 179,720 | 170,499 | ||||||
| Multi-family residential | 475,526 | 452,663 | ||||||
| Commercial real estate | 263,149 | 257,054 | ||||||
| Co-operative apartments | 4,823 | 5,205 | ||||||
| Construction | 13,355 | 17,827 | ||||||
| Small Business Administration | 4,952 | 4,301 | ||||||
| Commercial business and other | 3,766 | 4,185 | ||||||
| Unearned loan fees and deferred costs, net | 1,349 | 1,463 | ||||||
| Allowance for loan losses | (6,589 | ) | (6,581 | ) | ||||
| Net loans | 1,184,293 | 1,169,560 | ||||||
| Interest and dividends receivable | 8,592 | 8,409 | ||||||
| Real estate owned, net | - | - | ||||||
| Bank premises and equipment, net | 5,374 | 5,389 | ||||||
| Federal Home Loan Bank of New York stock | 22,463 | 22,213 | ||||||
| Goodwill | 3,905 | 3,905 | ||||||
| Other assets | 36,815 | 36,879 | ||||||
| Total assets | $ | 1,737,281 | $ | 1,652,958 | ||||
| LIABILITIES | ||||||||
| Due to depositors: | ||||||||
| Non-interest bearing | $ | 41,029 | $ | 35,287 | ||||
| Interest-bearing: | ||||||||
| Certificate of deposit accounts | 557,818 | 543,330 | ||||||
| Passbook savings accounts | 214,077 | 213,572 | ||||||
| Money market accounts | 214,782 | 170,029 | ||||||
| NOW accounts | 39,434 | 39,795 | ||||||
| Total interest-bearing deposits | 1,026,111 | 966,726 | ||||||
| Mortgagors' escrow deposits | 16,099 | 9,812 | ||||||
| Borrowed funds | 493,159 | 493,164 | ||||||
| Other liabilities | 25,258 | 16,583 | ||||||
| Total liabilities | 1,601,656 | 1,521,572 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock ($0.01 par value; 5,000,000 shares authorized) |
- | - | ||||||
|
Common stock ($0.01 par value; 40,000,000 shares authorized; 13,852,063 shares issued; 12,599,923 and 12,598,343 shares outstanding at March 31, 2003 and December 31, 2002, respectively) |
139 | 139 | ||||||
| Additional paid-in capital | 47,453 | 47,208 | ||||||
|
Treasury stock, at average cost (1,252,140 and 1,253,720 shares at March 31, 2003 and December 31, 2002, respectively) |
(21,709 | ) | (21,733 | ) | ||||
| Unearned compensation | (7,473 | ) | (7,825 | ) | ||||
| Retained earnings | 112,908 | 109,208 | ||||||
| Accumulated other comprehensive income, net of taxes | 4,307 | 4,389 | ||||||
| Total stockholders' equity | 135,625 | 131,386 | ||||||
| Total liabilities and stockholders' equity | $ | 1,737,281 | $ | 1,652,958 | ||||
-1-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
| For the three months | ||||||||
|---|---|---|---|---|---|---|---|---|
| ended March 31, | ||||||||
| (In thousands, except per share data) |
2003 |
2002 | ||||||
| (Unaudited) | ||||||||
| Interest and dividend income | ||||||||
| Interest and fees on loans | $ | 23,234 | $ | 21,801 | ||||
| Interest and dividends on securities: | ||||||||
| Interest | 4,091 | 4,096 | ||||||
| Dividends | 34 | 36 | ||||||
| Other interest income | 85 | 180 | ||||||
| Total interest and dividend income | 27,444 | 26,113 | ||||||
| Interest expense | ||||||||
| Deposits | 6,936 | 6,863 | ||||||
| Other interest expense | 6,271 | 6,839 | ||||||
| Total interest expense | 13,207 | 13,702 | ||||||
| Net interest income | 14,237 | 12,411 | ||||||
| Provision for loan losses | - | - | ||||||
| Net interest income after provision for loan losses | 14,237 | 12,411 | ||||||
| Non-interest income | ||||||||
| Other fee income | 822 | 699 | ||||||
| Net gain (loss) on sales of securities and loans | 46 | 20 | ||||||
| Other income | 737 | 667 | ||||||
| Total non-interest income | 1,605 | 1,386 | ||||||
| Non-interest expense | ||||||||
| Salaries and employee benefits | 3,827 | 3,429 | ||||||
| Occupancy and equipment | 667 | 655 | ||||||
| Professional services | 691 | 696 | ||||||
| Data processing | 410 | 373 | ||||||
|
Depreciation and amortization of premises and equipment |
256 | 257 | ||||||
| Other operating | 1,398 | 1,091 | ||||||
| Total non-interest expense | 7,249 | 6,501 | ||||||
| Income before income taxes | 8,593 | 7,296 | ||||||
| Provision for income taxes | ||||||||
| Federal | 2,572 | 2,263 | ||||||
| State and local | 721 | 495 | ||||||
| Total provision for income taxes | 3,293 | 2,758 | ||||||
| Net income | $ | 5,300 | $ | 4,538 | ||||
| Other comprehensive income, net of tax | ||||||||
| Unrealized gains (losses) on securities: | ||||||||
|
Unrealized holding gains (losses) arising during period |
$ | (97 | ) | $ | (917 | ) | ||
|
Reclassification adjustments for (gains) losses included in income |
15 |
- |
||||||
| Net unrealized holding gains (losses) | (82 | ) | (917 | ) | ||||
| Comprehensive net income | $ | 5,218 | $ | 3,621 | ||||
| Basic earnings per share | $ | 0.47 | $ | 0.38 | ||||
| Diluted earnings per share | $ | 0.45 | $ | 0.36 | ||||
| Dividends per share | $ | 0.10 | $ | 0.09 | ||||
-2-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
| For the three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, | ||||||||
| (In thousands) |
2003 |
2002 | ||||||
| (Unaudited) | ||||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 5,300 | $ | 4,538 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
|
Depreciation and amortization of bank premises and equipment |
256 | 257 | ||||||
| Net (gain) loss on sales of securities | 28 | -- | ||||||
| Net gain on sales of loans | (74 | ) | (20 | ) | ||||
|
Amortization of unearned premium, net of accretion of unearned discount |
708 | 666 | ||||||
| Deferred income tax provision | (120 | ) | (107 | ) | ||||
| Deferred compensation | 153 | 119 | ||||||
| Net increase (decrease) in other assets and liabilities | (1,174 | ) | 2,965 | |||||
| Unearned compensation | 348 | 274 | ||||||
| Net cash provided by operating activities | 5,425 | 8,692 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchases of bank premises and equipment | (241 | ) | (167 | ) | ||||
| Net redemptions (purchases) of Federal Home Loan Bank shares | (250 | ) | 1,458 | |||||
| Purchases of securities available for sale | (131,978 | ) | (49,306 | ) | ||||
| Proceeds from sales and calls of securities available for sale | 72 | -- | ||||||
|
Proceeds from maturities and prepayments of securities available for sale |
40,628 | 30,434 | ||||||
| Net originations and repayment of loans | (14,109 | ) | (18,944 | ) | ||||
| Purchases of loans | (619 | ) | (9,994 | ) | ||||
| Net cash used by investing activities | (106,497 | ) | (46,519 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net increase in non-interest bearing deposits | 5,742 | 1,560 | ||||||
| Net increase in interest-bearing deposits | 59,385 | 35,794 | ||||||
| Net increase in mortgagors' escrow deposits | 6,287 | 6,476 | ||||||
| Proceeds from long-term borrowings | 15,000 | 10,000 | ||||||
| Repayment of long-term borrowings | (15,005 | ) | (36,005 | ) | ||||
| Purchases of treasury stock, net | (418 | ) | (6,698 | ) | ||||
| Cash dividends paid | (1,140 | ) | (1,088 | ) | ||||
| Net cash provided by financing activities | 69,851 | 10,039 | ||||||
| Net decrease in cash and cash equivalents | (31,221 | ) | (27,788 | ) | ||||
| Cash and cash equivalents, beginning of period | 47,619 | 38,508 | ||||||
| Cash and cash equivalents, end of period | $ | 16,398 | $ | 10,720 | ||||
| SUPPLEMENTAL CASH FLOW DISCLOSURE | ||||||||
| Interest paid | $ | 13,054 | $ | 13,620 | ||||
| Income taxes paid | 489 | 209 | ||||||
| Non-cash activities: | ||||||||
| Securities purchased not yet settled | 10,000 | -- | ||||||
-3-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| For the three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands, except share data) |
March 31, 2003 | |||||||
| Common Stock | ||||||||
| Balance, beginning of period | $ | 139 | ||||||
| No activity | -- | |||||||
| Balance, end of period | $ | 139 | ||||||
| Additional Paid-In Capital | ||||||||
| Balance, beginning of period | $ | 47,208 | ||||||
|
Award of shares released from Employee Benefit Trust (1,189 common shares) |
14 | |||||||
| Tax benefit of unearned compensation | 231 | |||||||
| Balance, end of period | $ | 47,453 | ||||||
| Treasury Stock | ||||||||
| Balance, beginning of period | $ | (21,733 | ) | |||||
| Purchases of common shares outstanding (42,700 common shares) | (744 | ) | ||||||
| Repurchase of restricted stock awards (1,890 common shares) | (32 | ) | ||||||
| Forfeiture of restricted stock awards (1,030 common shares) | (18 | ) | ||||||
| Options exercised (47,200 common shares) | 818 | |||||||
| Balance, end of period | $ | (21,709 | ) | |||||
| Unearned Compensation | ||||||||
| Balance, beginning of period | $ | (7,825 | ) | |||||
| Restricted stock award expense | 213 | |||||||
| Forfeiture of restricted stock awards (1,030 common shares) | 18 | |||||||
|
Release of shares from Employee Benefit Trust (23,696 common shares) |
121 | |||||||
| Balance, end of period | $ | (7,473 | ) | |||||
| Retained Earnings | ||||||||
| Balance, beginning of period | $ | 109,208 | ||||||
| Net income | 5,300 | |||||||
| Options exercised (47,200 common shares) | (460 | ) | ||||||
| Cash dividends declared and paid | (1,140 | ) | ||||||
| Balance, end of period | $ | 112,908 | ||||||
| Accumulated Other Comprehensive Income | ||||||||
| Balance, beginning of period | $ | 4,389 | ||||||
|
Change in net unrealized gain, net of taxes of approximately $83 on securities available for sale |
(97 | ) | ||||||
|
Less: Reclassification adjustment for losses included in net income, net of taxes of approximately $(13) |
15 | |||||||
| Balance, end of period | $ | 4,307 | ||||||
-4-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
The primary business of Flushing Financial Corporation (the “Holding Company”) is the operation of its wholly owned subsidiary, Flushing Savings Bank, FSB (the “Bank”). The Holding Company also owns a special purpose business trust, Flushing Financial Capital Trust I (the “Trust”). The consolidated financial statements presented in this Form 10-Q include the collective results of the Holding Company, the Trust and the Bank (collectively the “Company”), but reflects principally the Bank’s activities.
The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for such periods of Flushing Financial Corporation and Subsidiaries (the “Company”). Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for the full year.
Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information should be read in conjunction with the Company’s 2002 Annual Report on Form 10-K.
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 reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
3. Earnings Per Share
Basic earnings per share for the three-month periods ended March 31, 2003 and 2002 was computed by dividing net income by the total weighted average number of common shares outstanding, including only the vested portion of restricted stock awards. Diluted earnings per share includes the additional dilutive effect of stock options outstanding and the unvested portion of restricted stock awards during the period. Earnings per share has been computed based on the following:
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, | ||||||||
| (Amounts in thousands, except per share data) |
2003 |
2002 | ||||||
| Net income | $ | 5,300 | $ | 4,538 | ||||
| Divided by: | ||||||||
| Weighted average common shares outstanding | 11,194 | 11,970 | ||||||
| Weighted average common stock equivalents | 473 | 571 | ||||||
| Total weighted average common shares & common stock equivalents | 11,667 | 12,541 | ||||||
| Basic earnings per share | $ | 0.47 | $ | 0.38 | ||||
| Diluted earnings per share | $ | 0.45 | $ | 0.36 | ||||
| Dividends per share | $ | 0.10 | $ | 0.09 | ||||
| Dividend payout ratio | 21.28 | % | 23.68 | % | ||||
Common stock equivalents that are antidilutive are not included in the computation of diluted earnings per share. Options to purchase 272,950 shares at $18.70 and 3,000 shares at $16.88 were not included in the computation of diluted earnings per share for the three months ended March 31, 2003 and 2002, respectively. Unvested restricted stock awards of 68,325 shares at $18.63 and 1,500 shares at $16.88 were not included in the computation of diluted earnings per share for the three months ended March 31, 2003 and 2002, respectively
-5-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements
4. Stock Option Plans
As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company has chosen to apply APB Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations in accounting for its Stock Option Plan. Accordingly, no compensation expense has been recognized for options granted under the Stock Option Plan. Compensation expense is recognized in the financial statements for restricted stock awards. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No.123 to all stock-based employee compensation. However, the present impact of SFAS No. 123 may not be representative of the effect on income in future periods because the options vest over several years and additional option grants may be made each year.
| Three Months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, | ||||||||
| (Dollars in thousands, except per share data) |
2003 |
2002 | ||||||
| Net income, as reported | $ | 5,300 | $ | 4,538 | ||||
|
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects |
132 | 93 | ||||||
|
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
(278 | ) | (203 | ) | ||||
| Pro forma net income | $ | 5,154 | $ | 4,428 | ||||
| Basic earnings per share: | ||||||||
| As reported | $ | 0.47 | $ | 0.38 | ||||
| Pro forma | $ | 0.46 | $ | 0.37 | ||||
| Diluted earnings per share: | ||||||||
| As reported | $ | 0.45 | $ | 0.36 | ||||
| Pro forma | $ | 0.44 | $ | 0.35 | ||||
There were no stock option grants in either of the three-month periods ended March 31, 2003 and 2002.
-6-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
Flushing Financial Corporation, a Delaware corporation (the “Holding Company”), was organized in May 1994 to serve as the holding company for Flushing Savings Bank, FSB (the “Bank”), a federally chartered, FDIC insured savings institution, originally organized in 1929. The Holding Company also owns a special purpose business trust, Flushing Financial Capital Trust I (“Trust”). The Bank is a consumer-oriented savings institution and conducts its business through ten banking offices located in Queens, Brooklyn, Manhattan, Bronx and Nassau County. Flushing Financial Corporation’s common stock is publicly traded on the Nasdaq National Market under the symbol “FFIC”. The following discussion of financial condition and results of operations includes the collective results of the Holding Company, the Bank and the Trust (collectively, the “Company”), but reflects principally the Bank’s activities.
The Company’s principal business is attracting retail deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, primarily in (1) origination and purchases of one-to-four family residential real estate loans (focusing on mixed-use properties — properties that contain both residential dwelling units and commercial units), multi-family income-producing property loans and commercial real estate loans; (2) mortgage loan surrogates such as mortgage-backed securities; and (3) U.S. government and federal agency securities, corporate fixed-income securities and other marketable securities. To a lesser extent, the Company originates certain other loans, including construction loans, Small Business Administration loans and commercial business and consumer loans.
The Company’s results of operations depend primarily on net interest income, which is the difference between the income earned on its interest-earning assets and the cost of its interest-bearing liabilities. Net interest income is the result of the Company’s 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. The Company also generates non-interest income from loan fees, service charges on deposit accounts, mortgage servicing fees, late charges and other fees, income earned on Bank Owned Life Insurance, dividends on Federal Home Loan Bank of NY (“FHLB-NY”) stock and net gains and losses on sales of securities and loans. The Company’s operating expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and administrative expenses and income tax expense. The Company’s results of operations also can be significantly affected by its periodic provision for loan losses and specific provision for losses on real estate owned. Such results also are significantly affected by general economic and competitive conditions, including changes in market interest rates, the strength of the local economy, government policies and actions of regulatory authorities.
Statements contained in this Quarterly Report relating to plans, strategies, objectives, economic performance and trends 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, the factors set forth in the preceding paragraph and elsewhere in this Quarterly Report, and in other documents filed by the Company with the Securities and Exchange Commission from time to time, including, without limitation, the Company’s 2002 Annual Report to Stockholders and its SEC Report on Form 10-K for the year ended December 31, 2002. Forward-looking statements may be identified by terms such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.
-7-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
General. Diluted earnings per share increased 25.0% to $0.45 for the three months ended March 31, 2003 from $0.36 for the three months ended March 31, 2002. Net income increased $0.8 million, or 16.8%, to $5.3 million for the three months ended March 31, 2003 from $4.5 million for the three months ended March 31, 2002. The return on average assets for the three months ended March 31, 2003 increased to 1.25% compared to 1.20% for the three months ended March 31, 2002, while the return on average equity for the three months ended March 31, 2003 increased to 16.15% from 13.75% for the three months ended March 31, 2002.
Interest Income. Total interest and dividend income increased $1.3 million, or 5.1%, to $27.4 million for the three months ended March 31, 2003 from $26.1 million for the three months ended March 31, 2002. This increase was primarily the result of a $158.7 million increase in the average balance of interest-earning assets for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002. The average balance of mortgage loans, net, and mortgage-backed securities increased $98.5 million and $95.2 million, respectively, for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002. These increases were partially offset by decreases in the average balance of other securities and interest earning deposits and federal funds sold of $24.4 million and $13.1 million, respectively. The yield on interest-earning assets declined 40 basis points to 6.94% for the three months ended March 31, 2003 from 7.34% for the three months ended March 31, 2002. This decrease is primarily due to the declining interest rate environment experienced during the past two years, the effect of which further lowered the yield on assets in the first quarter of 2003. Our focus on the origination of higher yielding multi-family residential and commercial real estate mortgage loans, along with the origination of mixed-use property one-to-four family residential mortgage loans, allowed us to maintain a higher yield on our loan portfolio than we would have otherwise experienced.
Interest Expense. Interest expense decreased $0.5 million, or 3.6%, to $13.2 million for the three months ended March 31, 2003 from $13.7 million for the three months ended March 31, 2002, primarily due to a 57 basis point decline in the cost of interest-bearing liabilities to 3.53% in the three months ended March 31, 2003 from 4.10% in the three months ended March 31, 2002. This decrease was partially offset by a $158.8 million increase in the average balance of interest-bearing liabilities. The decrease in the cost of funds is primarily due to the declining interest rate environment experienced during the past two years, the effect of which further lowered the cost of funds in the first quarter of 2003. This was coupled with an increase in the average balance of lower costing core deposits. This marks the tenth consecutive quarter that the cost of funds has declined.
Net Interest Income. For the three months ended March 31, 2003, net interest income increased $1.8 million, or 14.7%, to $14.2 million from $12.4 million in the three months ended March 31, 2002. This increase in net interest income is primarily due to a $158.7 million increase in the average balance of interest-earning assets combined with a 17 basis point increase in the net interest spread. The net interest margin increased 11 basis points to 3.60% for the three months ended March 31, 2003 from 3.49% for the three months ended March 31, 2002.
Provision for Loan Losses. There was no provision for loan losses for the three-month periods ended March 31, 2003 and 2002. In assessing the adequacy of the Company’s allowance for loan losses, management considers the Company’s historical loss experience, recent trends in losses, collection policies and collection experience, trends in the volume of non-performing loans, changes in the composition and volume of the gross loan portfolio, and local and national economic conditions. Based on these reviews, no provision for loan losses was deemed necessary for either of the three-month periods ended March 31, 2003 and 2002.
Non-Interest Income. Total non-interest income increased $0.2 million, or 15.8%, to $1.6 million for the three months ended March 31, 2003 from $1.4 million for the three months ended March 31, 2002. This increase is attributed to higher income from loan fees and banking services.
-8-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Non-Interest Expense. Non-interest expense was $7.2 million for the three months ended March 31, 2003, an increase of $0.7 million, or 11.5%, from $6.5 million for the three months ended March 31, 2002. The increase from the prior year period is attributable to the Bank’s continued focus on expanding its current product offerings to enhance its ability to serve its customers. This resulted in increases in salaries and benefits, promotion, training and loan origination costs. Management continues to monitor expenditures resulting in an improvement in the efficiency ratio to 45.7% for the three months ended March 31, 2003 from 47.1% for the three months ended March 31, 2002.
Income before Income Taxes. Total income before the provision for income taxes increased $1.3 million, or 17.8%, to $8.6 million for the three months ended March 31, 2003 as compared to $7.3 million for the three months ended March 31, 2002, for the reasons stated above.
Provision For Income Taxes. Income tax expense increased $0.5 million to $3.3 million for the three months ended March 31, 2003 as compared to $2.8 million for the three months ended March 31, 2002 This increase is due to the $1.3 million increase in income before income taxes. The effective rate was 38.3% for the three months ended March 31, 2003 compared to 37.8% for the three months ended March 31, 2002.
FINANCIAL CONDITION
Assets. Total assets at March 31, 2003 were $1,737.3 million, an $84.3 million increase from December 31, 2002. During the three months ended March 31, 2003, loan originations and purchases were $42.3 million for multi-family real estate loans, $19.6 million for commercial real estate loans, $15.5 million for mixed-use property one-to-four family residential real estate loans, $9.8 million for conventional one-to-four family residential real estate loans, and $3.7 million in construction loans. For the first three months of 2002, loan originations and purchases were $37.9 million for multi-family real estate loans, $15.4 million for commercial real estate loans, $17.3 million for mixed-use property one-to-four family residential real estate loans, $5.9 million for conventional one-to-four family residential real estate loans, and $4.1 million in construction loans. Total loans increased $14.7 million during the three months ended March 31, 2003 to $1,184.3 million from $1,169.6 million at December 31, 2002.
As the Company continues to increase its loan portfolio, management continues to adhere to the Bank’s strict underwriting standards. As a result, the Company has been able to minimize charge-offs of losses from impaired loans and maintain asset quality. Non-performing assets were $2.0 million at March 31, 2003 compared to $4.3 million at December 31, 2002 and $2.1 million at March 31, 2002. Total non-performing assets as a percentage of total assets were 0.12% at March 31, 2003 compared to 0.26% at December 31, 2001 and 0.14% at March 31, 2002. The ratio of allowance for loan losses to total non-performing loans was 501% at March 31, 2003 compared to 183% at December 31, 2002 and 327% at March 31, 2002.
Mortgage-backed securities increased $80.2 million to $399.5 million at March 31, 2003, while other securities increased $20.2 million to $59.9 million at March 31, 2003. Funds not used during the quarter for future loan originations have been invested in readily marketable mortgage-backed securities and shorter-term investment securities to provide readily available funding for loan originations. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities. At March 31, 2003, loans in process totaled $161.4 million.
Liabilities. Total liabilities increased $80.1 million to $1,601.7 million at March 31, 2003 from $1,521.6 million at December 31, 2002. During the three months ended March 31, 2003, due to depositors increased $65.1 million as certificate of deposit accounts increased $14.5 million while lower costing core deposits increased $50.6 million. As a result of the increase in deposits, borrowed funds were $493.2 million at March 31, 2003, the same as December 31, 2002.
-9-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Equity. Total stockholders’ equity increased $4.2 million to $135.6 million at March 31, 2003 from $131.4 million at December 31, 2002. Net income of $5.3 million for the three months ended March 31, 2003 was partially offset by $1.1 million in cash dividends paid during the same three-month period. Book value per share was $10.76 at March 31, 2003 compared to $10.43 per share at December 31, 2001 and $9.90 at March 31, 2002.
Under its stock repurchase program, the Company repurchased 42,700 shares for the three months ended March 31, 2003, at a total cost of $0.7 million, or an average of $17.43 per share. At March 31, 2003, 587,300 shares remain to be repurchased under the current stock repurchase program.
Cash flow. During the three months ended March 31, 2003, funds provided by the Company’s operating activities amounted to $5.4 million. These funds, together with $69.9 million provided by financing activities and funds available at the beginning of the year, were utilized to fund net investing activities of $106.5 million. The Company’s primary business objective is the origination and purchase of 1-4 family residential, multi-family and commercial real estate loans. During the three months ended March 31, 2003, the net total of loan originations less loan repayments was $14.1 million, and the total amount of real estate loans purchased was $0.6 million. The Company also invests in other securities including mortgage loan surrogates such as mortgage-backed securities. During the three months ended March 31, 2003, the Company purchased a total of $132.0 million in securities available for sale. Funds for investment were also provided by $40.6 million in maturities and prepayments of securities available for sale. The Company also used funds of $0.4 million for net treasury stock repurchases and $1.1 million in dividend payments during the three months ended March 31, 2003.
-10-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
INTEREST RATE RISK
The consolidated statements of financial position have been prepared in accordance with generally accepted accounting principles, which requires 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 fluctuates 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 operation 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 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 prepares the “Earnings and Economic Exposure to Changes In Interest Rate” report for review by the Board of Directors, as summarized below. This report quantifies the potential changes in net interest income and net portfolio value should interest rates go up or down (shocked) 300 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. All changes in income and value are measured as percentage changes from the projected net interest income and net portfolio value at the base interest rate scenario. The base interest rate scenario assumes interest rates at March 31, 2003. Various estimates regarding prepayment assumptions are made at each level of rate shock. Actual results could differ significantly from these estimates. The Company is within the guidelines set forth by the Board of Directors for each interest rate level.
| Projected Percentage Change In |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Interest | Net Portfolio | ||||||||||
| Change in Interest Rate |
Income |
Net Portfolio Value |
Value Ratio | ||||||||
| -300 Basis points | -14.22 | % | -29.09 | % | 6.33 | % | |||||
| -200 Basis points | -6.48 | -19.71 | 7.26 | ||||||||
| -100 Basis points | -2.44 | -8.48 | 8.38 | ||||||||
| Base interest rate | -- | -- | 9.29 | ||||||||
| +100 Basis points | -1.18 | -3.96 | 9.12 | ||||||||
| +200 Basis points | -3.93 | -14.42 | 8.35 | ||||||||
| +300 Basis points | -7.96 | -28.21 | 7.22 | ||||||||
-11-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
REGULATORY CAPITAL POSITION
Under Office of Thrift Supervision ("OTS") capital regulations, the Bank is required to comply with each of three separate capital adequacy standards. At March 31, 2003, the Bank exceeded each of the three OTS capital requirements and is categorized as "well-capitalized" by the OTS under the prompt corrective action regulations. Set forth below is a summary of the Bank's compliance with OTS capital standards as of March 31, 2003.
| (Dollars in thousands) |
Amount |
Percent of Assets | ||||||
|---|---|---|---|---|---|---|---|---|
| Tangible Capital: | ||||||||
| Capital level | $ | 131,407 | 7.66 | % | ||||
| Requirement | 25,717 | 1.50 | ||||||
| Excess | $ | 105,690 | 6.16 | |||||
Leverage and Core Capital: |
||||||||
| Capital level | $ | 131,407 | 7.66 | % | ||||
| Requirement | 51,434 | 3.00 | ||||||
| Excess | $ | 79,973 | 4.66 | |||||
Risk-Based Capital: |
||||||||
| Capital level | $ | 137,996 | 14.41 | % | ||||
| Requirement | 76,624 | 8.00 | ||||||
| Excess | $ | 61,372 | 6.41 | |||||
-12-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion 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 operations for the three-month periods ended March 31, 2003 and 2002, 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,
| ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | |||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||
| (Dollars in thousands) |
Balance |
Interest |
Yield/Cost |
Balance |
Interest |
Yield/Cost | ||||||||||||||
| Assets | ||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||
| Mortgage loans, net | $ | 1,167,631 | $ | 23,090 | 7.91 | % | $ | 1,069,122 | $ | 21,692 | 8.12 | % | ||||||||
| Other loans, net | 8,815 | 144 | 6.53 | 6,295 | 109 | 6.93 | ||||||||||||||
| Total loans, net | 1,176,446 | 23,234 | 7.90 | 1,075,417 | 21,801 | 8.11 | ||||||||||||||
| Mortgage-backed securities | 332,239 | 3,766 | 4.53 | 237,049 | 3,435 | 5.80 | ||||||||||||||
| Other securities | 42,395 | 359 | 3.39 | 66,831 | 697 | 4.17 | ||||||||||||||
| Total securities | 374,634 | 4,125 | 4.40 | 303,880 | 4,132 | 5.44 | ||||||||||||||
|
Interest-earning deposits and federal funds sold |
31,136 | 85 | 1.09 | 44,211 | 180 | 1.63 | ||||||||||||||
| Total interest-earning assets | 1,582,216 | 27,444 | 6.94 | 1,423,508 | 26,113 | 7.34 | ||||||||||||||
| Other assets | 110,857 | 90,201 | ||||||||||||||||||
| Total assets | $ | 1,693,073 | $ | 1,513,709 | ||||||||||||||||
| Liabilities and Equity | ||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||
| Passbook accounts | $ | 214,143 | 526 | 0.98 | $ | 199,939 | 850 | 1.70 | ||||||||||||
| NOW accounts | 39,205 | 73 | 0.74 | 33,655 | 83 | 0.99 | ||||||||||||||
| Money market accounts | 186,479 | 1,070 | 2.30 | 100,920 | 592 | 2.35 | ||||||||||||||
| Certificate of deposit accounts | 551,721 | 5,244 | 3.80 | 474,484 | 5,320 | 4.48 | ||||||||||||||
| Total due to depositors | 991,548 | 6,913 | 2.79 | 808,998 | 6,845 | 3.38 | ||||||||||||||
| Mortgagors' escrow deposits | 12,251 | 23 | 0.75 | 12,959 | 18 | 0.56 | ||||||||||||||
| Total deposits | 1,003,799 | 6,936 | 2.76 | 821,957 | 6,863 | 3.34 | ||||||||||||||
| Borrowed funds | 491,883 | 6,271 | 5.10 | 514,877 | 6,839 | 5.31 | ||||||||||||||
|
Total interest-bearing liabilities |
1,495,682 | 13,207 | 3.53 | 1,336,834 | 13,702 | 4.10 | ||||||||||||||
| Non-interest bearing deposits | 33,607 | 27,682 | ||||||||||||||||||
| Other liabilities | 32,481 | 17,222 | ||||||||||||||||||
| Total liabilities | 1,561,770 | 1,381,738 | ||||||||||||||||||
| Equity | 131,303 | 131,971 | ||||||||||||||||||
| Total liabilities and equity | $ | 1,693,073 | $ | 1,513,709 | ||||||||||||||||
|
Net interest income / net interest spread |
$ | 14,237 | 3.41 | % | $ | 12,411 | 3.24 | % | ||||||||||||
|
Net interest-earning assets / Net interest margin |
$ | 86,534 | 3.60 | % | $ | 86,674 | 3.49 | % | ||||||||||||
|
Ratio of interest-earning assets to interest-bearing liabilities |
1.06 | x | 1.06 | x | ||||||||||||||||
-13-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion 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.
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) |
March 31, 2003 |
March 31, 2002 | ||||||
| Mortgage Loans | ||||||||
| At beginning of period | $ | 1,166,192 | $ | 1,066,270 | ||||
| Mortgage loans originated: | ||||||||
| One-to-four family residential - conventional | 9,360 | 5,129 | ||||||
| One-to-four family residential - mixed-use properties | 15,273 | 17,260 | ||||||
| Co-operative apartments | -- | 150 | ||||||
| Multi-family residential | 42,306 | 37,892 | ||||||
| Commercial real estate | 19,561 | 6,040 | ||||||
| Construction | 3,664 | 4,053 | ||||||
| Total mortgage loans originated | 90,164 | 70,524 | ||||||
| Mortgage loans purchased: | ||||||||
| One-to-four family residential - conventional | 424 | 674 | ||||||
| One-to-four family residential - mixed-use properties | 190 | -- | ||||||
| Commercial real estate | -- | 9,315 | ||||||
| Total acquired loans | 614 | 9,989 | ||||||
| Less: | ||||||||
| Principal and other reductions | 68,654 | 51,598 | ||||||
| Sales | 7,501 | -- | ||||||
| Mortgage loan foreclosures | -- | -- | ||||||
| At end of period | $ | 1,180,815 | $ | 1,095,185 | ||||
| Other Loans | ||||||||
| At beginning of period | $ | 8,486 | $ | 6,725 | ||||
| Other loans originated: | ||||||||
| Small Business Administration | 1,934 | 1,424 | ||||||
| Small business | 358 | 7 | ||||||
| Other | 446 | 228 | ||||||
| Total other loans originated | 2,738 | 1,659 | ||||||
| Less: | ||||||||
| Sales | 1,016 | 964 | ||||||
| Principal and other reductions | 1,490 | 845 | ||||||
| At end of period | $ | 8,718 | $ | 6,575 | ||||
-14-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
NON-PERFORMING ASSETS
The Company reviews loans in its portfolio on a monthly basis to determine whether any problem loans require classification in accordance with internal policies and applicable regulatory guidelines. The following table sets forth information regarding all non-accrual loans, loans which are 90 days or more delinquent, and real estate owned at the dates indicated.
| (Dollars in thousands) |
March 31, 2003 |
December 31, 2002 | ||||||
|---|---|---|---|---|---|---|---|---|
| Non-accrual mortgage loans | $ | 1,170 | $ | 3,373 | ||||
| Other non-accrual loans | 146 | 219 | ||||||
| Total non-accrual loans | 1,316 | 3,592 | ||||||
|
Mortgage loans 90 days or more delinquent and still accruing |
-- | -- | ||||||
|
Other loans 90 days or more delinquent and still accruing |
-- | -- | ||||||
| Total non-performing loans | 1,316 | 3,592 | ||||||
Real estate owned (foreclosed real estate) |
-- | -- | ||||||
| Investment securities | 700 | 700 | ||||||
| Total non-performing assets | $ | 2,016 | $ | 4,292 | ||||
| Non-performing loans to gross loans | 0.11 | % | 0.31 | % | ||||
| Non-performing assets to total assets | 0.12 | % | 0.26 | % | ||||
-15-
PART I — FINANCIAL INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
ALLOWANCE FOR LOAN LOSSES
The Company has established and maintains on its books an allowance for loan losses that is designed to provide a reserve against estimated losses inherent in the Company’s overall loan portfolio. The allowance is established through a provision for loan losses based on management’s evaluation of the risk inherent in the various components of its loan portfolio and other factors, including historical loan loss experience, changes in the composition and volume of the portfolio, collection policies and experience, trends in the volume of non-accrual loans and regional and national economic conditions. The determination of the amount of the allowance for loan losses includes estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and regional economic conditions and other factors. In connection with the determination of the allowance, the market value of collateral ordinarily is evaluated by the Company’s staff appraiser; however, the Company may from time to time obtain independent appraisals for significant properties. Current year charge-offs, charge-off trends, new loan production and current balance by particular loan categories are also taken into account in determining the appropriate amount of allowance. The Board of Directors reviews and approves the adequacy of the loan loss reserves on a quarterly basis.
The following table sets forth the activity in the Bank’s allowance for loan losses for the periods indicated.
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) |
March 31, 2003 |
March 31, 2002 | ||||||
| Balance at beginning of period | $ | 6,581 | $ | 6,585 | ||||
| Provision for loan losses | -- | -- | ||||||
| Loans charged-off: | ||||||||
| One-to-four family residential real estate | -- | -- | ||||||
| Co-operative apartment | -- | -- | ||||||
| Multi-family real estate | -- | -- | ||||||
| Commercial real estate | -- | -- | ||||||
| Construction | -- | -- | ||||||
| Commercial business and other | 115 | 4 | ||||||
| Total loans charged-off | 115 | 4 | ||||||
| Recoveries: | ||||||||
| Mortgage loans | 123 | 1 | ||||||
| Commercial business and other | -- | 4 | ||||||
| Total recoveries | 123 | 5 | ||||||
| Balance at end of period | $ | 6,589 | $ | 6,586 | ||||
| Ratio of net charge-offs during the period to | ||||||||
| average loans outstanding during the period | 0.00 | % | 0.00 | % | ||||
| Ratio of allowance for loan losses to loans at | ||||||||
| end of period | 0.55 | % | 0.60 | % | ||||
| Ratio of allowance for loan losses to non-performing | ||||||||
| assets at end of period | 326.91 | % | 312.73 | % | ||||
| Ratio of allowance for loan losses to non-performing | ||||||||
| loans at end of period | 500.85 | % | 327.14 | % | ||||
-16-
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
Within the 90-day period prior to the filing of this report, 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-14(c) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
PART II-- OTHER INFORMATION
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
-17-
PART II — OTHER INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
Exhibit 3.1 Certificate of Incorporation of Flushing Financial Corporation (1)
Exhibit 3.2 Certificate of Amendment of Certificate of Incorporation of Flushing Financial
Corporation (3)
Exhibit 3.3 Certificate of Designations of Series A Junior Participating Preferred Stock of
Flushing Financial Corporation (4)
Exhibit 3.4 By-Laws of Flushing Financial Corporation (1)
Exhibit 4.1 Rights Agreement, dated as of September 17, 1996, between Flushing Financial
Corporation and State Street Bank and Trust Company, as Rights Agent (2)
Exhibit 99.1 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
Exhibit 99.2 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
(1) Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1,
Registration No. 33-96488.
(2) Incorporated by reference to Exhibits filed with Form 8-K filed September 30, 1996.
(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, 2003.
b) REPORTS ON FORM 8-K.
On April 17, 2003 the Company filed an 8-k announcing the release of its first quarter 2003 results of operations and financial condition.
On May 1, 2003 the Company filed an 8-k announcing that Messrs. Michael J. Hegarty, President and CEO, and John R. Buran, Executive Vice President and COO, would be making a presentation to a group of individual investors and fund managers on May 6, 2003.
-18-
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, | ||||||||
| Date: May 5, 2003 | By: | /s/Michael J. Hegarty | ||||||
| Michael J. Hegarty | ||||||||
| President and Chief Executive Officer | ||||||||
| Date: May 5, 2003 | By: | /s/Monica C. Passick | ||||||
| Monica C. Passick | ||||||||
| Senior Vice President, Treasurer and | ||||||||
| Chief Financial Officer | ||||||||
-19-
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CERTIFICATIONS
I, Michael J. Hegarty, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Flushing Financial Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| Date: May 5, 2003 | By: | /s/Michael J. Hegarty | ||||||
| Michael J. Hegarty | ||||||||
| President and Chief Executive Officer | ||||||||
-20-
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
CERTIFICATIONS
I, Monica C. Passick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Flushing Financial Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| Date: May 5, 2003 | By: | /s/Monica c. Passick | ||||||
| Monica C. Passick | ||||||||
| Senior Vice President, Treasurer and | ||||||||
| Chief Financial Officer | ||||||||
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Exhibit 99.1
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, 2003 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Michael J. Hegarty, 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/Michael J. Hegarty | |||||||
| Michael J. Hegarty | ||||||||
| Chief Executive Officer | ||||||||
| May 5, 2003 | ||||||||
A signed original of this written statement required by Section 906 has been provided to Flushing Financial Corporation and will be retained by Flushing Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
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FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Exhibit 99.2
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, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Monica C. Passick, 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/Monica C. Passick | |||||||
| Monica C. Passick | ||||||||
| Chief Financial Officer | ||||||||
| May 5, 2003 | ||||||||
A signed original of this written statement required by Section 906 has been provided to Flushing Financial Corporation and will be retained by Flushing Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
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