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Flushing Financial Corporation Reports Record Net Income for 2010; GAAP Net Income Increases 52% and Core Net Income Increases 31%

Full Year 2010
/ Source: GlobeNewswire

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.

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:

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:

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.

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.

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 .

"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.

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CONTACT: David W. Fry Executive Vice President, Treasurer and Chief Financial Officer Flushing Financial Corporation (718) 961-5400