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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 June 30, 2004

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(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.01 par value (and
                                                                                                    associated Preferred Stock Purchase Rights).

           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 July 31, 2004 was 19,291,979.

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		   9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk   23
ITEM 4. Controls and Procedures   23
PART II - OTHER INFORMATION    
ITEM 1. Legal proceedings   23
ITEM 2. Changes in Securities, Use of Proceeds and Issuer
     Purchases of Equity Securities		   23
ITEM 3. Defaults Upon Senior Securities   23
ITEM 4. Submission of Matters to a Vote of Security Holders   24
ITEM 5. Other Information   24
ITEM 6. Exhibits and Reports on Form 8-K   25
SIGNATURES   27

i

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Financial Condition

(Dollars in thousands, except share data)
 June 30, 2004
 December 31, 2003
(Unaudited)
ASSETS          
Cash and due from banks $ 12,309 $ 20,300  
Securities available for sale: 
    Mortgage-backed securities  432,956   479,393  
    Other securities  82,099   56,316  
Loans: 
    Multi-family residential  597,784   541,837  
    Commercial real estate  315,647   290,332  
    One-to-four family - mixed-use property  278,757   226,225  
    One-to-four family - residential  162,348   178,474  
    Co-operative apartment  3,350   3,729  
    Construction  27,273   23,622  
    Small Business Administration  5,404   4,931  
    Commercial business and other  7,789   4,894  
    Uunearned loan fees and deferred costs, net   3,111   2,030  
    Allowance for loan losses   (6,547 ) (6,553 )
   
 
 
         Net loans   1,394,916   1,269,521  
Interest and dividends receivable   8,789   8,647  
Real estate owned, net  --   --  
Bank premises and equipment, net  6,560   6,380  
Federal Home Loan Bank of New York stock  23,762   24,462  
Goodwill  3,905   3,905  
Other assets  62,776   41,827  
   
 
 
          Total assets $ 2,028,072 $ 1,910,751  
   
 
 
LIABILITIES  
Due to depositors: 
    Non-interest bearing $ 50,098 $ 41,397  
    Interest-bearing: 
       Certificate of deposit accounts  630,658   593,760  
       Passbook savings accounts  220,704   216,988  
       Money market accounts  273,517   263,621  
       NOW accounts  44,426   42,809  
   
 
 
          Total interest-bearing deposits   1,169,305   1,117,178  
Mortgagors' escrow deposits  15,996   11,334  
Borrowed funds  614,749   578,142  
Other liabilities  28,022   15,938  
   
 
 
          Total liabilities   1,878,170   1,763,989  
   
 
 
STOCKHOLDERS' EQUITY  
Preferred stock ($0.01 par value; 5,000,000 shares authorized)   --   --  
Common stock ($0.01 par value; 40,000,000 shares authorized; 19,456,696  
    shares issued and 19,227,983 shares outstanding at June 30, 2004,  
    19,290,601 shares issued and outstanding at December 31, 2003)   195   193  
Additional paid-in capital  35,004   32,783  
Treasury stock, at average cost (228,713 shares and none at June 30, 2004  
    and December 31, 2003, respectively)   (3,112 ) --  
Unearned compensation  (5,214 ) (7,373 )
Retained earnings  127,662   120,683  
Accumulated other comprehensive income (loss), net of taxes   (4,633 ) 476  
   
 
 
          Total stockholders' equity   149,902   146,762  
   
 
 
          Total liabilities and stockholders' equity $ 2,028,072 $ 1,910,751  
   
 
 

The accompanying notes are an integral part of these consolidated financial statements.
-1-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income

For the three months For the six months
ended June 30,
 ended June 30,
(In thousands, except per share data)
 2004
 2003
 2004
 2003
(Unaudited)
Interest and dividend income          
Interest and fees on loans $ 24,291 $ 22,993 $ 47,846 $ 46,227  
Interest and dividends on securities:  
    Interest   5,162   4,612   10,585   8,703  
    Dividends   85   56   172   90  
Other interest income   23   32   63   117  
   
 
 
 
 
          Total interest and dividend income   29,561   27,693   58,666   55,137  
   
 
 
 
 
Interest expense  
Deposits   6,939   7,073   13,947   14,009  
Other interest expense   5,761   6,223   11,447   12,494  
   
 
 
 
 
          Total interest expense   12,700   13,296   25,394   26,503  
   
 
 
 
 
Net interest income   16,861   14,397   33,272   28,634  
Provision for loan losses   -   -   -   -  
   
 
 
 
 
Net interest income after provision for loan losses   16,861   14,397   33,272   28,634  
   
 
 
 
 
Non-interest income  
Other fee income   944   805   1,842   1,627  
Net gain on sales of securities and loans   72   105   164   151  
Other income   599   738   1,085   1,475  
   
 
 
 
 
          Total non-interest income   1,615   1,648   3,091   3,253  
   
 
 
 
 
Non-interest expense  
Salaries and employee benefits   4,358   4,105   9,506   7,932  
Occupancy and equipment   783   739   1,644   1,406  
Professional services   910   685   1,700   1,376  
Data processing   474   410   1,003   820  
Depreciation and amortization   368   294   725   550  
Other operating expenses   1,616   1,657   3,220   3,055  
   
 
 
 
 
          Total non-interest expense   8,509   7,890   17,798   15,139  
   
 
 
 
 
Income before income taxes   9,967   8,155   18,565   16,748  
   
 
 
 
 
Provision for income taxes  
Federal   2,919   2,445   5,611   5,017  
State and local   968   666   1,629   1,387  
   
 
 
 
 
          Total taxes   3,887   3,111   7,240   6,404  
   
 
 
 
 
Net income $ 6,080 $ 5,044 $ 11,325 $ 10,344  
   
 
 
 
 

Other comprehensive income (loss), net of tax		  
Unrealized gains (losses) on securities:  
   Unrealized holding losses arising during period $ (7,738) $ (199) $ (5,118) $ (296)  
   Reclassification adjustments for (gains) losses  
      included in income   9   (5)   9   10  
   
 
 
 
 
          Net unrealized holding losses   (7,729)   (204)   (5,109)   (286)  
   
 
 
 
 
Comprehensive net income (loss) $ (1,649) $ 4,840 $ 6,216 $ 10,058  
   
 
 
 
 

Basic earnings per share		   $0.35   $0.30   $0.65   $0.61  
Diluted earnings per share   $0.34   $0.28   $0.62   $0.59  
Dividends per share   $0.09   $0.067   $0.17   $0.133  

The accompanying notes are an integral part of these consolidated financial statements.
-2-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows

For the six months ended
June 30,
(In thousands)
 2004
 2003
(Unaudited)
OPERATING ACTIVITIES      
Net income $ 11,325 $ 10,344  
Adjustments to reconcile net income to net cash provided by operating activities:  
     Depreciation and amortization of bank premises and equipment   725   550  
     Net loss on sales of securities  16   19  
     Net gain on sales of loans  (180 ) (170 )
     Amortization of unearned premium, net of accretion of unearned discount  1,180   1,535  
     Deferred income tax benefit  (577 ) (98 )
     Deferred compensation  786   394  
Origination of loans held for sale  (4,385 ) (7,870 )
Proceeds from sale of loans originated for sale  4,385   7,870  
Net increase (decrease) in other assets and liabilities  1,473   (14 )
Unearned compensation   2,036   721  
   
 
 
          Net cash provided by operating activities   16,784   13,281  
   
 
 
INVESTING ACTIVITIES 
Purchases of bank premises and equipment   (905 ) (773 )
Redemptions (purchases) of Federal Home Loan Bank shares  700   (2,500 )
Purchases of securities available for sale  (85,855 ) (249,547 )
Proceeds from sales and calls of securities available for sale  22,600   10,639  
Proceeds from maturities and prepayments of securities available for sale  68,406   89,478  
Proceeds from sale of non-performing loans  1,980   3,501  
Net originations and repayment of loans  (127,437 ) (45,123 )
Purchases of loans  --   (787 )
   
 
 
          Net cash used by investing activities  (120,511 ) (195,112 )
   
 
 
FINANCING ACTIVITIES 
Net increase in non-interest bearing deposits  8,701   5,946  
Net increase in interest-bearing deposits  52,127   98,160  
Net increase in mortgagors' escrow deposits  4,662   943  
Net decrease in short-term borrowed funds   (25,000 ) --  
Proceeds from long-term borrowed funds  100,000   80,000  
Repayment of long-term borrowed funds  (39,012 ) (30,011 )
Purchases of treasury stock  (4,153 ) (1,793 )
Proceeds from issuance of common stock upon exercise of stock options  1,395   2,946  
Cash dividends paid  (2,984 ) (2,306 )
   
 
 
          Net cash provided by financing activities  95,736   153,885  
   
 
 
Net decrease in cash and cash equivalents  (7,991 ) (27,946 )
Cash and cash equivalents, beginning of period  20,300   47,619  
   
 
 
         Cash and cash equivalents, end of period  $   12,309   $   19,673  
   
 
 
SUPPLEMENTAL CASH FLOW DISCLOSURE 
Interest paid $ 25,243 $ 26,600  
Income taxes paid   5,881   6,314  
Non-cash activities: 
   Securities purchased not yet settled  9,728   40,422  
   Securities sold not yet settled  15,717   --  

The accompanying notes are an integral part of these consolidated financial statements.
-3-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
 (Unaudited)

For the six months ended
(In thousands, except share data)
 June 30, 2004
Common Stock      
Balance, beginning of period $ 193  
Issuance upon the exercise of stock options (166,095 common shares)   2  
   
 
         Balance, end of period $ 195  
   
 
Additional Paid-In Capital 
Balance, beginning of period $ 32,783  
Award of shares released from Employee Benefit Trust (2,684 common shares)   39  
Surrender of restricted stock awards (124,650 common shares) which were replaced with  
   restricted stock units   (227 )
Options exercised (166,095 common shares)   858  
Tax benefit from compensation expense in excess of that recognized for financial  
   reporting purposes   1,551  
   
 
         Balance, end of period $ 35,004  
   
 
Treasury Stock  
Balance, beginning of period $ --  
Purchases of common shares outstanding (221,279 common shares)   (3,899 )
Surrender of restricted stock awards (124,650 common shares) which were replaced with  
   restricted stock units   (1,177 )
Repurchase of restricted stock awards (20,267 common shares) to satisfy tax obligations   (350 )
Shares issued upon vesting of restricted stock unit awards (33,885 common shares)   490  
Forfeiture of restricted stock awards (750 common shares)   (10 )
Issuance for Options exercised (104,348 common shares)   1,834  
   
 
         Balance, end of period $ (3,112 )
   
 
Unearned Compensation  
Balance, beginning of period $ (7,373 )
Restricted stock award expense   1,283  
Surrender of restricted stock awards (124,650 common shares) which were replaced with  
   restricted stock units   564  
Forfeiture of restricted stock awards (750 common shares)   10  
Release of shares from Employee Benefit Trust (88,760 common shares)   302  
   
 
         Balance, end of period $ (5,214 )
   
 
Retained Earnings  
Balance, beginning of period $ 120,683  
Net income   11,325  
Options exercised (104,348 common shares)   (1,203 )
Shares issued upon vesting of restricted stock units (33,885 common shares)   (159 )
Cash dividends declared and paid   (2,984 )
   
 
         Balance, end of period $ 127,662  
   
 
Accumulated Other Comprehensive Income (Loss)  
Balance, beginning of period $ 476  
Change in net unrealized gain (loss), net of taxes of approximately $3,882 on  
   securities available for sale   (5,118 )
Less: Reclassification adjustment for losses included in net income, net of taxes  
   of approximately $(7)   9  
   
 
         Balance, end of period $ (4,633 )
   
 

The accompanying notes are an integral part of these consolidated financial statements.
-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 consolidated financial statements presented in this Form 10-Q include the collective results of the Holding Company and the Bank, but reflect 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 presentation 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 principles in the United States of America ("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 2003 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 and six month periods ended June 30, 2004 and 2003 was computed by dividing net income by the total weighted average number of common shares outstanding, including only the vested portion of restricted stock and unit awards. Diluted earnings per share includes the additional dilutive effect of stock options outstanding and the unvested portion of restricted stock and restricted stock unit awards during the period. Earnings per share has been computed based on the following:

Three months ended Six months ended
June 30,
 June 30,
(Amounts in thousands, except per share data)
 2004
 2003
 2004
 2003
Net income $6,080 $5,044 $11,325 $10,344
Divided by:
     Weighted average common shares outstanding 17,439 17,055 17,408 16,924
     Weighted average common stock equivalents 654 718 713 719
Total weighted average common shares &
   common stock equivalents		 18,093 17,773 18,121 17,643
Basic earnings per share $0.35 $0.30 $0.65 $0.61
Diluted earnings per share $0.34 $0.28 $0.62 $0.59
Dividends per share $0.09 $0.067 $0.17 $0.133
Dividend payout ratio 25.71% 22.73% 26.15% 21.74%

Common stock equivalents that are antidilutive are not included in the computation of diluted earnings per share. Options to purchase 133,650 shares at an average exercise price of $17.66 and 267,150 shares at an average exercise price of $13.55, were not included in the computation of diluted earnings per share for the three months ended June 30, 2004 and 2003, respectively. Unvested restricted stock and restricted stock unit awards of 1,687 shares at an average market price on date of grant of $17.66 and 81,337 shares at an average market price on date of grant of $13.50, were not included in the computation of diluted earnings per share for the three months ended June 30, 2004 and 2003, respectively. Options to purchase 673,050 shares at an average exercise price of $12.90 were not included in the computation of diluted earnings per share for the six months ended June 30, 2003. Unvested restricted stock and restricted stock unit awards of 159,037 shares at an average market price on date of grant of $12.96 were not included in the computation of diluted earnings per share for the six months ended June 30, 2003. There were no common stock equivalents that were considered antidilutive for the six month period ended June 30,2004.

-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 and restricted stock unit 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 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 Six months ended
June 30,
 June 30,
(Dollars in thousands, except per share data)
 2004
 2003
 2004
 2003
Net income, as reported $6,080 $5,044 $11,325 $10,344
Add: Stock-based compensation expense included
   in reported net income, net of related tax effects 362 202 1,018 343
Deduct: Total stock-based compensation expense
   determined under fair value based method for all
   awards, net of related tax effects (890) (391) (2,491) (678)
 
Pro forma net income $5,552 $4,855 $9,852 $10,009
 
Basic earnings per share:
   As reported $0.35 $0.30 $0.65 $0.61
   Pro forma $0.32 $0.28 $0.57 $0.59
Diluted earnings per share:
   As reported $0.34 $0.28 $0.62 $0.59
   Pro forma $0.31 $0.27 $0.54 $0.57

There were stock option grants of 201,700 shares of common stock, at an average exercise price of $17.36, and 267,150 shares of common stock, at an average exercise price of $13.55 granted in the three- and six-month periods ended June 30, 2004 and 2003, respectively. There were restricted stock and restricted stock unit grants of 73,783 shares of common stock, at an average market price on date of grant of $16.95, and 81,333 shares of common stock, at an average market price on date of grant of $13.50 granted in the three- and six-month periods ended June 30, 2004 and 2003, respectively. All of the above mentioned grants and awards were made in the second quarter of each respective year.

The three-month period ended June 30, 2004 includes a charge to earnings, on an after-tax basis, of $0.2 million or $0.01 per diluted share related to certain restricted stock unit awards made in June 2004. The six-month period ended June 30, 2004 includes, in addition to the previously mentioned charge, a charge to earnings (recorded during the three months ended March 31, 2004), on an after-tax basis, of $0.5 million or $0.03 per diluted share, related to an adjustment of compensation expense for certain restricted stock awards made in prior periods. These charges reflect that certain participants under these plans have reached, or are close to reaching, retirement eligibility, at which time such awards will be fully vested. These amounts are included above in stock-based compensation expense.

In addition, the three-month period ended June 30, 2004 includes, in the deduction for stock-based compensation determined under fair value method, a net after tax charge of $0.4 million or $0.02 per diluted share, related to certain stock option grants awarded in June 2004. The six-month period ended June 30, 2004 includes, in the deduction for stock-based compensation determined under the fair value method, in addition to the previously mentioned deduction, a net after tax deduction of $0.8 million or $0.04 per diluted share, related to an adjustment of compensation expense using the fair value method for stock option grants awarded during prior periods. These deductions reflect that certain participants under these plans have reached, or are close to reaching, retirement eligibility, at which time such awards will be fully vested.

-6-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements

5. Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which established guidance for determining when an entity should consolidate another entity that meets the definition of a variable interest entity ("VIE"). A VIE exists either when the entity does not have sufficient equity at risk or lacks any one of three characteristics normally associated with a controlling financial interest. If an entity is considered a VIE, judgment and quantitative analysis typically is required to assess whether the company should consolidate the entity as the primary beneficiary. The company is considered the primary beneficiary when it has a variable interest that will absorb a majority of an entity's expected losses, receive a majority of an entity's expected residual returns, or both. In December 2003, the FASB issued a revision to FIN 46, FIN 46R, to address various technical corrections and implementation issues that have arisen since its issuance. The provisions of FIN 46R were effective beginning in the first quarter of 2004.

The Holding Company owns Flushing Financial Capital Trust I (the "Trust"), a special purpose business trust formed to issue capital securities, which is subject to FIN 46 and FIN 46R. Prior to 2004, the Trust was consolidated. Under FIN 46R, the Company has deconsolidated the Trust, effective with the first quarter of 2004. Deconsolidation of the Trust has not had a material impact on the Company's financial statements.

6. Stock Split

On November 18, 2003, the Board of Directors of the Holding Company declared a three-for-two split of the Holding Company's common stock to be paid in the form of a 50% stock dividend, payable on December 15, 2003. Each stockholder received one additional share for every two shares of the Holding Company's common stock held at the record date, December 1, 2003. All historical share and per share amounts reported in this Form 10-Q have been restated to reflect the three-for-two stock split paid in the form of a stock dividend on December 15, 2003.

-7-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Notes to Consolidated Financial Statements

7. Pension and Other Postretirement Benefit Plans

The following table sets forth the components of net expense for the pension and other postretirement benefit plans.

Three months ended Six months ended
June 30
 June 30
2004
 2003
 2004
 2003
  (In thousands)
Employee Pension Plan:        
   Service cost $155  $138  $310  $277 
   Interest cost 197  188  394  377 
   Amortization of unrecognized loss 21  4  41  9 
   Amortization of past service liability (3) (6) (6) (12)
   Expected return on plan assets (291) (272) (583) (544)
 
        Net employee pension expense $79  $52  $156  $107 
 
Outside Director Pension Plan:
   Service cost $18  $10  $37  $20 
   Interest cost 13  5  25  10 
   Amortization of unrecognized loss 3  4  7  7 
   Amortization of past service liability 36  30  71  60 
 
        Net outside director pension expense $70  $49  $140  $97 
 
Other Postretirement Benefit Plans:
   Service cost $42  $38  $83  $76 
   Interest cost 55  54  110  109 
   Amortization of unrecognized loss 12  16  25  31 
   Amortization of past service liability (32) (33) (65) (66)
 
        Net other postretirement benefit expense $   77  $   75  $ 153  $ 150 
 

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2003 that it expects to contribute $0.9 million, $0.1 million and $0.1 million to the Employee Pension Plan, Outside Director Pension Plan and Other Post Retirement Benefit Plans, respectively, during the year ended December 31, 2004. As of June 30, 2004, the Company has contributed $50,000 to the Outside Director Plan and $47,000 to the Other Postretirement Benefit Plans. As of June 30, 2004, the Company has not made a contribution to the Employee Pension Plan for the year ending December 31, 2004. As of June 30, 2004, the Company has not revised its expected contributions for the year ending December 31, 2004 for any of these plans.

-8-

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 Bank is a consumer-oriented savings institution and conducts its business through eleven 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 and the Bank (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 (focusing on mixed-use properties - properties that contain both residential dwelling units and commercial units), multi-family residential and commercial real estate mortgage 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 other small 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 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. However, the Company has not recorded a provision for possible loan losses since 1999. 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, 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, 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 Annual Report on Form 10-K for the year ended December 31, 2003. 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.

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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
JUNE 30, 2004 AND 2003

General. Diluted earnings per share increased $0.06, or 21.4%, to $0.34 for the three months ended June 30, 2004 from $0.28 for the three months ended June 30, 2003. Net income increased $1.0 million, or 20.5%, to $6.1 million for the three months ended June 30, 2004 from $5.0 million for the three months ended June 30, 2003. The return on average assets for the three months ended June 30, 2004 increased to 1.22% compared to 1.14% for the three months ended June 30, 2003, while the return on average equity for the three months ended June 30, 2004 increased to 16.25% from 14.70% for the three months ended June 30, 2003.

Interest Income. Total interest and dividend income increased $1.9 million, or 6.7%, to $29.6 million for the three months ended June 30, 2004 from $27.7 million for the three months ended June 30, 2003. This increase was primarily the result of a $243.0 million increase in the average balance of interest-earning assets for the three months ended June 30, 2004 as compared to the three months ended June 30, 2003. The average balance of mortgage loans, net, mortgage-backed securities and other securities increased $166.7 million, $65.3 million and $8.9 million, respectively, for the three months ended June 30, 2004 as compared to the three months ended June 30, 2003. The yield on interest-earning assets declined 45 basis points to 6.20% for the three months ended June 30, 2004 from 6.65% for the three months ended June 30, 2003. This decrease is primarily due to the declining interest rate environment experienced during the past three years, the effect of which further lowered the yield on assets during the second quarter of 2004. We continued our focus on the origination of higher yielding multi-family residential and commercial real estate mortgage loans, along with the origination of one-to-four family mixed-use property mortgage loans, which allowed us to maintain a higher yield on our loan portfolio than we would have otherwise experienced. The yield on mortgage loans reflects the high refinancing activity that has taken place during the current quarter and preceding two years. The Bank's existing borrowers have been refinancing their higher costing mortgage loans at lower rates, which have resulted in a reduction on the yield of the mortgage portfolio. However, this decrease has been partially offset by prepayment penalties that have been collected. In addition, the increase in the average balance of the securities portfolio, while increasing interest income, reduced the yield on total interest-earning assets.

Interest Expense. Interest expense decreased $0.6 million, or 4.5%, to $12.7 million for the three months ended June 30, 2004 from $13.3 million for the three months ended June 30, 2003, primarily due to a 54 basis point decline in the cost of interest-bearing liabilities to 2.84% in the three months ended June 30, 2004 from 3.38% in the three months ended June 30, 2003. This decrease was partially offset by a $217.8 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 three years, the effect of which further lowered the cost of funds in the second quarter of 2004. This was coupled with an increase in the average balance of lower costing core deposits. This marks the fifteenth consecutive quarter that the cost of funds has declined.

Net Interest Income. For the three months ended June 30, 2004, net interest income increased $2.5 million, or 17.1%, to $16.9 million from $14.4 million in the three months ended June 30, 2003. This increase in net interest income is primarily due to a $243.0 million increase in the average balance of interest-earning assets, combined with a nine basis point increase in the net interest spread and an increase of $25.2 million in the amount by which average interest-earning assets exceeds average interest-bearing liabilities. The net interest margin increased 7 basis points to 3.53% for the three months ended June 30, 2004 from 3.46% for the three months ended June 30, 2003, due to the increase in the net interest spread, partially offset by the growth in the average balance of interest-earning assets.

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PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Provision for Loan Losses. There was no provision for loan losses for the three-month periods ended June 30, 2004 and 2003. 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 June 30, 2004 and 2003.

Non-Interest Income. Non-interest income was $1.6 million for the three months ended June 30, 2004 and 2003. Loan fees and banking services fees increased $0.1 million, and miscellaneous income increased $0.1 million compared to the three months ended June 30, 2003. These increases were offset by a reduction in dividends on Federal Home Loan Bank of New York ("FHLB-NY") stock, which decreased $0.2 million for the three months ended June 30, 2004 from the three months ended June 30, 2003.

Non-Interest Expense. Non-interest expense was $8.5 million for the three months ended June 30, 2004, an increase of $0.6 million, or 7.8%, from $7.9 million for the three months ended June 30, 2003. The increase from the prior year period is primarily attributable to the expensing of certain restricted stock unit awards at the time of grant as the grant recipients under these plans have reached, or are close to reaching, retirement eligibility at which time such awards will be fully vested, and increased professional services due to costs incurred to comply with the Sarbanes-Oxley Act. Management continues to monitor expenditures resulting in efficiency ratios of 46.01% and 49.20% for the three months ended June 30, 2004 and 2003, respectively.

Income before Income Taxes. Income before the provision for income taxes increased $1.8 million, or 22.2%, to $10.0 million for the three months ended June 30, 2004 as compared to $8.2 million for the three months ended June 30, 2003, for the reasons discussed above.

Provision For Income Taxes. Income tax expense was $3.9 million for the three months ended June 30, 2004 compared to $3.1 million for the three months ended June 30, 2003. This increase is due to the $1.8 million increase in income before income taxes and an increase in the effective tax rate. The effective tax rate was 39.00% for the three months ended June 30, 2004 compared to 38.15% for the three months ended June 30, 2003.

COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED
JUNE 30, 2004 AND 2003

General. Diluted earnings per share increased 5.1% to $0.62 for the six months ended June 30, 2004 from $0.59 for the six months ended June 30, 2003. Net income for the six months ended June 30, 2004 increased $1.0 million, or 9.5%, to $11.3 million from the $10.3 million reported for the six months ended June 30, 2003. The return on average assets for the six months ended June 30, 2004 was 1.15% compared to 1.19% for the six months ended June 30, 2003, while the return on average equity for the six months ended June 30, 2004 was 15.22% compared to 15.40% for the six months ended June 30, 2003.

The six-month period ended June 30, 2004 includes a charge to earnings of $1.1 million, $0.7 million on an after-tax basis or $0.04 per diluted share, relating to an adjustment of compensation expense for certain of the Company's restricted stock awards and supplemental retirement benefits to reflect that certain grant participants under these plans have reached, or are close to reaching, retirement eligibility at which time such awards will be fully vested. This charge was recorded in the first quarter of 2004. Although this adjustment relates to prior periods, the amount of the charge attributable to any prior year would not have been material to the Company's financial condition or results of operations as reported for that year.

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PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Interest Income. Total interest and dividend income increased $3.5 million, or 6.4%, to $58.7 million for the six months ended June 30, 2004 from $55.1 million for the six months ended June 30, 2003. This increase was primarily the result of a $257.1 million increase in the average balance of interest-earning assets for the six months ended June 30, 2004 as compared to the six months ended June 30, 2003. The average balance of mortgage loans, net, mortgage-backed securities and other securities increased $143.9 million, $104.9 million and $12.6 million, respectively, for the six months ended June 30, 2004 as compared to the six months ended June 30, 2003. These increases were partially offset by a $5.9 million decrease in the average balance of interest-earning deposits and federal funds sold for the six months ended June 30, 2004 compared to the six months ended June 30, 2003. The yield on interest-earning assets declined 55 basis points to 6.24% for the six months ended June 30, 2004 from 6.79% for the six months ended June 30, 2003. This decrease is primarily due to the declining interest rate environment experienced during the past three years, the effect of which further lowered the yield on assets during the first six months of 2004. Our focus on the origination of higher yielding multi-family residential and commercial real estate mortgage loans, along with the origination of one-to-four family mixed-use property mortgage loans, allowed us to maintain a higher yield on our loan portfolio than we would have otherwise experienced. The yield on mortgage loans reflects the high refinancing activity that has taken place during the six month period ended June 30, 2004 and the preceding two years. The Bank's existing borrowers have been refinancing their higher costing mortgage loans at lower rates, which have resulted in a reduction on the yield of the mortgage portfolio. However, this decrease has been partially offset by prepayment penalties that have been collected. In addition, the increase in the average balance of the securities portfolio, while increasing interest income, reduced the yield on total interest-earning assets.

Interest Expense. Interest expense decreased $1.1 million, or 4.2%, to $25.4 million for the six months ended June 30, 2004 from $26.5 million for the six months ended June 30, 2003, primarily due to a 59 basis point decline in the cost of interest-bearing liabilities to 2.87% in the six months ended June 30, 2004 from 3.46% in the six months ended June 30, 2003. This decrease was partially offset by a $233.9 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 three years, the effect of which further lowered the cost of funds during the first six months of 2004. This was coupled with an increase in the average balance of lower costing core deposits.

Net Interest Income. For the six months ended June 30, 2004, net interest income increased $4.6 million, or 16.2%, to $33.3 million from $28.6 million in the six months ended June 30, 2003. This increase in net interest income is primarily due to a $257.1 million increase in the average balance of interest-earning assets, combined with a four basis point improvement in the net interest spread and an increase of $23.2 million in the amount by which average interest-earning assets exceeds average interest-bearing liabilities. The net interest margin increased one basis point to 3.54% for the six months ended June 30, 2004 from 3.53% for the six months ended June 30, 2003, due to the increase in the net interest spread, partially offset by the increase in the average balance of interest-earning assets.

Provision for Loan Losses. There was no provision for loan losses for the six-month periods ended June 30, 2004 and 2003. 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 six-month periods ended June 30, 2004 and 2003.

Non-Interest Income. Non-interest income decreased $0.2 million, or 5.0%, to $3.1 million for the six months ended June 30, 2004 from $3.3 million for the six months ended June 30, 2003. The decrease is primarily due to a reduction in dividends on Federal Home Loan Bank of New York ("FHLB-NY") stock, which decreased $0.4 million for the six months ended June 30, 2004 from the six months ended June 30, 2003. The decrease was partially offset by a $0.2 million increase in loan fees and banking services fees for the six months ended June 30, 2004 from the six months ended June 30, 2003.

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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 $17.8 million for the six months ended June 30, 2004, an increase of $2.7 million, or 17.6%, from $15.1 million for the six months ended June 30, 2003. Salaries and employee benefits and other operating expenses increased $0.9 million and $0.2 million, respectively, as a result of the adjustment to amortization of compensation expense for certain of the Company's restricted stock awards and supplemental retirement benefits during the first quarter of 2004, and the expensing of certain restricted stock unit awards at the time of grant during the second quarter of 2004 to reflect that certain participants under these plans have reached, or are close to reaching, retirement eligibility at which time such awards will be fully vested. The second quarter of 2004 also includes increased professional service fees due to costs incurred to comply with the Sarbanes-Oxley Act. The remaining increase from the prior year period is primarily attributable to the Bank's continued focus on expanding its current product offerings to enhance its ability to serve its customers, including increases in personnel to provide these services, and, in the fourth quarter of 2003, the opening of a new branch in Astoria, Queens. Management continues to monitor expenditures resulting in an efficiency ratio of 48.9% and 47.4% for the six-month periods ended June 30, 2004 and 2003, respectively.

Income before Income Taxes. Income before the provision for income taxes increased $1.8 million, or 10.8%, to $18.6 million for the six months ended June 30, 2004 as compared to $16.7 million for the six months ended June 30, 2003, for the reasons discussed above.

Provision For Income Taxes. Income tax expense was $7.2 million for the six months ended June 30, 2004 an increase of $0.8 million, or 13.1%, compared to $6.4 million for the six months ended June 30, 2003. This increase is due to the $1.8 million increase in income before income taxes and an increase in the effective tax rate. The effective tax rate was 39.00% for the six months ended June 30, 2004 compared to 38.24% for the six months ended June 30, 2003.

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PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations

FINANCIAL CONDITION

Assets. Total assets at June 30, 2004 were $2,028.1 million, a $117.3 million increase from December 31, 2003. Total loans, net increased $125.4 million during the six months ended June 30, 2004 to $1,394.9 million from $1,269.5 million at December 31, 2003.

The following table shows loan originations and purchases for the period indicated.

  For the three months For the six months
ended June 30,
 ended June 30,
  2004
 2003
 2004
 2003
  (in thousands)
Multi-family residential $53,048  $43,009  $100,005  $85,315 
Commercial real estate 20,661  24,080  48,948  43,641 
One-to-four family - mixed-use property 35,287  20,064  67,732  35,527 
One-to-four family - residential 6,759  1,871  8,242  11,655 
Construction 4,873  5,824  10,317  9,488 
Co-operative apartment 122  35  227  35 
Commercial business and other loans 5,290  2,914  8,022  5,652 
 
Total $126,040  $97,797  $243,493  $191,313 
 

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 $4.3 million at June 30, 2004 compared to $0.7 million at December 31, 2003 and $2.3 million at June 30, 2003. The increase in non-performing assets at June 30, 2004 is attributed to two mortgages secured by commercial properties. The borrower is negotiating the sale of these properties. The Company believes it has a secure position in these two loans, and does not anticipate a significant loss, if any, will be incurred. Total non-performing assets as a percentage of total assets were 0.21% at June 30, 2004, 0.04% at December 31, 2003, and 0.12% at June 30, 2003. The ratio of allowance for loan losses to total non-performing loans was 152% at June 30, 2004 compared to 961% at December 31, 2003 and 410% at June 30, 2003.

Mortgage-backed securities decreased $46.4 million to $433.0 million at June 30, 2004, while other securities increased $25.8 million to $82.1 million at June 30, 2004. The funds obtained from the repayment and sale of mortgage-backed securities have been used to originate higher yielding mortgage loans. The increase in other securities is attributed to the Company borrowing $40.0 million, with maturities of two to five years, during the three months ended June 30, 2004 to repay borrowings maturing in July 2004. The Company decided to obtain these funds during the second quarter when long-term interest rates began to rise. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities. At June 30, 2004, loans in process totaled $208.4 million.

Liabilities. Total liabilities increased $114.2 million to $1,878.2 million at June 30, 2004 from $1,764.0 million at December 31, 2003. Due to depositors increased $60.8 million as certificate of deposit accounts increased $36.9 million while lower costing core deposits increased $23.9 million. Borrowed funds increased $36.6 million during the six months ended June 30, 2004, primarily as a result of the Company borrowing $40.0 million during the second quarter to repay borrowings maturing in July.

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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 $3.1 million to $149.9 million at June 30, 2004 from $146.8 million at December 31, 2003. Net income of $11.3 million for the six months ended June 30, 2004 was partially offset by $3.8 million in treasury shares purchased through the Company's stock repurchase programs, a net after-tax decrease of $5.1 million in the market value of securities available for sale, and $3.0 million in cash dividends paid during the six month period. In addition, the exercise of stock options increased stockholders' equity by $2.7 million, including the income tax benefit realized by the Company upon the exercise of stock options. Book value per share was $7.80 at June 30, 2004 compared to $7.61 per share at December 31, 2003 and $7.37 per share at June 30, 2003.

Under its stock repurchase programs, the Company repurchased 216,200 shares during the six months ended June 30, 2004, at a total cost of $3.8 million, or an average of $17.59 per share. At June 30, 2004, 223,750 shares remain to be repurchased under the current stock repurchase program. Through June 30, 2004, the Company had repurchased approximately 45% of the common shares issued in connection with the Company's initial public offering at a cost of $103.7 million.

Cash flow. During the six months ended June 30, 2004, funds provided by the Company's operating activities amounted to $16.8 million. These funds, together with $95.7 million provided by financing activities and funds available at the beginning of the year, were utilized to fund net investing activities of $120.5 million. The Company's primary business objective is the origination and purchase of one-to-four family (primarily mixed-use properties), multi-family and commercial real estate loans. During the six months ended June 30, 2004, the net total of loan originations less loan repayments was $127.4 million. The Company also invests in other securities including mortgage loan surrogates such as mortgage-backed securities. During the six months ended June 30, 2004, the Company purchased a total of $85.9 million in securities available for sale. Funds for investment were also provided by $91.0 million in maturities, prepayments, calls and sales of securities available for sale. Additional funds of $1.4 million were provided through the exercise of stock options. The Company also used funds of $4.2 million for treasury stock purchases and $3.0 million in dividend payments during the six months ended June 30, 2004.

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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 in the United States of America, 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 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 June 30, 2004. 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   -16.52 % -14.07 % 8.53 %
-200 Basis points   -5.36   -5.04   9.53  
-100 Basis points   -0.12   2.29   10.40  
Base interest rate   --   --   10.39  
+100 Basis points   -3.18   -8.84   9.72  
+200 Basis points   -7.89   -19.89   8.79  
+300 Basis points   -14.01   -31.63   7.72  

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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 June 30, 2004, 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 June 30, 2004.

(Dollars in thousands)
 Amount
  
 Percent of Assets
Tangible Capital:          
     Capital level   $147,733   7.32 %
     Requirement   30,261   1.50  
     Excess   $117,472   5.82  
Leverage and Core Capital: 
     Capital level   $147,733   7.32 %
     Requirement   60,522   3.00  
     Excess   $87,211   4.32  
Risk-Based Capital: 
     Capital level   $154,280   13.50 %
     Requirement   91,418   8.00  
     Excess   $62,862   5.50  

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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 June 30, 2004 and 2003, 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 June 30,
  2004
   2003
  Average   Average   Average   Average
(Dollars in thousands)
 Balance
 Interest
 Yield/Cost
  
 Balance
 Interest
 Yield/Cost
Assets                            
Interest-earning assets:  
  Mortgage loans, net (1) $ 1,350,029 $ 24,128   7.15 % $ 1,183,342 $ 22,858   7.73 %
  Other loans, net (1)   10,277   163   6.34     7,851   135   6.88  
   
   
 
     Total loans, net   1,360,306   24,291   7.14     1,191,193   22,993   7.72  
   
   
 
  Mortgage-backed securities   469,289   4,731   4.03     404,005   4,171   4.13  
  Other securities   67,186   516   3.07     58,285   497   3.41  
   
   
 
     Total securities   536,475   5,247   3.91     462,290   4,668   4.04  
   
   
 
  Interest-earning deposits and  
    federal funds sold   11,620   23   0.79     11,877   32   1.08  
   
   
 
        Total interest-earning assets   1,908,401   29,561   6.20     1,665,360   27,693   6.65  
       
       
 
Other assets   92,890             110,528          
   
           
         
        Total assets $ 2,001,291           $ 1,775,888          
   
           
         
Liabilities and Equity  
Interest-bearing liabilities:  
  Passbook accounts $ 220,319   274   0.50   $ 217,586   503   0.92  
  NOW accounts   44,208   56   0.51     39,043   73   0.75  
  Money market accounts   292,069   1,286   1.76     229,627   1,243   2.17  
  Certificate of deposit accounts   615,018   5,311   3.45     567,120   5,241   3.70  
   
   
 
     Total due to depositors   1,171,614   6,927   2.36     1,053,376   7,060   2.68  
  Mortgagors' escrow deposits   23,435   12   0.20     18,562   13   0.28  
   
   
 
     Total deposits   1,195,049   6,939   2.32     1,071,938   7,073   2.64  
  Borrowed funds   594,212   5,761   3.88     499,518   6,223   4.98  
   
   
 
        Total interest-bearing  
          liabilities   1,789,261   12,700   2.84     1,571,456   13,296   3.38  
       
       
 
Non-interest bearing deposits   45,708             35,815          
Other liabilities   16,659             31,360          
   
           
         
        Total liabilities   1,851,628             1,638,631          
Equity   149,663             137,257          
   
           
         
        Total liabilities and equity $ 2,001,291           $ 1,775,888          
   
           
         
Net interest income/  
   net interest spread     $ 16,861   3.36 %     $ 14,397   3.27 %
       
       
 
Net interest-earning assets /  
    Net interest margin $ 119,140       3.53 % $ 93,904       3.46 %
   
     
   
     
 
Ratio of interest-earning assets to  
    interest-bearing liabilities           1.07 X           1.06 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 $1.2 million and $0.8 million for the three-month periods ended June 30, 2004 and 2003, respectively.

-18-

PART I - FINANCIAL INFORMATION

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations

AVERAGE BALANCES (continued)

The following table sets forth certain information relating to the Company's consolidated statements of financial condition and consolidated statements of operations for the six month periods ended June 30, 2004 and 2003, 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 six months ended June 30,
  2004
   2003
  Average   Average   Average   Average
(Dollars in thousands)
 Balance
 Interest
 Yield/Cost
  
 Balance
 Interest
 Yield/Cost
Assets                            
Interest-earning assets:  
  Mortgage loans, net (2) $ 1,319,429 $ 47,533   7.21 % $ 1,175,530 $ 45,948   7.82 %
  Other loans, net (2)   10,026   313   6.24     8,330   279   6.70  
   
   
 
     Total loans, net   1,329,455   47,846   7.20     1,183,860   46,227   7.81  
   
   
 
  Mortgage-backed securities   473,175   9,703   4.10     368,320   7,937   4.31  
  Other securities   63,005   1,054   3.35     50,384   856   3.40  
   
   
 
     Total securities   536,180   10,757   4.01     418,704   8,793   4.20  
   
   
 
  Interest-earning deposits and  
    federal funds sold   15,531   63   0.81     21,453   117   1.09  
   
   
 
        Total interest-earning assets   1,881,166   58,666   6.24     1,624,017   55,137   6.79  
       
       
 
Other assets   96,881             110,692          
   
           
         
        Total assets $ 1,978,047           $ 1,734,709          
   
           
         
Liabilities and Equity  
Interest-bearing liabilities:  
  Passbook accounts $ 218,700   544   0.50   $ 215,874   1,029   0.95  
  NOW accounts   43,088   108   0.50     39,124   146   0.75  
  Money market accounts   294,675   2,776   1.88     208,173   2,313   2.22  
  Certificate of deposit accounts   606,581   10,495   3.46     559,463   10,485   3.75  
   
   
 
     Total due to depositors   1,163,044   13,923   2.39     1,022,634   13,973   2.73  
  Mortgagors' escrow deposits   20,218   24   0.24     15,424   36   0.47  
   
   
 
     Total deposits   1,183,262   13,947   2.36     1,038,058   14,009   2.70  
  Borrowed funds   584,465   11,447   3.92     495,721   12,494   5.04  
   
   
 
        Total interest-bearing  
          liabilities   1,767,727   25,394   2.87     1,533,779   26,503   3.46  
       
       
 
Non-interest bearing deposits   43,155             34,717          
Other liabilities   18,315             31,917          
   
           
         
        Total liabilities   1,829,197             1,600,413          
Equity   148,850             134,296          
   
           
         
        Total liabilities and equity $ 1,978,047           $ 1,734,709          
   
           
         
Net interest income/  
   net interest spread     $ 33,272   3.37 %     $ 28,634   3.33 %
       
       
 
Net interest-earning assets /  
    Net interest margin $ 113,439       3.54 % $ 90,238       3.53 %
   
     
   
     
 
Ratio of interest-earning assets to  
    interest-bearing liabilities           1.06 X           1.06 X
           
           
 

(2) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $2.2 million and $1.7 million for the six-month periods ended June 30, 2004 and 2003, respectively.

-19-

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.

  Six months ended
(In thousands)
 June 30, 2004
 June 30, 2003
Mortgage Loans    
At beginning of period $1,264,219  $1,166,192 

Mortgage loans originated:
    Multi-family residential 100,005  85,315 
    Commercial real estate 48,948  43,641 
    One-to-four family - mixed-use property 67,732  35,337 
    One-to-four family - residential 8,242  11,063 
    Construction 10,317  9,488 
    Co-operative apartment 227  35 
 
          Total mortgage loans originated 235,471  184,879 
 
Mortgage loans purchased:
    One-to-four family - residential --  592 
    One-to-four family - mixed-use property --  190 
    Commercial real estate --  -- 
 
          Total acquired loans --  782 
 
Less:
    Principal and other reductions 109,107  134,637 
    Sales 5,424  9,501 
    Mortgage loan foreclosures --  -- 
 
At end of period $1,385,159  $1,207,715 
 
   
Other Loans
At beginning of period $9,825  $8,486 
Other loans originated:
    Small Business Administration 2,021  2,945 
    Small business 4,800  506 
    Other 1,201  2,201 
 
           Total other loans originated 8,022  5,562 
 
Less:
    Sales 941  1,870 
    Principal and other reductions 3,713  2,827 
 
At end of period $13,193  $9,441 
 

-20-

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)
 June 30, 2004
 December 31, 2003
Non-accrual mortgage loans $4,132  $525 
Other non-accrual loans 171  157 
 
          Total non-accrual loans 4,303  682 

Mortgage loans 90 days or more delinquent
     and still accruing --  -- 
Other loans 90 days or more delinquent
     and still accruing --  -- 
 
          Total non-performing loans 4,303  682 

Real estate owned (foreclosed real estate)		 --  -- 

Investment securities		 --  -- 
 
          Total non-performing assets $4,303  $682 
 

Non-performing loans to gross loans		 0.31% 0.05%
Non-performing assets to total assets 0.21% 0.04%

-21-

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.

Six months ended
(Dollars in thousands)
 June 30, 2004
 June 30, 2003
Balance at beginning of period $6,553  $6,581 
Provision for loan losses --  -- 
Loans charged-off:
    One-to-four family residential real estate --  -- 
    Co-operative apartment --  -- 
    Multi-family residential --  -- 
    Commercial real estate --  -- 
    Construction --  -- 
    Commercial business and other (8) (147)
 
          Total loans charged-off (8) (147)
 
Recoveries:
    Mortgage loans 2  123 
    Commercial business and other --  -- 
 
          Total recoveries 2  123 
 
Net charge-offs (6) (24)
 
Balance at end of period $6,547  $6,557 
 

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 0.47% 0.54%
Ratio of allowance for loan losses to non-performing
    assets at end of period 152.14% 285.37%
Ratio of allowance for loan losses to non-performing
    loans at end of period 152.14% 410.40%

-22-

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 June 30, 2004, 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.

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, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The following table sets forth information regarding the shares of common stock repurchased by the Company during the quarter ended June 30, 2004.

      Total Number of Maximum Number of
      Shares Purchased as Shares that May
      Part of Publicly Yet Be Purchased
Total Number of Average Price Announced Plans or Under the Plans or
Period
 Shares Purchased
 Paid per Share
 Programs
 Program
April 1 to April 30, 2004 30,000  $17.27  30,000  354,950 
May 1 to May 31, 2004 71,500  $17.55  71,500  283,450 
June 1 to June 30, 2004 66,499  $16.86  59,700  223,750 
 
 
Total 167,999  $17.23 161,200 223,750
 
 

The above table includes 6,799 common shares the Company withheld from employees, valued at an average price per share of $17.10, to satisfy tax withholding obligations due upon vesting of restricted stock awards.

The above table does not include restricted stock awards of 124,650 common shares that were surrendered and replaced with restricted stock units. Upon the surrender of these restricted stock awards, the shares originally awarded were returned to treasury. The Company anticipates that an equivalent number of common shares will be issued upon settlement of the restricted stock units.

The current common stock repurchase program was approved by the Company's Board of Directors on December 17, 2002. This repurchase program authorized the repurchase of 945,000 common shares, as adjusted for the three-for-two common stock split paid in the form of a stock dividend on December 15, 2003. The repurchase program does not have an expiration date or a maximum dollar amount that may be paid to repurchase the common shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

-23-

PART II - OTHER INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At the Company's Annual Meeting of Stockholders held on May 18, 2004, as contemplated by the Company's definitive proxy material for the meeting, certain matters were submitted to a vote of stockholders. The following table summarizes the results of voting with respect to each matter.

    Against/  
 For
 Withheld
 Abstain
Election of Directors (four directors were elected to serve until the 2007 Annual Meeting of Stockholders and until their successors are elected and qualified)      
James D. Bennett 17,240,999  367,166  -- 
John R. Buran 17,074,668  533,497  -- 
Vincent F. Nicolosi 14,150,195  3,457,970  -- 
Gerard P. Tully, Sr 17,024,202  583,963  -- 
Ratification of appointment of PricewaterhouseCoopers LLP as the independent auditors of the Company 17,466,673  127,709  13,783 

ITEM 5. OTHER INFORMATION.

Not applicable.

-24-

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 10.2 Employment Agreement between Flushing Savings Bank, FSB and David W. Fry (substantially identical in all material respects to the Amended and Restated Employment Agreement that filed as exhibit 10.2(a) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 2000) (6)
Exhibit 10.3 Employment Agreement between Flushing Financial Corporation and David W. Fry (substantially identical in all material respects to the Amended and Restated Employment Agreement filed as exhibit 10.3(d) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 2000) (6)
Exhibit 10.12(b) Indemnity Agreement among Flushing Financial Corporation, Flushing Savings Bank, FSB, and David W. Fry (substantially identical in all material respects to the Indemnity Agreement filed as exhibit 10.8(a) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 1996) (5)
Exhibit 10.17 1996 Restricted Stock Incentive Plan of Flushing Financial Corporation (as amended effective April 20, 2004)
Exhibit 10.19 Retirement Agreement among Flushing Financial Corporation, Flushing Savings Bank, FSB, and Monica C. Passick
Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer.
Exhibit 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer.
Exhibit 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.
Exhibit 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.

(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, 2002.
(5) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 1996.
(6) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 2000.

-25-

PART II - OTHER INFORMATION
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

b) REPORTS ON FORM 8-K.

On April 23, 2004, the Company filed an 8-K announcing the release of its first quarter 2004 results of operations and financial condition.

On May 7, 2004, the Company filed an 8-K announcing that it has been invited to present at the Community Bank Investors Conference on Tuesday, May 11, 2004.

On May 19, 2004, the Company filed an 8-K announcing that Monica C. Passick would retire as Senior Vice President, Treasurer and Chief Financial Officer, effective July 1, 2004, and that David W. Fry will be named to succeed Mrs. Passick.

On May 19, 2004 the Company filed an 8-K announcing that on May 18, 2004, the Board of Directors declared an increase of 12.5 percent in its quarterly dividend on its common stock to $0.09 per common share, payable on June 30, 2004 to shareholders of record at the close of business on June 10, 2004.

On June 23, 2004, the Company filed an 8-K announcing that it will make presentations to several institutional investors on June 23rd and June 24th.

-26-

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: August 1, 2004		 By: /s/Michael J. Hegarty
  Michael J. Hegarty
  President and Chief Executive Officer

Dated: August 1, 2004		 By: /s/David W. Fry
  David W. Fry
  Senior Vice President, Treasurer and
  Chief Financial Officer

-27-

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES
EXHIBIT INDEX

Exhibit No. Description
3.1 Certificate of Incorporation of Flushing Financial Corporation (1)
3.2 Certificate of Amendment of Certificate of Incorporation of Flushing Financial Corporation (3)
3.3 Certificate of Designations of Series A Junior Participating Preferred Stock of Flushing Financial Corporation (4)
3.4 By-Laws of Flushing Financial Corporation (1)
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)
10.2 Employment Agreement between Flushing Savings Bank, FSB and David W. Fry (substantially identical in all material respects to the Amended and Restated Employment Agreement that filed as exhibit 10.2(a) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 2000) (6)
10.3 Employment Agreement between Flushing Financial Corporation and David W. Fry (substantially identical in all material respects to the Amended and Restated Employment Agreement filed as exhibit 10.3(d) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 2000) (6)
10.12(b) Indemnity Agreement among Flushing Financial Corporation, Flushing Savings Bank, FSB, and David W. Fry (substantially identical in all material respects to the Indemnity Agreement filed as exhibit 10.8(a) to the Company's SEC Form 10-Q for the quarterly period ended September 30, 1996) (5)
10.17 1996 Restricted Stock Incentive Plan of Flushing Financial Corporation (as amended effective April 20, 2004)
10.19 Retirement Agreement among Flushing Financial Corporation, Flushing Savings Bank, FSB, and Monica C. Passick
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer.
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.
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.

(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, 2002.
(5) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 1996.
(6) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 2000.

-28-