updated 1/25/2011 6:46:18 PM ET 2011-01-25T23:46:18

Full Year 2010

  • GAAP net income for 2010 was $38.8 million, an increase of $13.3 million from 2009.
  • Core net income for 2010 was $34.5 million, an increase of $8.1 million from 2009.
  • GAAP diluted earnings per common share increased $0.37, or 40.7%, to $1.28 for 2010.
  • Core diluted earnings per common share increased $0.14, or 14.0%, to $1.14 for 2010.
  • Achieved record net interest income of $137.9 million for the year ended December 31, 2010 as the net interest margin increased 47 basis points to 3.43% for the year.
  • Achieved record core pre provision pre tax ("PPPT") earnings of $77.7 million for the year ended December 31, 2010, a $15.3 million, or a 24.6% increase from the prior year. (See "Reconciliation of GAAP and Core Earnings before Provision for Loan Losses and Income Taxes").
  • Net charge-offs for the year ended December 31, 2010 were 0.42% of average loans.
  • Recorded a $21.0 million provision for loan losses for the year ended December 31, 2010.
  • Recorded other-than-temporary impairment ("OTTI") charges totaling $1.1 million on four private issue collateralized mortgage obligations ("CMOs") and $1.0 million on one pooled trust preferred security during the year ended December 31, 2010.
  • Due to depositors increased $497.0 million, or 18.6%, while borrowed funds decreased $351.6 million, or 33.2%.
  • Regulatory capital ratios at December 31, 2010 continue to be above regulatory requirements at 9.18% for core capital and 14.34% for risk-based capital.
  • Book value per common share increased to $12.48 at December 31, 2010 from $11.57 at December 31, 2009.
  • Tangible common equity to tangible assets increased to 8.67% at December 31, 2010 from 8.32% at December 31, 2009.

Fourth Quarter 2010

  • GAAP diluted earnings per common share was $0.28, a $0.13 increase from the comparable prior year period, and a $0.20 decrease from the three months ended September 30, 2010.
  • Core diluted earnings per common share was $0.29, a $0.04 increase from the comparable prior year period, and a $0.02 decrease from the three months ended September 30, 2010.
  • The net interest margin increased 27 basis points from the comparable prior year quarter to 3.41% from 3.14%, primarily due to a reduction in the cost of funds.
  • The net interest margin decreased 15 basis points on a linked quarter basis to 3.41% from 3.56%, primarily due to an increase in the average balance of short term investments.
  • Recorded a $6.0 million provision for loan losses in the fourth quarter of 2010.
  • Net charge-offs for the quarter ended December 31, 2010 were 0.70% of average loans.
  • Recorded OTTI charges totaling $0.5 million on three private issue CMOs in the fourth quarter of 2010.

LAKE SUCCESS, N.Y., Jan. 25, 2011 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the "Company") (Nasdaq:FFIC), the parent holding company for Flushing Savings Bank, FSB (the "Bank"), today announced its financial results for the year and three months ended December 31, 2010.

John R. Buran, President and Chief Executive Officer, stated: "We are pleased to report record GAAP and core net income for the year ended December 31, 2010. Net income under GAAP was $38.8 million, an increase of $13.3 million, or 51.9%, from $25.6 million for the year ended December 31, 2009. We achieved record core net income of $34.5 million, an increase of $8.1 million, or 30.5%, from $26.4 million for the year ended December 31, 2009. Our strong operating performance for 2010 was primarily driven by an increase of $23.1 million in net interest income, as the net interest margin for the year ended December 31, 2010 improved over the prior year by 47 basis points to 3.43%.

"The improvement in the net interest margin for 2010 was generated through a reduction in our funding costs. During 2010 we continued to focus on growing our core deposits, which increased $206.9 million in 2010, and reducing our borrowed funds, which decreased $351.6 million in 2010. At the same time we also looked to extend the maturity of deposits to protect against future rising interest rates. We therefore increased certificates of deposit accounts by $290.1 million to $1,520.6 million at December 31, 2010 from $1,230.5 million at December 31, 2009. As a result of these changes to our funding mix, and a favorable interest rate environment, we were able to reduce our cost of funds 72 basis points to 2.45% for the year ended December 31, 2010 from 3.17% for the year ended December 31, 2009. The reduction in our cost of funds in the fourth quarter was 13 basis points, with the cost of interest-bearing liabilities declining to 2.26% for the three months ended December 31, 2010 from 2.39% for the three months ended September 30, 2010.

"The reduction in our cost of funds was partially offset by a 21 basis point decrease in the yield of interest-earning assets to 5.72% for the year ended December 31, 2010 from 5.93% in the comparable prior year. This decline was primarily caused by a decline in rates earned on new loans originated during 2010 as compared to the yield of the existing portfolio, and an increase in non-accrual loans for which we do not accrue interest income.

"Our net interest margin for the fourth quarter of 2010 represents a 15 basis point reduction from the third quarter of 2010. The fourth quarter's net interest margin was reduced by one basis point due to net interest reversals on non-accrual loans. The third quarter's net interest margin was enhanced by six basis points due to net collections of interest on non-accrual loans during that quarter. Excluding the effect of these interest accrual adjustments in both linked quarters of 2010, the net interest margin would have declined eight basis points in the current quarter from the prior quarter. The current quarter's net interest margin was also negatively impacted compared to the prior linked quarter due to an $80.9 million increase in the average balance of lower yielding interest-earning deposits, yielding 22 basis points, to $112.4 million for the three months ended December 31, 2010 from $31.5 million for the three months ended September 30, 2010. As deposits increased during the fourth quarter of 2010, they were temporarily invested in overnight interest-earning deposits, and then later used to fund loan originations and purchases of loans and securities, as well as for repayment of maturing borrowed funds. At December 31, 2010 the balance of overnight interest-earning deposits had declined to $42.6 million.

"We continue to see some signs of credit stabilization. Although non-performing loans increased $6.6 million in the fourth quarter, total classified loans decreased $5.9 million in the fourth quarter. Net charge-offs increased year over year to $13.6 million in 2010 from $10.2 million in 2009, but remain at a manageable 42 basis points of average loans, which continues to be below industry averages. The majority of our non-performing loans are collateralized by residential income producing properties located in the New York City metropolitan area that continue to show low vacancy rates, thereby retaining more of their value. We anticipate that we will continue to see low loss content in this portfolio that constitutes the majority of our non-performing loans. Nonetheless, we increased our allowance for loan losses to 85 basis points of gross loans from 63 basis points at December 31, 2009. The provision for loan losses recorded in the fourth quarter of 2010 increased $1.0 million from that recorded in the third quarter of 2010. The increase in the quarterly provision reduced our diluted earnings per common share by $0.02 in the fourth quarter from the third quarter. Our continued growth in net interest income has more than offset the additional provision for loan losses, allowing us to report record net income.

"The Bank continues to be well-capitalized under regulatory requirements, with tangible and risk-based capital ratios of 9.18% and 14.34%, respectively, at December 31, 2010."

Net income for the quarter ended December 31, 2010 was $8.5 million, an increase of $2.6 million, or 43.0%, from the $6.0 million earned in the fourth quarter of 2009. Diluted earnings per common share for the fourth quarter were $0.28, an increase of $0.13, or 86.7%, from the $0.15 earned in the comparable quarter a year ago.

Net income for the year ended December 31, 2010 was $38.8 million, an increase of $13.3 million, or 51.9%, from the $25.6 million earned in the comparable 2009 period. Diluted earnings per common share for the year ended December 31, 2010 were $1.28, an increase of $0.37, or 40.7%, from the $0.91 earned in the comparable 2009 period. The percentage increase in diluted earnings per common share was less than the percentage increase in net income due to the net effect of a 30.6% increase in average common shares used in the computation of diluted earnings per common share and the redemption of preferred stock in October 2009. These additional shares were issued in the common stock offering completed in September 2009.

Core earnings, which exclude the effects of net gains and losses from fair value adjustments, OTTI charges, net gains losses from the sale of securities, and certain non-recurring items, was $8.9 million for the three months ended December 31, 2010, an increase of $1.0 million, or 12.0%, from $7.9 million in the comparable prior year period. Core diluted earnings per common share were $0.29 for the three months ended December 31, 2010, an increase of $0.04 per common share, or 16.0%, from $0.25 per common share in the comparable prior year period.

Core earnings were $34.5 million for the year ended December 31, 2010, an increase of $8.1 million, or 30.5%, from $26.4 million in the comparable prior year period. Core diluted earnings per common share were $1.14 for the year ended December 31, 2010, an increase of $0.14 per common share, or 14.0%, from $1.00 per common share in the comparable prior year period.

For a reconciliation of core earnings and core diluted earnings per common share to accounting principles generally accepted in the United States ("GAAP") net income and GAAP diluted earnings per common share, please refer to the tables in the section titled "Reconciliation of GAAP and Core Earnings."

The Company elected to reclassify owner-occupied commercial loans that were originated by the Business Banking Department prior to January 1, 2010, from commercial real estate loans to commercial business loans. All loan originations of this type from January 1, 2010 forward have been and will be reported as commercial business loans. These loans are underwritten using the same underwriting standards used to originate unsecured business loans, with the mortgage obtained as additional collateral. Based upon the underwriting standards used to originate the loans, it is more appropriate to report the loans as commercial business loans. Prior period amounts have been adjusted to reflect this change.

Earnings Summary - Three Months Ended December 31, 2010

Net income for the three months ended December 31, 2010 was $8.5 million, an increase of $2.6 million, or 43.0%, as compared to $6.0 million for the three months ended December 31, 2009. Diluted earnings per common share were $0.28 for the three months ended December 31, 2010, an increase of $0.13, or 86.7%, from $0.15 for the three months ended December 31, 2009. Diluted earnings per common share for the three months ended December 31, 2009 were reduced by $0.04 due to the write-off of unamortized issuance costs related to the redemption of preferred stock.

Return on average equity was 8.7% for the three months ended December 31, 2010 compared to 6.3% for the three months ended December 31, 2009. Return on average assets was 0.8% for the three months ended December 31, 2010 compared to 0.6% for the three months ended December 31, 2009.

For the three months ended December 31, 2010, net interest income was $35.1 million, an increase of $4.3 million, or 14.1%, from $30.7 million for the three months ended December 31, 2009. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $193.2 million, to $4,109.4 million for the quarter ended December 31, 2010, combined with an increase in the net interest spread of 34 basis points to 3.25% for the quarter ended December 31, 2010 from 2.91% for the quarter ended December 31, 2009. The yield on interest-earning assets decreased 36 basis points to 5.51% for the three months ended December 31, 2010 from 5.87% in the three months ended December 31, 2009. However, this was more than offset by a decline in the cost of funds of 70 basis points to 2.26% for the three months ended December 31, 2010 from 2.96% for the comparable prior year period. The net interest margin improved 27 basis points to 3.41% for the three months ended December 31, 2010 from 3.14% for the three months ended December 31, 2009. Excluding prepayment penalty income, the net interest margin would have been 3.37% and 3.10% for the three month periods ended December 31, 2010 and 2009, respectively.

The 36 basis point decline in the yield of interest-earning assets was primarily due to a 24 basis point reduction in the yield of the loan portfolio to 5.99% for the quarter ended December 31, 2010 from 6.23% for the quarter ended December 31, 2009, combined with a 39 basis point decline in the yield on total securities to 4.20% for the quarter ended December 31, 2010 from 4.59% for the comparable period in 2009. In addition, the yield of interest-earning assets was negatively impacted by a $126.9 million increase in the combined average balances of the lower yielding securities portfolio and interest-earning deposits for the three months ended December 31, 2010, both of which have a lower yield than the yield of total interest-earning assets. The 24 basis point decrease in the loan portfolio was primarily due to a decline in the rates earned on new loan originations combined with an increase in non-accrual loans for which we do not accrue interest income. The 39 basis point decrease in the securities portfolio was primarily due to new securities being purchased at lower yields than the existing portfolio. The yield on the mortgage loan portfolio declined 22 basis points to 6.06% for the three months ended December 31, 2010 from 6.28% for the three months ended December 31, 2009. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 23 basis points to 6.00% for the three months ended December 31, 2010 from 6.23% for the three months ended December 31, 2009. The decline in the yield of interest-earning assets was partially offset by an increase of $66.2 million in the average balance of the loan portfolio to $3,249.0 million for the three months ended December 31, 2010.

The 70 basis point decrease in the cost of interest-bearing liabilities is primarily attributable to the Bank reducing the rates it pays on its deposit products and the Bank's focus on increasing lower costing core deposits and reducing borrowed funds. The cost of certificates of deposit, money market accounts, savings accounts and NOW accounts decreased 64 basis points, 47 basis points, 35 basis points and 46 basis points respectively, for the quarter ended December 31, 2010 compared to the same period in 2009. This resulted in a decrease in the cost of due to depositors of 59 basis points to 1.73% for the quarter ended December 31, 2010 from 2.32% for the quarter ended December 31, 2009. The cost of borrowed funds also decreased 23 basis points to 4.46% for the quarter ended December 31, 2010 from 4.69% for the quarter ended December 31, 2009. The combined average balances of lower-costing core deposits increased a total of $329.1 million for the quarter ended December 31, 2010 compared to the same period in 2009, while the combined average balances of higher-costing certificates of deposits and borrowed funds declined $133.1 million for the quarter ended December 31, 2010 from the comparable period in 2009. 

The net interest margin for the three months ended December 31, 2010 decreased 15 basis points to 3.41% from 3.56% for the three months ended September 30, 2010. The yield on interest-earning assets decreased 27 basis points during the quarter and the cost of interest-bearing liabilities decreased 13 basis points. Excluding prepayment penalty income, the net interest margin would have been 3.37% for the quarter ended December 31, 2010, a decrease of 14 basis points from 3.51% for the quarter ended September 30, 2010. The decreases in the yield on interest-earning assets and the net interest margin were primarily due to two factors. First, the average balance of lower yielding interest-earning deposits increased $89.2 million for the three months ended December 31, 2010. These assets had a lower yield at 0.22% than the yield of total interest-earning assets. Second, interest accrual adjustments for non-accruing loans had a negative effect on the yield of loans in the current quarter as compared to the three months ended September 30, 2010. During the three months ended December 31, 2010, interest reversals on non-accrual loans outpaced interest recoveries on non-accrual loans. The quarter ended September 30, 2010 had net recoveries of interest on non-accrual loans. 

A provision for loan losses of $6.0 million was recorded for the quarter ended December 31, 2010, which was an increase of $1.0 million from the $5.0 million recorded in the quarter ended December 31, 2009. The increase in the provision for loan losses recorded for the three months ended December 31, 2010 was primarily due to an increase in both non-performing loans and charge-offs in the fourth quarter of 2010. This increase in non-performing loans primarily consists of mortgage loans collateralized by residential income producing properties located in the New York City metropolitan market. The Bank continues to maintain conservative underwriting standards that include, among other things, a loan to value ratio of 75% or less and a debt coverage ratio of at least 125%. However, given the increase in non-performing loans, the current economic uncertainties, and the charge-offs recorded in the fourth quarter of 2010, management, as a result of the regular quarterly analysis of the allowance for loans losses, deemed it necessary to record an additional provision for possible loan losses in the fourth quarter of 2010.

Non-interest income for the three months ended December 31, 2010 was $2.1 million, an increase of $2.7 million from a loss of $0.6 million for the three months ended December 31, 2009. The increase in non-interest income was primarily due to a $4.2 million reduction in OTTI charges during the three months ended December 31, 2010 as compared to the three months ended December 31, 2009. The three months ended December 31, 2010 included $0.5 million in OTTI charges on three private issue CMOs while the three months ended December 31, 2009 included $4.8 million in OTTI charges. The reduction in OTTI charges was partially offset by a $0.8 million decrease in net gains recorded from fair value adjustments to $0.2 million for the three months ended December 31, 2010 from $1.0 million for the comparable prior year period, and a net loss of $0.1 million on securities sales for the three months ended December 31, 2010 compared to net gains on securities sales of $0.3 million for the three comparable prior year period.

Non-interest expense was $17.2 million for the three months ended December 31, 2010, an increase of $1.3 million, or 8.3%, from $15.9 million for the three months ended December 31, 2009. The increase was primarily due to the growth of the Bank over the past year with increases of $0.8 million, $0.3 million and $0.1 million in salary and employee benefits, other operating expense and occupancy and equipment expense, respectively. The efficiency ratio improved to 45.6% for the three months ended December 31, 2010 from 47.2% for the three months ended December 31, 2009.

Earnings Summary - Year Ended December 31, 2010

Net income for the year ended December 31, 2010 was $38.8 million, an increase of $13.3 million or 51.9%, as compared to $25.6 million for the year ended December 31, 2009. Diluted earnings per common share were $1.28 for the year ended December 31, 2010, an increase of $0.37, or 40.7%, from $0.91 in the year ended December 31, 2009. The percentage increase in diluted earnings per common share was less than the percentage increase in net income due to the net effect of a 30.6% increase in average common shares used in the computation of diluted earnings per common share and the redemption of preferred stock in October 2009. These additional shares were issued in the common stock offering completed in September 2009.

Return on average equity was 10.3% for the year ended December 31, 2010 compared to 7.8% for the year ended December 31, 2009. Return on average assets was 0.9% for the year ended December 31, 2010 compared to 0.6% for the year ended December 31, 2009.

For the year ended December 31, 2010, net interest income was $137.9 million, an increase of $23.1 million, or 20.1%, from $114.8 million for the year ended December 31, 2009. The increase in net interest income is attributed to an increase in the average balance of interest-earning assets of $138.0 million, to $4,017.5 million for the year ended December 31, 2010, combined with an increase in the net interest spread of 51 basis points to 3.27% for the year ended December 31, 2010. The yield on interest-earning assets decreased 21 basis points to 5.72% for the year ended December 31, 2010 from 5.93% for the year ended December 31, 2009. However, this was more than offset by a decline in the cost of funds of 72 basis points to 2.45% for the year ended December 31, 2010 from 3.17% for the prior year. The net interest margin improved 47 basis points to 3.43% for the year ended December 31, 2010 from 2.96% for the year ended December 31, 2009. Excluding prepayment penalty income, the net interest margin would have been 3.39% and 2.92% for the years ended December 31, 2010 and 2009, respectively.

The decline in the yield of interest-earning assets was primarily due to a 20 basis point reduction in the yield of the loan portfolio to 6.10% for the year ended December 31, 2010 from 6.30% for the year ended December 31, 2009, combined with a 37 basis point decline in total securities to 4.41% for the year ended December 31, 2010 from 4.78% for the comparable period in 2009.  The 20 basis point decrease in the loan portfolio was primarily due to a decline in the rates earned on new loan originations combined with an increase in non-accrual loans for which we do not accrue interest income. The 37 basis point decrease in the securities portfolio was primarily due to new securities being purchased at lower yields than the existing portfolio. The yield on the mortgage loan portfolio declined 20 basis points to 6.16% for the year ended December 31, 2010 from 6.36% for the year ended December 31, 2009. The yield on the mortgage loan portfolio, excluding prepayment penalty income, declined 20 basis points to 6.10% for the year ended December 31, 2010 from 6.30% for the year ended December 31, 2009. The decline in the yield of interest-earning assets was partially offset by an increase of $152.6 million in the average balance of the loan portfolio to $3,238.5 million for the year ended December 31, 2010.

The decrease in the cost of interest-bearing liabilities is primarily attributable to the Bank reducing the rates it pays on its deposit products and the Bank's focus on increasing lower costing core deposits and reducing borrowed funds. The cost of certificates of deposit, money market accounts, savings accounts and NOW accounts decreased 61 basis points, 64 basis points, 50 basis points and 48 basis points respectively, for the year ended December 31, 2010 compared to the same period in 2009. This resulted in a decrease in the cost of due to depositors of 72 basis points to 1.89% for the year ended December 31, 2010 from 2.61% for the year ended December 31, 2009. The cost of borrowed funds also decreased 24 basis points to 4.41% for the year ended December 31, 2010 from 4.65% for the year ended December 31, 2009. The combined average balances of lower-costing core deposits increased a total of $360.6 million for the year ended December 31, 2010 compared to the prior year, while the average balance of higher-costing certificates of deposits decreased $75.3 million for the year ended December 31, 2010 from the prior year. The average balance of borrowed funds declined $179.0 million to $864.2 million for the year ended December 31, 2010 from $1,043.2 million for the prior year, as the increase in deposits allowed us to decrease borrowed funds. 

A provision for loan losses of $21.0 million was recorded for the year ended December 31, 2010 compared to $19.5 million recorded in the year ended December 31, 2009. The provision for loan losses recorded in 2010 was primarily due to an increase in both non-performing loans and the level of charge-offs recorded in 2010. This increase in non-performing loans primarily consists of mortgage loans collateralized by residential income producing properties that are located in the New York City metropolitan market. The Bank continues to maintain conservative underwriting standards that include, among other things, a loan to value ratio of 75% or less and a debt coverage ratio of at least 125%. However, given the increase in non-performing loans, the current economic uncertainties, and the charge-offs recorded during 2010, management, as a result of the regular quarterly analysis of the allowance for loans losses, deemed it necessary to record an additional provision for possible loan losses in the year ended 2010.

Non-interest income decreased $2.7 million, or 24.2%, for the year ended December 31, 2010 to $8.3 million, as compared to $11.0 million for the year ended December 31, 2009.  The decrease in non-interest income was primarily due to a $4.9 million decline in net gains recorded from fair value adjustments and a $1.4 million decrease in net gains from the sale of securities for the year ended December 31, 2010 as compared to the year ended December 31, 2009. These reductions to non-interest income were partially offset by a $3.9 million decrease in OTTI charges recorded during the year ended December 31, 2010 from the prior year.  

Non-interest expense for the year ended December 31, 2010 was $70.4 million, an increase of $5.5 million, or 8.4%, from $64.9 million for the year ended December 31, 2009. Salary and employee benefits, occupancy and equipment expense, professional services and other operating expense increased $4.9 million, $0.4 million, $0.6 million and $1.0 million, respectively, which are primarily attributed to the growth of the Bank. FDIC insurance decreased $1.5 million from the prior year, primarily due to a $2.0 million special assessment levied by the FDIC during the year ended December 31, 2009 partially offset by an increase in deposits during the year ended December 31, 2010. The efficiency ratio improved to 47.4% for the year ended December 31, 2010 from 51.8% for the year ended December 31, 2009.

Balance Sheet Summary

At December 31, 2010, total assets were $4,324.7 million, an increase of $181.5 million, or 4.4%, from $4,143.2 million at December 31, 2009. Total loans, net increased $48.5 million, or 1.5%, during the year ended December 31, 2010 to $3,248.6 million from $3,200.2 million at December 31, 2009. Loan originations and purchases were $416.5 million for the year ended December 31, 2010, a decrease of $84.1 million from $500.6 million for the year ended December 31, 2009, as loan demand has declined due to the current economic environment and we tightened our underwriting standards. At December 31, 2010, loan applications in process totaled $142.2 million, compared to $158.4 million at December 31, 2009.

The following table shows loan originations and purchases for the periods indicated. The table includes loan purchases of $7.0 million and $10.7 million for the three months ended December 31, 2010 and 2009, respectively, and $14.7 million and $43.3 million for the years ended December 31, 2010 and 2009, respectively.

  For the three months For the year
  ended December 31, ended December 31,
(In thousands) 2010 2009 2010 2009
Multi-family residential  $ 43,832  $ 46,248  $ 171,238  $ 212,274
Commercial real estate  330  5,651  33,697  35,474
One-to-four family – mixed-use property  6,956  7,586  29,415  33,053
One-to-four family – residential  5,401  14,691  34,694  54,669
Co-operative apartments  --   534  407  534
Construction  4,282  2,843  10,493  18,263
Small Business Administration  38  2,474  3,869  4,457
Taxi Medallion  21,374  18,631  74,226  61,049
Commercial business and other loans  13,747  13,044  58,496  80,817
 Total  $ 95,960  $ 111,702  $ 416,535  $ 500,590

As the Bank continues to increase its loan portfolio, management continues to adhere to the Bank's conservative underwriting standards. Non-accrual loans and charge-offs for impaired loans have increased, primarily due to the current economic environment. In response, the Bank has increased staffing to handle delinquent loans by hiring people experienced in loan workouts. The Bank reviews its delinquencies on a loan by loan basis and continually explores ways to help borrowers meet their obligations and return them back to current status. The Bank takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative. The Bank has been developing short-term payment plans that enable certain borrowers to bring their loans current. In addition, the Bank has restructured certain problem loans by either: reducing the interest rate until the next reset date, extending the amortization period thereby lowering the monthly payments, or changing the loan to interest only payments for a limited time period. At times, certain problem loans have been restructured by combining more than one of these options. The Bank believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. These restructured loans are classified as "troubled debt restructured."

Interest income on loans is recognized on the accrual basis. The accrual of income on loans is discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Additionally, uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. Loans in default 90 days or more, as to their maturity date but not their payments, continue to accrue interest as long as the borrower continues to remit monthly payments.

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

  December 31, September 30, December 31,
(In thousands) 2010 2010 2009
Loans 90 days or more past due      
and still accruing:      
Multi-family residential  $ 103  $ 392  $ --
Commercial real estate  3,328  2,570  471
One-to-four family - residential  --  --  2,784
Commercial business and other  6  6  --
Total  3,437  2,968  3,255
       
Troubled debt restructured:      
Multi-family residential  11,242  11,246  478
Commercial real estate  2,448  2,453  1,441
One-to-four family - mixed-use property  206  207  575
       
Total  13,896  13,906  2,494
       
Non-accrual loans:      
Multi-family residential  35,633  33,830  27,483
Commercial real estate  22,806  23,066  18,862
One-to-four family - mixed-use property  30,478  27,834  23,422
One-to-four family - residential  10,695  9,710  4,959
Co-opertative apartments  --  --  78
Construction loans  4,465  3,730  1,639
Small business administration  1,159  1,258  1,232
Commercial business and other  3,419  3,091  2,442
Total  108,655  102,519  80,117
       
Total non-performing loans  125,988  119,393  85,866
       
Other non-performing assets:      
Real estate acquired through foreclosure  1,588  1,090  2,262
Investment securities  5,134  4,525  5,134
Total  6,722  5,615  7,396
       
Total non-performing assets  $ 132,710  $ 125,008  $ 93,262

The Bank's non-performing assets were $132.7 million at December 31, 2010, an increase of $7.7 million from $125.0 million at September 30, 2010 and an increase of $39.4 million from $93.3 million at December 31, 2009. Total non-performing assets as a percentage of total assets were 3.07% at December 31, 2010 as compared to 2.94% at September 30, 2010 and 2.25% at December 31, 2009. The ratio of allowance for loan losses to total non-performing loans was 22% at December 31, 2010 as compared to 23% at September 30, 2010 and 24% at December 31, 2009.

Non-performing investment securities at December 31, 2010, include two pooled trust preferred securities totaling $5.1 million for which we currently are not receiving payments.

Performing loans delinquent 60 to 89 days were $19.8 million at December 31, 2010, a decrease of $1.6 million from $21.4 million at September 30, 2010 and a decrease of $5.6 million from $25.4 million at December 31, 2009.   Performing loans delinquent 30 to 59 days were $73.5 million at December 31, 2010, an increase of $9.2 million from $64.3 million at September 30, 2010 and an increase $1.2 million from $72.3 million at December 31, 2009.

The Bank recorded net charge-offs for impaired loans of $5.7 million and $3.3 million during the three months ended December 31, 2010 and 2009, respectively and net charge-offs for impaired loans of $13.6 million and $10.2 million during the year ended December 31, 2010 and 2009, respectively.

The following table shows net loan charge-offs (recoveries) for the periods indicated by type of loan:

  For the three months For the year
  ended December 31, ended December 31,
(In thousands) 2010 2009 2010 2009
Multi-family residential  $ 1,731  $ 582  $ 5,773  $ 2,326
Commercial real estate  1,496  612  2,634  728
One-to-four family – mixed-use property  882  145  2,465  1,009
One-to-four family – residential  121  228  236  284
Construction  1,017  668  1,879  1,075
Small Business Administration  407  247  752  1,062
Commercial business and other loans  49  772  (114)  3,720
 Total net loan charge-offs  $ 5,703  $ 3,254  $ 13,625  $ 10,204

The Bank considers a loan impaired when, based upon current information, we believe it is probable that we will be unable to collect all amounts due, both principal and interest, according to the original contractual terms of the loan. All non-accrual loans are considered impaired. Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate or at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The property value of impaired mortgage loans are internally reviewed on a quarterly basis using multiple valuation approaches in evaluating the underlying collateral. These include obtaining a third party appraisal, an income approach or a sales approach. When obtained, third party appraisals are given the most weight. The income approach is used for income producing properties, and uses current revenues less operating expenses to determine the net cash flow of the property. Once the net cash flow is determined, the value of the property is calculated using an appropriate capitalization rate for the property. The sales approach uses comparable sales prices in the market. In the absence of a third party appraisal, greater reliance is placed on the income approach to value the collateral. The loan balance of impaired mortgage loans is then compared to the property's updated estimated value and any balance over 90% of the loans updated estimated value is charged-off against the allowance for loan losses. 

During the year ended December 31, 2010, mortgage-backed securities increased $105.6 million, or 16.3%, to $754.1 million from $648.4 million at December 31, 2009. The increase in mortgage-backed securities during the year ended December 31, 2010 was primarily due to purchases of $345.3 million, which was partially offset by principal repayments of $184.4 million and sales of $56.5 million. During the year ended December 31, 2010, other securities increased $14.8 million, or 41.7%, to $50.1 million from $35.4 million at December 31, 2009. Other securities primarily consists of securities issued by government agencies and mutual or bond funds that invest in government and government agency securities. During the year ended December 31, 2010, there were $52.7 million in purchases and $33.8 million in calls of other securities.

Total liabilities were $3,934.7 million at December 31, 2010, an increase of $151.6 million, or 4.0%, from $3,783.1 million at December 31, 2009. During the year ended December 31, 2010, due to depositors increased $497.0 million, or 18.6%, to $3,163.3 million, as a result of increases of $206.9 million in core deposits and of $290.1 million in certificates of deposit. Borrowed funds decreased $351.6 million as the increase in deposits allowed us to reduce our borrowed funds.

Total stockholders' equity increased $29.9 million, or 8.3%, to $390.0 million at December 31, 2010 from $360.1 million at December 31, 2009. The increase is primarily due to net income of $38.8 million and an increase in other comprehensive income of $2.8 million for the year ended December 31, 2010. These increases were partially offset by the declaration and payment of dividends on the Company's common stock of $15.8 million. Book value per common share was $12.48 at December 31, 2010 compared to $11.57 at December 31, 2009. Tangible book value per common share was $11.95 at December 31, 2010 compared to $11.03 at December 31, 2009.

The Company did not repurchase any shares during the year ended December 31, 2010 under its current stock repurchase program. At December 31, 2010, 362,050 shares remain to be repurchased under the current stock repurchase program.

Reconciliation of GAAP and Core Earnings

Although core earnings are not a measure of performance calculated in accordance with GAAP, the Company believes that its core earnings are an important indication of performance through ongoing operations. The Company believes that core earnings are useful to management and investors in evaluating its ongoing operating performance, and in comparing its performance with other companies in the banking industry, particularly those that do not carry financial assets and financial liabilities at fair value. Core earnings should not be considered in isolation or as a substitute for GAAP earnings. During the periods presented the Company calculated core earnings by adding back or subtracting, net of tax, the net gain or loss recorded on financial assets and financial liabilities carried at fair value, OTTI charges, net gains/losses on the sale of securities, and the income or expense of certain non-recurring items listed below.

  Three Months Ended Year Ended
  December 31, December 31, September 30, December 31, December 31,
  2010 2009 2010 2010 2009
  (In thousands, except per share data)
           
GAAP income before income taxes  $ 13,928  $ 9,232  $ 15,154  $ 54,776  $ 41,332
           
Net (gain) loss from fair value adjustments  (201)  (966)  20  (47)  (4,968)
Other-than-temporary impairment charges  507  4,754  550  2,045  5,894
Net (gain) loss on sale of securities  72  (327)  (39)  10  (1,401)
FDIC special assessment  --   --   --   --   2,007
Partial recovery of WorldCom, Inc. loss  --   --   --   (164)  -- 
Bank Owned Life Insurance exchange fee  87  --   --   87  -- 
           
Core income before taxes  14,393  12,693  15,685  56,707  42,864
           
Provision for income taxes for core income  5,540  4,790  6,246  22,238  16,451
           
Core net income  $ 8,853  $ 7,903  $ 9,439  $ 34,469  $ 26,413
           
GAAP diluted earnings per common share  $ 0.28  $ 0.15  $ 0.48  $ 1.28  $ 0.91
           
Deemed dividend upon redemption of          
TARP preferred stock  --   0.04  --   --   0.06
Net (gain) loss from fair value adjustments  --   (0.02)  --   --   (0.12)
Other-than-temporary impairment charges  0.01  0.09  0.01  0.04  0.14
Net (gain) loss on sale of securities  --   (0.01)  --   --   (0.03)
FDIC special assessment  --   --   --   --   0.05
Partial recovery of WorldCom, Inc. loss  --   --   --   --   -- 
New York State Legislative tax change  --   --   (0.18)  (0.18)  -- 
Bank Owned Life Insurance exchange fee  --   --   --   --   -- 
           
Core diluted earnings per common share*  $ 0.29  $ 0.25  $ 0.31  $ 1.14  $ 1.00
 
* Core diluted earnings per common share may not foot due to rounding.

Reconciliation of GAAP and Core Earnings before Provision for Loan Losses and Income Taxes

Although core earnings before the provision for loan losses and income taxes are not a measure of performance calculated in accordance with GAAP, the Company believes this measure of earnings is an important indication of earnings through ongoing operations that are available to cover possible loan losses and OTTI charges. The Company believes this earnings measure is useful to management and investors in evaluating its ongoing operating performance. During the periods presented the Company calculated this earnings measure by adjusting GAAP income before income taxes by adding back the provision for loan losses and adding back or subtracting the net gain or loss recorded on financial assets and financial liabilities carried at fair value, OTTI charges, net gains/losses on the sale of securities, and the income or expense of certain non-recurring items listed below.

  Three Months Ended Year Ended
  December 31, December 31, September 30, December 31, December 31,
  2010 2009 2010 2010 2009
      (In thousands)    
           
GAAP income before income taxes  $ 13,928  $ 9,232  $ 15,154  $ 54,776  $ 41,332
           
Provision for loan losses  6,000  5,000  5,000  21,000  19,500
Net (gain) loss from fair value adjustments  (201)  (966)  20  (47)  (4,968)
Other-than-temporary impairment charges  507  4,754  550  2,045  5,894
Net (gain) loss on sale of securities  72  (327)  (39)  10  (1,401)
FDIC special assessment  --   --   --   --   2,007
Partial recovery of WorldCom, Inc. loss  --   --   --   (164)  -- 
Bank Owned Life Insurance exchange fee  87  --   --   87  -- 
           
Core net income before the provision for          
 loan losses and income taxes  $ 20,393  $ 17,693  $ 20,685  $ 77,707  $ 62,364

About Flushing Financial Corporation

Flushing Financial Corporation is the parent holding company for Flushing Savings Bank, FSB, a federally chartered stock savings bank insured by the FDIC. Flushing Bank is a trade name of Flushing Savings Bank, FSB. The Bank serves consumers and businesses by offering a full complement of deposit, loan, and cash management services through its sixteen banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. The Bank also operates an online banking division, iGObanking.com®, which enables the Bank to expand outside of its current geographic footprint. In 2007, the Bank established Flushing Commercial Bank, a wholly-owned subsidiary, to provide banking services to public entities including counties, towns, villages, school districts, libraries, fire districts and the various courts throughout the metropolitan area.

Additional information on Flushing Financial Corporation may be obtained by visiting the Company's website at http://www.flushingbank.com .

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "forecasts", "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.

- Statistical Tables Follow -

FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data)

(Unaudited)
  December 31, December 31,
  2010 2009
ASSETS    
Cash and due from banks  $ 47,789  $ 28,426
Securities available for sale:    
Mortgage-backed securities  754,077  648,443
Other securities  50,112  35,361
Loans:    
Multi-family residential  1,252,176  1,158,700
Commercial real estate  662,794  686,210
One-to-four family ― mixed-use property  728,810  744,560
One-to-four family ― residential  241,376  249,920
Co-operative apartments  6,215  6,553
Construction  75,519  97,270
Small Business Administration  17,511  17,496
Taxi medallion  88,264  61,424
Commercial business and other  187,161  181,240
Net unamortized premiums and unearned loan fees  16,503  17,110
Allowance for loan losses  (27,699)  (20,324)
Net loans  3,248,630  3,200,159
Interest and dividends receivable  19,475  19,116
Bank premises and equipment, net  23,041  22,830
Federal Home Loan Bank of New York stock  31,606  45,968
Bank owned life insurance  76,129  69,231
Goodwill  16,127  16,127
Core deposit intangible  1,405  1,874
Other assets  56,354  55,711
Total assets  $ 4,324,745  $ 4,143,246
     
LIABILITIES    
Due to depositors:    
Non-interest bearing  $ 96,198  $ 91,376
Interest-bearing:    
Certificate of deposit accounts  1,520,572  1,230,511
Savings accounts  388,512  426,821
Money market accounts  371,998  414,457
NOW accounts  786,015  503,159
Total interest-bearing deposits  3,067,097  2,574,948
Mortgagors' escrow deposits  27,315  26,791
Borrowed funds   708,683  1,060,245
Other liabilities  35,407  29,742
Total liabilities  3,934,700  3,783,102
     
STOCKHOLDERS' EQUITY    
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)  --   -- 
Common stock ($0.01 par value; 100,000,000 shares authorized; 31,255,934
shares and 31,131,059 shares issued at December 31, 2010 and 2009, 
respectively; 31,255,934 shares and 31,127,664 shares outstanding at
December 31, 2010 and 2009, respectively)  313  311
Additional paid-in capital  189,348  185,842
Treasury stock (none and 3,395 at December 31, 2010 and 2009, respectively)  --   (36)
Unearned compensation  --   (575)
Retained earnings  204,128  181,181
Accumulated other comprehensive loss, net of taxes  (3,744)  (6,579)
Total stockholders' equity  390,045  360,144
     
Total liabilities and stockholders' equity  $ 4,324,745  $ 4,143,246
 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)
  For the three months For the year
  ended December 31, ended December 31,
  2010 2009 2010 2009
     
Interest and dividend income        
Interest and fees on loans  $ 48,694  $ 49,572  $ 197,469  $ 194,317
Interest and dividends on securities:        
 Interest  7,652  7,849  31,252  34,523
 Dividends  203  26  813  1,130
Other interest income  61  20  94  91
 Total interest and dividend income  56,610  57,467  229,628  230,061
         
Interest expense        
Deposits  13,014  14,998  53,655  66,778
Other interest expense  8,541  11,732  38,112  48,497
 Total interest expense  21,555  26,730  91,767  115,275
         
Net interest income  35,055  30,737  137,861  114,786
Provision for loan losses  6,000  5,000  21,000  19,500
Net interest income after provision for loan losses  29,055  25,737  116,861  95,286
         
Non-interest income (loss)        
Other-than-temporary impairment ("OTTI") charge  (3,285)  (16,314)  (7,130)  (17,454)
Less: Non-credit portion of OTTI charge recorded in Other    
 Comprehensive Income, before taxes   2,778  11,560  5,085  11,560
Net OTTI charge recognized in earnings  (507)  (4,754)  (2,045)  (5,894)
Loan fee income  412  422  1,695  1,755
Banking services fee income  397  429  1,747  1,755
Net gain on sale of loans held for sale  --   212  --   208
Net gain on sale of loans   --   --   17  4
Net (loss) gain from sale of securities  (72)  327  (10)  1,401
Net gain from fair value adjustments  201  966  47  4,968
Federal Home Loan Bank of New York stock dividends  594  637  2,102  2,237
Bank owned life insurance  598  614  2,638  2,476
Other income  433  504  2,109  2,045
 Total non-interest income (loss)  2,056  (643)  8,300  10,955
         
Non-interest expense        
Salaries and employee benefits  8,659  7,908  34,785  29,934
Occupancy and equipment  1,931  1,807  7,246  6,874
Professional services  1,285  1,231  6,344  5,716
FDIC deposit insurance  1,166  1,024  4,889  6,407
Data processing  722  863  3,996  4,121
Depreciation and amortization  701  684  2,795  2,663
Other operating expenses  2,719  2,345  10,330  9,194
 Total non-interest expense  17,183  15,862  70,385  64,909
         
Income before income taxes  13,928  9,232  54,776  41,332
         
Provision for income taxes        
Federal  4,154  3,489  19,343  12,187
State and local  1,225  (237)  (3,402)  3,584
 Total taxes  5,379  3,252  15,941  15,771
         
Net income  $ 8,549  $ 5,980  $ 38,835  $ 25,561
         
Net income available to common shareholders  $ 8,549  $ 4,390  $ 38,835  $ 21,118
         
Basic earnings per common share  $ 0.28  $ 0.15  $ 1.28  $ 0.91
Diluted earnings per common share  $ 0.28  $ 0.15  $ 1.28  $ 0.91
Dividends per common share  $ 0.13  $ 0.13  $ 0.52  $ 0.52
 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except share data)

(Unaudited)
  At or for the three months At or for the year
  ended December 31, ended December 31,
  2010 2009 2010 2009
Per Share Data        
Basic earnings per share  $ 0.28  $ 0.15  $ 1.28  $ 0.91
Diluted earnings per share  $ 0.28  $ 0.15  $ 1.28  $ 0.91
Average number of shares outstanding for:        
 Basic earnings per common share  

 computation
 30,372,646  30,040,108  30,335,680  23,237,904
 Diluted earnings per common share

 computation
 30,414,577  30,050,802  30,366,899  23,248,467
Book value per common share (1) $12.48 $11.57 $12.48 $11.57
Tangible book value per common share (2) $11.95 $11.03 $11.95 $11.03
         
Average Balances        
Total loans, net  $ 3,249,003  $ 3,182,786  $ 3,238,491  $ 3,085,895
Total interest-earning assets  4,109,353  3,916,192  4,017,511  3,879,520
Total assets  4,329,738  4,108,862  4,234,550  4,065,607
Total due to depositors  3,010,770  2,580,379  2,840,022  2,554,702
Total interest-bearing liabilities  3,813,316  3,616,575  3,742,440  3,633,783
Stockholders' equity  392,767  379,151  376,291  327,886
Common stockholders' equity  392,767  358,151  376,291  270,352
         
Performance Ratios (3)        
Return on average assets       0.79%     0.58%     0.92%     0.63% 
Return on average equity  8.71  6.31  10.32  7.80
Yield on average interest-earning assets  5.51  5.87  5.72  5.93
Cost of average interest-bearing liabilities  2.26  2.96  2.45  3.17
Interest rate spread during period  3.25  2.91  3.27  2.76
Net interest margin  3.41  3.14  3.43  2.96
Non-interest expense to average assets  1.59  1.54  1.66  1.60
Efficiency ratio (4)  45.56  47.17  47.37  51.76
Average interest-earning assets to average interest-bearing liabilities  1.08 X   1.08 X   1.07 X   1.07 X 
 
 
(1) Calculated by dividing common stockholders' equity of $390.0 million and $360.1 million at December 31, 2010 and 2009, respectively, by 31,255,934 and 31,127,664 shares outstanding at December 31, 2010 and 2009, respectively. Common stockholders' equity is total stockholders' equity less the liquidation preference value of any preferred shares outstanding.
(2) Calculated by dividing tangible common stockholders' equity of $373.6 million and $343.4 million at December 31, 2010 and 2009, respectively, by 31,255,934 and 31,127,664 shares outstanding at December 31, 2010 and 2009, respectively. Tangible common stockholders' equity is total stockholders' equity less the liquidation preference value of any preferred shares outstanding and intangible assets (goodwill and core deposit intangible, net of deferred taxes).
(3) Ratios for the three months ended December 31, 2010 and 2009 are presented on an annualized basis.
(4) Calculated by dividing non-interest expense (excluding REO expense) by the total of net interest income and non-interest income (excluding net gain/loss from fair value adjustments, OTTI charges, net gains on the sale of securities and certain non-recurring items).
 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA

(Dollars in thousands)

(Unaudited)
  At or for the year  At or for the year
  ended ended
  December 31, 2010 December 31, 2009
     
Selected Financial Ratios and Other Data    
     
Regulatory capital ratios (for Flushing Savings Bank only):    
 Tangible capital (minimum requirement = 1.5%)  9.18%  8.84%
 Leverage and core capital (minimum requirement = 4%)  9.18  8.84
 Total risk-based capital (minimum requirement = 8%)  14.34  13.42
     
Capital ratios:    
 Average equity to average assets  8.89%  8.06%
 Equity to total assets  9.02  8.69
 Tangible common equity to tangible assets  8.67  8.32
     
Asset quality:    
 Non-accrual loans  $ 108,655  $ 80,117
 Non-performing loans  125,988  85,866
 Non-performing assets  132,710  93,262
 Net charge-offs  13,625  10,204
     
Asset quality ratios:    
 Non-performing loans to gross loans  3.86%  2.68%
 Non-performing assets to total assets  3.07  2.32
 Allowance for loan losses to gross loans  0.85  0.63
 Allowance for loan losses to non-performing assets  20.87  21.10
 Allowance for loan losses to non-performing loans  21.99  23.67
 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

NET INTEREST MARGIN

(Dollars in thousands)

(Unaudited)
 
  For the three months ended December 31,
  2010 2009
  Average   Yield/ Average   Yield/
  Balance Interest Cost Balance Interest Cost
Assets            
Interest-earning assets:            
 Mortgage loans, net (1)  $ 2,958,601  44,836  6.06%  $ 2,932,597  $ 46,074  6.28%
 Other loans, net (1)  290,402  3,858  5.31  250,189  3,498  5.59
 Total loans, net  3,249,003  48,694  5.99  3,182,786  49,572  6.23
 Mortgage-backed securities  706,748  7,513  4.25  643,255  7,686  4.78
 Other securities  41,160  342  3.32  42,835  189  1.76
 Total securities  747,908  7,855  4.20  686,090  7,875  4.59
 Interest-earning deposits and            
 federal funds sold  112,442  61  0.22  47,316  20  0.17
Total interest-earning assets  4,109,353  56,610  5.51  3,916,192  57,467  5.87
Other assets  220,385      192,670    
 Total assets  $ 4,329,738      $ 4,108,862    
             
Liabilities and Equity            
Interest-bearing liabilities:            
 Deposits:            
 Savings accounts  $ 402,168  691  0.69  $ 435,388  1,133  1.04
 NOW accounts  785,370  1,869  0.95  426,118  1,499  1.41
 Money market accounts  379,701  808  0.85  376,641  1,244  1.32
 Certificate of deposit accounts  1,443,531  9,636  2.67  1,342,232  11,107  3.31
 Total due to depositors  3,010,770  13,004  1.73  2,580,379  14,983  2.32
 Mortgagors' escrow accounts  37,353  10  0.11  36,582  15  0.16
 Total deposits  3,048,123  13,014  1.71  2,616,961  14,998  2.29
 Borrowed funds  765,193  8,541  4.46  999,614  11,732  4.69
 Total interest-bearing liabilities  3,813,316  21,555  2.26  3,616,575  26,730  2.96
Non interest-bearing deposits  93,988      85,678    
Other liabilities  29,667      27,458    
 Total liabilities  3,936,971      3,729,711    
Equity  392,767      379,151    
 Total liabilities and equity  $ 4,329,738      $ 4,108,862    
             
Net interest income /

net interest rate spread
   $ 35,055  3.25%    $ 30,737  2.91%
             
Net interest-earning assets /

net interest margin
 $ 296,037    3.41%  $ 299,617    3.14%
             
Ratio of interest-earning assets to

interest-bearing liabilities
     1.08 X      1.08 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 $0.2 million for both three-month periods ended December 31, 2010 and 2009, respectively.
 
FLUSHING FINANCIAL CORPORATION and SUBSIDIARIES

NET INTEREST MARGIN

(Dollars in thousands)

(Unaudited)
 
  For the year ended December 31,
  2010 2009
  Average   Yield/ Average   Yield/
  Balance Interest Cost Balance Interest Cost
Assets            
Interest-earning assets:            
 Mortgage loans, net (1)  $ 2,956,514  182,086  6.16%  $ 2,865,591  $ 182,132  6.36%
 Other loans, net (1)  281,977  15,383  5.46  220,304  12,185  5.53
 Total loans, net  3,238,491  197,469  6.10  3,085,895  194,317  6.30
 Mortgage-backed securities  673,000  30,246  4.49  690,181  33,430  4.84
 Other securities  54,069  1,819  3.36  55,805  2,223  3.98
 Total securities  727,069  32,065  4.41  745,986  35,653  4.78
 Interest-earning deposits and            
 federal funds sold  51,951  94  0.18  47,639  91  0.19
Total interest-earning assets  4,017,511  229,628  5.72  3,879,520  230,061  5.93
Other assets  217,039      186,087    
 Total assets  $ 4,234,550      $ 4,065,607    
             
Liabilities and Equity            
Interest-bearing liabilities:            
 Deposits:            
 Savings accounts  $ 413,657  3,334  0.81  $ 422,399  5,529  1.31
 NOW accounts  683,390  7,511  1.10  373,854  5,906  1.58
 Money market accounts  394,536  3,713  0.94  334,703  5,290  1.58
 Certificate of deposit accounts  1,348,439  39,044  2.90  1,423,746  49,987  3.51
 Total due to depositors  2,840,022  53,602  1.89  2,554,702  66,712  2.61
 Mortgagors' escrow accounts  38,245  53  0.14  35,879  66  0.18
 Total deposits  2,878,267  53,655  1.86  2,590,581  66,778  2.58
 Borrowed funds  864,173  38,112  4.41  1,043,202  48,497  4.65
 Total interest-bearing liabilities  3,742,440  91,767  2.45  3,633,783  115,275  3.17
Non interest-bearing deposits  88,238      76,559    
Other liabilities  27,581      27,379    
 Total liabilities  3,858,259      3,737,721    
Equity  376,291      327,886    
 Total liabilities and equity  $ 4,234,550      $ 4,065,607    
             
Net interest income /

net interest rate spread
   $ 137,861  3.27%    $ 114,786  2.76%
             
Net interest-earning assets /

net interest margin
 $ 275,071    3.43%  $ 245,737    2.96%
             
Ratio of interest-earning assets to

interest-bearing liabilities
     1.07 X      1.07 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 $0.7 million for the year ended December 31, 2010 and 2009, respectively.
CONTACT: David W. Fry
         Executive Vice President, Treasurer and
         Chief Financial Officer
         Flushing Financial Corporation
         (718) 961-5400

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